Summary
NVIDIA Corporation announced on July 2, 2008, that it expects to take a significant charge of $150 million to $200 million against its cost of revenue. This charge is intended to cover anticipated costs associated with customer warranty, repairs, returns, replacements, and other consequential expenses. The issue stems from a weak die/packaging material set in certain older generation MCP (Media and Communications Processor) and GPU (Graphics Processing Unit) products used in notebook systems, which are failing in the field at higher than normal rates. While NVIDIA has implemented a software driver to mitigate thermal stress and is advising customers on design modifications, the company is actively engaged in discussions with its supply chain for potential reimbursement and plans to pursue insurance coverage. This charge, while material, addresses issues specifically identified in certain notebook configurations and NVIDIA continues to monitor other product lines for any similar anomalies.
Key Highlights
- 1NVIDIA announced a charge of $150 million to $200 million against cost of revenue due to product failures.
- 2The charge covers anticipated customer warranty, repair, return, replacement, and other consequential costs.
- 3The issue is related to a weak die/packaging material set in certain previous generation MCP and GPU products used in notebook systems.
- 4Newer manufactured products and current volume shipping products use a different, more robust material set.
- 5NVIDIA has released a software driver to help mitigate thermal stress on affected chips.
- 6Discussions are underway with the supply chain for potential cost reimbursement, and insurance coverage will be sought.
- 7NVIDIA is continuing to investigate other products for potential defects, though no abnormal failure rates have been observed outside of specific notebook configurations.