Myth 1 - NVIDIA has denied responsibility for the failures and is blaming suppliers and partners.
In our announcements accept responsibility for the failures. We DO call out the material failure but we also acknowledge that our suppliers and notebook designs because this is true and we need to disclose this in our official statements to the SEC. We would not go on record with the SEC making such bold claims if they weren’t true. See our Form 8-K statement below.
Myth 2 – There is an “official story” that the problems were limited a batch of a few bad parts for HP.
We have never issued a statement like this. See our publics statements below.
Where is source for that?
Myth 3 – NVIDIA is forcing a fix on notebook makers
The idea that a supplier like NVIDIA can dictate a fix to the world’s largest PC makers is preposterous.
The truth is the notebook makers determining their own course of action and we are supporting them.
Where is source for that?
Myth 4 – NVIDIA is trying to cuts our financial liability.
We put aside $200M to help partners solve this problem for consumers. As far as we know NVIDIA is the first and only chip maker to help fund the cost for repairs.
Myth 5 – This affects desktop chips, G92, G94, etc.
We have only seen this problem on notebooks. We just reiterated this during an official financial call. Once again we would not say this if it wasn’t true. Note we have not disclosed the specific GPUs but we have stated this impact previous generation GPUs and that current gen GPUs are not in production.
Fact
Charlie has an obvious bias against NVIDIA and he has no sources to back up his claims. Out of all of the hundreds upon hundreds of notebooks models designed with NVIDIA chips in the last few years, only a small number of these have experienced the problem. Within this small number of models, only a small percentage actually experience the chip failure. It is highly unlike a notebook user will experience the problem. And we have never seen this problem on desktop.
Official communication about the notebook chip material failures.
Quarterly Business Update Press Release – July 2
http://www.nvidia.com/object/io_1215037160521.html
“Separately, NVIDIA plans to take a one-time charge from $150 million to $200 million against cost of revenue for the second quarter to cover anticipated warranty, repair, return, replacement and other costs and expenses, arising from a weak die/packaging material set in certain versions of its previous generation GPU and MCP products used in notebook systems. Certain notebook configurations with GPUs and MCPs manufactured with a certain die/packaging material set are failing in the field at higher than normal rates. To date, abnormal failure rates with systems other than certain notebook systems have not been seen. NVIDIA has initiated discussions with its supply chain regarding this material set issue and the Company will also seek to access insurance coverage for this matter. “
Form 8-K – July 2
http://www.secinfo.com/d14D5a.t4ehp.htm
“On July 2, 2008, NVIDIA Corporation stated that it would take a $150 million to $200 million charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other consequential costs and expenses arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems. All newly manufactured products and all products currently shipping in volume have a different and more robust material set.
The previous generation MCP and GPU products that are impacted were included in a number of notebook products that were shipped and sold in significant quantities. Certain notebook configurations of these MCP and GPU products are failing in the field at higher than normal rates. While we have not been able to determine a root cause for these failures, testing suggests a weak material set of die/package combination, system thermal management designs, and customer use patterns are contributing factors. We have developed and have made available for download a software driver to cause the system fan to begin operation at the powering up of the system and reduce the thermal stress on these chips. We have also recommended to our customers that they consider changing the thermal management of the MCP and GPU products in their notebook system designs. We intend to fully support our customers in their repair and replacement of these impacted MCP and GPU products that fail.
We have begun discussions with our supply chain regarding reimbursement to us for some or all of the costs we have incurred and may incur in the future relating to the weak material set. We will also seek to access our insurance coverage. We continue to not see any abnormal failure rates in any systems using NVIDIA products other than certain notebook configurations. However, we are continuing to test and otherwise investigate other products. There can be no assurance that we will not discover defects in other MCP or GPU products.”
Press statement – emailed to press July – 15
“NVIDIA’s highest priority is to ensure complete satisfaction and delight for all of our customers. We fully stand behind our products and are cooperating with our partners to resolve the recently announced notebook field failure issue.
Please remember the following:
1) The issue is limited to a few notebook chips only; we have not seen and don't expect to see this issue on any NVIDIA-based desktop systems.
2) Only a very small percentage of the notebook chips that have shipped are potentially affected, and the problem depends on a combination of environmental conditions, configuration and usage model.
3) We continue to work closely with our partners and have taken the necessary steps to ensure that all NVIDIA chips currently in production do not exhibit the problem.
As a result, it is very unlikely that your NVIDIA-based notebook product is affected.”
Financial call transcript – August 13
http://seekingalpha.com/article/9064...=yahoo&page=-1
Jen-Hsun Huang
“We also noted that we would be taking a non-recurring charge against cost of revenue to cover anticipated customer warranty, repair/return replacement and other associated costs resulting from a weak die/packaging material set in certain previous generation GPU and MCP products using notebooks. Although the failures are only seen in a small percentage of all the chips we shipped with this material set, the repair cost of a notebook can be expensive. In total, we took a charge of $196 million. We will continue to support on OEM partners on responding and resolving end customer issues.”
Jen-Hsun Huang – in response to whether we expect to incur additional charges beyond what we set aside to assist notebook makers with repairs
“We’re not expecting more write-downs in the future. When we scoped out the problem, we had -- we felt we had enough data to project out the anticipated failures from the various platforms that are out there. This doesn’t happen to all of our chips and it doesn’t happen to most of the notebooks that are out there. There are only a few examples of them and of all the notebooks that have shipped. So we think we have a pretty good handle on the situation but -- and we thought that we were relatively conservative but we’ll see how it goes.”
Jen-Hsun Huang – in response to a question about how this impact future orders from notebook makers
Frankly, on the work that we are doing supporting our OEMs to help them repair and to support their end users, frankly all of our engagement with all of our OEMs, they have been just delighted by the work that we are doing. Obviously this isn’t something we absolutely need to do but we stepped up to do it because we think it’s the right thing to do. And so each case is a little different, so we have to look at each case carefully but our open-minded approach and our good partnership approach is welcomed by all the OEMs. And so if this is going to be anything at all, it should be a positive.
