Report: NVIDIA Forms Custom Chip Unit for Cloud Computing and More
by Anton Shilov on February 13, 2024 8:00 AM EST
With its highly successful A100 and H100 processors for artificial intelligence (AI) and high-performance computing (HPC) applications, NVIDIA dominates AI datacenter deployments these days. But among large cloud service providers as well as emerging devices like software defined vehicles (SDVs) there is a global trend towards custom silicon. And, according to a report from Reuters, NVIDIA is putting together a new business unit to take on the custom chip market.
The new business unit will reportedly be led by vice president Dina McKinney, who has a wealth of experience from working at AMD, Marvell, and Qualcomm. The new division aims to address a wide range of sectors including automotive, gaming consoles, data centers, telecom, and others that could benefit from tailored silicon solutions. Although NVIDIA has not officially acknowledged the creation of this division, McKinney’s LinkedIn profile as VP of Silicon Engineering reveals her involvement in developing silicon for 'cloud, 5G, gaming, and automotive,' hinting at the broad scope of her alleged business division.
Nine unofficial sources across the industry confirmed to Reuters the existence of the division, but NVIDIA has remained tight-lipped, only discussing its 2022 announcement regarding implementation of its networking technologies into third-party solutions. According to Reuters, NVIDIA has initiated discussions with leading tech companies, including Amazon, Meta, Microsoft, Google, and OpenAI, to investigate the potential for developing custom chips. This hints that NVIDIA intends to extend its offerings beyond the conventional off-the-shelf datacenter and gaming products, embracing the growing trend towards customized silicon solutions.
While using NVIDIA's A100 and H100 processors for AI and high-performance computing (HPC) instances, major cloud service providers (CSPs) like Amazon Web Services, Google, and Microsoft are also advancing their custom processors to meet specific AI and general computing needs. This strategy enables them to cut costs as well as tailor capabilities and power consumption of their hardware to their particular needs. As a result, while NVIDIA's AI and HPC GPUs remain indispensable for many applications, an increasing portion of workloads now run on custom-designed silicon, which means lost business opportunities for NVIDIA. This shift towards bespoke silicon solutions is widespread and the market is expanding quickly. Essentially, instead of fighting custom silicon trend, NVIDIA wants to join it.
Meanwhile, analysts are painting the possibility of an even bigger picture. Well-known GPU industry observer Jon Peddie Research notes that they believe that NVIDIA may be interested in addressing not only CSPs with datacenter offerings, but also consumer market due to huge volumes.
"NVIDIA made their loyal fan base in the consumer market which enabled them to establish the brand and develop ever more powerful processors that could then be used as compute accelerators," said JPR's president Jon Peddie. "But the company has made its fortune in the deep-pocked datacenter market where mission-critical projects see the cost of silicon as trivial to the overall objective. The consumer side gives NVIDIA the economy of scale so they can apply enormous resources to developing chips and the software infrastructure around those chips. It is not just CUDA, but a vast library of software tools and libraries."
Back in mid-2010s NVIDIA tried to address smartphones and tablets with its Tegra SoCs, but without much success. However, the company managed to secure a spot in supplying the application processor for the highly-successful Nintendo Switch console, and certainly would like expand this business. The consumer business allows NVIDIA to design a chip and then sell it to one client for many years without changing its design, amortizing the high costs of development over many millions of chips.
"NVIDIA is of course interested in expanding its footprint in consoles – right now they are supplying the biggest selling console supplier, and are calling on Microsoft and Sony every week to try and get back in," Peddie said. "NVIDIA was in the first Xbox, and in PlayStation 3. But AMD has a cost-performance advantage with their APUs, which NVIDIA hopes to match with Grace. And since Windows runs on Arm, NVIDIA has a shot at Microsoft. Sony's custom OS would not be much of a challenge for NVIDIA."
Source: Reuters
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NextGen_Gamer - Tuesday, February 13, 2024 - link
I am thinking that the Switch 2 and its custom NVIDIA SoC will be one of the first announcements of this new division, if NVIDIA makes it official. As the article said, it would be though for NV to get into the PS6 or Xbox Next console. Sony has a horrible history of backwards-compatibility, essentially entirely relying on hardware-compatibility to achieve it. PS2 had the entire PSone CPU/GPU/RAM on board, and PS3 in turn had the PS2 CPU/GPU/RAM on it, and then actually did use software-emulation for PSone. PS4 had zero compatibility at all. PS5 runs PS4 purely because it is the same x86-64 architecture CPU and and AMD GPU.Microsoft would have an easier time since their consoles have been using the DirectX API going back to Xbox original, but even still it would require a ton of effort. They wrote full software emulation for Xbox OG and Xbox 360 to run on Xbox One/Xbox Series, and they would have to almost redo that entirely to get it to run on an ARM/NVIDIA system. Not to mention also creating software emulation for Xbox One/Xbox Series to run on it. Reply
domboy - Tuesday, February 13, 2024 - link
Well, Microsoft already has an x86/x64 emulation layer in Windows on ARM. Maybe getting that to work on a console would be a lot of work, I'm not sure, but I expect that they wouldn't have to start from scratch.I do hope nVidia will get back into suppling chips for Surface devices though. That could technically fall under the custom chips category. Reply
NextGen_Gamer - Tuesday, February 13, 2024 - link
That's true, I suppose it wouldn't be starting from scratch but probably still a lot of work. Since the PS4/Xbox One, it seems the APU is just the way things are now for consoles. But there is always a small chance MS could ask AMD for a crazy small 16 x Zen 5c processor or something, along with a beefy discrete NVIDIA GPU, in order to keep the base CPU architecture as x86-64 still. I just think it's unlikely at this point. ReplyPeachNCream - Tuesday, February 13, 2024 - link
NV is worth more than China's entire stock market due in no small part to its AI and HPC units. At this point AMD probably only exists because NV buying it would run afoul of antitrust laws and the US SEC or whatever government organization it is that regulates mergers likely blocking a consolidation. ReplyDante Verizon - Tuesday, February 13, 2024 - link
NVidia will not reach consoles beyond the Switch, but will reach cell phones through Mediatek Replykn00tcn - Tuesday, February 13, 2024 - link
sony already made the deal, nvidia will not be in ps6 or next portablexbox who knows, very shaky department right now
"NVIDIA is of course interested in expanding its footprint in consoles – right now they are supplying the biggest selling console supplier, and are calling on Microsoft and Sony every week to try and get back in,"
weird sentence that needs more or changed words (at least remove 'supplier') Reply
whatthe123 - Wednesday, February 14, 2024 - link
it also seems weird for nvidia to be trying to get back into high performance console manufacturing. the margins are low for chip suppliers and nothing or negative at launch for console manufacturers. they could be spending those wafers on more AI chips.meanwhile the switch uses a super outdated SoC and players are fine with it. margins are probably good so why bother with the ps6/xbox 180? Reply
lmcd - Wednesday, February 14, 2024 - link
Nvidia wants the next Xbox so that they get into the Xbox Cloud racks, or even better rent to Xbox! ReplyBlastdoor - Wednesday, February 14, 2024 - link
The best way for nvidia to compete with custom silicon might be to cut prices on their massively overpriced GPUs. Those 70 percent margins are not sustainable and create an incentive for big customers to roll their own. ReplyBruzzone - Wednesday, February 14, 2024 - link
There are two issues with consumer SOCs confronted by design producers. The first issue is making margin in relation the variable cost of design production including the foundry mark up. The second issue is wafer supply that coincides with the first, making margin.Observing Nvidia Maxwell Switch and AMD Renoir PS5 and Xbox the products held wafers and starts but were not a great margin contributor. They were in fact marginal cost production contributors that offset the cost of wafer reservations (supply) waiting for high margin product allocation 'starts'' which in 2023 for AMD is Genoa. Nothing wrong with this low margin SOC business it pays for waiting wafers holding foundry starts subject 'price at cost' anticipating a higher margin production opportunity.
AMD made about $22 per PS5/Xbox SOC on the royalty and appears to make in the hundreds of millions for design work. The question then becomes if you reserve silicon for marginal cost SOC production, what picks up that slack production in the future to actually turn a competitive profit.
Noteworthy AMD 7840U in Rog Ally does make a competitive profit commensurate AMD gross margin objective where PS5/Xbox and Switch were all 'in fact' a gross margin drag. They held wafers and starts but took from gross margin it's a delicate balancing act.
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