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NVIDIA Corporation (NVDA) Goes Grey

This has been a long time coming for NVIDIA Corporation (NASDAQ:NVDA): “Grey” is here. The graphics specialist turned mobile powerhouse has just announced its Tegra processor with an integrated LTE baseband, which promises to intensify its competition with dominant rival QUALCOMM, Inc. (NASDAQ:QCOM).

The news comes just over a month after NVIDIA unveiled its next-generation Tegra 4 processor, previously known as “Wayne.” The new Tegra 4i with the integrated cellular connectivity has been known as “Grey” and is a major milestone in the company’s mobile ambitions.

Source: NVIDIA.

Make no mistake: this is a big deal.

There’s no “I” in Tegra — until now
The Tegra 4i uses a similar architecture to both the Tegra 4 and previous generation Tegra 3 in that there will be four primary processing cores with a fifth “companion core” for low-power tasks. However, there is a big difference in the specific cores doing the heavy lifting in each chipset.

The new Tegra 4i uses a new Cortex-A9 r4 from ARM Holdings plc (ADR) (NASDAQ:ARMH), which collaborated with NVIDIA to develop the chip. The Cortex-A9 r4 is a more power efficient version of the Cortex-A9 found in the Tegra 3, but also isn’t as powerful as the Cortex-A15 cores found in the Tegra 4.

Source: NVIDIA.

On the graphics front, the same is true. The Tegra 4i features more GPU cores than the Tegra 3 but less than the Tegra 4. NVIDIA is promising console-quality gaming at full 1,080p HD resolutions with the Tegra 4i.

Integration is key
Cellular integration has been a key differentiator for Qualcomm and a significant competitive advantage. The broader market for discrete baseband modems hasn’t been faring too well as a result. The largest buyer in the discrete baseband modem market is Apple Inc. (NASDAQ:AAPL), which buys exclusively from Qualcomm.

NVIDIA CEO Jen-Hsun Huang outlined what’s currently happening in the market on the last conference call:

You have to invest in Tegra and you have to invest in LTE in order to engage that LTE connected device market. There is no stand-alone modem business anymore and in many of these new 4G connected device marketplace, an integrated approach is necessary and that’s the reason why we bought Icera and that’s the reason why we’re investing in LTE. So that’s really one investment. You have to do it all together or you don’t do it at all. And so that’s one of the reasons why all of the stand-alone modem companies really have gotten out and that’s the reason why most of the stand-alone application processor companies have gone now. [Emphasis mine.]

That statement also has negative implications for Broadcom Corporation (NASDAQ:BRCM), which just launched a discrete LTE modem that has a chance of grabbing the Apple win from Qualcomm. Broadcom’s chip is smaller than rival offerings, which the company hopes will differentiate it from the rest. As far as Apple is concerned, a smaller die size appeals more than integrated cellular connectivity right now, since the iPhone maker uses its own A-X processors.