Nvidia in Chip Spat With Microsoft
Nvidia, the chipmaker that supplies the Xbox's central graphic processing unit to Microsoft, is currently in arbitration with the company over the prices of the chips they produce, according to Nvidia CEO Jen-Hsun Huang.
In a call to analysts, Huang stressed that although the arbitration is "just a pricing issue" and Nvidia will maintain strong ties with Microsoft, they are currently disputing over the price of the Xbox's GPU and MCP (media communications processor). Nvidia received a flat $200 million fee in 2000 for the two chipsets, which together form the core of the Xbox system.
"We're delighted we have a wonderful relationship with Microsoft and working on many fronts together, and the arbitration is just a step in an overall process in resolving this thing," Huang told the Reuters news service earlier today. "In the meantime we're recognizing the difference between what Microsoft is paying and the price they believe they should be paying as deferred revenues. When all this gets resolved, my guess is it'll be a pretty dramatic positive impact on our business."
Huang said in the analyst call that he expects his company to emerge victorious from the arbitration. However, Nvidia's operating income will go down approximately $13 million per quarter to account for the difference between "the price being paid by Microsoft and the price Microsoft claims it should be paying" until the trial is over.