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NVIDIA has provided some insights about how the NVIDIA Shield portable gaming device came to be (read about our hands-on time with the Shield at CES). I recommend reading the article on their website, and if you want a quick primer: it’s a great story of an ambitious idea which was turned into reality by an initial group of hardcore engineers which subsequently got company-wide support to the finish line. I think that they tell their story very well (with a hint of corporate marketing), so there’s no point in parroting it here – it’s a very good read.

Most people see NVIDIA only as a chip or graphics cards manufacturer which is remote from building gamer consoles but in my view, the company always had a “platform building” DNA that the world sees only now. Note that although I worked at NVIDIA until 2007, this post only reflects my opinion, and I don’t have any current insider information, so your guess is as good as mine.

NVIDIA can build almost anything it wants to

If you go back to NV1 (NVIDIA’s first chip in 1995), it was already a combination of a graphics card and a sound card: that was much more complex than most multimedia add-on cards at the time. Later, NVIDIA built the Xbox XGPU and its Media and Communications Processor, which were key components that were doing pretty much everything (memory controller, IO, Audio, GPU) except the CPU operations.

"FEW COMPANIES CAN BUILD A COMPLETE COMPUTER SYSTEM. NVIDIA IS ONE OF THEM"   While the NVIDIA Shield portable gaming concept was put together in record time, it is not only because the engineers worked smart and hard, but also because Shield represents the accumulation of all the computer system know-how that NVIDIA has built over the years.

Very few companies in the world have the capability to build a complete computer system, and NVIDIA is one of them. In NVIDIA’s blog post, Tony Tamasi (Senior Vice President of Content and Strategy) says that they have been talking about building something for 5 or 10 years – it’s because during all that time, NVIDIA always had the technical ability to build such a device.

In fact, it’s never been about what NVIDIA “can” do (as engineers), but what NVIDIA “should” do with the time and resources that are at its disposal. In my opinion, NVIDIA Shield’s purpose is not to sell tens or hundreds of thousands of units, it’s more about turning Android into a “true” gaming platform (with real AAA titles), and it’s about carving a space for NVIDIA’s Tegra processor to grow.

Space? The mobile market is huge – is there no space to grow?

In today’s mobile chip market, NVIDIA is a high-profile player, but in terms of mobile market share percentage, the company is still fairly small. The reason is simple: if you combine the market share of Apple and Samsung, it is immense (roughly… 60-70%?).

Both those companies build their own chips (also called system on chip, or SoC), and although Samsung occasionally buys NVIDIA chips, it’s likely that they will use their own Exynos chip whenever possible – just check the powerful Exynos Octa, it’s quite interesting. I just can’t imagine Apple using anything else than their own chip just because it’s so financially advantageous for them to bypass a third-party royalty payments by using their own design (plus, their graphics performance is remarkable too).

As you can see, a large chunk of the market is already “locked” away from Tegra. Add to the mix that Qualcomm is another huge company with excellent products to compete against for whatever is left after Apple and Samsung, and you can see how difficult things can get. NVIDIA needs to change the landscape in order to make some room for its Tegra processors, and it can do that by altering the demand itself.

"A LARGE CHUNK OF THE MARKET IS ALREADY LOCKED AWAY FROM TEGRA"  

NVIDIA has been there before

This is not a new situation for NVIDIA. When it entered the PC chipset market, some large players literally laughed at them, and the “integrated GPU” idea was a tough sell at first. A few years later, NVIDIA had grabbed a significant share and was making big money in that market.

NVIDIA was basically able to arm-wrestle its way into a multi-billion dollar market by leveraging its memory controller, SLI (multi-GPU) and GPU technology to outperform competitors. It took the integration of the memory controller into the Intel Core processor and a lawsuit with Intel to make that business melt away for NVIDIA. NVIDIA subsequently won a $1.5B dollar settlement from Intel for graphics-related patents. That was the end of that episode.

I’m just about sure that NVIDIA is looking at the mobile space with the same mindset: use the unique technological background to create a crack, and expand to the rest of the market from there. Just look at how Tegra 4 handles the image processing using the powerful GPU cores, or look at the possible market disruption that “software” LTE modems can bring and you may see some (unrealized) potential.

Hum… And how does Shield help?

Traditionally, the console market works this way: a hardware vendor builds an eco-system and spends Billions to increase the installed base (by selling consoles for a loss). As the base grows, that attracts developers who build more/better games and hopefully, the virtuous circle continues (if not, it becomes  SEGA).

"GAMING IS THE ORIGIN NVIDIA'S SUCCESS"   In the process, the hardware vendor charges developers a “per-game-unit fee” for the right to distribute their game on the platform. In short: if you have a good eco-system, you can get others to work for you. It’s like owning San Francisco: you can create a start-up IPO tax, or jack-up parking ticket prices: life is good.

NVIDIA has chosen to build a portable gaming system that does not use a “walled-garden” business model, so structurally, this business cannot become a Nintendo, Xbox or PlayStation – at least not in the way that I understand the console market today.

What Shield could do is to create a target platform for developers to build better Android games. Gaming is the origin NVIDIA’s success. Gaming is what generates real money in the app stores. Gaming is what pushes the hardware envelope. It matters… a lot.

Given that Android developers main problem is “discovery” and that NVIDIA has enough marketing muscle to provide that, developers would be more than willing to jump on board. If Shield becomes a  commercial success, developers may even join this for money rather than marketing. That’s a big “if” for now.

Shield would raise the bar for Android gaming

As we have seen on PC, competitive pressure will raise the level of graphics complexity, and when that happens, NVIDIA can take the fight to a turf on which it has been fighting for almost two decades, and where it has defeated 50 other graphics companies or so, although a few like AMD and PowerVR remain very strong. If Android becomes a great gaming platform, NVIDIA would have a chance to add more value, faster than anyone else – that’s how I imagine NVIDIA sees it.

Between its Grid and GPU technologies, and more importantly its relationship with key developers, the company would be at an advantage even if its hardware isn’t clearly superior (that’s when you actually need an advantage the most). Just look at some of the Tegra Zone games: many have extra-features that are not enabled anywhere else, even on faster chips.

Being the reference development platform is good: you become the de-facto standard, while other chip vendors have to play catch-up and jump hoops and loops to make sure that the game optimizations work great on their hardware too. In short, the competitors would face an uphill battle. The terrain works for you.

Shield may be a niche market, but it could have a significant impact

Some look at Shield, compare it with the Nintendo DS, and say: “that’s a niche market, they’ll never make hundreds of millions, let alone billions with it”. That may be true, but I don’t think that’s the point.

Instead, I see Shield as an opportunity for NVIDIA to spark something that Ouya (a Tegra 3 $99 Android console) will not: drastically raise the bar for Android games. Shield also provides something that no other competitor has today: “PC gaming” capabilities (via streaming). This combination could turn NVIDIA into that “must-target” gaming platform for developers. From there, the technology used in Shield can be integrated into TVs, set top boxes, tablets…

"GAMING HAS BEEN A DECIDING FACTOR OF WHICH COMPANIES LIVED AND DIED"  

History shows that Gaming has shaped what the PC industry is today. Gaming has been a deciding factor of which companies lived and died, and Gaming may be the key for NVIDIA to strike with the “tip of the spear”, rather than “playing defense” on LTE (4G), big.LITTLE or other technological issues. With today’s Android “BBB” games, there is just no window of opportunity for NVIDIA to play its strength.

I didn’t think that NVIDIA would decide to actually build a portable gaming console. When I tested it, it felt surprisingly good and played very well. In my opinion, Shield is great, but it is not about making a buck by selling console hardware, it’s part of a multi-faceted strategy to leverage 20 years of computer system design expertise in order to break into a seemingly unbreakable market (mobile SoCs).

Can NVIDIA pull it off? Without knowing what the pricing is going to be, it’s very hard to have an educated opinion on the matter. But an aggressive price would validate the idea that Shield is part of a larger initiative, while a high-price may indicate that this is just a hardware business. What do you think will happen now? As I said, your guess is as good as mine. Drop a comment below.

Filed in Gaming. Read more about game console, NVIDIA, NVIDIA Shield, Opinions and portable gaming.

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