Summary

nVidia Tegra had a shaky start, but it looks like recent reorganization inside nVidia Corporation is yielding results - after winning OEM deals with Microsoft and Samsung, Tegra SoC will be inside next-gen Nintendo handheld. The current generation, Nintendo DS/DS Lite/DSi sold in almost 115 million units over the course of five years - taking 68% of worldwide market.

Analysis

When Jen-Hsun Huang, confounder and CEO of nVidia announced that he expects to see Tegra capturing 50% of nVidia's revenue within the next five years, the statement was received with skepticism, as an attempt to sway the attention from its battles against AMD and Intel.
However very aggressive approach started to yield results over the course of 2009; the company managed to sway not just Microsoft with the Zune HD multimedia player or Samsung's BeatPlayer M1 but also a longtime ARM, IBM and ATI customer - Nintendo.
The recent deal between Nintendo and nVidia will result in Tegra SoC [System-on-a-Chip] inside each Nintendo's next-generation handheld gaming device. Launched in 2004, the Nintendo DS and its two latter redesigns [DS Lite and DSi] sold in massive 111.49 million units. With almost 40 million handheld consoles sold in United States alone, Nintendo DS owns 68.3% of worldwide market share.

Given the fact that current Nintendo DS hardware is based upon two outdated processors from ARM - 16-bit ARM7TDMI and a 32-bit ARM946-E, there is little doubt that next-gen DS could be backwards compatible with the whole DS application library. First prototypes used Tegra APX 2600, a chip found in Microsoft Zune HD.

But the timeframe of release puts Nintendo in a comfortable position - this digital entertainment leader doesn't need to use the current APX 2600 chip, as in February 2010 nVidia will introduce second generation Tegra, built on a power-saving 40nm process at TSMC. According to my conversations with nVidia engineers, Tegra Gen2 offers quite a graphics punch; GeForce 9 based hardware [CUDA-enabled design] should offer immense experience on small screens - we see no reason why you could not use advanced graphics features from "grown up" consoles and personal computers, such as Anti-Aliasing and Anisotropic filtering.
If Nintendo picks the current gen hardware, next-gen DS will be based upon 65nm chips. If they go with 2nd gen parts, they will get 40nm chips offering higher performance and even lower power consumption. This is one sweet deal for the Japanese company known for hardware simplification. According to iSuppli, Nintendo is the only console maker earning profits of sold hardware, not just on software and peripherals.
This win can be seen as a test for nVidia: if Nintendo chose nVidia for the handheld console, does that mean nVidia may have an entrance into the lucrative Wii business? The numbers are there - Wii console reached 54 million units sold, taking almost half of current console market [48.4%, source: VGchartz.com].
You can read the story here: http://bit.ly/TegraDS

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