WE KNOW THAT HP, Dell and every other PC maker out there is having graphics chips fail at alarming rates due to defective Nvidia chips, but who pays in the end? The users in everything other than money, but the cash cost is evenly divided between HP and Nvidia.
According to people close to the agreement, Nvidia has agreed to shoulder half the costs that HP sees, and that is averaging about $150 per incident. Someone doesn't want this information out, and anyone close to it is being shut up.
This brings up two questions, why are people not talking when it is in their best interest to talk, and how much could this cost in the end? Both have unpleasant answers.
The talking part is the most puzzling, if you look at HP and Dell, they are getting their posteriors reamed by their best customers. We will tip the hat to Dell for leaving the comments up there, they are taking quite a severe beating. HP is taking one as well, just not as publicly, and with far less direct control, as it is off their servers.
It is costing them about as much in dollars as it is reputation. If you recall, the initial NV hit on this was $150-200 million, and the OEMs pay half of that, depending on who they are. This means they take the same hit collectively, likely mostly shouldered by the big three (Dell, HP, Lenovo), meaning tens of millions per company.
So, the companies are being bled to the tune of eight digits and getting kicked in the sensitive parts as a thank-you. The one way they could clear the air is to say "We got a batch of defective chips from Nvidia, we are sorry. This isn't our fault, but we will make it right". Easy enough, and they will have to do this eventually, either because of bad PR or lawsuits, but for some reason they are shutting up. Large corporations are not known generally for masochism, especially when there is an easy out with most sides winning.
But they are not doing it. Makes sense, right? No, it doesn't, and there is only one good reason for this to happen, they are being shut up. Think about it, ten or so affected OEMs (Dell, HP, Lenovo, Apple, Asus and others), and no one is giving anything other than the same stupid corporate line about BIOS updates and thermal management.
What do all these OEMs have in common? Nvidia. We have not seen any hard documents on this, but the behaviour of the OEMs simply screams contractual gag. An educated guess here says the contract said something like "Nvidia out of the goodness of their hearts will pay half the cost if you guys shut up and bury this. If you don't, we will only pay for the bad chips". Now does the silence make sense?
That brings us back to why the OEMs are being so stupid. The PR hit they are taking, and the customers they are losing can't be worth the thin slice of $150-200 million they are getting. What we wouldn't give to see that contract, it will likely surface long before this whole mess is resolved though. The more heat you put on a pressure cooker, the harder it blows.
The second part may answer the why side a bit more, and that is money. Nvidia has only owned up to $150-200 million of this, and steadfastly refuses to list the affected parts. They claim it is simply a small batch of parts, and of those, there are only a small batch affected, and this is worth up to $200 million.
First a little mathematics, and for this estimate, we will be using very rough and round number to try and get an estimate of the magnitude of the problem. Exacting numbers will be left for the analyst community to pour over.
So, $150 per dead part, $150-200 million total. That means 1-1.33 million dead parts that they are admitting to. Small batch, our flabby posterior. Moving on, there are about 250 million computers sold worldwide per year, and about half of those are laptops. The bad chips, G84 and G86 among others, were sold for about 16 months, so 250 million / 2 * 1.33 = 166 million laptops or so in the time period.
Nvidia had about a 70 per cent mobile market share, and laptops have about a 30 per cent GPU attach rate. 166 million * .7 * .3 ~= 35million parts sold into laptops. Of that, not all are the officially 'affected' parts, several lines and older products don't have the same tendency for early death. Another educated estimate says about half the parts are potentially affected, lets call it 18 million bad parts. That would put the admitted failure rate at between five and eight per cent so far.
Using the high number of eight per cent and the low number of $150 million, we can figure out that the the total cost of a recall, again with NV paying only half, is around (100/8)*$150 million = $1.875 billion. Nvidia only has about $1.6 billion in the bank, so this could put a crimp on the decoration at the company non-denominational winter festivities party that does not endorse or disclaim any particular faith, religion, or point of view.
Basically, what it looks like is a recall could bankrupt Nvidia, even if they only pay half. They are quite desperate to minimise this and shut things up because they know what happens if it gets out. It is out, and why they keep continuing to pretend is beyond us, but that is corporate culture for you.
The OEMs? Well it looks like they got sucker punched. They likely agreed to shut up about this before they knew it would blow up in their faces. They took the easy money, and now are paying far more out the other side in terms of lost sales and customer ire. And here we thought the CEOs of those companies had a v ague clue, maybe not.
In any case, the numbers in the end don't lie. Nvidia is admitting responsibility by paying half of HPs cost, and getting twitchy about the cost of having to fix the real problem. Won't it be interesting to see how this ends up? And if Nvidia survives. µ
All Nvidia G84 and G86s are bad
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