Nvidia producing XBox chipsets under duress

NVIDIA HAS BEEN ORDERED to keep producing graphics chipsets for Microsoft's X-BOX, despite the on-going wrangle over the price they'll get for them.

An arbitration panel ruled that the company should continue to supply Microsoft with the graphics chipsets it requires until the issue is settled -- which could be over six months away.

The development is outlined in a fling with the Securities and Exchange Commission.

In the filing, Nvidia says, "The arbitration panel has issued an interim ruling that we must supply Microsoft's reasonable requirements of chipsets, but no minimum or maximum amount has been set overall or for any particular period."

It says, further, that Microsoft has asked for damages for alleged violations of the agreement between the two companies and requested that the arbitration panel reduce chipset prices paid by Microsoft. In its turn, Nvidia has asked for "pricing relief" and also claims damages.

Nvidia explains that it has deferred revenue or sales of the Xbox processors "in an amount equal to the difference between the price being paid by Microsoft and the price Microsoft claims it should be paying."

It expects to continue to defer revenue related to the disputed pricing and volume discount for future sales of these processors until final resolution of the matter. "This amount was approximately $46.2 million as of July 28, 2002," it adds.

The arbitration is being conducted in New York by a panel under the rules of the American Arbitration Association. The arbitration is expected to conclude before June 30, 2003.

The full text on Nvidia's filing to the SEC is here . µ