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Nvidia lowers Q2 gross- margin forecast

130nm chips costing more than expected

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Nvidia has lowered its gross-margin expectations for its current fiscal quarter, the company said yesterday, thanks to "higher than anticipated product costs attributed to the 0.13 micron semiconductor process technology".

In announcing preliminary results for its second quarter, which ended on Sunday, Nvidia reiterated that it expects revenues for the period to reach between $455 million and $460 million. Even the low end of that range is more than ten per cent up on the previous quarter.

Nvidia's chips are fabricated by TSMC and IBM, though the latter is a relatively recent addition to the company's list of partners. Nvidia didn't say which, if any, of these two it has in mind as the cause for the reduced margins.

Whoever is to blame, the transition to 130nm isn't proving an easy one, with yields taking some time to improve, and that's bound to have a knock-on effect on fab customers' margins.

Higher than expected costs are keeping other companies from transitioning to 130nm, as shown by the latest research from market watcher Semico, which yesterday cut its foundry demand growth forecast for 2003 from 29 per cent to 27 per cent. That reduction is largely due to lower than anticipated demand for 130nm parts.

Nvidia also said it experienced solid growth during the quarter from Xbox and from record shipments of its GeForce FX family of graphics chips. In addition, the company "successfully transitioned its mobile product line to its new GeForce FX Go family and recently began ramping numerous notebook design wins," it said in a statement. ®

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