Nvidia Corporation SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

1. Faster rendering technology used by its competitors: AMD – the most important competitor of NVIDIA uses OpenGL as its main rendering technologies which is much faster than the rendering technologies used by NVIDIA. NVIDIA uses DirectX. The answer as to why OpenGL is faster than DirectX is OpenGL has more efficient pipeline. OpenGL is rendering a frame in 3.69milliseconds at 303.4 fractions per second, whereas DirectX is rendering a frame in 3.69 milliseconds at 270.6 fractions per second. Although NVIDIA has a much higher market share of 81% than 18% market share of AMD, but there are other competitors that are creeping up. For example, Intel has plans to introduce discrete GPUs and may challenge NVIDIA’s dominance. Some of the competitors of NVIDIA are AMD (the most important one), Intel, NXP, Qualcomm, Texas Instruments, Broadcom, Samsung, Apple, Sony, etc.

2. Increased use of mobile technology: As the mobile technology is gaining the attention, many games are easily available in the mobile phone platform. So the demand for explicit graphics card to play is decreasing. And for that reason NVIDIA has also started paying its resources towards improvisation of mobile gaming technology. Newzoo predicted the revenue in October 2018 that total gaming would be worth $174.0 billion by 2021. Among them they predicted that mobile gaming will continue to grow reaching $91.2 billion with 43% users of market smartphone gaming and 9% users of tablet.

3. Crypto currency meltdown to impact GPU demand: The sale of high-end CPUs of NVIDIA increased many folds in 2017 and 2018 because of the large amount of orders by crypto currency miners. It caused shortage of supply of GPU for its use in core PC gaming market. But Bitcoin and other crypto currencies faced a problem of bubble popping up in late 2018 which has continued in 2019. Thinking about the worse condition, if these miners retreat themselves and moreover if they start selling their already used GPUs at lower rate, then this situation would lead to another supply glut. This can be worse by considering the increase in supply of new GPUs by NVIDIA.

4. Competitive threats in the automotive market: Introducing Tegra CPU, a powerful invention for infotainment and navigation system in high-end cars, brought the first mover advantage to NVIDIA. Tegra-assisted Drive PX platform empowers the driver-less vehicles. NXP and Intel are the biggest competitors of NVIDIA in this business segment. NXP is one of the biggest car’s chip maker challenge NVIDIA with BlueBox, another autonomous platform. Intel along with famous chipmakers – Movidius and ADAS (advanced driver assistance system) leader Mobileye is another threat to NVIDIA.

Political

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Economic

1. Strong dollar to impact Asian sales: With the US dollar strengthening by 4.3% in 2018, Nvidia’s products seem to be more expensive in Asia (where it is mostly marketed) and has consequently pushed the company’s prices lower. 59% of the company’s revenues come from the gaming as of FY ended Jan 2019. Further, China and Taiwan combined accounted for over 50% of the company’s total sales in FY2019 in GPU segment. This conscious lowering of prices has resulted in the revenues to come down.

2. Uncertainties associated with dependence on international operations: Third party manufacturers, assemblers, testers and packagers play a major role in the production of Nvidia’s semiconductor wafers. These are all located at places outside the United States. The major portion of the company’s revenue is sourced from outside the U.S. amounting to almost 87% of the total revenue for the fiscal years 2019, 2018, and 2017. Brexit and other similar Politico-economic factors, import and export regulations and restrictions as well as fluctuating local business and cultural factors can thus have a strong impact upon Nvidia operations and revenues.

Social

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Technological

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Legal

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Environmental

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