Nvidia Forced to Continue Making Chips for Xbox
Posted by talleyrand on Tuesday, September 10 2002

The arbitrator’s hearing a dispute between Nvidia and Microsoft over graphics chips for the Xbox video game console have ordered Nvidia to continue supplying the chips to Microsoft, threatening penalties if production is stopped.

Nvidia under a March 2000 agreement supplies certain graphics and processing chips for Microsoft's game console. Microsoft and Nvidia’s dispute is over the price it pays for those chips and the quantities in which they are produced.

"The arbitration panel has issued an interim ruling that the company must supply Microsoft's reasonable requirements of chipsets, but no minimum or maximum amount has been set overall or for any particular period," Nvidia said in a quarterly report filed with the U.S. Securities and Exchange Commission.

Nvidia has been recording the difference between what Microsoft is paying and what the software giant claims it should be paying as deferred revenue. The company said the deferred amount was $46.2 million as of July 28, the end of its fiscal second quarter.

Nvidia has cautioned that if it loses, it could be forced to produce the Xbox chips at a loss and might have to reduce production of other chips to satisfy Microsoft's demands thus forcing Nvidia to miss a product cycle. This could spell doom for Nvidia if ATI can leap ahead.

No decision has been reached about the price dispute.