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As early as August of last year Jen-Hsun Huang, NVIDIA’s CEO, said of netbooks, “that’s just not our target. I mean, there are a lot of things that are not our targets and that just happens to be one of the things that is not our target” (Earnings Call Transcript).

That was then. This is now. Since that time, the recession has turned global, netbooks are thriving like tubeworms at the bottom of the Atlantic, and NVIDIA’s CEO is singing a different tune. NVIDIA recently announced plans for Ion, which is Intel’s Atom processor combined with NVIDIA graphics, for netbooks. The buzz surrounding Ion is reminiscent of the first Centrino.

The Nvidian CEO recently gave a couple of interviews, which contain information that may be of interest to investors.

Ion

It did not take a great leap of the imagination to see Ion coming. NVIDIA has been contending for some time that graphics processors (GPUs) been growing in importance and that to get the most bang for your buck, system integrators could wed a less powerful CPU with a more powerful GPU.

When Intel brought Atom to market, it was natural to think of what might happen if one were to pair Intel’s smallest microprocessor with high-end NVIDIA graphics. Ion however does not use NVIDIA’s highest-end graphics chips but rather the same chip that is used in recent Apple notebooks.

Intel

When Ion was announced, it did not take long for the rumor mill to swing into action. About a week later, it was said that Intel would not allow Atom to be sold separately from Intel core logic (DigiTimes).

Intel quickly replied that this is not the case, “there is no exclusionary bundling in play” (InternetNews).

But what if Intel allowed Atom to be sold separately but charged a ridiculous amount? Of such speculation the NVIDIA CEO “brushed it off so far as rumors” (LAPTOP Magazine).

At this point, only one thing is certain; NVIDIA really likes Atom. “Intel’s Atom is a fabulous processor” (VentureBeat).

Atom

Management at NVIDIA and AMD–unlike NVIDIA and Intel–seem to communicate with one another, and I say this because they frequently say the same thing with a slightly different spin, and it seems improbable that such similarities of content originate entirely separately. Case in point, NVIDIA and AMD both say that they don’t see much difference between netbooks and other notebooks or computers, other than obvious differences in size and cost.

To this it must be pointed out that, though they may look similar, the hardware underlying netbooks is quite different than that of other Intel notebooks. The CPUs are based on entirely different architectures. Perhaps Intel has a point that the Atom CPU was designed for a different type of machine than a notebook.

AMD

AMD does not have a comparable chip to the Atom, so AMD hardware cannot as easily go into netbooks. That will not stop AMD, however, from trying to take market share from netbooks. The idea is pretty simple: prey upon the frustrations many feel using netbooks, win away their business, and offer most of what netbooks offer but with a larger screen and fuller PC experience.

NVIDIA’s CEO thinks that Ion, because of its strong graphics, would be competitive with such products from AMD that would try to take market share from netbooks, and that Ion would be better in some ways. The beefier CPU and GPU of AMD’s platform may trump an Intel netbook in sheer performance. The Ion, however: “That’s totally different” (LAPTOP).

Design Wins

So when might we expect to see netbooks based upon Ion? Don’t hold your breath. “Design cycles are typically less than a year” (VentureBeat).

Another processor investors should watch is NVIDIA’s application processor which is to power smart phones in conjunction with ARM processors and run a version of Windows CE.

Design cycles for smart phones or Internet devices with Tegra appear to be even longer than netbooks. It “typically takes a year or year and a half to get to market” (LAPTOP).

VIA Nano

AMD and Intel are not the only two companies to manufacture CPUs. There’s also a small company on the other side of the world which makes a CPU that targets low-power devices.

When NVIDIA announced Ion, it was assumed that NVIDIA was dumping VIA and the Nano processor. This appears to be inaccurate. NVIDIA is a processor-agnostic company and will make graphics for any processor, be it Intel, AMD, ARM, or VIA.

In fact, the CEO of NVIDIA said his company is a huge fan of the Nano and intends to include it in “our next-generation Ion platform” (LAPTOP Magazine).

While NVIDIA is CPU agnostic, NVIDIA has no intentions to enter the CPU market itself. To the CEO’s thinking, that would be like reinventing the wheel. “Why redo it?” (VentureBeat).

Fusion

AMD was the first company to announce that it was going to integrate graphics directly onto the CPU. AMD had scored a coup against its arch-nemesis Intel by integrating the memory controller directly onto the CPU. So, the thinking went, why not do it with GPU as well?

Such thinking may have seemed logical back then. However, it has become more and more likely that on-die graphics will never amount to more than a mainstream part and not the high-margin, high-performance part once hoped.

Technology moves too fast, and to integrate graphics on the CPU is to lock one into yesterday’s graphics for a period of 3-5 years. Said NVIDIA fellow David Kirk and chief scientist at the time: “A device with a mix of GPU and CPU cores would be a great product for the low end” (EE Times).

That being said, there may very well always be a place for affordable good-enough graphics, and such graphics may be integrated on the CPU. This is a space in which NVIDIA typically does not play, and the CEO’s response to on-die graphics was “That’s OK” (VentureBeat).

AMD’s Rich Uncle

Those who say that AMD could fold any day now seem to be unaware that AMD has an investor with deep pockets. How deep? Abu Dhabi recently invested $8.4 billion in AMD. That’s not a typo.

Apart from the backing from Abu Dhabi, AMD should be bankrupt right about now. Jen-Hsun’s take on AMD and Abu Dhabi is interesting. “They couldn’t have survived without the Abu Dhabi deal”.

Abu Dhabi doesn’t “want the microprocessor business. They don’t understand it. They want a manufacturing business”. Getting Abu Dhabi to invest in AMD was “a brilliant deal that saved the company”.

Is NVIDIA worried about Abu Dhabi’s deep pockets and their support of NVIDIA’s principal competitor? Not at the moment. Of AMD Jen-Hsun said: “We are miles ahead of them in GPU computing” (VentureBeat).

GPU Computing

NVIDIA is primarily known as a graphics company. However, the company has started to extend its graphics technologies beyond graphics to non-graphics applications. Applying a GPU to non-graphics workloads is known as GPU computing.

Not all applications lend themselves equally well to GPU computing. Most do not. However, for those that do, speedups are being seen sometimes by an order of magnitude in the hundreds. NVIDIA has been investing in GPU computing for quite some time, and GPU computing has, in the opinion of the CEO, “passed the tipping point” (VentureBeat).

Windows 7

The NVIDIA CEO appears to have done an about-face in regard to operating systems as well. Jen-Hsun used to be bullish on Microsoft Vista. “Any consumer will [enjoy] Vista”, he said way back in 2007 (F3Q08 Transcript).

There’s only one problem with that. Vista is too resource hungry to run on netbooks. This is a problem because netbooks are the fastest (only?) growing segment in the PC industry today. Enter Windows 7. “Windows 7 will go all the way down into the cheap PCs. Vista didn’t” (VentureBeat).

Brave New World

One thing that makes NVIDIA unusual in the current environment is the aggressiveness with which it is investing in R&D. The company is investing more not less. It is investing more, not just trying to keep expenditure of R&D level. Said Jen-Hsun: “I’m going to invest a lot more in R&D this year than I did last year — by a lot” (VentureBeat).

Foolish? Only time will tell.

The CEO contends that a lot of things will be different when this recession ends. It may be that all consumers will want is something that looks like a netbook but which is much more powerful. “I am prepared for that outcome” (VentureBeat).

If and when this recession ends, and the smoke clears, there will likely be two main chips inside netbooks, smart phones, and other Internet devices and computers. The CPU and the GPU. The CEO of NVIDIA: “I will have one of them” (VentureBeat).

Disclosure: long NVDA and INTC

The most interesting thing in computing these day is GPU computing.

Instead of using the the CPU to do computations, one can use the GPU. GPU stands for graphics processing unit. These are the chips that have traditionally handled graphics in computers.

However, they are now able to handle much more.