NVidia announced disastrous results for the end of 2008. Its sales completely crumbled as from November. Even though the economic crisis is of course to blame, NVidia also blames some of the integrators of its products, the manufacturers of computers and of graphics cards.
To limit the crisis as much as possible, the integrators decided to reduce in a drastic way their stocks of products, going from a 2 months inventory to two weeks, which of course completely kills off the sales of chips by NVidia.
In order to convince them to stock again, NVidia is prepared to propose a protection of price on the products that they will buy. Thus, if the price drops, NVidia will refund them and they will be compensated in case of the announcement of new products.
This phenomenon is not only found at Nvidia. All the component makers, and those in the chain are very affected by the fall of the sales and the orders, and those that can not halt their production will be obliged to lose very large sums of money quickly.
Thus, NVidia will not order the new manufacture of chips by TSMC, its foundry. TSMC are already running at 50% of their capacity.
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