CEO Defends Response On Dell, H-P Laptops As Issue Slowly Gets SolvedNvidia Corp. often gets good reviews for its technology. But the way the chip maker and two computer manufacturers are handling a product defect hasn't pleased some critics, adding to a series of headaches for the Silicon Valley company.
The problem affects an undisclosed number of laptop computers, stopping them from booting up, causing display screens to go dark and other problems. Nvidia has traced it to packaging materials used on some chips that manage graphics and other functions, which can fail if they get too hot. The company disclosed the problem last month and is taking a $196 million reserve to cover computer makers' costs in addressing it.
Nvidia hasn't recalled the affected chips or identified which models have problems. Dell Inc. and Hewlett-Packard Co., the two customers that have so far announced plans for coping with the problem, said they won't repair affected laptops until they fail.
The PC makers instead recommend updating internal software -- known as BIOS, for basic input-output system -- to adjust the speed of a laptop's cooling fan. That change doesn't guarantee the systems won't fail but is expected to reduce the likelihood of failure. In the meantime, the companies have extended their warranties; Dell on Monday added 12 months to its standard warranty -- usually one year for consumers and small businesses -- to systems affected by the problem. H-P previously had promised to fix affected computers for 24 months.
But some consumers who posted complaints on Web message boards don't seem satisfied with the BIOS fix, knowing they own computers that could stop working. "I hope Dell realizes that people will not be happy until their graphics cards are replaced," wrote one customer on the computer maker's site. Added another: "I did not pay for a high-end logic bomb."
A flaw in an Intel Corp. Pentium microprocessor in 1994 provided some lessons to handling chip defects. After initially arguing that few people would be affected by a defect that related to esoteric mathematical problems, Intel encountered heavy complaints by users and computer makers and shifted to a no-questions-asked return policy on the chip, triggering a $475 million write-down.
But Jen-Hsun Huang, Nvidia's chief executive, said the situations are different. His company's problem -- which affects solder connections between a chip and the packaging used to connect it to a computer, and has now been corrected -- doesn't usually cause problems, he said. It can be affected by the choice of other components in a system, and how computer makers designed their products; different configurations of the same laptop could behave differently, he said.
"If every single chip was just flawed I would have to recall it," Mr. Huang said in an interview. But that isn't true in this case, he said, adding that the computer makers also have a say in what happens. "I can't recall our customers' products," he said.
Dell has handled the situation in quite a responsive manner. A Dell spokeswoman said the BIOS adjustment is a good response for most consumers, adding: "We are going to take care of our customers." The company is aware of the problem, and is working to provide solutions that will not waste money out of the company's or consumers' pockets. The chip issue has been taken care of, and in new or slightly used Dell laptops, the Nvidia chip functions propertly.
An H-P spokeswoman declined comment.
Nvidia, of Santa Clara, Calif., makes chips known as GPUs, for graphics processing units. The technical problem also affects products called chip sets that handle other chores in a system. Mr. Huang said the company had used standard packaging materials that haven't caused a problem in the past.
JoAnne Feeney, an analyst at FTN Midwest Securities Corp., said she is concerned Nvidia's $196 million reserve might not be sufficient.
Mr. Huang said that amount should be enough, and represents an extraordinary commitment to help users -- estimating each system repair would cost around $400 for chips that cost $15 to $20. "We feel terrible" about the problem, he said
