It has been obvious for some time that integrated graphics processors (IGPs) will move from the chipset onto the processor die, and that this development will leave NVIDIA with no market for its chipsets. Such an eventuality is, in fact, the reason behind the oft-mooted skunkworks NVIDIA x86 project (the thinking goes that NVIDIA will try to compete with CPU/GPU combo chips from Intel and AMD by producing a CPU/GPU combo of its own). Regardless of whether the secret, NVIDIA-made x86 processor will ever see the light of day, it seems that NVIDIA has not only resigned itself to the eventual loss of its chipset business, but they've also decided not to blow any more money fighting a losing battle with Intel in that space.

Today brings word that the GPU maker is bailing on the chipset market for Nehalem, and opting to halt development of future chipsets that might work with Intel's recently announced Core i5/i7 PC architecture. It's also looking like NVIDIA will quit developing new AMD chipsets, as well. NVIDIA has released a slew of statements to different press outlets, including Ars, pining the blame for this decision on the company's ongoing patent dispute with Intel (see below for more on this).

Of course, NVIDIA has been careful to go back and tweak its language, because "Bowing to the inevitable but blaming Intel, NVIDIA announces plans to bail on PC chipset market" doesn't make very flattering copy. But it does seem that this is what's happening—though, in fairness to NVIDIA we'll reproduce their actual statement in a moment.

NVIDIA will keep making Ion, the 9400M, and the other chipsets that it has in the product pipeline. But work on future designs appears to have been halted, though NVIDIA prefers a to speak of merely "postponing" development while the Intel licensing issue is sorted.

News of NVIDIA's chipset market bombshell tipped up at PC Magazine earlier today, where NVIDIA's Robert Sherbin told the site, "We have said that we will continue to innovate integrated solutions for Intel's FSB architecture... We firmly believe that this market has a long healthy life ahead. But because of Intel's improper claims to customers and the market that we aren't licensed to the new DMI bus and its unfair business tactics, it is effectively impossible for us to market chipsets for future CPUs. So, until we resolve this matter in court next year, we'll postpone further chipset investments."

PC Magazine also reported as an unexplained aside that work on AMD chipsets has also been halted, despite the fact that the Intel DMI issue should have no bearing on NVIDIA's AMD platform plans.

NVIDIA spokesperson Ken Brown told Ars that the company has "a roadmap for future chipsets which haven't been announced yet." Presumably, these are chipsets that have already been designed and are in the product pipeline, but haven't yet been announced. Brown followed up with a fuller statement a few hours later:

We've received a number of inquiries recently about NVIDIA's chipset (MCP) business. We'd like to set the record straight on current and future NVIDIA chipset activity. On Intel platforms, the NVIDIA GeForce 9400M/ION brands have enjoyed significant sales, as well as critical success. Customers including Apple, Dell, HP, Lenovo, Samsung, Acer, ASUS and others are continuing to incorporate GeForce 9400M and ION products in their current designs. There are many customers that have plans to use ION or GeForce 9400M chipsets for upcoming designs, as well. On AMD platforms, we continue to sell a higher quantity of chipsets than AMD itself. MCP61-based platforms continue to be extremely well positioned in the entry CPU segments where AMD CPUs are most competitive vs. Intel We will continue to innovate integrated solutions for Intel's FSB architecture. We firmly believe that this market has a long healthy life ahead. But because of Intel's improper claims to customers and the market that we aren't licensed to the new DMI bus and its unfair business tactics, it is effectively impossible for us to market chipsets for future CPUs. So, until we resolve this matter in court next year, we'll postpone further chipset investments for Intel DMI CPUs. Despite Intel's actions, we have innovative products that we are excited to introduce to the market in the months ahead. We know these products will bring with them some amazing breakthroughs that will surprise the industry, just as GeForce 9400M and ION have shaken up the industry this year. We expect our MCP business for both Intel and AMD to be strong well into the future.

NVIDIA has clearly ducked the question about AMD chipset R&D that we included in our initial request for a statement from them, so we followed up again with a point-blank question about the company's R&D plans for AMD chipsets, asking if it was true that the AMD work was also halted. NVIDIA has yet to respond, so we're assuming that the PC Mag report is accurate, and that NVIDIA's chipset "postponement" also applies to the AMD chipsets.

Though NVIDIA seems determined to pin the blame for this move on Intel, it seems more likely that some combination of the Intel dispute and current economic conditions forced NVIDIA to take this painful but inevitable step earlier than it might have liked.

The DMI bus licensing dispute

In our report on Intel's Core i5/i7 launch, we discussed the change in PC architecture that the new processors ushered in. We won't recap that here, but take a look at the two diagrams below:

A typical pre-Nehalem Intel system

In the diagram above, the IGP would go on the memory controller hub (MCH), which is connected to the CPU by a frontside bus. NVIDIA has a license to Intel's frontside bus protocol, so it can make chipsets that talk to Intel CPUs. NVIDIA didn't need a license to the DMI bus that the two parts of Intel's chipset use to talk to each other, because it either made its own I/O controller hub (ICH) or just incorporated the MCH and ICH into one chip.

Intel's new P55 platform for Nehalem

The second diagram above shows Intel's new P55 architecture, in which the frontside bus has completely disappeared, and the CPU now talks to the I/O hub via the same DMI bus that was formerly used by the MCH. Because NVIDIA can't get a DMI license from Intel (the matter is being litigated), any PCH replacement that it would make wouldn't be able to talk to the CPU.

Given that the outcome of the DMI licensing dispute is uncertain, a company in NVIDIA's position can't afford to keep funding the development of chipsets that may not make it to market, and if they do make it to market, will have a finite lifespan. At best, the market for third-party IGPs for Nehalem will last about two years after Intel launches its CPU/GPU combo, as the latter part gains market share at the expense of chipset IGPs. Of course, that's a few years in which NVIDIA could have made some money, but given the company's current troubles it's better to take the losses early and move on.