NVIDIA is being sued in a class action for allegedly concealing knowledge of a defective manufacturing process which resulted in overheating and widespread chip failures.
NVIDIA fessed up to performance problems in July., announcing that it would take a hit of up to $US200 million to cover the costs of dealing with defective materials in its notebook GPU (graphics processing unit) and MCP (media and communications processor) products. "Certain notebook configurations with GPUs and MCPs manufactured with a certain die/packaging material set are failing in the field at higher than normal rates," its earnings announcement disclosed, an announcement which promptly sliced $US3 billion or so off the company's market value.
"Today's high performance notebooks are highly complex systems with extreme thermal environments," the earnings announcement noted. "The combination of limited thermal management and frequent power cycling is particularly challenging for complex processors like the GPU." An informal translation: these things can run so hot there's no telling what might happen. Notebooks from Acer, Apple, Asus, BenQ, Dell, Fujitsu, HP, LG, MSI, NEC, Sony and Toshiba are among manufacturers known to use the same model chips as those that are faulty.
With that said, it was probably predictable that a lawsuit would result. The suit, filed this week against NVIDIA, its CEO Jen-Hsun Huang and CFO Marvin Burkett, seeks class action status for any investors who purchased Nvidia shares between November 2007 and July 2008, according to a copy of the filing on the site of lawyers Shalov Stone Bonner & Rocco LLP, who are spearheading the action. The filing notes that NVIDIA executives have suggested that they were aware of the problems as far back as August 2007, and seeks compensation for making, in effect, an less-than-fully-informed stock purchase decision.
"The problem stems from what has been termed 'heat cycling' by industry professionals," the suit noted in part. "When computers equipped with NVIDIA's graphics cards are switched on, the cards quickly reach high temperatures. As the cards cool down, however, the rapid change in temperature subjects them to extreme physical stress. As a result, solder joints weaken and ultimately crack, causing the video adapters to malfunction and stop working altogether."
NVIDIA hasn't had a great year on the reputational front. In March, evidence filed as part of a lawsuit against Microsoft for its 'Vista Capable' hardware tagging program suggested that as many as 30% of all Vista system crashes were caused by NVIDIA drivers.