Faulty graphics chips cost NVIDIA $66 million

During its last fiscal year graphics chip manufacturer Nvidia spent $US43.6 million ($67 million) to cover warranty and product replacement claims as they related to graphics chips which were sold utilizing a weak packaging material that allowed the chips to become damaged due to overheating.

In July 2008 Nvidia took a $196 million charge against its second quarter earnings for the specific purpose of covering any more warranty and replacement costs for the same issue.

However the $43.6 million spent to date means that so far NVIDIA has only spent a mere 22% of the original amount set aside suggesting that there are still thousands of notebooks out there with the faulty chips.

The details of the money spent thus far for the replacement or repair of flawed chips is included in the company’s annual report.

Nvidia did not increase the amount that has currently been set aside for the purpose of covering warranty costs for their flawed products leading individuals to believe that the original estimate will be enough to cover the issue.

However NVIDIA’s allocation doesn’t account for any potential lawsuits which the company is currently fighting from customers and investors seeking damages in regards to the flawed chips and the method in which the issue was handled.