Additionally, the increase in unit sales and a richer product mix of our GeForce desktop and notebook products and Quadro workstation products as well as manufacturing cost efficiencies and strong management of inventory also helped our gross margin improve in fiscal year 2012. Other favorable impacts to gross margin were the absence in fiscal year 2012 of a net charge to cost of revenue in the amount of $181.2 million recorded in fiscal year 2011 related to a weak die/packing material set and lower provisions for net inventory reserves in fiscal year 2012 compared to fiscal year 2011.



Our gross margin was favorably impacted by sales of products that were previously written down and sales of such items improved gross margin by approximately 1.8% and 1.9% in fiscal years 2012 and 2011, respectively.   Offsetting these releases are provisions for new inventory reserves.  The net effect to gross margin from inventory reserves and sales of items previously written down was a 0.5% favorable impact in fiscal year 2012 and a 3.0% unfavorable impact in fiscal year 2011.



GPU Business. The gross margin of our GPU business increased during fiscal year 2012 when compared to fiscal year 2011.  This was primarily due to lower net provisions for inventory in fiscal year 2012 compared to fiscal year 2011 and additional warranty accruals arising from a weak die/packaging material set recorded in fiscal year 2011. Higher unit sales and richer product mix of our GeForce desktop and notebook products also improved gross margin for the GPU business. In addition, the gross margin for both Quadro and Tesla products remained stable during fiscal year 2012 as compared to fiscal year 2011.  



Tegra Processor Business.  The gross margin of our Tegra Processor business decreased during fiscal year 2012 as compared to fiscal year 2011. This decrease was a result of a change in product mix driven by a lower mix of license fees and other revenue related to game consoles and a higher mix of revenue from our Tegra products, which grew substantially during fiscal year 2012.

    

Operating Expenses 

Research and Development



Fiscal Year 2013 vs. Fiscal Year 2012



Research and development expenses increased by $144.7 million, or 14.4%, year over year. This increase was primarily due to a $99.4 million increase in compensation and benefits expense as we continue to hire engineering talent to invest in our business. Depreciation and amortization increased by $9.8 million, driven primarily by amortization of intangible assets associated with our acquisition of Icera in fiscal year 2012, as well as purchases of additional hardware and licenses during the year. Engineering development expenses increased by $6.8 million related to the ramp of our next-generation GPU architecture, Kepler, designed for 28nm technology and our next generation Tegra processor architecture, Tegra 4.



Fiscal Year 2012 vs. Fiscal Year 2011



Research and development expenses increased by $153.8 million, or 18.1%, year over year. This increase was primarily driven by investments in our efforts to build next generation energy efficient computing architectures. These efforts resulted in a