GPU Wars: Attack of the $200-300 GPUs
Monday, December 15th, 2008It’s a good thing NVIDIA does more than just desktop GPU discrete graphics these days. If NVIDIA had never expanded beyond the desktop, the company would really be in a world of hurt. NVIDIA’s revenue share, for example, in high-end GPUs went from 80% to 30% from the second to third quarter (NVIDIA Corporation at Credit Suisse Group Technology Conference Presentation, December 2, 2008)!
High-end desktop graphics has traditionally been a high-margin business, with cards commanding $400-600 in prices. Not anymore. AMD recently released chips intended for the $200 and $300 markets, the Radeon HD 4870 and 4850. However, the $300 chip was good enough to take on NVIDIA’s $400 offering, and ATI’s $200 GPU NVIDIA’s $300 GPU. “ATI now had a $300 card that was competitive with NVIDIA’s brand new $400 GTX 260“.
A price war ensued. There went the margins.
The pricing of the card above the $200-400 cards in the GPU hierarchy was even affected.
Today cards that originally cost around $300 and $400 can be had for little more than $200. Amazing.
While price wars are good for consumers, they can be bad for margins. Make no mistake. The smaller AMD chip costs less to produce than the larger NVIDIA chip. Nevertheless, the fact that AMD’s ATI graphics division has yet to return a net profit argues that ATI’s GPUs are not making that much money.
Likewise, NVIDIA’s desktop margins are under pressure. High-end GPUs have traditionally been a high-margin business for NVIDIA and chipsets a lower-margin business. Yet the CEO was recently asked if “chipset gross margins right now are greater than your desktop gross margins”, and the CEO replied, “Yes, they are close“.
AMD’s current company-wide strategy is simply to return to profitability. The company’s gross margins are such that all they have to do, to achieve a net profit, is get their sales up. It should happen eventually, though it doesn’t look like it’s going to happen this quarter. Consequently AMD is presently trying not so much to push the envelope of technology, or to expand the overall CPU or GPU markets, as it is trying to take market share from what’s already out there.
One area where AMD would love to take market share is the incredibly lucrative area of professional workstation graphics. This space is practically owned by NVIDIA, which in the third quarter had “90% of overall units” and enjoys gross margins of around 70% (Credit Suisse Conference, 12/2/08).
I don’t see how a chip designed for the $300 price point, such as ATI’s, is going to scale far into the high end of professional workstation graphics. It seems that it would be more difficult to scale up a GPU than to scale down: to add to the complexity, than to simplify a design.
That being said, the reviews I have seen of ATI’s professional workstation cards have been good. We’ll have to see how this plays out. I always like a good fight.
Disclosure: long NVIDIA
