PC Graphics Market on Track for Post-pandemic Correction

[N3M3515]

Imagine this scenario:

- AMD launch just 2 GPUs, for now
- AMD sells their flagship GPU that trades blows @ least in raster with 4090 (if not higher performance) for ... say ... $1000
- AMD lowers the prices of ALL their current line accordingly, so that every tier has their own pricing

How do you think will nVidia respond to that?

It's not like there hasn't been a precedent for this: remember when Zen launched? 8c / 16t @ CPU around half the price of what Intel priced their premium CPU.

If amd releases the top gpu for $1000 and second for $800, they stop there and lower 6900xt to 600 - 6800xt to 500 - 6800 to 400 - 6750xt to 300 - 6650xt to 250 and 6600 to 200
Until inventory for 6000 series dries up, then release the rest of 7000 series. Although i'm being VERY optimistic with prices.

 

[HTC]

If amd releases the top gpu for $1000 and second for $800, they stop there and lower 6900xt to 600 - 6800xt to 500 - 6800 to 400 - 6750xt to 300 - 6650xt to 250 and 6600 to 200
Until inventory for 6000 series dries up, then release the rest of 7000 series. Although i'm being VERY optimistic with prices.

Something like that, yes: the idea is to have a FAR LOWER price than nVidia's equivalent segment cards.

This would FORCE nVidia to lower their prices @ the very least and maybe even lose money by being forced to sell below cost.

However, such a move would be a HUGE GAMBLE: does AMD "have to stones" to try it?

 

[cvaldes]

Something like that, yes: the idea is to have a FAR LOWER price than nVidia's equivalent segment cards.

This would FORCE nVidia to lower their prices @ the very least and maybe even lose money by being forced to sell below cost.

However, such a move would be a HUGE GAMBLE: does AMD "have to stones" to try it?

The bigger question is how much gross margin erosion will AMD shareholders stomach before demanding the board of directors to sack management.

It's not like AMD is a charity. Their primary responsibility is to increase shareholder value.

NVIDIA sells four times more PC graphics cards than AMD. Datacenter is NVIDIA's largest business and growing at a much faster rate than their runner-up Gaming business.

I think AMD can grab a little short term marketshare with strategic pricing but they aren't going to knock NVIDIA off their throne anytime soon.

Not only does NVIDIA have superior technology they also have a much deeper and expansive developer environment. NVIDIA's software prowess is easily a major contributor to their ongoing success.

 

[HTC]

I think AMD can grab a little short term marketshare with strategic pricing but they aren't going to knock NVIDIA off their throne anytime soon.

Before Zen, i'd agree with you 100%. However, Zen showed us what can be achieved if "the push is hard enough": keep in mind AMD's CPU market share was below that of current AMD GPU market share.

It all depends on the performance of this new generation:

- if their new halo product is not @ least on par in raster, such a move would likely not work
- if their halo product is noticeably faster @ least in raster, then such a move would likely have good odds of success, IMO

Either way, it would be a MASSIVE gamble.

 

[AusWolf]

Before Zen, i'd agree with you 100%. However, Zen showed us what can be achieved if "the push is hard enough": keep in mind AMD's CPU market share was below that of current AMD GPU market share.

It all depends on the performance of this new generation:

- if their new halo product is not @ least on par in raster, such a move would likely not work
- if their halo product is noticeably faster @ least in raster, then such a move would likely have good odds of success, IMO

Either way, it would be a MASSIVE gamble.

Zen showed us that AMD is still in the game. Intel still leads by market share on the CPU front. One generation of good products at a decent price is not enough to knock another company off its throne. PC is an increasingly long-term business nowadays. Unlike in the '90s when you needed a new PC every year, upgrade plans can easily span 5-10 years with some careful choices now.

And that's just the home PC business.

 

[HTC]

@AusWolf

To use an analogy, it's better to sell 100 Kg of apples @ 1.5€ per kg than to sell 40 Kg of apples @ 2.5€ per kilo.

They don't need to overtake nVidia's market share: raising it by 10 to 15% would already be massive for AMD. They could then expand on that in the next generation.

Chiplets are coming to AMD's GPUs, and with them is far lower GPU manufacturing costs: unless nVidia can also come up with chiplets of their own, there's only so much they can do with monolithic designs, from a cost perspective.

 

[cvaldes]

@AusWolf

To use an analogy, it's better to sell 100 Kg of apples @ 1.5€ per kg than to sell 40 Kg of apples @ 2.5€ per kilo.

Here we go yet again.

Revenue ≠ profit

Let's say the cost to grow apples is 1.00€ per kg.

100 kg x (1.50€ -1.00€) = 50€ profit off of 150€ revenue, gross margin 33.3%
40 kg x (2.50€ -1.00€) = 60€ profit off of 100€ revenue, gross margin 60%
...
60 kg x (2.00€ -1.00€) = 60€ profit off of 120€ revenue, gross margin 50%
80 kg x (1.75€ -1.00€) = 60€ profit off of 140€ revenue, gross margin 42.9%

The problem? We don't know AMD's COGS for Radeon 7000 series cards. While AMD might report gross margin at a very high level, they certainly won't report it for a product line like Radeon RX 7700 XT.

Sure, shareholders would love to see revenue, profits, and gross margins all go up. That's very hard to do when your business is contracting.

There's no one perfect formula/ratio for this. If you heavily discount prices, customers may balk at future price increases. If you bump up prices too fast, some will show their displeasure.

AMD has an opportunity to gnaw away at NVIDIA's market share by undercutting prices. Doing so comes with the risk of eroding gross margin and possibly setting a tone to customers that your products aren't as good as the competition.

One unanswered question: whose apples taste better?

 

[HTC]

Here we go yet again.

Revenue ≠ profit

Let's say the costs to grow apples is 1.00€ per kg.

100 kg x (1.50€ -1.00€) = 50€ profit off of 150€ revenue, gross margin 33.3%
40 kg x (2.50€ -1.00€) = 60€ profit off of 100€ revenue, gross margin 50%

The problem? We don't know AMD's COGS for Radeon 7000 series cards.

This is unknown for both AMD and nVidia, for ANY generation, but i take your point.

Still, the general idea is to have a VERY LOW profit now (this generation, @ least until RDNA 2 is sold out) to have high profits later, with the advent of chiplet based GPUs, but that's not the target of this strategy: the target is to increase significantly their market share.

 

[AusWolf]

Here we go yet again.

Revenue ≠ profit

Let's say the cost to grow apples is 1.00€ per kg.

100 kg x (1.50€ -1.00€) = 50€ profit off of 150€ revenue, gross margin 33.3%
40 kg x (2.50€ -1.00€) = 60€ profit off of 100€ revenue, gross margin 60%
...
60 kg x (2.00€ -1.00€) = 60€ profit off of 120€ revenue, gross margin 50%
80 kg x (1.75€ -1.00€) = 60€ profit off of 140€ revenue, gross margin 42.9%

The problem? We don't know AMD's COGS for Radeon 7000 series cards.

This is why even if we see some separation between Nvidia and AMD's pricing, it won't dethrone Nvidia. The market will just revert to the old "Nvidia is king, AMD is for budget buyers" kind of thinking.

 

[HTC]

The market will just revert to the old "Nvidia is king, AMD is for budget buyers" kind of thinking.

If nVidia's cards are better, yes.

But what if AMD's offer better performance, @ least in raster?

 

[kapone32]

Today's hot deals a Gigabyte 6600 for $299 at Canada Computers. I also saw a 6700XT for $499 but can't remember where. Those prices are in Canadian dollars so.

 

[cvaldes]

This is unknown for both AMD and nVidia, for ANY generation, but i take your point.

Still, the general idea is to have a VERY LOW profit now (this generation, @ least until RDNA 2 is sold out) to have high profits later, with the advent of chiplet based GPUs, but that's not the target of this strategy: the target is to increase significantly their market share.

The problem is the human element: customers.

If you see something that was priced at $30,000 and now it's discounted to $18,000, the natural response is, "Hey, those guys were robbing us all those years." What happens when they reprice it at $25,000 the following year? "Forget it, the true value is about $18,000. That's what it's worth. The most I'll pay is $18,500 now."

For sure, AMD knows what COGS are for their products. They control gross margin by setting the price.

Customers control revenue and profit by the number of times they open their wallet.

If a product price bounces from $30K to $18K to $25K, I assure you that a lot of wallets will stay in pockets with that third price change.

 

[AusWolf]

If nVidia's cards are better, yes.

But what if AMD's offer better performance, @ least in raster?

Performance isn't everything. Nvidia still has Tensor core / DLSS superiority and better software package in general (even though I personally prefer AMD's driver GUI).

 

[HTC]

If a product price bounces from $30K to $18K to $25K, I assure you that a lot of wallets will stay in pockets with that third price change.

They wouldn't: the RDNA 2 would be sold out by then (EOL).

For sure, AMD knows what COGS are for their products. They control gross margin by setting the price.

But they don't know nVidia's, and vice-versa.

Performance isn't everything. Nvidia still has Tensor core / DLSS superiority and better software package in general (even though I personally prefer AMD's driver GUI).

DLSS 2, yes. DLSS 3, not really: the latency increase caused by DLLS 3 is VERY noticeable despite the high frame rates, which leads to worse gaming experience.

 

[cvaldes]

But they don't know nVidia's, and vice-versa.

Correct. AMD know what COGS is for their own products. And they know what their product is capable of doing. They can only guess what NVIDIA is planning until the moment NVIDIA announces.

Now AMD knows NVIDIA's pricing (at least for the 4090 and 4080 16GB). Performance results are starting to emerge. AMD can't go back to the lab and make their cards any better in the next week, they have to go with what they came up with.

If RDNA3 is an Ada Lovelace killer, AMD can charge more than NVIDIA's prices. If the two are comparable and the price are the same, it'll be a toss up for the customers (but the card features aren't the same as AusWolf pointed out). If the market decides that the RDNA3 cards are less performant than Ada Lovelace, they won't want to pay as much.

Customers don't know what the gross margin is. Even if they have an idea of a top level, companywide GM, they aren't going to buy a product simply because they think the GM is lower than that of the competition. They'll buy the product that fits their needs and budget the best. You buy a GPU to do something with it.

As for DLSS, remember that you can turn it off if you don't want it. There's also a performance-quality slider. Higher image quality results in less of a performance boost. Same with DLSS Frame Injection on or off. For some gaming titles, increased latency is not so noticeable. More game reviewers are noting whether or not DLSS 3-related latency increases are impacting the game's enjoyment. I know I've read some DSOG reviews that touch of this topic.

However on Radeon cards, you don't even get this choice. You basically have a vanilla raster engine with some ray tracing cores that aren't as good as NVIDIA's. There's more varied functionality in GeForce RTX cards which helps users who want those additional special functions.

 

[Bwaze]

Bear also in mind that AMD's fabrication options are very limited.

They aren't just competing with Apple, Nvidia, even Intel now at TSMC orders, AMD graphics departnent is also competing with AMD processors - both consumer and server. Even if it's not on a completely same process.

Couple that with a long lead time from placing an order to shipping products to customers, AMD would have to plan a large market grab months ago. At the time when none of Nvidia's bizzare choices were public.

So, pricing revolution is very unlikely. Also, judging from price increases in motherboards, we're heading for a more "sell less products, with higher profit" era.

 

[steen]

They aren't just competing with Apple, Nvidia, even Intel now at TSMC orders, AMD graphics departnent is also competing with AMD processors - both consumer and server. Even if it's not on a completely same process.

Good way to look at it. TSMC 5nm wafers are common to N31/32 GDC & Zen 4 dies (there are some tweaks for each). AMD is not interested in volume shipments of RDNA31/32 as GM for Epyc 5nm wafers is much higher. They have locked in allocation (indeed expanded), so will target mobile/APU extensively Q1/2 2023 but the horse may have bolted. N33 TSMC 6nm is volume capable, but pushed hard into mobile space. Unfortunately market contraction will leave them exposed for any high end or market share play. See Nvidia attempts to shed TSMC allocation volume as market contracts. There are some niche areas for AMD to pursue in the stack vs Ada arch eg 1080/1440 perf.

 

[3211]

I'll quote myself from two posts that i wrote in another forum:




I had written part of this in another topic here @ TPU, but i added some bits.

This is mostly fantasy and even if we're being absurd and say amd, the scummy company that increased prices everywhere the first second it saw itself having a semblance of being able to compete with intel, would sell at a major loss. People would still buy nvidia. People always want AMD to price it lower so nvidia will also price it lower so they can buy nvidia. Nvidia is just too entrenched in gaming. Feature wise, performance wise, support wise, marketshare, mindshare. AMD can price it whatever they want, hordes of gamers are not gonna go to them and lose on ray tracing and dlss, among other things

 

[N3M3515]

If RDNA3 is an Ada Lovelace killer, AMD can charge more than NVIDIA's prices.

The thing is, if they are within 5% - 7% from 4090, this gen amd has way more room for pricing adjustment than nvidia.

 

[SOAREVERSOR]

Something like that, yes: the idea is to have a FAR LOWER price than nVidia's equivalent segment cards.

This would FORCE nVidia to lower their prices @ the very least and maybe even lose money by being forced to sell below cost.

However, such a move would be a HUGE GAMBLE: does AMD "have to stones" to try it?

No it would not force them to lower their prices. This constantly comes up and each time people say "I hope AMD is great, cause cheaper nVidia" and then nVidia doesn't lower their prices and everyone goes out and buys nVidia anyways. It's imply nonsense that never happens. Companies aren't stupid and nVidia knows that people want cheaper AMD because it could cause nVidia to drop prices but since they won't buy AMD nVidia can just raise prices and laugh, and they will!

Even when nVidia has bombs like fermi they sell at a premium. There's really been only one time nVidia was under pressure and that was the diaserous 5800 FX which got crushed by the 9700 PRO followed by the bundling of Half Life 2 with ATi cards. Then once the 6800 hit that era was over again.

Like it or not nVidia is the premium brand. That means you have to sell at a premium or flush it all away so the one thing you must not do is lower prices, ever. Brands like apple, Rolex, BMW all get this. It's worth more because you charge more for it and the high cost of it justifies the high cost. The moment you sell cheap or prices go down you are not a premium brand and it's over. Other brands cannot put market pressure on you because you charge more. All that cheap budget stuff might be as good or better, but it will never be worth more because it's budget and people won't buy them because they aren't the name brand and you are only the name brand because you charge a premium.

This is mostly fantasy and even if we're being absurd and say amd, the scummy company that increased prices everywhere the first second it saw itself having a semblance of being able to compete with intel, would sell at a major loss. People would still buy nvidia. People always want AMD to price it lower so nvidia will also price it lower so they can buy nvidia. Nvidia is just too entrenched in gaming. Feature wise, performance wise, support wise, marketshare, mindshare. AMD can price it whatever they want, hordes of gamers are not gonna go to them and lose on ray tracing and dlss, among other things

It's not even ray tracing and DLSS. People just don't want to buy AMD, they want to buy nVidia. How do you know nVidia is better, it costs more! That's the trap. The average person does not understand DLSS or ray tracing or even care. If they go out and look at what's in the premium systems at stores or what reviewers actually use it's always nVidia. The sorry situation is nVidia could release a card that performs worse than AMD has less features and still charge more of it and it will still be what peoplle buy.

When you look at the hot selling GPUs these aren't ones that you're going actually ray trace on. It's all mid range stuff to push 1080p. DLSS, raw performance, ray tracing do not matter here. AMD is competitive or out right better in this area routinely. Yet this is where nVidia gets most of it's sales.

If you're the premium brand and the competition is the budget brand you don't have to react to their pricing at all.

 

[HTC]

No it would not force them to lower their prices. This constantly comes up and each time people say "I hope AMD is great, cause cheaper nVidia" and then nVidia doesn't lower their prices and everyone goes out and buys nVidia anyways. It's imply nonsense that never happens. Companies aren't stupid and nVidia knows that people want cheaper AMD because it could cause nVidia to drop prices but since they won't buy AMD nVidia can just raise prices and laugh, and they will!

In normal circumstances, yes.

However, these ARE NOT normal circumstances: we're in a global economic downturn, which means people consider prices A LOT MORE than they'd normally would.

While this won't apply nowhere near as much for those that can afford the high end, for the vast majority of people, it most definitely will.

 

[kapone32]

This is mostly fantasy and even if we're being absurd and say amd, the scummy company that increased prices everywhere the first second it saw itself having a semblance of being able to compete with intel, would sell at a major loss. People would still buy nvidia. People always want AMD to price it lower so nvidia will also price it lower so they can buy nvidia. Nvidia is just too entrenched in gaming. Feature wise, performance wise, support wise, marketshare, mindshare. AMD can price it whatever they want, hordes of gamers are not gonna go to them and lose on ray tracing and dlss, among other things

I guess based on your sentiment I should be lamenting my 6800XT but to blindly say that people are just buying Nvidia is subscribing to the propaganda that Nvidia likes to tout. With Ray Tracing enabled at 4K High with FSR at Ultra I am getting 165 FPS with my 6800XT with CP2077 and as much as you may think that AMD is desultory for responding to Intel's jump in price., they had better chips period. Intel has not caught up until 12th Gen. I can guarantee that if the 6800XT goes to $400 Canadian they will sell every single one of them though. DLSS is something I would like to focus on. What percentage of PC Games support DLSS?

Doesn't the PS5 do Ray tracing? There is also the thought that you will no longer be able to buy an EVGA Nvidia card and now that the counterpoint to Nvidia's morally irresponsible behaviour with excellent Customer Service is not there anymore. Good luck working with MSI, ASUS and Gigabyte on Warranty issues. Especially given the size of that card. The weather is getting colder and heat is way more important than Gaming in the Northern Hemisphere so that 1600 will look worse and worse.

I also want to address the scummy. AMD releases the 6500XT at the height of the Mining craze. The card is great for 1080P Gaming but it can't encode so all the people that made their money making videos dismissed the card. Now I have seen it said that the RX570 is about as good as a 6500XT but that is complete BS. RX570 does not support HDMI 2.1 so no 120HZ 4K Freesync for you there. Especially on a 4KTV with HDMI 2.1 ports. All for about $160 US.

Let's see what Nvidia did. They released the 3060 laptop version and it is the best solution in terms of price/performance in 2021 for Gaming. Meanwhile they were not even letting cards get into the consumer chain by supplying directly to mining farms as twitter and Youtube has many examples of. Then Nvidia releases the 3050 and that card is the replacement 1030 in this generation for me and not nearly as fast as the 3060 but the laptops are more expensive?

Let's look at software. Does Nvidia's software have the functionality of AMD Adrenline? One of the great GPUs that are out in the wild are the 6600M chips. You can even get Mini PCs with that chip and it is cheaper than the 6400. The thing is the drivers are so universal that you don't have to worry about buying a card from China.

 

[SOAREVERSOR]

In normal circumstances, yes.

However, these ARE NOT normal circumstances: we're in a global economic downturn, which means people consider prices A LOT MORE than they'd normally would.

While this won't apply nowhere near as much for those that can afford the high end, for the vast majority of people, it most definitely will.

Let's make a gentlemens bet. nVidia won't lower prices and will still outsell AMD regardless of how good AMD is this generation.

I guess based on your sentiment I should be lamenting my 6800XT but to blindly say that people are just buying Nvidia is subscribing to the propaganda that Nvidia likes to tout. With Ray Tracing enabled at 4K High with FSR at Ultra I am getting 165 FPS with my 6800XT with CP2077 and as much as you may think that AMD is desultory for responding to Intel's jump in price., they had better chips period. Intel has not caught up until 12th Gen. I can guarantee that if the 6800XT goes to $400 Canadian they will sell every single one of them though. DLSS is something I would like to focus on. What percentage of PC Games support DLSS?

Doesn't the PS5 do Ray tracing? There is also the thought that you will no longer be able to buy an EVGA Nvidia card and now that the counterpoint to Nvidia's morally irresponsible behaviour with excellent Customer Service is not there anymore. Good luck working with MSI, ASUS and Gigabyte on Warranty issues. Especially given the size of that card. The weather is getting colder and heat is way more important than Gaming in the Northern Hemisphere so that 1600 will look worse and worse.

I also want to address the scummy. AMD releases the 6500XT at the height of the Mining craze. The card is great for 1080P Gaming but it can't encode so all the people that made their money making videos dismissed the card. Now I have seen it said that the RX570 is about as good as a 6500XT but that is complete BS. RX570 does not support HDMI 2.1 so no 120HZ 4K Freesync for you there. Especially on a 4KTV with HDMI 2.1 ports. All for about $160 US.

Let's see what Nvidia did. They released the 3060 laptop version and it is the best solution in terms of price/performance in 2021 for Gaming. Meanwhile they were not even letting cards get into the consumer chain by supplying directly to mining farms as twitter and Youtube has many examples of. Then Nvidia releases the 3050 and that card is the replacement 1030 in this generation for me and not nearly as fast as the 3060 but the laptops are more expensive?

Let's look at software. Does Nvidia's software have the functionality of AMD Adrenline? One of the great GPUs that are out in the wild are the 6600M chips. You can even get Mini PCs with that chip and it is cheaper than the 6400. The thing is the drivers are so universal that you don't have to worry about buying a card from China.

What I'm saying is that yet again, none of this will matter. AMD will have better price to performance and not a silly product and people will say "now nVidia has to lower prices" and they won't, and people will still go out and buy nVidia.

 

[HTC]

Let's make a gentlemens bet. nVidia won't lower prices and will still outsell AMD regardless of how good AMD is this generation.

It will depend on the extent of this economic downturn and whether or not AMD will go for such a gamble.

We'll know either way when the prices of RDNA 3 are officially announced: if prices are similar to nVidia's, AMD will have opted to NOT MAKE such a gamble.

 

[cvaldes]

It will depend on the extent of this economic downturn and whether or not AMD will go for such a gamble.

We'll know either way when the prices of RDNA 3 are officially announced: if prices are similar to nVidia's, AMD will have opted to NOT MAKE such a gamble.

Don't forget that AMD -- like NVIDIA -- is a publicly traded company. They have shareholders to please as well. Could they take a more modest price hike (by percentage)? Sure.

But one thing that's pretty certain (well, to everyone except those who have zero grasp on reality) is that prices aren't going down with the RNDA3 generation.