It's no secret that upper-end GPU prices have come down recently, thanks to AMD's recent launch of its RX 5700 and RX 5700 XT. AMD has now stirred the pot a bit, claiming that it successfully bluffed Nvidia into cutting costs, only to yank the rug out from under them and cut prices even more.
This bit of data is embedded in Hot Hardware's 2.5 Geeks podcast/interview with Scott Herkelman, AMD's VP of Radeon. Scott goes on to detail how AMD laid its plans carefully, with evaluations of what the RTX cards were capable of in terms of clock speeds, die sizes, Nvidia's expected revenue and margin targets, and much more. AMD's initial prices for the RX 5700 and 5700 XT were $500 and $379, but after Nvidia unveiled its Super family, the company cut them back to $350 and $400. According to AMD, this was always the plan.
Herkelman lays out how AMD carefully analyzed the RTX family of GPUs, including their price points, die sizes, and how much headroom was left in the family. It picked its initial price points for the RX series expecting Nvidia to undercut them, so it could then deliver its own price improvements:The prices that we originally put out, we waited to see what they put out, and then we made the appropriate move -- not only to de-position their Super series, but also to logjam their 2060 and 2070. Because we knew that they were having slower success and we wanted to do a double jebait, not only block their Super strategy, but also slow down the 2060 and 2070.
Let me say first that I believe everything AMD has said about analyzing Turing's headroom, price points, and other market factors. We perform similar analyses ourselves, and AMD is in a vastly better position to understand certain aspects of Nvidia's manufacturing situation than we are. Nvidia has maintained very high margins on its GPUs; the company-wide margin as of last year was ~60 percent. When it raised prices with Turing, we argued that Nvidia was doing so in part because it had no real competition from AMD.
Similarly, it makes perfect sense that AMD would bring a part to market that gave it an advantage of its own. Navi's die sizes are much smaller than Turing. The RX 5700 and 5700 XT
(Opens in a new window) are 251mm2, while the RTX 2060 and RTX 2070 are 445mm2. The RTX 2070S, 2080, and 2080S are even larger, at 545mm2, though AMD is not competing directly against the RTX 2070S.
Without yield and wafer cost information, however, we can't make a direct comparison between what Nvidia and AMD are likely paying for final chips. It's true that AMD has a decisive die size advantage, but AMD is also building on a newer node and likely paying at least a bit more for wafers. How all of this plays out, in the end, is uncertain. But obviously, AMD felt it had an advantage it could use.
Still, once Nvidia announced it would introduce the "Super" family, AMD was likely to cut price. At $500 and $379, the RX 5700 and 5700 XT would have been facing off against the RTX 2060S and RTX 2070S(Opens in a new window) instead of the RTX 2060 and RTX 2060S. That represents a tougher challenge for both cards, at higher price points. It also would've forced a near-repeat of the Radeon VII debut, in which AMD may have approximately matched the RTX 2080 on performance, matched it on price, brought no new features to market, and wasn't warmly received. Yes, Navi does include some new features, and we still want to talk about some of them in more detail, but it doesn't have any earthshattering new capabilities to discuss that would have changed the equation.
Matched equally on price, the 5700 and 5700 XT would have been less-well positioned against the RTX 2060S and 2070S than they are now. AMD made a decision to position their GPUs more advantageously by reducing prices. Do I think they planned for that? Absolutely. Do I think AMD would've kept its prices higher if the 5700 and 5700 XT had been faster cards? Yes. I can scarcely argue otherwise. I spent six months writing articles about how AMD wouldn't give its CPUs away if it achieved performance parity with Intel just because some fanboys thought it was a good idea. There's no reason to think the company wanted to improve its CPU margins but is fine with giving GPUs away at a fraction of what it could charge for them. Our slideshow, with results from our RX 5700 XT and 5700 reviews versus the RTX 2060, 2070, and 2080 (with the 2080 standing in for the 2070S) is shown below:
[metaslider id="294523"]
If Nvidia hadn't cut prices with its Super cards, I highly doubt AMD would have backed off their own higher prices. That doesn't mean AMD didn't have a plan in advance, but this was a fairly predictable, straightforward plan.
The bigger and more important takeaway here is that companies absolutely will raise prices when there is no competition. Nvidia didn't just magically find a way to reduce Turing costs the same month that AMD launched new GPUs. They raised prices with Turing in part because there was no competition with AMD to stop them.
As soon as AMD re-entered the market with a competitive part, GPU prices came down again. If AMD had been able to ship competitive parts last year, Nvidia might not have been able to increase prices in the first place. If Nvidia hadn't been focused on squeezing gamers like Juicero bagjuice (and hadn't possibly misread the crypto market as new gaming sales), it wouldn't have raised prices regardless. AMD's attempt to spin a relatively prosaic price cut as a dramatic coup against Team Green doesn't really track, but high-end GPUs are undeniably less expensive today than they were a month ago. That's a win for everyone, no matter whose hardware you favor.
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