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Question 1: Nvidia’s Low- To Mid-Range Products

Talking Heads: VGA Manager Edition, September 2010
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Question: AMD is currently benefiting from a visible gap in Nvidia’s discrete product portfolio. At the moment, it lacks Fermi-based DX11 products below the $200 GeForce GTX 460. In the next three months, do you expect to see Nvidia address the low-end to mid-range desktop graphic space with derivative DX11 products?

  • The Fermi-based DX11 low/mid-range products from Nvidia should be ready soon. Nvidia will definitely need to launch new products to get back some market share.
  • For channel [sales], maybe GF108 needs to wait until Q4.
  • The GeForce GTX 460 just launched last month and received exceptional feedback from customers and the media. Nvidia is working at full-speed to pull out the rest of its DX11 family. As you may know, the GTS 450 is going to launch in September, and other new SKUs like GF108 are following very shortly. We will see a much better product line-up from Nvidia in the next 2Qs.
  • DX 11 is becoming increasingly important to the user, with the uptake of Windows 7 and new DX11 applications. We anticipate this rolling out into the mainstream space from Nvidia in order to remain competitive, as it already is available with ATI-based products.
  • Detailed visuals for gaming and home theater are a must for users. After the success of GeForce GTX 460, Nvidia has a great possibility to have new DX11 products in mid-range segments in Q4.
  • Nvidia has done a great job designing the GF104 used in the GTX 460. They've shown the ability to take the DX11 Fermi architecture and develop a more power-efficient variant of a performance card. I think we'll see new products in the mid-range of the lineup for sure. The low-end may or may not show up, which in my opinion is not a big deal given the performance you need to truly take advantage of a DX11 title.

One hundred percent of our respondents expect to see Fermi-based entry-level and mid-range offerings before the end of the year. We never expected Nvidia to retreat from this market space. It is even more important to note that AMD-exclusive vendors are in agreement on when Nvidia is coming to market, sometimes right down to the month. One has to wonder if everyone just happens to be feeling the ripples in the water. Then again, a lot of money can be made in the lower- and mid-range group, just by way of volume.

We should make it clear that our question was always about time-to-market. Was Nvidia going to try and fight back this quarter or in early 2011? We know now that it is going to happen in the early half of Q4. How much market share Nvidia retakes depends on the performance and pricing of GF108, said to follow the already-popular GF104 and the soon-to-come GF106. We’ll cover that variable in-depth once we get hardware into the labs. No doubt this will be an interesting fight, especially with talk of an AMD-based retaliation before the end of 2010.

The fight for top spot is constantly up in the air. When you’re “King of the Hill,” it often doesn’t matter if your lower-end products perform subpar versus the competition. With all the press generally focused on performance, the two companies often enjoy good sales from buzz generated by flagship products. At least, this was the thinking in previous years. This doesn’t really seem to be true anymore, primarily because we are now seeing more and more educated buyers.

Another pressure at play here is the effect of economic factors on discretionary spending. In this context, customers may conceivably care less and less about the top spot. Whereas an enthusiast might normally purchase a GeForce GTX 480 or a Radeon HD 5870, they might instead purchase something in the sub-$200 range. Some retailers have noticed this trend, and we imagine this translates into the quarterly sale reports.

At the moment, it certainly seems that AMD is better situated to address the economic climate. This is not to suggest AMD planned for these pressures and Nvidia didn’t. Strategic time-to-market and product plans often occur years before economic conditions are known. We won’t rule anything out, but what we have seen is AMD’s market approach. It attacked the mid- to upper-range space first, and then branched out to the highest and lowest spaces through its Sweet Spot strategy.

Compare this to Nvidia’s monolithic GPU approach, introducing the GeForce GTX 480, and then working its way down the ladder. The company is committed to a top-down plan. As a result, it is 6-12 months “late” in bringing a competitive DX11 architecture (Fermi) to the mid-range and low-end spaces. Nvidia’s current position means it needs to step up its game if it really wants to retake market share. The pricing of its mid-level and low-end products might actually be more important than the performance they deliver, assuming they can hold their weight against AMD’s existing lineup. We can only speculate how well they will sell, since Q4 earnings won’t be out until 2011.

With some serious price slashing, Nvidia could really hack chunks of the market from an already-entrenched AMD during the holiday buying season. At a recent Microsoft partner conference, we were informed that the average age of the business PC is the highest it has been in a long time (now at 4.4 years). Sure, business computers have become more powerful and are expected to have a longer lifespan. But the current economic condition indeed seems to have an enhancing effect. We have seen this in the low-end server’s sales surge, noted by early quarterly reports.

It would be logical to deduce that the consumer market is likewise affected. The fact that both Newegg and Best Buy are still selling AGP cards at a semi-decent click seems to reinforce our point. Compared to Nvidia, AMD’s product offerings are much stronger from $50 to $125. The 3650 is still a very compelling value here (~$60), performing reasonably well, even against the 3850, 4650, and 4570 (~$70 to $100). Whereas AMD took the time early in the Radeon HD’s lifespan to invest in bridge chips, Nvidia took a different approach, and the ramifications of that are showing today.

One might argue that this isn’t a problem, considering there aren’t really any DX11 parts for AGP (nor are there plans for them, as far as we are aware). In fact, 2011 may be the year we finally see AGP disappear from the channel. However if the interface's demand continues to persist until the end of 2011, Nvidia’s current GeForce 6200 (~$40) isn’t going to cut it. The only place the company has AMD beat is pricing on  the 6200 and 5200, already pegged at rock-bottom. Considering all new AGP purchases are likely to be upgrades, there isn’t much to be seen in unit sales. Oddly enough, the low-end market space is an area the company historically handles well, (i.e. 7200 GS and 8400 GS at ~$30). Yet, one person in the survey suggested the lowest end of Nvidia’s DX11 graphics line up might never see the light of day. This makes us wonder if perhaps Nvidia is anticipating the strength of Sandy Bridge and Llano, and perhaps making space for those products.

On the PCI Express side, one generation back, Nvidia’s DirectX 10 offerings still fall short in terms of performance given their current pricing strategy, which is why the Q4 launch is so important. However, Fermi-based DX11 cards under the GeForce GTX 460 really need to launch at an attractive price if they’re to hit the ground running in 2011. AMD is already shifting its argument towards Nvidia’s heat and power consumption, but we’re not sure how successful it’ll be now that the GeForce GTX 460 has shown that Fermi doesn’t have to be hot or loud. Besides, the average consumer doesn’t think about heat and fan speed when they make a graphic card purchase. The only time power really becomes an issue is when the PSU’s limits are considered. Unless AMD shows us evidence that its cards  can save some serious money versus the new Fermi-based DX11 competition, it’s probably not going to drive that point home. Plus, based on our results, it’s not even quite clear Nvidia’s architecture is always the most power-hungry. As it stands, we are already starting to see the price drops from the GeForce GT 240 through the GTX 470. Make no mistake; Nvidia is wising up for the Q4'10 and 2011 battle.

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