Graphics card prices have risen in recent years to the point of becoming too expensive. Nvidia’s fault for inflating its prices? Not really.
With every graphics card announcement, gamers stick their tongues out. Even with the launch of the GeForce RTX 4070 Ti, the first of its generation to drop below €1,000, the price is still very unattractive.
This is also what earned this card an 8/10 on frandroid — instead of a 9/10 for example — and the same overall rating in the tech press or among videographers on YouTube. They all criticize the pricing of the new Nvidia cards. It has to be said that the card doesn’t offer any performance/price progress over the previous generation: you get 40% more performance for a price that’s inflated by 40% (versus the RTX 3070 Ti).
So, is the company taking advantage of its lead over the competition to gobbling up prices? No, the reality is much more complex.
TSMC: the mandatory intermediary that drives up the bill
Nvidia’s GeForce RTX 4000 uses TSMC’s latest manufacturing process, TSMC 4N. The Taiwanese founder is the only one capable of ensuring mass production at such a level of technological progress for clients like Apple or Nvidia.
And the least we can say is that TSMC charges a high price for this expertise and production capacity. a report of Digitimes published in November 2022 reveals that TSMC has skyrocketed the prices of its most advanced processes.
Where a wafer (the wafer an SoC is cut into) was $10,000 in 2018 for 7nm, the $20,000 bar was crossed by 3nm. In short, the price of the transistor has skyrocketed, especially for Nvidia graphics cards that use very large chips. The AD102 GPU powering the RTX 4090 packs 76 billion transistors, more than a full Apple M1 Max chip (57 billion) that includes a CPU, GPU, and other elements.
Therefore, we understand that TSMC is putting financial pressure on Nvidia. The latter also pays here for the complexity of its monolithic architecture. If AMD can offer more competitive prices with its Radeon RX 7000, it is thanks to its chiplet design that allows the brand to mix more levels of technologies in its chips.
But TSMC isn’t the only one to blame for the price hike.
Commodity prices have skyrocketed
The Covid crisis and the market transformations since 2019 have caused the price of the raw material necessary to manufacture components, and in particular graphics cards, to skyrocket.
The situation has improved since the end of 2021, but the prices of metals, and in particular rhodium and iridium, remain very high. We are talking about prices that have been multiplied by 7 or 10 for the first and by 5 for the second. All this in just a few years.
Nvidia does not set prices alone
Obviously, it is impossible to know in detail Nvidia’s calculations to determine its sale price. It’s even more complex since Nvidia is just one link in the chain. If you buy a graphics card, chances are they’ll be marketed by Gigabyte, MSI, Asus, or another GeForce partner who will inevitably factor their own markup into the price. To this you can add the margin of the store that sells you the graphics card.
These intermediaries have always been there, but each link has also had tumultuous years with Covid 19 and probably wants to solidify its margins.
Are Nvidia GeForce prices too high?
So is Nvidia inflating its prices? The firm is certainly in no rush to cut its margins and attempt a price war. By dominating the graphics card industry for several generations, the firm has some margin of safety in defining its price list, even if AMD is still on the prowl.
Obviously, we cannot deny that Nvidia continues to incorporate significant margins on high-end products or dedicated to professionals, as do other brands in the sector (hello Apple). But it’s a stretch to blame Nvidia entirely for the industry’s new reality.
There is a shortage of raw materials. There is the increasing complexity of developing increasingly technologically advanced products. There is competition for production lines between graphics cards and other chips dedicated to cryptocurrencies or cars. The reality is that in 2023 a graphics card has never cost so much. It’s hard to imagine the situation improving in the coming months, even if AMD gets back on the level and competes more directly with Nvidia. The two actors are all right subject to the same restrictions.
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