Radeon 5800 Series: Prices Up, Supplies Down
by Ryan Smith on November 5, 2009 12:00 AM EST- Posted in
- Ryan's Ramblings
It’s not often we write about prices going up.
Last week there was a rumor going around that AMD intended to raise prices on the 5800 series. At the time we wrote this off as yet another highly-speculative rumor based on shaky evidence. Official price hikes are virtually unprecedented, after all.
Then things changed.
We’ve talked previously about TSMC – the foundry both NVIDIA and AMD GPUs are manufactured at – having yield issues with their 40nm process. This first surfaced with the Radeon 4770, which at the time of its introduction was being built while TSMC’s yields were below 40%, and this coupled with its popularity made for a significant shortage around its introduction. TSMC continued to improve their yields, and by the time of the Radeon 5000 series launch, AMD told us that they weren’t concerned with yields. As of this summer, TSMC was reporting yields of 60%.
On Friday the 30th, Digitimes broke the word that TSMC’s yields were back down to 40%. This we believe is due to issues TSMC is having ramping up overall 40nm production, but regardless of the reason it represents a 33% drop in usable chips per 40nm wafer. When you’re AMD and you’re rolling out a top-to-bottom 40nm product line in a 6 month period, this is a problem.
The 5870 and 5850: Out Of Stock Everywhere
When the 5800 series launched, we knew supplies would initially be tight, but we had been expecting them to pick up. With these yield problems, that has not happened. Instead 5800 cards continue to be out of stock near-universally, even with the fact that most OEMs have yet to start using these cards. AMD’s current 5800 supplies are being exhausted just by Dell and self-builders.
Meanwhile NVIDIA started the end-of-life process for the GTX 200 series some time ago, with production of the GT200 GPU ramping down. So NVIDIA doesn’t need to play pricing games with AMD, as they’ve already planned on selling out anyhow.
With low supplies, no (single-GPU) performance competition, and no price competition, you have the perfect storm for a price hike.
All of a sudden that rumor about an AMD price hike became far more realistic. Checking around, virtually none of the 5800 series cards are listed at their MSRP. Although they’ve continued to be in low supply since launch, it’s only recently that there’s been a breakaway from the $379 and $259 MSRP of the 5870 and 5850 respectively.
After our latest round of price checks, we talked with AMD about the situation and asked them if there was any truth to the rumor of an official price hike. The news is not good: 5850 prices are officially going up. AMD is citing supply issues of components (including memory) amidst the heavy demand for the 5850, and ultimately deciding to pass the cost on to the consumer. Meanwhile there is no official price hike for the 5870, although it’s going to be affected by any increased component costs just as much as the 5850.
| ATI Radeon HD 5870 | ATI Radeon HD 5850 | NVIDIA GeForce GTX 295 | NVIDIA GeForce GTX 285 | |
| Original MSRP | $379 | $259 | x | x |
| AMD Estimated MSRP | $379 | $279 | x | x |
| Our Estimated Prices | $400 | $300 | $450 | $350 |
Bear in mind that the 5850 is also a special case. AMD can’t keep the 5870 in stock, never mind the 5850. For every fully-functional Cypress die they get, the only reasonable option is to build a 5870 out of it. The only things that should be going in to the 5850 are dice with a defective functional unit, making them ineligible for use in a 5870. Without an idea of how many harvestable dice TSMC is spitting out, we can’t get any real numbers, but the most reasonable assumption is that most of them are either fully-functional or unsalvageable, so we expect AMD and their vendors to be producing many more 5870s than they will 5850s. In other words, the 5850 shortage is going to be worse than the 5870 shortage.
The result of all of this is, is that regardless of the reason, there’s a price hike across the entire 5800 series – an official hike for the 5850, and an unofficial hike for the 5870. AMD has not established a new MSRP for the 5850, but their best guess is $20; ultimately it’s up to vendors (and retailers) to determine pricing. It’s hard to get an idea of what the price is going to be on a card that’s always out of stock, but an MSRP of $279 is probably too low. $300 (or more) is a more realistic target for the 5850. As for the 5870, it seems to be settling around $400.
Our best guess is that these new prices will continue through the rest of the year, even if supplies pick up as TSMC gets their yields back in order. Without any serious competition from NVIDIA, these cards can be priced anywhere between $300 and $500 based on performance alone, and no one has any incentive to keep prices down so long as 5800 series cards keep flying off of the shelves. It’s Economics 101 in action.
We can’t say we’re happy with any of this, but we can’t accuse AMD and their vendors of acting irrationally here. It’s a lousy situation for consumers, but that’s a shortage for you. When has there ever been a good shortage?
Finally, with these price hikes, our product recommendations are changing some. The 5870 is still the card to get if money is no object, but the 5850 is far more situational since it’s no longer the great bargain it once was. We can get 1GB 4890s for $170 right now, which have become downright cheap compared to our projected $300 for a 5850. Certainly the 5850 whips the 4890 by upwards of 40%, not to mention DX11 and Eyefinity, but at that level it’s commanding a 75% price premium. It’s a $300 card and performs accordingly, but don’t break the bank in order to get a 5850 at these prices.
If you want a cheap 5800 series card, then it looks like you’re out of luck until 2010.
The Biggest 5850/4890 Performance Gap
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JPForums - Friday, November 6, 2009 - link
While nVidia has a much larger die thus lower yields due to both defects and unused wafer space, they will also be hitting the process much later. ATi has now used TSMC's 40nm process for 2 generations of chips (HD 4770 and the entire HD 5000 series). By the time Fermi launches, TSMC will have had several (five?) months more time to resolve the yield issues and the process will be much more mature. This should keep the costs much lower per area for nVidia compared to the costs AMD is seeing at the moment.Of course it is up to nVidia whether to pocket the savings or pass it along to the customers. The bad news for nVidia is that, if the process matures the way it should, there won't be much of a drop in the cost of manufacturing the chips over the life of the chip.
JPForums - Friday, November 6, 2009 - link
While nVidia has a much larger die thus lower yields due to both defects and unused wafer space, they will also be hitting the process much later. ATi has now used TSMC's 40nm process for 2 generations of chips (HD 4770 and the entire HD 5000 series). By the time Fermi launches, TSMC will have had several (5?) months more time to resolve the yield issues and the process will be much more mature. This should keep the costs much lower per area for nVidia compared to the costs AMD is seeing at the moment.Of course it is up to nVidia whether to pocket the savings or pass it along to the customers. The bad news for nVidia is that, if the process matures the way it should, there won't be much of a drop in the cost of manufacturing the chips over the life of the chip.
SlyNine - Friday, November 6, 2009 - link
AMD is currently making money off of the die. So even with the yields AMD is gaining ground.Nvidia is selling a different, more complexe chip. The issues now will delay their GPU even longer. So even if it effects Nvidia slightly less the problems still transfer to Nvidia. Nvidia's chip is also a different die so they are currently facing the same problems ATI is, and some of their own.
Ananke - Friday, November 6, 2009 - link
They make double the profit margin than the previous Radeons, and they can completely absorb the price fluctuations until production ramps up. Btw, how come the lower end chips 5700 have enough volume, and the higher end don't. :) AMD is just being greedy, similarly to the AthlonX2 introduction 5 years ago. They have the experience with this technique already. It creates negative perception though - major problem for establishing brand loyalty.JPForums - Friday, November 6, 2009 - link
(Quote)They make double the profit margin than the previous Radeons, and they can completely absorb the price.(/Quote)(Quotes aren't working)
I tend to believe that the initial higher prices are the result of having a larger die, using a less mature process, and TSMCs apparent back step in yields. Larger die sizes are something that can only change with a new process. Though, TSMC's 40nm is older than their 55nm was when they launched the ATi HD 4800 series, it seems that it still hasn't reached adequate yields. Further, TSMC seems to have gotten worse rather than better. If AMD priced the chips with the assumption that yields would be 60% then their cost would go up considerably it they only managed a 40% yield. Chances are, AMD IS absorbing some of the cost with the anticipation that TSMC will resolve the issue sooner rather than later.
(Quote)AMD is just being greedy(/Quote)
The job of corporations is to make money. Being greedy is a given. However, the perception of greed is relative to their competition. All in all, I'd say nVidia and Intel appear more greedy than AMD. Just compare the launch price of the current undisputed single GPU champ (HD 5870) to the GTX280 when it launched. How about the HD 5850 vs the GTX260. Intel manages to stay close in price in the areas in which AMD is competitive. However, I have a hard time understanding how the Core i7-975 or even the i7-950 justify their price premium over the i7-920.
Will AMD follow the same pattern when they have the overwhelming advantage? They are currently on top with no real competition in the GPU space, and haven't yet come anywhere close. However, given enough time on top, I'd say yes. Lately, though, they haven't even kept up with the cost of doing business, so I tend to think their prices are artificially low to maintain market share. I hope it pays off in the long run as I like how prices have gone with good competition.
SlyNine - Thursday, November 5, 2009 - link
OMG dude, you need availability before you can have great pricing. You're talking about a different situation , which will not change this one.Changing the topic will not change the fact that AMD at this point in time cannot create more market penetration because of availability, so to improve profit margins ( what any good company does) they will have to raise prices, since they will sell out anyways.
I figured this might happen, it happened with the 8800GT. So I got mine early.
Ratinator - Thursday, November 5, 2009 - link
Hmmm.....this almost seems like the equivalent of a gas pump increase a few days before a long weekend. Isn't AMD almost ready to introduce the 5900 series.....maybe a little bit of profiteering before they have to lower the prices to make the 5900 series somewhat affordable.JPForums - Friday, November 6, 2009 - link
(quote)maybe a little bit of profiteering before they have to lower the prices to make the 5900 series somewhat affordable.(/quote)Perhaps, but it's hard to say that just yet. I tend to look at it as a rather intelligent method to lower demand to levels that they can keep up with at the moment. I'm not saying that the increased revenue wasn't a compelling motivator to support this hike, but before chalking it up to pure profiteering lets consider a few things.
Original MSRP => AMD Estimated MSRP
HD 5870 $379 => $379
HD 5850 $259 => $279
AMD didn't raise the price of the 5870. AMD raised the price of the 5850 by an amount that they think should only raise the cost of manufacturing by $20. Given that nothing about the manufacturing process changes, I think we can safely assume that the raised the price of the chip by about $20. Any further raises in price are done by board manufacturers and distributors.
Ryan Smith's Estimated Prices
(Arranged by performance descending)
GTX 295 $450
HD 5870 $400
HD 5850 $300
GTX 285 $350
If you assume Ryan and any colleagues that helped him come up with the estimated prices are correct, then you still end up in a price competitive situation. The GTX 295 is the top performer commanding $450, but the HD 5870 sits more or less in the correct price bracket given its performance. The HD 5850 sits at $300 after the price hike. However, the less powerful GTX 285 is still going for $350. If AMD used nVidia's pricing scheme, then the HD 5850 should go for a price closer to $370 and the HD 5870 should go for even more.
If AMD doesn't lower the price back down once supply exceeds demand, you could say that they are profiteering to some extend. We'll find out when the time comes.
Even if you take this as a guarantee, let's put this into perspective. When the GTX 260 came out, it's launch price was $400. Just like the HD 5850, it was a step down from the top of the line single GPU card, that beat the previous generation top of the line card. Yet it was priced the same as Ryan's estimated price hike of today's top of the line single GPU card. The GTX 280's launch price was $650.
For a more current example, nVidia is phasing out their GTX series cards. AMD is phasing out most of the ATi HD 4000 series. AMD is pricing them such that the best value in their lineup is probably the 4870/4890 (from a performance perspective). nVidia is keeping the GTX series prices the same as they were before the 5800 series launch, despite the fact that they are clearly dominated at these prices. They were smart about it, though, as they artificially limited supply to undercut demand at these prices. I'd say charging $50 more than the competition (post-price hike) for a card that underperforms compared to the competition is a little more deserving of the profiteering title.
On the same token, if prices don't come back down once supply solidifies, I still won't recommend them. Their are plenty of "lower-end" options like the HD 4870/4890 that can be crossfired for less money and deliver greater performance. The GTS 250 and lower end cards from nVidia (particularly the GTS 250) still hold good value for anyone with 1680x1050 resolution displays and smaller.
rudy - Friday, November 6, 2009 - link
Even if it is only to increase revenue what is wrong with that? AMD is in serious financial trouble if they expect to survive they need to make some money and while they have a hot product they should do it. If the price is high might as well have some of the money rather then allowing retailers to take most of the profit.James5mith - Thursday, November 5, 2009 - link
Just curious as I've always wondered about it.When you are talking about the die for a GPU/CPU, is the correct plural dies or dice?
Dice seems so weird, since I associate it with gaming dice (d4,d6,d8,d10,d12,d20,etc.) But then again, the gaming items singular noun is die, and the plural is dice.