RTX below 3% margin for Manufacturers, also possible price hike incoming

[Tech Enthusiast]

Source: Gamers Nexus

 

RTX Margins, Gamers Nexus:

Quote

"..some of them are 2.8%. Some of the RTX cards, for the partners we spoke to,... it's under 3% margin."

 

Note: The phrase "some of them" hint at worst case scenarios, so likely 2070s or 2080s, not the 4 digit 2080ti cards. 

 

This falls in line with some discussion I remember from one of the forums I read. People tried to calculate the RTX prices by Waver and GDDR6 pricing. 

The numbers showed upwards of 900$, without any PCB, Cooler, etc. So the discussion died right there. No one wanted to believe it was that bad, including me,

which is the reason I did not save a link and don't remember where exactly I saw this calculation.

Considering NVidia is likely getting some form of bulk discounts, the numbers could have been true according to this new information.

They may actually try to push this tech out before it is financially viable for the masses.

 

The new information from Tech Jesus could warrant a new calculation, as people may not buy this info due to being sure it can only be greed.

This, however, was actually just a side note from Steve.

 

 

Upcoming price hikes due to government enforced tariffs in the US

Timestamp 6:18 onwards

 

The topic he is talking about in the video is actually Amazon trying to keep the prices down, even tho they are seeing up to 25% tariffs.

Board partners tried to raise MSRP, but Amazon tries to eat some of those tariffs so the prices stay competitive. Steve points out, that it is unlikely,

that they can keep that up and prices will likely go up for US costumers as early as tomorrow (6th of September). 

He also makes sure to note, that these price increases are not down to Nvidia or Board partners, but a government enforced tariff that they have no control over.

 

 

There are a few takeaways I see here:

• We don't know about Nvidia margins as these are partner margins, they could just make it expensive for partners. I would consider this unlikely tho.
• This is likely US only due to the new tariffs. Possibly the first consumer good that feels the hurt of adding a tax on top. Margins will raise when prices evidently raise as well.
• If these claims are true, we are less likely to see an RTX 2060, but may really get a GTX branded low - mid-tier lineup.
• Currently, the price may be as low as it gets for US residents. So it may actually be a good idea to make up your mind before benchmarks if you are almost certain anyways.

We will have to see how it turns out, but the most likely outcome will be (much) higher prices for US customers in the very near future. Manufacturers will probably wait for launch day to get initial sales, then slowly increase the price in the following weeks, claiming "low stock and high demand". The usual marketing BS to cover up the real reasons will follow. I don't see them being able to follow Amazon's forcing hand if they are not making any profits. But those tariffs are hard to hide. So people will notice.

 

Please try and keep the political stuff out of this topic. 

I know tariffs are a political thing and the consumers are paying for that, but this is more of an information about RTX pricing kinda topic. Please.

 

[asus killer]

2.8% margins. I smell bullshit. 

[mikedrewsmy]

Ray Tracing FTW!

[Tech Enthusiast]

As a side note: How do I embed the video in an OP?

Neither iframe, [media] or [youtube] seems to work,... checked my older postings and in replies I just copy/pasted a link and it auto turned into an embedded version.

[Dylanc1500]

1 minute ago, Rattenmann said:

As a side note: How do I embed the video in an OP?

Neither iframe, [media] or [youtube] seems to work,... checked my older postings and in replies I just copy/pasted a link and it auto turned into an embedded version.

 

[i_build_nanosuits]

So these cards cost 1200$ at retail but nobody is making a penny on them...yeah sure...go f*** yourself.

[Tech Enthusiast]

12 minutes ago, James Evens said:

Since i don't read this forum do you might have a link?

Sure, ill go and look for the discussion I had in mind. It is a 700+ reply topic, so gimme a min. ;-)

 

Edit: I actually can't find the discussion I had in mind. I too was sure that the calculations can't be true, so I did not think about saving it for later.

I may have actually seen this elsewhere. I will update the OP to reflect that I don't have a link for that. Here is the community I had in mind tho: https://www.hardwareluxx.de/community/f14/

[porina]

That margin sounds very low. Like, don't bother to make the thing low. It might work if volumes are high enough, but given these are top end boards...

[Tech Enthusiast]

3 minutes ago, porina said:

That margin sounds very low. Like, don't bother to make the thing low. It might work if volumes are high enough, but given these are top end boards...

Pushing new technology is never cheap. We are all bend on claiming Nvidia is greedy and increasing profits while AMD is no concern. But there is a chance NVidia really tries to push the industry forward and not just bend over customers. You know, it is cool to hate on every company nowadays, but there is still a chance that the torch-wielding mob is not always correct.

 

That and in order to milk us more, they need new stuff sometimes. Kinda investing in future milking? Also possible.

Or they know that Intel is gonna make RT work in 2 years anyway, so they invest now in order to not be in AMDs position down the line.

[porina]

Ok, there are more complicated reasons why companies might do low margin offerings, in a limited manner. There will likely be parts cost reductions in due course, and margins will raise then, assuming they don't lower pricing too quickly. Also the lower models may be around by then, and they could see to gain the margin on those. Image is also important, they have to be there if they want to maintain a reputation. 

[Jtalk4456]

somehow i don't buy the margin being that low

[cluelessgenius]

well...duh..

nvidia is a company first so if they could sell you stickers for 1000 bucks im sure they would

i have no clue what it costs to make that chip but every party involved is gonna try to maximize their earnings.

you buy your card from lets say asus/msi/zotac/gigabyte/whoever else (not picking on anyone in particular)

they dont care about you or your wallet if they could get double they would ask for double

then they buy their chips from nvidia and again nvidia doesnt give a crap about what asus & co. make in profits.

nvidia gets their chip manufacturered by [shit, forgot who exactly does that for them...was it TSMC? not sure maybe bullshit, doesnt matter] and as we saw recently when memory prices were inflated by all those memroy manufacturers they dont give a crap either whether or not nvidia or asus or you get a worse deal for it.

 

this is totally unsurprising i saw this coming a mile away. would have been more shocked if it stated that they had a 812% margin or so.

[cj09beira]

21 minutes ago, Rattenmann said:

Pushing new technology is never cheap. We are all bend on claiming Nvidia is greedy and increasing profits while AMD is no concern. But there is a chance NVidia really tries to push the industry forward and not just bend over customers. You know, it is cool to hate on every company nowadays, but there is still a chance that the torch-wielding mob is not always correct.

 

That and in order to milk us more, they need new stuff sometimes. Kinda investing in future milking? Also possible.

Or they know that Intel is gonna make RT work in 2 years anyway, so they invest now in order to not be in AMDs position down the line.

so what did they do? they kept their good margins are threw their partners under the bus

[D13H4RD]

That’s...an insanely low margin.

 

I understand pushing new tech but NVIDIA is a company as well, and a publicly listed one at that. Their main goal is profit, like any company that isn’t a non-profit.

 

It’s just odd

[Brooksie359]

1 minute ago, D13H4RD2L1V3 said:

That’s...an insanely low margin.

 

I understand pushing new tech but NVIDIA is a company as well, and a publicly listed one at that. Their main goal is profit, like any company that isn’t a non-profit.

 

It’s just odd

I mean apparently AMD did the same with Vega when it first launched. 

[Blademaster91]

I doubt the margins would be that low, even with memory inflation. These $1,200 cards and the AIB's make nothing, yet companies like Asus and EVGA came up with new cooler designs to lose profit on? I don't buy that at all either.

[ravenshrike]

The fact of the matter is that nVidia doesn't have a viable consumer grade upgrade for their video card lineup. instead they're trying to squeeze prosumer/professional grade hardware into the consumer space in order to say they have an upgrade.

[AlTech]

Everybody here seems to think the margins mentioned are Nvidia's margins. They're not. It's the AIB's margins. AIB's are making 3% margins. Not Nvidia,

[CTR640]

1 hour ago, i_build_nanosuits said:

So these cards cost 1200$ at retail but nobody is making a penny on them...yeah sure...go f*** yourself.

This smells to manipulating the market since there is no competition at all so they simply wanna profit much more further than ever.

Just like what happened with DDR4 RAM, manufacturers manipulating the market.

[Tech Enthusiast]

5 minutes ago, cj09beira said:

so what did they do? they kept their good margins are threw their partners under the bus

That is a possibility as I mentioned in the OP.

I personally doubt Nvidia would do that since there are plenty of good reasons to go with low margins that are not just "because they are mean!". 

 

Only thinking short term is not what makes a company market leader. A short-term low margin or even a loss is something many companies did and still do.

As pointed out by @porina there is also image, upcoming price cuts for parts etc.

Just doing whatever is the most money NOW is unlikely to be a driving factor for big companies. Yet people make it sound so easy: "They can get x now, so they do it!". That is wrong on so many ends, but hard to explain to people that don't have a degree in business.

 

To make it as simple as possible:

Most of the time a short-term strategy leads to more money upfront. This is done if you need the cash, now.

A long-term strategy usually leads to less money upfront, but more money down the road. Due to a better image, marketing, being the first to do X (like RT).

 

Marketing and getting a good image is a huge cost factor. If you can offload some of that cost directly into a product, you are effectively winning money.

The flat out cost may be the same, but the product may be better due to the offloading of said costs. Which in return leads to a better image long term, easier marketing both long and short-term and possibly being the first for something that would otherwise not be financially possible.

 

RT may very well be exactly that. They want to be first. Since Intel tried it 2009 with their canceled GPU and just now said they will return to GPUs, Nvidia is under pressure. If they don't do RT now, they may lose to Intel. And imagine Intel making a push for GPUs and instantly adding something new to the game that makes Graphics look better. That would be a tremendous marketing and image boost for Intel. Nvidia can diminish that long-term risk, by sacrificing some profits short-term.

 

TL;DR:

A lot of speculations and predictions.

Businesses work far more complex than what some people make it sound like. They don't just take whatever they can NOW. They have to think ahead for half a decade or even more in order to stay in the market. There is a very solid point to be made that this is indeed what is happening here. Long-term strategy.

[Tech Enthusiast]

10 minutes ago, Blademaster91 said:

I doubt the margins would be that low, even with memory inflation. These $1,200 cards and the AIB's make nothing, yet companies like Asus and EVGA came up with new cooler designs to lose profit on? I don't buy that at all either.

it is likely that those 3% margins are for 2070s or 2080 cards, not for the 1300 2080ti. Also mentioned this in the OP.

[Tech Enthusiast]

8 minutes ago, AluminiumTech said:

Everybody here seems to think the margins mentioned are Nvidia's margins. They're not. It's the AIB's margins. AIB's are making 3% margins. Not Nvidia,

I underlined the part of the OP where I mentioned exactly that. You are correct in that most replies seem to ignore that part of the information, or have missed it.

Same with the part about those margins likely being 2070s or 2080s, not the 4 digit cards.

[Sakkura]

7 minutes ago, AluminiumTech said:

Everybody here seems to think the margins mentioned are Nvidia's margins. They're not. It's the AIB's margins. AIB's are making 3% margins. Not Nvidia,

Still seems awful low.

 

I can certainly buy the 20 series having low margins for AIBs, but under 3% is horrible. It would take so little disruption for them to be making a loss, it's probably not worth even selling them in the first place (if everything goes right you make a 2.8% profit, if even the smallest thing goes wrong you make a loss - and quite possibly a big one).

 

Maaaybe Nvidia could rope them into doing this as a temporary thing, with expectation of improving margins over the coming months.

[Scheer]

40 minutes ago, cluelessgenius said:

well...duh..

nvidia is a company first so if they could sell you stickers for 1000 bucks im sure they would

i have no clue what it costs to make that chip but every party involved is gonna try to maximize their earnings.

you buy your card from lets say asus/msi/zotac/gigabyte/whoever else (not picking on anyone in particular)

they dont care about you or your wallet if they could get double they would ask for double

then they buy their chips from nvidia and again nvidia doesnt give a crap about what asus & co. make in profits.

nvidia gets their chip manufacturered by [shit, forgot who exactly does that for them...was it TSMC? not sure maybe bullshit, doesnt matter] and as we saw recently when memory prices were inflated by all those memroy manufacturers they dont give a crap either whether or not nvidia or asus or you get a worse deal for it.

 

this is totally unsurprising i saw this coming a mile away. would have been more shocked if it stated that they had a 812% margin or so.

 

I think you are backwards on what margin means. A 3% margin means it is costing them ~$1,160 to make that $1200, so they are taking home around $40.

[Tech Enthusiast]

3 minutes ago, Sakkura said:

Still seems awful low.

 

I can certainly buy the 20 series having low margins for AIBs, but under 3% is horrible. It would take so little disruption for them to be making a loss, it's probably not worth even selling them in the first place (if everything goes right you make a 2.8% profit, if even the smallest thing goes wrong you make a loss - and quite possibly a big one).

 

Maaaybe Nvidia could rope them into doing this as a temporary thing, with expectation of improving margins over the coming months.

Also, these numbers could be with the included US only tariffs. We don't know that from the information given in the video.

 

Without those tariffs, they may end up having a quite solid 15-20% margin.

Don't forget that Amazon is trying to keep the prices down, ignoring the tariffs.

But you can't just ignore a 25% tax and expect to still make a profit.

 

This may just be a US thing and they may make bigger margins everywhere else.