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

[cluelessgenius]

7 minutes ago, Scheer said:

 

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.

right. so do you think board partners are just gifting them to you? i bet theres some limitation why they cant ask for more and someone down the line is jackin up prices. this means if true then board partner may ge fucked by nvidia or chip manufacturers or someone else in that chain. 

[Dylanc1500]

I want clarify that Steve said some of the manufactures are trying to eat some of the cost of from the tariffs, not Amazon. Amazon is saying they won't won't increase prices of current SKUs being sold.

[Tech Enthusiast]

8 minutes ago, cluelessgenius said:

right. so do you think board partners are just gifting them to you? i bet theres some limitation why they cant ask for more and someone down the line is jackin up prices. this means if true then board partner may ge fucked by nvidia or chip manufacturers or someone else in that chain. 

Amazon and the Government for the US. 

As pointed out in the OP and the source.

 

Amazon tries to keep the prices where they are, even after 25% tariffs come into play.

Some manufacturers try to eat some of that costs in order to stay competitive, but Amazon is actually trying to force them to eat all of it.

 

So Amazon is the one blocking them or trying to. And the US Government is the one that is doing the fucking, to use your words.

Or to stay with pictures as examples. There are manufacturers in the middle, Government and Amazon on both ends, doing a,... well. You know. And Nvidia is sitting on the side, watching it happen. It is not Nvidia actively doing something here tho. So that may be the important part.

[cj09beira]

23 minutes ago, Scheer said:

 

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.

probably lower than that because there is still the distributor slice of the pie 

[Tech Enthusiast]

2 minutes ago, cj09beira said:

probably lower than that because there is still the distributor slice of the pie 

Pretty sure that slice is included in the figure.

Why would they talk about a margin as exactly as a tenth of a percent and then ignore a whole part in the chain?

[cj09beira]

2 minutes ago, Rattenmann said:

Pretty sure that slice is included in the figure.

Why would they talk about a margin as exactly as a tenth of a percent and then ignore a whole part in the chain?

meant that it might be lower than 40 bucks, not that it would be lower than 3%

[Tech Enthusiast]

5 minutes ago, cj09beira said:

meant that it might be lower than 40 bucks, not that it would be lower than 3%

Same thing.

Margin always includes all slices of the pie.

 

You can't reduce the 40 bucks, without reducing the 3% figure. They are both the same, one is absolute for the product, the other is relative to the product. But changing one, will change the other.

[cluelessgenius]

23 minutes ago, Rattenmann said:

Amazon and the Government for the US. 

As pointed out in the OP and the source.

 

Amazon tries to keep the prices where they are, even after 25% tariffs come into play.

Some manufacturers try to eat some of that costs in order to stay competitive, but Amazon is actually trying to force them to eat all of it.

 

So Amazon is the one blocking them or trying to. And the US Government is the one that is doing the fucking, to use your words.

Or to stay with pictures as examples. There are manufacturers in the middle, Government and Amazon on both ends, doing a,... well. You know. And Nvidia is sitting on the side, watching it happen. It is not Nvidia actively doing something here tho. So that may be the important part.

fair point. my bad. but how is amazon telling them the prize? at least around here nobody even buys their gpus from amazon. theres a but ton of online shops. how much sales would they actually loose if they told amazon to go screw themselves.

[porina]

Maybe we should have done it earlier, can we define "margin"? I've only ever seen it used in the context of gross margin, which is essentially how much you make on the cost of goods alone, and doesn't take into consideration other business operating costs. In a quick search for a definition, I also came across net margin, which does included other costs. 3% as gross margin is really horrible. Where I work (mainly professional electronic products, also consumer to lesser extent), the target is around 50%. If it were net margin, 3% would still be on the low side but sound a lot less worse. However I don't encounter the term net margin used in practice.

[Tech Enthusiast]

Just now, cluelessgenius said:

fair point. my bad. but how is amazon telling them the prize? at least around here nobody even buys their gpus from amazon. theres a but ton of online shops. how much sales would they actually loose if they told amazon to go screw themselves.

Seeing you are from Germany I understand the confusion. Even tho I am from Germany as well.

We are not used to buying from Amazon, since they usually have higher prices, or don't have GPUs at all. 

 

In the US you can get the best deals from Amazon. Just compare the prices on amazon.com.

Losing Amazon as a platform is pretty damn bad for sales. And long-term also for customer awareness. Most people that want stuff fire up Amazon. If it does not show up there, it does not exist. We are actually starting to see this in Germany as well. Just imagine if Amazon.de would start pushing GPUs as much as Alternate or MindFactory. if I get the same GPU, for the same price... I would ALWAYS pick Amazon over any other retailer. Their service is so much better.

 

My 970 was broken when I ordered it from Alternate. They said "fuck you, you are on your own" basically. So I had to use Zotac service. It took me 6 weeks to get a replacement and I did not have a GPU meanwhile. Amazon would have sent me a new one right away, without even asking. 

 

Bottom line: People prefer Amazon for a reason. And warranty issues are a HUGE part of that. So losing that platform for sales hurts tremendously. Amazon is now trying to use that power to force prices on the manufacturers in the US. The question here is, how long this is gonna work. 25% tariffs really screw up the bottom line. And while I seriously hate to see the political part in this,.. it is the nr 1 reason this is happening.

 

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. But those tariffs are hard to hide. So people will notice.

[Tech Enthusiast]

9 minutes ago, porina said:

Maybe we should have done it earlier, can we define "margin"? I've only ever seen it used in the context of gross margin, which is essentially how much you make on the cost of goods alone, and doesn't take into consideration other business operating costs. In a quick search for a definition, I also came across net margin, which does included other costs. 3% as gross margin is really horrible. Where I work (mainly professional electronic products, also consumer to lesser extent), the target is around 50%. If it were net margin, 3% would still be on the low side but sound a lot less worse. However I don't encounter the term net margin used in practice.

From the source, we can't tell if what sort of margin we are talking about sadly.

So I assumed it was as simple as: "From a 100$ sale, we get 3$ profit and 97$ vanish into other slices of the pie". 

 

Hard to guess otherwise, without further information and sources. And I doubt we will be getting those either. This stuff usually falls under permanent NDAs.

[Yoinkerman]

3% doesn't even cover tax.

 

Also this means cards cost 25% less in Canada right?  Right?

[DocSwag]

9 minutes ago, cluelessgenius said:

fair point. my bad. but how is amazon telling them the prize? at least around here nobody even buys their gpus from amazon. theres a but ton of online shops. how much sales would they actually loose if they told amazon to go screw themselves.

A lot of people do. Amazon's dominance in online shopping mean they're lots of people's first place to look, or even the only place they look. Maybe people see the prices and they're solid so they don't think to look elsewhere. Perhaps they have Amazon prime and want that two day shipping. Plus, for the most part their prices are pretty competitive unless others are having sales.

[Tech Enthusiast]

1 minute ago, Yoinkerman said:

3% doesn't even cover tax.

 

Also this means cards cost 25% less in Canada right?  Right?

You are usually paying tax on profit only, right? paying tax according to revenue would kill most, if not all businesses. As far as Canada,... well. Short term i doubt that. But it may actually happen if the tariffs stay in place for a while. But it is important to say, that prices for Canada will not really go DOWN, but prices for the US will go UP. They will be closer to each other, but there won't be a winner, only a loser. I doubt companies will just eat that 15-25 % forever. They will pass it on to customers. 

[DaRk0]

Seems kind of normal. Can't disclose where I work, but our partners get anywhere from 2% to 5% on hardware, software and complete solutions.

[SolarNova]

I highly doubt this, in regards to Nvidia.

 

 

Now AIB's, that i can understand, they have low margins because they have 'relatively' low production cost anyway, they don’t MAKE the components, they don’t NEED specialised microprocessor production facilities, they just need assembly plants and cooler production.

A simplistic way to look at it is if a person decides to build PC's for a living, but makes the cases themselves from whatever material they like to work with.

They buy the components put it all together, tune it as they see fit, build a case, and sell it for a small profit. It’s simple and relatively easy money, though small.

Nvidia on the other hand, they spend the time, RnD, money, build specialised facilities for microprocessor development and manufacture, they are the starting point, they decide how much every1 else has to pay, they choose their own profit margins as they themselves are 1 of a very few companies making such microprocessors. I will bet vital parts of my anatomy to the fact that Nvidia is making ALOT more than 3% on these GPU's .. ALOT.

 

Also these tarrifs, lets say its a 20% price increase for certain things. That does not mean a 20% increase in graphcs cards, that means a 20% increase to the prices of some component the AIBs use in the process of making their boards. Those components, they dont cost loads of money, most of the cost is in the manufacturing itself.

The Tarrif is a perfect opotunity for AIB's to increase profits, they can shift the blame of it. When in acutal fact the cost increase will only afect a couple components, which when bought in bulk from other suppliers in China, may well cost 20% more, but per card thats very very little.

 

 

For AIB's. We are talking 20% of 'maybe' 2% of the total cost of a card. That works out at 0.4%. I.E if a card costs $700 to make (and they sell for 3% , at 721), and the 20% tarrif effects maybe 2% of the total cost of the cards manufacturing, thats an increase total cost of $2.8 per card. So they loose 2.8$ of their $21 proffit per card (6.6% of their profit goes away).

 

*Even if it somehow affects 25% of the total cost of the card (which is unlikely as most of the cost is everythng else other than individual component costs which is what the Tarrif effects), that still works out, on a $700 card, at $35. So if they were selling at 721 to consumers at 3% profit, then they would have to sell at 756 now for the same profit ($21) but it would be. 2.86% profit not 3% (757 at 3%).

 

(Total manufacture cost / 100) *25 (+20%) + (Total cost - 25%) + profit margin = Final selling price.

 

Card prices 'should' not increase , if they do, only buy a very small amount.

[asus killer]

1 hour 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,

the video clearly states it's 2.8% for some of the cards for the partners (as in Asus, EVGA) not the retailers.

 

5:32 @ jesus tech video  

[Taf the Ghost]

1 hour ago, Rattenmann said:

Amazon and the Government for the US. 

As pointed out in the OP and the source.

 

Amazon tries to keep the prices where they are, even after 25% tariffs come into play.

Some manufacturers try to eat some of that costs in order to stay competitive, but Amazon is actually trying to force them to eat all of it.

 

So Amazon is the one blocking them or trying to. And the US Government is the one that is doing the fucking, to use your words.

Or to stay with pictures as examples. There are manufacturers in the middle, Government and Amazon on both ends, doing a,... well. You know. And Nvidia is sitting on the side, watching it happen. It is not Nvidia actively doing something here tho. So that may be the important part.

Tariff is at Importer Cost, so that's around 10% at the consumer's level. Just noting.

 

On the cost, has no one mentioned this is likely the fault of GDDR6? AIBs are the ones that pay for that, likely through an Nvidia volume supply deal, and if the price is really high it's eating up all of their margin against MSRP.

[dtaflorida]

Well I asked the question in the cpu, mobo, memory forum of whether to buy now or if the tariffs weren't going to affect building a new computer, and ppl generally thought that the tariffs would mostly not affect tech, maybe computer cases since they use aluminum and steel. 

 

I ordered all the parts I needed immediately after that on gut intuition. 

[Taf the Ghost]

1 minute ago, dtaflorida said:

Well I asked the question in the cpu, mobo, memory forum of whether to buy now or if the tariffs weren't going to affect building a new computer, and ppl generally thought that the tariffs would mostly not affect tech, maybe computer cases since they use aluminum and steel. 

 

I ordered all the parts I needed immediately after that on gut intuition. 

It depends on a lot of subtle little things for whether a product gets tagged. With the likely exception of be quiet!, almost all cases at PC Cases are manufactured in mainland China. But, a lot of other tech is out of Taiwan, which isn't hit. Thus without a really good understanding of the production on specific things, it's been hard to predict.

[dtaflorida]

3 minutes ago, Taf the Ghost said:

It depends on a lot of subtle little things for whether a product gets tagged. With the likely exception of be quiet!, almost all cases at PC Cases are manufactured in mainland China. But, a lot of other tech is out of Taiwan, which isn't hit. Thus without a really good understanding of the production on specific things, it's been hard to predict.

In any case, I'm not waiting on the next generation of anything so building immediately isn't gonna affect my cost and prices can only go up if something does get hit by the tariffs and unlikely to go down before the end of the year. Not even expecting a good Black Friday or Boxing Day sale.

[DrMacintosh]

Buy current gen GPUs now before the tariffs hit and wake up and realize that RTX is a joke right now. RTX is too expensive for something that improves visual fidelity so little. Wait until the tech improves and is actually worth it. 

[DrMacintosh]

36 minutes ago, SolarNova said:

Also these tarrifs, lets say its a 20% price increase for certain things.

These are import tariffs. Meaning that because GPUs are in the product category of things to be taxed, the cost of GPUs will go up relative to the tariff. Your reasoning would make sense if most GPUs were assembled in the US with components shipped here, but I’m pretty sure they aren’t. 

[Taf the Ghost]

27 minutes ago, dtaflorida said:

In any case, I'm not waiting on the next generation of anything so building immediately isn't gonna affect my cost and prices can only go up if something does get hit by the tariffs and unlikely to go down before the end of the year. Not even expecting a good Black Friday or Boxing Day sale.

Unless you're buying at the very high-end, anyway, there's not really much in the way of upgrades until next year anyway. (Though the 2060 should be out in November, maybe. Nvidia can still push that to Q1.)

[Tech Enthusiast]

17 minutes ago, DrMacintosh said:

Buy current gen GPUs now before the tariffs hit and wake up and realize that RTX is a joke right now. RTX is too expensive for something that improves visual fidelity so little. Wait until the tech improves and is actually worth it. 

You know, I don't want to sound like I am attacking you here, so please bear that in mind.

Just finding it funny that Mr. Apple himself is talking about stuff being overpriced. ;-)