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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  • tamalero - Wednesday, November 11, 2009 - link

    you need to take into consideration the fact that nvidia had the same problem with their 8800GT series. Reply
  • Slaimus - Friday, November 06, 2009 - link

    This is the same thing that happened two years. I snoozed on buying the 8800GT when it was launched at MSRP, and by November, prices have gone up to $300 for the 3870 and $320 for the 8800GT.

    On a side note, Dell/Alienware seems to have no shortage of 5800 cards, so the rumor that they gets first dibs is probably true.
    Reply
  • yacoub - Friday, November 06, 2009 - link

    The 8800GT prices at launch were around $299 and there were launch deals as low as $259. Then they went up to around $320, yes, but soon enough came back down to the $250 range and then lower still to around $220. Reply
  • DukeN - Friday, November 06, 2009 - link

    Prices went up after the first Intel fiasco and haven't changed much since. Reply
  • yacoub - Friday, November 06, 2009 - link

    This article conveniently avoids how the original MSRPs for the 5850 and 5870 cards were supposed to be lower than what they debuted at.

    Pre-launch, everyone, including review sites like Anandtech, were talking about 5850 for $199-249 and 5870 for $299-349. Some of us still remember that.
    Reply
  • ATimson - Monday, November 09, 2009 - link

    The MSRPs were only $10 and $30 more respectively. I think a <10% bump between estimate and final process is hardly unreasonable. Reply
  • airmantharp - Friday, November 06, 2009 - link

    Assuming we had Nvidia's GT300 today and no 40nm issues at TSMC, those prices sound about right. RV870 is the same die size as RV770, which means that if yields were the same, RV870 should only cost a little more than the RV770 to produce, per die. I'm making an assumption about the price difference between the production technologies.

    But in the end, products are priced according to the market, and that's a good thing.
    Reply
  • qwertymac93 - Saturday, November 07, 2009 - link

    rv870 is not the same size as rv770, its MUCH bigger. rv870(5870/5850) is 334mm2, rv770(4850/4870/4890) is only 263mm2. how on earth would ati be able to pack more then TWICE the transistors in a space the same size when the process is only 30% smaller? simple math estimating would show that is impossible. even if amd didnt release the die size, it would still be ridiculous to think rv870 was the same size as its predecessor! (263mm2 for rv770*2)*.7=368.2mm2, so even this SIMPLE (although inaccurate) equation shows you'r just plain wrong. Reply
  • yacoub - Friday, November 06, 2009 - link

    That's fine, I can wait. Besides, "It’s Economics 101 in action." - Yes but so is the rest of the economy and that's still not doing well. So they really can't just raise prices very far or for very long. They'll come back down and I have no problem waiting until then. Reply
  • airmantharp - Friday, November 06, 2009 - link

    They can raise prices as long as someone's willing to pay those prices. The cards don't stay in stock, so I'm pretty sure there's more elasticity left; they could raise the prices even more, and people would still buy them. It's not even related to performance; the GTX285 has been overpriced for it's performance since the day it was released, and yet they still sell. Reply

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