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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  • haukionkannel - Thursday, November 05, 2009 - link

    TSMC problem is allso problem to Nvidia. The Ferni is even bigger than ATI chip, so they are not going to get too many working chips out.
    The only one who may benefit from this is Intel. AMD is not getting money from GPU because they have "nothing" to sell, even they have very good product, same may be true with Nvidia. So no financial boost to Intel rivals for a long time.
    I really hope that TSMC can fix their problems or that Clobal foundaries are early in their production!
    Reply
  • HDHannes - Sunday, November 08, 2009 - link

    can't they sue tsmc for not delivering what was agreed upon (i am not in that industry, but there must be some agreement - contract - must there not?)

    if they knew about those yield probs while the 4770er was in manufacturing, why the heck didnt they change the manufacturer? is tsmc the one and only?

    Reply
  • Zoomer - Thursday, November 05, 2009 - link

    With the way defects and yields work, nVidia's problems will be exponentially worse.

    Probability!
    Reply
  • jav6454 - Thursday, November 05, 2009 - link

    What I hope is that AMD can make their own chip factory. It's sad that both major graphic chip makers have to depend on one company.

    Reply
  • rrinker - Thursday, November 05, 2009 - link

    AMD did have their own fabs - they spun them off to a separate company of which they own only a small part of.
    Reply
  • Zoomer - Thursday, November 05, 2009 - link

    Yeah, about 0.1% less than half. Reply
  • dragonsqrrl - Thursday, November 05, 2009 - link

    true, but ATI GPU's weren't being manufactured at those fabs to begin with... to my knowledge. Reply
  • lucky9 - Thursday, November 05, 2009 - link

    Consumers aren't without influence. Not eveeryone has the abilityto justify paying for someone else's mistake. Looks like their are other options. Reply
  • jav6454 - Thursday, November 05, 2009 - link

    The worst thing that could have happened. Why? I was planning on a build with 2 HD 5850s and this shortage is gong to delay me by a fair amount of time. Not to mention cost. Reply
  • yyrkoon - Friday, November 06, 2009 - link

    *OR* you could just go with something else.

    The only thing that is holding you back, is you, and not wanting to go with something else. Whether said product has "AMD inside", or not.

    Personally, if I wanted to build a system _right_now_, I would, and move on to something else that is available, and in my price range.
    Reply

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