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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arnavvdesai - Thursday, November 5, 2009 - link
I dont believe AMD can even afford to introduce 5900 as they would need two dies for every one of the cards. They have no incentive to do so since atm I believe there is a large enough demand from either games or 'normal' folk.Ananke - Thursday, November 5, 2009 - link
Initial MSRPs were so-so OK, but any price hike will erase AMD's advantage of being first to the market. What happens is people will just buy SONY PS3 this hollidays for entertainment, and wait unitil Nvidia and Intel come with new graphics. Which means, no games and applications for the new RAdeons, i.e. no broad customer base. After Christmass the Radeon pricing would not matter anyway, Nvidia will be almost on the market.These should be $250 for 5850 and around $320 for 5870 to flood the market. Anything hire than this competes with other consumer electronics and particularly with game consoles, which unfortunately for AMD, have the higher hand today.
Anyway, brilliant product, bad marketing execution....
Live - Thursday, November 5, 2009 - link
Ananke as you can read in the article (I know reading is hard :) they can't get enough cards to flood the market. That is the problem. They are selling every card they can get from the factory i.e. TSMC. Your plan, great as it might be, can only be done when you can produce lots of cards.mjcutri - Thursday, November 5, 2009 - link
"These should be $250 for 5850 and around $320 for 5870 to flood the market."Did you even READ the article? They aren't getting enough dies as it is, so lower prices would do nothing but cost them money. You obviously have no knowledge of basic economics. If they had enough supply, then yes, lower prices would help them sell more; but it isn't prices driving how many they sell, it is supply of their dies; therefore they can raise prices without any effect on their sales because they are already selling as many as they can make.
Ananke - Thursday, November 5, 2009 - link
I read the article of course. Also, I work at a major AMD distributor. This pricing will cost them market share gains...which is sad, because the product is good. They have 4-5 months ahead of Nvidia, and bad pricing will erase their advance.My comments are from marketing /sales/ view point, based on sales statistics.
PrinceGaz - Thursday, November 5, 2009 - link
No this will not cost them market share gains because they cannot produce enough cards to satisfy demand, even at the higher price.They could price the 5850's at $10 each and their market-share would remain exactly the same because they can't produce any more to sell. When they can produce enough to more than satisfy demand, then and only then should the price come down.
Ananke - Thursday, November 5, 2009 - link
My point is that ATI demand is more elastic to pricing than Nvidia, i.e. distributors are not selling ATI, because the final clients don't want ATI unless the price point is good to penetrate the market.So, AMD had good chance to position themselves in the professional market, but now it seems that opportunity diminishes. I am not saying they are doing this intentionally, but their pricing/application/support mix now is above the point to make sense selling them in the distribution channel. They could have made good share increase in the discrete graphics retail market, but they need availability and better pricing. And, they compete with gaming consoles in the consumer retail area - tough battle against PS3 at $299.
I understand it is an outside AMD reason /TSMC/, but this affects AMD sales. Now, people will just completely decide to wait for Nvidia, instead giving ATI a try.
My point is - it could have been better for their market share if they had the volume availability. I am talking about lost good opportunity. They will keep their market share, but they have less chance to increase it.
The0ne - Friday, November 6, 2009 - link
PrinzGaz is right, they just can't make enough for the demand, plain and simple.erple2 - Thursday, November 5, 2009 - link
I think that the current market is telling us that any Distributor can sell as many boards as they can make, somewhat independently of the price they're asking. Demand is just crazy high right now, and supply is crazy low. Things will start happening soon, however, as supply starts to catch up, and there are alternatives available to distributors (aka NVidia has a competing product). Then AMD is going to have to seriously consider dropping the price they charge distributors for the dies.I also understand that distributors have a lag time between when they receive a die from manufacturing to when they can turn around and sell those to retailers/end users. If that time is too long, then when the prices do finally come down, distributors will be sitting on "expensive" dies that they paid for months ago that are now selling for less. Is that what you're talking about?
If AMD is not able to quickly change the price points that board vendors purchase their products for, and the lag time (inventory) of distributors has a long shelf life, then yes, you're right. When supply does eventually catch up with demand, they will be forced to start lowering prices.
Until NVidia is capable of releasing a competing product, and since demand exceeds supply, however, AMD can more or less set whatever they want. While Distributors get squeezed a bit, if they're selling every board they make, there's not much of an issue. That's the market we're in today.
If it takes 6 months for Distributors to re-negotiate the die pricing they get from AMD, then AMD will have issues selling to Distributors.
In the short term, however, it's win-win for AMD and Distributors.
SlyNine - Friday, November 6, 2009 - link
Since AMD and Nvidia both use TSMC, and since AMD has a less complicated die. I don't see how its a problem. ATI will be one step ahead the whole time.If TSMC really is having trouble with their yields on AMDs die, Nvidia is going to struggle even more with theirs. AMD also has a possible future of using global foundries(SP?) Nvidia will be forced to use TSMC.