That lines up with the impression I got. They lose money CURRENTLY on the high end cards, it sure wasn’t going to get any better.
Might as well get out while the getting is good.
Might as well get out while the getting is good.
It's not shocking that the vendors aren't interested in getting zero of the upsides, but all of the downsides of the bullwhip effect.
To lose money, it seems like the raw chip price differences between mid level and high end cards would need to be even higher than what the MSRP differences are.
But if that's the case, why not just sell midrange cards? Or just a tiny amount of high end ones for advertising purposes.
NVidia's datacenter products seem to charge for GDDR like it's made from gold. Memory prices may play a role.
two things:
first, high-end cards are the ones that miners liked, so, partners really loaded up on orders of those cards. They sold a huge number of high-end cards relative to previous generations. And now the mining market has crashed, and they're stuck with a huge number of high-end cards (relative to actual sustainable demand) both at the vendor (NVIDIA) level and the partner (EVGA, et al) level. And miners are dumping their cards, so you have a huge number of high-end cards flowing back into the market too.
secondly, the card he cites as being "their highest-margin card" is a model that was a bad deal at launch and has seen virtually no price reduction since then. I have actually seen quite a few people commenting on just how little prices of that specific model have dropped, with the 3060 Ti and 3070 pushing downwards (and those are significantly faster than the base 3060). On the AMD side, you can now get a 6700XT (which again, significantly faster) for the same price, which is a performance bracket higher. It's an oddity of that specific model.
so, what he's saying is, an overpriced card that has seen no price reduction while much faster cards crash around it, has high margins - "no shit", as they say. Doesn't mean anybody is really buying it though.
the whole thing is very much "true, from a certain point of view"... like his "wow we're losing money!". Yeah, now that the GPU market is crashing you're losing money... and during those years, the company as a whole lost money because this CEO has been doing all sorts of zany business ventures that ended up in massive losses... the GPU division made money hand-over-fist for the last 2 years, and he's lost money hand-over-fist by trying to break into the enthusiast monitor market and enthusiast motherboards (both extremely support, warranty, and R&D intensive markets) and doing a ton of branding deals where he sticks EVGA logos on hdmi capture devices and pcie sound cards (in 2020, seriously) on products licensed from other vendors (who it turns out were skeezes and EVGA was on the hook for a ton of defective and falsely-marketed products).
he ran the company into the ground and is trying to shift blame to NVIDIA. Yeah, the board-partner thing is predatory, but partners don't really add significant value to the product anymore, and middlemen get squeezed out of business everywhere. Yeah, EVGA is in deep shit, and he's lying when he says they're not going to go under, the writing has been on the wall for months now. The GPU market crashing is almost certainly the last straw for EVGA and they won't be able to pivot to their remaining markets.
But like, he did make a ton of money on GPUs over the last 2 years, he just lost a ton of money on other stuff, and that's not NVIDIA's fault. Partners in general ordered way too much (and again, particularly the high-end stuff) trying to cash in, they make fucktons of margin on it during 2020-2021, and now they are lobbying NVIDIA to cover their downside and buy back all the chips they have left over. This is part of that push, and they know the public generally doesn't like NVIDIA, so it's worth a go.
And it's true that unless NVIDIA buys back the chips from EVGA, they probably go under. I imagine that's not a very pleasant conference room to be in during the negotiations. GN notes the extremely "personal" tenor of this guy's affront. If NVIDIA doesn't cave, his company goes under, and he's toast because EVGA is a pillar of the fucking community. Super tempting to try and go around the negotiations and take your case to the public, try and cash in on anti-NVIDIA sentiment (which is broad and intense), and try to appear to be the good guy.
Partners tried to pull this same stunt in 2018... they ran to tech media framing it as "NVIDIA is forcing us to buy obsolete chips if we want next-gen ones!" and if you read the details, what actually happened is partners wanted to cancel their contractually-agreed orders after mining tanked, and NVIDIA said no, if you do that it's over, we're not giving you 20-series chips if you break your contract on the previous batch.
https://www.techspot.com/news/76103-nvidia-putting-squeeze-a...
I bet NVIDIA wishes they could cancel their contractually-agreed orders from TSMC too. That's not how it works unfortunately. But NVIDIA did knuckle under in 2018 and bought chips back from Gigabyte and perhaps other vendors, and now the board partners are hoping for a repeat. But that was 300k chips, which, while it's a lot, was tractable. The current overstock is like, millions of chips, all in the high end.
That's why both NVIDIA and AMD are launching top-first this generation... the lower chips would compete with those massively-overstocked 30-series cards. So, launch the high-end stuff over the top and let the 30-series inventory burn through.
Last I checked most miners went for 3070s and below, because they're energy efficient. Though when supply ran short they used everything they could get.
And you really didn't get the point about high end cards. EVGA previously served a segment of enthusiast consumers that would spend exorbitant amounts of money for slight performance gains / overclocking sport. But under the new NVIDIA rules you can't take a 3090 and put the highest quality components and beefiest coolers on it, because the price of a 3090 is limited by NVIDIA to be around the range of a FE 3090.
https://www.igorslab.de/en/evga-pulls-the-plug-with-loud-ban...
Basically: other partners have confirmed they think EVGA is just being dramatic and making a statement in general here, that this is kinda just how being a partner is. And that EVGA in general has some factors that make it worse - they're super small and contract out all their assembly, so they take lower margins there, they have a very generous warranty by industry standards, and they've been losing money on other business ventures and the GPU market collapsing makes things tough for the company as a whole.
But they describe last year as a "10x margins year" which fits what I'm talking about with TUL Corp too. They think EVGA just wants to quit on a high note, and quit cleanly during a generational changeover.
Actually there probably was a lot wrong all over the place over the last two years, the whole market was insane.
TUL Corp is a great example to look at the profit margins of GPU companies, because their revenue is approximately 95% GPUs (they own PowerColor) and they're publicly traded, unlike most of the other examples of GPU-heavy private companies (EVGA is privately owned). I've seen them used for similar analyses of the 2018 mining boom on seeking alpha [0], for example.
https://www.morningstar.com/stocks/roco/6150/financials
So, profit in 2019: -80m. Profit in 2020: 30m. Profit in 2021: 1.08 billion.
So, they made a 36x increase in profits that year. In contrast, topline revenue increased only 2.3x. So they had a massive fucking increase in margins.
People need to stop being so incredibly credulous, do you really think the CEO doesn't have his own angle here?
It's completely amazing, a year ago nobody would have pissed on these CEOs if they were on fire, because everyone knew they were selling straight to mining farms. And now everybody is just taking them at their word that they didn't make any money on GPUs during the mining boom, heck they probably lost money right?
Like gosh if they say they didn't rob the bank I guess we just have to trust them, why would they lie about something like that?
It's been really fascinating watching the "green man bad" field overpower everybody's common sense. I guess the reflexive hatred of NVIDIA is stronger than the hatred of miners and companies that catered to miners. So much so that people will believe obvious lies (or significant misrepresentations) from companies that were blatantly profiteering right in front of our faces for more than a year, as long as it caters to the "green man bad" perspective. It is incredibly frustrating to watch, as someone who considers themself a seeker of truth and insight.
But then, here we are with the "partners didn't really make any money on GPUs during the mining boom" take. Could it just maybe be possible that maybe the CEO is not being fully honest here?
[0] https://seekingalpha.com/article/4181940-asian-aib-read-thro... https://seekingalpha.com/article/4186417-tul-corp-revenue-da...