Why So High? . . .

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There’s another article about rising video card prices over here.

In this article, the author asks a nVidia spokesperson about it, and basically gets a song and dance about trickle-down economics:

The reason we have that amount of horsepower at that price point is because we also have a $649 card at the top end and drive the technology down in to the lower product segments. We have spent over 1 billion dollars in R&D over the last 3 years to make that happen–the benefit of which goes squarely to the gamer—the consumer. . . . I would be sad for the enthusiasts if we were forced to design GPUs to fit in to a $199 or $249 or $399 price ceiling. In that case, the rapid progression of technology, which NVIDIA is the driving force behind, would slow up.

How much merit does this argument have?

There are two big cost items on a video card: the GPU and the memory. GPU makers don’t make memory, so let’s leave that out of the discussion for the moment.

Manufacturing a GPU is much like making a CPU: big fixed costs (design, cost of fabs), small variable costs (the actual cost of making an additional CPU/GPU isn’t very much).

Chip production is a matter of mass production: you try to make as many units as possible to spread the high initial costs of design and fab over as many units as possible to lessen the cost per chip.

Spending a billion dollars over three years on R&D may sound like a lot of money until you realize that nVidia made over a hundred million graphics units over that time. That amounts to about $10 a GPU.

The demands of mass production also means you do everything possible to make one size fits all. nVidia (or ATI, or for that matter AMD and Intel) make their chips in a given generation based on one core design. There can be some enhanced variations on a theme when a good deal more money can be made on it (i.e., CPU server chips) but there’s not much fundamental core difference between a Sempron and an Opteron 8P, between a Celeron and a Xeon.

In the GPU industry, within a generation, there usually isn’t any difference at all. Differentiation comes from clock speed, and increasingly, crippling of certain GPU features like pipelines. There can also be some cherry-picking of units, but it’s coming out of one big production line.

So, from a cost perspective, it’s not like the GPU in a 7800GTX costs nVidia a lot more to make than a 7800GT (or any lesser future 7-series). It may be reasonable to charge more for a pick-of-the-litter GPU, but it has little to do with increased costs.

But, most of the time, the issue isn’t creating a technology, then slowly letting it trickle down. What happens is that the technology gets created, then is crippled below certain price points.

In other words, the difference between GPUs in video cards is not as much the difference between a Lexus and a Toyota than it is between a Lexus and one with a wheel chopped off.

True, a video card is not just a GPU. Memory plays a big role in the price, and trickle-down is actually more applicable here. Video card sales do stimulate the initiation and mass production of faster and faster memory, and that can mean initial high costs, simply because economies of scale are not at work. But that has nothing to do with the cost of a GPU.

Overall, though, even additional memory costs do not justify what we’ve seen.

Arguing Past The Point: Everything Is Relative

Though the increased cost of video cards (along with the emergence of Suckers Like It) is problem enough; it’s still to a significant degree a matter of a fool and his money.

The real problem are the other shifts meant to push as many people as possible into fooldom. You do that by making your low- to middle-range cards so relatively awful that people decide to spend a lot more just to stay relatively even.

For instance, a few years back, a $140 Ti4200 gave you roughly 80% of the performance of the more expensive Ti4600. Today, by nVidia’s own admission, a $289 video card (the 6800GT) offers only about 55% of the performance of a 7800GTX (from the article linked above):

The GeForce 6800 GT is priced around $289 average, but the overall difference in performance between this card and the new 7800 GTX 512 MB is actually huge. Two 6800 GT’s can almost perform on par with the 7800 GTX 512. When comparing each card singly there is nearly an 80% difference in performance, and there are extra features in the 7800 over the 6800 (such as Transparency AA).

That’s a second source of increased revenues, probably more so that those who buy the high-end.

Repositioning The Brand

Talk about increased GPU cost and the like by no means justify what’s been going on in the video card market.

The video card makers have simply decided they ought to be taking a lot more money away from gamers for what they do, and have found a pool of insecure but sufficiently solvent people who associate cost with social status.

With the advent of professional gaming, the video folks are following the old tried-and-true model of spend a dollar on promoting the sport, then get ten dollars back from wannabes.

Is that so bad? Well, if gaming becomes a vacuum cleaner for the disposable income of post-school, pre-marital twenty-something geeky types, something you do after you go to school and before you get married, well, there’s going to be a lot less PC gaming in the long run, especially among those over and under that age group.

And if that happens, at the very least, all those websites that practically fellate the manufacturers whenever they open up their mouths on the subject will have far fewer following.

A Guest Editorial

Almost two weeks ago, I got this email which really says it all:

I totally agree with your statement and I am guilty of it. For the longest time I have seen the price of video cards go up and up. And the first thing I do when a new video card comes out is rush out and buy it, or in my current system I bought 2 7800GTX from BFG. I can guarantee that every company that makes PC parts is watching. How we spend our money. A perfect example is the DFI Expert, I owned a DFI SLI-DR and I had no problems with it what so ever, but as soon as I got word from DFI that there was an Expert Version coming soon I bought it, now instead of paying $189.00 like I did for the SLI-DR I paid $217.00 actually I was one of the 1st to get the board , I had mine before the techs in san Jose had theres I paid a price and it performs the same as the SLI-DR another example is AMD I bought a SD 3700+ $280.00 great chip but then the SD4000+ came out and I paid $400.00 to tell you the truth they perform the same in my experience but I bought into it. They are good at what they do, some people need the best of everything out there I bought a Razor Viper $49.00 then they came out with the diamondback $59.00 (bought it) now I own the Copperhead and I paid $79.00 did it really improve my game??? NOPE but they got my money

My son as a P4 2.4 (533) with ATI 9600XT 1024mb cheap ram that whole system cost me $600.00 I have a Killer system $2000.00 and he can kick my butt in every game I for one cannot tell the difference in graphics sure my benchmarks are awesome I can play Quake4 and it looks awesome but it looks awesome on his cheap P4 system. I think one of the BIGGEST problems is the hype or reviews that come out from some the sights they show the latest and greatest parts to hit the market and they show very impressive performance but those parts NEVER or very few of those parts hit the market for the people spending the top dollar. I for one cannot overclock my 7800GTX’s to some of the benchmarks out there I don’t even come close but as soon as I read the reviews I had to have them $1200.00 2 months later $1000.00.

Last year I spent around $10000.00 on computer systems and it was for the latest and greatest but NO MORE I refuse to I have learned my lesson, yea it was fun having all the latest and greatest stuff but because of that I think I was in part one of those responsible for the rising prices of pc parts. If more sights would test off the shelf components and not components given to them by the manufactures I think people would not rush out and buy them. A perfect example is the new 512mb video cards some of the benchmarks out there show that the 256mb are just as fast,but because of the 512mb people will spend there money and spend a lot they will.

The last thing is the Web, It is a wonderful tools but when dealing with Computer hardware it can be very confusing. One person is pushing ATI as the best then Nvdia is the best. Oh buy this memory it does DDR600 well I have that exact memory on 4 systems and not one can do DDR600. I think you understand me. I have read everyone of your notes and thought and I have to agree with you 100% so keep up the good work. Thanks for taking the time to read my ranting and raving

How many more will go through this?

Ed

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