Originally posted by: Cookie Monster
What makes you think 65nm is more cost effective while providing a higher production capacity than the 55nm process? Im not sure where your going with the whole wafer price analogy but if you haven't realised TSMC has been offering 55nm process for almost ~2 years now. The more chips you can fit per wafer means less cost (less wafers obviously and other production related costs per wafer) and able to meet the demand (if there is any) since the supply (yield and quantity) is there.
55nm hasn't been offered anywhere close to 2 years; the first 55nm part was RV670 which launched in Nov 07. Its obvious production capacity for older processes is going to be greater than new processes as building new fabs for every new process would be far too costly. The upgrade cycle will go something like new process > ramp up production > ramp down > retrofit/transition to a new process. Obviously retrofit and transition is going to incur significant capital expenditures and as such, will also incur significant premiums for products based on that process. Seriously, it goes against all business/manufacturing/accounting principles to think a newer, faster process technology costs the same or less than a slower, older process technology based on the price of raw materials alone.
nVIDIA is taking a loss in terms of market share and profitability. Because nVIDIA has had a very good financial background due to about 10 consecutive quarters (correct me if I am wrong, kind of lost track on this) they can
afford to cut into their margins.
In their Q3 financial report that they admit to having lost market share.
A direct quote from JS Huang
We transitioned our performance segment GPUs to 55 nanometers and are now poised to recapture lost share
How time will tell on the exact details of this once we get a more clear view of the market by jon peddie research for Q3/Q4 08. nVIDIA's Q4 conference call will be more interesting since ive been hearing small tidbits about the high end market evaporating by 80% because of AMD. Hopefully we will have a more breakdown at B3D if they get to attend it.
They've certainly lost some market share, 3-4% from Q2 and Q3 estimates, the height of RV770's popularity and price advantage. I highly doubt Q4 will show anything more than Nvidia regaining much of that share, but we'll see. The latest
Steam Survey certainly indicates the 4800 series hasn't gained as much traction as many expected:
ATI Radeon HD 4800 Series (+0.56%) 7.09%
NVIDIA GeForce GTX 260 (+0.40%) 1.88%
NVIDIA GeForce GTX 280 (+0.07%) 1.29%
NVIDIA GeForce 9800 (+0.71%) 6.06%
So 9.23% competing NV parts to ATI's 7.09% 4800 Series, neither of which come close to the 24.58% listed under GeForce 8800. Its certainly a better picture than the 3870/2900 days, but still a far way to go considering ATI no longer has any price advantage or the performance crown.
That is exactly a short term solution. No business companies wants to sell their product at lower margins, especially when its disadvantaged when it comes to production and supply. What you said about keeping the price high would only work if their product was a much faster performing product than the competition. However it wasn't seeing as the HD4870 was already close to its performance only for half the cost. It would rather end up killing demand. I would also think that AMD is more flexible when it to comes to price cuts.
I too however think AMDs initial pricing was too low, but they did capture alot of mindshare and probably have regained quite abit of lost marketshare. You also have to remember that AMDs financial problems have more to do with the CPU side of things than anything else while nVIDIA's profit numbers are more to do with its other well competitive products like the 9300/9400 mGPUs than the desktop GTX series.
You're claiming Nvidia can't sustain this pricing because they're concerned about lower margins and lower market share, when lower prices would actually result in lower margins and higher market share and higher sales volume. This is in contrast to higher margins and lower market share and sales volume, but ultimately the same profit. In reality Nvidia isn't gaining or losing market share from AMD so much as they're adjusting market share within their own product lines. By lowering pricing and increasing market share for their single-GPU, they're moving away from high-end pricing for single-GPU, which will be replaced by a dual-GPU for the halo effect.
Also I'd disagree that AMD's problems are isolated to their CPU division. While their GPU division is certainly improving, they weren't exactly blowing anyone away the two years prior to RV770. Also, while they've shown some hints of profitability on the itemized income statements, that's before any impairments, write-offs or expenses are prorated. Also, I'd say you're underestimating the impact of Nvidia's discrete GPU business. Again, looking back at FY2008 where they enjoyed record sales, profits, and margins on the strength of the 8800 series, G80 and G92.