EVGA shocked the world of gamers and enthusiasts last week by announcing that it would be exiting the graphics card industry entirely following a standoff with “autocratic” partner Nvidia.Today, Igor’s Igor’s lab released his thoughts on EVGA’s departure and believes most of EVGA’s problems are self-inflicted.
According to Igor, EVGA as an add-in node (AIB) manufacturer operates very differently compared to Nvidia’s other AIB partners. EVGA relies entirely on third parties to make circuit boards and coolers, and engineering is the only part of the process his EVGA directly covers.
As a result, EVGA’s GPU margins are very low for AIB partners, and much of that resource has to be fed back to the third parties responsible for manufacturing the actual graphics cards. Igor asked several competitors about their margins and found that the worst case scenario (including EVGA’s strategy) accounted for about 5% of their margin gains.
This is a significant difference compared to the 10% profit margins assigned to other AIB partners who do all their manufacturing in-house, and these companies are much more efficient to get higher profit margins. increase.
To make matters worse, EVGA has also suffered a volume loss compared to other AIB partners, shipping far fewer GPUs overall. This is probably related to EVGA’s sales reach being mostly in America (and Europe) compared to AIB’s competitors who manufacture and ship his GPUs worldwide. According to Igor, shipment volume matters when profit margins are only 5% to 10%.
At the same time, EVGA has tried to stand out by offering longer warranty periods and step-up programs, neither of which other competitors in the GPU industry offer. This strategy gives EVGA an excellent track record of customer satisfaction, but according to EVGA’s competitors, it is a “suicide strategy.” An anonymous source with a competitor told Igor:If it was profitable, we would have done it long ago. “
Weighing Nvidia’s Responsibility
There’s no denying that Nvidia has strict guidelines for its AIB partners, including what to do and what not to do with each graphics card design. Nvidia is also working harder to compete directly with its AIB partners with Founders Edition GPU models. JPR Recent Statistics shows that Nvidia’s gross margins have grown fairly steadily since 2005, while AIB partners’ margins have declined since 2000.
There’s no denying that Nvidia has strict guidelines for its AIB partners, including what to do and what not to do with each graphics card design. Nvidia is also working harder to compete directly with its AIB partners with Founders Edition GPU models. JPR Recent Statistics shows that Nvidia’s gross margins have grown fairly steadily since 2005, while AIB partners’ margins have declined since 2000.
Nvidia withholding MSRP information until the GPU is announced on stage and professing reasons for EVGA’s departure from Nvidia, including forcing AIB partners to set GPU prices in specific categories for specific models. No doubt. But it will be interesting to see this new information come to light. This shows that EVGA has the lowest profit margins compared to the rest of his Nvidia’s AIB partners.
It’s clear that we don’t know the full details of the situation. And Nvidia and its partners never seem disinterested or outspoken about documenting sales, profits, or other statistics, so we know more than we do today. It may never happen. However, it should come as no surprise to hear that EVGA’s exit from his GPU market was due to a combination of problems directly caused by Nvidia and financial problems of their own making.
Still, take all this with a grain of salt. Igor is a well-respected and well-connected figure in the PC industry, but considering it’s only been a few days since EVGA’s shocking announcement, he may have a lot more to learn.
