NVIDIA's response
The president of NVIDIA board partner BFG spoke to HEXUS.channel to give his take on the launch of AMD/ATI’s Radeon HD 4800 series, which promises to put intense pressure on NVIDIA in the mid-range market.
“It’s always good to have competition and it’s been a long time coming from AMD,” said Herkelman. “However, if I was a consumer I would pause, wait for the reviews and see what NVIDIA does in response.”
Indeed, NVIDIA is in a potentially tricky situation. If it cuts costs to negate the anticipated price/performance advantage of the HD 4850 and 4870 then it will have to either compensate board partners and retailers or risk damaging its relationship with them. If it doesn’t react it might lose that dominance of the graphics market it’s enjoyed for the past couple of years.
“NVIDIA has been number one for quite a while, and still is. But now it has to consider its response,” said Herkelman. “NVIDIA has made a lot of money and it will guarantee it wins the price/performance battle.”
Herkelman was quick to point out that this was just a statement of his belief in NVIDIA and not derived from anything NVIDIA has told him. However it does at least imply he anticipates price cuts, but he insisted it’s not as simple as that. “It’s definitely complicated and that’s why it’s taking NVIDIA a while to respond. AMD has gone aggressive on price in order to gain back consumer confidence but its R&D spend doesn’t come close to NVIDIA’s.”
Nobody questions that, in the long term, NVIDIA’s R&D spend will yield products that further raise the bar, price/performance wise, but for the time being, with the exception of the sudden introduction of the 9800 GTX+, it is restricted to price-cutting as its short term response.
The issue for the channel is how those price cuts will manifest themselves. Board partners, distributors and retailers will all have stock bought at certain price points that they will now have to sell for less, such as the 9800 GTX. Unless NVIDIA compensates them, they will make a loss on these products.
Herkelman stressed that there is unlikely to be a blanket policy on this. “Each partner is in a unique position – it’s not clear cut how to react to price adjustments,” he said. Maybe so, but one thing’s for sure: any partners who aren’t happy with NVIDIA’s handling of the situation now have a good alternative GPU option.
