EVGA shocked the gamer and enthusiast world last week when it announced its departure from the graphics card industry entirely, due to conflicts with Nvidia as its “tyrannical” partner. Today, Igor of Igor’s Lab published his thoughts on EVGA’s departure, deeming most of EVGA’s problems self-inflicted.
According to Igor, EVGA as an add-in-noard (AIB) manufacturer, operates very differently compared to Nvidia’s other AIB partners. EVGA relies completely on third parties to create the circuit boards and the coolers, with engineering being the only part of the process EVGA covers directly.
As a result, EVGA’s GPU margins are exceptionally low for an AIB partner, since much of its resources have to be fed back to the third parties responsible for manufacturing the actual graphics cards. Igor asked several competitors about margins, and found worst-case scenarios — which includes EVGA’s strategy — account for around 5% in margin profits.
This is a significant difference compared to the 10% profit margins allotted to other AIB partners who do all the manufacturing in-house, allowing these companies to be a lot more efficient to gain those higher margins.
To make matters worse, EVGA is also operating on a volumetric loss compared to its other AIB partners, with far fewer GPU shipments overall. This is probably related to EVGA’s sales coverage of primarily America (and Europe), compared to its AIB competitors who manufacture and ship GPUs worldwide. According to Igor, shipment volume is a big deal when you’re only making 5% to 10% profit margins.
At the same time, EVGA has also tried to stand out by offering longer warranty periods, and a step-up program, both things no other competitor in the GPU industry offers. While this strategy does provide EVGA with a stellar track record for customer satisfaction, it is a “suicidal strategy” according to EVGA’s competitors. One anonymous source at a competitor told Igor, “If it were profitable, we would have done it long ago.”
Weighing Up Nvidia’s Blame
There is no denying that Nvidia has strict guidelines for its AIB partners, including what to do or not do with each graphics card design. Nvidia also goes the extra mile to compete with its AIB partners directly with its Founders Edition GPU models. Recent stats from JPR indicates Nvidia’s gross margins have grown fairly steadily since 2005, while the margins of its AIB partners have fallen since 2000.
We don’t doubt EVGA’s professed reasons for leaving Nvidia are true, including Nvidia withholding MSRP information until GPUs are announced on stage, and forcing AIB partners to set GPU prices to specific categories on specific models. But, it is interesting to see this new information come to light, indicating EVGA has one of the lowest profit margins compared to the rest of Nvidia’s AIB partners.
It’s clear we don’t know the full details of the situation. And with Nvidia and its partners seemingly uninterested or unable to go on the record and be candid about sales, profits and other stats, we may never know much more than we do today. But it would not be surprising to hear EVGA left the GPU market due to issues originating from Nvidia directly, as well as from self-inflicted financial problems combined.
Still, take all this with a grain of salt. Igor is a respected, well-connected individual in the PC industry, but we may still learn more, given we’re just a few days past EVGA’s bombshell announcement.
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