AMD Gets An "F" On Pricing

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Adele McLean, Vice President of Holden Advisers, explains why she gave AMD an F on pricing. While we expect the RX 480 to be the best performing GPU at the $200 price point, the author of the article outlines her reasons for AMD getting an F on pricing:

Why do I give them an F in pricing? Well for four reasons:

  • There are limited PC makers in the market who make VR PCs and these PC makers will open the markets by deciding on the value they deliver to the end customer and their end user pricing not by the reduction in the price of the chip; this is called derived demand, which means it’s not actually the price of the graphics chip that can grow the market but the overall price of the VR ready PC.
  • AMD’s products are ‘me too’ with no mentioned competitive differentiation. This article and other articles on the subject suggest that AMD is behind the market. Thus, AMD is simply signaling the rest of the market to lower their pricing and inciting a price war that we all know is futile. The real winners of the price war will be the PC makers and ‘maybe’ the consumer. We call this the ‘death spiral’ of pricing;
  • The VR market is just emerging and early adopters are going to be the least price sensitive. I believe AMD is misreading or mishandling the lifecycle of the VR market.
  • AMD is in no financial position to start a price war! The article mentions they are losing money and ‘expect to return to profitability in the second half of the year.’
 
The whole thing seems like a stretch. Half the reasons are based on VR being basically a fad. Who cares about VR? A $200 GPU that can deliver the performance of $400 GPU's is a bad thing because VR may not take off? I'm not a smart man but I would think VR's success doesn't mean shit to how successful a GPU is. She's got a point about AMD not being in a position to start a price war but they are in a position where they need to try something to spark some success. They can't go toe to toe with Nvidia's high end so why not bring it in the midrange where the majority of the market is? I don't get the "me too products" crack either. What does that even mean? Haven't GPU's been pretty much the same forever? Was AMD supposed to come out with a GPU that runs on diesel or something? How much different are Nvidia's GPUs?

This kinda seems like an analyst trying to prove she's the smartest person in the room and ending up being too smart by half.
 
They could be right but they seem to be basing everything on VR and leaving out the gaming side for price/perofrmance, which to me at least in the short run is an advantage.
 
Bowman15 said:
They could be right but they seem to be basing everything on VR and leaving out the gaming side for price/perofrmance, which to me at least in the short run is an advantage.
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And the VR market seems like a pretty small market right now, even if it does grow, there will be new technologies out before it really starts to make an impact like they are talking about. It sounds like AMD is pricing their GPUs based on gaming performance, where the majority of the market is... so how is that wrong/bad?
 
She's really not wrong on some of those points. It is too early to pin hopes on selling these cards as devices for VR. VR is a small, relatively niche, market right now and is likely to remain one for the next 2-3 years or longer. That is assuming HTC/Valve, MS, Sony, and Oculus doesn't completely fuck it all up with stupid decisions that drive customers away.

As for some of her other points, eh maybe. AMD probably can't afford a big price war right now, but I wonder if Nvidia will really bother trying to engage in one. If Nvidia does decide to engage that will be a big problem, but we'll see.

With OEMs if AMD can keep up with supply and work closely with OEMs they have a chance of getting this card into systems. However, if AMD can't keep up with demand that will be a problem.

The "me too" perception problem is a big thing as well. AMD seriously needs to fix the perception it has among people. The problem is their current marketing team seems, to put it nicely, entirely incapable of actually doing that.
 
This is dumb. AMD is falling behind in performance, if they were to price their cards higher, they wouldn't be competitive and would lose even more money. They're in a non-ideal solution, but this analyst sounds like she doesn't know what she's talking about. It's better to sell ten cards at $200 than 2 cards at $300. AMD is taking the least-worst route given their current predicament. This analyst wants them to just pretend like their problems aren't even happening. I guess I shouldn't be surprised from an economics expert!
 
This is what happens when non-technical people try to analyze a company's decision just on making money alone VR is a benefit not the sole reason for releasing the card. The whole reason for the price point is that AMD knows they can not compete with nvidia right now on shear single card performance. $200 bucks assuming the benchmarks support it will make great crossfire setups not just dual but quad gpu setups. Also i know tons of people who will never throw down $400 bucks for a new card no matter how much faster it is. I for one are not going to spend $400 bucks on my kids computer to upgrade it maybe $200 :p
 
Derangel said:
She's really not wrong on some of those points. It is too early to pin hopes on selling these cards as devices for VR. VR is a small, relatively niche, market right now and is likely to remain one for the next 2-3 years or longer. That is assuming HTC/Valve, MS, Sony, and Oculus doesn't completely fuck it all up with stupid decisions that drive customers away.

As for some of her other points, eh maybe. AMD probably can't afford a big price war right now, but I wonder if Nvidia will really bother trying to engage in one. If Nvidia does decide to engage that will be a big problem, but we'll see.

With OEMs if AMD can keep up with supply and work closely with OEMs they have a chance of getting this card into systems. However, if AMD can't keep up with demand that will be a problem.

The "me too" perception problem is a big thing as well. AMD seriously needs to fix the perception it has among people. The problem is their current marketing team seems, to put it nicely, entirely incapable of actually doing that.
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Nvidia probably will. I have a gut feeling. Kinda like what they did with the 960 and 950's. They didn't have too, but they completely saturated the market from $30 to $1500 on video cards.
 
hakstarr said:
This is what happens when non-technical people try to analyze a company's decision just on making money alone VR is a benefit not the sole reason for releasing the card. The whole reason for the price point is that AMD knows they can not compete with nvidia right now on shear single card performance. $200 bucks assuming the benchmarks support it will make great crossfire setups not just dual but quad gpu setups. Also i know tons of people who will never throw down $400 bucks for a new card no matter how much faster it is. I for one are not going to spend $400 bucks on my kids computer to upgrade it maybe $200 :p
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Can you argue that this is what happens when technical people try to judge a professional financial persons perspective on a subject they are professionals in?

We don't know how much AMD is losing or gaining from a $200 video card, but they have to pay for R&D somehow and being able to charge a little more for new tech helps clear that hump.

Hell Nvidia made 7 billion on selling 970's, but spent 2 billion on Pascal, and they raised the price and people are taking that hot load to their face like sasha grey. I think Nvidia might be coming out of this one a little better.
 
I disagree because I want AMD to do well, so they are wrong because it doesn't fit my dream of AMD taking over the world
 
I feel like AMD has carried this architecture too long (GCN) without seriously addressing the power consumption. This round, AMD's clock speed and power numbers still appear to be worse than nvidia's, so they're still going to be stuck being the cheaper option. It's too bad, as performance has been fine for most of the stack, but nobody wants to pay about the same price and use an extra 100+ watts with less overclocking headroom. I own a lot of AMD gpu's, so that's a bit sad for me, but mostly because we don't have another competitive option. The mobile GPU companies are catching up on features but I don't think they have windows drivers. Maybe ARM or Samsung or Qualcomm or whomever will make a desktop GPU, but I doubt it will happen any time soon. So we need AMD for at least another 3-5 years to be competitive. Perhaps with Vega they will figure out how to reduce power consumption and increase clock speeds or next years cards will be a revision 2 (like sandy bridge) with much higher clocks and power characteristics, but it doesn't sound like that's the story for polaris. At $200-$230 it's going to be a good buy, it just makes me concerned about AMD's long term prospects.
 
Someone's butt hurt.
There are limited PC makers in the market who make VR PCs and these PC makers will open the markets by deciding on the value they deliver to the end customer and their end user pricing not by the reduction in the price of the chip; this is called derived demand, which means it’s not actually the price of the graphics chip that can grow the market but the overall price of the VR ready PC.
Click to expand...
As far as I can tell, the limiting factor for VR gaming is the VR headset. Ever see a $200 VR Headset? Probably not.

AMD’s products are ‘me too’ with no mentioned competitive differentiation. This article and other articles on the subject suggest that AMD is behind the market. Thus, AMD is simply signaling the rest of the market to lower their pricing and inciting a price war that we all know is futile. The real winners of the price war will be the PC makers and ‘maybe’ the consumer. We call this the ‘death spiral’ of pricing;
Click to expand...
You mean capitalism? Dear God, what kind of country do we live in when we resort to such fowl behaviour, like capitalism. Just tell Nvidia to be ready to sell their GTX 980's at $200. Cause we know that's exactly what Nvidia has to do to stay competitive. Feel free to call it the GTX 1060.
The VR market is just emerging and early adopters are going to be the least price sensitive. I believe AMD is misreading or mishandling the lifecycle of the VR market.
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Early adopters might be happy to know that once they're done spending $800 on a VR headset, the GPU is only $200. Nice to know the butt sex has some lubrication right?
AMD is in no financial position to start a price war! The article mentions they are losing money and ‘expect to return to profitability in the second half of the year.
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Considering AMD's market share, a price war is exactly what they need. Cause to be frank, AMD has offered equal products to Nvidia but Nvidia sold more. Lots more, in fact. So basically for AMD to increase market share they need to offer drastically cheaper products. If not, they die off and someone like Samsung Qualcomm will buy them.
 
JNavy89GT said:
analysis always bashing on AMD. NO change here.
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Well they haven't been wrong have they?

Some member on this forum probably lacked pubes the last time amd was top dog.

I want them to be myself but remember recently what happened to one the last billion dollar company that offered a mega cheap product that was traditionally expensive?

The Amazon phone.

Yeah. About that thing.
 
I can get a AMD Athlon 5350 quad core 2.0Ghz with video built-in AND a motherboard for $40 from Microcenter.....and it's been like that for probably a year now.

I give that an
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trentchau said:
Can you argue that this is what happens when technical people try to judge a professional financial persons perspective on a subject they are professionals in?

We don't know how much AMD is losing or gaining from a $200 video card, but they have to pay for R&D somehow and being able to charge a little more for new tech helps clear that hump.

Hell Nvidia made 7 billion on selling 970's, but spent 2 billion on Pascal, and they raised the price and people are taking that hot load to their face like sasha grey. I think Nvidia might be coming out of this one a little better.
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That's the problem with some professional financial opinions it's mostly speculation I mean the whole article was geared towards VR PC are not consoles it is not a one size fits all.
 
trentchau said:
Nvidia probably will. I have a gut feeling. Kinda like what they did with the 960 and 950's. They didn't have too, but they completely saturated the market from $30 to $1500 on video cards.
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I think so too
Yields probably are good, that's why they started with high end
Collecting lower end chips to sell cheaper when they actually need to, like when AMD comes out in bigger numbers of it's new line of cards

Hell if they do what they like doing they start selling cards targeting the 480's a week before the 480 would come out

Though luckily for AMD that's already passed :- )
 
hakstarr said:
That's the problem with some professional financial opinions it's mostly speculation I mean the whole article was geared towards VR PC are not consoles it is not a one size fits all.
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I don't exactly agree that the whole article was just about vr, but I do agree that VR was a strong point about it. I agree with the assessment from the author because AMD could of given a huge advantage to DELL, HP, APPLE, etc to let them take the reigns of their marketing campaign rather than try to drive the point themselves. By working with the vendors to saturate the market with a powerful gpu (which the 480 seems to be) that makes things VR ready. It goes to the old adage of "Why pay for something when someone else will pay it for you".

This is from the article

"A better approach would have been to launch their new VR chip with key PC partners where they have great relationships rather than the broad PR announcement. By providing these PC partners a launch price to support a lower consumer price point, AMD could have quietly helped key partners expand the market while keeping their own pricing strategy ‘under wraps’ and protected from competitive knowledge. AMD could have forged market share recovery quietly using simple ROI calculators showing the revenue gain their partners could achieve when supported by AMD’s lower pricing vs. the next best competitive alternative. Their competitors would have been left wondering what was happening as the market started to expand and their own share was not growing."

I agree with that.

But other points that aren't vr are bullet points 2 and 4, which go beyond the scope of what VR will do for them. It's corporate mentality. While I believe companies are unique in their paradigm and decision making, history does show that actions like AMD are taking are more for desperation over a dying breed.

While I do love value and price, and I think the $200 price tag of the 480 is amazing. I think bullet point 3 hits the nail on the head. Most everyone who has the expendable income to buy a $800 vr device will probably also want to buy the most powerful vr card they can afford. This doesn't mean the 480 won't sell, but as of this point it is a luxury and early adopters don't think value when they think of luxury.



(btw if it seems I'm agreeing a lot, it's because my degree is in marketing and sales, so while I do read a lot about this shit, I also know it's speculation and anything can happen. It's just interesting seeing the waves and patterns).
 
If you think that's something, wait till AMD's Zen comes out. Tell Intel to be ready to actual use Moore's Law, cause people with 2500K's want an actual upgrade. AMD's coming for dat butt Intel.

 
DukenukemX said:
If you think that's something, wait till AMD's Zen comes out. Tell Intel to be ready to actual use Moore's Law, cause people with 2500K's want an actual upgrade. AMD's coming for dat butt Intel.

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Lol it makes me wonder if Vegas has a bidding line for Zen when it comes out. I wouldn't mind putting $25 betting that Zen will be underwhelming at this point :)
 
westrock2000 said:
I can get a AMD Athlon 5350 quad core 2.0Ghz with video built-in AND a motherboard for $40 from Microcenter.....and it's been like that for probably a year now.

I give that an
ContentImage_2D00_GradeAPlus.jpg
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As long as it is for a NAS ;-)
It's a nice system, if you know what you want to do with it
Like not gaming

Though I have to say they have to overcome a stigma
There's not a single AMD in my company
P4's, core 2 duo's to full blown xeon's
 
DukenukemX said:
If you think that's something, wait till AMD's Zen comes out. Tell Intel to be ready to actual use Moore's Law, cause people with 2500K's want an actual upgrade. AMD's coming for dat butt Intel.

Click to expand...

Someone is hopeful
Or sarcastic
Not sure


I'd like to believe in AMD, but I'm just not optimistic about a company that seemingly doesn't want to compete at high end

Also a 40% increase in IPC is nice, but from where AMD is starting they better

Also why does everyone believe AMD could make high end parts for cheap

Saw on this forum hope for a 8 core ZEN with performance of Broadwell-E for 200 bucks
Like silicone and R&D is cheaper for AMD
If anything it only gets Intel/Nvidia more in line while costing ~ the same

Time will tell
 
In summary, penetration pricing should be used for product launches with products that have little differentiation in the hopes of gaining market share in an elastic or growing market (usually the same thing). The PC market is a cross elastic market meaning share just shifts among suppliers. Here a neutral strategy is the better choice. Since there are alternatives in the market that will support the VR PC makers, I am afraid the competitive response to lower price will thwart AMD’s efforts to gain market share via penetration pricing and instead simply lower the AMD’s profitability and the industry overall.
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When you have no idea what you are talking about and just see a product for $199 then you get this. Calling it a price war is far fetched because AMD with these cards are just making sure they burn as much wafers so the GF penalty goes away for this year and gain in the VR market (yes that is the best I can think of).
On the heels of this paywall article Serious problem hits Nvidia's consumer Pascal GPUs - SemiAccurate

Seems that Nvidia might be running out of steam :) .
 
Pieter3dnow said:
When you have no idea what you are talking about and just see a product for $199 then you get this. Calling it a price war is far fetched because AMD with these cards are just making sure they burn as much wafers so the GF penalty goes away for this year and gain in the VR market (yes that is the best I can think of).
On the heels of this paywall article Serious problem hits Nvidia's consumer Pascal GPUs - SemiAccurate

Seems that Nvidia might be running out of steam :) .
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Really dude? SemiAccurate? I'd almost trust an analyst over them. Almost...Maybe.
 
How full of S she sounds. but looking her background it explains it. "P&L analysis for major business lines; gross margin modeling"
Someone likes Nvidia and doesn't want the margin shrink to compete.
 
lol that is one short sighted analysis, and quite frankly stupid, he is the kind to think that AMD's 200$"premiumVR" product, is supposed to boost VR sales ? or be sold through VR ? it's simply stupid.
VR is nothing more than a marketing argument, and a line in the company's resume, "First HBM GPU", "First mainstream VR GPU"...
alhought the reason is very obvious and simple, AMD need to make changes in PC gaming for their Navi architecture, to be able to influence Devs they need more market share, so they bring a GPU to do just that increase market share.
 
Quix said:
... inability to produce a competitive high-end GPU since the Radeon 290x.
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Well how do you think they can show the benefits from HBM without producing samples? how they should recover the investment from HBM R&D?
Fury (X) arent bad performance wise ,even adm marketed as a 4k card not 1440/1080 still with driver improvements it became competitive,still with its raster,tessellation and DX11 issues
alamox said:
lol that is one short sighted analysis, and quite frankly stupid, he is the kind to think that AMD's 200$"premiumVR" product, is supposed to boost VR sales ? or be sold through VR ? it's simply stupid.
VR is nothing more than a marketing argument, and a line in the company's resume, "First HBM GPU", "First mainstream VR GPU"...
alhought the reason is very obvious and simple, AMD need to make changes in PC gaming for their Navi architecture, to be able to influence Devs they need more market share, so they bring a GPU to do just that increase market share.
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they are aiming to the market where amd should have an advantage clearly with DX12 and Asynchronous shaders nvidia is the one which is relying into a new architecture. To get asynchronous capabilities

amd can influence already the market with using GCN as unified architecture in consoles

About HBM it wasnt just marketing,HBM allowed lower power consumption,higher density memory on same area,higher bandwidth,smaller form factor,lower latency
 
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Quix said:
I don't know about that, the analyst here assumes AMD's products are competitive, which they aren't. That throws the whole analysis off.
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I think they cover that in the second one when they acknowledge that AMD is behind the market.
 
MacLeod said:
The whole thing seems like a stretch. Half the reasons are based on VR being basically a fad. Who cares about VR? A $200 GPU that can deliver the performance of $400 GPU's is a bad thing because VR may not take off? I'm not a smart man but I would think VR's success doesn't mean shit to how successful a GPU is. She's got a point about AMD not being in a position to start a price war but they are in a position where they need to try something to spark some success. They can't go toe to toe with Nvidia's high end so why not bring it in the midrange where the majority of the market is? I don't get the "me too products" crack either. What does that even mean? Haven't GPU's been pretty much the same forever? Was AMD supposed to come out with a GPU that runs on diesel or something? How much different are Nvidia's GPUs?

This kinda seems like an analyst trying to prove she's the smartest person in the room and ending up being too smart by half.
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I think that line could be leveled at any analyst, bullish or bearish.
If you read the bullish AMD columns on SA, I'm sure you'd probably agree with anything they've said. Both Moyen and Lau have lettered bullish columns in AMD's favor.

The bottom line argument (and I'm sure you've read it already) is Hibben's discussion of the turnaround thesis. Can AMD leverage this release to generate a turnaround?
I think basing analysis on VR (either for or against) is a mistake, because it is too early to deem a fad or not. I'm just focused purely on the sales, marketshare, and ASP.

If you've looked at AMD's quarterlies, their Computing and Graphics Revenue makes up 55% of their revenue but is also accounting for 83% of their operating loss overall.
Not surprisingly their Enterprise/Embedded/Semi-Custom is the one category generation operating income - and of course the console and Apple design wins will continue helping that.

But that *just* maintains the status quo. Ideally the major revenue generator would also be accompanied with 1) Positive margins and 2) Growing margins at that.

So if you're long, you need to evaluate if this launch can truly address these two things.
 
What's up with the overestimated importance of VR in a mid-range video card? Only third and fourth points had any merit whatsoever.
 
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