By EVGA made the announcement today that it will be parting ways with NVIDIA, which is a decision that will have huge ramifications for the video card sector in North America and Europe.
As a direct consequence of this, the firm has decided that it will not produce video cards based on the next generation of GPUs from NVIDIA, and it also has no plans to instantly convert its allegiance to AMD or Intel. As a direct consequence of this, NVIDIA is about to lose its largest add-in board (AIB) in North America, and the market for video cards in North America as a whole is going to lose one of its largest and most well-known vendors.
In a brief announcement that was posted on EVGA’s forums, the company outlined their parting ways with NVIDIA. The company also made it clear that this will have an impact on the next generation of video cards, but that EVGA will continue to provide products for the current generation and support customers who have already purchased their products.
The graphics cards of the following generation will not be carried by EVGA.
1. EVGA is committed to maintaining support for the products that are currently in their current generation.
2. EVGA will proceed to provide items that belong to the currently shipping generation.
EVGA is dedicated to our patrons and will maintain our present sales and support policies for our product selection in the foreseeable future. In addition, EVGA would like to extend its gratitude to our wonderful community for the support and passion shown by EVGA graphics cards over the course of many years.
EVGA Management
In the meanwhile, EVGA’s CEO and founder, Andrew Han, provided a briefing on which Jon Peddie Research and Gamers Nexus were present, in which he outlined some further specifics regarding the move. Because these are both excellent works, and because I’m not going to regurgitate them point by point here, I’d want to suggest to readers who are interested in a first-hand account of the briefing that they check them out.
According to EVGA, their relationship with NVIDIA has deteriorated over the course of the years, which is something that is covered in both of these pieces. As a result, EVGA has decided to end its partnership with NVIDIA.
Notably, AIB margins have been gradually decreasing over the past couple of decades. JPR published that gross margins at the AIB partners have decreased from 25% in 2000 to 10% in 2015, and ultimately an anticipated 5% this year. This is the most notable example of this trend.
AIBs like EVGA have been put in the position of directly competing with its partner-turned-supplier, NVIDIA since the latter has been progressively ramping up its own attempts to directly sell its Founders Edition (reference) video cards in Best Buy and other shops.
This has resulted in EVGA being forced into a situation where they are making a loss on the sale of high-end NVIDIA cards. This is a dramatic shift from what are traditionally the goods with the greatest margins that are sold by video card manufacturers.
And despite the fact that customers are seeing short-term benefits in the form of cheaper video cards as a result of this development, incurring a loss of hundreds of dollars on each video card is not a sustainable business approach, nor is it even a viable business practice to begin with.
As a result of these considerations (and possibly more tales known only between EVGA and NVIDIA), EVGA has elected to split ways from NVIDIA. This means that EVGA will not be selling video cards that are based on the next generation of GPUs from NVIDIA, and that EVGA will be slowing down manufacturing of current cards in the GeForce RTX 30 series.
According to Gamers Nexus, EVGA plans to run out of current-generation cards for retail by the end of the year, with the firm keeping aside the rest of those cards as spares to meet warranty commitments.
A Product That Will Cost You Money, the EVGA RTX 3090 Ti FTW3
Perhaps just as noteworthy is the fact that EVGA has made it quite plain that they will not be forming a partnership with a rival GPU provider in the near future. Therefore, it does not appear that EVGA will be transferring its support from Intel to AMD any time soon, at least not in the near future.
Instead, EVGA is likely to withdraw from the market for video cards for an unspecified amount of time in the near future. According to GN and JPR, the business has not fully ruled out the possibility of forming a partnership with one or more other GPU vendors; however, they have also said that they are not actively pursuing the topic at this time.
And despite the fact that this will have a significant impact on EVGA’s company – Gamers Nexus says that video cards account for 80% of EVGA’s income – EVGA will not go out of business as a result of this development. In addition to its more specialized position in high-end motherboards and gaming peripherals, the company continues to maintain a power supply business that is very profitable and much acclaimed.
Because of this, EVGA will continue to serve its current video card clients even after they have exhausted their remaining video card stockpile. This is because the firm values its excellent reputation for providing excellent customer care and wants to keep it.
Commentary: A Terrible Setback for Customers, and an Invitation to Vertical Mergers and Acquisitions
The departure of EVGA from the video card business signals what is unquestionably the most significant upheaval in the competitive environment for retail video cards in more than a decade. Although EVGA is not the first NVIDIA partner to end its relationship with the firm — BFG and XFX were both significant NVIDIA partners in the 00s – the latter’s departure appears to be the most significant one to date.
According to JPR, EVGA controlled forty percent of the retail market in North America, and they were also a significant player in Europe. [Citation needed] EVGA was NVIDIA’s de facto premier partner in the west, both in terms of total video card volumes and in terms of mindshare. With a tradition of providing high-quality video cards supported by some of the finest support in the business, EVGA had a reputation for being NVIDIA’s top partner in the west.
As a direct consequence of this, the withdrawal of EVGA is a significant setback for customers and aficionados of video cards in general. Despite the fact that NVIDIA is able to (and without a doubt will) shift allocations over to their remaining AIB partners – Zotac is arguably the next best-known NVIDIA-exclusive vendor in North America – this still represents a reduction in competition in video card designs, particularly with premium products where EVGA did some of their best work. EVGA is arguably the most well-known NVIDIA-exclusive vendor in North America.
And not one of the other AIBs has EVGA’s stellar reputation when it comes to customer service (although it’s important to note that a company’s reputation isn’t always an accurate reflection of how it actually operates).
More motherboards and power supply units are in EVGA’s immediate future.
The entire impact, though, will be felt in the consumer market regardless of what NVIDIA decides to do in the future. Even if these facts are fresh to outsiders, those working within the company have been at odds with one another for some time now. It is evident that there has been some tension between the two companies for quite some time, according to EVGA’s briefing.
Because of this, NVIDIA had a sufficient amount of time to prepare for EVGA’s separation (they were notified for the first time in April), and NVIDIA already has its own retail operations.
In point of fact, it appears that those retail enterprises were the ones that paved the way for what is occurring right now. NVIDIA did not start selling its own retail cards until the Pascal generation/GTX 10 series (2016); for the previous 20 years, NVIDIA has relied on AIBs to move its goods. In 2016, NVIDIA began selling its own retail cards. And even beyond that moment, NVIDIA has purposefully limited its reach by only selling cards directly, and then subsequently by only selling them via Best Buy.
However, I have long been curious about how AIBs have reacted to the fact that NVIDIA has entered into rivalry with their own board partners. It would appear that we now have an answer to this question. The direct presence of NVIDIA on the market, coupled with the fact that the pricing of NVIDIA’s Founders Edition cards is lower than that of EVGA’s goods, is helping to hasten EVGA’s exit from the market.
It is a partnership that, by its very nature, puts AIBs like EVGA at a disadvantage. NVIDIA has superior brand awareness (all cards are NVIDIA cards), and a significant portion of NVIDIA’s research and development is funded by the company’s internal requirement for reference cards. This implies that original equipment manufacturers (AIBs) will have to pay additional charges on top of purchasing hardware from NVIDIA, particularly if they want to go for luxury designs like EVGA has a tendency to do.
Whether it was done on purpose or not, NVIDIA’s choice to directly sell video cards is placing pressure on original equipment manufacturers (AIBs). Moreover, AIBs like EVGA which is NVIDIA-exclusive are in the most precarious position.
The departure of EVGA from the market for video cards, in turn, paves the way for further significant shifts in the manufacture and distribution of video cards. The degree of complexity of video cards has greatly expanded over the years, and as a direct result, the R&D costs at every single level have also increased.
Not only are graphics processing units (GPUs) becoming more powerful, but they also require ever finer PCB routing for memory, more advanced VRMs, more cooling capacity, and other improvements. It’s very similar to how the fab market works, where each new generation raises the stakes in terms of cost and discourages the kind of competition that leads to lower prices, lower margins, and the inability to afford to participate in the next generation of the game. This situation is very similar.
As a result of this, vertical integration is beginning to appear like a more and more attractive strategy. The actual value that the AIBs add is, unfortunately, decreasing. This is despite the fact that AIBs, in one form or another, have played crucial roles in the video card market since the dawn of the PC era. They have done so by providing retail reach and support that GPU vendors either didn’t have or didn’t want to bother with.
Video cards are getting so sophisticated that, especially at the high end, the smartest approach may very well be to remain with the reference designs. All of these factors contribute to an overall decrease in the value (and uniqueness) that may be provided by AIBs.
Experiments Conducted By EVGA Have Not Always Been Successful…
To summarise, this may be the turning point in the development of video cards when we see a shift away from the usage of AIBs and toward direct sales of cards by GPU manufacturers directly.
As a result, rather than having ten video cards within a generation and then numerous AIB variations thereof – as is the case now with NVIDIA’s GeForce RTX 30 series – we’d have something more akin to desktop CPUs, in which there are approximately a dozen SKUs provided directly by the manufacturer. In other words, we wouldn’t have to worry about having 10 video cards within a generation and then numerous AIB variations thereof.
This, of course, has been attempted in the past, and it failed miserably (children, ask your parents about 3dfx), so it’s safe to say that it’s not a sure thing by any stretch of the imagination. However, now that EVGA has left the market, NVIDIA has the opportunity to swoop in and reclaim for themselves forty percent of EVGA’s retail market share, if that is what they want to do.
In the event that NVIDIA is unable to fill the void, the company’s surviving AIBs will, without a doubt, be more than delighted to do so. The absence of EVGA in the market has created a volume vacuum, which implies that over half of the NVIDIA North American video card market is currently up for grabs.
It is a great chance to rearrange the landscape and gain the type of market share that would take years and years to chip away under more regular conditions. This is a market share that would take years and years to get. Even if today is a bad day for EVGA, there is still hope for the AIBs that are still standing.
At this point, the next most important question is whether or not EVGA will continue to participate in the market for video cards. It is very evident from the stories published on Gamers Nexus and JPR that EVGA is not enthusiastic about instantly jumping back in with a replacement partner.
And considering that the Ethereum Merge just took place this week, video cards all over the world were finally freed from their pointless labor (read: Ethereum is no longer dependent on proof-of-work for blockchain processing), now is not the time to make any concrete preparations.
The industry as a whole anticipates that all of these formerly mining cards will eventually make their way back onto the market for used video cards, much like what happened during the previous crypto hangover but in significantly larger quantities due to the fact that this most recent mining boom continued for a significantly longer period of time.
As a result, the market for video cards is going to be facing an overstock as it is, which indicates that it is not going to be a good time to produce additional video cards. This is because even next-generation cards that are not at the flagship level will be competing with their predecessors.
Therefore, even if EVGA decides, in the end, to go back into the video card business – and I really hope they do – taking a break from the competition while the market sorts itself out and processes the unexpected influx of old cards is the wise thing to do. It is impossible to predict how long all of that will take, but given that the current scenario developed over the course of years, getting out of it won’t be a simple or quick cure.
When the time comes, it would be a feather in the head of either AMD or Intel to line up EVGA as a partner. This is because EVGA brings a level of expertise and respect that none of their present AIBs have. Although it should be noted that the overall GPU market share is currently so significantly tilted in favor of NVIDIA – a ratio of 4:1 – at former production levels EVGA could probably absorb most of the AMD retail market presence. This is something that AMD’s other AIBs would be unhappy with, so it is important to note that this is the case.
Because video card sales accounted for 80 percent of EVGA’s income, the company’s decision to leave the market, unfortunately, highlights how susceptible EVGA is in the video card industry. The firm does provide additional product lines, but the volume of sales for these lines is far lower, and they are all classified as products that fall into categories that are even more standardized than video cards.
EVGA Has Made Huge Strides In the Power Supply Unit Industry Over the Past Decade, and in More Ways Than One
For its part, EVGA has definitely made steps to diversify throughout the years, but the company has only had limited success with those efforts. Nearly ten years ago, I had the wonderful fortune to be present for a business dinner with EVGA and Anand. During the course of the meal, Andrew Han inquired about our opinions regarding the kinds of goods and markets that we believed would be beneficial for EVGA to develop.
We ended up providing a number of proposals, but as the current product mix of EVGA demonstrates, the company was never able to find a second market that was the same size as the market for video cards. As a result, it did not come as a surprise to me when I read on Gamers Nexus that EVGA has no plans to expand into new product categories in the near future. That is not something the company has had success with even in prosperous times, so it is unlikely that it will have any success going into what is likely to be a recession.
In the end, despite the fact that today’s news represents a seismic upheaval in the landscape of video cards, it is the type of news that cannot be presented in any way that might be seen as being favorable. The market for video cards, on the other hand, will continue to thrive even without EVGA, but both the industry as a whole and individual customers will suffer as a result of this development.
To our great relief, this is not EVGA’s funeral; the firm is still operating, but I have a serious wish that in the years to come when we discuss EVGA, it will be for reasons other than simply motherboards and power supply units (PSUs). Video cards are where EVGA gained its reputation, and they are still where EVGA produces some of its best work. EVGA is known for its excellence in this area.
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