AMD’s Bold New Strategy

Last week, NVIDIA unveiled their next-generation flagship GPU the GTX 1080, along with the slightly less powerful GTX 1070. With both of these new GPUs the company has made some pretty outrageous — and if at all true, very impressive — claims in terms of performance.

With all the hype surrounding the launch of NVIDIA’s flagship, many people are questioning AMD’s decision to focus on the mainstream desktop and notebook markets with the launch of their upcoming GCN (Graphics CoreNext) 4.0 GPUs, codenamed Polaris 10 and 11.

After all, historically GPU manufacturers are known to release the flagship or ‘high-end’ products first with the launch of a new product generation, with ‘mainstream’ and ‘performance segment’ parts usually following months later, once yields have matured. Seems smart, right? You may even ask yourself.. why fix what isn’t broken? — Well, I’ll tell you why: AMD sees a tremendous opportunity in upsetting the status quo. It’s a very bold strategy, and I believe it’ll pay off, Cotton. Memes aside, I’ll explain why I believe this below.

Mainstream GPUs account for the majority of GPU sales.

While high-end, flagship level graphics cards usually carry the largest profit margins, mainstream and performance segment GPUs account for the vast majority of total graphics card sales. This makes perfect sense when you think about it, after all, most gamers obviously can’t afford to shell out ~$500 for a new GPU every couple of years.

AMD’s Polaris 11 compared against NVIDIA’s GTX 950 in Star Wars Battlefront

Using Steam’s Hardware Survey as an example, we can see that as of April, at least 25% of users who participated in the survey are using a mainstream or performance-segment desktop GPU from the last three hardware generations. When you compare that to the roughly 14% commanded by higher end cards priced between $350-$700 of the same three generations, you start to see why AMD would want to focus on this larger market segment first. It is also worth noting that, these numbers are without factoring in mobile (notebook) GPU users, which would skew the numbers even further in the mainstream direction.

Taking a look at this report from JPR; a computer graphics marketing and management-consulting firm which provides market and competitive analysis. We see that AMD’s discrete GPU sales increased by 6.69% in Q4 of 2015, which also happens to coincide with their release of the performance-segment R9 380X graphics card. In that same quarter, NVIDIA’s desktop discrete GPU shipments were down -7.56% compared to the previous quarter in which it released its mainstream GTX 950. These may look like relatively small bumps, but they provide significant insight into the market as a whole. When you consider that AMD could take roughly 7% of NVIDIA’s sales in a single quarter, with the release of a graphics card in a price segment that NVIDIA had little relative competition offered (save for the GTX 960 4GB, which was already being beaten out by AMD’s R9 380), then you realize what AMD’s plans are.

Competing Without Competition

With NVIDIA focusing on the high-end market first, as usual. It will be a number of months before we see a new performance or mainstream segment GPU from the Green Team. Just looking at the release of the Maxwell-based GTX 900 series which was first introduced with the GTX 980 and 970 In September 2014, it wasn’t until January of 2015 that we saw the release of the cheaper, $200 GTX 960. And, it wasn’t until August of that year when the company released the mainstream targeted GTX 950. It is also much of the same story with the GTX 600 series as well, with nearly six months between initial launch of the of GTX 680 and the cheaper GTX 660 and GTX 650 models.

If history is any indication, we can expect anywhere between three and six months before NVIDIA releases new cards which compete with AMD’s Polaris, giving the Red Team ample time to chip away at a significant portion of NVIDIA’s rather large market share. This could also put AMD in a relatively comfortable position when it comes time to release its flagship graphics card based on the HBM2 powered Vega 10 GPU, which has been rumored to have been pushed forward to as early as October 2016, rather than the original expected launch in 2017.

Vega 10 is rumored to be substantially more powerful than the GTX 1080 and is meant to go toe-to-toe with a possible GTX 1080 Ti or Titan X successor. This could mean that while AMD will initially concede the high-end market to NVIDIA in favor of the larger, performance and mainstream segments, it could be planning to beat NVIDIA to the ultra high-end market, in order to make up the difference. Effectively, AMD would be putting their best effort into avoiding direct competition with NVIDIA altogether, for as long as it possibly can.

Of course, in essence, this plan may not be the best for consumers. Competition in every market segment is always best as it helps to ensure you get the most bang for your buck when purchasing a new product. That being said, you can’t necessarily fault AMD for taking this approach: with NVIDIA currently commanding somewhere between 75 and 80% of the total GPU market share, AMD has to be extra aggressive at taking back significant portions of the market. By avoiding the standard release cycle, AMD sees an opportunity to go after the low-hanging fruit that is the mainstream and performance segments. This should result in significant gains in market share for the company at the cost of some initial mind share by not having a flagship, benchmark busting GPU available to go toe-to-toe with NVIDIA’s offerings.