AMD's Sweet-Spot Strategy: Desperation or Stroke of Genius?

by: Phil Coffman November 28, 2008 | about stocks: AMD / NVDA    

Phil Coffman

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Many would say today that Advanced Micro Devices (AMD) has surpassed NVIDIA (NVDA) in graphics performance. The question is, however, is it right to compare the performance of two GPUs with a single GPU? For that is what is being compared. AMD puts two GPUs on one card to trump NVIDIA’s single-card. So there are two different ways of looking at this: single card vs. single GPU.

Fighting NVIDIA’s single GPUs with two GPUs can only go on for so long. For one thing, NVIDIA can put two GPUs on one card too. And NVIDIA’s multi-GPU SLI scales a lot better than ATI’s Crossfire.

For another, putting two GPUs on a single card and dropping the price to compete with single GPUs hurts your profits. ATI has yet to achieve a net profit: their operating profit is still a loss.

Nevertheless AMD should eventually turn a profit. However, they will never get rich by targeting the mainstream. The mainstream is by and large a commodity.

Pretending to have technology leadership by putting together two GPUs to compete with one GPU can only be seen as so much posing.

AMD’s sweet-spot strategy is nothing new. It’s the same thing they have done with CPUs. As with CPUs, the sweet-spot strategy as applied to graphics is based on an inability to compete on the high end. In the case of graphics, however, AMD has achieved much greater success. AMD now claims product and technical leadership in graphics. Furthermore it is not only AMD who claims this. The technical press abounds with assertions that AMD has the best performing CPUs. They have even trotted out an industry analyst to make the claim.

AMD’s resurgence in graphics is based on two things. One, rave reviews from the technical press, and, two, barn-burning low prices.

AMD had better enjoy the good times while they last. The technical press is notoriously fickle, and NVIDIA is in great shape to take back that single-card performance crown.

Disclosure: Author holds a long position in NVDA


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This article has 13 comments:

  •  
    Nov 28 06:35 AM
    I think you are way off here - whats important is the efficiency per silicon mm2. And if you took the time to look at the die sizes of the NVIDIA 280 and the ATI 4870 chip you would find that the 4870 is less than half the size of the NVIDIA 280. So add two 4870s which by the mile floors the NVIDIA 280 in performance despite using less silicon die size.
    Reply | Link to Comment
  •  
    Nov 28 07:14 AM
    Do you sleep well at night, knowingly writing misleading articles to further your long position in NVDA? Does it bother your conscience that you're posing as an expert on something you clearly know absolutely nothing about, in hopes of fooling others to help you recover from a disasterous investment? Or are you no better than all the other shills on this mis-informed joke of a website?

    Here's hoping for your sake that Santa isn't watching, because posting idiotic things like this guarantees nothing but coal in your stocking. Or even worse, a GTX 280.
    Reply | Link to Comment
  •  
    Nov 28 10:23 AM
    I think a couple of points have been left out:
    Cost: Is a card with 2 ATI chips less expensive than 1 NVIDIA? Now compare the performance.
    Heat: If one puts 2 NVIDIA 280 chips on one card, I think it will spontaneously combust.

    Right now AMD cannot afford to be Bleeding Edge. They have to hope to survive by offering exceptional pricepoints.
    Reply | Link to Comment
  •  
    Nov 28 11:59 AM
    While it certainly is not a perfect analogy, but seems like Intel did a very nice job packaging two C2D CPU's on a single die, in the same fashion ATI is doubling up on GPU's on a PCB with the X2.

    You are likely correct that the X2 model will not last (the market should decide that) but to say that approach makes ATI a poseur may be a bit of a stretch.
    Reply | Link to Comment
  •  
    Nov 28 05:26 PM
    NVIDIA can only put 2 GPUs on one card if they can get the single GPU Thermal Design Power far below the mind-blowing 230 watts. The 4870 X2 takes about 260 watts giving approximately 130 watts per GPU core. I agree with schkube, we should let the market decide which is the best approach. According to ATI, they saw that they were approaching a TDP wall with Monolithic GPUs, and they felt that you could achieve greater performance per watt with a multi GPU solution.

    Another factor to consider is that AMD/ATI may be selling their GPUs for lower price/performance because they are actually cheaper to produce. If their GPUs are actually cheaper to produce, then they can maintain profits at lower prices, forcing NVIDIA to take in less profit on a more expensive Silicon process.

    Right now, if you are buying a GPU strictly for gaming, go ATI. If you multipurpose your computer, and use your graphics card for something like Folding@Home, go with NVIDIA, their monolithic design is much more versatile. Unfortunately for NVIDIA, most people looking at GPUs are interested in gaming performance ONLY, or they don't know what a GPU is.
    Reply | Link to Comment
  •  
    Nov 28 06:17 PM
    If AMD survives then it may be the buy of a lifetime. As for NVDA, their new chip is being used by Apple in the new MacBook. The performance looks damn good..
    Reply | Link to Comment
  •  
    Nov 28 10:47 PM
    Point taken about efficiency per silicon mm2 and the 4870 being much smaller than the 280. However, one of the reasons the die of the 280 is so large is that it is manufactured on a larger process technology: 65nm as opposed to 55nm.

    I would argue that to get a fair comparison of performance or efficiency per silicon mm2, you would need to use a 280 or 260 manufactured at 55nm. It's coming.

    Two 4870s may trump one 280, but two 280s trump two 4870s. So it all depends on your perspective: whether you want to compare GPUs or cards.

    The other reason the die of the 280 is so large is that it has more transistors. One of the reasons it has more transistors is to extend the GPU beyond graphics.

    On Nov 28 06:35 AM jkj wrote:

    > I think you are way off here - whats important is the efficiency
    > per silicon mm2. And if you took the time to look at the die sizes
    > of the NVIDIA 280 and the ATI 4870 chip you would find that the 4870
    > is less than half the size of the NVIDIA 280. So add two 4870s which
    > by the mile floors the NVIDIA 280 in performance despite using less
    > silicon die size.
    Reply | Link to Comment
  •  
    Nov 29 01:44 PM
    to sad you are long on Nvidia ;o(
    I. as some said AMD is already producing in 55 nano when Nvidia is on 65. AMD has already some tests and designs going on on 32nm and 22nm (IBM Agreements)!
    II. AMD next graphic may use 45nm already in prod with Shangai(monolithic quad core!) and yes they have learned the lesson from Intel, its better to gain sooner market share with 2 dual core in one pakage than a mono quad!
    III. soft nvidia has not offered dirext X10.1 when AMD and even S3 does! and some games are already taking advantage of it ! + other free software like the one for very complex calculus
    IV.Intel will propose newer graphic chips this implies less room for Nvidia
    V. Even if today some AMD platform use Nvidia Graphics all the new AMD platforms are offered with Chipset and ATI graphics
    VI Nvidia has not yet the capability to integrate X86 and Graphics, that AMD has and may propose soon
    Reply | Link to Comment
  •  
    Nov 29 10:06 PM
    Actually the thermal characteristics (and power draw) of the GTX 280 and 260 are quite good. See techreport.com/article.... The GTX 260 drew less power than the HD 4870 at idle and full load. The temperature of the 260 under load was less than that of the 4870.

    A more probable reason for not issuing a dual-GPU card at the present time is the size and possibly cost of the die. NVIDIA is supposed to do another GX2 when they shrink the process to 55nm.

    On Nov 28 10:23 AM jcb wrote:

    > I think a couple of points have been left out:
    > Cost: Is a card with 2 ATI chips less expensive than 1 NVIDIA? Now
    > compare the performance.
    > Heat: If one puts 2 NVIDIA 280 chips on one card, I think it will
    > spontaneously combust.
    >
    > Right now AMD cannot afford to be Bleeding Edge. They have to hope
    > to survive by offering exceptional pricepoints.
    Reply | Link to Comment
  •  
    Nov 30 01:00 AM
    Intel and AMD put multiple cores in CPUs because the chipmakers can no longer drive performance by increasing the frequency at the same rate as in the past.

    I believe AMD's dual-GPU strategy is the result of AMD being unable to effectively compete with NVIDIA on the high end since at least 2005.

    I know AMD says otherwise, that it was because of power consumption that they went with their approach (See venturebeat.com/2008/1.../).

    However, the power consumption of the GTX 260, as near as I can tell, is actually better than that of the HD 4870. This strongly suggests that power consumption ought not to be a show stopper for a large die.

    On Nov 28 11:59 AM schkube wrote:

    > While it certainly is not a perfect analogy, but seems like Intel
    > did a very nice job packaging two C2D CPU's on a single die, in the
    > same fashion ATI is doubling up on GPU's on a PCB with the X2.<br/>
    >
    > You are likely correct that the X2 model will not last (the market
    > should decide that) but to say that approach makes ATI a poseur may
    > be a bit of a stretch.
    Reply | Link to Comment
  •  
    Nov 30 01:14 AM
    On Nov 28 05:26 PM Shellshock wrote:

    > Another factor to consider is that AMD/ATI may be selling their GPUs
    > for lower price/performance because they are actually cheaper to
    > produce. If their GPUs are actually cheaper to produce, then they
    > can maintain profits at lower prices, forcing NVIDIA to take in less
    > profit on a more expensive Silicon process.

    No doubt the die of AMD GPUs cost less to produce. However, the fact that the ATI subdivision did not score a net profit, rather only an operating profit, strongly suggests that their margins are under pressure. In other words, they are selling their graphics really cheap.

    Similarly NVIDIA did not have that good gross margins on its desktop GPUs last quarter.

    There's a price war.
    Reply | Link to Comment
  •  
    Nov 30 01:21 AM
    On Nov 28 06:17 PM Ames Tiedeman wrote:

    > If AMD survives

    AMD practically just received over $8 billion from Abu Dhabi.

    If the deal goes through, AMD will survive.
    Reply | Link to Comment
  •  
    Dec 13 12:06 PM
    The answer will come in 18 months.
    Reply | Link to Comment
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