Inside the EVGA-Nvidia Breakup In a significant turn of events in the tech industry, EVGA has announced its decision to cease the production and sale of NVIDIA-based graphics cards. This breakup is monumental, as EVGA has previously held a 40% market share in North America for NVIDIA GPUs, making this decision quite puzzling.
Understanding the Decision
EVGA's decision seems counterintuitive at first glance, especially considering the high demand and prices for graphics cards, particularly during the pandemic. However, an in-depth analysis reveals that the graphics card business is not as lucrative as many assume. Typical profit margins for Add-In Board (AIB) partners like EVGA hover between 5% and 10%. Despite being a leading manufacturer, EVGA’s margins lagged behind competitors because of their reliance on outsourced manufacturing, sacrificing higher profits for convenience. The company's commitment to excellent customer support and generous warranty policies, while valuable to consumers, further squeezed their already narrow margins. Unlike competitors that diversify their portfolios by offering both NVIDIA and AMD products, EVGA relied solely on NVIDIA, which further complicated their financial landscape.
The Strained Partnership with NVIDIA
The relationship with NVIDIA has also shown signs of strain. AIB partners often learn about official pricing at the same time as the public, making it challenging for them to manage costs effectively. Additionally, NVIDIA's tight control over design specifications has stifled innovation, as AIBs are unable to differentiate their products meaningfully. As EVGA faced rising production costs and thinner margins with the RTX 4000 series, their situation worsened after the cryptocurrency market crash, which previously had bolstered GPU sales. With no AMD products to fall back on, EVGA's business model grew increasingly vulnerable.
Future Prospects
Despite exiting the graphics card market, there is a silver lining for EVGA. The company has a successful power supply division that boasts much healthier profit margins and will continue to operate. In conclusion, the EVGA-Nvidia split exemplifies the complexities within the tech industry's supply chain and market dynamics, revealing the inherent challenges AIB partners face. As we watch this situation develop, it's likely to spark broader discussions on pricing, market access, and innovation in the PC components sector. Feel free to share your thoughts or insights on this topic! Have you used EVGA products, and how do you feel about their exit from the graphics card market?