Revived GPU war hurting bottom line

As a consumer it might be a bit difficult to even consider that perhaps this new graphics war might have some negative connotations for the future. Low prices, high performance, and a wide array of options are all mashed together into a puree of gaming bliss for those of us looking to buy. However, the routine price drops and new product launches at ultra-affordable price points might be hurting the bottom line of both combatants. If this is indeed the case, there could be some adverse consequences on the graphics market in general.

report on Fudzilla last week claims that NVIDIA’s “average selling prices are destroyed”. This article basically just points out the obvious consequences of the price drops over the past month, which have become more aggressive and frequent since the launch of the GeForce GTX280. NVIDIA, selling video cards at price points nearly $200 cheaper than the intended launch MSRP, are obviously not going to have the kind of margins that the company is used to achieving after the two-year unbridled success of the 8800 series.

It is important to note that this really does not mean that NVIDIA is no longer going to be profitable. However, huge pressure from AMD on two fronts is definitely causing their average selling prices to drop. The performance of the Radeon HD4800 series has launched AMD onto the graphics leaderboard for really the first time since the ATI acquisition, and NVIDIA’s counter to this product line was by most accounts lacklustre. Consequently, NVIDIA has had to engage in aggressive price cuts to remain competitive with the much lower-priced cards from AMD.

We have to ask at what point will these price drops begin to have the negative effect on both companies. If this trend of constant one-upsmanship continues unchecked, both companies can end up in what we would probably call a precarious financial situation. At this point, we would expect the cost of video cards to jump through the roof as a means for loss prevention.