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Economics of Graphics Cards

As an avid gamer and a computer enthusiast, the price of PC components is something I keep an eye on. In particular, graphics cards(GPU). GPUs are responsible for compiling and rendering display data for computer monitors. This is very important for getting the best visual experience in video games. Graphics cards can be the single most expensive component and provide the best price to increase performance to a custom PC regardless if it is a brand new build or upgrading an older rig. My vested interest in GPUs as a product has led to further interest in the current market state of GPUs.

The current market type that best describes the GPU market is an oligopoly albeit a unique one. If one were to go online or the electronic store one will see many different brands of GPUs, but upon closer analysis will notice that on the boxes will have the brand and then its reference card. The reference card is the base chipset or ‘type of GPU’ i.e RTX 4080 or Radeon RX 6000. Only 3 companies design and produce these reference cards: Nvidia, AMD, and Intel. Nvidia and AMD are long time players in this market and compete with each other for who makes the best product, Intel has restarted their GPU line and are attempting to make their space in the market. These references cards are then sent to other companies who then design the printed circuit board (PCB), the housing that facilitates connection to all the components involving the electronics, and then have a cooler attached to them as these chips can generate a lot of heat to be then ready for the consumer to install into a PC.The uniqueness of this oligopoly stems from that while these three companies design and produce these reference cards for other companies/brands to then be completed as fully functional GPUs, they themselves also produce full GPUs that are ready to install. To summarize the supply chain of a gpu, first it starts with the raw materials and the refinement of raw materials, then it goes to reference cards producers, computer hardware companies, and then to retail. Nvidia, AMD, and Intel are not only the main pillars in the supply chain to these computer hardware companies, but they are also competing with those same computer hardware companies on fully assembled GPUs.

Since Nvidia, AMD, and Intel provide reference cards and produce their own GPUs this leads to their product being more competitive in the market. Using the RTX 4090 reference card as an example and StockX, a website where customers can resell products, for data we can compare the Nvidia offering GeForce RTX 4090 Founder’s Edition retailing at $1599.00 and Asus, a computer hardware company, offering ROG Strix Geforce RTX 4090 OC Edition retailing at $1999.99. First thing we can compare is the 12-month historical Number of sales. On the Nvidia product the quantity is 492 while the Asus product quantity is 56. Next we compare the average sale price of Nvidia: $1865 and Asus: $2054. These numbers can be further broken down by looking at the average profit by Ave. Profit = Ave. Sale price - Retail price.

 Nvidia: $165.01

 Asus: $54.01

Comparing the average profit and the quantity we can see that the Nvidia product is much more desirable than the Asus product. This one example of many which shows this trend where the reference card producer GPU is much more desirable than the third party computer hardware product.

Sources

StockX, NVIDIA Founders GeForce RTX 4090 24GB Graphics Card 900-1G136-2530-000. StockX. https://stockx.com/nvidia-founders-geforce-rtx-4090-24gb-graphics-card-900-1g136-2530-000

StockX, NVIDIA ASUS ROG Strix GeForce RTX 4090 OC Edition 24GB Graphics Card. StockX. https://stockx.com/nvidia-founders-geforce-rtx-4090-24gb-graphics-card-900-1g136-2530-000