Earlier this week, Nvidia introduced the GeForce 8800GT targeting the mid-range enthusiast segment. The performance and the relatively moderate price tag are enticing. However, the problem is that these new cards aren’t quite available for the promised price ? The reason : Limited channel supply.
In briefings the previous week, Nvidia GeForce General Manager Ujesh Desai told the press that the highly praised GeForce 8800GT would come to market at a $250 price point. After looking at prices online, however, graphics cards based on the new reference designs are selling for $270-300, depending on the manufacturer. Admitted, this is not as bad as a premium as enthusiasts were used to with cards such as the GeForce 6800, but we are still talking about a 10 – 15% from the stated price just five days ago. That is reason enough to look into this issue.
We have learned from previous product launches in this market segment that there are several possible reasons with the first dealing with marketing and PR spin. While we would like to believe that all manufacturers are absolutely truthful, we cannot take a company’s word for gospel truth. Based on what we know and what we were told by industry sources, it does not appear that Nvidia was trying to put a spin on its pricing at launch. Looking around online also shows that - while they were out of stock - cards from PNY list for $249.
This means we should look to the basic competitive laws of capitalism. While price is predicated on demand, demand might have actually been higher than Nvidia and its graphics card partners originally anticipated. It is also not uncommon for retailers to charge a premium to the earlier adopters. These two factors could cause prices to be high.
However, a price jump wouldn’t happen the instant cards were available. Generally there needs to be a brief period where the actual demand can be calculated and the appropriate price applied. Most of the prices above the $250 mark were in place when the second GeForce 8800GT launched. While some cards are out of stock, many places like NewEgg have plenty in stock. This would mean that there isn’t a short term demand or short term supply problem. This turns us to long term supply. What if there is limited supply of the product available to the channel ? Two industry sources stated that roughly 30,000 of these graphics processors were available worldwide at the time of this writing. If this is the case, supply is low and this would facilitate a higher unit price for the consumer.
The fact remains that there is a premium on GeForce 8800GT graphics cards already. The next six months indicate a bright outlook for computer graphics and gaming, especially because of the launch of a new generation of games and the introduction of new processors. The upcoming launch of AMD graphics products also will bring more competition to the market. More choices for the consumer mean better pricing and more money in our wallets with the performance we want is generally a good thing.
While all of these factors can contribute to higher prices in the short run, a lack of supply could be disastrous to Nvidia in the long run.
We contacted Nvidia to comment on the supply situation and are waiting for an answer. We will updated this article as soon as we receive this answer from Nvidia.