NVIDIA last year launched Turing graphics cards that support RTX real-time light pursuit, in which the RTX 2080 Ti sells for a million dollars, making the RTX 20 Series graphics cards significantly higher than previous graphics cards and making high-end game cards more expensive. Even more frightening, this trend is likely to continue, even if NVIDIA itself is unwilling to raise prices, but their costs are increasingly stressed.
NVIDIA last week reported revenue of $3,014 million, down 5 percent from the 2020 fiscal year ended October 27, 2019, and net profit of $899 million, down 27 percent from a year earlier. The fall in profits is still expected, but the reasons for the decline in profits disclosed in the 10-Q document are more alarming.
From this cost list, NVIDIA last quarter, the cost of the hardware chip itself only accounted for 36.4% of revenue, gross margin as high as 63.6%, this gross margin is still very high, to know that AMD’s gross margin has just recovered to about 40%.
Among NVIDIA’s other costs, the growth in research and development was noteworthy, with research and development spending at just 19% in the same period last year, up nearly 5 percentage points from 23.6% in the previous quarter, compared with a 1.1 percentage point increase in sales promotion costs.
In the first three quarters of this year, NVIDIA’s research and development spending ratio increased to 26.8%, compared with 18.2% in the first three months of last year, which is also a significant reason for NVIDIA’s decline in earnings, resulting in NVIDIA’s net profit margin from 37.5% last year to 23.6%.
NVIDIA points out that the increase in research and development costs is mainly due to the recruitment of new employees, while the salaries and incentives of existing research and development staff are also increasing.
After comparing these data, we can understand why NVIDIA on the 7nm process gpu chip is not anxious reasons, first of all, 12nm process Turing is very capable of playing, performance, energy efficiency both have advantages, NVIDIA does not need to upgrade so quickly.
But 7nm upgrade is also sooner or later, this is probably NVIDIA in addition to TSMC to choose Samsung’s 7n EUV process contract reasons, because rumors that Samsung in order to grab TSMC 7nm orders, 7nm EUV contract price is about 40% lower, very attractive to manufacturers, Qualcomm, NVIDIA has increased its order for Samsung.
In the present situation, NVIDIA’s future 7nm graphics card can not do more to sell (look at the current economic environment is difficult, after all, the opportunity in the mineral card market is gone), then in order to maintain the current level of profit, the price is likely to rise a wave.