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Posted26 days ago
Key Takeaways
They can choose how strong they commoditize their complement: perhaps buying up and expanding operations of RAM manufacture (an investment indeed, or a revenue insurance if a GPU competitor springs up), or more expensive buying up IP and licensing IP below market prices to novel RAM factories in friendly nations perhaps with exclusive priority or agreed prices for RAM at specified volumes etc., or even more expensive buying up IP and putting in public domain. The most optimal depth of commoditization would have to be calculated by such a GPU manufacturer.
I think commoditize means "make cheaper, maybe by commoditizing" in this context.
Memory is and was commoditized. It just got more expensive.
Nvidia's business is cored on selling hardware to price insensitive customers. Those customers are price insensitive because the value created with Nvidia's GPU's is a non-fractional multiple of their capital cost and the capital cost of the GPU's is a fraction of the capital cost of the overall infrastructure.
And this is really important: if you maintain your margins, higher prices mean more net revenue. 30% of $2500 is less than 30% of $3000 while logistic and marketing and development costs are the same.
The retail market is price sensitive but is not the core of Nvidia's business. Large price insensitive customers are what drives development direction and what goes into retail is condensed from the exhaust fumes.
As a customer for RAM fabs, Nvidia drives the direction of RAM development without capital expenditure on infrastructure and R&D. It also mitigates the investment risks from political changes and disruption caused by technological breakthrough (the inertia of obsolescent RAM fabs driving design decisions).
Or to put it more simply, the age where near-leading-edge GPU hardware was readily accessible to consumers are past. The leading edge is increasingly military-industrial scale...with all that implies. Good luck.
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