AMD stifling competition? Did Palit screw AMD?

Opinion – There is heated debate going on in the graphics industry discussing a rather unusual choice of add-in-board (AIB) maker Palit to modify an AMD reference design in an obvious move to cut costs. AMD wasn’t happy and halted chip shipments to Palit. Now Palit is upset. So, was the modification a smart decision by Palit to promote innovation or simply a cheap shot to get an unfair advantage over the competition and kill one of AMD’s SKUs?

Let’s be clear upfront. The margins in the graphics AIB industry are extremely low and manufacturers do depend on their engineering ideas and marketing to stay alive, much more so than other industries. And it seems that Palit had a seemingly ingenious idea to cut a bunch of dollars off their bill of materials (BOM) for a new graphics card. And the question is: How far should AIB manufacturers be allowed to go to change reference designs? Should they be limited simply to changing clock speeds or should they be able to switch hardware components?

You can read the entire background of the controversy over at geek.com, but it seems that Palit exchanged the GDDR3 memory in the Radeon 4850 card in favor of faster GDDR5 memory. The result is that this modified 4850 is, according to industry sources, virtually as fast as a more expensive 4870 card. In effect, Palit was about to offer a 4870 card, while paying AMD for a 4850 chip, which cut about $30 from their BOM, those sources told us. We are pretty sure that AMD can’t be happy about this and we surely know Palit rivals are angry. Why? Well, apparently AIBs are contractually prevented from substituting the GDDR3 with GDDR5 memory and Palit simply may have ignored that guideline.

From a consumer’s point of view there are two sides to this story. First, you could say that Palit was “innovating” by cutting a corner and looking for a way to offer a certain product for less money. On the other hand, we hear that GDDR5 memory technology is very different from GDDR3, requiring a different BIOS and a new qualification process, which simply do not exist for the Palit GDDR5 4850 card, at least not from AMD. Sources told us that memory suppliers are also concerned about their products being used and sold in a non-qualified product.

So, what is the problem? AMD could simply qualify Palit’s GDDR5 card, right? Well, no.

Aside the additional cost of the qualification, Palit’s idea virtually eliminates the business case for all other 4870 cards. There are different Radeon SKUs addressing different markets. It is rather obvious that AMD can’t be happy with an AIB that decides on its own that the 4870 is not needed anymore and violates a contractual obligation. AMD positions its products against Nvidia, there is a certain choice of products, and if consumers decide that the Radeon cards are too expensive, AMD will have to lower the prices of their GPUs. It is not up to Palit to make that choice.

From a consumer’s point of view, yes, Palit’s move makes sense. But the underlying business case makes it difficult for me to chastise AMD and accuse them of stifling innovation. They have different products to sell, they have to compete effectively with Nvidia, and AIBs need to stay within the contractual design guidelines. It is as simple as that.      
   

Wolfgang Gruener is the founder of TG Daily. The opinions expressed in this commentary are solely those of the author.

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