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Understand NVIDIA's Brilliant Move – The Motley Fool



In August 2018, the graphics specialist NVIDIA (NASDAQ: NVDA) announced the first of its next generation graphics processors targeting the PC gaming market, known as the GeForce RTX series. This lineup consisted of three models: GeForce RTX 2080 Ti, GeForce RTX 2080 and GeForce RTX 2070. (The higher the model number, the better the performance and the price tag.)

Later this month, the company is expected to launch the GeForce RTX 2060, which looks as it will be based on the same basic chip as the GeForce RTX 2070, but with some graphics cores disabled to reduce performance. GeForce RTX 2060, according to VideoCardz, will sell for around $ 349.

  NVIDIA's Titan RTX.

Image source: NVIDIA.

Now the truth is that NVIDIA needs to offer even cheaper graphics card options to fully serve the market. (On the analyst day last year, the company said that the average GeForce GTX-based graphics card sold for $ 200.)

To serve the market with a new generation of graphics processors, NVIDIA does something a bit unusual. However, I think this move makes full sense, and I hope that once I have explained it, you will agree.

RTX 20 Series for High End, GTX 1
1 Series for Lower End

There have been some credible leaks to suggest that in addition to launching the GeForce RTX 2060, NVIDIA will also fly out some called the GeForce GTX 1160 NVIDIA currently sells GeForce GTX 1060 in the middle of the PC gaming GPU market, and this alleged GTX 1160 acts as a more incremental successor to the GTX 1060.

In fact, according to VideoCardz, a site that has NVIDIA will sell parts labeled as " GeForce GTX "with model numbers beginning with" 11 "instead of" 20 "for price points lower than the RTX 2060. 19659003] The GTX 11 series parts will still be based on the same basic NVIDIA Turing graphics architecture as the RTX 20 series cards, but According to a leak (via VideoCardz), it will not previously support NVIDIA's RTX ray tracing technology. [19659008] Why does it make sense?

It is both technical and business reasons that this makes sense. The chips on which the GTX 11 series is based do not seem to actually have the built-in circuit to support NVIDIA's RTX ray tracing features (although we do not know for sure). Since such lower graphics processors would not have the necessary reason to run games with high quality configurations with these features enabled anyway, it makes sense to remove those chips from features that are likely to sit there and take up space.

It gives you a good business flow in two ways. Firstly, silicon that sits there taking up space without any real advantage makes a chip larger and therefore more expensive to produce. If NVIDIA can't get paid for the silicon property it uses for these features, it might as well strip them.

In addition to this, by limiting RTX technology to the higher end portions, NVIDIA creates an additional sales argument for its pricier products, which can potentially turn into a richer product mix for the company, increasing revenue and earnings. (Onus is now on NVIDIA to continue working with developers to ensure that both RTX technology is widely adopted and that performance can be applied to any card with technology embedded.)

Ashraf Eassa has no position in any of the shares mentioned . Motley Fool owns shares and recommends Nvidia. Motley Fool has an information policy.


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