Only 7.29% of Nvidia's revenue is from USA😲

[poohbear]

So this is quite shocking. Was looking into the sales distribution of Nvidia to understand this GPU shortage a little more, and I was shocked to see the vast majority of their sales are not even in the USA! Is this correct or am I missing something? Check out the link:

NVIDIA's Revenue Breakdown by Region (Bill to Location)

This statistic highlights NVIDIA's Revenue Breakdown by Region, reported on a quarterly basis from Q1 2016 onwards.

businessquant.com

So basically, we can complain all we want in North America, but we're not really a priority for them if this is indeed true.

 

[terzaerian]

So this is quite shocking. Was looking into the sales distribution of Nvidia to understand this GPU shortage a little more, and I was shocked to see the vast majority of their sales are not even in the USA! Is this correct or am I missing something? Check out the link:

NVIDIA's Revenue Breakdown by Region (Bill to Location)

This statistic highlights NVIDIA's Revenue Breakdown by Region, reported on a quarterly basis from Q1 2016 onwards.

businessquant.com

So basically, we can complain all we want in North America, but we're not really a priority for them if this is indeed true.

I would surmise their sales in Asia are to middle-man suppliers that are then selling the cards on to retailers, myself. I don't think this represents the actual breakdown of end-use customers using any given card.

 

[neeyik]

I would surmise their sales in Asia are to middle-man suppliers that are then selling the cards on to retailers, myself. I don't think this represents the actual breakdown of end-use customers using any given card.

Correct, Nvidia doesn’t sell many graphics cards itself. The bulk of it revenue comes from selling trays of GPUs and SoCs to third party vendors, such as EVGA. The majority of which are based in Taiwan and China, hence why they form such a large slice of the global revenue.

 

[poohbear]

Correct, Nvidia doesn’t sell many graphics cards itself. The bulk of it revenue comes from selling trays of GPUs and SoCs to third party vendors, such as EVGA. The majority of which are based in Taiwan and China, hence why they form such a large slice of the global revenue.

ahhh thanks for clarifying. So the Taiwanese buyers are Asus, Gigabyte, MSI, Zotac etc. Makes sense now. I guess their initiative to sell directly to consumer with their Founders Editions is a very small portion of sales. 7% North America is still tiny, I'm guessing that's mostly Evga.

What about datacentre sales? That's also through 3rd party vendors?

 

[neeyik]

Those figures did start to get me wondering just how accurate that analysis was. So I dived into Nvidia's financial reports, and here's a little bit on what they say about sales and marketing:

Our sales strategy involves working with end customers and various industry ecosystems through our partner network. Our worldwide sales and marketing strategy is key to achieving our objective of providing markets with our high performance and efficient GPU and embedded system-on-a-chip, or SOC, platforms. Our sales and marketing teams, located across our global markets, work closely with end customers in each industry. Our partner network incorporates each industry's respective OEMs, original device manufacturers, or ODMs, system builders, add-in board manufacturers, or AIBs, retailers/distributors, internet and cloud service providers, automotive manufacturers and tier-1 automotive suppliers, mapping companies, start-ups, and other ecosystem participants.

As NVIDIA’s business has evolved from a focus primarily on gaming products to broader markets, and from chips to platforms and complete systems, so, too, have our avenues to market. Thus, in addition to sales to customers in our partner network, certain of our platforms are also sold through e-tail channels, or direct to cloud service providers and enterprise customers. Sales to Dell Technologies Inc., or Dell, accounted for 11% of our total revenue for fiscal year 2020.

This is what Nvidia themselves have to say about manufacturing and distribution:

We utilize industry-leading suppliers, such as Taiwan Semiconductor Manufacturing Company Limited and Samsung Electronics Co. Ltd, to produce our semiconductor wafers. We then utilize independent subcontractors, such as Advanced Semiconductor Engineering, Inc., Amkor Technology, BYD Auto Co. Ltd., Hon Hai Precision Industry Co., Ltd., JSI Logistics Ltd., King Yuan Electronics Co., Ltd., and Siliconware Precision Industries Company Ltd. to perform assembly, testing, and packaging of most of our products and platforms. We purchase substrates from IbidenCo. Ltd., Kinsus Interconnect Technology Corporation, and Unimicron Technology Corporation, and memory from Micron Technology, Samsung Semiconductor, Inc., and SK Hynix.

We typically receive semiconductor products from our subcontractors, perform incoming quality assurance and configuration, and then ship the semiconductors to contract equipment manufacturers, or CEMs, distributors, motherboard and AIB customers from our third-party warehouse in Hong Kong. Generally, these manufacturers assemble and test the boards based on our design kit and test specifications, and then ship our products to retailers, system builders, or OEMs as motherboard and AIB solutions.

We also utilize industry-leading contract manufacturers, or CMs, such as BYD and Hon Hai Precision Industry Co., and ODMs such as Quanta Computer and Wistron Corporation, to manufacture some of our products for sale directly to end customers. In those cases, key elements such as the GPU, SoC and memory are often consigned by us to the CMs, who are responsible for the procurement of other components used in the production process.

And now the key parts - some revenue figures for the past 3 financial years (ending January) given by Nvidia:



So in terms of percentage, it works out as:

Taiwan - 27.7%
China & HK - 25.0%
OAP - 24.6%
Europe - 9.1%
USA - 8.1%
Others - 5.5%

So that analysis was pretty much right, though I'm not sure what data they looked at to get 7.3% for USA.

Anyway, the point is that the reports make it clear that regardless of the market sector (gaming, AI, datacentres, etc), the vast majority of those products are sold by companies based in Taiwan, China, and (probably) Japan. In the case of datacentres, even if the company is US-based, such as Dell or HP, they'll be buying the components for their systems from manufacturers in the aforementioned countries.

Other nice details:



So gaming, which covers GPUs and SoCs, accounted for 50.5% of their revenue in FY2020; datacentres was 27.3%, followed by ProVis at 11.%.

My favourite part is the statement that one customer accounted for 21% of their accounts receivable balance - I.e. one particular customer isn't overly forthcoming with paying their bills! I wonder who it could be...

 

[poohbear]

ch as EVGA. The majority of which are based in Taiwan and China, hence why they

Those figures did start to get me wondering just how accurate that analysis was. So I dived into Nvidia's financial reports, and here's a little bit on what they say about sales and marketing:

Our sales strategy involves working with end customers and various industry ecosystems through our partner network. Our worldwide sales and marketing strategy is key to achieving our objective of providing markets with our high performance and efficient GPU and embedded system-on-a-chip, or SOC, platforms. Our sales and marketing teams, located across our global markets, work closely with end customers in each industry. Our partner network incorporates each industry's respective OEMs, original device manufacturers, or ODMs, system builders, add-in board manufacturers, or AIBs, retailers/distributors, internet and cloud service providers, automotive manufacturers and tier-1 automotive suppliers, mapping companies, start-ups, and other ecosystem participants.

As NVIDIA’s business has evolved from a focus primarily on gaming products to broader markets, and from chips to platforms and complete systems, so, too, have our avenues to market. Thus, in addition to sales to customers in our partner network, certain of our platforms are also sold through e-tail channels, or direct to cloud service providers and enterprise customers. Sales to Dell Technologies Inc., or Dell, accounted for 11% of our total revenue for fiscal year 2020.

This is what Nvidia themselves have to say about manufacturing and distribution:

We utilize industry-leading suppliers, such as Taiwan Semiconductor Manufacturing Company Limited and Samsung Electronics Co. Ltd, to produce our semiconductor wafers. We then utilize independent subcontractors, such as Advanced Semiconductor Engineering, Inc., Amkor Technology, BYD Auto Co. Ltd., Hon Hai Precision Industry Co., Ltd., JSI Logistics Ltd., King Yuan Electronics Co., Ltd., and Siliconware Precision Industries Company Ltd. to perform assembly, testing, and packaging of most of our products and platforms. We purchase substrates from IbidenCo. Ltd., Kinsus Interconnect Technology Corporation, and Unimicron Technology Corporation, and memory from Micron Technology, Samsung Semiconductor, Inc., and SK Hynix.

We typically receive semiconductor products from our subcontractors, perform incoming quality assurance and configuration, and then ship the semiconductors to contract equipment manufacturers, or CEMs, distributors, motherboard and AIB customers from our third-party warehouse in Hong Kong. Generally, these manufacturers assemble and test the boards based on our design kit and test specifications, and then ship our products to retailers, system builders, or OEMs as motherboard and AIB solutions.

We also utilize industry-leading contract manufacturers, or CMs, such as BYD and Hon Hai Precision Industry Co., and ODMs such as Quanta Computer and Wistron Corporation, to manufacture some of our products for sale directly to end customers. In those cases, key elements such as the GPU, SoC and memory are often consigned by us to the CMs, who are responsible for the procurement of other components used in the production process.

And now the key parts - some revenue figures for the past 3 financial years (ending January) given by Nvidia:

View attachment 87454

So in terms of percentage, it works out as:

Taiwan - 27.7%
China & HK - 25.0%
OAP - 24.6%
Europe - 9.1%
USA - 8.1%
Others - 5.5%

So that analysis was pretty much right, though I'm not sure what data they looked at to get 7.3% for USA.

Anyway, the point is that the reports make it clear that regardless of the market sector (gaming, AI, datacentres, etc), the vast majority of those products are sold by companies based in Taiwan, China, and (probably) Japan. In the case of datacentres, even if the company is US-based, such as Dell or HP, they'll be buying the components for their systems from manufacturers in the aforementioned countries.

Other nice details:

View attachment 87455

So gaming, which covers GPUs and SoCs, accounted for 50.5% of their revenue in FY2020; datacentres was 27.3%, followed by ProVis at 11.%.

My favourite part is the statement that one customer accounted for 21% of their accounts receivable balance - I.e. one particular customer isn't overly forthcoming with paying their bills! I wonder who it could be...

whoah! Great analysis!

 

[Tyrchlis]

Well, Neeyik beat me to it, but just looking at it from a common sense perspective, it shouldn't be surprising to see the US at under 10% of demand for pretty much anything when you measure population, the US isn't nearly the biggest consumer on the planet at all. China and India have the US beat hands down for consumption numbers overall, pretty much in the majority of markets you measure.

Just because the US is really advanced in some areas doesn't put us ahead in a whole lot of others. We're really not that big in the grand scheme of things, we just get big headed about it is all

 

[neeyik]

Well, Neeyik beat me to it, but just looking at it from a common sense perspective, it shouldn't be surprising to see the US at under 10% of demand for pretty much anything when you measure population, the US isn't nearly the biggest consumer on the planet at all. China and India have the US beat hands down for consumption numbers overall, pretty much in the majority of markets you measure.

Just because the US is really advanced in some areas doesn't put us ahead in a whole lot of others. We're really not that big in the grand scheme of things, we just get big headed about it is all

It's not so much that the US has a much smaller graphics card consumer population compared to the likes of China. It's down to the fact that the majority of companies buying GPUs from Nvidia aren't US-based. Here are a few examples:

Asus - Taiwan
EVGA - US
Gigabyte - Taiwan
MSI - Taiwan
Palit - Taiwan (also owns the Galax brand)
PNY - US
XFX - US headquarters but owned by Pine Technology (China - Hong Kong)
Zotac - China (Hong Kong)

System builders such as Dell or Hewlett Packard obviously use Nvidia graphics cards in their models, but they don't buy them or the GPUs directly from Nvidia; instead, they source them from the likes of Zotac or other manufacturers who don't sell their own branded products in the US or Europe (and thus will be unknown outside of China, for example).

That said, note that almost 25% of Nvidia's revenue in 2020 came from Asian-Pacific countries, excluding Taiwan and China. When one looks at the list of states in that region, three stand out as being the most likely purchasers of Nvidia's products: Japan, India, and South Korea. The former has brands such as Kuroutoshikou and, of course, there's Nintendo who use Tegra SoCs in the Switch.

But as for India and South Korea? I'm not aware of them having any card manufacturers themselves (but may well be very wrong in this matter) and it can't be down to them buying Quadros and Teslas directly from Nvidia for compute and data systems, as then Europe and USA would be much higher.

There again, Asia-Pacific also includes Russia, Australia, New Zealand, Thailand, Indonesia, Malaysia, Pakistan, etc - I suppose if one grouped all of these together, with regards to the direct purchasing of professional graphics cards, then it may well all add up to the indicated revenue.

 

[Tyrchlis]

Yeah, I get it. Just saying though that it's not so surprising that the US accounts for a smaller percentage overall of the world pie. It's just seemingly common sense that countries like China and India are going to consume more of anything in general than the US does now. They caught up to us and passed us some time ago in overall tech and resource consumption.