Why are video cards shaking so much in 2021?
There is only one reason for the rise in price - shortage. But its occurrence was influenced by several factors at once.
Initially, the shortage of video cards was associated with stagnation among leading manufacturers - Samsung and TSMC. Over time, production problems gradually improved. Samsung has already returned to its usual course, and TSMC is still moving in this direction, since the deficit has already formed, and it is impossible to fill it immediately.
The second factor was mining. Thus, modern cryptocurrency traders are buying up graphics accelerators at an unprecedented speed. Moreover, in whole batches and directly from suppliers, not allowing them to even reach store shelves. All that gets there is a GeForce GT 710 or GTX 1030, etc.
Mining on video cards is more than profitable. Take, for example, the GeForce RTX 3080. Now you can buy it for 160 thousand rubles, and you can earn yours in just a couple of months.
Therefore, it is not surprising that miners create entire mining farms, and there are practically no high-quality new generation accelerators on the market. And this is how things are not only in Russia. Mining on video cards is a common practice worldwide.
Why is cryptocurrency worth so much?
One of the limiting factors is cryptocurrency. Now part of the investment goes into Bitcoin and related currencies, inflating them to colossal proportions. The same Elon Musk is not lazy to invest in crypto: Tesla invested $1.5 billion in Bitcoin.
Just imagine, Bitcoin’s capitalization has exceeded the ruble! While blockchain technology itself is great, investing in cryptocurrency is no different from the stock market. As quickly as Bitcoin has risen, it can fall just as quickly. This is about the mining boom, which must end someday. I hope it will not take place under the auspices of a global crisis.
Bitcoin's summer fall leads to lower card prices
So, cryptocurrency and graphics accelerators are in serious connection. Accordingly, the exchange rate of Bitcoin, like other digital currencies, has a direct impact on the pricing policy of the video card market.
In any case, this is the case in China and Europe. After the rapid fall in the Bitcoin rate from more than 60 thousand dollars. to 35 thousand in the summer of 2022, the Chinese have reduced card prices by almost 30%. Much the same thing happened in the European market.
As for Russia, a completely different picture is observed here. With the rise of Bitcoin, prices for video cards automatically increased. But after the June fall of the cryptocurrency, no significant changes occurred.
Moreover, prices have not fallen and are not even planning to decrease.
So, RTX 3090 from Asus now costs about 280 thousand rubles. And you can only get it by pre-ordering with prepayment. In Citylink, for example, top cards cost at least 300 thousand. However, they are not available. And even after paying a large sum, the gamer will have to come to terms with a certain waiting period.
Why shortages are not just a “mining boom”
And now the worst part: deglobalization, a pandemic and an overheated stock market . It sounds complicated and abstruse, but the problem of shortage of consoles, video cards, components and other goods arose back in 2007.
Economic background
Everyone knows that the trends in the world economy are dictated by the United States, because the focus of investment and technology is located there. In the 20th century, enormous resources flowed into the country, making it a powerful economic engine. Having developed their own institutions, the States begin to invest in other countries, setting transaction terms that are convenient for themselves. This is how the United States became the world economic leader, personally growing Europe and Asia and earning huge dividends.
It is interesting that in history there have always been centers of trade and technological development - the Dutch cycle (16-18 centuries) , British (18-20 centuries) and American , in which we live. But don't forget the key feature of every cycle: it always ends.
Having received the palm from Britain, the United States quickly jumped ahead: what are Hollywood, legal reforms and key scientific discoveries fueled by the Cold War. America and the USSR began to divide spheres of influence, investing in poorer neighbors. Only now the Union of Republics collapsed, and the States moved on.
Owning the latest technologies and buying out all startups, the American economy has become the strongest on the planet. Simply put, all developed and developing countries in the world benefit from America’s “gifts.” And you have no idea how bad it is.
Stock market bubble
The United States economy is driven by the stock market. When humanity made progress in certain areas, investors began to pour money into securities - stocks. That is, there are no technological and production improvements, but funds continue to be invested, inflating capitalization to incredible proportions. A striking example is Tesla, the brainchild of Elon Musk.
If you google the price of a company's shares and its capitalization, you will ask a logical question: is it really worth that much? Of course not! If you take a pure production process, Tesla would be one of the poorest car companies in the world. But investors artificially inflated the value of shares in the stock market, creating a sense of stability and wealth. But this is a real soap bubble - slowly inflating, it instantly bursts. And 2007 showed the complete failure of such a strategy.
The crisis that hit the world that year stunned both investors and ordinary people. It turns out that huge amounts of money were circulating in the economy, but they were not spent on increasing production and developing technology. Of course, there has been some progress, but it cannot be called breakthrough. Large companies relaxed, believing that current production would be enough and there would never be a repeat of the Great Depression for the United States.
But, unfortunately, that's not how the stock market works. The bubble bursts sooner or later, damaging the economy of the entire world . However, after a while, everything returns to normal, because no one can offer an alternative. Investors are again investing money in non-existent production, and companies believe that now they have definitely provided for everything. But COVID-19 has once again exposed the stock market's inconsistency, and we are once again on the verge of another crisis that governments are trying their best to contain.
How much will prices for video cards drop by fall, according to experts?
A survey of retailers conducted by employees of the Digitimes portal showed disappointing results. Experts have come to the conclusion that record demand for video cards will continue at least until the fall of 2021. And if we take into account the success of miners, it may last until the end of this year.
For gamers, this means only one thing: manufacturers will not be able to satisfy all consumer needs. This means that the shortage of graphics accelerators and, accordingly, high prices for them will persist for some time.
The analytical company TrendForce also made a disappointing forecast. Its experts emphasized that one of the key components of video cards of all generations is video memory. And according to their forecasts, in the third quarter of 2022 it will rise in price.
True, the share of such a rise in price will not be significant, varying from 8 to 13%. But by the fall, video memory will skyrocket by as much as 48% compared to the beginning of the year. And such figures do not provide any reliable evidence for reducing the cost of graphics accelerators.
Alarm bells
After the excellent presentations, players rushed to place pre-orders - the manufacturers claimed that there would be enough video cards and consoles for everyone. However, the first batches flew away instantly, and people became suspicious. Bitcoin slowly began to grow, and thanks to it, other cryptocurrencies also strengthened.
Sony, Microsoft and NVidia denied it, saying that they simply did not expect such an influx of buyers. After waiting for the next delivery, gamers ran to the stores, but the goods disappeared somewhere again.
Someone managed to snatch the console and video card at the recommended price, looking sarcastically at the losers. Well, let's wait for the next delivery, especially since the company promises to fix everything and increase production. But that was not the case: if the consoles somehow covered the demand, then hard times came for the “bakers”.
Companies under attack
Automakers. In late July, US Commerce Secretary Gina Raimondo said the situation was improving for automakers hit by chip shortages that have forced plant closures to hurt production.
However, suppliers of these vital electronic components have warned that the problem has not yet been solved and said the auto industry's rapid shift to electric vehicles (the semiconductor content of electric vehicles, including hybrids, is twice that of gasoline-powered cars) could make the situation even worse. and their clients share this view. Chip manufacturers are benefiting from this situation - their profits have reached record levels, while car showrooms remain empty. This is preventing car manufacturers from fully benefiting from the post-coronavirus demand surge. Prolonged uncertainty has resulted in losses for automakers amounting to at least $110 billion in lost revenue this year.
It takes months for chipmakers to significantly ramp up production, let alone build new factories, which can take years and add billions of dollars in costs. Meanwhile, the coronavirus pandemic is still ongoing, causing production disruptions.
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Internet providers. Broadband providers have experienced months-long delays in connecting internet routers. With the dramatic shift to remote work and the need to provide jobs at home, demand for services has seen rapid growth, leading to a severe shortage of semiconductors.
Manufacturers of computers, smartphones and computer equipment, game consoles. As for manufacturers of computer equipment, not only the factor of significant growth in demand, but also the accumulation of inventories was at work here. PC makers began warning of supply shortages in early 2022. Then around mid-year, Huawei Technologies Co., the Chinese smartphone maker that also dominates the global market for 5G networking equipment, began building up inventory to make sure it could survive U.S. sanctions. Other manufacturers followed suit.
Manufacturers of household appliances. During quarantine, people spent all their time at home and bought household goods to make their lives more comfortable. This has led to a surge in sales of home appliances, from TVs to air purifiers, which now come with custom chips.
Who did win
Microcircuits can be divided into simple (for example, memory chips) and complex. Simple ones are used to store information, do not require large production costs and are relatively cheap. More complex chips are like the brain of the device that runs programs; they are more expensive and complex. Very often, these chips are designed by one semiconductor company (Apple, Qualcomm, or Nvidia) and manufactured in other companies' factories, called foundries. Large semiconductor manufacturers include primarily TSMC, Samsung, Intel Corp.
Taiwan's TSMC produces the most complex chips. Its share of the global foundry market (51.9%) is greater than that of the next three competitors combined. The company does not stand still and is constantly increasing its production capacity. So, in 2022, it announced plans to build a plant in Arizona. Construction should start this year, and the factory is planned to be launched in 2024. TSMC has already allocated $3.5 billion for this project; the plant will produce 5nm chips, with a capacity of 20,000 300mm silicon wafers per month. Total semiconductor fab costs could reach $12 billion.
Samsung is improving its production technology and receiving new orders from companies such as Qualcomm Inc. and Nvidia Corp. The company is committing about $151 billion to the 10-year project to keep up with its Taiwanese rival.
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Intel Corp. The U.S. champion in the field has higher total revenue than any other chipmaker, but its business is largely focused on making its own brand of chips that serve as the central processing unit for laptops and desktop computers. Production delays have left the company vulnerable to competitors who benefit from using TSMC chips to produce their designed chips. Intel plans to regain market leadership by building two new factories in Arizona and spending $20 billion on it.
Smaller manufacturers are the American GlobalFoundries Inc., the Chinese Semiconductor Manufacturing International Corp. (SMIC) and Taiwan's United Microelectronics Corp. They are two to three generations behind TSMC technology.
Among the companies worth considering in pursuit of the semiconductor shortage trend are both the manufacturers themselves and equipment suppliers (ASML, Lam Research). This is a more long-term bet, since they will be attracted to supply equipment for production and development of new factories, for example, in the USA and the EU.
The problem of semiconductor shortages is already being solved at the global level, and not within individual countries. The United States, which continues to lead the world in chip design, is seeking to encourage companies to build or expand advanced factories domestically to address what Commerce Secretary Gina Raimondo calls a national and economic security risk. In June, President Joe Biden recommended that Congress provide at least $50 billion to support U.S. semiconductor research and manufacturing (the legislation easily passed the Senate the same day). The Biden administration will also develop tax incentives for TSMC, which is building a plant in Arizona, and Samsung, which plans to build a plant in Texas. The European Union, in turn, is exploring ways to build an advanced semiconductor foundry in Europe, possibly with help from TSMC and Samsung.
At the same time, measures are being taken not only in the West: on Friday, August 6, state media published a warning about the fight against speculators in the chip market, and on Monday, August 9, the markets opened with a drop in manufacturers' shares by 6-8%.
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Deglobalization
But you can try to escape the crisis. The hero's name is deglobalization . This is a negative process that can be turned for good. If we talk about Russia, the country is increasingly moving away from the global economy, building ecosystems of domestic production. Thanks to this, the global collapse may not affect us, since internal processes will not depend on other countries.
China, Japan, South Korea and developed European countries are following the same path. Perhaps the next economic center will be Asia.
However, it is best to get rid of the addiction that leads to the inevitable bursting of the stock bubble.
I hope you are not too frightened by the economic processes awaiting us. The main message of my article is that not everything is clear. Sometimes a problem comes from where you least expect it.
