It turns out that the world is facing two calamities simultaneously — the pandemic and the massive chip shortage. The second problem is bigger than it seems. Scalpers are having an excellent time, and the situation has gotten so bad that just the packaging box for a graphics card sells for $200 on eBay. But, this hasn’t happened before, and what else hasn’t transpired before? It is the outbreak of the virus — so straightway, the virus has caused all of this. Easy answer, right? It isn’t that simple. There’s an even simpler story behind what’s causing the massive GPU shortage.
People Keep Buying Graphics Cards
Right off the bat, we’ll say everyone keeps buying the graphics cards, and companies like NVIDIA or AMD didn’t expect this. Whereas, Intel is in stock just because their sales kept steadily falling over the years. Wait, but didn’t Bitcoin blow up and mining became even more common than ever before? Also, aren’t miners stocking up all the GPUs? Well, that may be true, but companies have confirmed the majority of the GPUs have ended in gamers’ hands. It’s just that there are more “gamers” than ever.
Steam publishes its total number of users every month. If you were to take a look, you’d learn the number of gamers exploded in 2020. Looking closer at 2020 would let you know the two waves of the virus caused a spike in the user base. Additionally, as you may have heard, there is a massive semiconductor shortage happening. But, the supply of semiconductors was only briefly disrupted, and throughout the year companies have been pumping out more GPUs than ever.
Virus Made Things More Difficult
COVID-19 has worsened things to an extent as more people started to work from home. Their old machines that sat collecting dust over the years simply couldn’t keep up with the needs of the modern workflows. Therefore, they just had to get something beefier. Unsurprisingly, more upgrades equal more pressure on the supply system. The year 2020 saw record-breaking growth in the PC market industry, with a whopping 20.6% increase in PC sales in the U.S. in Q4.
Working from home and keeping in touch with family remotely led to loads of video data consumption. This put pressure on services like Microsoft Teams, Zoom, JioMeet, and Google Meet. To keep up with this demand and compete with faster connections and non-existent hiccups during meetings, all companies kept pushing more data centers.
Also, AMD workstation chips, i.e., the EPYC chips, consist of the same wafers as the consumer-grade Ryzen processors you use for gaming. Thus, the higher demand for EPYC made the Ryzen chips less available. All this happened after AMD had already bought all semiconductors from their respective manufacturers. Horrible, right?
The Bigger Story and the Solution
Before we dive deeper into this, you should know about Samsung Foundries and Taiwan Semiconductor Manufacturing Limited or TSMC. These are the only two companies that make the bleeding edge components, or the chips, that make up your CPU or GPU and plenty of other electronics. The ongoing high demand made these two companies run at full capacity, which leads to zero downtime for their machines. As you can imagine, on one hand, the supply goals aren’t met, while on the other, the chances of their machines burning out is ever-increasing.
Well, that is why you may see both of these companies investing big time to make ends meet. TSMC or Samsung would love more money in their pockets, and who wouldn’t? Samsung Foundries has already started a project called “Silicon Silver”, in which they are spending 12B$ to build a semiconductor fabrication plant in Texas by 2023. In contrast, TSMC is building one in Arizona. Both of these exist thanks to the United States’s decision to address the global semiconductor shortage.
However, chip production is only a link in a large chain. You need to make the PCB (Printed Circuit Board) and ship the cards to the retail companies. They will make the cooling component, add them on top, and package them. Only then you can order or drive a GPU home. As you can see, the matter isn’t straightforward.
Consoles Enter the Picture
Then came the launch of the next generation of consoles in 2020, after 7 long years. The release of PlayStation 5 and Xbox Series X/S added more fuel to the fire. Not only are they great holiday gifts for parents to give to their kids, but are very cheap for the performance they promise. You get the idea. At this point, it seems that if we had more launch exclusives hit the market, the scenario could have gotten even worse. All of this kind of explains why scalpers are having a superb time. It also makes it obvious why all graphics cards sell as soon as they come in stock.
Thankfully, it seems things are finally getting easier, according to the CEO of AMD, Dr. Lisa Su. She attended a conference with Anandtech in early 2021. Both Dr. Lisa Su and Jensen Huang stated it’s more of a demand issue than a supply issue. The RTX 3060 Ti and the RTX 3070 have seen a sharp fall in MSRP (Manufacturer’s Suggested Retail Price) over the last few weeks. Moreover, the RX 6600 XT and the RTX 3060 are available at prices almost close to their MSRP.
To draw the bottom line, the number of gamers has risen. The growth is so substantial that companies are struggling to make up for it.