Are you looking for a sweet new RTX graphic card to build or upgrade your PC and noticing that you cannot find any available from basically all retailers? You are not alone and it could be a couple more years before inventory levels return to normal.
The reason for the shortage in graphic cards is due to the global crisis in the semiconductor market, specifically the integrated circuits or more commonly chips in industry terms. These chips are quite costly to produce and are also inherently low-yielding causing enormous precision in the manufacturing process to reduce scrapping. This causes a high barrier of entry for the competition in manufacturing these products resulting in a worldwide dependency on just two suppliers — Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics Company out of South Korea.
These chips are used in much more than just graphics cards. They can be found in everyday basic consumer electronics such as kitchen appliances, smartphones, and car and motor industries.
There are two types of chips: memory chips and logic chips. Memory chips are relatively more simple and cheaper to produce and are used as the name implies – to store data. Logic chips are used to run as the brain of systems and carry out program functions. These chips are more expensive to produce due to their higher complexity. Logic chips are used in all the name-brand technology companies such as Broadcom, NVIDIA, and Samsung. Even Sony and Nintendo have felt the pain.
What are some factors for the graphic card shortage?
- Covid-19 promoting the stay-at-home era. Everybody in lockdown spurred up instant demand for laptops and telecommunication products. This helped push chip demand beyond levels anticipated in the manufacturer’s projected sales plan. With everybody staying home more the demand for electronics for work and pleasure shot sky-high.
- U.S and China tensions. The U.S. government submitting sanctions on Chinese technology companies has put some international trade tensions on obtaining these products.
- Natural disasters. In February 2021, the U.S. had a terrible cold snap that shut down Texas resulting in local semiconductor plants in Austin halting production.
- Scalpers. A real problem in the last couple of years has been the rise in scalping bots. This is where an entire retailer inventory is wiped clean within seconds of launching a product by automated bots purchasing the products faster than a human can by hand. These scalpers then list the purchased products on sites like Amazon and eBay for a much higher markup making a large profit on impatient consumers.
- Stockpiling. The tight supply of chips was foreseen by some companies who began placing large orders to build their inventory before the rest of the world caught on. One example would be Huawei Technologies Company who grabbed up as much inventory as possible in response to the U.S. issuing sanctions against their primary suppliers.
- Cryptocurrency Miners. Cryptocurrency is becoming a hot topic and many believe this is the next big thing coming in the future. With this many are jumping into setting up mining farms where the graphic cards are used to help validate the network algorithm and in return are rewarded with a number of coins paid for the service.
How long will the chip shortage last?
Goldman Sachs released a statement saying there are 169 U.S. industries that utilize semiconductors within their products. Analysts are warning there are signs that some components within these chips will remain in sparse supply until at earliest fall of 2021 and quite possibly longer into the new year of 2022.
Currently, every industry using semiconductors in their products is working to backlogs. This means there’s quite some catching up to do on current orders before suppliers can even start working on future orders. Jim Whitehurst, President of IBM, has been quoted stating, “we are looking at a couple of years … before we get enough incremental capacity online to alleviate all aspects of the chip shortage.” (Source: The Guardian)
All signs are pointing to a continued dark future for the time being. We will continue to see struggles finding PC components, especially in graphic cards since we are also competing against the cryptocurrency market for mining coins. It may very well be into midyear of 2022 before we see any signs of the semiconductor chip market recovering.