Why are graphics cards so expensive?

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The PC component market has been quite an unpredictable nightmare since the end of 2020, and specifically, you may ask why are graphics cards so expensive? GPUs are easily the most expensive part of any build but there comes a point where it becomes too much even for a single part. Especially when a few years ago you could buy the top-end card of the line for under $600 with the launch MSRP of the GTX 1080.

Even at the next generation, the RTX 2080 would cost you $699 at launch but most importantly you could easily find one in stock. The issues started with the launch of the 30 series Nvidia cards and the 6000 series from AMD where stock and price became an issue. We take a look at why that is the case and the reasons why the cards have become so expensive.

Advanced technology

The first reason is looking at the base price of the graphics cards. The MSRP is the manufacturer’s suggested retail price, it is what AMD or Nvidia recommend their products be sold for. This isn’t always followed as the AIB’s (add-in boards) will give their own design and solutions onto the base PCB (printed circuit board) sold by AMD or Nvidia. Which is then in turn sold to retailers and eventually the consumer. Passing on hands and with fine margins in costs, the companies try not to stray too far away from the MSRP.

With the basic understanding of the supply of the GPUs, we then look at that cost itself and how the advancement of technology increases that base price. Below is a table comparing the xx80 cards from Nvidia across three generations. It shows how the technology in the cards has changed over four years.

So through the generations, the cost has jumped just $100 base price but the increase in specification and changes in manufacturing are significant. The GTX 1080 has no ray tracing cores, but the RTX cards do and so are able to run that on the go bringing innovation to the gaming market.

A significant increase in performance is seen in the RTX 3080 with much more able to fit on the process but also a bigger PCIe lane. So even though the clock rate might be lower on the card, it can make up for the difference by communicating with the CPU much faster. It’s also much faster in the VRAM section, with an increase to 10GB it also has over double the bandwidth capable of delivering much faster speeds in memory to bring higher resolutions and textures.

Overall, the card is capable of much more. With gamers moving to higher framerates and resolutions, a bigger card capacity is required and the 3080 provides that and so the improvement in production and technology increases the price.

The pandemic

The COVID-19 pandemic sent the world into disarray. With national lockdowns around the world, people started working from home or were just unable to work. Resulting in a shutdown in production as well as an increase in demand, a simple supply and demand issue. More people at home, especially working, resulted in people wanting upgrades to their hardware or investing in new hardware. Such as monitors, new parts, computers, consoles, and so on.

With such a higher demand for stock, retailers were unable to keep up, with everything they have selling out. Then trying to get any stock again would prove difficult with everyone else also trying to get the same products. Any stock the retailers and suppliers would try to get everyone else would be aiming for too, increasing the demand drastically without enough supply.

This situation across multiple countries would put a massive strain on the manufacturers and transporters. So with limited capacity in manufacturing, and transporting across the globe everything became backed up. With unprecedented demand, everyone was waiting for these parts to come through along with other essential supplies that would be needed. Leading to either low or no stock being produced or a massive delay on anything being sent out.

Chip shortage

Another huge factor of expensive graphics cards is the global chip shortage which comes from the world’s demand for semiconductor chips. These are what run the graphics cards and any product that requires these integrated circuits. In modern times this affects nearly any electronics technology. They all will be sharing the same fabrication capacity and so any effect on those will affect all the industries.

There are multiple causes to why the output of the factories was reduced, and the first one is as mentioned the pandemic. Not all exempt from lockdown meant a stop in production and eventual depletion of their inventories. Another factor is the disruption at some of the fabs. With the main producer for GPUs, TSMC experiencing a lack of material with Taiwan experiencing the worst drought in 2021. Causing a lack of ultra-pure water it requires to produce the parts.

Import tariffs

The imposed tariffs on goods imported from China are still in place from the previous office. It adds an extra 25% to the value of the goods. Which in turn is passed along onto the customers as an additional cost, inflating the costs and ultimately increasing the prices of GPUs.

There is no announcement to lift the tariffs from the current administration. So there’s no known timescale of when or if these will be lifted, so for the foreseeable future these will make graphics cards more expensive.

Scalpers

Where there is profit to be made, you’ll find people taking advantage of the situation. One of the GPU hoarders are the scalpers, these are resellers of hot commodities making a profit on very wanted items. They are managing to buy the cards at close to MSRP and then resell them to consumers for a much higher inflated price and netting the difference.

At the release of this generation of graphics cards even with a lot of hardware enthusiasts wanting to buy a new card, scalpers had an ace in their sleeves. With the use of bots, they were able to snatch up the GPUs from under people’s noses, much quicker than a human can and in much larger quantities.

Bots are automatic scripts that will scan through websites selling GPUs and purchase them with stored info. They can do this without the limitation of having to click through everything and on a much larger scale, with hundreds being able to run at a time. This quickly consumes the inventory of retailers and leaves none for people and end up being sold on third-party websites for a much higher price.

Cryptocurrency miners

Crypto mining compared to regular mining requires a lot of computational power to work. It requires a graphics card working on maths problems as proof of work and after finishing these long problems they net some coin. These then accumulate and keep working for the miner to then be sold on or exchanged for profit.

There are a lot of different coins that miners can work on like Ethereum or Bitcoin, but most require 4GB of VRAM to be able to work. And the more powerful cards tend to have higher hashrates (how well they mine), they are well sought after by all the miners. With many big mining farms taking hundreds of graphics cards for bigger gains, there again is even less for the rest of us.

Even with lower hashrates implemented with newer chips, it hasn’t deterred them from buying out stock of these cards. There is hope in the cryptocurrency crashes that may deter more miners, or even force some to sell off their machines to save profits.

Final word

There is a multitude of factors affecting the price of graphics cards right now. All it comes down to is a simple supply and demand model, previously the supply and demand were fairly neutral and so prices stayed as they should. However, with a shift in both lines, demand for GPUs increasing and factors decreasing supply, the equilibrium shifts away to a higher price.

With scalpers, the pandemic, and crypto the main factors we can not be sure of when the market will return as to how it previously was. With new releases from Intel and new generations possibly coming at the end of the year we can hope they increase supply enough to meet the demand.

Update: 3dcenters report has shown that GPU prices are once again falling and the lowest they’ve been in quite a while. Giving us hope that the stock is much better and the prices might once again reach MSRP.

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