Since the end of 2020, the market for computer components, specifically graphics cards, has been quite unpredictable. Although we all know GPUs have always been expensive, today, it has come to a point where it is too costly for a single component. This raises the question of why graphics cards are so expensive.
The reason GPUs are expensive boils down to the law of supply and demand, which have been affected by numerous variables. The global shortage of silicon chips, the recent pandemic outbreak, the demand for advanced technology, crypto miners, scalpers, and so on all contributed to the inflation of the price of GPUs.
What is even worse is that GPUs are not only expensive but hard to find in stock. Today, GPUs have become the gold for PCs.
In this article, we look at the reasons behind the surge in GPUs price.
7 Reasons GPUs Are Expensive
Most of the reasons behind the surge in GPUs price are apparent, while others, on the other hand, may surprise you. Below are the seven major reasons GPUs are expensive.
Reason #1: Shortage of Silicon Chips
GPUs contain semiconductors, and these semiconductors are made using silicon chips. But recently, there has been a shortage of silicon chips worldwide, which is one of the main reasons GPUs are so expensive. This shortage happened primarily because of double booking, scarcity, and the outbreak of COVID-19.
Double booking, particularly between the US and China tech war, caused a chaotic and crisis scenario that hurts both sides worldwide. Moreover, the use of silicon in almost all electronic devices made it even more scarce. And since most electronic devices were just thrown away and not recycled.
Reason #2: COVID-19
The outbreak of COVID-19 played a significant role in the scarcity of silicon chips which caused a spike in the price of GPUs. Production factories had to cease operation during the pandemic to curb the virus’s spread.
While production was on halt, the demand didn’t decrease; instead, it increased as more people sought to buy more GPUs to work from home. And because of the increase in demand, marketers inflated the price due to the limited availability of GPUs.
The pandemic significantly affected the GPU economy, as it did in other fields.
Reason #3: Entertainment
If you are a gamer, GPU is integral to your PC build. With users’ demand for a more advanced gaming experience, this calls for the need for high-quality GPUs. And with the gaming industry increasing rapidly, more people are seeking to buy GPUs.
There is also an increase in the demand for high-quality animation, computer graphics, and video editing to meet entertainment needs, leading to the price of GPUs. The increasing demand for high-quality streaming content is also rising, which requires advanced GPUs.
Reason #4: Import Tariffs
The cost to import items aboard has been messed up lately since the COVID-19. Unlike what it used to be, the price is much higher today. This increase in tariff has affected the cost of many products, including semiconductors used in making GPUs.
As the tariff to import products from China or elsewhere increased, this caused an increase in the cost to produce items that use those imported goods. So, with this increase in production cost, manufacturers pass it on to the consumer in the form of higher prices for GPUs.
Reason #5: Cryptocurrency Miners
The boom of the crypto industry is another primary reason GPUs are costly. Mining or validating cryptocurrency transactions like Bitcoin and Ethereum demands a lot of computing power. Fortunately, GPUs include several ALUs (Arithmetic Logic Unit), which can efficiently perform many mathematical operations of mining cryptocurrency.
The demand for GPUs skyrocketing due to crypto miners created an imbalance in the supply-demand chain. A large cryptocurrency mining operation can use thousands of GPUs at once. As such, the cryptocurrency industry has caused a shortage of GPUs, making markers inflate the price of GPUs.
Reason #6: Scalpers
Scalpers are also another cause of the price spike of GPUs. Because of the high demand for GPUs, scalpers see it as a potential market to capitalize on. Scalpers buy GPUs in bulk immediately after they are on sale from manufacturers, and since there is a limited supply, it goes out of stock in no time.
Scalpers then take the GPUs they bought and resell them at a profit when demand grows. Scalping is a legitimate method of arbitrage, so no federal law prohibits it, even though it has significantly affected the GPU industry. However, a few states have come up with legislation to ban it.
Reason #7: Advanced Technology
Like all things technical, GPUs have experienced an increase in their capabilities and performance to meet and exceed demand. Today, GPUs are packed with power, compatibility, and storage. This increase in what GPUs can do to handle the advancement of technology has caused a rise in their price.
To curb the crypto industry’s effect on the use of GPUs, NVIDIA Corporation decided to add a hash rate limiter.
Conclusion
As you can see from this article, there are multitudes of factors that affect the price of GPUs today. But in all, it comes down to simple supply and demand. Previously the supply and demand for GPUs were pretty neutral, and so was their price. Today, the shift in both lines is why GPUs are so expensive.
Frequently Asked Questions
With the rate at which things are going, there is no sign that the price of GPUs is not going back to the way it once was. For GPU price to be normal again, the crypto industry needs to shift its dependency on GPU processing power, scalping has to become illegal, shipping tariff has to reduce, and more silicon has to be manufactured.
Gamers who love to play with every setting turned up should invest in more memory between 12GB and 24GB to play at 4K resolution. But on average, a 4GB VRAM will be sufficient for 720p gaming. And if you want to go full HF at 1080p, then go for 8GB of VRAM.
