The price of graphics cards continues to skyrocket at levels we have never seen before. The excessive speculation and the usury of stores and individuals have set up a business with the support of AMD and NVIDIA, as well as distributors, which has made it impossible for the common user to get units at the correct prices. After the latest news, price reports deviate from logic, what is happening?
The fall in mining drags the price of GPUs +
Although TSMC already said at the beginning of the year that it was eliminating the economic benefits for all its large customers by volume, although Samsung has already confirmed that it will raise the price of wafers to finance its new R&D projects and the new Fab , TrendForce says that the price of GPUs is going to stay in this quarter and that it will fall for the last of the year.
While this seems impossible, there is one factor that seems to be the one that explains it all. As we well know, cryptocurrencies have returned to normal prices and the bubble once again burst as it did in the past, stabilizing or making many miners enter losses.
This implies that the sales of GPUs are much lower despite the fact that it might be thought that users are going to jump on top of the stores to buy new graphics. This does not seem to happen, mainly because the prices are through the roof, the user has already become used to waiting due to the nullity of stock and patience has become a virtue. As the saying goes: before the virtue of asking is the gift of not giving.
The market contracts, smartphones, assembled PCs and users on the defensive
TrendForce’s statements on what’s to come are very illuminating:
Recent observations on the spot trading of graphics card DRAM products indicate that changes in this market are closely correlated with changes in the value of Ethereum (ETH) because graphics cards are the crucial tool for processing the mining algorithm of this cryptocurrency.
ETH prices fell more than 50% in a span of two months as a result of the latest measures enacted by regulatory agencies around the world to clamp down on cryptocurrency speculation. Consequently, the interest of cryptocurrency miners and investors in ETH has also declined significantly.
The drop in demand from cryptocurrency miners also means that a substantial number of graphics cards are being introduced to the second-hand market. TrendForce research shows that spot prices for graphics cards have fallen between 20% and 60% in the last month (or more depending on the market). In addition, the widespread drop in graphics card spot prices has also severely limited the spot demand for graphics DRAM.
According to TrendForce’s understanding, although the spot prices are still higher than the contract prices for GDDR6 chips, the gap is narrowing rapidly. This, in turn, will have an adverse effect on the general price trend of GDDR6 chips going forward. The trade is even more moderate for GDDR5 chips that are used in previous generations of graphics cards from NVIDIA and AMD. Spot prices are now 20% lower than contract prices for GDDR5 chips. The difference here indicates that there is a glut of older graphics cards and the GDDR5 chips that are built into them are no longer in high demand.
Therefore, DRAM contract prices for graphics cards are expected to increase by almost 15% for 3Q21as the compliance rate for graphics DRAM vendors is still relatively low.
Low sales are going to drive cuts in the price of GPUs, if they want to sell the stock …
Regarding the contract market for graphics DRAMs, the selling side has considerable influence on price negotiations, as these vendors prioritize server DRAM production ahead of other product categories. In today’s discrete graphics card ecosystem, graphics DRAM buyers such as NVIDIA continue to opt for a business model based on bundled sales (i.e., graphics card manufacturers who buy NVIDIA GPUs they must also buy DRAM for their graphics cards).
Since NVIDIA and AMD have accounted for the vast majority of the GPU DRAM supply, laptop OEMs and small and midsize manufacturers of PC components (such as motherboards) will have a difficult time acquiring enough VRAM, while the compliance rate of DRAM providers for GPU DRAM chips remain relatively low.
These aforementioned factors are responsible not only for the almost 15% QoQ increase in overall graphics DRAM contract prices for 3Q21 (which is slightly higher than the corresponding price increases on conventional PC and DRAM products). server for 3Q21), but also why the spot prices of GDDR6 chips are about 10-15% higher than the contract prices.
Overall, prices on the graphics DRAM spot market, which is an extremely responsive market, have already started to reflect the weakening demand of the end-product segment, particularly for graphics cards (NVIDIA / AMD) used in cryptocurrency mining. As the supply of second-hand graphics cards increases, some graphics card manufacturers can initiate price cuts on GPUs in promotional format to boost sales.
Additionally, buyers in the spot market may also begin to anticipate even lower prices, and this anticipation will likely lead to a massive decline in demand for graphics cards or result in these buyers adopting a speculative attitude with respect to graphical DRAM. TrendForce therefore believes that the gap between spot prices and contract prices for GDDR6 chips will start to narrow in 3Q21.
As we can see, it is a tremendously complicated market and the situation is extremely delicate. The forecasts are these, the movements have already been made and the demand for GPUs falls. In other words, either they incentivize sales by lowering prices to “normal” levels or the stock will pick up dust on the shelves, since miners are no longer buying them and users are not going to pay a fortune like the former.
The gamers until recently made invisible by both AMD and NVIDIA (much more for the first, it must be said) now seem the solution for the market and price of GPUs, curious to say the least.