Graphics chip prices are falling due to a combination of increasing supply, slower demand, and improved production. It could also herald the end of the global semiconductor scarcity that has plagued the world since the Covid epidemic began.According to Jack E. Gold, founder and principal analyst of J.Gold Associates, an IT advice firm in Northborough, Mass., the reduction in graphics chip pricing is a simple issue of supply and demand.
“Along with the reduction in PC sales post-pandemic, demand for graphics processors is falling,” he told TechNewsWorld. “This, combined with the graphics firms’ stringent restrictions on crypto mining on their chips, is a recipe for disaster.”
When the Ethereum cryptocurrency community chooses a new technique to mine its crypto this summer, that demand is likely to continue to suffer. The “proof-of-stake” technique of mining cryptocurrencies does not necessitate as much computational power and graphics muscle as the prior model did.According to Gold, the current demand slowdown does not imply that graphics processors are losing favor. He described the situation as a “short-term market adjustment period.”
“Price is nearly always a function of supply and demand,” he added. “If prices are going down, the market is producing more chips than people are buying.”
“It can also be an indication that a new generation of chips are coming soon and vendors are cleaning out their inventories,” he said. “It’s about this time in.
Assurance of Capacity
Softening demand and rising supply difficulties are affecting the entire semiconductor business, not just graphics chips. “Over the course of the year, things will continue to improve,” IDC semiconductor researcher Shane Rau told TechNewsWorld. “Right present, power management chips are in short supply.”
“On the demand side, over the course of the year, there’s been a decrease in demand for PCs this year compared to last year,” he said of the graphics processor market.
“On the supply side,” he continued, “NVIDIA and AMD have made steps to improve their supply by purchasing additional capacity and committing to their wafer and packaging vendors.” To mitigate the risk, they’re proposing to buy all of the capacity they can.
He stated that fluctuating chip costs can affect the cost of other components used in graphics cards.”Nvidia and AMD frequently assist their board clients in obtaining graphics memory so that they can get the memory their boards require at a reasonable price. He described how this might lead to dependency. “If GPU demand slows or card prices fall, this could have an impact on graphics memory demand and the price of RAM that goes on the board.”
He went on to say, “It’s crucial to highlight that customers don’t buy GPU chips.” “They either buy PCs with GPU cards or buy the GPU cards separately.” The card contains a variety of other components and is passed along the supply chain by various parties. They’re all different.
That could also explain why the graphics card market is still plagued by shortages. Nvidia’s GeForce graphics cards, for example, were largely out of stock at stores including BestBuy and Newegg Commerce, according to a recent Reuters check.
Chip supply imbalance
The consistent improvement in the Gartner Index of Inventory Semiconductor Supply Chain Tracking is another indicator that chip shortages are ending. “[The index] is expected to rise even more in 1Q22, marking the third consecutive quarter of improvement,” said Gaurav Gupta, Gartner Vice President of Semiconductors and Electronics.
“The GIISST is now predicted to enter the normal zone by 3Q22,” he told TechNewsWorld, citing the slower-than-expected performance in 4Q21.
He went on to say that several chip types, such as PMICs/FPGAs/enterprise-grade networking chips and automotive-grade MCUs, will still be in low supply. Chips that rely on eight-inch wafers will face a shortage for a longer time, possibly a few years, he noted, and there will be a shortage of silicon.
He stated, “There is also demand softening in consumer electronics, such as cellphones and notebook PCs.” Fuel prices are rising, logistics are being affected owing to prolonged Covid restrictions in China, and raw material prices are rising because to Russia’s invasion of Ukraine, he said.
“The imbalanced chip supply situation is still significant, forcing the index to reach the normal zone before supply normalcy across multiple chip types is achieved,” he explained. “By 2Q23, we estimate typical inventory levels in all chip categories.”
Recovery is uneven
While the chip supply appears to be recovering, there may be some stumbling blocks along the way that could derail the process.
“The chip makers’ performance is important,” Rau added. “We’ve seen in the last few of years how a lack of sufficient GPU production may lead to shortages.” That’s a wild card to keep an eye on.”
Even if processors are plentiful, production can be hampered by shortages of other components. “If a PC maker is missing one essential component, it can stymie production of the entire PC,” Rau explained.
“The PC has to get to market as well,” he added. “Priority is given to PCs with discrete GPUs because they are more expensive, thus they are flown on an aircraft, but most PCs are shipped by boat.” There is still considerable congestion at ports in Asia and the United States, preventing systems from reaching market on schedule.”
China’s lockdowns might also affect exports. “If the lockdowns continue for several weeks longer, it could have a significant impact on system development,” Rau added.
“Whatever the length of the deficit, it will be an uneven supply recovery,” Gold continued, “since some chips will reach full production capability to meet market needs sooner than others.”
“It depends on whatever process node they’re on.”