WEBVTT 00:00:00.640 --> 00:00:04.280 I was right. 00:00:04.640 --> 00:00:11.599 And it's terrible. At the start of last year, I predicted computer hardware 00:00:09.440 --> 00:00:16.240 prices would rise and that they would be sold out everywhere. And yep, over a 00:00:14.320 --> 00:00:21.920 year later, that has basically come true. But no, no, don't congratulate me. 00:00:19.439 --> 00:00:27.119 Because while everything I said was true, I wasn't even close to being 00:00:24.720 --> 00:00:31.439 correct about why there is still a shortage of PC parts and a broader 00:00:29.519 --> 00:00:36.880 global shortage of semiconductor products. But now I've talked to some 00:00:34.640 --> 00:00:41.360 people high up in the industry off the record of course. You know how it is. 00:00:39.040 --> 00:00:48.879 And I finally got the real reasons why it is so hard for gamers to find the 00:00:44.079 --> 00:00:51.039 CPUs and GPUs they need to get them FPS. 00:00:48.879 --> 00:00:54.719 And this bad news is brought to you by Pulseway. Pulseway is a remote 00:00:53.199 --> 00:00:58.239 monitoring and management tool that we use ourselves here at Linus Media Group. 00:00:56.640 --> 00:01:02.399 With it, you can control all your Windows, Mac, and Linux machines from 00:01:00.320 --> 00:01:05.800 one app. So try it today at the link in the video description. 00:01:12.560 --> 00:01:17.840 For those of you living under a rock, currently there is a massive global 00:01:16.240 --> 00:01:22.159 shortage of semiconductors and everything that they're used to make. 00:01:19.680 --> 00:01:26.799 So, CPUs, graphics cards, cars, even fridges. Last February, when I predicted 00:01:24.960 --> 00:01:31.040 there would be a global shortage of PC components, my reasoning was that COVID 00:01:29.360 --> 00:01:35.280 and the restrictions it caused would interrupt manufacturing facilities and 00:01:33.360 --> 00:01:40.960 the logistics companies that they rely on. It was a fair guess and lots of 00:01:38.960 --> 00:01:45.840 smart people made the same guess with companies like Apple lowering their 00:01:42.560 --> 00:01:47.840 projected revenues. But then in reality, 00:01:45.840 --> 00:01:52.640 supply of semiconductors was only briefly disrupted. And for almost all of 00:01:50.640 --> 00:02:01.680 2020, they have been pumping out more CPUs and GPUs than ever. So, uh, why are 00:01:58.240 --> 00:02:03.600 the Ryzen 5900X and RTX 3080 weapons 00:02:01.680 --> 00:02:07.759 grade unobtanium then? The real honest to goodness truth, guys, is because you 00:02:05.680 --> 00:02:12.080 keep buying them all. When people got stuck working from home, that old e- 00:02:10.160 --> 00:02:16.560 machines that they hadn't used in years suddenly didn't cut it. I mean, it's 00:02:14.959 --> 00:02:20.480 reasonable to think that in one household, Junior could be attending a 00:02:18.640 --> 00:02:24.640 lecture, the MS could be keeping her elderly parents company on Zoom, and 00:02:22.560 --> 00:02:30.480 Pops could have suddenly gotten into day trading or NFTTS or whatever, all at the 00:02:27.360 --> 00:02:32.879 same time. This has led to a trend 00:02:30.480 --> 00:02:37.599 reversal that I don't think anyone saw coming. 2020 was the biggest growth year 00:02:35.120 --> 00:02:44.000 in the PC market in a decade with a whopping 20.6% increase in US PC sales 00:02:40.879 --> 00:02:45.680 in Q4. And fun fact, Chromebooks are 00:02:44.000 --> 00:02:51.120 actually tracked separately. And those reported a staggering 200% increase in 00:02:48.959 --> 00:02:55.599 shipments year-over-year. To add even more fuel to this fire, enterprises have 00:02:53.519 --> 00:03:00.720 had to heavily invest in their cloud services with providers like Zoom, 00:02:58.160 --> 00:03:05.280 Microsoft with Teams, and Slack needing to seriously beef up their data centers 00:03:03.120 --> 00:03:09.680 to keep up with everyone all of a sudden working and meeting from home. That's a 00:03:07.440 --> 00:03:14.800 lot of video data. And while you might think, oh well, okay, Microsoft needs a 00:03:12.319 --> 00:03:20.319 new server. How does that affect me? The truth is that your Ryzen desktop chip is 00:03:17.680 --> 00:03:25.680 made of the same chiplets as an Epic. It's just down to how AMD glued them 00:03:23.280 --> 00:03:29.280 together. The two hardest hit sectors, though, are automotive and graphics 00:03:27.680 --> 00:03:33.200 cards. And we'll start with automotive because it's simpler and because it's 00:03:31.280 --> 00:03:37.840 the better example of how I was kind of right. Automakers currently are being 00:03:36.080 --> 00:03:40.959 very vocal about having to stop their assembly lines because they can't get 00:03:39.440 --> 00:03:45.920 enough computer chips to go in their cars. But this is actually largely a 00:03:43.680 --> 00:03:49.680 problem of their own making. Back at the start of the pandemic, most automakers 00:03:47.760 --> 00:03:55.200 cut their forecasts and reduced their orders, assuming that demand for new 00:03:51.200 --> 00:03:57.120 cars would drop. And it did temporarily 00:03:55.200 --> 00:04:00.400 until all of a sudden, no one liked riding the bus with an infectious 00:03:58.560 --> 00:04:05.040 disease on the loose, and demand came roaring back. By the time they realized 00:04:02.879 --> 00:04:10.640 this, though, the fabrication capacity that they had released had already been 00:04:07.519 --> 00:04:12.799 sold to someone else. So, okay, I wasn't 00:04:10.640 --> 00:04:17.600 right. I was just wrong with the automakers. Now for GPUs. Well, it's the 00:04:15.840 --> 00:04:23.520 miners, right? Let's all say it together, guys. You miners. you 00:04:21.120 --> 00:04:28.720 miners. You minor. No. No. Okay, hold on. Actually, nobody that we talked to 00:04:26.080 --> 00:04:33.520 actually agreed that miners were the underlying problem. Like to be clear, 00:04:31.040 --> 00:04:39.360 they're not helping the situation. And no one could say for sure if their GPUs 00:04:36.080 --> 00:04:41.680 are going to gamers or not. But everyone 00:04:39.360 --> 00:04:47.199 we talked to is pretty sure that the majority of GPUs are currently ending up 00:04:44.000 --> 00:04:50.080 in gamers hands. It's just that way more 00:04:47.199 --> 00:04:54.560 people want GPUs than usual. And there is some data to back this up. Valve 00:04:52.720 --> 00:05:01.440 generously makes their concurrent Steam user count public. And if we look Whoa. 00:04:58.800 --> 00:05:07.440 If we look at this, it absolutely explodes at the start of the pandemic 00:05:03.759 --> 00:05:09.039 and then just as suddenly jumps again 00:05:07.440 --> 00:05:14.000 after the summer when the second wave forced everyone indoors. Then at the 00:05:11.440 --> 00:05:18.320 same time, a new generation of GPUs that was finally a solid upgrade from 00:05:15.759 --> 00:05:22.880 NVIDIA's 10 series along with a new generation of consoles showed up after 00:05:20.240 --> 00:05:26.560 seven long years. And we shouldn't be surprised. In fact, we should actually 00:05:24.720 --> 00:05:30.240 be grateful that the new consoles didn't have a ton of compelling launch titles. 00:05:28.479 --> 00:05:35.199 This could have been even worse, David. Now, you might not realize this, but 00:05:32.240 --> 00:05:40.000 NVIDIA and AMD have to guess how many GPUs that they'll be selling months or 00:05:37.520 --> 00:05:45.039 even a year before the first one hits a consumer's hands. And while they were 00:05:42.479 --> 00:05:49.199 able to assume that demand for Aier and Big Navi would be a bit higher than 00:05:47.120 --> 00:05:53.280 previous launches, you know, based on prototype testing data being very 00:05:51.039 --> 00:05:58.479 promising and historical sales numbers for premium cards, they got it wrong. 00:05:56.320 --> 00:06:03.039 Way wrong. I mean, you might even remember Jensen's saying in the leadup 00:06:00.160 --> 00:06:08.400 to the launch of the RTX 3070, the 3080 and 3090 have a demand issue, not a 00:06:05.759 --> 00:06:15.039 supply issue. The demand issue is that well it's much greater than we expected 00:06:10.479 --> 00:06:17.440 and we expected really a lot. So uh okay 00:06:15.039 --> 00:06:26.080 you might say why don't they just make more? Well because again I'm kind of 00:06:20.880 --> 00:06:28.000 right. Demand issues cause supply issues 00:06:26.080 --> 00:06:32.240 and there are only two companies in the world that can make this kind of 00:06:29.600 --> 00:06:36.560 bleeding edge tech. Samsung Foundaries and Taiwan Semiconductor Manufacturing 00:06:34.240 --> 00:06:41.120 Company or TSMC. Under normal circumstances, they would be operating 00:06:38.080 --> 00:06:43.120 at roughly 80 to 90% of their capacity, 00:06:41.120 --> 00:06:46.639 which strikes a nice balance between making enough semiconductors to stay 00:06:44.880 --> 00:06:50.319 profitable while offering enough downtime to perform maintenance, and 00:06:48.479 --> 00:06:54.639 extend the life of their equipment. If AMD or NVIDIA had higher demand for 00:06:52.400 --> 00:06:58.880 their GPUs, they would just buy up some of that 10 to 20% idle time, pump out a 00:06:57.600 --> 00:07:03.120 couple million more chips, and everything's hunky dory. But the current 00:07:01.440 --> 00:07:08.160 situation means that the fabs are already running at 100% capacity. So 00:07:05.919 --> 00:07:13.039 companies are getting exactly what they pre-booked and not away from more. This 00:07:11.520 --> 00:07:16.479 is why you're seeing some parts of the industry that are fairing much better 00:07:14.560 --> 00:07:22.000 stock-wise than others. Finding an iPhone, for example, no problem, even 00:07:18.639 --> 00:07:24.400 though it uses TSMC silicon. But that's 00:07:22.000 --> 00:07:28.720 not because Apple has some kind of extra pull because of their size. They've just 00:07:26.880 --> 00:07:32.960 been selling fewer iPhones for a couple of years now. And the pandemic didn't 00:07:30.639 --> 00:07:37.360 change that. Same thing for Intel. You can buy their CPUs at MSRP, no problem. 00:07:35.599 --> 00:07:42.639 But they've also seen less growth over the last year. So, their demand ended up 00:07:40.160 --> 00:07:47.199 more in line with their forecasts. Now, obviously then, given the choice, I'd 00:07:44.720 --> 00:07:52.319 rather be in NVIDIA or AMD's shoes, even if it does mean that gamers are mad at 00:07:49.120 --> 00:07:54.080 me. Which raises the question then, is 00:07:52.319 --> 00:07:59.919 there even a strong motivation to fix this problem? I mean, high prices are 00:07:56.960 --> 00:08:05.919 good for Texas Energy suppliers, right? Well, NVIDIA, AMD, and TSMC may have all 00:08:03.520 --> 00:08:09.680 reported record-breaking revenues, but if capitalism has taught me anything, 00:08:07.759 --> 00:08:14.319 it's that leaving any amount of potential sales on the table is straight 00:08:11.840 --> 00:08:19.680 up unacceptable. I'm sure TSMC would love to sell 20% more wafers this year. 00:08:17.280 --> 00:08:24.400 So, why is it taking so long? It's because they're trying actually, but it 00:08:22.000 --> 00:08:30.800 takes a lot of money. Like tens of billions of dollars, lot of money. TSMC 00:08:27.520 --> 00:08:32.800 has plans to build a $ 35 billion plant 00:08:30.800 --> 00:08:37.200 in Arizona, upping their spend from 12 billion after Joe Biden called for a $ 00:08:34.959 --> 00:08:40.880 37 billion in federal funding to address the global chip shortage. As for 00:08:39.039 --> 00:08:46.399 Samsung, well, they've also got plans for a 17 billion fab in the US by late 00:08:44.159 --> 00:08:52.240 2023. 2023. 00:08:49.279 --> 00:08:56.640 So yeah, these plants obviously won't be done anywhere near soon enough to stop 00:08:54.000 --> 00:09:01.600 the shortage of chips today. But then even if they came online tomorrow, 00:08:58.720 --> 00:09:06.720 they're only one part of the chain. After AMD or NVIDIA get the wafers from 00:09:03.760 --> 00:09:10.800 TSMC or from Samsung, a lot still needs to be done to turn those into a graphics 00:09:08.720 --> 00:09:14.399 card you can plug into your system. They need to be tested and sorted for their 00:09:12.720 --> 00:09:19.040 capabilities. They need to be forwarded to board partners who need to 00:09:15.839 --> 00:09:21.279 manufacture PCBs, assemble the cards, QC 00:09:19.040 --> 00:09:27.440 them, package them. You guys get the idea. And the thing is all of those 00:09:23.839 --> 00:09:29.519 factories are also at capacity. So every 00:09:27.440 --> 00:09:33.839 single part of this entire supply chain, I mean even the guys who make the 00:09:31.360 --> 00:09:37.680 capacitors that go on the boards needs to be upgraded, which means that these 00:09:35.519 --> 00:09:43.200 shortages will continue for quite some time. How long? Well, we tried to find 00:09:41.279 --> 00:09:47.920 out, but unfortunately, there seems to be a crystal ball shortage as well, and 00:09:45.760 --> 00:09:52.480 no one, even off the record, was willing to make a solid prediction. One good 00:09:50.880 --> 00:09:56.399 gauge that you can use at home, though, is the used market. Right now, if you 00:09:54.480 --> 00:10:01.040 were to use only retailers as an indication, getting a fifth gen AMD CPU 00:09:59.040 --> 00:10:06.640 looks pretty difficult. But the thing is, the prices on eBay are only a touch 00:10:03.920 --> 00:10:10.959 more than MSRP. What that indicates is that supply and demand for these have 00:10:08.640 --> 00:10:16.880 nearly equalized, so it's likely we'll be seeing them in stock regularly pretty 00:10:12.720 --> 00:10:19.760 soon. As for RTX 3000 series GPUs, 00:10:16.880 --> 00:10:25.040 big yikes. It's estimated that graphics cards are being shipped anywhere from 10 00:10:21.839 --> 00:10:26.959 to 30% below demand. And it's estimated 00:10:25.040 --> 00:10:30.800 that it will take 3 to four quarters for the supply of semiconductors to catch up 00:10:29.040 --> 00:10:35.440 and an additional 1 to two quarters until inventories are back to normal 00:10:32.399 --> 00:10:39.360 levels. So yeah, you might be lucky to 00:10:35.440 --> 00:10:42.800 get a GPU at MSRP this time next year. 00:10:39.360 --> 00:10:45.440 That is unless maybe big crypto crash 00:10:42.800 --> 00:10:48.720 leads to big sell-off. Of course, there's another burning 00:10:46.880 --> 00:10:52.240 question in all of this. I mean, didn't basically the entire tourism industry 00:10:50.640 --> 00:10:57.200 get laid off? Aren't we in the middle of a huge recession? Why is there this 00:10:54.640 --> 00:11:01.360 unprecedented demand for $800 graphics cards? 00:10:59.360 --> 00:11:05.360 Well, here's the thing. Normally during a recession, the heaviest hit sectors 00:11:03.200 --> 00:11:09.839 are goods producing industries and construction. People make less money. 00:11:07.839 --> 00:11:15.279 They can't buy as much stuff. Pretty simple. But the pandemic recession, it's 00:11:12.880 --> 00:11:20.240 totally different. Here in Canada, our economy has already returned to about 00:11:17.200 --> 00:11:22.000 95% of where it was pre- pandemic, which 00:11:20.240 --> 00:11:26.000 sounds pretty good and explains why people have all this disposable income 00:11:23.519 --> 00:11:30.800 to buy graphics cards. But it's got a dirty secret. Economists are calling it 00:11:28.320 --> 00:11:35.120 a K-shaped recovery. And what that means is that high earners and those who are 00:11:33.279 --> 00:11:38.560 able to conduct their business remotely have done great. And we've been 00:11:37.120 --> 00:11:42.880 fortunate enough to be part of this group. But because restaurants, 00:11:40.880 --> 00:11:49.440 hospitality, and entertainment have had to remain closed, that last 5% of the 00:11:45.839 --> 00:11:51.040 economy has been absolutely destroyed. 00:11:49.440 --> 00:11:55.440 So, in a nutshell, this means that Johnny Big Bucks is now making more than 00:11:53.120 --> 00:11:59.200 ever, but can't go out and blow it on Puagra and a $100 cocktail that includes 00:11:57.839 --> 00:12:03.600 a story about the bartender getting inspired by the forest in Tofino. 00:12:01.279 --> 00:12:08.560 Instead, Johnny is patting his savings account while the bartender is moving 00:12:05.440 --> 00:12:10.399 into his or her parents' basement. So, 00:12:08.560 --> 00:12:16.000 if your biggest problem right now then is, is that you can't buy a GPU at MSRP, 00:12:13.279 --> 00:12:19.920 maybe consider just waiting, buying it later when it's MSRP, and spending some 00:12:18.560 --> 00:12:24.800 money with a local business in the meantime. 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