Computers keep getting more expensive. Why? Take a look at this.
That right there, that's an NVIDIA GPU. Can we talk about NVIDIA, please?
Cause I'm dying to talk about NVIDIA. NVIDIA has got the GPU market cornered
and they're charging like it, but they're a fabless chip company.
They're fabs, they don't exist.
See, they get their chips from TSMC, Taiwan, Taiwan.
Right there. They have the only fabs and they're charging like it.
But guys, you think it stops there? No, we ain't anywhere near the top.
See, ASML, they don't have the fabs, but they have the machines,
the machines to make the fabs, to make the chips. And those machines, they're $200 million.
There's no competition, no competition all the way to the top.
What do you say about that?
I mean, yeah, that's a problem. You're damn right it is.
And what do you say about our sponsor?
Here's the less manic and more thorough version. Over the last 20 years, NVIDIA's market share
of discrete GPUs has climbed to 92%.
Now that alone doesn't make them a literal monopoly,
but what it does do is it allows them to act like one.
I mean, think about it. AMD has fallen to a measly 7%
and Intel only just broke the 1% barrier
after three painful years in the market. So who's gonna stop them?
Nobody. So thanks, at least in part,
to their dominant position in the market, NVIDIA has dramatically ratcheted up their pricing
over the years, pushing their flagship consumer GPUs
from just $500 back in 2010 to $2,000 today
with premium variants that cost much more than even that.
I mean, it's no wonder then that consumers are resentful, even angry about it.
Not angry enough to buy a radio, mind you,
but angry enough to complain online. And I get it.
We've become hooked on ever cheaper technology,
even in the face of high inflation. But as it turns out, there's actually more of a reason
for NVIDIA's pricing than just their desire for more money.
See, neither AMD nor NVIDIA actually manufactured GPUs, the chips.
They don't even own the fabrication plants that make them.
Even Intel, who does own fabs, doesn't manufacture cutting edge GPUs in their fabs.
In fact, all three of the players in the GPU space
source from a single company called Taiwan Semiconductor Manufacturing Company,
or TSMC. They also aren't a literal monopoly.
Samsung and others have done their best to keep up over the years, but like NVIDIA,
they have outcompeted their competition to the point where they are the only viable fabricator
for the cutting edge chips that power the latest gaming GPUs and AI accelerators.
That's not because nobody else could build them. Intel, for instance, has access to the very same equipment
that TSMC does, but semiconductor manufacturing
is not about access to the equipment or even about the ability to build one chip.
It's about the ability and the knowledge to build millions of chips and to do it economically.
So the process control has to be darn near perfect.
Too many defects and even if you could build it in-house,
it might actually be cheaper to outsource the production
even if it goes to a competitor. But how did TSMC become so dominant?
They don't even have their own CPU brand. Well, that's actually a big part of it.
By not competing with their customers, they became the ideal partner
for fabless chip companies around the world, which gives them the volume of business they need
to continually reinvest and even outcompete
vertically integrated companies like Intel and AMD,
who used to own their own fabs, but now are just one of TSMC's many customers.
TSMC also bet very early on a technology
that completely overshadowed the rest of the semiconductor industry.
EUV lithography, a chip fabrication technology that is, let's put it mildly, pretty incredible.
EUV lithography creates and uses extreme ultraviolet light,
an incredibly short wavelength that doesn't naturally exist on Earth
by evaporating drops of tin with high powered lasers
and then forcing its electrons into higher energy states.
That light passes through a photo mask, which you could think of as kind of like a high tech stencil
with cutouts so fine that they're measured in nanometers.
Those cutouts form a chip's pattern. This patterned light is passed
between highly specialized mirrors called Bragg's reflectors
that shrink the design down before finally etching
or printing it onto our silicon wafer. All of this takes place hundreds
or thousands of times per chip under complete vacuum
because even any air in the chamber would absorb that EUV light.
Now longer wavelengths like deep ultraviolet or DUV,
they're much easier to work with, but they simply won't pass through cutouts that small,
which makes it impossible to pack in all of the transistors that you need for the highest performance processors.
That's the tech in a nutshell, but if you want some more detail,
you can check out our video on EUV lithography equipment.
TSMC's mastery of EUV has given them a dominant market share
in the semiconductor manufacturing space overall
with a portfolio that, maybe more importantly, includes basically every single cutting edge chip
on the planet. And while their pricing is shrouded in secrecy,
what little we do know is that it has only gone up over time
and that's a trend that is widely expected to continue.
So then, TSMC is the big bad? Solely responsible for our gaming GPUs becoming unaffordable?
Haha, not even close. Let's talk about ASML.
Every time TSMC, or anyone for that matter,
wants an EUV lithography machine, they need to dig about $200 million
out of their couch cushions and hand that over to ASML.
Why ASML? Well, at risk of sounding a bit like a broken record here,
because they're the only ones who make them.
This time, the monopoly is a literal one, not a de facto one.
And EUV equipment has made ASML so valuable
that the mere suggestion that it could move its growth outside of its headquarters in the Netherlands
for better infrastructure and talent acquisition prompted the Dutch government to spend $2.7 billion
in infrastructure to keep them in the country.
It's also given ASML extreme latitude when it comes to pricing.
It's new high-NA EUV lithography fab,
which is capable of producing an even smaller wavelength for even denser chips will apparently cost $400 million.
Double the cost of the current low-NA EUV.
Even TSMC is bulking at that price and has said, you know what?
We'll grab a few for R&D purposes, but for now, I think we're gonna stick with the old systems
for our 1.4 nanometer chips. With that said, it's not like they're gonna be able
to put off buying the new hotness forever. And when it's time to pull the trigger,
they won't be buying just one. Production facilities need many fabs,
cost billions of dollars, and take years to ramp up production.
So it actually kind of makes sense that the new chips cost more than the old ones.
But that's not the only thing putting pressure on consumer pricing.
The big thing is that at every level,
there's a complete lack of competition to put pressure on these major players to keep prices low.
And the worst part is that it didn't have to be this way.
EUV was kind of a joint venture with Intel
who invested in ASML for EV development back in 2012.
But then, Team Blue grew skeptical of EUV, got cold feet, and divested from ASML
when it started cutting assets back yet another
in a series of cell phones during that time.
And before that time, and more recently,
Intel, sometimes you really are the smartest nincompoops in the entire industry.
And the really bad news is unfortunately,
things are likely to get worse before they get better, if they get better.
The AI boom has gotten to the point where the very silicon wafers,
like the big discs that they make chips out of, even those are in shortage.
Why? If you guessed, because the production is controlled
by a surprisingly small number of players who, like everyone else, feel they ought to be entitled
to a bigger slice of that delicious AI money pie,
you guessed right. Now, competition in cutting edge chips is coming,
but not in a way that's guaranteed to benefit consumers,
at least not consumers outside of China. Chinese fabs are ramping up new facilities
that use creative approaches to, ostensibly, make competitive products
without EUV technology. This matters because Western sanctions
make it difficult for them to purchase ASML's cutting edge machines.
The other thing is that even if their efforts pan out, building new fabs takes a long time,
and there's no telling where the rest of the industry will be by the time they're pumping out chips at scale.
Closer to home for many of our viewers, Intel is investing heavily in ASMC's new high NA EUV fabs,
but any payoff from that is gonna be a long way away. And realistically, until a certain bubble pops,
we're likely to be stuck with the skyrocketing prices
that it has created. But hey, at least now you know
where your headache's coming from. Maybe from too many segues to our sponsor.
If you guys enjoyed this video, why not check out the time that we toured ASML's facility?
Yes, thermonopoly, and yes, that kinda sucks right now,
but that doesn't take anything away from how cool their stuff is.