WEBVTT 00:00:00.000 --> 00:00:03.860 Computers keep getting more expensive. Why? Take a look at this. 00:00:03.860 --> 00:00:07.640 That right there, that's an NVIDIA GPU. Can we talk about NVIDIA, please? 00:00:07.640 --> 00:00:11.800 Cause I'm dying to talk about NVIDIA. NVIDIA has got the GPU market cornered 00:00:11.800 --> 00:00:14.920 and they're charging like it, but they're a fabless chip company. 00:00:14.920 --> 00:00:18.020 They're fabs, they don't exist. 00:00:18.020 --> 00:00:23.120 See, they get their chips from TSMC, Taiwan, Taiwan. 00:00:23.120 --> 00:00:27.400 Right there. They have the only fabs and they're charging like it. 00:00:27.400 --> 00:00:30.840 But guys, you think it stops there? No, we ain't anywhere near the top. 00:00:30.840 --> 00:00:34.800 See, ASML, they don't have the fabs, but they have the machines, 00:00:34.800 --> 00:00:42.120 the machines to make the fabs, to make the chips. And those machines, they're $200 million. 00:00:42.600 --> 00:00:46.720 There's no competition, no competition all the way to the top. 00:00:46.720 --> 00:00:49.840 What do you say about that? 00:00:49.840 --> 00:00:54.600 I mean, yeah, that's a problem. You're damn right it is. 00:00:55.600 --> 00:00:58.840 And what do you say about our sponsor? 00:01:08.520 --> 00:01:13.560 Here's the less manic and more thorough version. Over the last 20 years, NVIDIA's market share 00:01:13.560 --> 00:01:16.640 of discrete GPUs has climbed to 92%. 00:01:16.640 --> 00:01:20.200 Now that alone doesn't make them a literal monopoly, 00:01:20.200 --> 00:01:23.200 but what it does do is it allows them to act like one. 00:01:23.200 --> 00:01:27.440 I mean, think about it. AMD has fallen to a measly 7% 00:01:27.440 --> 00:01:30.480 and Intel only just broke the 1% barrier 00:01:30.480 --> 00:01:34.360 after three painful years in the market. So who's gonna stop them? 00:01:34.360 --> 00:01:37.880 Nobody. So thanks, at least in part, 00:01:37.880 --> 00:01:42.920 to their dominant position in the market, NVIDIA has dramatically ratcheted up their pricing 00:01:42.920 --> 00:01:46.020 over the years, pushing their flagship consumer GPUs 00:01:46.020 --> 00:01:51.020 from just $500 back in 2010 to $2,000 today 00:01:51.740 --> 00:01:55.340 with premium variants that cost much more than even that. 00:01:55.340 --> 00:01:59.740 I mean, it's no wonder then that consumers are resentful, even angry about it. 00:01:59.740 --> 00:02:02.780 Not angry enough to buy a radio, mind you, 00:02:02.780 --> 00:02:07.340 but angry enough to complain online. And I get it. 00:02:07.340 --> 00:02:10.380 We've become hooked on ever cheaper technology, 00:02:10.380 --> 00:02:17.100 even in the face of high inflation. But as it turns out, there's actually more of a reason 00:02:17.100 --> 00:02:21.780 for NVIDIA's pricing than just their desire for more money. 00:02:21.780 --> 00:02:28.380 See, neither AMD nor NVIDIA actually manufactured GPUs, the chips. 00:02:28.380 --> 00:02:31.380 They don't even own the fabrication plants that make them. 00:02:31.380 --> 00:02:37.140 Even Intel, who does own fabs, doesn't manufacture cutting edge GPUs in their fabs. 00:02:37.140 --> 00:02:41.140 In fact, all three of the players in the GPU space 00:02:41.140 --> 00:02:45.780 source from a single company called Taiwan Semiconductor Manufacturing Company, 00:02:45.780 --> 00:02:49.820 or TSMC. They also aren't a literal monopoly. 00:02:49.820 --> 00:02:55.220 Samsung and others have done their best to keep up over the years, but like NVIDIA, 00:02:55.220 --> 00:03:01.340 they have outcompeted their competition to the point where they are the only viable fabricator 00:03:01.340 --> 00:03:06.620 for the cutting edge chips that power the latest gaming GPUs and AI accelerators. 00:03:06.620 --> 00:03:12.660 That's not because nobody else could build them. Intel, for instance, has access to the very same equipment 00:03:12.660 --> 00:03:16.220 that TSMC does, but semiconductor manufacturing 00:03:16.260 --> 00:03:22.420 is not about access to the equipment or even about the ability to build one chip. 00:03:22.420 --> 00:03:28.500 It's about the ability and the knowledge to build millions of chips and to do it economically. 00:03:28.500 --> 00:03:32.000 So the process control has to be darn near perfect. 00:03:32.000 --> 00:03:35.260 Too many defects and even if you could build it in-house, 00:03:35.260 --> 00:03:38.300 it might actually be cheaper to outsource the production 00:03:38.300 --> 00:03:43.900 even if it goes to a competitor. But how did TSMC become so dominant? 00:03:43.900 --> 00:03:48.540 They don't even have their own CPU brand. Well, that's actually a big part of it. 00:03:48.540 --> 00:03:52.700 By not competing with their customers, they became the ideal partner 00:03:52.700 --> 00:03:57.740 for fabless chip companies around the world, which gives them the volume of business they need 00:03:57.740 --> 00:04:01.340 to continually reinvest and even outcompete 00:04:01.340 --> 00:04:05.180 vertically integrated companies like Intel and AMD, 00:04:05.180 --> 00:04:10.660 who used to own their own fabs, but now are just one of TSMC's many customers. 00:04:10.660 --> 00:04:13.880 TSMC also bet very early on a technology 00:04:13.880 --> 00:04:17.520 that completely overshadowed the rest of the semiconductor industry. 00:04:17.520 --> 00:04:22.860 EUV lithography, a chip fabrication technology that is, let's put it mildly, pretty incredible. 00:04:24.200 --> 00:04:29.080 EUV lithography creates and uses extreme ultraviolet light, 00:04:29.080 --> 00:04:32.720 an incredibly short wavelength that doesn't naturally exist on Earth 00:04:32.720 --> 00:04:36.800 by evaporating drops of tin with high powered lasers 00:04:36.800 --> 00:04:40.000 and then forcing its electrons into higher energy states. 00:04:40.000 --> 00:04:45.840 That light passes through a photo mask, which you could think of as kind of like a high tech stencil 00:04:45.840 --> 00:04:50.080 with cutouts so fine that they're measured in nanometers. 00:04:50.080 --> 00:04:54.280 Those cutouts form a chip's pattern. This patterned light is passed 00:04:54.280 --> 00:04:57.960 between highly specialized mirrors called Bragg's reflectors 00:04:57.960 --> 00:05:01.120 that shrink the design down before finally etching 00:05:01.120 --> 00:05:05.200 or printing it onto our silicon wafer. All of this takes place hundreds 00:05:05.200 --> 00:05:08.560 or thousands of times per chip under complete vacuum 00:05:08.560 --> 00:05:12.560 because even any air in the chamber would absorb that EUV light. 00:05:12.560 --> 00:05:16.600 Now longer wavelengths like deep ultraviolet or DUV, 00:05:16.600 --> 00:05:21.640 they're much easier to work with, but they simply won't pass through cutouts that small, 00:05:21.640 --> 00:05:27.200 which makes it impossible to pack in all of the transistors that you need for the highest performance processors. 00:05:27.200 --> 00:05:30.440 That's the tech in a nutshell, but if you want some more detail, 00:05:30.440 --> 00:05:33.680 you can check out our video on EUV lithography equipment. 00:05:35.200 --> 00:05:39.360 TSMC's mastery of EUV has given them a dominant market share 00:05:39.360 --> 00:05:42.480 in the semiconductor manufacturing space overall 00:05:42.480 --> 00:05:48.440 with a portfolio that, maybe more importantly, includes basically every single cutting edge chip 00:05:48.440 --> 00:05:52.800 on the planet. And while their pricing is shrouded in secrecy, 00:05:52.800 --> 00:05:56.520 what little we do know is that it has only gone up over time 00:05:56.520 --> 00:06:00.240 and that's a trend that is widely expected to continue. 00:06:00.240 --> 00:06:06.280 So then, TSMC is the big bad? Solely responsible for our gaming GPUs becoming unaffordable? 00:06:06.280 --> 00:06:11.040 Haha, not even close. Let's talk about ASML. 00:06:12.040 --> 00:06:15.040 Every time TSMC, or anyone for that matter, 00:06:15.040 --> 00:06:22.480 wants an EUV lithography machine, they need to dig about $200 million 00:06:22.480 --> 00:06:26.200 out of their couch cushions and hand that over to ASML. 00:06:26.200 --> 00:06:31.120 Why ASML? Well, at risk of sounding a bit like a broken record here, 00:06:31.120 --> 00:06:34.120 because they're the only ones who make them. 00:06:34.120 --> 00:06:38.680 This time, the monopoly is a literal one, not a de facto one. 00:06:38.680 --> 00:06:42.000 And EUV equipment has made ASML so valuable 00:06:42.000 --> 00:06:46.240 that the mere suggestion that it could move its growth outside of its headquarters in the Netherlands 00:06:46.240 --> 00:06:52.760 for better infrastructure and talent acquisition prompted the Dutch government to spend $2.7 billion 00:06:52.760 --> 00:06:56.520 in infrastructure to keep them in the country. 00:06:56.520 --> 00:07:00.920 It's also given ASML extreme latitude when it comes to pricing. 00:07:00.920 --> 00:07:04.120 It's new high-NA EUV lithography fab, 00:07:04.120 --> 00:07:11.720 which is capable of producing an even smaller wavelength for even denser chips will apparently cost $400 million. 00:07:11.720 --> 00:07:15.760 Double the cost of the current low-NA EUV. 00:07:15.760 --> 00:07:20.320 Even TSMC is bulking at that price and has said, you know what? 00:07:20.320 --> 00:07:25.640 We'll grab a few for R&D purposes, but for now, I think we're gonna stick with the old systems 00:07:25.640 --> 00:07:30.120 for our 1.4 nanometer chips. With that said, it's not like they're gonna be able 00:07:30.120 --> 00:07:33.840 to put off buying the new hotness forever. And when it's time to pull the trigger, 00:07:33.840 --> 00:07:38.120 they won't be buying just one. Production facilities need many fabs, 00:07:38.120 --> 00:07:41.920 cost billions of dollars, and take years to ramp up production. 00:07:41.920 --> 00:07:48.000 So it actually kind of makes sense that the new chips cost more than the old ones. 00:07:48.000 --> 00:07:52.720 But that's not the only thing putting pressure on consumer pricing. 00:07:52.720 --> 00:07:55.880 The big thing is that at every level, 00:07:55.880 --> 00:08:02.800 there's a complete lack of competition to put pressure on these major players to keep prices low. 00:08:02.840 --> 00:08:06.440 And the worst part is that it didn't have to be this way. 00:08:06.440 --> 00:08:10.480 EUV was kind of a joint venture with Intel 00:08:10.480 --> 00:08:15.040 who invested in ASML for EV development back in 2012. 00:08:15.040 --> 00:08:20.880 But then, Team Blue grew skeptical of EUV, got cold feet, and divested from ASML 00:08:20.880 --> 00:08:23.880 when it started cutting assets back yet another 00:08:23.880 --> 00:08:27.000 in a series of cell phones during that time. 00:08:27.000 --> 00:08:29.680 And before that time, and more recently, 00:08:30.160 --> 00:08:35.440 Intel, sometimes you really are the smartest nincompoops in the entire industry. 00:08:35.440 --> 00:08:38.880 And the really bad news is unfortunately, 00:08:38.880 --> 00:08:43.080 things are likely to get worse before they get better, if they get better. 00:08:43.080 --> 00:08:47.260 The AI boom has gotten to the point where the very silicon wafers, 00:08:47.260 --> 00:08:52.240 like the big discs that they make chips out of, even those are in shortage. 00:08:52.240 --> 00:08:57.200 Why? If you guessed, because the production is controlled 00:08:57.200 --> 00:09:02.160 by a surprisingly small number of players who, like everyone else, feel they ought to be entitled 00:09:02.160 --> 00:09:06.200 to a bigger slice of that delicious AI money pie, 00:09:06.200 --> 00:09:12.120 you guessed right. Now, competition in cutting edge chips is coming, 00:09:12.120 --> 00:09:15.400 but not in a way that's guaranteed to benefit consumers, 00:09:15.400 --> 00:09:20.440 at least not consumers outside of China. Chinese fabs are ramping up new facilities 00:09:20.440 --> 00:09:25.240 that use creative approaches to, ostensibly, make competitive products 00:09:25.240 --> 00:09:29.320 without EUV technology. This matters because Western sanctions 00:09:29.320 --> 00:09:32.520 make it difficult for them to purchase ASML's cutting edge machines. 00:09:32.520 --> 00:09:36.760 The other thing is that even if their efforts pan out, building new fabs takes a long time, 00:09:36.760 --> 00:09:41.320 and there's no telling where the rest of the industry will be by the time they're pumping out chips at scale. 00:09:41.320 --> 00:09:48.200 Closer to home for many of our viewers, Intel is investing heavily in ASMC's new high NA EUV fabs, 00:09:48.640 --> 00:09:55.600 but any payoff from that is gonna be a long way away. And realistically, until a certain bubble pops, 00:09:56.480 --> 00:09:59.520 we're likely to be stuck with the skyrocketing prices 00:09:59.520 --> 00:10:03.280 that it has created. But hey, at least now you know 00:10:03.280 --> 00:10:09.320 where your headache's coming from. Maybe from too many segues to our sponsor. 00:10:09.320 --> 00:10:14.360 If you guys enjoyed this video, why not check out the time that we toured ASML's facility? 00:10:14.360 --> 00:10:18.760 Yes, thermonopoly, and yes, that kinda sucks right now, 00:10:18.760 --> 00:10:22.240 but that doesn't take anything away from how cool their stuff is.