Why Are GPUs So Expensive: Possible Reasons Explained in Detail

Globally, GPU prices have skyrocketed, but why are GPUs so expensive is a question being asked by many people. Whether you’re looking for a next-gen card or an older one, they are getting expensive.

These prices increased because the current demand for graphics cards outweighs the total supply available. However, there are other reasons as well.

Let’s find them out!  

Why Are GPUs So Expensive?

The GPUs are expensive because of not one but many reasons that happened at the same time:

• Chip shortage all around the world
• COVID-19 pandemic crisis and lockdown restrictions
• US tariffs on imports
• The cryptocurrency miners
• Scalpers selling for profit
• High-quality GPUs
• Cost of GPU shipping
• Bundling of raw materials
• Entertainment and gamers’ demands
• Eco-friendly GPU process 

– Chip Shortage All Around the World

Currently, there is a global chip shortage that can possibly continue as long as imports and exports are affected by the social crisis. Normally, semiconductor chips are used in everything, from computers to airplanes and so on. Manufacturers from all around the world have to limit their production due to the shortage of their raw materials. 

In doing so, this not only impacts graphics cards but other sectors as well, including laptops, phones, and video game consoles production, etc. This shortage has occurred due to large buyers in the marketplace, including scalpers, crypto miners, and other companies that use GPUs. 

Therefore, this increased demand from the mentioned sectors above has led to this scarcity, affecting the manufacturing of the GPUs in a steady supply to fulfill the rising demand of its customers; thereby, the current prices are on the higher side. 

– COVID-19 Pandemic Crisis

The Covid-19 pandemic has stopped the transportation and manufacturing of GPUs – a major reason why this shortage occurred in the first place. During the quarantine period, a lot of people stayed within their homes, reading books, playing games, and surfing the internet for entertainment and knowledge-based pursuits.

Apart from the other daily life processes, the gaming industry gained a lot of attention, resulting in high-performance GPU sales. Thereby, the GPUs were suddenly in demand to meet the expectations of high-end gamers. 

Additionally, a lot of people are either working or have started to work remotely. This resulted in an increased demand for personal and professional electronics. Thus, the increased purchase of electronics led to increased production of GPUs as well, impacting the demand and supply divide that existed in the market and continues till now. In response to these market fluctuations, the prices went higher. 

– Lockdown Restrictions

Another reason is that many countries have implemented lockdown restrictions that have limited the number of imports and exports passing through the customs borders. Graphics cards are considered a luxury good when compared to other essential goods like food or water, as different waves of the pandemic lurk around the corner. 

When countries or cities are blocked from the international borders or do not import luxury goods (wants) in order to fulfill the growing basic needs, the graphic cards become a want as well. Therefore, they are not at the top of the priority list. In such cases, people who need them look for other options, burdening the market or approach through illicit means, impacting the overall supply of the GPUs and their market pricing.

– US Tariffs on Imports

During Donald Trump’s tenure as the President of the United States, new tariffs were imposed on imports from overseas trade, including a tariff of 25% tax on graphics cards imported from China. Hence, the conflict between the US and China led to the boycott of the graphic card supply, impacting the pricing of domestic units available in the local market.

As the US is one of the major importers of graphic cards, this boycott has impacted the exports of these GPUs within the Chinese market. So far, there has been little progress in addressing this issue and resume the trade once again. Not only the graphic cards but semiconductors are also blocked, which are an essential product required to make the GPUs. The manufacturing of domestic graphic cards by the US has led to increased prices respectively. 

– The Cryptocurrency Miners

Crypto miners need a sound graphics card to facilitate their cryptocurrency blockchain technology. They buy cards for crypto-mining rigs in bulk – computer systems used for mining Bitcoins. Crypto miners often have high requirements for what kind of graphics cards they need for their setups. The faster the card, the faster the mining. Hence, high-end graphics cards are in demand in the booming cryptocurrency market. 

Crypto miners need to use cards with the capacity of at least 4 GB of VRAM in order to mine effectively. Many miners prefer 6 to 8 GB of VRAM for longevity and performance. The consequences of this high demand are increased shortages of premium GPUs for the other consumer bases in the local and international markets. 

NVIDIA has announced that it would restrict crypto mining in its new cards in order to counteract this development. However, the cryptocurrency industry is increasing day by day; hence the chances of this increased demand would need to be met by NVIDIA or some other potential suppliers for these crypto miners. 

Cryptocurrency is based on blockchain technology. However, as technology is advancing and consumers are demanding more efficient and transparent transactions, other businesses are embracing blockchain technology as well, including startup companies in the fintech sector.

Blockchains are now used in many fields such as finance, mortgages, records of data and materials tracking, etc. This increase in the use of blockchain technology leads to an increase in the demand for GPUs that are capable of handling and validating transactions.

– Scalpers Selling for Profit

Besides the crypto miners, there exist scalpers who are creating a shortage in the graphics-card market. They are there in hopes of profiteering, trying to generate their revenues through various means. 

Scalpers buy things and resell them for a quick (and usually large) profit. Graphics cards are currently hot commodities due to their shortage in the current markets, perfect for reselling at a high price to desperate consumers, preferably gamers and other stakeholders.

In some countries, scalping is illegal. But in other countries, scalping in any form is still a legal practice that many people use to earn high profits. In the US, there are no laws that prohibit scalping. However, a few states have implemented laws that discourage this practice.

In the 2021 holiday period, the US passed a new bill—the Stopping Grinch Bots Act 2021—intending to prevent scalpers from using bots to secure goods online. At the time of writing, this bill was still only a proposal and was yet to become law. However, other parts of the world still face the problem of stopping these profiteering individuals from exploiting the already exhausted market of GPUs. 

– High-Quality GPUs

Since technology is advancing day by day, GPUs are now expected to provide increased performance and capabilities to meet and exceed the demands of the current customer. Value additions such as storage, compatibility, efficiency, and other metrics are regularly being researched by different manufacturers. 

These offerings often increase the prices of the GPUs due to the customized or premium options that they provide for the customer. Some of the primary target markets include gamers and their gaming PCs – various media modes as well as their equipment. Lastly, the professionals that use advanced GPUs for their creative innovations.

– Cost of GPU Shipping

When the increments of tariffs took place on Chinese products, the cost of shipping the goods also increased respectively. Although the US supplies have greatly been reduced due to lesser exports, other countries importing from China have to pay higher shipping costs as the fuel prices soar and the overall markets are more uncertain than ever before. 

Along with the sea shipping industry, the airline industry also witnessed a major spike in its shipping costs due to the decreased demand for both domestic and international flights during and after the pandemic. The freight that was normally being shipped was greatly impacted, leading to a logistics dilemma and resulting in reduced deliveries of all types of goods, including the GPUs and electronic systems containing them. 

– Bundling of Raw Materials 

It is not just the GPUs that have become expensive – the raw materials needed to manufacture them have also become scarce. This has forced the suppliers to increase their market prices of the GPUs as their manufacturing costs have almost doubled, thereby resulting in the overall changes in GPU prices across the world. 

– Entertainment and Gamers’ Demands

GPU is highly demanded in the entertainment industry – gaming being the dominant sector. Gaming demands high-quality GPUs, and as the demand for more advanced gaming experience surges with the release of both mobile, PC, and gaming console options, the need for high-quality GPUs has also greatly increased.

However, this demand extends beyond the gamers and the gaming industry. There is also an increasing demand for high-quality animation, video editing, and computer graphics to meet the respective entertainment needs. Demand for high-quality streaming content is also on the rise, requiring more advanced GPUs to meet the needs demanded by the customers. 

• Growing gaming and animation industry

As hinted in the above section, computer gaming is a leading industry. The video gaming market size will hit $156,770 million by the end of 2027, and the GPU used in gaming computers is a much-needed component to create the required videos and animations.

The growing animation industry has also accelerated the usage of the latest and most advanced GPUs being offered in the market. Due to this regular supply of innovative technologies in the electronics industry, where GPUs are a major part of most of the manufactured goods, they are facing a shortage as producers fight each other to acquire the larger reserve of raw materials. 

In such a tough and competitive situation, GPU marketing companies are increasing the prices of GPUs to compensate for the additional costs incurred while purchasing the raw materials and meeting the overheads of their plants. Even the lowest-performing GPU is now expensive, showing the trend of an inflated demand from the customers. 

– Eco-Friendly GPU Process

Top companies such as Intel, AMD, Nvidia, Gigabyte, etc., are manufacturing GPUs that do not have eco-friendly procedures and harm the environment. In the spotlight, it has been obvious that the semiconductor industry is causing environmental problems by not practicing eco-friendly manufacturing procedures. 

• Climate change concerns

Annually, the carbon emissions are 51 billion tonnes, which has raised many countries’ concerns and attention towards expedited steps to counter carbon emission processes.

The GPUs in the electronics are made using the same process where non-renewable fuel is used to process and manufacture such raw materials that further produce the GPUs and their respective electronics. 

• Governmental regulations

During this course of production, with governmental legislation in the form of acts and amendments, companies are wary of producing excess products in fear of being heavily taxed or prevented from exports. At the same time, competitive companies (mostly startups) have stepped into this industry and provided eco-friendly products. However, these products are not as affordable as the ones produced by manufacturers that use carbon emissions. 

As all the companies consider eco-friendly manufacturing, the costs are a major factor as the raw materials and the processes involved in making these products are expensive. Therefore, the end product is also expensive for the customer. GPUs are part of these manufactured outputs as companies try to cut down costs and provide green solutions. 

Are There Any Chances for GPU Prices To Drop?

Firstly, graphics cards were expensive due to the GPU crisis – shortage of the silicon chip and their non-availability in the market; thereby, a shortage all around the world was visible. As a result, companies were not able to manufacture enough GPUs to meet the demand. Later, companies again started manufacturing GPUs, but they kept the original prices high to cover up the losses made earlier when they lost money due to the crisis, pandemic, or other reasons.

Also, the latest GPUs are costly because they have high manufacturing costs. New and latest GPUs use materials that deliver better performance and durability. Using these materials and acquiring them is an expensive process due to increased competition from the suppliers and manufacturers. Lastly, the consumer market has also increased demand, leading to higher bids of market prices from the retailers. 

In the coming years, the prices of GPU cards are expected to drop. Furthermore, it is anticipated that the graphics cards will come back to the Manufacturer’s Suggested Retail Price (MSRP) list in the near future. With CPU products and GPU cards becoming available in the marketplace at reasonable prices, the overall prices may decrease accordingly. Similarly, there will be a positive trend with Peripherals.

What Are GPUs and Where Are They Applicable?

The graphics processing unit, or GPU, was originally designed for rendering 3D graphics, but as time passed, the capabilities of GPUs were used for more applications than just graphical rendering. The GPU now acts as a parallel processor in conjunction with the CPU to produce visual displays in normal operations and gaming/entertainment industries.

The power of GPUs is now being harnessed for high-performance computing, artificial intelligence, deep learning, video editing, virtual reality, and content creation. Furthermore, they supply the primary role as a power station for cryptocurrency mining, as mentioned earlier. Therefore, the majority of the electronics industry depends on GPUs as their component for graphical interpretation. 

FAQ

1. Has the GPU Shortage Been Over Yet?

Yes, the GPU shortage is almost over, as there are already positive trends in the form of performance and flowcharts. However, the prices are still higher than they should be. In the future, chances are that the prices will further fall down, leading to affordable GPUs once again available to the domestic and international market.

2. Are GPUs and Graphic Cards Still Overpriced?

The graphics cards are still expensive. However, the retail prices of GPUs in stores continue to fall on a positive note. Additionally, the average prices of Nvidia GPUs in March were 50% above their MSPR – they were the cheapest in the marketplace sold by Newegg. Furthermore, in April, the figure dropped to 28%, but it was still above the MSPR. A pattern of a 12% drop per passing month is obvious. 

Graphics cards are cheaper now, and prices have continued to drop because the economy is coming back to normal. Although some models of GPU are still overpriced – mostly the latest ones — it is safe to say that GPU prices may return to normal.

3. Why Are the GPUs More Expensive Than the CPUs?

A graphics card is not only a silicon piece like a CPU; it is more complex and needs PCB, Memory chips, VRMs, and Capacitors. They also need to assemble all these parts together, which adds cost to the final graphic card. This value addition makes them more expensive than the CPUs.

The reason why all the GPUs, even the older and underpowered ones, are expensive is due to a limited stock in the overall market. Only selected sellers and scalpers who are hoarding the GPUs have the pricing power. Additionally, some other reasons for higher prices also include the pandemic, crypto miners, and other stakeholders that want to keep the demand high.

4. What Are Steps Being Taken By Manufacturers To Solve This Shortage of GPUs? 

Environmentalists and entrepreneurs are working closely, trying to reduce their carbon emissions and provide breakthroughs to manufacture products without switching to new methods that would further increase production costs. 

As chip technology has kept its innovation index high – the GPU manufacturers can provide better products with enhanced performance if the green technology solutions from scientists aid in their manufacturing dilemmas and fulfilling their scarcity of raw materials.

Therefore, this will greatly increase their supply power and balance the pricing factor that is a problem today. Until that happens, the prices may fluctuate accordingly.

Conclusion

After reading this article, you can see why Graphics card prices have greatly increased throughout the globe.

Here are key takeaways to keep in mind: 

• The global crisis due to Covid-19 created a shortage of silicons in the market, due to which GPUs could not be manufactured. Inflation and shortage occurred almost instantly after the lockdown.
• Semiconductors are used in every digital gadget, and millions of them are bought each day. However, they have been short recently, affecting GPU production.
• Covid-19 restricted the imports of other luxury goods until the end of 2020. When the restriction subsided, the prices were still high, and they will be for some time.
• Scalpers are hoarding GPUs and selling them at a higher price, profiting from this rising demand.

Be sure to find authorized dealers and retailers that provide certified GPUs. This will save you from scalpers trying to sell at higher prices than the original market value.