The causes of the PC component supply shortage and the outlook for 2021

Nvidia's latest graphics card, the RTX 3080, had an official selling price (MSRP) of $699. However, there are currently no products sold for less than $850 in North American shopping malls such as Amazon and New Egg. The successor, the RTX 3080 Ti, was also released for $999, but it sells for over $1,200, and there aren't many types. The same goes for the CPU. The Radeon RX 6800XT, which was released for $800-900, went up more than $200 online.

The PC market is definitely starting to revive. Worldwide PC shipments reached a high of 366 million in 2011 and then went downhill sharply. However, the situation has changed with the increase of high-performance desktop PC-oriented content such as video editing and the growth of the mobile PC sector such as notebook computers. In 2019, after eight years, shipments escaped the decline and rebounded. Since then, PC shipments in the third quarter of 2020 recorded the highest growth rate in the past decade.

However, the supply of major PC parts such as CPUs and graphics cards has not been able to keep up with the surge in demand. Almost all of the newest parts released in 2020 were not sold smoothly. Some products sold out at the same time as they were released and were not restocked, so the prices of online retail stores gradually increased. 

Why is supply unable to keep up when demand is increasing? What is the reason for the long-lasting PC hardware supply shortage?

The first is increased demand. Research firm Canalis analyzed that the global PC demand increased due to the impact of Corona 19, and companies also began investing in PCs to actively support employees' remote work. As physical mobility was limited, activities centered on PCs such as teleworking at home, distance education, and games began to increase significantly. In particular, the high-performance gaming PC market, which has been noticed only by enthusiasts for a while, has grown significantly with revenues of 18.5 billion dollars in 2020. It can be said that the number of users who want indoor home entertainment has increased rapidly.

In the case of some of the latest parts, such as AMD Ryzen 9 and the Radeon 6000 series, which received a lot of attention, inventory procurement was not smooth, resulting in an increase in sales of older products, the previous generation. Manufacturer AMD also acknowledged the difficult situation indirectly, saying that demand was unprecedented. 

The second reason is the bad news caused by Corona 19. The manufacturing and logistics markets have been hit. Canalis announced that worldwide PC shipments declined 8% in the first quarter of 2020. The biggest decline in shipments since 2016 was due to the inability to meet the surge in demand in the tense manufacturing sector. As operations such as airlines and container ships decrease, the period for moving major parts from the manufacturing country to the importing country is delayed, and products are not being supplied in a timely manner.

US PC component suppliers commented that Nvidia has failed to forecast demand for new graphics cards. Nvidia GeForce graphics cards always sold out at the same time as they were released, and after a couple of weeks, they went through a pattern of securing stock again. However, now in the midst of a pandemic crisis, the overall logistics transport and restocking process including industrial cargo is delayed. At the end of last year, Nvidia explained that there are restrictions on the supply and demand of graphics card components such as substrates.

In particular, the continued supply shortage is expected to lead to price hikes for major components. Asus announced that it plans to reestablish the list price for consumers to reflect the increase in operation, logistics, tariffs, and parts costs and that it is trying to minimize the extent of a price increase. Other hardware vendors also show that the cost of doing business has increased significantly, so it is highly likely that they will raise prices for new products like Asus.

The situation will not change much in 2021. Major companies such as Nvidia said it would be difficult to alleviate the supply shortage until early 2021. Intel expanded its supply by 25% throughout 2020, focusing on understanding and forecasting user demand, but by the end of the year, there was not enough stock of the major latest chipsets. AMD has decided to respond to supply shortages by continuously producing reference products that are discontinued after delivering designs and specifications to partners, usually immediately after the announcement.

Although major manufacturers are actively responding, it will be difficult to increase supply in a short time due to various causes. If you are an individual user, it will be safest to delay upgrading your PC for a while and watch the price per supply and specification.