GPU makers promise relief is at hand over chip shortages, prices expected to fall in second half of the year

Maybe the days of entering lotteries for graphics cards will be over

Buyers may not have to resort to treasure hunting for elusive GPUs in the second half of this year as semiconductor companies expect supply and prices to start normalizing.

Nvidia is working with supply-chain partners to push out larger quantities of its chips, including GPUs, to the market, said Colette Kress, Nvidia's chief financial officer, during the JP Morgan Auto/Tech forum, which was held alongside CES this week.

"In the calendar year of 2022, we believe we'll be in great shape in terms of supply, being able to meet the demand that is out there," Kress said.

Nvidia and AMD have added manufacturing capacity to mitigate shortages of their chips, including GPUs. Nvidia has made long-term supply commitments to the tune of $6.9bn to secure a larger chip supply for this year.

"We are also partnering with our supply chains to assist in our future capacity needs in the second half of... 2022," Kress said.

For at least the past year demand has outstripped GPU supply, with crypto miners and gamers snapping up the few available GPUs hitting the open market.

As a result, GPU prices have gone up. Nvidia's GeForce RTX 3090 has a manufacturer's price of $1,499, but third-party graphics cards are either out of stock or selling at three times the price on sites like Newegg. Online retailer B&H Photo Video has a waiting list for Nvidia's GeForce RTX 3090 graphics cards.

The crazy GPU prices should start descending as the supply eases, but it won't be an overnight thing, said Dean McCarron, analyst at Mercury Research, which calculates quarterly GPU shipments.

PC makers including Dell, which makes Alienware laptops, get first dibs to GPUs fresh out of factories, followed by graphics card makers. Direct retailers are lowest on the priority list.

"As supply improves, you'll see a greater increase in retail," McCarron said,

The shortage of GPUs has prompted some graphics card makers such as EVGA to implement a lottery system to evenly distribute boards to gamers. As EVGA gets GPU supply in, they make a random selection of users, and send an email to buy the card within 24 hours.

"It's a way of evenly distributing graphics cards and to prevent board flippers and crypto miners from buying out inventory," McCarron said.

Nvidia has prioritized gamers with its Ampere-based GPUs shipped being "Lite Hash Rate," or unfriendly to crypto mining.

Average selling prices of Nvidia and AMD GPUs have also gone up due to companies prioritizing shipment of higher priced GPUs, which deliver more profits. This shorts the supply of lower priced mid-range and low-end GPUs.

The price relief won't matter to those willing to plonk down premium money on newer and more capable GPUs due this year, McCarron said.

Nvidia and AMD unveiled new GPUs at the ongoing CES trade show. Nvidia previewed the next "monster" GPU, the RTX 3090 Ti. AMD announced the Radeon RX6850M XT for gaming laptops, and the RX6000S GPU for ultraportables, and the Radeon RX6500 XT for desktops, will be available on January 19 for $199.

AMD CEO Lisa Su previously told Barron's that she expects chip supply shortages to ease late this year.

The chip maker added more manufacturing capacity by increasing its wafer-supply agreement with GlobalFoundries to $2.1bn through 2025, an increase from $1.6bn through 2024.

The companies have not disclosed what chips the extended agreement will cover. Globalfoundries doesn't have cutting edge nodes to make AMD's finest graphics chips, but the companion chips used alongside CPUs and GPUs are as important, said Tom Caulfield, CEO of GlobalFoundries, during the JP Morgan Auto/Tech forum.

"I think if you're a processor-centric business, whether it's graphics or CPU, you'll want to make sure you have great products and then you'll look to open the aperture to how do you put companion chips along with that, that compliment the overall function," Caulfield said. ®