 I was right! Woohoo! And it's terrible. At the start of last year, I predicted computer hardware prices would rise and that they would be sold out everywhere. And yep, over a year later, that has basically come true. But no, no, don't congratulate me because while everything I said was true, I wasn't even close to being correct about why there is still a shortage of PC parts and a broader global shortage of semiconductor products. But now I've talked to some people high up in the industry, off the record, of course, you know how it is. And I finally got the real reasons why it is so hard for gamers to find the CPUs and GPUs they need to get them FPS. And this bad news is brought to you by Pulseway. Pulseway is a remote monitoring and management tool that we use ourselves here at Linus Media Group. With it, you can control all your Windows, Mac, and Linux machines from one app. So try it today at the link in the video description. For those of you living under a rock, currently there is a massive global shortage of semiconductors and everything that they're used to make. So CPUs, graphics cards, cars, even fridges. Last February, when I predicted there would be a global shortage of PC components, my reasoning was that COVID and the restrictions it caused would interrupt manufacturing facilities and the logistics companies that they rely on. It was a fair guess. And lots of smart people made the same guess with companies like Apple lowering their projected revenues. But then in reality, supply of semiconductors was only briefly disrupted. And for almost all of 2020, they have been pumping out more CPUs and GPUs than ever. So why are the Ryzen 5900X and RTX 3080 weapons grade on Obtanium then? The real honest to goodness truth guys, is because you keep buying them off. When people got stuck working from home, that old E-machines that they hadn't used in years suddenly didn't cut it. I mean, it's reasonable to think that in one household, junior could be attending a lecture, the Mrs. could be keeping her elderly parents company on Zoom, and Pops could have suddenly gotten into day trading or NFTs or whatever, all at the same time. This has led to a trend reversal that I don't think anyone saw coming. 2020 was the biggest growth year in the PC market in a decade with a whopping 20.6% increase in US PC sales and Q4. And fun fact, Chromebooks are actually tracked separately and those reported a staggering 200% increase in shipments year over year. To add even more fuel to this fire, enterprises have had to heavily invest in their cloud services with providers like Zoom, Microsoft with Teams and Slack needing to seriously beef up their data centers to keep up with everyone all of a sudden working and meeting from home. That's a lot of video data. And while you might think, oh, well, okay, Microsoft needs a new server. How does that affect me? The truth is that your Ryzen desktop chip is made of the same chiplets as an Epic. It's just down to how AMD glued them together. The two hardest hit sectors though are automotive and graphics cards. And we'll start with automotive because it's simpler and because it's the better example of how I was kind of right. Automakers currently are being very vocal about having to stop their assembly lines because they can't get enough computer chips to go in their cars. But this is actually largely a problem of their own making. Back at the start of the pandemic, most automakers cut their forecasts and reduced their orders assuming that demand for new cars would drop. And it did temporarily until all of a sudden no one liked riding the bus with an infectious disease on the loose and demand came roaring back. By the time they realized this though, the fabrication capacity that they had released had already been sold to someone else. So, okay, I wasn't right. I was just wrong with the automakers. Now for GPUs. Well, it's the miners, right? Let's all say it together, guys. F**k you, miners. F**k you, miners. F**k you, miners. No, no, okay, hold on actually. Nobody that we talked to actually agreed that miners were the underlying problem. Like to be clear, they're not helping the situation and no one could say for sure if their GPUs are going to gamers or not. But everyone we talked to is pretty sure that the majority of GPUs are currently ending up in gamers hands. It's just that way more people want GPUs than usual. And there is some data to back this up. Valve generously makes their concurrent Steam user count public. And if we look, whoa, if we look at this, it absolutely explodes at the start of the pandemic. And then just as suddenly jumps again after the summer when the second wave forced everyone indoors. Then at the same time, a new generation of GPUs that was finally a solid upgrade from Nvidia's 10 series along with a new generation of console showed up after seven long years. And we shouldn't be surprised. In fact, we should actually be grateful that the new consoles didn't have a ton of compelling launch titles. This could have been even worse, David. Now you might not realize this, but Nvidia and AMD have to guess how many GPUs that they'll be selling months or even a year before the first one hits a consumer's hands. And while they were able to assume that demand for Ampere and Big Navi would be a bit higher than previous launches, based on prototype testing data being very promising and historical sales numbers for premium cards, they got it wrong, way wrong. I mean, you might even remember Jensen saying in the lead up to the launch of the RTX 3070, the 3080 and 3090 have a demand issue, not a supply issue. The demand issue is that, well, it's much greater than we expected. And we expected really a lot. So, okay, you might say, why don't they just make more? Well, because again, I'm kind of right. Demand issues cause supply issues. And there are only two companies in the world that can make this kind of bleeding edge tech, Samsung Foundries and Taiwan Semiconductor Manufacturing Company or TSMC. Under normal circumstances, they would be operating at roughly 80 to 90% of their capacity, which strikes a nice balance between making enough semiconductors to stay profitable while offering enough downtime to perform maintenance and extend the life of their equipment. If AMD or Nvidia had higher demand for their GPUs, they would just buy up some of that 10 to 20% idle time, pump out a couple million more chips and everything's hunky dory. But the current situation means that the fabs are already running at 100% capacity. So companies are getting exactly what they pre-booked and not away for more. This is why you're seeing some parts of the industry that are faring much better stock wise than others. Finding an iPhone, for example, no problem, even though it uses TSMC silicon. But that's not because Apple has some kind of extra pull because of their size. They've just been selling fewer iPhones for a couple of years now and the pandemic didn't change that. Same thing for Intel. You can buy their CPUs at MSRP, no problem. But they've also seen less growth over the last year. So their demand ended up more in line with their forecasts. Now, obviously then given the choice, I'd rather be in Nvidia or AMD's shoes, even if it does mean that gamers are mad at me. Which raises the question then, is there even a strong motivation to fix this problem? I mean, high prices are good for Texas energy suppliers, right? Well, Nvidia, AMD and TSMC may have all reported record breaking revenues. But if capitalism has taught me anything, it's that leaving any amount of potential sales on the table is straight up unacceptable. I'm sure TSMC would love to sell 20% more wafers this year. So why is it taking so long? It's because they're trying actually, but it takes a lot of money, like tens of billions of dollars, lot of money. TSMC has plans to build a $35 billion plant in Arizona, upping their spend from 12 billion after Joe Biden called for 37 billion in federal funding to address the global chip shortage. As for Samsung, well, they've also got plans for a $17 billion fab in the US by late 2023. 2023. So yeah, these plans obviously won't be done anywhere near soon enough to stop the shortage of chips today. But then even if they came online tomorrow, they're only one part of the chain. After AMD or Nvidia get the wafers from TSMC or from Samsung, a lot still needs to be done to turn those into a graphics card you can plug into your system. They need to be tested and sorted for their capabilities. They need to be forwarded to board partners who need to manufacture PCBs, assemble the cards, QC them, package them. You guys get the idea. And the thing is, all of those factories are also at capacity. So every single part of this entire supply chain, I mean, even the guys who make the capacitors that go on the boards needs to be upgraded, which means that these shortages will continue for quite some time. How long? Well, we tried to find out, but unfortunately there seems to be a crystal ball shortage as well. And no one even off the record was willing to make a solid prediction. One good gauge that you can use at home though is the used market. Right now, if you were to use only retailers as an indication, getting a fifth gen AMD CPU looks pretty difficult. But the thing is the prices on eBay are only a touch more than MSRP. What that indicates is that supply and demand for these have nearly equalized. So it's likely we'll be seeing them in stock regularly pretty soon. As for RTX 3000 series GPUs, big yikes. It's estimated that graphics cards are being shipped anywhere from 10 to 30% below demand. And it's estimated that it will take three to four quarters for the supply of semiconductors to catch up and an additional one to two quarters until inventories are back to normal levels. So yeah, you might be lucky to get a GPU at MSRP this time next year. That is unless maybe big crypto crash leads to big sell off. Of course, there's another burning question in all of this. I mean, didn't basically the entire tourism industry get laid off? Aren't we in the middle of a huge recession? Why is there this unprecedented demand for $800 graphics cards? Well, here's the thing. Normally during a recession, the heaviest hit sectors are goods producing industries and construction. People make less money, they can't buy as much stuff. Pretty simple. But the pandemic recession is totally different. Here in Canada, our economy has already returned to about 95% of where it was pre-pandemic, which sounds pretty good and explains why people have all this disposable income to buy graphics cards. But it's got a dirty secret. Economists are calling it a K-shaped recovery. And what that means is that high earners and those who are able to conduct their business remotely have done great. And we've been fortunate enough to be part of this group. But because restaurants, hospitality, and entertainment have had to remain closed, that last 5% of the economy has been absolutely destroyed. So in a nutshell, this means that Johnny Big Bucks is now making more than ever, but can't go out and blow it on foie gras and $100 cocktail that includes a story about the bartender getting inspired by the forest in Tofino. Instead, Johnny is padding his savings account while the bartender is moving into his or her parents' basement. So if your biggest problem right now then is that you can't buy a GPU at MSRP, maybe consider just waiting, buying it later when it's MSRP, and spending some money with a local business in the meantime. We've got a couple down below that we think are great and are local to us, and feel free to drop your recommendations for your city down in the comments. I'm also gonna drop a recommendation to check out our sponsor, Fubo TV. Fubo TV is an amazing alternative to paying high cable prices and dealing with credit cable companies. It comes with over 100 of your favorite channels, including all major sports league networks, NFL Red Zone, ESPN, ABC, CBS, and more. Allows you to record your favorite games and shows on Fubo TV's cloud DVR and watch anywhere on any device. It requires no cable box. You can try it for free and cancel anytime. And I just said you can try it for free, but that's in my talking points again, cause that's a big deal. So try it out, risk free, at the link down below. It's fubotv.com slash Linus, and you'll get 15% off your first month. If you guys are looking for something else to watch now, maybe check out our $20,000 desk PC build. It at least won't make you feel any worse, because even if it was an MSRP, you still couldn't afford it. Thanks for that. Bang. Okay, everyone's way off. We should practice that then. Okay, we got this, okay.