What about the world wide chip shortage I’ve been hearing about?

First things first. The world is still in the process of recovering from the supply problems brought about by COVID. The chip shortage you might have heard about is very real and is still even now having an effect on the world-wide supply of computers, components, phones, tablets, cars and anything else that uses a processing chip.

Is it a good time to buy a new computer now? Well, I think it’s best to put that into some context so you can make your own decision based on your own circumstances.

The case for and against buying now

In a nutshell (all of these points are covered in detail later on):

For buying now

  • Supply chains are moving again
  • The current cryptocurrency cycle appears to be coming to an end
  • There is evidence that prices are currently on a downward trend
  • Inflation in the UK (the CPI) appears to be on the rise, energy prices are at an all time high and there is instability on the Ukraine-Russia border
  • DDR5 memory and PCIe 5.0 are supported in the newest processors and motherboards

Against buying now

  • AMD are likely to release their newest processors (6000 series, laptop only) soon
  • NVIDIA’s RTX 4000 series is expected to be released later in the year, as is Apple’s M2 chip
  • Prices are continuing on a downward trend
  • We’re still experiencing inflated prices as a result of the 2020/21 supply situation at the moment

TLDR: Should I buy now?

Depends on your circumstances and what you think will happen in the future. If you can’t afford to buy now, it should be OK to wait. If you really need something right now, you will be OK to buy now. If you think computer prices will fall because of the reasons detailed below, wait. If you think inflation will cause computers to become more expensive (also discussed below), buy now.

The supply situation and the chip shortage – why it matters to you

The chip shortage and the COVID-related supply issues are important to understand so that you can decide for yourself if you should be buying now.

The chip shortage was brought about by an unprecedented increase in demand coupled with COVID-linked supply issues. When COVID hit in 2020 (or 2019, depending on your region), manufacturing essentially ground to a halt. Chip manufacturers weren’t able to keep producing for a multitude of reasons – even if they were able to reopen their factories, their suppliers weren’t able to provide them with the resources and components they needed, so manufacturing couldn’t take place. It took an exceptionally long time to restart supply chains after they had ground to a halt.

While all this was happening, the world was at home trying to work, study or even just entertain themselves. The workforce suddenly needed more computers so that they could work remotely. Parents suddenly needed internet-connected devices for their children to learn remotely. There was suddenly a bigger demand for computing equipment than there had been in a very long time.

There have been other factors too that have pushed prices high, particularly for anyone wanting to buy gaming-related computing equipment. The price of Ethereum (the second-biggest cryptocurrency, which can be generated using consumer-grade computing equipment) rose dramatically from around £170 per ETH at the start of the pandemic to over £3,000 per ETH within 18 months. Because computing equipment (specifically graphics cards) could be used to generate this cryptocurrency, it became clear to many people that owning a GPU was essentially a money printing machine. How much would you pay for a money printing machine? Well, that number in your head right now is about the price a GPU rose to during the pandemic, with certain components easily costing double or triple what they were the previous year. How many money printing machines would you buy? All of them – which people did – so the shops had none.

So what has changed in February 2022?

The supply situation is much better, although it is still taking a little time for those prices to filter down to end users like you and me. The sudden unprecedented immediate demand for devices has started to subside, with computer, car and other prices starting to even out. It appears that the current Ethereum cycle is on the way down and in any case, once it becomes impossible to use consumer graphics processors to generate ETH (a change planned for mid-2022), there is anticipated to be a sudden oversupply of graphics cards on the used market, further increasing supply and sating demand. But it is worth noting that prices do not always fall at the same rate they rose. For example, a solid mid-range GPU like a 1060 or RX 580 was released at an MSRP of around £220 five years ago. The last 18 months has seen the manufacturers increase the price that they set by around 50%, with actual retailers charging much more than this. Manufacturers, stores and resellers have certainly made hay during this period and it is becoming clear that they are reluctant for prices to return to pre-COVID levels. The new normal for GPU manufacturers looks quite rosy, it seems.

In addition, there are a number of factors that threaten to increase prices once again. There are stories circulating about contamination in SSD production, which could reduce the supply and therefore increase the price of computer storage. The cost of energy in Europe has risen considerably in the last 6-12 months, which affects essentially every step of the supply chain again in one way or another. While the supply is still forthcoming from the manufacturing plants in China and the East, it is costing more to ship them here, more to transport them through Europe and more to maintain and run the shops and warehouses in the UK that consumers use to buy their products. All of these costs are passed on to the end link in the chain – you. This helps to explain why inflation is so high at the moment, and there is a very real danger that escalating tensions on the Ukraine-Russia border will further increase inflation, making your money worth even less to the people and countries outside of Europe who are manufacturing your electronics.

So now might be the best time to buy for a while. It’s as simple as that.

It’s not, is it?

No… no it’s not. We don’t know how far prices will fall on their return to the new normal and it is perfectly possible that the market will drive prices back to where many believe they should be. There may be an absolute glut of graphics processors in June/July 2022 as crypto miners look to sell of their GPUs, increasing supply and sending prices plummeting. There are also new processors on the horizon, with AMD set to release their latest 6000 series laptop-only CPUs perhaps as early as this month. Upon the launch of a new computing technology, the older technology that was the best is suddenly playing second fiddle, again pushing prices of those components down.

However, a word of caution. I’ve been buying computers and components, whether in a personal or professional capacity, for over twenty years, and the one thing you can guarantee is that there is always a new technology on the horizon. It is how the industry works and how obsolescence can be built into our modern devices. If you wait for the next AMD processors, when they arrive you might be tempted by the new Apple M2 chips, rumoured to be coming in half a year’s time. Or you might be interested to see what Intel is developing – their next round of processors may integrate with their rumoured upcoming GPUs. By then, you might as well wait for the Ryzen 7000 series to come out in 2023. Before you know it, you have waited a year and you are still anticipating the next big thing. And even then, when the new technology emerges (as it has with DDR5 RAM and PCIe 5.0 compatibility), it is usually prohibitively expensive in at first (as it is with DDR5 RAM and PCIe 5.0 compatibility). My recommendation is that unless you are really close to a new product launch that you’re really interested in, be wary of worrying too much about the latest model. It will be superseded by the next big thing soon enough.

Wrap it up, James. Should I buy a computer right now or not?

If you’re buying for gaming and you can wait, you should wait. GPU prices will fall soon enough. The current prices are, in my opinion, unsustainable (once crypto-mining profitablility reduces due to Ethereum moving to proof of stake and with energy prices spiralling ever upwards).

If you are not buying for gaming, you should buy at the time that best suits your circumstances. If you need something right now, go for it. If you want to wait – for whatever reason – that’s fine too. It doesn’t hurt to keep an eye on prices in the meantime. I’ll do what I can to keep you informed 😉

James

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