This led to frustration in the gaming community and people delayed their purchases in the anticipation of a fall in prices.
Today we drill down this issue to find if the prices of GPUs are set to reduce in this year or the coming year.
Why Did the Prices Inflate?
The basic principles of supply and demand can be used to explain the increase in the prices of GPUs.
Firstly, the demand for GPUs increased substantially due to the lockdown. More and more people were finding activities to kill time and thus a lot of them chose to spend time gaming.
Thus, as per expectations, the demand and consequently the prices increased. Crypto miners also constituted the heavy demand for GPUs.
The increasing trend of crypto means more mining, hence the demand for GPUs kept increasing and so did the price.
However, an increased demand wasn’t the only reason for the high prices. A decrease in supply was, arguably, the more important reason for this inflation.
A shortage of components after they weren’t able to ship due to COVID restrictions caused the supply to decrease and the price to increase.
Moreover, factory closures and production halts further reduced the supply leading to higher prices.
Not just that but certain government policies particularly in the US also caused a lot of disruptions. All of these factors led to one thing; lower supply.
And as per basic economic rules, a decreased supply coupled with increased demand leads to nothing but price inflation.
Also read: Is buying a used graphics card a good idea?
Will Prices Decrease?
Though COVID restrictions have been relaxed and life is returning to normal, the production of GPUs is still slow.
Tech giants say they need time before the product can be taken back to the normal speed and thus the supply of GPUs in the market is still low.
Moreover, the components required to make graphics cards are still quite short in supply and it is difficult to find them which further slugs down the speed of production.
Another problem that has recently arisen is the black market. Ever since the price increase took place, hoarders bought GPUs in bulk and started storing them.
They are selling these at higher prices. But that’s not the only problem.
Due to the graphics cards being purchased by these people, it has become even more difficult for companies to supply directly to the right consumer, making the condition worse.
The price can only decrease when the production fastens and the market supply increases to such an extent that the demand is met.
This, according to producers, cannot happen any time before the third quarter of 2022.
This means, that we shouldn’t be expecting a price fall in this year and not even the first six months of 2022. However, after that, prices should decrease.