Why So Expensive

Why is The AMD RX 6600 XT So Expensive?

AMD announced their latest GPU the AMD RX 6600 XT at Chinajoy which no one can afford, thanks to miners and scalpers but AMD’s Radeon RX 6600 XT announcement also give us an excuse to talk about why pricing for these parts is still so outrageous and some of the big changes that could finally end GPU shortages in the coming months.

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AMD’s Radeon RX 6600 XT is looking like a pretty standard launch so far, you got 32 compute units 8GB of GDDR6 memory, and 32MB of infinity cache, clock speeds are reasonably high.

We already know that RDNA 2 is a ridiculously scalable architecture thanks to earlier looks at the mobile parts, they will be available starting August 11 from third parties only, no AMD branded part this time around, although AMD says that there is a reference design that will likely make up the bulk of the early shipments.

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The reference design calls for only a single 8 pin PCIE power connector with a total board power of 160W and that’s not too shabby for what AMD is tauting as a 1080P monster that beats out the RTX 3060 and pulls over double the GTX 1060’s performance and its efficient enough to be CEC compliant.

The only problem with this announcement is that if you hated the RTX 3060’s MSRP of $329 then RX 6600 XT’S $379 price tag is going to be even more painful for you, it is roughly as fast as its price difference suggests if AMD’s benchmarks are to be believed, however, so it could end up being a great value, at least by today’s standards.

It’s an open secret that GPU prices have been steadily rising over the past few generations, the GTX 1080 launched at $599, and 1080 TI a GPU that held its status as a top tier gaming card for over 3 years cost just $699 at the time of launch.

But unfortunately, that’s just the way it is, as for why it is the way it is, there are few key factors that result in these prices, starting with of course the corporate greed angle that’s been thrown around ever since the launch of Nvidia’s RTX 20 series, believe it or not, both Nvidia and AMD for that matter love their shareholders much more then they will ever love you or me.

revenue report

But it’s also not the only reason, there are some very real logistical problems steadily pushing pricing up as the companies try to remain profitable.

But to be clear I’m not referring to Nvidia or AMD neither of which are struggling to remain profitable in fact compared to a year ago both of them reported nearly double the gaming revenue in the most recent quarter with healthy gross margins from 50% to 65%.

So the business of designing GPS’s partnering with a chip foundry, TSMC, or Samsung and selling the chips to board partners is as healthy as ever, it’s the board partners like EVGA, Asus, or MSI who are feeling the squeeze and passing that squeeze along to you.

Table: QoQ increase in Graphics DRAM contract prices, 1Q21-3Q21

1Q212Q21E3Q21F
Graphics DRAMup 5 – 10% up 20 – 25% up 8 – 13%

Take memory, for example, DRAM supply has been seriously hampered by the silicon shortage with contract pricing going up by 5 to 10% in the first quarter of this year then a staggering 20 to 25% in the second quarter with a projected 8 to 13% more again, coming in the third quarter, that over a 50% cumulative increase in the price since the end of 2020.

And the spot prices have been consistently worse with current prices sitting at easily double the contract price and TrendForce saying that at the scalp-pocalypse’s peak spot prices were up as much as 200% higher than contract pricing.

Demand from game consoles and GPUs remains high. And the realities of wafer production mean that 8GB and 16GB GDDR6 chips need separate allocations. So this crucial manufacturing
capacity is split. The consoles use 16GB chips while consumer GPUs currently use 8GB chips.

And the majority of 8GB capacity is reportedly feeding NVIDA’s lower-end 30 series GPUs, which leaves very little on the bone for anyone else. Thankfully, the 6600 XT is going to be using 16GB chips. So for this launch, anyway, it’s less of a concern.

The final DRAM factor though is somewhat unexpected and its servers. That’s right. This whole thing is colliding with a big boom in server orders. And servers, they need DRAM. Lots and lots of DRAM. And all of that is just the memory.

Next up, we’ve got copper, you know, that stuff that good heat sinks are made of among other things. Well, copper has gone from a little under $2.20 per pound in mid-2020 to double that as of today. And a lot of that has to do with speculation that a global economic rebound will boost demand for metals used in manufacturing
and in construction.

If that sounds like it’ll impact a lot more than copper, you’re right. Aluminum prices are skyrocketing. They’re up about 45% since this time last year. Steel and nickel are up nearly 30%. Plastics are up 47% and neodymium, which is used for magnets in fans and headphones
is up a staggering 88%. Even tin and led, which make up solder, are up nearly 36 and 14%, respectively.

So all of that means that virtually every material that goes into producing a GPU or really any consumer electronics is significantly more expensive than it was just a year ago.

If you’re a U.S. resident and the GPU that you want is made in China. Tariffs are famously misrepresented by politicians and enthusiasts alike. But the TLDR is, U.S. consumers get to pay the U.S. government between 10 to 25% more for electronics manufactured in China right now, which as of the end of 2020 has GPUs falling in that 25% bracket.

Now we can see from AMD and NVIDIA's financial reporting

The final head of the GPU pricing high trade is, of course, the Silicon shortage itself. Now we can see from AMD and Nvidia’s financial reporting that they’ve been telling the truth all along, sorry.

Like clearly they are producing plenty of GPU’s, but even if we account for Nvidia taking, on average,10% more profit margin than they did in 2015, both of them are experiencing clearly unprecedented levels of demand.

And when demand goes up, pricing goes up. This shortage is affecting industries everywhere from electronics all the way to automobiles. And recent reports show that even Apple, who to date has seemed relatively insulated, thanks to their careful production forecasting, is starting to feel the crunch.

AMD’s Dr. Lisa Su said, during an interview with Barrons, that supply is expected to
remain quite tight until 2022. And while AMD may be making inroads on supply, the Silicon shortage as a whole is likely to continue well into next year, thanks to the disruptions that COVID has caused in labor, logistics, and materials.

Thankfully, Taiwan’s worst drought on record did let up in late June, which should take some of
the pressure off of TSMC, which happens to be the world’s largest chip foundry. In other good news for consumers looking to buy a GPU.

One of the major factors influencing demand for these processors, mining, has begun to wane in recent weeks, following crackdowns on crypto mining by the Chinese government.

Since crypto’s pricing began to fall in early May, GPUs have at least begun to experience a slow return to normal as miners have begun firesale-ing GPUs in the Chinese market.

Although, pent-up demand from gamers means that prices are likely to remain high for
the foreseeable future.

That is until we get a mainstream GPU that is shipping in serious enough volume to put
enough cards in gamer’s hands that it puts pricing pressure on the more premium ones.

It’s based on AMD’s Navi 23 die, which should mean better yields per wafer, helping to chip away, pun intended, at the supply constraints. That is, assuming it ends up being a solid card.

Now, at this point, you might’ve noticed that I didn’t even offer an opinion on the state of the gaming GPU market. That’s because, in my opinion, it doesn’t matter what I think.

That’s the hottest take you’re going to get from me today. The unfortunate facts are that there is little that can be done about GPU pricing right now, but the good news is that once economic recovery efforts are in full swing demand for raw materials should begin to fall off.

And with any luck, we’ll be able to live in a world where the fun comes back into PC building. You could try to accelerate the end of the ride by keeping your money in your pocket when the 6600 XT briefly hit store shelves, but truthfully, it probably won’t change anything.


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