There is a severe shortage of graphics cards and memory in the market thanks to the continued rise in demand for the chips to handle cryptocurrency mining. This leaves a large market of do-it-yourself consumers and PC gamers without the ability to build or upgrade computers without overpaying for these components. OEM PC builders have an advantage of priced-locked component costs that is redirecting consumers previously uninterested into the market for these pre-built machines. Vendors like HP, Dell, Lenovo, and others have an opportunity to capitalize on the product shortages with increased revenue and new customers for both notebooks and desktop PCs.
With cryptocurrency miners buying up the stock of graphics cards and system memory in order to ramp up profits, the price of those components has skyrocketed once again. Groups looking to buy the hardware as investment to make money are willing to pay elevated prices (sometimes as much as 200% expected MSRP) as they need only balance the return on investment. Gamers and enthusiasts that want to build PCs for gaming purposes are more sensitive to the price changes, and as a result, have significantly slowed buying habits. This means companies that make other components used for PC building are penalized for the higher prices of graphics cards as well.
PC OEMs Hold the Power
Computers built by OEMs will often have different pricing arrangements. Fixed price agreements that might have been in place for several quarters with key component providers, allow companies like HP, Dell, and Lenovo to reduce risk of market changes. Traditionally, the cost of an OEM PC is higher than a DIY build due to warranty, support, and labor overhead. But because of the price spikes in the component market for graphics cards and memory, the fixed-priced agreements in place allow those OEMs to offer systems at lower prices that the DIY market can.
The result is that gamers and PC buyers that would have previously never considered an off-the-shelf system are looking that direction as the only reasonable outlet available to buying computer hardware.
It is not only desktop PCs that are seeing this increased interest. Gaming notebooks also look significantly more appealing to gamers that are in need of a new system or upgrade but refuse to pay the higher prices they find online for individual PC components. Vendors like HP, Dell (with its Alienware brand), Lenovo and lesser known brands like ASUS and Acer have been selling gaming-centric notebook computer for many years, but the market has been small relative to the rest of the mobile PC market. The shifts in demand for desktop components are now driving more gamers into this space than ever before.
To take advantage of this shift, marketing and product teams at these OEMs should be targeting this group of outcast consumers. Branding and messaging that showcases the newly acquired “value” angle for these desktops and notebooks could go a long way to creating a new customer that translates into increased revenue and market share. The first player to nail this in the short-term will likely earn a stronger following in the consumer space with repeat sales as the end-goal.
It is also possible (or likely) that as this trend continues during the length of time of the component shortage, those same OEMs will recognize the added value their products suddenly have earned, raising pricing in line with the rest of the market.
Other Players Benefit Too
Even NVIDIA could take advantage of this shortage of graphics cards in its own way. Though its products are part of the problem for desktop buyers, in the mobile space, NVIDIA has more direct control over the pricing, marketing, and partnerships that ship NVIDIA graphics chips in the gaming notebooks space. With a dominant lead in the add-on graphics market for laptops, NVIDIA should want to raise awareness of this opportunity. It gives them a place to create long-term fans of the brand while also giving them a chance to sell GPUs at a higher margin than is possible with the partner arrangements on desktop graphics cards.
Brick and mortar retailers like Best Buy, Costco, and Wal-Mart should see an increased interest from PC gamers and enthusiasts hunting for the best deal on hardware. OEM PCs have a much wider distribution through those big box stores than traditional PC component vendors do, so as the savvy buyers in the market begin to branch out to pre-built systems for their hardware needs, expect to see much of that traffic to find its way into retail.