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| Source: Stefen Chow IEEE Spectrum |
Anyone interested in graphics add-in boards (AIBs) knows the supply has gone to zero and the prices have hit the stratosphere. But why? There are several possibilities, but most of the blame is being laid at the door of the crypto miners, particularly the Ethereum miners. Why? Because the Ethereum algorithm for hash monitoring takes advantage of the GPU’s tightly coupled memory interface, manager, and the associated high-speed GDDR6 RAM. Ethereum developers have promised to change that algorithm and make it more adaptable to a custom ASIC, but that hasn’t happened yet. In the early days of Bitcoin, GPUs were the processor of choice and later replaced with less expensive ASICs.
Ethereum had an incredible run-up—from $240 U.S. dollar equivalent a year ago to a peak of $4,000 in May. (At the time of this writing, it was at $2,700.) Gains like that in such a short period will attract a lot of the mining farms to expand and be inviting to the amateurs.
Miners receive crypto coins as a reward for completing blocks of verified transactions that get added to the blockchain. The miner who discovers a solution to a complex hashing puzzle first earns dividends. The probability that a participant will be the one to find the answer is related to the portion of the total mining power on the network.
The miners make the cost trade-off analysis of coin inflation versus the cost of power to run the farm’s mining apparatus. That makes the location of a mining operation critical as the operator wants to be near as low a cost electrical supply system as possible. Included in the electrical cost is the cost of cooling the farm, so some miners locate in cold climates.
We have tracked AIB shipments since 1985. Throughout that body of work, we have very carefully watched the attach rate of AIBs to PCs, and the ratio has steadily tracked down from 100% in the 1980s to about 34% in 2014 before the previous crypto mining surge. During the surge from 2016 to 2018, the attach rate jumped to as high as 70%. However, that was before the shortage due to other factors like pandemics and supply-chain interruptions.
More recently, we watched the attach rate drop to 25% and recently jump up to 50%. We calculate the mining use of AIBs as the difference between the trending normal attach rate and the current rate. The assumption being that miners have dedicated rigs and do not buy a PC to build a mining system. For the most part, that is true; however, some amateurs buy PCs for mining.
The model is not as precise today as it was in 2017 due to the overall shortage of parts. That has led to the introduction of buying bots that crawl the web looking for AIB inventory and, when found, immediately buy it. The bot owners then take the AIBs, plug them into their farm, raise the price, and offer them on eBay. And some miners will buy them from eBay sellers. Not only new AIBs but AIBs from the last generation.
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| Graphics boards are hot: a recent eBay page shows prices being almost consistently 2× retail. (Source: eBay) |
The other source of inflated prices for AIBs is the cost increase in the components besides the GPU. That includes the GDDR memory, the second most expensive stuff on an AIB. It also consists of voltage regulators, capacitors, and other sundry parts. They have all gone up, and some as much as 70% since the beginning of the year. Why did they go up? Supply and demand plain and simple. Some people are saying it’s because of increased consumer demand due to working at home. And yes, there is some of that, but not 70%. And even if it was due to WFH, that demand should be satisfied by now.
So, the AIB price run-up and inventory shortage are pretty much due to the buyer bots, speculators, and miners.
How much, or how many?
In our last crypto report, we put a market value on the impact of the miners. We can’t do that this time because the prices are so volatile and increase almost every minute as bots fight or negotiate with other bots and humans.
We plot the high-end and midrange PCs and AIBs as they are the one which has the most value (payoff) for the minors, and we exclude workstation and notebooks. As the following charts shows, PCs have dropped (in Q1’21) while AIBs’ attach rate has increased, leaving the conclusion that the difference is the buying of AIBs by miners.
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| AIB attach rate over time |
Notice the peak in ’17-’18 and at present.
The model predicts that about 25% of the AIBs shipped in Q1’21 went to miners and speculators. That’s approximately 700,000 high-end and midrange AIBS in Q1’21. And the market value is about $500 million—a half a billion dollars.
Now, before you run out and buy AMD and Nvidia shares, understand that they are not getting that surge in pricing—the channel is, and the speculators are getting even more.
Nvidia has hoped to wean the miners away from the graphics AIBs by offering a GPU AIB that doesn’t have a video output called the crypto mining processor. The 350 W CMP 170HX can accomplish a 164 MH/s hash rate. Nvidia’s top-of-the-line GeForce RTX 3090 can reach between 120 MH/s and 130 MH/s, and the newer RTX 3080 Ti is in the same range or less.
Nvidia has also put a Hashing decelerator in the 3000 GPUs and modified the driver to discourage people from using them for mining.
Nvidia’s new CMP and its lowered hash capability on many standard products will inoculate Nvidia against the possibility of another 2018-style crash.
AMD has a different attitude and doesn’t do anything saying a miner is a customer too. Nvidia’s pro-gamer perspective is bound to win them more votes from the gamer community than AMD’s laissez-faire policy.
Complementary to Nvidia’s moves is Best Buy’s new policy— you must come into the store to buy an AIB, only one per customer.
Dedicated versus casual
The above discussion is primarily about dedicated miners. The attach rate model has no way to tease out gamers or others who may occasionally do some mining. We consider them casual miners and categorize them similarly to gamers or other users who sometimes use a word processor or a photography app.
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| Photo: Giga Watt’s mining facility, Coincentral |
The IEEE Spectrum published an article about the miners in China. Inner Mongolia has some of the cheapest electricity prices globally (4 U.S. cents per kilowatt-hour, a government-reduced rate), which is the primary reason miners set up shop there. The top five mining farms are listed on Coincentral.
Miners don’t buy PCs, so their AIB acquisitions don’t follow PC purchases and therefore raise the attach rate. So, our model detects the dedicated mining farms.