The race for semiconductors: Are crypto miners taking the lion’s share?

Over the last couple of years, the world has been grappling with the lack of semiconductors, which are the substances that conduct electricity between metals and isolates. The most famous semiconductor is silicon. 

If correlating this concept to electronic devices, then the key semiconductors are processors and other microcircuits that are present in almost all devices that people use every day, from smartphones to cars. 

In 2021, semiconductors hit a world record in terms of sales. Electronics production also boomed, with hundreds of millions of complex semiconductors being devoured by gaming consoles. The number of GPUs produced grew to unseen levels, with major manufacturers like Nvidia seeing all-time highs in terms of production.

Despite all this, electronics prices skyrocketed and manufacturers of related goods were struggling to find semiconductors. 

Crypto miners: Guilty or innocent? 

It has become customary to not only mention but to blame cryptocurrency miners for the global shortage of GPU cards and semiconductors. To their credit, miners would buy up huge swaths of graphics processing units, sometimes emptying whole stores at once.

Some countries that are feeling the shortage of cards acutely are already fighting against cryptocurrency mining.

At the same time, the manufacturers, themselves, do not take such a definite position. AMD CEO Lisa Su said in June 2021 that miners are far from guilty for the lack and even complete absence of certain GPU cards. She said that their influence on the market is generally minimal and does not exceed 5%–10% of the total demand. 

Andy Long, CEO of White Rock Management, a digital asset technology company situated in Switzerland, agreed with Su that mining isn’t entirely to blame:

“GPUs are still in high demand to power Ethereum and other altcoin mining. Nvidia’s published estimate for the percentage of traditional GPUs going to miners is in the single digits, but the true figure is likely higher than that — somewhere around 20%.”

Another important factor behind the shortage of GPU cards is the COVID-19 pandemic. The supply chain showed that due to the many employees who began to work at home, the number of buyers increased so much that graphics processors — a crucial component in home computers — simply disappeared from sale.

However, the situation with miners’ appetite for GPU cards began to change noticeably at the beginning of this year. 

Firstly, the change is due to Ethereum (ETH) switching to the proof-of-stake (PoS) protocol, which is slated to take place in the summer of 2022. 

Currently, the Ethereum blockchain is maintained by miners solving cryptographic puzzles and subsequently receiving a reward, the value of which is calculated according to the hash rate of each individual GPU.

This is called proof-of-work (PoW). As soon as Ethereum switches to the new protocol, miners will no longer be needed as crypto holders will validate block transactions based on the number of tokens they stake.

Since GPU cards will no longer be needed for Ether mining, once Ethereum 2.0 goes into effect, the demand for them will reduce drastically. 

This shift in demand is already very noticeable. In the first two months of 2022, Nvidia’s GPU card sales are down by 75% compared to 2021 as large mining companies that used to purchase such cards have stopped buying. This also means that Nvidia will be forced to redirect GPU cards to the gaming sector and cut prices. 

There are other reasons for the price decrease. Since April of this year, the United States has reduced import tariffs on the supply of goods from China by 25%. America is one of the main players in the GPU market, where companies such as Nvidia, AMD and Intel operate, so the tariff cuts have led to lower prices for GPU cards.

Buyers’ interest in the cards is also declining against the backdrop of a gradual…