Crypto Mining's Role in the 2021 Electronic Parts Shortage
When they're not catching fire, electronic parts fabs and manufacturers are running at full capacity—producing as many advanced components as they can. The trouble with our current parts shortage isn't necessarily a shortage, after all. The trouble is supply cannot currently meet demand. Why else would Intel and TSMC announce multi-billion dollar plans for new fab sites in Arizona?
Working from home, remote learning, people realizing if they're going to quarantine, then they might as well buy new TVs and gaming systems. All of these factors have contributed to the booming demand for advanced chips.
But what about crypto mining?
The rise of Bitcoin and Ethereum—two of the most popular cryptos out there—might just be the biggest contributor to our current parts shortage.
Graphics cards (GPUs) and application-specific integrated circuits (ASICs) are the bread and butter of crypto mining. These advanced electronics contain much of the same parts and components as your gaming systems, TVs, computers, cars, etc. And to get an idea as to why crypto mining might be one of the biggest catalysts for the current electronic component shortage, let's take a look at mining facilities around the world.
Here's a crypto mining facility in Washington. That's a lot of hardware.
Here's Russia's largest mining operation:
Wall after wall of GPUs and ASICs used for one goal.
And let's not forget our friends to the north. Here's a crypto mining facility in Quebec:
You're starting to get the idea, right? These facilities are using thousands of GPUs and ASICs to mine digital currencies. Now, it's not so hard to believe when you see articles about how Bitcoin uses more electricity than Argentina.
When paired with sky-high consumer and automotive demand for advanced chips, crypto mining only adds further fuel to the fire.
In fact, GPU makers like NVIDIA are even taking steps to limit the use of their products for crypto mining. The company's latest graphics cards have been altered to be 50% less efficient when used for crypto mining purposes. And this isn't NVIDIA taking shots at crypto mining. The company is simply trying to prevent crypto mining from interfering with consumer needs. To support this, NVIDIA has plans to manufacture its own bespoke graphics card used for crypto mining. This way, consumers and miners will not have to compete for the same graphics cards.
To shed further light on the amount of advanced hardware being used by crypto miners, take a look at this statistic: NVIDIA estimates that up to 6% of its 2020 Q4 revenue came from Ethereum miners. Ethereum, by the way, is the cryptocurrency valued next highest to Bitcoin.
On the other hand, AMD has said they have no plans to produce chips that reduce mining efficiency when mining activities are spotted. So you have one company creating a new market for miners with NVIDIA, and another company letting miners and consumers fight for the same cards. I wonder which plan will prevail?
Why is mining so popular?
Like any capitalist venture, crypto mining has experienced a recent ascension because it has become very profitable. Crypto prices went on a bull run during the Autumn of 2020, leading to an increase in miners. It's simple, really. The higher the value, the more something is sought.
As long as mining profitability continues, these giant mining operations will continue to gobble up GPUs and ASICs—and all of the advanced semiconductors that come with them.