EXCLUSIVE: NVIDIA RTX Series MSRP And Soon To Rise Cost Of PC DIY
I’ll admit something right off-the-bat, while my headline is about NVIDIA’s RTX-Series MSRP, this article actually has very little to do with NVIDIA; because the primary factors hindering Jensen’s promised MSRP levels actually have nothing to do with them. This story will go into one of the biggest problems stopping AIB (Add-in-Boards) partners from achieving MSRP pricing and what this has to do with President Trump’s trade tariffs.
AIB: Achieving NVIDIA RTX MSRP with U.S. trade tariffs is not possible in the near term, cost of most PC parts will be rising soon
This article details the essence of the conversations I had with a group of technophilic birds which had taken a sudden fancy to my windowsill; nothing has been modified except the term AIC (Add-in-Card) has been changed to AIB (Add-in-Board) to make it in-line with our editorial policy. It revealed one of the biggest reasons why Jensen’s MSRP will not materialize in the near future and the cost of PC building – known as the PC DIY market – is about to rise. The reason has much to do with U.S. President Trump’s trade tariffs.
Our story begins with how the PC market is structured right now. For the purposes of our tale, we can split them into two parts: the components market and the pre-built market. The former is usually referred to as the DIY sector while the latter is what you see with OEMs and system combos. Most PC enthusiasts will be part of the DIY market since building your own PC is half of the fun of owning one. Usually when a PC product launches, it is initially above MSRP but as economies of scale kick in and the companies overcome the learning curve the cost comes down. Unfortunately, however, PC components are part of the trade tariff that President Trump enforced recently on China. Before we go any further let’s go over some details:
…there is a 10% tariff impacting $200B of goods that is scheduled to take effect on 10/1/2018. Every Monday there is an update on whether there is any progress made by US and China in the negotiations. If the tariff does take effect on 10/1, then […] would try to move assembly and testing over to Taiwan in order to avoid the tariff but most likely there would have to push back shipment lead times or else raise prices while they get it all sorted out – Red feathered bird.
Essentially it means that all the DIY parts you put in your PC will be taxed on the tariff that President Trump is proposing. It is worth noting here that the tariffs do not cover pre-built systems and laptops – only individual parts – so the cost of business for most enterprises will not rise unless you are in the business of building data centers. Since graphics cards like the NVIDIA RTX series are usually shipped on a stand-alone basis to gamers, they will be taxed at the AIB level – and the AIB in return will divert that cost to you – the customer. At a proposed 10% tariff, the selling price of PC parts (in the short term at least) will rise proportionally.
[we] are certain that all [of our] products will be affected by the tariff tax. It’s uncertain at this time what that will be. – Blue feathered bird.
NVIDIA’s RTX cards are going to be caught dead center in this tariff and all of its AIBs will be affected; therefore the natural price curve will no longer apply. Instead of the price going down with time, it is now very much a possibility that the cost might actually rise. This is because current pricing does not include the impact of the tariffs – that much I have confirmed. There is a lot of uncertainty regarding just how much the tariffs will hit pricing but for RTX, the estimates are an increase of $100-200 over market price. The tariff is supposed to go live on the 1st of October, 2018 in a few weeks time. Along with GPUs, other PC parts that ship from China will be impacted – which includes pretty much all components used in a standard build.
As for the tariffs, [President] Trump doesn’t want China to continue having advantage over US manufacturing with their made in China 2025 17% factory tax credit so he’s hitting them with tariffs. […] need to get with the program and move assembly out of China because it doesn’t appear a deal to end the tariffs is coming anytime soon. – Orange feathered bird.
AIBs have two options here – they can either pay the tariff (and move cost to the customer) – or they can move their operations out of China into some other country which is not currently war-ing with the US. The most likely candidate for this is Taiwan. Since many of the AIBs have their HQ in Taiwan it is the logical place to move operations – and we have confirmation that at least 5 of the major Taiwanese-based AIBs will do so. At the same time, the OEMs and ODMs are going to be moving their operations to the Mexican Free Trade Zone where they can get systems assembled and shipped into the US instead of China.
For minimal cost, Mexico would be the best option but since […] HQs are already in Taiwan, it makes the most sense that they move their assembly and testing their much like the Taiwan based memory OEMs are already doing.
We will just have to get desktops built in Mexico and shipped over as otherwise costs will be $100-$200 higher on the RTX GPUs. – Teal feathered bird.
All this, however, takes time and dollars, which means that in the short term, if the tariff is applied, the companies will have no choice except to pass on that cost to you – the consumer. Even companies that beat the curve and are able to move their operations pronto will probably want to pocket the margin while everyone else gets their act together.
For SSD and RAM memory, ODMs like Geil, Team Group, and ADATA already test and ship out of Taiwan thereby avoid the tariffs. – Red feathered bird.
At the same time, some manufacturers that have operations already in Taiwan will be able to radically benefit from the tariff as their competitors supply chains are suddenly disrupted. After the tariff passes, Geil, Team Group and ADATA, for example, will be in the enviable position of deciding whether to increase their retail selling prices and cash in on the delicious margin or simply enjoy the predatory pricing that will automatically result as a consequence of their rivals raising prices to adjust for the tariff while they do not. Whatever the case may be, it looks like the operations will not be moving into the US.
If the tariff is passed as-is on the 1st of October, it will result in pre-built systems suddenly getting disproportionally cheaper on the market as they skip the tariffs completely. It should also make buying PC parts expensive – unless AIBs decide to subsidize the cost while they move their operations out of China. This is certainly a possibility but one I think unlikely. At any rate, it is clear that you will not be seeing the selling price of NVIDIA RTX graphics cards coming down anytime soon. At best – you can hope the pricing levels remain the same.
The silver lining here, of course, will be the Pascal inventory. Since AIBs are liquidating them at a discount they will suddenly represent much higher value than before (assuming they don’t increase prices here as well as a way to subsidize RTX) and would make for a genuinely good deal for DIY PC builders. One thing is for sure though, on face value, it looks like PC building is about to become a more expensive hobby.