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MSI Expects GPU Shipments to Continue Dropping, May Raise Prices in 2021

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Buying a video card has been an exercise in futility for the last year, and don’t hold your breath for it to get better anytime soon. During a recent investor call, MSI chairman Joseph Hsu said the company expects the supply of video cards and other in-demand gaming components will continue to drop. MSI points to dropping shipments from both Nvidia and AMD as the primary culprit, and as a result, GPU prices could increase even before they get to the resellers who are charging an arm and a leg. 

Currently, you’d be extremely lucky to find a GPU in stock at any reputable retailer. The listings available online are almost all resellers who have used bots and other sketchy methods to vacuum up the very limited supply. Then they’ll sell those cards for as much as double MSRP, and people will pay it. For example, if you wanted to pick up an RTX 3090 that should retail for around $ 700, you’ll probably have to pay about twice that. That’s if you can find one! Even scalpers are starting to come up dry. 

MSI says that its 2020 sales rose by 30 to 50 percent compared with 2019. Although profits in the final quarter of the year were softer than expected, the company still saw its highest annual profits ever. The problem going forward is that 53 percent of MSI’s revenue comes from GPU sales. With shipments expected to continue dropping, MSI says it’ll probably have to charge more for each card. The situation is unlikely to improve in 2021. MSI has projected interest in GPUs, motherboards, and gaming notebooks will continue to rise at double-digit rates. 

The shortage is the result of numerous interconnected events, all conspiring to make gaming hardware obscenely expensive. There’s the pandemic, which has made gaming a more attractive way to pass the time. The global disruptions stemming from COVID-19 also affected supply chains, leading to semiconductor shortages. Technically, it exacerbated a problem that already existed, but the results are the same. 

At the same time, the increasing price of cryptocurrency has made GPU-based mining profitable again, prompting miners to scoop up many of the cards intended for gaming. Nvidia hopes its upcoming CMP cards will loosen demand a bit. These cards are specifically designed for crypto mining — they don’t even have video outputs. Nvidia also said CMP production would not further reduce its shipments of gaming cards, but it’s just not a great time to be a gamer.

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PS5 Availability Is Improving, but GPUs Prices Are the Worst We’ve Ever Tracked

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For the past six months, every CPU, GPU, and console gamers have wanted to buy has been between difficult and impossible to find, depending on your luck, skill, and willingness to pay scalpers a monthly fee for a chance to buy hardware. We’ve kept an eye on the situation as it has developed, and there’s even the ghost of some good news to report if you’re a console buyer. PC customers, unfortunately, shouldn’t expect relief any time soon.

First, the good news: A new analysis by The Verge shows prices for the PlayStation 5 coming down. More and more systems are selling on eBay for lower prices or aren’t selling at all at sky-high targets. Sean Hollister writes, “Over a seven-day period, eBay moved 5,284 PS5 consoles, and yet plenty of PS5s that were listed didn’t sell. PS5 scalping is becoming less profitable, eBay’s getting flooded, and things are slowing down.”

“Slowing down” is still a careful qualifier, considering that Sony has told people it doesn’t expect big improvements until the back half of the year, but at least the analysis demonstrates positive motion. The Verge’s findings on GPUs were not so rosy.

GPU-Pricing-LateMarch

Image by The Verge

Now, it just so happens that I performed a similar analysis almost exactly three years ago. Let’s take a look at MSRP data from today against how hot things were running back three years ago. Verge’s data is above, here’s our 2018 data below:

Nvidia-Chart-GPU-Price

AMD-GPU-Pricing

Back in 2018, we had five GPUs out of 16 running more than 2x above MSRP. Today, no fewer than 7 GPUs out of 9 are running above 2x, while two are running above 3x. This is the worst GPU prices have been in my two-decade career. It’s not even close. The cheapest GT 1030 from an OEM brand I recognize (Gigabyte) is $ 133. The cheapest 1050 Ti is $ 262. A new RX 580 is currently selling for $ 649 for the 8GB flavor. The GTX 1080 is no longer on sale at a $ 500 price point, but the RTX 3070 is supposed to be. The current price of $ 1,239 as measured by the Verge makes the $ 776 inflation from several years ago seem nostalgic.

This tweet summarizes the situation quite well:

GPU manufacturers reportedly expect Nvidia availability to remain scarce into Q3 2021, and we can expect holiday demand to surge for Q4 like always. I’ve tried to remain positive in our various update articles on the GPU pricing debacle, but it increasingly looks like the market will be tight for the entire year. I’m not going to say this means nobody will get a card for MSRP — GPUs continue to ship, and clearly, some customers are getting them at retail — but it doesn’t look like you can depend on getting a GPU at MSRP this year, at any price point. Hopefully, as the year progresses, TSMC will be able to allocate more capacity for GPU manufacturing and finally get ahead of mining demand.

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Nvidia’s RTX 3000 Prices Have Gone From Bad to Brutal

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As we head deeper into March, there’s no relief in sight from the ongoing video card shortage. In fact, Nvidia GPU prices are getting worse, at least in the case of the RTX 3080.

This data comes from Michael Driscoll, the same individual who provided analytics on the impact of scalpers on console, CPU, and GPU markets a few months ago. Driscoll spoke with PCMag and provided our sister site with an update on his findings. GPU prices skyrocketed in February across the entire Ampere family, and while they’re trending back downwards now, they’re still elevated far above where they were in January and during 2020:

Data by Michael Driscoll

“The prices stopped going up exactly when the 3060 launched, so that can’t be a coincidence,” Driscoll told us. “Not a huge drop, but significant. For the increases, I have no way of confirming this, but I know many employers give out year-end bonuses in February, and people are starting to file and receive tax returns, which could be driving some of the price increase.”

Cryptocurrency mining could also be driving part of the increase. We have to give credence to the idea, if only because Nvidia has been taking steps to guard against it by reactivating older GPU SKUs like the RTX 2060. The RTX 3060 may have brought prices back towards the Earth, but we’re still talking about a situation in which most GPUs are running between 2x – 2.5x above MSRP.

Tariffs haven’t helped this situation and are responsible for some across-the-board PC component prices. Desktop hardware loadouts aren’t as nice right now as they were a few months ago as far as performance-per-dollar. It’s not clear how much of that is specifically tariffs and how much is being caused by silicon shortages, but the market is out of whack.

We took a stroll around eBay’s completed GPU listings today, and the data certainly backs up Driscoll’s point. While a handful of actual RTX 3000 GPUs appear to have sold for $ 800-$ 900, almost every auction that moved for this price turned out to be for digital art or a reprint of a box. One enterprising individual labeled their auction “NO HUMANS,” which piqued our curiosity:

Not all heroes wear capes. Best of luck.

A great many cards have sold for between $ 1,100 and $ 2,500. When they’ll actually get back to normal is still a complete unknown. Nvidia has attempted to take steps to limit the appeals of newer GPUs for cryptocurrency mining but has also said that cryptocurrency-related sales only accounted for ~$ 300M out of more than $ 5B in total revenue last quarter. Then again, Nvidia has historically had a problem estimating how many of its GPUs are sold for crypto mining. The 2020 lawsuit against Nvidia alleging that it deliberately hid this information is still winding its way through the court system.

If Nvidia can alleviate these shortages and the situation begins to improve, we might see normal-ish conditions in the market by mid-year. The chip shortage could persist until the end of 2021 in some segments, but we don’t have insight into which ones or for how long. It’s still possible to get lucky and snag good deals — I’ve seen the Ryzen 7 5800X in stock at Amazon twice in the past 36 hours — but there’s no way of predicting whether you’ll be able to do so.

Right now, it looks like 2021 will be one of the all-time worst years to attempt to build or buy a new computer.

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After 15 Years, Retail Video Game Prices May Be Rising

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Back in 2005, Microsoft, Sony, and other game developers collectively decided the new standard price for a video game would rise, from $ 49.99 to $ 59.99. For the past 15 years, retailers have avoided punching through that number, even as inflation reduced its value in absolute terms. Now, 2K has raised the price of its upcoming NBA 2K21 to $ 69.99 for the PlayStation 5 or Xbox Series X. If you want to buy the game for both platforms, it’ll cost $ 99.99 for the “Mamba Edition” to do so.

This could be an arguable positive. Adjusted for inflation, the price of a $ 59.99 game in 2005 should have risen to $ 77.84 already. A $ 69.99 price is only a $ 10 increase, and it’s unlikely to break the bank. It’s no accident that the long pause between price increases has coincided with the rise of alternative funding models, including crowdsourcing, increasing use of DLC, aggressive efforts to push customers towards pre-ordering, microtransactions, and loot crates. Gamers have not greeted all of these innovations with open arms. Game publishers have made some particularly egregious attempts to ring money out of the community like a dishrag. Raising the price of games by $ 10 could be a good thing if it led to fewer predatory tactics.

If history is any indication, we may be less likely to see these kinds of walk-backs than people might like. There’s no talk of reducing the use of microtransactions, while the release trailer for NBA 2K20 last year drew multiple unflattering comparisons to a casino or pachinko parlor for how heavily it marketed these mechanics.

There’s a tempting narrative here about greedy publishers and hapless developers trapped in months of crunch due to their leaders’ poor financial and game design decisions. But the situation is more complex than that. Game developer Ralph Koster, lead designer of Ultima Online and the creative director behind Star Wars Galaxies, has published multiple blog posts on the finances and challenges of building games. His website is an excellent resource — not many game development presentations from 2005 can claim to be great resources in 2020, but he’s got an online discussion of “Moore’s Wall” that I’d still recommend giving a look (mousing over the slides will display the talk transcript).

Graphic by Ralph Koster

On the subject of game development’s increasing expenses, he writes:

‘Too expensive’ isn’t a measure of just cost though, it’s a measure of risk. As costs have risen, we have seen massive consolidation across the industry… As costs have risen, third parties have either died when they overextended trying to reach the quality bar, or they were absorbed by the larger companies. Publishers overextended by banking on major franchises, and when one didn’t hit, went away.

This cycle tends to reset only when new technology platforms come along that don’t let you do expensive productions because they don’t have the graphics horsepower. Mobile was like that, so was Flash gaming. But as soon as you can overspend on graphics, it becomes mandatory, and then the spiral starts.

He dives into why microtransactions and similar content models exist, and how they interact with price thresholds and psychology. Put simply, cheap DLC, cosmetics, and the like offer content that’s inexpensive enough for people to want to buy it. Some games have adopted a free-to-play model in an effort to grow their user bases, while others, like NBA 2K21, combine microtransactions and a base $ 70 price. In both cases, though, the goal is the same: The developer is trying to nudge players into spending more money over time. In many cases, the reasons they’re chasing more revenue is that games-as-a-service incur ongoing costs and the price of building games and marketing them has been increasing every generation for decades.

A $ 69.99 price point for video games will recoup a little more revenue for developers and publishers, but according to the sources in the industry we’ve spoken with, DLC and microtransactions tend to be extremely profitable and critically important to the perpetually rising costs of game development. The advent of indie games may also make it easier for gamers to swallow the $ 10 price increase — there are now many, many titles available for prices ranging from $ 0 – $ 40, and it doesn’t long for new titles to go on sale. A game selling for $ 69.99 in January may well be on sale for $ 30 – $ 50 by the end of the year.

I don’t think gamers are going to go nuts over a $ 10 increase after a 15-year pause in game pricing. But I think the advent of more expensive games would go down better if people didn’t feel relentlessly nickel and dimed already.

Feature image by 2K.

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Tesla Slashes Prices By Up to $5,000 on Almost Every Vehicle Line

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Tesla has cut its prices on multiple models, with price cuts of up to $ 5,000 on specific vehicles. The cuts may be an attempt to stimulate demand after the pandemic, but Tesla hasn’t announced an official rationale.

First up, the Standard Range Plus variant of the Model 3 has picked up a $ 2,000 price cut, dropping from $ 39,990 to $ 37,990. The Model S Long Range Plus is now $ 74,990, a $ 5,000 reduction from its previous price of $ 79,990. Both vehicles dropped by ~5-6 percent, so the degree of reduction is equivalent on both cars.

Click to enlarge.

Similarly, the Model S Performance is now $ 94,990, and the Model X Long Range Plus is down to $ 79,990. The only product line that doesn’t seem to have been impacted by price cuts is the Model Y, but that vehicle only recently launched, and cutting its price by $ 5,000 now would be a slap in the face to people who’ve just recently purchased the car.

The automotive market is currently in bad shape. A report from Meticulous Research suggests that the Covid-19 pandemic could knock 12-15 percent off the global automotive industry in 2020. Industry tracker ALG believes May 2020 vehicle sales will be 21 percent below May 2019. Include the impact of reduced fleet sales, and the decline is larger, down an estimated 32 percent from last year.

So, should we all expect great deals? Unclear. Hertz’s recent bankruptcy could flood the market with used vehicles because the company has already stated it intends to begin some fleet liquidation as part of its Chapter 11 proceedings. If buyers head for used vehicles instead of new ones, we could see more manufacturers offering aggressive discounts to move new vehicles.

As for Tesla, specifically, opinions are divided. Some investors think this is a sign of improved profitability at Tesla thanks to larger economies of scale and that the company has the room to cut prices and attempt to stimulate demand. Those who are more bearish on Tesla see the move as intended to ward off a potential demand cliff. I’m scarcely an automotive analyst, but judging by the reports coming out of the industry, you don’t have to be to see that manufacturers are spooked by the idea of a long-term decline in car-buying thanks to COVID-19. That’s the kind of cliff that every manufacturer could fall off, not just Tesla. If car sales don’t pick up in the near future as the economy reopens, auto manufacturers may face serious problems in the months ahead.

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Oil prices take biggest plunge in decades amid coronavirus uncertainty, price-war fears

Oil prices dramatically dropped on Monday, down more than 30 per cent after a 10 per cent drop on Friday.

West Texas Intermediate crude fell $ 11.80 US to $ 29.48 and international benchmark Brent fell $ 12 to $ 33.20.

It was the largest single-day drop since the beginning of the Gulf War in 1991.

Prices are falling as Saudi Arabia, Russia and other oil-producing countries argue about how much to cut production in order to prop up prices.

Demand for energy is falling as people cut back on travel around the world. The worry is that the coronavirus outbreak will slow economies sharply, meaning even less demand.

OPEC and key ally Russia failed to agree Friday on a cut to oil production that would have contained the plunge, and on Saturday, Saudi Arabia’s state oil giant Aramco slashed export prices.

“We’re seeing the outcome of a one-two punch in terms of a demand shock from the coronavirus … and on top of that this weekend’s news of a price war started after the breakdown of OPEC plus Russia arrangements,” said Blake Shaffer, an assistant professor of economics and public policy at University of Calgary.

Shaffer said the demand-side drop was expected but the more recent development of a price war is a supply-side issue that’s hammering the market.

A ‘nuclear-sized event’

The oil market has seen arguments like this before. In 2014, OPEC held off production cuts in order to hold onto market share in the face of a resurgent U.S. oil industry. That led oil to tumble from over $ 100 US a barrel to below $ 40 by 2015.

But experts say this drop is much more dramatic.

“This is a really big move. I was an energy trader for 15 years. I don’t have all the daily moves in my head, but this would definitely be one of the biggest ones I’ve seen,” Shaffer said.

Martin Pelletier, a portfolio manager with Trivest Wealth Council in Calgary, said this is a “nuclear-sized event” for an already-hurting Alberta, and if not contained, the economic malaise could spread to the rest of the country.

“This could be the knock-out punch for Alberta, unfortunately,” Pelletier said, adding that some companies might not survive the hit.

“We’re going to really need to see some leadership coming out of Ottawa, and I mean both the Bank of Canada and [Prime Minister Justin] Trudeau and the government … This is a crisis; this is a very serious event.”

Pelletier said he’d like to see both a large fiscal spending program tailored to impacted provinces and an emergency rate cut.

The Alberta government’s recent spring budget forecasts WTI will average $ 58 US a barrel in the coming year, and Shaffer said this is bad news both for the economy as a whole and for the province’s royalty revenues.

“Roughly every dollar [per barrel] is about $ 350 million to the government … We’re talking about a $ 7 billion decline in revenue expectations,” he said, adding that about $ 2 billion is made up from the improved differential and the Canadian dollar, so the net hit would be about $ 5 billion.

Some experts are predicting even lower numbers could be on the way.

Ali Khedery, a former Exxon adviser and now CEO of strategy firm Dragoman Ventures, tweeted “$ 20 oil in 2020 is coming” after news broke of Saudi Arabia’s plans to hike production.

Shaffer said seeing such a wide difference in price forecasts after the province’s budget dropped just weeks ago makes a strong case for the government to change how royalty revenues are budgeted and push for further economic diversification.

“If this is prolonged, you’ll see continued job layoffs and effects on families. One of the really important things I’ll stress is having an economy that isn’t dependent on the outcome of a price war between the Saudis and the Russians … I hope it’s yet another wake-up call in terms of the efforts to diversify our economy,” he said.

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Energy prices spike after Saudi oil attack, U.S. blames Iran

An attack on Saudi Arabia that shut five per cent of global crude output caused the biggest surge in oil prices in nearly three decades, after U.S. officials blamed Iran and President Donald Trump said Washington was “locked and loaded” to retaliate.

The Iran-aligned Houthi movement that controls Yemen’s capital claimed responsibility for the attack, which damaged the world’s biggest crude oil processing plant. Iran denied blame and said it was ready for “full-fledged war.”

Two sources briefed on the operations of state oil company Saudi Aramco said it might take months for Saudi oil production to return to normal. Earlier estimates had suggested it could take weeks.

Brent crude futures settled at $ 69.02 US a barrel, up $ 8.80, or 14.6 per cent, its largest one-day gain since at least 1988. West Texas Intermediate, the U.S. benchmark, rose Monday by $ 8.05 US, or 14.7 per cent to $ 62.90 US per barrel. It was WTI’s largest one-day percentage gain since December 2008.

The attacks have possibly curtailed as much as one million barrels per day of Aramco’s refining capacity, Energy Aspects said, although this could not be confirmed and it was not clear to which Saudi Aramco refineries it was referring.

Prices eased after Trump announced that he would release U.S. emergency supplies, and producers around the world said there were enough stocks stored up to make up for the shortfall.

“There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Trump said on Twitter on Sunday.


The facility is some 330 kilometres northeast of the Saudi capital of Riyadh. (CBC)

U.S. Energy Secretary Rick Perry pinned the blame squarely on Iran for “an attack on the global economy and the global energy market.

“The United States wholeheartedly condemns Iran’s attack on Saudi Arabia and we call on other nations to do the same,” he said in a speech to an annual meeting in Vienna of the United Nations nuclear watchdog IAEA.

Perry said he was confident the oil market “is resilient and will respond positively.”

While Iran has denied blame for the attacks, its Yemeni allies have promised more strikes to come. Houthi military spokesperson Yahya Sarea said the group carried out Saturday’s pre-dawn attack with drones, including some powered by jet engines.

“We assure the Saudi regime that our long arm can reach any place we choose and at the time of our choosing,” Sarea tweeted. “We warn companies and foreigners against being near the plants that we struck because they are still in our sights and could be hit at any moment.”

U.S. officials say they believe the attacks came from the opposite direction, possibly from Iran itself rather than Yemen, and may have involved cruise missiles. Wherever the attacks were launched, however, they believe Iran is to blame.

“There’s no doubt that Iran is responsible for this. No matter how you slice it, there’s no escaping it. There’s no other candidate,” a U.S. official said on Sunday, speaking on condition of anonymity.

Saudi Arabia also pointed the finger at Iran, saying in a statement that initial investigations have indicated that the weapons used in the attack were Iranian, without offering further details.

“The kingdom condemns this egregious crime, which threatens international peace and security, and affirms that the primary target of this attack is global energy supplies,” the Saudi Foreign Ministry said Monday.

Saudi Arabia and Iran have been enemies for decades and are fighting a number of proxy wars, including in Yemen where Saudi forces have been fighting against the Houthis for four years.Tension in the oil-producing Gulf region has dramatically escalated this year after Trump imposed severe U.S. sanctions on Iran aimed at halting its oil exports altogether.


For months, Iranian officials have issued veiled threats, saying if Tehran is blocked from exporting oil, other countries will not be able to do so either. However, Iran has denied any role in specific attacks, including bombings of tankers in the Gulf and previous strikes claimed by the Houthis.

Foreign Ministry spokesperson Abbas Mousavi called the U.S. accusations of Iranian involvement in Saturday’s attacks “unacceptable and entirely baseless.”


Saturday satellite image from Planet Labs Inc. shows thick black smoke rising from the Abqaiq facility. (Planet Labs Inc via AP)

Russia and China both said it was wrong to jump to hasty conclusions about who was responsible for the attack. Britain also stopped short of ascribing blame but described the assault as a “wanton violation of international law.”

Washington has imposed its “maximum pressure” strategy on Iran since last year when Trump pulled out of an international deal that gave Tehran access to world trade in return for curbs on its nuclear program.

U.S. allies in Europe oppose Trump’s strategy, arguing it provides no clear mechanism to defuse tensions, creating a risk the foes could stumble into war.

Trump has said his goal is to force Iran to negotiate a tougher agreement and has left open the possibility of talks with President Hassan Rouhani at an upcoming UN meeting. Iran says there can be no talks until Washington lifts sanctions. Rouhani would not meet Trump, its Foreign Ministry said on Monday. 

The giant Saudi plant that was struck cleans crude oil of impurities, a necessary step before it can be exported and fed into refineries. The attack cut Saudi output by 5.7 million barrels a day, or around half.

Saudi Arabia is the world’s biggest oil exporter and has a unique role in the market as the only country with enough spare capacity to increase or decrease its output by millions of barrels per day, keeping the market stable.

Big countries such as the United States and China have reserves designed to handle even a major outage over the short term. But a long outage would make markets subject to swings that could potentially destabilize the global economy.

International response

Martin Griffiths, the UN envoy for Yemen, is appealing for an urgent move toward peace in the war-ravaged country, saying the latest attack on key Saudi Arabian oil facilities “has consequences well beyond the region” and risks dragging Yemen “into a regional conflagration” at a minimum.

Griffiths told the UN Security Council on Monday that the attack and military escalation “makes the chances of a regional conflict that much higher,” and with Yemen linked in some way “this is frankly terrifying.”

He said “it isn’t entirely clear” who was behind Saturday’s attack, but said it’s “bad enough” that Yemen’s Houthi rebels, who are fighting the Saudi-led coalition supporting the government, claimed responsibility.

China’s Foreign Ministry also expressed concerns, saying authorities have noted reports the U.S. blamed Iran for the strikes.

Hua Chunying, spokesperson at the Ministry of Foreign Affairs, said “given the absence of a conclusive investigation and result, I think it is irresponsible to determine who should assume responsibility for it.”

Hua also on Monday reiterated China’s position opposing “any expansion and intensification of conflicts.”

Raveesh Kumar, India’s External Affairs Ministry spokesperson, expressed India’s resolve to “oppose terrorism in all its forms and manifestations” in a short statement Monday.

Saudi Arabia is India’s second-largest oil supplier after Iraq. India’s dependence on Saudi oil has been growing as it stops buying Iranian oil because of U.S. sanctions on Iran.

Russia and an OPEC source said on Monday there was no need for an extraordinary meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+ that has orchestrated a supply-curbing deal.

Russian Energy Minister Alexander Novak told reporters there was enough oil in commercial stockpiles to cover the shortfall.

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Sony Will Likely Raise PlayStation Prices If Chinese Tariffs Increase

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The US and China have been engaged in a trade war for months now, but the two nations have thus far managed to avoid a new round of mutual escalation. While the United States has threatened to raise tariffs on a range of Chinese goods from 10 percent to 25 percent, the Trump Administration hasn’t actually done it yet. According to Sony’s Senior General Manager of Finance Department and Corporate Planning, Naomi Matsuoka, the company may have no choice but to raise console prices in the United States if the tariffs go through.

In the quote below, the reference to “Level four” tariffs refers to the fact that this would be the fourth set of tariffs imposed by the United States in the ongoing trade dispute. These are typically referred to as “tranches” (a tranche is defined as “a portion of something, especially money”). Tranche 4 tariffs are expected to impact $ 250B worth of Chinese goods if they go into effect. Tranches 1-3 previously covered goods collectively worth $ 250B, so the 4th tranche represents a substantial expansion in terms of the number of goods to be tariffed, as well as a significant increase in the tariff amount.

Sony-Earnings

When asked about the potential impact of tariffs on Sony’s PS4SEEAMAZON_ET_135 See Amazon ET commerce business, Matsuoka responded with the following:

Well supposing hypothetically, the Level four tariffs are actually decided, so this is based on the assumption that it will take place up to the — it’d be up to the timing of that as well as the specific conditions attached. But supposing — and we are not currently assuming that, but if this is actually invoked, what will be the impact? What we are foreseeing is that in Game & Network Services, hardware business will be affected… higher tariffs on these products will actually impact distribution and employment and consumers in the United States will be a negative for the U.S. economy as such.

So our subsidiary are working with the industry associations and government associations, approaching the government where we have sent the opinion leaders to the government. And as of now, we are of course contemplating these actions based on the potential risk for Level four and for all the products affected, for instance the changing of the production sites or passing through of the prices to the market or changing the continuous sales structure.

So, we are considering risk ahead of the current actions if this happens. And once the decision is made to introduce Level four, all the contributing actions will be put to force to mitigate the negative impact.

Nintendo, Microsoft, and Sony have all previously asked the Trump Administration not to raise tariffs on consoles, noting that the machines are largely built in China and that moving their supply lines would be difficult to impossible. That may be true for some companies more than others, however, as Nintendo has already said it’s moving production of the Switch Mini to Southeast Asia to avoid potential tariff entanglements. It’s also possible that it’s easier with some product lines as opposed to others — Sony and Microsoft may have long-term production contracts on the PS4 and Xbox One that are difficult to break, or the two companies may face short-term problems with supply chains and the associated costs of setting up shop in a new location.

As for the actual trade negotiations themselves, there has been a little movement on that front. China said three days ago that it would begin larger purchases of some farm products and the US and China trade delegations met on Wednesday, July 30 for several hours. The meetings did not resolve any outstanding issues, however, and the ongoing trade war continues with “No deal in sight” according to the New York Times. The White House called the talks “constructive,” while the Chinese state news media characterized the talks as “frank, efficient, and constructive.”

This was the first formal meeting of the two sides since talks fell apart three months ago. President Trump has tweeted that there may be little chance of a trade deal before the 2020 election is complete. If the Tranche 4 tariffs actually go into effect, we may see the impact on consoles from multiple manufacturers and different product generations, depending on whether Sony, Microsoft, and Nintendo can secure a waiver. The trade talks will resume again in September.

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Report: Tariffs Could Raise Laptop, Phone Prices 22 Percent

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Ever since the Trump Administration kicked off a trade war with China, there have been questions about what kinds of impact this could have on the consumer electronics market. The Consumer Technology Association has released its own report estimating the potential impact if the Trump Administration’s latest round of tariffs on $ 300B worth of additional Chinese goods goes into effect.

Before we dive in, here’s the current state of play. The US and China seemed to be near an agreement earlier this year that would resolve the earlier rounds of the trade war when the Chinese reportedly made significant negative changes to their negotiating position (from the US perspective). The US has threatened to add a 25 percent tariff to an additional $ 300B worth of Chinese goods as a result. When combined with the tariffs already levied against Chinese goods now, the end result would be a tariff on virtually all Chinese imports, including finished computers and cell phones — two categories that had previously been excluded.

The CTA is a business trade organization and can be assumed to be generally anti-tariff — but this doesn’t mean the organization’s estimate of the short-term or long-term effects of a tariff spike is wrong. It is, however, something to be aware of as we evaluate the results.

The CTA predicts that the price of importing a smartphone from China would rise by 1.22x. China accounts for approximately 3/4 of our total smartphone imports. It is not clear if this report takes into consideration recent statements like that from Foxconn, which claims it can meet demand for US iPhones from non-Chinese sources. (The CTA report does consider the idea that manufacturers will move production into non-Chinese facilities, but does not break down what it believes individual companies will do in response to a potential $ 300M tariff).

Korea and Vietnam would benefit from increased export revenues related to stronger phone imports for US markets, but US consumers would pay $ 8.1B more for smartphones. The CTA predicts a net $ 4.5B economic loss even after calculating the benefits of the tariffs themselves.

Tablets are hit by similar metrics. Prices would rise an estimated 1.19x, leading to a 1.35x reduction in consumption. Because there’s virtually no US-based tablet production (mirroring the situation in smartphones), there would be no gain to net American manufacturing. I trust the CTA as far as these conclusions are concerned — America doesn’t build smartphones or tablets, and very few computers are actually assembled here. Tariffs can be used to boost domestic production at the expense of international trade, but not if you don’t have a domestic base to begin with.

Tablet-Laptop-Impact

Estimated impact of new tariffs on laptops and tablets.

The organization predicts broad price gains of 1.19x – 1.22x in video games, tablets, smartphones, and drones. None of the tariffs result in a net positive outcome for US manufacturers because the US doesn’t manufacture most of these products. Prices on laptops could rise by $ 150, while tablets could jump $ 50.

I suspect the real-world outcome, should these tariffs go into effect, will be more nuanced than what the CTA outlines — and may possibly be impacted by the ongoing Huawei situation as well. The United States’ efforts to strangle this Chinese company are far more unusual than saber-rattling over tariff levels, and I can’t imagine that it isn’t a major bargaining chip in the negotiations between US and Chinese officials.

My own guess is that we’ll see companies try to buffer the impact of these tariffs on some products, where they can absorb some or all of the impact, while passing them straight along to customers on products where profit margins are low and there’s no room to eat the cost. At the same time, every company with the ability to move production out of China to dodge tariffs will do so.

In the long term, this will presumably produce some ability to move back towards pricing baseline, as new production comes online. Diminished demand for Chinese-manufactured products could reduce their prices, thereby also reducing the relative size of the tariff they incur. Not everyone will be able to move production out of China, at least not right away, and so at least some of the concern about the possibility for a global trade slowdown is real.

Of course, there are other concerns to be balanced as well. One might argue that the value of a cheap 4K TV is less important than retaining the technological edge that allows US companies to continue pushing the envelope on technology as a whole. Forced technology transfers and IP theft have both been major concerns of the Trump Administration and the Obama Administration before it, but the TA has chosen to be much more aggressive in how it attempts to deal with these problems. Some have pointed out that this strategy could backfire long-term if it encourages China to divest from working with the US altogether long-term and sets the stage for the two largest economies on the planet to be at economic war with each other rather than continuing to cooperate.

There is merit in considering all of these points. Trade is a complex and multi-faceted topic. There has been a note of uncertainty in the world economy regarding these issues, and various financial institutions would clearly prefer to see them amicably resolved. The CTA’s analysis of the economic harms of tariffs should be treated with a grain of salt, but it does at least provide a window into what the results might be.

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‘You disappointed us’: Why is Canada opposing more transparency in drug prices?


This is an excerpt from Second Opinion, a weekly roundup of eclectic and under-the-radar health and medical science news emailed to subscribers every Saturday morning. If you haven’t subscribed yet, you can do that by clicking here.


Behind closed doors at the World Health Assembly (WHA) meeting in Geneva this week, health officials from around the world began hammering at the black box of secrecy surrounding the pharmaceutical industry.

As the debate in the room heated up, observers were surprised that Canada was among the countries that seemed to be trying to weaken that effort.

The fact that transparency is even on the agenda for government health officials at the WHA is evidence of the mounting international frustration over high drug prices. The meeting sets priorities for the World Health Organization (WHO), which is already grappling with the global impact of drug prices on public health.

Pharmaceutical companies have long insisted that high prices are necessary to cover research and development (R&D) costs and keep them in business.

But with increasing numbers of new drugs priced at hundreds of thousands of dollars per patient per year, some countries are demanding to see the industry’s financial data.

The WHA’s transparency resolution would demand unprecedented disclosure by drug companies about how much they spend on R&D, including the cost of clinical trials.

The resolution would also call for a system for countries to compare the true prices they pay for individual drugs. Right now, no country knows what another country is paying for the same drug. That’s because companies hold secret negotiations with individual governments, forcing officials to sign non-disclosure agreements preventing them from revealing any price discounts that they were able to negotiate.

But battle lines quickly appeared in the meeting room, with Germany, the United Kingdom, the United States and several other countries, including Canada, proposing changes to the wording that would soften the resolution and protect industry secrecy.

You guys are supposed to be the good guys, right?– James Love, of advocacy group Knowledge Ecology International

Out in the hallway, members of various health advocacy organizations posted updates about the debate on social media. At this point, they’re the only ones reporting on what’s going on as the transparency resolution undergoes various drafts. And they are surprised by what they’re hearing about Canada’s role.


Tweet from MSF Access Campaign as delegates to the WHA debated wording for the transparency resolution demanding drug companies release confidential data about R&D costs and prices. (MSF Access Campaign )

“We have pretty good intelligence about what’s going on in the room,” said James Love, of Knowledge Ecology International, a non-profit group that advocates for access to affordable drugs.

Love tweeted his dismay at Canada’s industry-friendly position.


“You disappointed us this week, Canada,” Love told CBC News. “You guys are supposed to be the good guys, right?”

Love described several examples where Canada requested changes that softened the resolution.

In one case, the original wording called on countries to “undertake measures to publicly share information on prices and reimbursement cost of medicines.” But Canada joined Germany, the U.K. and Australia to eliminate the word “public.”

And instead of “requiring” companies to release the costs and the results of human clinical trials, Canada suggested  “encourage and support,” according to a text of the changes published by Love’s group.

“People are already encouraged,” said Love, adding that the whole point is to force companies to disclose the information. “You’re just blocking the reform.”

Love pointed to Germany and the U.K. as the strongest voices against increased industry transparency.


Tweet from MSF Access Campaign reporting changes to the wording of the transparency resolution as it was discussed by WHA delegates. (MSF Access Campaign via Twitter)

Questioning R&D costs

Back in Canada, Aidan Hollis watched the debate unfold on social media. He is a professor at the University of Calgary, who researches the economics of pharmaceutical markets.

He said part of the pressure behind this international call for pharmaceutical industry transparency has been created by the growing opacity in drug pricing.

“The information is all on one side at the moment,” Hollis said. “The company knows what it spends and what it is charging every country. But the countries are not able to compare prices because they’re legally sworn to secrecy.”

“When you have this kind of asymmetry of information, basically the party with more information is the one that’s going to win.”

The debate highlights growing skepticism over industry claims that high R&D costs require high prices.

“The costs of R&D and production may bear little or no relationship to how pharmaceutical companies set prices of cancer medicines,” a recent WHO report on cancer drug prices concluded. “Instead, pharmaceutical companies set prices according to demand-side factors, with a focus on extracting the payers’ maximum willingness or ability to pay for a medicine.”

Hollis said transparency about R&D costs is needed to evaluate what is a reasonable price for drugs, adding that Canadians are willing to pay if the price is not excessive.

“The problem is when people feel like they’re being taken advantage of,” Hollis said. “When there’s basically huge excess profits that are being captured by companies, and they say, ‘Oh, we need it because of the small patient population.’ And then it turns out that actually they only need it in order to have huge profits for shareholders and huge payoffs to the executives.”

‘Follow the money’

Why are some countries blocking transparency?

“Follow the money,” Hollis said. “It seems that countries with a large pharmaceutical industry are the ones that are supporting non-transparency because that’s where the profits are.”


James Love, director of the advocacy group Knowledge Ecology International, waits outside a committee room as WHA delegates debate a resolution demanding greater transparency from the pharmaceutical industry.

What is Canada’s objective? At this point, it’s not clear. 

Health Canada confirmed in an email to CBC News that Canada “is participating in ongoing negotiations to achieve a productive resolution that recognizes the significance of price transparency as an important element of improving access to medicines.”

But the agency did not specify which changes it has asked for in the draft resolution and why it requested those changes.

“Our proposed changes are aimed at reflecting the varied legal and jurisdictional circumstances of Member States (including our own), and allowing the WHO to take more action on this issue,” the Health Canada spokesperson said.

Hollis said, “I find it perplexing on the part of Canada. We don’t really have a substantial pharmaceutical industry, and we pay really quite high prices it seems for the drugs that we’re getting.”


Professor Aidan Hollis, who researches the economics of pharmaceutical markets at the University of Calgary, is following the debate over the transparency resolution at the WHA in Geneva. (Provided by Aidan Hollis)

Meanwhile, back in Geneva, the final draft of the transparency resolution will be discussed before the session ends next Tuesday. If the resolution is adopted, it would reflect a new commitment by the WHO to demand greater transparency around drug prices.

“While WHA resolutions are not legally binding, they show member states’ commitment on the specific issue,” WHO spokesperson Tarik Jasarevic said in an email to CBC News.


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