Gadgetory

you may have heard about the new tariffs impacting PC component prices by now with increases upwards of 10 percent to 25 percent by January 1st we've spoken with several companies and individuals in the industry to better understand how PC builders can expect prices to increase on our list of those providing insight as EVGA CEO Andrew Hahn NZXT silverstone and alpha cool among off-record insight from others in the very least North American buyers can anticipate price increases as a result of the current administration's new tariffs it's just a question of how much of that price is passed on to the consumer before that this video is brought to you by power colors red dragon Vega 56 which is now below MSRP on new I got $380 with a rebate from the 28th to the 30th of September when we first tested Vega 56 we found the card competitive and fun for tweaking and modding and now that it's back in stock it's worth the consideration Vega 56 also comes with three free games including Assassin's Creed Odyssey star control and a strange Brigade while supplies last learn more at the link below here's the TLDR of the tariffs everything imported from China that is a computer component for the most part will be affected so that's almost everything you buy within this specific industry there are a few exceptions we'll go through those but most of the things you buy if you were in North America for sure will be affected if you're not in North America there could still be an outward reaching effect so even if you're in Europe even though these tariffs obviously don't apply to you since they are u.s. tariffs imposed on Chinese imports even if you're in Europe you might feel some affect of this because companies are going to be trying to stabilize their revenue sources as they are compensating for potential downtrend and overall sales especially in the US market so the tariffs were pushed into law by the US federal government with the first 10% tariff taking effect October 1st of this year and then after that there's another it's a total 25% tariff so there's another 15% tariff that will be imposed by January 1st of 2019 so total impacts will be about 25 percent increase in cost to bring the goods into the US ports or North American ports into the poor and then distributed to Canada for example so that's that's a total impact 10% by October 1st that's the most immediate and we'll be facing that within a couple of days here we're looking at over a 25 percent increase in product and port prices by next year which we passed on to consumers the full list of tariffs includes power supplies motherboards video cards complete system builds sometimes SLI and NV link bridges SSDs mouse pads mice keyboards and mice only if bundled together but not if sold separately for the keyboards that is CPU coolers are affected cases chairs and more the tariffs cost is applied as goods come into port technically it is the company that must pay the tariffs but those costs will be passed along to consumers this isn't because the companies are evil it's because as a reminder a lot of the margin in this industry is very low so some video cards we've worked with recently have profit margins of under 3% like 2.8 for example on one of the cards we recently benchmarked there's an average of around 4% very few cards reach even an 8% margin the retailers often profit more than the video card makers in terms of strict margin and all this means that it's impossible for the manufacturers to bear the burden of a tariff increase without consumers also paying more for the products they buy the most heavily impacted companies are those which make electrical components that come from China so that would include all of them even case manufacturers are getting hit here because aluminum and steel are included on the list of affected items and of course some of those cases do include power supplies or other electronics very few manufacturers in this industry make things outside of China and it's typically Taiwan when it's made elsewhere Taiwan isn't tooled up with enough factories to allow for a mass switchover of manufacturing but it does have a few low capacity factories like gigabytes motherboard and video card factory a few case factories like in wins and Lian Lee's but not much more than that even still all of these companies make more Goods in China than not and will still be affected one off-record industry source told us that some companies will likely offset prices by greater than the 25% import overhead as the time cost to money carries a value as well companies now won't be able to invest as much their money elsewhere like ordering more products because they needs a free up budget to pay the extra import fees or the tariffs this has a knock-on effect where the companies lose spending power and will charge consumers more to try and make up for it the need-to-know information is as follows October 1st is when you're gonna see the first 10% tariff impact but whether or not it affects you depends on warehouse inventory we'll talk about that in a moment there's an additional 15% January 1st and then the companies are currently trying to stockpile inventory in warehouses as much as they can because the tariffs the extra money being paid on these imports takes effect when it gets to ports and that's October 1st year later for the first 10% so anything they can bring them before October 1st and this has been going on for the last few months now as they've prepared is not going to be affected by this increase and depending on the company hopefully most of them will not be passing along the tariffs on products that they imported before it took effect but we'll see how that plays out so tell me is with larger warehouses in the US will fare better during this cycle EVGA has a pretty small warehouse in the US as an example gigabyte has limited warehouse space as well but from what we understand a decent amount still so having more warehouse space bringing more stuff in before the tariffs take effect will benefit the consumer because you shouldn't have to pay that extra cost because they didn't have to pay that extra cost unless of course they all decide the profits here off of it anyway but we really have no way of validating that so inventory that makes it in before the tariff hike will dodge the cost increase to the manufacturers and hopefully consumers and just for perspective as to how wide reaching this is if you think it's not affecting everyone actually the cost increase also applies to shipping costs to increases here because as manufacturers are panicking and trying to get more of their stuff out of China and into the US before the tariff hike shipping costs are going up and we know this firsthand so even outside of the tariff impacts on cost of goods for goods which are not affected by the tariffs their shipping cost is still going up our own mod mats for example the ones we saw we saw on the store the one I have on the table here shipping cost of these went up by 30% just because of the limited space on planes on boats what whatever shipping mode you have even the trucks that go from the factories to the plains it's limited so that's driving the cost up to ship things even for things which are not directly affected by the tariff a 30% increase on our shipping rates eats margin a lot and you can bet that this also applies to computer part manufacturers we've decided to keep our prices on the product the same but that does mean we're profiting less as a result and that's on a product with already low margin some companies can't afford to do this if they're making things like video cards and power supplies because the margins are low enough that the increase in cost would destroy the margin and leave them losing money we spoke with a few of our international and shipping logistics experts on these increases and one of them provided the following comment quote the air and ocean rates as I advised are increasing due to the providers polling space out of both air and ocean airlines have reduced their flights and steamship lines that have reduced their capacities and allocations out of China imports from China continue to be strong and are increasing however with the next round of tariffs imports will sharply start to decrease Andrew Hahn CEO of EVGA told gamers Nexus the following thanks for reaching out and being proactive to educate the gaming community about the upcoming tariff and how it could impact gaming components with the previous imposing tariffs on China made goods so far the impact has been minimal to EVGA based on list at number one effective July 6th and list number two effective the 23rd of August however list number three will have a significant impact to the GPU power supply and motherboard categories for EVGA with a proposed at 25% tariff since many key products are produced in China the ultimate impact to the consumers is significant to our knowledge not all manufacturers including EVGA have a sufficient capacity to produce all these products outside of China in the near term with the upcoming holiday season EVGA is trying its best to mitigate the impacts to the gaming customers NZXT provided gamers nexus to this statement unfortunately the latest round of proposed tariffs on imports from China will very likely impact on z-axis products if we cannot obtain a waiver or legally reclassify our Goods will be forced to increase our suggested retail to cover whatever tariff level is finally set currently either a 10 percent or 25 percent increase is being considered the timing for the increase would be directly tied to win the tariff goods clear US customs and move into our retail channels the price increases would affect all of our North American customers including Canada NZXT continued by saying quote everyone NZXT works very hard to deliver quality products and great service at fair prices it would be regrettable to see our prices increase to customers in North America due to changes in our federal government's trade policy if you wish to express your opinions on these policy decisions and how they are affecting you you can find your elected officials at contacting Congress org silverstone noted that all of its products have been classified as affected by the tariff and the u.s. office will have to increase prices as a result silverstone noted the followings a gamer's axis before the tariffs came into effect quote we are aware of the possible impacts the tariffs will have on our products will raise prices if our own cost is affected and will not take advantage of the circumstances to increase our profit margin alpha coul also replied to a request from comment and stated the following it seems alpha cool isn't affected by the tariffs as much as some of the other brands in the industry will be our prices on certain products will have to increase these include but are not exclusive to our hard and soft tubing our ice cam cable combs and our alpha cord sleeving this is due to them falling into categories that will have the increase implemented we don't yet know how much of an effect it will have on the pricing for the end-user we're trying to keep them as low as possible still but when a region implements an increase unfortunately it has a knock-on effect the US region is one that alpha cool is currently looking to be more active in and the tariffs are not ideal we don't think it will affect our end goal too much it will still be able to purchase our products at a reasonable price and although the prices may go up slightly we're committed to making the increases to the end-user as easy to swallow as possible we look like we're a little luckier than some of our friends in the industry and we hope that other companies are not hit so hard that it isn't viable for them to continue trading it is certainly a strange time for the industry's gigabites statement to partners noted that notebooks keyboards at memory and headsets will be unaffected at this time given existing memory price-fixing concerns is a silver lining and otherwise of bad news we don't fully understand why motherboards Paris flies and mice can be affected but laptops are somehow unaffected but it has something to do with the fact that it's a preassembled complete unit we also spoke with several the larger component manufacturers off record who didn't want to go on record with a statement like some of these other companies all of them 100% of the people we spoke with shared concerns of a 10 to 25% price increase from the tariffs and concerns of impact to consumer pricing as well so I mean that's we I can't remember a time when we've done something like this reaching out to manufacturers where when 100% of the people come back with the same answer which is that they're all concerned about it so this is real at this point alpha coal was the closest manufacturer to one that expressed that they aren't heavily impacted well that's because alpha cool doesn't trade too much in the u.s. right now they're trying to get into the US market so these tariffs will absolutely affect alpha coals ability to enter the US market and start serving a customer base here and that's unfortunate but as a company overall they do most of their sales elsewhere outside of the US so they aren't impacted quite as hard as some of the others but they're the closest to a company that is less impacted and it's still not completely unaffected so this will be bad for the industry overall it will hurt the consumers it will hurt all the companies in it including media because even just on our side you're looking at a follow-on impact of reduced advertising budget because our companies have to worry about how do they afford the tariff cost there is reduced affiliate revenue because consumers will probably be buying less and we don't really benefit from the increased price if it's also everything is getting tariffs to when it comes in and consumers buying lastest hurts everything of course so reduced interest as products become increasingly difficult to purchase as a problem and the US market even though it's actually it's it's about 40 something percent a viewership for most of the youtube channels you watch it's the largest buying market at least out of all the channels we know that use affiliate links and things like that the u.s. comprises most of the revenue the u.s. also has the highest advertising spend and terms of cost per thousand views it's got the highest affiliate revenue payouts so to lose a big chunk potentially of us-based sales of computer hardware will impact everybody including the media and if you want to get involved and are a u.s. resident your best bet of course is to vote appropriately but as NZXT said you can also go to contacting Congress org that was their recommendation to find your representatives if you don't know who they are as for manufacturing that's not leaving China anytime soon despite its old reputation for low quality try to now have some of the best facilities for manufacturing the products you buy on the planet that includes things like motherboards and video cards of course any country can have low quality as well and they do but the components you buy all of them for your computer including the ones that you like a lot maybe high end power supplies high end video cards things like that there's a company that makes stuff you like a lot there's an extremely high of a certainly high chance that at least some of the components in that product come from China if not the entire product as a whole so despite the old reputation good stuff does come out of China and it's just at the end of the day the only stuff I can really be moved elsewhere to avoid potential tariff impact is primarily going to be things like a couple of motherboards and some video cards in some cases and those will be going to Taiwan next door where some factories already exist but out of the companies we've spoken with none of them have an immediate plan to start building new factories in Taiwan because the tooling up cost of that is tremendous and the concern from the companies we've spoken with is that an administration change or a decision flip on the tariffs could mean that that effort and money would be wasted if they start twing up a factory and then the tariffs are wiped out all this stuff is reverted something like that then it's just wasted money wasted time because it takes a while to get those factories up and running so it's not like it's an instant flip over that they can do and manufacturing in the u.s. is just not even on the radar for all the companies we spoke with which is really not all that surprised and knowing what we know the entire supply chain in Asia for this stuff like if you're making a motherboard video card power supply capacitors come from Asia Japan in a lot of cases MOSFETs Asia inductors Asia so the entire supply chain is already there which means most the manufacturing will likely stay there to avoid shipping stuff back and forth a whole lot so that's where we stand right now aluminum and steel also affected by these tariffs which means cases without electronics will be affected by these tariffs and we did have notes from several case companies some of them did not want to go on record or we're not yet prepared but we'll probably get commentary from them soon enough but the case comedy silver stones in here they went on record with an answer and DX T's in here but some of the other ones did strongly support our decision to make this video because the concern I think for everyone in the industry right now that makes stuff is that consumers will see the price hikes and just feel like they're getting screwed for no reason like it's just profiteering and while that is certainly possible it's possible that a company could import a lot of stuff now and increase the prices on it anyway that surely could happen the end game is that as we get through the current inventory it's actually just going to be a straight tariff increase and that will be passed on to you so the companies we spoke with wanted to make sure that consumers understood that this isn't like the RAM price fixing concerns or the mining price higher prices concerns that we saw over the last year this is in fact a result of a federal government decision it will impact the u.s. almost certainly Canada and then there can be a knock-on effect as a local said to other countries and regions in the world so that about covers it we're not going to get any deeper in this it's it becomes a political topic so we're staying away from that but strictly as it affects the computer hardware industry this will change the prices in the not-so-distant future so keep an eye out for it and if you want to read more there's plenty of material out there USTR has all the documents for affected components if you want to see those as well thank you for watching as always subscribe for more you go to store dockings nexus dotnet to pick up one of our on mats which is at the same price it's always been even though we're paying 30% more for shipping at least today anyway and patreon.com slash gamers Nexus helps out where there are no tariffs applied they were watching I'll see you all next time