The Tariff Buzzsaw Is Coming For Hardcore Gamers

Summary

Podcast Summary: Odd Lots – The Tariff Buzzsaw Is Coming For Hardcore Gamers

Episode Released: May 7, 2025
Hosts: Joe Weisenthal & Tracy Alloway
Guest: Steve Burke, Editor-in-Chief of Gamers Nexus

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1. Introduction to the Tariff Impact on Gaming Hardware

Joe Weisenthal kicks off the episode by highlighting a commonly overlooked perspective on tariffs. While tariffs are often discussed in terms of their macroeconomic effects—such as rising prices, inflation, and employment impacts—Weisenthal emphasizes the less-examined microeconomic consequences, particularly the potential for economic chaos within specific industries.

Tracy Alloway adds depth by pointing out the real-world dependencies exposed during the pandemic, especially in manufacturing and supply chains. She uses the computer industry as a prime example of how intricate and globally interconnected supply chains can lead to significant disruptions when tariffs are introduced.

[01:32] Joe Weisenthal: "Tracy, this has come up on the podcast, but one of the things with the tariffs is I still think for the most part, people are talking about them from like a fiscal standpoint... less about the potential for, like, actual economic chaos because something isn't getting to somewhere else that it needs to be."

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2. The Complexity of the Gaming Hardware Supply Chain

Delving into the intricacies of the gaming hardware supply chain, Alloway illustrates the global "spider web" of component sourcing. From raw materials in Africa and South America to chip manufacturing in Taiwan and packaging in Malaysia, the process involves multiple countries and specialized facilities.

Weisenthal underscores the challenges of reshoring manufacturing efforts, noting that simply moving production from China to the U.S. isn't feasible overnight due to the vast number of interconnected links in the supply chain.

[02:34] Tracy Alloway: "If you look at one of those supply chain graphics for computers, it's just a bunch of lines crisscrossing the world... it just looks like a spider web."

[03:01] Joe Weisenthal: "It's a total spider web... it's not even as simple as like, oh, let's move it from China to the US or something like that."

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3. Introducing Steve Burke and the Documentary

Weisenthal introduces Steve Burke from Gamers Nexus, commendably describing Burke's recent three-hour documentary titled "The Death of Affordable Computing and the Tariffs Impact on the World of Gaming Hardware." This in-depth exploration serves as the foundation for their discussion, offering an extraordinary journalistic perspective on how tariffs are affecting the gaming hardware industry.

[04:03] Joe Weisenthal: "Steve Burke... put out an insane documentary, three-hour long documentary on YouTube called the Death of Affordable Computing and the Tariffs impact on the World of Gaming Hardware."

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4. Real-World Responses from the Gaming Industry

Steve Burke elaborates on the industry's immediate reaction to the imposition of reciprocal tariffs. Companies are grappling with the uncertainty and logistical challenges, striving to maintain consumer trust while dealing with inevitable price increases.

[06:35] Steve Burke: "They have more room to cut margin or keep prices suppressed because there's not that middleman step."

Alloway notes that the eagerness of companies to discuss these challenges underscores the urgency and widespread impact of the tariffs within the gaming community.

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5. The Landscape of the Gaming Hardware Industry

Burke provides an overview of the gaming hardware industry, highlighting key players such as Nvidia, Intel, AMD, Asus, MSI, and Corsair. He emphasizes the significant overlap between components used in gaming PCs and those in workstations and scientific computing, illustrating the interconnectedness of various tech sectors.

[08:26] Steve Burke: "Computer gaming hardware is used in workstations and scientific computing around the world... it's a huge industry."

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6. Navigating Tariff Uncertainty and Supply Chain Challenges

The conversation delves into how companies are strategizing amidst tariff-induced uncertainty. Burke explains that while companies can endure high tariffs, the unpredictability makes planning exceedingly difficult. He outlines the lengthy production timelines—ranging from three months for wafer production to 12 months for computer case manufacturing—that complicate the ability to adapt swiftly to tariff changes.

[10:11] Tracy Alloway: "What were companies actually saying about their plans for handling this?"

[10:38] Steve Burke: "What we have to deal with is uncertainty... it's about inventory they placed orders for at the end of last year."

---

7. Disparities Between Large and Small Companies

A significant portion of the discussion focuses on the differing capacities of large versus small companies to manage tariff impacts. Burke highlights that larger companies possess greater leverage with suppliers and can relocate manufacturing to other countries like Vietnam, Thailand, and Taiwan more effectively than smaller firms. In contrast, smaller companies often lack the negotiating power and must bear the brunt of increased costs, leading to potential market exits or reduced product offerings.

[21:00] Steve Burke: "The biggest difference was the ability to move production elsewhere... it's very difficult for smaller companies."

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8. Pricing Strategies and Consumer Impact

Burke anticipates that tariffs will invariably lead to price increases for consumers. He discusses the complexities retailers like Micro Center face, where strict margin requirements force manufacturers to absorb limited cost increases, resulting in higher prices for advanced components like computer cases.

[35:54] Steve Burke: "For computer cases, the margin demand is about 25%. And so that secures the shelf space... higher price classes."

The hosts ponder the consumer response to these price hikes, considering the possibility of reduced demand and the potential for empty shelves in niche markets.

[33:44] Steve Burke: "I don't see a reason the companies would do that. They're going to have inventory where they already paid import costs."

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9. The Future of Cloud Gaming

In response to escalating costs and supply chain disruptions, Weisenthal raises the question of whether the industry might pivot towards cloud gaming as a solution. Burke explains that while cloud gaming offers certain advantages, challenges like latency, lack of customization, and consumer reluctance to relinquish ownership make it unlikely to fully replace traditional PC gaming.

[45:01] Tracy Alloway: "Why not just the whole industry, go to cloud gaming and not have to worry about the spinning disk in your home."

[45:31] Steve Burke: "Latency and control or customization... it's really fun to build a computer."

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10. Manufacturing in the United States: An Impractical Solution

The conversation shifts to the feasibility of relocating manufacturing to the U.S., the purported goal of the tariffs. Burke provides a sobering analysis of the immense logistical hurdles, including the highly specialized and interdependent nature of component manufacturing. He concludes that, barring a significant and coordinated investment into establishing domestic production lines, moving manufacturing to the U.S. remains impractical in the near term.

[41:21] Steve Burke: "The challenge... there's a factory supply chain to make one part of one computer that might go... 100 factories deep."

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11. Concluding Thoughts and Industry Outlook

Wrapping up, Burke emphasizes the industry's resilience but acknowledges that the road ahead is fraught with challenges. The anticipated price increases and reduced product variety are likely to reshape consumer behavior and potentially accelerate shifts towards alternative gaming platforms.

Alloway and Weisenthal reflect on the broader economic and political implications, noting the potential for increased scrutiny and debate within the gaming community, particularly considering the demographic overlaps with political constituencies.

[49:54] Tracy Alloway: "The question is, if things get really bad, do the retailers start to move on that?"

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Key Takeaways:

• Supply Chain Vulnerability: The gaming hardware industry's global supply chain is highly susceptible to disruptions caused by tariffs, leading to potential economic instability within the sector.

• Impact on Manufacturers: Large companies can better absorb or navigate the costs and uncertainties of tariffs, while smaller firms may struggle to survive, leading to reduced competition and innovation.

• Consumer Prices on the Rise: Tariffs are expected to drive up prices for gaming components, possibly reducing demand and leading to diminished variety in available products.

• Limited Viability of Cloud Gaming: Despite challenges, cloud gaming is unlikely to fully replace traditional PC gaming due to inherent technological and consumer preference barriers.

• Challenges of Reshoring Manufacturing: Bringing manufacturing back to the U.S. involves overcoming formidable logistical hurdles, making it an impractical solution in the short term.

• Broader Economic and Political Repercussions: The tariff-induced strain on the gaming industry may influence consumer behavior and political discourse, particularly among demographics heavily invested in gaming.

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Notable Quotes:

• Steve Burke [06:35]: "The price increases are functionally guaranteed in this industry... companies are worried about consumer perception."

• Tracy Alloway [10:11]: "It's difficult to plan when the plan potentially changes on a daily basis."

• Steve Burke [35:57]: "Some of the companies... have very rigid margin demands. They make less... to get Micro Center shelf space."

• Steve Burke [33:44]: "I don't see a reason the companies would do that... they're going to have inventory where they already paid import costs."

• Steve Burke [45:31]: "Latency and control or customization... it's really fun to build a computer."

---

For more insights and detailed discussions on the interplay between tariffs and the gaming hardware industry, visit Bloomberg's Odd Lots.

Transcript

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[Joe Weisenthal]

Hello, and welcome to another episode of the Odd Lot Podcast. I'm Joe Weisenthal.

[Tracy Alloway]

And I'm Tracy Alloway.

[Joe Weisenthal]

Tracy, this has come up on the podcast, but one of the things with the tariffs is I still think for the most part, people are talking about them from like a fiscal standpoint, which is, okay, prices are gonna go up. What does that do to inflation? What does that do to sales? What does that do to employment? And less about the potential for, like, actual economic chaos because something isn't getting to somewhere else that it needs to be.

[Tracy Alloway]

You want to go more micro instead of the macro.

[Joe Weisenthal]

Yeah, okay. I'm good with that. We can talk to economists all day and they all have their estimates, et cetera, but, you know, there's a limit.

[Tracy Alloway]

To, you know, I think we should. So one of the things we obviously learned during the pandemic is, like, real things exist in the world and they have to come from someplace where they're made and be shipped over. And if there are disruptions, then those can snowball in quite a big way. And there's one product in particular that I think kind of embodies a lot of what we talk about when it comes to tariffs and manufacturing and disruptions. And that's computers, right?

[Joe Weisenthal]

Totally.

[Tracy Alloway]

And if you look at one of those supply chain graphics for computers, it's just a bunch of lines crisscrossing the world, basically, like the raw materials coming from Africa or South America going over to China and then chips being made in Taiwan and then all of those components heading over to the US where they're put together. It is extremely complex. And again, you look at it on a map, it just looks like a spider web.

[Joe Weisenthal]

It's a total spider web. Because then the chips get made and then they go to Malaysia for packaging and then they go back to somewhere else.

[Tracy Alloway]

No, I skipped a bunch of stuff.

[Joe Weisenthal]

I think a lot of people like this idea of reshoring more tech, and that's obvious. We saw it during the Biden administration, various efforts on chips, et cetera. But it certainly can't be done overnight. Certainly. And you know, again, because as you say, it's this such intense spider web, you know, it's not even as simple as like, oh, let's move it from China to the US or something like that. It's just so many different links and parts of what's assembly and packaging and components and all that, et cetera, that you're gonna announce a new set of tariffs one day and then an industry will just like digest those tariffs and.

[Tracy Alloway]

Then, you know, open up a US factory the next day or put a.

[Joe Weisenthal]

Little markup on it. It's like, okay, you know, whatever. Here's the tariff rate. It's 25%, you know, add 25% to what we sell, to the selling price. Like, the idea that it could be that simple is kind of unrealistic.

[Tracy Alloway]

We should talk about it. Let's get granular.

[Joe Weisenthal]

Okay, so I am very excited. We are going to be speaking with Steve Burke. He is the editor in chief of a publication, YouTube channel, et cetera, called Gamers Nexus. They do a lot of technical coverage of computer hardware, et cetera, which is a world that I basically know nothing about. I don't know much about gaming. I know that gamers, they buy their own chairs and they buy their own speakers and they buy decked out cooling towers so that they could play super high speed. But I really don't know much about it. But Steve and his team at Gamers Nexus, about a week ago, actually two weeks ago, I think it was April 14th, put out an insane documentary, three hour long documentary on YouTube called the Death of Affordable Computing and the Tariffs impact on the World of Gaming Hardware. It's a truly extraordinary piece of journalism and we wanted to talk to the creator behind it and what he did and what he learned. So, Steve Burke, thank you so much for coming on Odd lots.

[Steve Burke]

Oh, thanks for having me. Yeah, I'm excited when Tracy and I.

[Joe Weisenthal]

Do an episode of the podcast, we talk about tariffs. We're worried that it's gonna be out of date and irrelevant by the very next day. And that's just like a 40 minute conversation sometimes with like one economist. Just tell us, how did you quickly, within basically 12 days of, quote, Liberation Day, unquote, put together? And what did you put together? This three hour documentary about this world of computer hardware, Gaming hardware. What was this project?

[Steve Burke]

It was fun. I mean, it was born from chaos. And so for us, the moment we pulled the trigger on it was when the, I'll use the formal name, the reciprocal tariffs, as they're called, were put in place. And so basically immediately, as soon as that happened, I called a bunch of companies I've worked with over the last 16 years and everybody was ready to go on record, which is very rare, as I'm sure you all know. And we booked the flights for 12 hours from that moment, got on the plane without a return flight and just went out and started talking to people. So it was the underlying concern of this will all be out of date was definitely there. Our approach to that was if we tackle this story in a way where it's partly about that, if it's about the uncertainty and about the story of getting the story that resolves some of those concerns, because then what you're capturing at least is the sort of real feelings and the real decision making that these companies are doing at any given moment.

[Tracy Alloway]

Yeah. And at the very least, people will learn about the supply chain of PCs. So you always have that aspect of it. It seemed like people. And again, you spoke to dozens of companies here, but it seemed like people really wanted to talk about all of this. And in fact, I think you got some, like, competitors all together in a room to have a conversation about how they were all thinking and dealing with potential tariffs.

[Steve Burke]

That's right.

[Tracy Alloway]

People want to come on and talk about this, which really highlights the urgency here.

[Steve Burke]

Yeah, the biggest challenge that a lot of them are facing is I think they're concerned about what the consumer perception will be as prices go up or as stock dries out. There's good reason for that. Consumers. Absolutely. Our number one coverage angle is cynicism. It's being really critical of what the companies are saying at any given point. This was an interesting scenario, though, where the price increases are functionally guaranteed in this industry. I think what the companies were worried about is if we're not transparent right now, when we have this opportunity, then people won't necessarily believe us when we explain why the Prices went up. Consumers, to be clear, should still remain cynical to a healthy degree, but should also be aware that there are real world impact from these decisions that are much bigger than any of the companies.

[Joe Weisenthal]

No, that actually makes a ton of sense. Why it would be strategic for these companies to talk about the real impact so that when they raise the price of whatever that people understand why, but actually talk about this. Setting aside the tariffs, what is this industry? Talk to us about the existing gamer hardware industry that you set out to describe in this documentary.

[Steve Burke]

Oh, sure.

[Joe Weisenthal]

Who are these players and like, where do they sit and you know, what do they sell, what kind of products and what price, you know, give us an overview of it.

[Steve Burke]

Yeah, so I think the most important thing for anyone who doesn't pay close attention to it is to be aware that computer gaming hardware is used in workstations and scientific computing around the world. So companies that everyone in your audience would already be aware of, like Nvidia, intel, amd, so forth, all the stuff they make for scientific computing and AI and data center, a lot of that stuff also exists in some capacity in gaming. And it's potentially the same supply as in the same wafer supply, if it's silicon or shares at least the architecture of whatever that generation of product is using. And so there's a lot of crossover. And what that means is that these multiple technology industries all sort of prop each other up. You get economies of scale across them because if you're making the wafer that can be used in a data center card and can also be used in a gaming card, the company has some more strategic levers to pull for where do they want this particular chip to go? Which market? Has demand, has one dried up? They can move that supply over to something else and mark it up more. If it has good yield, it's a huge industry, then as far as gaming, I don't have the exact numbers off the top of my head anymore. But not too long ago we received a press briefing from one of the big three, Intel, Nvidia or amd, I don't remember which. But talk about the sort of worldwide gaming audience, PC gaming, depending on who you look at, it's anywhere in the very high hundreds of millions to the low billions of individuals who do some form of PC gaming. So it's a huge industry.

[Tracy Alloway]

So Joe's first question was about all the uncertainty over the tariffs themselves and the fact that we don't know what's going to happen tomorrow. Maybe there's another announcement and then maybe the day after there's some backtracking on. Seems really difficult to plan for tariffs coming in when you don't even know what exactly they're going to look like or when they might actually be phased in. What were companies actually saying about their plans for handling this?

[Steve Burke]

So far the plans are interesting. The number one thing they were telling us is that it's difficult to plan when the plan potentially changes on a daily basis. A number of the companies we spoke with, including an Austin, Texas based repair shop run by a guy named Louis Rossman, who's well known for Right to Repair Corsair, which is a huge publicly traded company. So you have this huge range. And generally speaking, the message we received was we can deal with a high tariff. What we can't deal with is uncertainty. So I don't know if the timelines are maybe interesting for people, but just to give an idea for things, without even getting into the discussion of where is the thing made, the question of how long does it take to make the thing is maybe kind of colors where their strategic decision making is coming from. So a silicon wafer takes maybe about three months to produce, assuming they don't run a hot lot. And so that's just to kind of make the wafer. It might be an 8 or a 12 inch wafer that then contains all of the silicon that eventually goes into a computer. So a wafer is just a disk, right? Looks like a CD basically. And they pattern the silicon on it in a fab. So intel has fabs, they're building some in the US as an example, and they then dice that, they send it out to packaging to test to eventually turn into a finished CPU or GPU that goes on a board and gets put in a computer just to make the wafer. It's about three months. So when you're making decisions that involve macroeconomics, I'm not an expert on that part of it, but you could imagine that it would be very difficult to plan how many of these things you might need. And that's just one part. The computer cases are typically 12 to 18 months, counting the design stage to get through mass production. The actual mass production part of it, they might order about four to maybe six months in advance of when they need the parts, depending on where Chinese New Year falls in that window. And so these types of numbers I think probably give a better indication as to why it's so difficult to project because the decisions they're making now are based off of inventory they placed orders for at the end of last year.

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[Joe Weisenthal]

You know I've never been a PC gamer or really a gamer of any sort. When I think about computers, you know I have a Mac, some laptop, I forget which one and I run my Bloomberg terminal on a computer made by Hewlett Packard and I think I have a webcam probably made by Logitech. When we're talking about the world of the hardware that you cover, what is the constellation look like of different players and what the role that they play because yeah again I'm familiar with intel, amd, Nvidia and some of the popular consumer facing names. But who are the big names and what do they do that a hardcore PC gamer would be thinking about?

[Steve Burke]

Yeah, there's a ton of them. So Asus you've probably heard of, does that sound familiar?

[Joe Weisenthal]

I think so, yeah. Yeah, yeah.

[Steve Burke]

So there's companies like Asus as an example which is one of the larger ones and they do just about everything. So they'll assemble computers, they also make motherboards. There's some scare quotes around that make I'll maybe come back to. And they make video cards, all this sort of type of thing. Laptops, MSI is another one. Corsair is huge. So these three I've just named, they're all massive in the space. They're billion dollar companies. You also have hundreds of smaller ones. So just to rattle off a few. But Cooler Master, Height Crucial is actually large. They're owned by Micron and you get into peripherals like LG is probably well known but then some of their competitors are probably less known in the space. So to list off a couple internal component manufacturers just for cooling alone, you have companies named ThermalRight, Thermaltake, there's Cooler Master, there's a company called Be Quiet, Deepcool which is no longer allowed to be sold in the US which is a different interesting story. Noctua is another huge one. So they're all very important. But by and large the way people know about them, if at all is because those parts that these companies make are put in the pre built machines from a company like cyberpower, I Power, Dell, hp, got it. And actually there's especially relating to the tariffs. There's something really interesting that I didn't put in that video when I was thinking about it. So factory relationships are an interesting web in this industry where a lot of the factories, they're not owned by the manufacturers. So when we talk about a brand like height, so height makes computer cases, coolers, keyboards, they don't actually own the factories but they work with them. And so there's contract manufacturing, which is true in most industries. But what's interesting in this one is those contract factories often are self branded manufacturers as well. So they're competitors of their own customers. A great example of this would be Deepcool. Did you ever hear about Deepcool?

[Joe Weisenthal]

I don't think so.

[Steve Burke]

Okay, so long story short, deepcool got banned from the US and that happened last year. But there's still a good example for this. Deepcool owns factories in China, they do contract manufacturing and they also are a self branded company in the US they're no longer sold but they were pretty big here. Deepcool also, I haven't stated this publicly but it's known. I've been in their factory, we've done videos. But what I haven't said publicly is that they make products for a company called Be Quiet, which is a German based manufacturer. They design cooling components and cases and things like that. And so some of their products in the past were made by DeepCool. DeepCool is a competitor to Be Quiet. So these two companies that one sources from the other, but they fight each other in the marketplace. And to be clear, today I'm not sure if Be Quiet still uses Deepcool because of the US ban, but that's not important for this. What's important is that where we have these tariffs coming into play, the factories that are supplying their customers, I think the read I'm getting is that they have more room to cut margin or keep prices suppressed because there's not that middleman step. So I think you're going to see this really interesting thing happen where some of these companies we spoke to, including Cooler Master in the documentary Cooler Master is bringing in 4,000 pallets of computer hardware goods, which is an absurd amount of stuff. And if they bring those in, as other companies are kind of scared away from it, there's going to be a sort of a vacuum forming in the market. And depending on consumer confidence and purchasing, they either end up filling that void where people can't get other components, or if there's a price war later because there's too much stuff that people brought in, then the companies that are the factories I think would have more room to fight on price.

[Joe Weisenthal]

By the way, Tracy, so it looks like Deepcool, it's a Beijing based company and they got banned from the US for the business dealing, various business dealings in Russia. So just a little context there.

[Tracy Alloway]

Thank you. Thank you, Joe, for the context. Actually, this reminds me. So one thing I wanted to ask is did you observe, I guess, any differences between the larger companies that you spoke to and the smaller companies? Because I imagine just on the factories point, the big guys probably have like solid relationships with their manufacturers and they probably have some ability to set prices or negotiate prices with suppliers, whereas the little guys, maybe they don't have, you know, as much room or as much market power to, to try to negotiate on prices. Was there much difference between the big and the small here?

[Steve Burke]

Oh, yeah, yeah. The biggest difference was the ability to move production elsewhere. Some of these companies are moving production to Vietnam, Thailand and other countries, mostly in Asia. What we're seeing right now is that the largest of the companies that either can build their own factory or more likely just have a lot of leverage with their suppliers. Maybe they're the biggest customer of the factory. They've been encouraging either existing factories that they work with to open in other countries or they've been going to factories in those other countries. Specifically in this industry. Vietnam, Thailand, Malaysia, Singapore and Taiwan are all pretty well tooled up. They already have factories. They might be able to absorb some of the excess spilling out of China if companies are trying to move their production. What wasn't on the list from anybody that I spoke to was the us so not one of them said they're going to try and build a factory in the us but what was interesting is that even those which can successfully move manufacturing out of China and to say Vietnam indicated an expected 30 to 35% increase in their cost just from the inefficiency, meaning that the lack of skilled manufacturing engineers and the lack of pipeline maturity and the lack of supply chain in that area will add overhead. And that's before potential tariffs on those countries. So the small companies, they don't have the negotiating power. It's very difficult to get a factory to make a highly complicated commodity product like a computer case with all these special bends and LCD panels and specially crafted fans and things like that. It's hard to get a factory to do already. But to then try and do it in a country where there isn't necessarily the existing know how to do it or the existing tooling to do it is basically an impossible ask for a smaller company where they just don't have the leverage, they don't have anything to offer versus a large company.

[Joe Weisenthal]

I have to imagine also that like a large company presumably has customers outside of the US and so many of them, probably to some extent large swathes of their business might not be affected by tariffs. Whereas a small specifically US based company, that's the whole thing.

[Steve Burke]

Yeah, and that's an excellent point because one of the things we ran into, you're talking about competitors being in the room in the video we shot. Yeah. So one of them, there's two companies, there's Cyberpower and IBuyPower. They're both in Southern California and they're actually basically on the same street. Despite both having power in the name, they are not related and they both started around the same time in the late 90s. But one of them remained basically entirely focused on the U.S. and that Cyberpower PC, the other one, iBuyPower, although their pre built PCs are mostly focused on the U.S. they own a brand that's called height, which makes computer cases. And so this brand, because it designs other components, it's successfully been able to get into other markets worldwide. This is a story that's true for a lot of companies in the industry. What they were telling us, they thought was really interesting was they're in this position where they don't need to ship into the US anymore. And in fact, they decided not to. The reason for that was the cost is too high, so it made more sense for them to ship the goods elsewhere. So it might hit the port in la, but they might instruct the forwarder to keep it on the vessel and send it around again somewhere else. So what they're doing right now is actually the product director in that video, we spoke with Rob Teller. He flew out to some other countries and started trying to establish relationships to build the brand and retailers outside of the us. Whereas cyberpower, coming back to them, they really only sell to the US, but they also assemble 100% of their computers in the US so they kind of get screwed in a way where they don't have these external markets like you're talking about, and they assemble it all here, but they don't make the stuff that they put in the computer, so they don't really have control over where it comes from. So getting back to the company size disparity, you can wish as much as you want that it comes from a country with a lower tariff or maybe even comes from the same country you're in, but if you don't make it, you don't really have any control over that.

[Tracy Alloway]

Yeah. And of course, there's an irony that the company which actually assembles stuff in the US is getting punished more than.

[Steve Burke]

Right.

[Tracy Alloway]

More than some other companies. There's another business that I wanted to ask you about specifically, and it is a logistics company that people use to actually, you know, transport stuff. It's called Straightforwarding, which is a great name.

[Steve Burke]

Yeah.

[Tracy Alloway]

For like a mail company. But what are they seeing right now in terms of actual shipping volumes?

[Steve Burke]

So when we were talking to them, it would have been price second week of April, I think. And what they were starting to see is that customers were indicating concern of the tariff. So this, just to put into perspective, the time I spoke to them, it was one day before the exemptions were announced, and therefore two days before the exemptions were kind of unannounced.

[Joe Weisenthal]

I remember that weekend.

[Steve Burke]

Yeah, yeah, yeah, yeah. And then it was a day or two after the most recent round of tariffs. And so at that time, the highest general tariff of Course it's different depending on the classification of the goods. The highest general, I think they quoted at 170% depending on how you count the previous administration. So what they were seeing was a lot of customer. I mean he just confirmed panic was the word I used and he confirmed that word where their customers were panicked about the pricing and about the uncertainty of what's the tariff going to be and if it goes away, can we get a refund? As far as shipment volume, in the time since talking to them, there's been a reduction of volume into the port in LA in particular. I think I actually saw a Bloomberg report about that. So you're probably more informed than I am on the specifics of it. But I think I read there was a year over year reduction anticipated for next week. Correct me if I'm wrong, I think something like 35%. Does that sound right?

[Tracy Alloway]

It sounds possible for sure.

[Steve Burke]

Yeah, I think that's the number I read this morning. Anyway, what they're seeing is potential reduction in import, which means reduction need for people who do that job and you know, couriers, anyone in that whole chain. Warehousing. There's a ton of warehousing in city of Industry in California and they're going to be impacted for sure.

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[Joe Weisenthal]

Stepping back, even setting aside the tariffs, what are gamers looking for when they buy? Whether it's, let's say, a tower, like, you know, I know there's some part of its design and then cooling, I imagine, sort of keeps it alive and healthy for high quality cooling keeps it alive and then there's purely, you know, high performant gear for the best gaming experience. What does your viewer, what do they want and what are they benchmarking? Various options against each other. On what specs?

[Steve Burke]

Sure, yeah. So our viewers tend to build their own computers. So you call it diy, right? Do it yourself. PC building. And for anyone who hasn't done it, it's really fun. It's pretty easy. It's like putting together Legos, except with way fewer pieces. But typically they shop first based. You set your budget, you have an idea of what you might want to spend. The first two components people are pricing out are normally the CPU and the gpu. Those drive the performance of the computer. So a lot of people in our audience will work on the same computer. They game on. So those users might be using something like Adobe Audition, which I just learned you all use for this podcast, or Adobe Premiere or Photoshop. And so like just these three Adobe solutions alone, depending on which one it is, they can be very CPU or very GPU intensive. And the same is true for gaming. So people tend to spec out the GPU and the CPU first. Something like cooling, I guess, to name the components. There's cooling for the cpu, there's a case, power supply, motherboard, ram, and typically a solid state storage device or an ssd. And so these are the core components, the ones that are more commodities would include the case, potentially the cooling, where what people are starting to go for if they have a little more budget is some kind of looks, focus. I mean, you can make computers look really cool these days. And so there's a lot of that too. It's really not that different in concept from car customization, where there's people who want performance and there's people who want fashion and then there's people who want both and there's the ones who spend the most money on it. But yeah, generally speaking, what they're looking for is a high frame Rate to make the gaming experience feel fluid. They want to be able to render the graphics at the highest quality settings with the most polygons and geometry in the graphics. And if they do work on the side, then they're trying to balance the parts within the system. Meaning they want to evenly distribute the money in a way that optimizes for what each application wants so that they can run those outside applications that might be core intensive versus, say, memory intensive or something.

[Tracy Alloway]

Joe, do you remember that old show Pimp My Ride?

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

Where they did makeovers of cars, we need to pimp my computer kind of thing, where they.

[Joe Weisenthal]

I'm surprised that doesn't exist.

[Tracy Alloway]

Yeah, I would actually watch that.

[Joe Weisenthal]

You would watch that, wouldn't you? Yeah, I could see you watching it.

[Steve Burke]

There is another YouTuber in the space, Jay's2cents, who basically did that for Terry Crews, actually. As in the actor.

[Joe Weisenthal]

Hmm.

[Steve Burke]

Yeah, he built him.

[Joe Weisenthal]

I'm gonna look that up.

[Steve Burke]

Yeah, okay. He built him a gaming PC.

[Tracy Alloway]

Very cool. Talk to us a little bit more about pricing because it sounds like everyone agrees that the tariffs are going to be. The cost is going to be borne by the American consumer, and so prices are gonna have to come up. But also when we're talking about tariffs that are Almost, you know, 200% in some cases, it feels like that is such a significant increase that you're also going to see volumes fall and demand destruction, which normally would pull prices down. But I guess everything is just so different this time. It's kind of hard to gauge what's actually going to happen to prices and how companies are actually dealing with that.

[Steve Burke]

Yeah, I think it could pull prices down eventually. In the short term, though. I mean, if their options are losing hundreds of dollars per device or letting it sit on a shelf, I think right now there's not enough pain to. Well, for most of them anyway, to take that hit, just to liquidate whatever they can. So pricing, I think it's pretty safe to say it's going to go up. They've told us as much, most of these companies. I think what we're going to see happen is an initial increase in price for the companies that are still bringing products to the US because not all of them are. And as the tariffs change, I mean, if they come down. This is a personal opinion, but I don't think the prices are going to come down in step with a tariffs reduction, at least not without some kind of really severe market force such as people just stop buying stuff, because I just don't see a reason the companies would do that. They're going to have inventory where they already paid import costs. Maybe they can get a government refund, maybe they can't. They are worried about the decrease in the value of their money. And they may also just feel like they need to shore up more profit to be a little safer. I really don't see pricing coming down anytime soon unless there's zero demand left and they get desperate. But in terms of increases, it's not linear. So this is pretty interesting where one of the things I learned talking to the companies was about the retail side. I knew nothing about how this worked before and retailers. So one of the biggest ones in the US is Micro center. And they are like a highly specialized Best Buy. I mean, if you do DIY PC building, they're your number one physical choice. The E tailors would be like Newegg or Amazon. And what we learned is that some of these retailers, like Micro center, have very rigid margin demands. And so for computer cases, for some of the companies we spoke to, the margin demand is about 25%. And that means these case manufacturers are often making less than just in terms of percentage or even dollar amount spent.

[Joe Weisenthal]

If they want to get Micro center shelf space.

[Steve Burke]

Correct? Yeah.

[Joe Weisenthal]

Okay.

[Steve Burke]

Yeah. So that secures the shelf space. And I think under typical conditions, I've had companies badmouth retailers to me privately before and ask us to keep it off record or not share it at all. I've never had them on camera just straight up say the retailers are making more money than us and then express their discontent at retailers being unwilling to budge on their own margin requirements. Interestingly, what they told us was that Amazon was a little more willing to have some flexibility, which maybe they're just big enough, they have enough categories where they can. It might be an opportunity for Amazon to try and soak some of that supply from these smaller retailers. But the question is, if a $360 computer case that has all these bells and whistles now has to be sold for $600 to $700, which is what the companies were telling us as an example, will a consumer actually pay for that? And when they don't, what happens at retail? Is it. You know, I've seen plenty of headlines about empty shelves. I really don't think that's just hyperbole. I think there's real chance of that, especially in niche industries like this one.

[Joe Weisenthal]

Yeah. So, you know, let's say, you know, my son isn't old enough yet, thankfully, to be a hardcore gamer, but it's probably only A matter of years because I see how much he likes screens of all sorts.

[Tracy Alloway]

I wonder where he gets that from.

[Joe Weisenthal]

Yeah, right, right. It is my fault. But let's say it's later in the year and I'm like, okay, I want to buy him a Christmas present for the gamer in your family or in anyone's family. What do you think this Christmas looks like in terms of higher prices and diminished variety of options?

[Steve Burke]

Yeah, the reduced variety is a big one because if you're consolidating your order volume, you're reducing your order volume. You might have to consolidate the SKUs. So suddenly the 1500 units of red become 1500 more units of black computer cases. That definitely would reduce, I think the choice or at least the variety like you're saying pricing. I mean if someone really as reviewers our recommendation right now to the consumer very focused on sort of consumer first. And to me it's like I wouldn't buy unless I know I really want the upgrade or need it maybe for work or just the computer's on its last legs and if I were going to buy it would probably be now. But I think the greater thing to consider there, at least in our recommendations is trying to remind people of, hey, if you're not so sure about your job prospects and you really don't need it, then maybe hold on to the money, which none of the companies want to hear us say. But I think that's probably the responsible thing to say for Christmas or holidays. Yeah, I would imagine there'll be some pain. I think the lower end. Here's where it gets interesting. The lower end components would typically be where people would be directed. In a time like that, if prices are coming up, you go for lower end. A percent increase on a cheaper product doesn't feel as bad as a percent increase on an expensive product, just by the math of it. The problem is right now there's not a lot of cheap products silicon in the gaming or the consumer space. So if you want. Right.

[Joe Weisenthal]

Why allocate silicon capacity when you could be selling to AI data centers anyway? Sorry, keep going.

[Steve Burke]

Exactly. No, I mean that's exactly right. Yeah, it's. And like intel for example, with its GPUs, they have a small GPU effort in consumer. They've been pushing. One of the people at intel stated to me in the past we should be wrapping these in dollar bills when we ship them out the door because they're fighting so much on the pricing with Nvidia and AMD that it feels like they're losing Money and they might well be. Unfortunately they are not well established yet. And they're the only ones who offer cheap ish video card for gaming. And so you're left with this price creep where all the video cards have pretty much moved up towards these higher price classes. They've cut down what you get for the dollar. There's lower memory capacity. Part of that is product segmentation where companies like Nvidia recognize. Like you said, if I have a user who wants 32 gigabytes of memory on the video card, they probably want to use it to make money. And so if I'm on video, I should make money because they're going to make money, right? So you segment that and then the consumer is left with things that are less viable, they have less longevity, so they won't age as well with the gaming graphics improvements and causes kind of a circle of buying hardware sooner because it's gotten too unobtainable to go up to the high end where you might have that better longevity.

[Tracy Alloway]

So I just have one last question. Obviously the stated goal of the tariffs is to move manufacturing production to the states. Did any of the companies that you actually spoke to talk about this as a possibility? And what are the sticking points other than the time frame of building a new factory? What are the sticking points or the challenges in actually making more stuff in.

[Steve Burke]

The U.S. almost all of them indicated that this is not a possibility anytime in the near future. There's one exception which is a company we spoke to called Protocase. And Protocase is part of another company that makes enterprise and server equipment called 45 drives. And so these companies, they are headquartered in Canada and For the last 12 years, the owner was telling us, or the co founder I should say, they were looking at opening a plant somewhere in the US for assembly and for some light manufacturing. And so they've done that. They're the only ones who've kind of gone that direction, but they were already going that direction. And their whole business model is speed. So if you need something, they can turn it around in a couple days versus if you need a lot of something, you might be waiting months. Everyone else basically said that it is not feasible to bring manufacturing into the US for the products that they sell. And a lot of that comes from supply chain. So the best way for me to contextualize it is a motherboard. A motherboard is roughly a one foot by one foot board that goes right in the middle of your computer. The CPU sockets into it, the GPU sockets into it, the RAM goes in it you can think of it kind of like the brainstem of the computer. And a high end motherboard for a workstation or whatever high end gaming PC has somewhere between 1800 and 3000 individual components on it. So they get really small. Yeah. And so these components come from all over the place. So a motherboard factory uses a surface mount technology line, it's called an SMT line, to mostly automatically pick and place components onto the board. And it's pulling those from normally reels like drums, almost like a film reel of components. And those reels of components come from other companies, which come from other companies. And so you have a factory supply chain to make one part of one computer that might go, depending on how you want to count it, 100 factories deep. Or if you look at just sort of the big components after they've come from raw materials and things like this, you're still at maybe 10 to 30 factories. And that's just to make one part of one computer.

[Joe Weisenthal]

Incredible.

[Steve Burke]

And so the challenge that all the companies enumerated to us was you can bring the SMT line to the US and you can stamp these components down on it. You're going to buy those components from somewhere else and it's going to be Vietnam, Thailand, China, mostly China, Taiwan, so forth. But if there's tariffs on those parts, which are about as they're not literal raw materials, but they're pretty close in the computer world, then you still face all the same challenges as before. So those would also have to come over to America. And then now you're bringing in capacitor supply or metal supply or rare earth metals. And pretty much no matter where you look, you're bringing something in from someone. And so I think it's just the challenge of what was stated to us was there needs to be a plan with kind of hard timelines of here's our target, to move this industry's manufacturing by this date. And just flipping a switch, it just seems to cause too much chaos there. People would be timid to invest in a factory in the US that might take several years to build if they're not sure what's going to change tomorrow.

[Joe Weisenthal]

I just have one last question too, and I sort of have this nagging feeling that I might be stepping into a gamer landmine, but I literally don't.

[Tracy Alloway]

Know at all do it, Joe.

[Joe Weisenthal]

Why not just, you know, all this stuff? It feels the idea of having to like worry so much about the specs on your own computer sort of feels retro. I just do every, all my work In a browser. Why not just like the whole industry, go to cloud gaming and not have to worry about the spinning disk in your home.

[Steve Burke]

Oh, you're hurting me. Yeah.

[Joe Weisenthal]

In one minute or less. No, let's. Could there just be a shift to cloud gaming? I don't know say about that. What are the constraints? Why not a Netflix for gaming or whatever?

[Steve Burke]

Sure. The shortest possible answer I have is latency and control or customization. So as quickly as possible. Latency is the responsiveness between your input and what happens on the screen. And going through networking infrastructure, you might be at 2 times longer, 3 times longer latency, meaning that when you push the button on the controller or the keyboard, you don't see that action until a perceptibly long difference versus if you played it locally. The other issue is the concern on the consumer side of you own nothing. Right. And the more you own nothing, I think the more uncomfortable certainly I. And I think most of our audience gets with the product in general. And then the last concern is just that customization, where it may be somewhat equivalent, would be why, if you can rent a car for about the same price as buying a car, why would you buy a car? There's a lot of reasons. One is external forces. You have no control over that car. What if they want it back? What do you do? Right? You like the car, they take it back. Or in the gaming world, if they just decide this game is not going to be available anymore, kill the license, it's gone. And you're talking about something that people have a very deep emotional connection with. It can just be snapped out of existence. So plus the customization, I mean, it's really fun to build a computer. So that's my quick version.

[Joe Weisenthal]

Our producer Dash says, I asked a noob question there. Steve Burke Gamers, Nexus it's really phenomenal work that you put together. I really would encourage all the listeners to go check it out. And thank you so much for coming on Oddlove.

[Steve Burke]

Thank you. It was.

[Joe Weisenthal]

Tracy. I think there was one point in my life maybe like, I don't know, 2010, I'd gotten my idea I should build a computer. I never did it.

[Tracy Alloway]

Oh, I thought you were gonna say you should get into gaming.

[Joe Weisenthal]

No, I should not get into gaming. I thought it might be fun and they're like, I don't know. But it does seem. It does seem cool to build your.

[Tracy Alloway]

Own computer, I imagine. Yes.

[Joe Weisenthal]

Thing is, all I do is tweet and email and I really cannot justify.

[Tracy Alloway]

Like, you want to get your hands.

[Joe Weisenthal]

Dirty No, I do kind of. It seems cool, but I can't really justify it because I don't do anything that's particularly computing intensive.

[Tracy Alloway]

All right, well, let me know if you decide to. You could do like a pie or something like that. There's so many interesting things to actually pull out of that episode. But I guess the big one for me is the question of where does the pain of tariffs actually land? And I know everyone's expecting higher prices at this point for consumers, but there are still all these additional layers where you could see companies or other entities kind of absorb the costs. And so it was really interesting when Steve was talking about micro center and margin demand of 25% and the frustration of people that actually make things that the retailers aren't necessarily budging on the margins that they want to see at their stores. That's really interesting. And I guess the question is, if things get really bad, do the retailers start to move on that?

[Joe Weisenthal]

There's so many, so many interesting micro and macroeconomic stories that you could take out of this one industry, including who bears the pain, who eats the margin. The question you asked about the difference between large and small companies and the risks that they can take, Obviously the web of supply chain, just extraordinary complex. And the uncertainty and how even one piece of moving manufacturing back would require multiple different kinds of factories. I just thought that was incredibly interesting. It's also sort of interesting, this industry. I think part of the reason I was curious, one of the stories in politics, of course, is the incredible success or the surprising success that Trump had with sort of young men in particular. And so when I think about an industry in which my guess is that many of the people in this space have drifted more towards that side of the aisle over the last several years, and then now, you know, I don't know for sure how the gamer audience voted, but I suspect that there's a pretty solid Trump contingent in there. And so this is just gonna be, you know, it's gonna be interesting to see the reaction.

[Tracy Alloway]

I imagine there's gonna be a lot of coverage of this issue in the gaming community, so we'll have to watch out for it. Maybe have Steve back on the show.

[Joe Weisenthal]

Absolutely.

[Tracy Alloway]

Shall we leave it there for now?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Weisenthal]

And I'm Jill Wiesenthal. You can follow me. Hestalwart. Follow Steve Burke's coverage at Gamers Nexus. Follow our producers, Carmen Rodriguez. At Kermanrmandasho, Bennett at Dashbot, and Kell Brooks at Kellbrooks. For more Odd Lots content, go to bloomberg.com oddlots we have a daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord where we even have a gaming sub channel. That's Discord Ggodlots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you like it when we talk about computer games and the supply chain of PCs, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcast and follow the instructions there. Thanks for listening.

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