May 7, 2025 • 37 mins
In this episode, Ed Zitron is joined by Steve Burke of GamersNexus to talk about how tariffs are throwing the PC gaming industry into disarray, and how the era of affordable computing is coming to an end.
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The End Of Affordable Computing: https://www.youtube.com/watch?v=1W_mSOS1Qts&t=2s&ab_channel=GamersNexus
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Also media coming up, Will Steve Burke of gamers Nexus
be able to help d zitron understand tariffs? Should we
treat Sam Altman's new startup like a venereal disease?
Speaker 2 (00:17):
And who is the mysterious.
Speaker 1 (00:19):
Identical man living in Kevin Russ's mirror? All this and
more on this week's Better Offline.
Speaker 3 (00:32):
Good grief.
Speaker 4 (00:45):
That's right, you're listening to Better Offline. I'm your host
ed Zititron. As a reminder, you're now able to buy
Better Offline merch. Check the episode notes for a link.
Of course, More importantly, today, I'm joined by Steve Burke,
the host of the incredible Game is Next as someone
I wanted them the shows since I started at Steve
recently put a three hour long video called the Death
of Affordable Computing, and it's the single best way of
seeing anybody explain the current tariff situation. Steve, thank you
(01:08):
for joining me.
Speaker 2 (01:09):
Oh thanks for having me.
Speaker 5 (01:10):
Yeah, I'm excited to talk more about it.
Speaker 4 (01:12):
So, is there any way you can break down in
simple language how these tariffs actually work?
Speaker 5 (01:20):
I mean, effectively the tariffs are they're effectively attacks. Right,
let's pay it on imports? So the goods come in
from any other country that's potentially tariff and the company
bringing those goods in has to pay some amount in
order to complete bringing them in, and so that then
gets passed on to somebody. Maybe they absorb some of
(01:42):
the costs, maybe they increase the price of the product.
But tariffs in general, of course not a new concept,
and it's just this particular round of them has effected
the computer hardware industry in a larger way.
Speaker 4 (01:55):
So they're paid by the people receiving the goods. So
the computer so like height or CyberPower, whomever receiving a case,
for example, would pay the tariff before they even shifted
to someone.
Speaker 2 (02:06):
Correct.
Speaker 5 (02:07):
Yeah, I mean it's the same all the way down
to the smallest companies. We spoke to Lewis Rossman as
part of that piece. He's known best for probably right
to Repair, and he's a good example where as a
small repair shop in Austin, Texas. He's got maybe six
or so employees. He personally doesn't, as he said in
the video, bring them the goods, but he buys them
(02:28):
from someone who does. So you know, then that person
would be the one importing them in paying the tariff.
Speaker 4 (02:34):
So what made you want to make this video because
you've done a good amount of PC industry stuff, but
tarift feels like a jump from you. Not an allogical
one though.
Speaker 2 (02:43):
Yeah, tariffs.
Speaker 5 (02:44):
It's a big topic and it was very challenging to
try and approach because for us, the number one reason
to get into it was just we're starting to see
the impact on computer hardware and a lot of companies
had things to say about it, so that was the
obvious reason to maybe look into it. The hesitations from
(03:05):
us initially were this is a topic that it's very
difficult to completely isolate from politics, which we try to
stay away from. But it's also important and it does
affect what we talk about every day, which is value
and pricing. But the other challenge is that this is
not something where I can claim to be an expert,
(03:28):
like global trade. You might imagine, Yeah.
Speaker 2 (03:32):
Yeah, it's a very large topic.
Speaker 5 (03:34):
But that made it interesting to us because it was
one of those like, okay, so we're closer to where
you might expect most viewers to be in terms of knowledge,
where you're just getting the information daily, with the one
exception that we might have better access to companies that
do have a lot of experience with this stuff, and
(03:55):
maybe no one person can break down global trade for us,
and we've all seen economists on TV and whatever. But
what we could get is people talking about just how
does it affect them and their company and then hopefully
with that put together a fuller picture that's a little
more maybe like a pragmatic approach to it. So that
(04:16):
was a yeah, that was the way to break it
down for us.
Speaker 4 (04:18):
So for the listeners who haven't watched the video, and
I say, this is someone who can barely make it
through a half an hour video, watch the whole bloody thing.
How what are the current effects? What are the things
happening today? To say, PC manufacturers that people might not
know about.
Speaker 5 (04:34):
It's interesting, so might not know about makes that interesting.
The ones that people do know about. I'll keep brief here,
but just days ago Microsoft moved to increase pricing of
its xboxes. Logitech has increased prices of its peripheral components
keyboards and mice and so forth. And this is something
(04:54):
we're going to see a course here.
Speaker 2 (04:56):
I was just speaking to them.
Speaker 5 (04:57):
They're about to increase the price of some of their
computer cases that we're in the process of reviewing, and
that's kind of the obvious one of that's the one
people expect. There's also and having listened to some of
your previous episodes, I think this might be a topic
you'd want to get into. But there's also some room
(05:17):
for greed, corporate greed where this is a great cover
story for them to change some prices. But then as
far as answer the question like what effects might people
not know about, I think there's there's some really interesting
ones sort of downchain in the in the supply chain,
where things like logistics and freight and shipping companies are
(05:45):
starting to have to deal with potentially reduced hours. And
so you think about the supply chain, like to get
a product from a country to another country, you know,
just to make it in say China, a motherboard might
require something like one hundred factories futality, all of them
meaning including yeah, including the metals factories. And so you've
(06:06):
got all those impacts, and then you have the freight
and the couriers, the port, the dock workers, the couriers
on the other side, the warehouse workers. Right, it's just
a huge chain, and it's really it can't be elastic.
Speaker 2 (06:20):
It's got to be pretty rigid.
Speaker 5 (06:22):
One of the interesting ones we're seeing though, is some
of the factories from some of the companies I was
just speaking with, are beginning to adjust their terms. So
factories will allow terms of payment to be potentially partially
upfront and partially on completion of order. Some of them
are starting to adjust to frontload more of the upfront
cost or all of it. And that's because they have
(06:47):
kind of gotten scared of potential order abandonment. When companies
can't afford the tariff, they abandon the container and stiff
the factory. Yeah, and so that'll have this unseen impact later.
It's going to affect the cost of money. Companies have
to borrow money a lot of times to bring this
stuff in. They have to pay more upfront.
Speaker 4 (07:05):
Oh, so I hope be borrowing more money upfront because otherwise,
exactly the way, they won't be able to afford the
orders that are now more expensive on the front end.
Speaker 5 (07:15):
Yeah, and then they pay interest for a longer period
of time that gets factored in. So it's just really
like the more you talk to people, the more there's
all these hidden consequences that pop up. And the one
thing everyone kind of drove home was. It's not to
them the tariffs themselves that are necessarily the problem. It's
sort of the way they were being rolled out where
(07:36):
it was at least for a couple of weeks. They're
nearly daily changes and unpredictable.
Speaker 4 (07:42):
I did like during the video watching as you went
from from person to person saying, Okay, right now, this
tariff is this By the end of this conversation, it
may not be. Yeah, insane way to run global trade.
You had a few examples as well where it kind
of looked like certain things would just doubling cost for
the company, that they would just be paying effectively nearly double,
(08:05):
or like if it's one hundred and twenty bucks to
buy something, they're paying one hundred bucks on top. How
is any of this sustainable?
Speaker 5 (08:13):
I think, I mean, yeah, for the computer industry, I'm
not sure that it is sustainable. There's already there's already
been price creep that is not anything to do with tariffs.
Speaker 2 (08:29):
It's just over the last several years.
Speaker 5 (08:31):
The companies, Yeah, I mean, they've they have big markets
to sell into, and so if you're a small time
consumer or gammer, you use Adobe Premiere with the Kuduk
GPU you're just not at the top of the priorities,
and the only way to get closer to the top
is to pay a whole hell of a lot more
for the components. So like there's already been price creep.
Speaker 4 (08:52):
Well, when you say pay a lot more for the components,
who's paying more there?
Speaker 2 (08:56):
It's it's the consumer.
Speaker 4 (08:57):
I mean, yeah, so it's really the high end stuff
is the best you have. Why do you have to
buy the more expensive stuff? Is it just that it
will be the cheap ones are having to use lower
quality components or is it something else?
Speaker 5 (09:10):
Well, it's it's interesting because it's almost like this question,
I think, is it the real answer is that cheap
stuff doesn't exist anymore? Huh, Like the cheap products are gone,
and this is pre tariffs. This is like it's only
getting worse. But you look at GPUs, Nvidia, with its dominance,
(09:35):
has has managed to slowly shift the low end into
the mid range in terms of pricing, and the mid
range into the high end in terms of pricing, but
not in terms of necessarily performance scaling. And so you're
already paying disproportionately more for what you're getting versus several
years ago. And this is beyond inflation. This is beyond tariffs.
(09:59):
You stack something massive tariffs on top of it, and
people who are already kind of struggling to justify a
purchase of an expensive GPU. I was looking at RTX
fifty nineties, which are supposed to be about a two
thousand dollars video card, about a week or two ago.
I haven't checked today, but and the cards were typically
(10:20):
in the twenty nine hundred to three hundred three thousand dollars.
Speaker 6 (10:23):
Rane of Jesus.
Speaker 5 (10:24):
Yeah, that includes on shelves at microcenters, and and some
of that's going to be a tariff impact, and some
of it is just kind of price creep.
Speaker 4 (10:45):
It does kind of feel like, well, to the title
of the to the title of the video, it's like
the end of affordable computing has already kind of happened,
because it doesn't seem and for our less technical listeners,
when we say fifty seventy fifty eight fifty night, you're
referring to in videographics cards on the consumer side, so
the things you put a computer so you can see
what's on your monotone also play games. Stephen, sure you
(11:08):
love that technical explanation.
Speaker 2 (11:09):
Yeah, it's great, but.
Speaker 4 (11:11):
It's I nearly said three DFX there for a second,
aging myself, but it feels like those lower end ones
aren't even anywhere near as good as you did a
video on this as well, that the fifty seventy, fifty eighty,
the lower end or mid range ones just on nowhere
near as good as mid range and lower end used
to be.
Speaker 5 (11:30):
Yeah, it's the I think the most understandable version of
this in terms of when we were trying to figure
out how do we communicate what's happening to people was
we came to the word shrinkflation, which people are familiar with,
except instead of a bag of chips, where you get.
Speaker 4 (11:48):
Well, maybe you should explain what it means?
Speaker 5 (11:50):
Just sure, yeah, yeah, So the concept being that, and
again to breakface this, you know we're experts on hardware,
not economy, but like this, this is that it all
kind of bleeds together in a way we get familiar
with it. But trinkflation being the concept of you go
to a store to buy your bag of chips or
your bundle of toilet paper or whatever, and you get
(12:14):
fewer items for minimally the same cost as it used
to be, right, So it sort of disguises the change
in value, the cost per unit or whatever that you're getting.
Then you apply this to electronics, and the version of
it is you buy the video card or the CPU,
and maybe you have fewer lower performance relatively speaking, than
(12:38):
you would have had in previous generations, while still spending
at least the same but likely more. And one of
the things that you know, this kind of deviates from
the tariff's discussion. But one of the things I'm concerned
about is as cost for consumer electronics goes up, especially
things like computers, and especially as caused by things like
(13:03):
the current tariffs, there's an opening for companies like on
Video to push for more of a lack of ownership model.
So like they have services where you can play games
over the internet streaming kind of like Netflix, that's right, Yeah,
And this creates a great opening for these companies to
(13:25):
step in and say, we're so sorry, you can't afford
our cheapest model five hundred and fifty dollars video card
to play games or to render videos, you know, or
do three D modeling. But good news, we have something
for you, and it's fifty dollars a month and you
can use it for you know, this many hours and
(13:45):
in between, maybe we'll do ads, or maybe we turn
on and off the different services you have access to.
And so that's one of my concerns is it's it's
another step in furthering that you own nothingness of the
current consumer economy.
Speaker 4 (14:01):
Yeah, it kind of feels as well. And you hint
it hinted at it earlier as well, where it's like
these companies are Microsoft's raising the price of the Xbox,
I don't imagine that's coming down. I don't get this.
I don't get the sense that Microsoft is going to say,
don't worry everyone that everyone on Wall Street, by the way,
they the markets love it when we charge less, so
(14:23):
we're going to bring this down as an ethical company.
It just feels like a that there are the immediate
near term effects where its prices are going to increase,
but just no one is going to like, no one's
going to bring these prices back down at the end
of the tariffs. No one really understands what's going on,
so they it almost feels like they'll be able to
(14:44):
kind of push it under the rug and obfuscate what
they've actually done as well.
Speaker 5 (14:48):
Yeah, I think there's there's a couple of things going
on where there's.
Speaker 2 (14:55):
It's interesting.
Speaker 5 (14:56):
Normally we as in GN we're in a very cynical
mindset for a lot of our coverage, and that's just
the nature of it. It's not necessarily adversarial, but it's untrusting,
i would say, of what companies are saying. And so
part of that in this situation is Okay, there are
(15:18):
avenues here for companies to get the price increases they've wanted,
but they've needed an opportunity to do it. But at
the same time, unlike most the other stories we cover,
this one is so wide reaching an industry impacting with
the sort of sporadic nature of the tariff's application and
(15:39):
also the high percentage of them that there are real
consequences and it is hurting companies. So you've got this
mix right where it's like, we can't be too cynical
this time because there are real world impacts, like with height,
where they were just going to lose money for computer
cases that they sell if they continued to sell them
into the US market.
Speaker 2 (16:00):
So they've abandoned it.
Speaker 5 (16:01):
They decided we don't need to sell the US, We'll
send them somewhere else, which.
Speaker 4 (16:05):
Is crazy that's a large part of their business.
Speaker 2 (16:09):
Yeah, it was.
Speaker 5 (16:10):
I want to say the number the product director Rob
Tyler shared during the interview, I think he said sixty
five percent revenue was from the US.
Speaker 2 (16:19):
Yeah.
Speaker 5 (16:21):
But at the same time, you know, so that's a
real That's where it's it's not helpful to be cynical
because this is a real impact to this company. We've
seen their numbers. But then on the flip side of that,
back to the cynesism, you look at a company like
Microsoft where they've increased not only the cost of their
physical hardware, which is impacted by tariffs because it's a
(16:42):
lot of it does come from China, but also they've
increased the price of their digital downloads like video games,
where they're saying they're going to start moving towards an
eighty dollars per game model from typically sixty and digital
video game downloads are not currently as far as I
understand it, are not tariffed.
Speaker 4 (17:02):
No, in fact, but that's the whole point of digital downloads.
That why they hate dollars. You're saving money selling this, right.
Speaker 5 (17:11):
And I think what's happening here is they have one
real reason to increase the price, which is their cost
has gone up on the hardware, and that is giving
them sort of cover fire to also increase the price
of things that haven't gone up. Maybe you could make
(17:31):
an argument for inflation affecting development costs or something like this,
but packaging it all together and doing it at the
same time.
Speaker 2 (17:39):
I think it's also it sort of exhausts the.
Speaker 5 (17:44):
Consumer's attention where it eases the acceptance of this higher price,
because at some point you get hit with this news
so frequently, like I just I don't care anymore.
Speaker 2 (17:55):
I get it.
Speaker 5 (17:55):
It's all expensive, and you lose the capacity to be
mad at a specific company.
Speaker 4 (18:00):
It's just I truly, I'm learning about this in real time.
So Microsoft is raising the price of first party games
to seventy nine to ninety nine. That's completely insane. And
I think that there is a delineation of cynicism here
where you can be cynical about a company. But all
of the companies you talked to in this video were
very much I mean, you had competitors hanging out with
(18:22):
each other to tell you stuff. It feels like there
is a marked difference between a company saying yeah, we
are Every two minutes a wheel spins and we pay
more on staff and having a real reason to do that,
and a company just saying, yeah, games are eighty bucks. Now,
I don't know what to tell your mate.
Speaker 2 (18:41):
Yeah.
Speaker 5 (18:42):
I think the companies we spoke to and they range,
like I said, from someone with six employees who's a
sort of true small business owner like that you think
of an American small business owner, and that's exactly the
representation you think of all the way up to multi
billion dollar publicly traded course hair Components, which makes memory, keyboards, computers.
(19:06):
They even have some assembly in the US, and all
of them feel the impact in comparable ways, but where
they differ is their ability to cope with it. And
so I think it's these smaller companies that are going
to get hit particularly hard. And as actually came up
a couple times in the interviews as well. One of
(19:27):
them that we didn't we didn't include was a comment
that someone from Coursair made. I think we weren't filming yet,
but we were talking about gn and my goal with
this wasn't to insert ourselves into this story, so we
kind of kept anything about gamers Nexus out of it.
But the tariffs impact us too, and one of the
(19:50):
comments he made. I asked him who do you think
this affects the most? And he said, well, it's guys
like you, right, Like, it's small businesses and medium size
businesses because the big ones are large enough to have
levers to.
Speaker 4 (20:04):
Pull, right. And I guess I'm going to ask you
one of the most annoying questions that I possibly could,
which is, and you do cover this in the video,
why can't they just make in America? And I know
that the answer is it's going to be very obvious,
but still people are gonna want to hear it.
Speaker 5 (20:21):
Sure, Yeah, it's really It is actually a great question.
It's obviously very common. It's complicated. So the easiest answer
to that, I think if you try to boil it
down into kind of like two components. There's cost, which
are one's familiar with, and we can kind of get
(20:43):
into that. So there's things like labor costs, real estate costs,
all this, and there's maybe some greater social discussions to
have there with regard to labor cost. But then there's
also supply chain and so if we ignore the cost
component for a moment and just assume it costs exactly
the same amount of money to make it in China
(21:05):
or Vietnam or Thailand as it does in the US,
which will cost which it doesn't. It's the global manufacturing
average cost in terms of wage per hour is, according
to Courser's CEO and our interview, is two to four
dollars per hour. Because it's obviously not even close. Yeah,
and so if we just assume it's equal though for
(21:28):
take conversation, the new challenge is in China in particular,
but just that part of Asia in general, there's already
a huge factory presence. They have the tooling, they have
the people, they have supply chain, and so what that
really means is you can go to Wachambai and Shenzhen
(21:49):
right now and you can go talk to someone to
get tell them you have this brilliant idea for a
new electronic device. You can have someone designed the PCB,
you can have someone print the PCB. The printing can
be delivered same day for a prototype. And you can
also start sourcing factories for the capacitors, the inductors, the semiconductors,
(22:14):
the mos vats, the shell or case if there's going
to be one. All of that can happen in the
same spot and it can all be sourced from sort
of the same, say fifty mile radius for the most part,
and that doesn't exist in the US. And if you
want to make a motherboard, as an example, that count
in the video in the US. We didn't get too
deep into it in the video, but there's probably ten
(22:37):
to thirty major component complete component suppliers for that board.
So if you want to make that motherboard in the US,
which your CPU and your GPU go into, it's sort
of the brain stem of the computer. You bring that
over here. And what you might have first is the
assembly line. It's an automated line. It's primarily done by
machine these days. So you bring over the SMT line,
(22:59):
the Service Amount Technolology line. That line has machines that,
first of all, are made all over the world. Yeah,
so that's already a different thing. And then those machines
have reels of components like capacitors. The capacitors come from
a factory in China, so you'd have to bring that
factory over. That factory to make the capacitors has factories,
(23:19):
so it uses factories for maybe ceramics or for aluminum
or steel or copper whatever.
Speaker 2 (23:25):
They may use.
Speaker 5 (23:25):
Copper coil for inductors, you have someone doing the winding
for the coil. For things like going power supplies and
all of that is downchain factories. So this one motherboard
quote unquote factory, what they're doing is effectively equivalent to
someone assemblying a pre built computer and a pre built
computer assembly plant in the US like Lenovo, they're doing
(23:48):
the same thing. They're putting all the parts together, but
they're buying them from elsewhere, and that's fine, that's how
it works. But to just bring that over, it's not
something you can flip a switch on.
Speaker 4 (24:11):
And it seems like a big part of it as
well is that China already has this infrastructure to manufacture
these things. To your point that they have someone who
can do the prototype that they have someone I don't know,
like I assume they were like screw factories and things
that don't exist in America, or if they do, they
are geographically inefficient in comparison.
Speaker 5 (24:29):
Yeah, I think that's a big part of it is
there are factories in the US that can do various things.
I mean, certainly you get down to physical hardware like screws.
I'm absolutely certain there's factories that make screws in the US.
There's factories that make cardboard boxes in the US, but
like you said, these things are not on the same block.
And while that can be reconciled, making a company eat
(24:55):
an extra cost is basically impossible. And so if the
approach is to do some form of taxes, it would
have to be so extreme that there really has no
other choice but to start building factories in the US.
But the problem then is that this takes years. So
some of them hey, M right, yeah, it just it
(25:18):
just takes forever to start building.
Speaker 2 (25:20):
I mean, then if.
Speaker 5 (25:22):
It's also just it's an enormous amount of money, you
can't just have it, you know, you need to plan
for it. So so that's a big challenge.
Speaker 4 (25:29):
It kind of feels like that on the cynical side,
I mean, it kind of feels like it is the
case where it's so much of our economy is based
on just cheap labor that we've outsourced, are entire manufacturing
to other countries that and it all relies upon a
certain kind of discount labor that just doesn't exist and
(25:50):
probably can't exist in America.
Speaker 5 (25:53):
I think it not only can't exist in America, but
the amount of available people is probably not high enough
to create that many manufacturing jobs, especially instantaneously. One thing
that's interesting, though, I don't think I've really spoken in
(26:16):
anywhere about this side, but something that's interesting with contract manufacturing,
especially in China is, at least for the factories we've
toured and visited over the years, a lot of the
contract factories they shut down for Chinese New Year for
a while. It's it's their biggest holiday, so similar to
Christmas in the US, you have several weeks off for
(26:37):
a lot of people, and there it lasts pretty long.
The one factory work with and we've toured, they shut
down for nearly a month for Chinese New Year. And
when I want to ask them, when it was my
first time over there, you know, I asked the factory owner.
It was basically, hey, no, absolutely, no disrespect, don't take
this throng way. I'm just curious why such a long time,
(26:58):
Like as an American, right, you come from work culture
in terms of just you're always at work for four
weeks is a big stretch of time. Doesn't that effect
to your production? And he said something really interesting to
me where that factor in particular, a lot of their
laborers come from all over in China. China is very large,
(27:19):
and they come from all these different provinces, and so
they sort of migrate out to do the work locally
at the factory, and then they might go back and
maybe they're going back to work at home, or they
just bring the money home and spend time with the family.
And the interesting thing there is that kind of opened
my eyes to how can a place like sheen Gen
(27:40):
exist where almost everything you need to make a product
is in like one city. That seems insane, right, Like
the amount of people that you would need for that
is crazy. And I guess that's part of it. And
I don't you know, obviously don't claim to be an
expert in it, but just from personal experiences talking to
people and visiting these places, these are kind of the
pieces that have really clicked for me to help me
(28:00):
better understand how manufacturing works.
Speaker 4 (28:05):
Yeah, it's just every time I think about what these
tariffs are meant to do, I feel insane because it's like, Okay,
we're going to charge more for things to the people
shipping them in, which will cause them to build things
in America which they can't do but they should. Like
that feels like most of the logic here, but we'll
(28:28):
just factories will spread out to the ground like weeds.
Like it's just bizarre.
Speaker 5 (28:34):
Yeah, and even the companies that do make stuff here.
This is what's interesting too, is that.
Speaker 4 (28:40):
Yeah, because you spoke to one an actual manufacturing company
in America.
Speaker 2 (28:44):
That's right.
Speaker 5 (28:45):
Yeah, So we spoke to three companies that we spoke
to have sort of different levels of manufacturing here. So
there's one of them. The one you're probably referring to
is called Proto Case and they stamp cases, so they
assemble servers and network attached storage devices and then they
(29:08):
can stamp their own cases for those they take the medals,
they put them in a big press with their own
tooling and they press it and then they can kind
of bend the metal into a server case. So they
do some manufacturing here and they do a lot of
it in Canada. The other two companies we spoke to
are a different type of manufacturing where it's assembly, and
(29:28):
actually course here to their credit has assembly as well,
so I guess three and the assembly groups they so
CyberPower PC makes pre built computers mostly for gaming, and
they employ hundreds of people in the city of Industry
California area to assemble computers. And so those people take
(29:49):
about eight to ten components that CyberPower does not make.
They buy them from other companies and they assemble them
right into a computer. And it's really that straightforward. But
this is effectively a factory job. It's an assembly job,
and the PC that's made ultimately it's branded a CyberPower PC.
(30:11):
But just like any PC on the market Dell HP
as US, it doesn't matter. They don't make the CPU,
they don't make the GPU that's probably Intel and Video AMD.
They often don't make the cooler, the storage device, the memory.
So all this stuff, yeah, it's got to come from
other people. And for the most part, the places it
ends up coming from are going to be China, Vietnam, Thailand, Singapore, Malaysia,
(30:37):
Taiwan I don't think I named yet, and some stuff
from Japan, but that's kind of the that's where the
stuff comes from, and then they assemble it in the US.
But those companies that assemble the computers in the US,
they still get hit by tariffs because they're bringing stuff
in to complete the products. But what's interesting is it's
(30:59):
almost like the components like cps and GPS. You can
think of them as raw materials where the products the
computer can't exist without those raw materials, but they're not
blanket exempted as raw materials.
Speaker 4 (31:13):
Yeah, and it feels like you can't actually exempt any
particular industry because of the amountifold different parts. I think
Lewis Russman made the point as well, where it's customers
are going to get pissed off about the price increases,
and it's kind of like, well, you're the one buying
these things that will make with Chinese pots. It's not
like you can avoid that, right.
Speaker 6 (31:34):
Yeah.
Speaker 5 (31:34):
No, I mean that that was an excellent point by him,
where he's he's a repair shop, and as he was saying,
for the device to even get to him, someone else
has to exist before him, and that's going to be
the customer buying from the original manufacturer. If the original
manufacturer chooses to make their products let's say entirely in Detroit,
(31:58):
and they use parts and time from Detroit, than Lewis
the repair shop will probably buy replacement parts from Detroit, right,
because that's that's where they come from. And so it's yeah,
I think like him just as much as the assembly
plants that put a product together the consumer's familiar with.
They're affected by the same thing, which is there's force
(32:20):
is so much larger than you. You can't you don't
have the option to move it because it's not yours,
and so what do you do?
Speaker 3 (32:29):
Right?
Speaker 4 (32:30):
Yeah, one thing as we come to the end here,
one thing that did strike me is how did you
get all of these competing companies to actually hang out
and talk to you quite candidly at the same time.
Speaker 5 (32:43):
Yeah, it's I've known a lot of the people in
that video.
Speaker 2 (32:47):
I've known for.
Speaker 5 (32:49):
Pretty close to some of them, like twelve to fourteen years. Fortunately,
like we've run across each other at conventions a lot,
and so for like the backstory, I guess Sorry Power
and Irapower two competing pre built companies, and I pained
to them both and I was like.
Speaker 2 (33:04):
Hey, it would.
Speaker 5 (33:06):
It would be it would really send a message if
you guys agree with each other on this particular issue.
I think it would help people understand that it is
impacting both of you in similar ways, because these are
companies that they're fighting for the same market share for
the same customers, and you know, if you can get
(33:30):
them together in a room and they were even sharing
numbers with each other, how many employees they have, how
many units per year they make, Like this is crazy
information to share, but I think it was. It was
sort of a solidarity moment where the read on the
situation I had was the companies were all looking at
this as this is our opportunity to try and explain
(33:50):
why the prices are going to go up, and whether
or not it's for legitimate reasons or for the more
cynical reasons we've discussed to them. It was an opportunity
to talk about that, and I think our timing was
a big part of that, where we booked our tickets
as soon as the pause went into effect on some
(34:13):
of the international tariffs, or actually.
Speaker 2 (34:18):
It was just before that.
Speaker 5 (34:19):
It was like a day before that, so we booked
the tickets a day before the pause, right around when
they went into effect. We landed, and then some of
these changes like pauses and exemptions and non exemptions were
happening already, but because of the chaos and that four
day window, I think everyone was willing to talk to
us on record because nobody knew what was going on.
Speaker 4 (34:40):
And just to close us off, you mentioned it clost
a ton of money and a ton of time, how
long and how much money?
Speaker 3 (34:47):
Roughly?
Speaker 4 (34:48):
Because this was I do not watch videos at these
Lanth Casey Casey friend of the show case Kagawa knows
this well. But I watched the whole thing like how
much like roughly, I want to make the video?
Speaker 5 (35:00):
You wook to make the video.
Speaker 2 (35:03):
So it was probably.
Speaker 5 (35:06):
If you count my time at zero dollars, then we
should have been over ten grand in total costs. So
that's travel plus editing time. There's a lot of editing
time because we had over eight hours of footage and
the way it kind of came together and it was
interesting where you know, we got the news down the
(35:30):
wire about the new The word the government has officially
named them is reciprocal tariffs. So when those came out,
that was when we started booking the flights. And like
I said, it was right before the pause on some
of them, and so we booked the flights with no
return flight. It's a twelve hour twelve hours away till
(35:51):
we got on that first plane. We had the first
hotel booked and then vitally and I'm a camera operator,
we flew out there and we played it day by
day and for you know, I used the hotel I knew,
so it was basically like, hey, yeah, we need to
extend one more day, you know. And and then we
just kept booking them based on who I could get
(36:12):
in touch with. And I was just on the phone
constantly calling every company I knew, and they're they're kind
of on the you know, they're either in San Francisco
or they're in LA for most of them.
Speaker 4 (36:22):
Steven, it's been such a pleasure having you on the show.
Where can people find you?
Speaker 5 (36:27):
They can check out gamersaxis dot net if they want
the written adaptation of videos, or the YouTube channel. Gamers
and Axus is where everything goes, and.
Speaker 4 (36:35):
You can find me on the internet. You were listening
to Better Offline. Of course, following this will be an
extremely old line of the I swear all update one day.
Thank you for listening, and Steven, thank you for joining us.
Speaker 6 (36:45):
Thank you, thank you for listening to Better Offline.
Speaker 4 (36:56):
The editor and composer of the Better Offline theme songs, Metosowski.
You can check out more of his music and audio
projects at Mattasowski dot com, M A T T O.
S O W s ki dot com. You can email
me at easy at better Offline dot com or visit
better Offline dot com to find more podcast links and
of course my newsletter. I also really recommend you go
(37:18):
to chat dot where's youreaed dot at to visit the discord,
and go to our slash.
Speaker 6 (37:22):
Better Offline to check out our reddit. Thank you so
much for listening. Better Offline is a production of cool
Zone Media.
Speaker 4 (37:29):
For more from cool Zone Media, visit our website cool
Zonemedia dot com, or check us
Speaker 5 (37:34):
Out on the iHeartRadio app, Apple Podcasts, or wherever you
get your podcasts.
Also media coming up, Will Steve Burke of gamers Nexus
be able to help d zitron understand tariffs? Should we
treat Sam Altman's new startup like a venereal disease?
Speaker 2 (00:17):
And who is the mysterious.
Speaker 1 (00:19):
Identical man living in Kevin Russ's mirror? All this and
more on this week's Better Offline.
Speaker 3 (00:32):
Good grief.
Speaker 4 (00:45):
That's right, you're listening to Better Offline. I'm your host
ed Zititron. As a reminder, you're now able to buy
Better Offline merch. Check the episode notes for a link.
Of course, More importantly, today, I'm joined by Steve Burke,
the host of the incredible Game is Next as someone
I wanted them the shows since I started at Steve
recently put a three hour long video called the Death
of Affordable Computing, and it's the single best way of
seeing anybody explain the current tariff situation. Steve, thank you
(01:08):
for joining me.
Speaker 2 (01:09):
Oh thanks for having me.
Speaker 5 (01:10):
Yeah, I'm excited to talk more about it.
Speaker 4 (01:12):
So, is there any way you can break down in
simple language how these tariffs actually work?
Speaker 5 (01:20):
I mean, effectively the tariffs are they're effectively attacks. Right,
let's pay it on imports? So the goods come in
from any other country that's potentially tariff and the company
bringing those goods in has to pay some amount in
order to complete bringing them in, and so that then
gets passed on to somebody. Maybe they absorb some of
(01:42):
the costs, maybe they increase the price of the product.
But tariffs in general, of course not a new concept,
and it's just this particular round of them has effected
the computer hardware industry in a larger way.
Speaker 4 (01:55):
So they're paid by the people receiving the goods. So
the computer so like height or CyberPower, whomever receiving a case,
for example, would pay the tariff before they even shifted
to someone.
Speaker 2 (02:06):
Correct.
Speaker 5 (02:07):
Yeah, I mean it's the same all the way down
to the smallest companies. We spoke to Lewis Rossman as
part of that piece. He's known best for probably right
to Repair, and he's a good example where as a
small repair shop in Austin, Texas. He's got maybe six
or so employees. He personally doesn't, as he said in
the video, bring them the goods, but he buys them
(02:28):
from someone who does. So you know, then that person
would be the one importing them in paying the tariff.
Speaker 4 (02:34):
So what made you want to make this video because
you've done a good amount of PC industry stuff, but
tarift feels like a jump from you. Not an allogical
one though.
Speaker 2 (02:43):
Yeah, tariffs.
Speaker 5 (02:44):
It's a big topic and it was very challenging to
try and approach because for us, the number one reason
to get into it was just we're starting to see
the impact on computer hardware and a lot of companies
had things to say about it, so that was the
obvious reason to maybe look into it. The hesitations from
(03:05):
us initially were this is a topic that it's very
difficult to completely isolate from politics, which we try to
stay away from. But it's also important and it does
affect what we talk about every day, which is value
and pricing. But the other challenge is that this is
not something where I can claim to be an expert,
(03:28):
like global trade. You might imagine, Yeah.
Speaker 2 (03:32):
Yeah, it's a very large topic.
Speaker 5 (03:34):
But that made it interesting to us because it was
one of those like, okay, so we're closer to where
you might expect most viewers to be in terms of knowledge,
where you're just getting the information daily, with the one
exception that we might have better access to companies that
do have a lot of experience with this stuff, and
(03:55):
maybe no one person can break down global trade for us,
and we've all seen economists on TV and whatever. But
what we could get is people talking about just how
does it affect them and their company and then hopefully
with that put together a fuller picture that's a little
more maybe like a pragmatic approach to it. So that
(04:16):
was a yeah, that was the way to break it
down for us.
Speaker 4 (04:18):
So for the listeners who haven't watched the video, and
I say, this is someone who can barely make it
through a half an hour video, watch the whole bloody thing.
How what are the current effects? What are the things
happening today? To say, PC manufacturers that people might not
know about.
Speaker 5 (04:34):
It's interesting, so might not know about makes that interesting.
The ones that people do know about. I'll keep brief here,
but just days ago Microsoft moved to increase pricing of
its xboxes. Logitech has increased prices of its peripheral components
keyboards and mice and so forth. And this is something
(04:54):
we're going to see a course here.
Speaker 2 (04:56):
I was just speaking to them.
Speaker 5 (04:57):
They're about to increase the price of some of their
computer cases that we're in the process of reviewing, and
that's kind of the obvious one of that's the one
people expect. There's also and having listened to some of
your previous episodes, I think this might be a topic
you'd want to get into. But there's also some room
(05:17):
for greed, corporate greed where this is a great cover
story for them to change some prices. But then as
far as answer the question like what effects might people
not know about, I think there's there's some really interesting
ones sort of downchain in the in the supply chain,
where things like logistics and freight and shipping companies are
(05:45):
starting to have to deal with potentially reduced hours. And
so you think about the supply chain, like to get
a product from a country to another country, you know,
just to make it in say China, a motherboard might
require something like one hundred factories futality, all of them
meaning including yeah, including the metals factories. And so you've
(06:06):
got all those impacts, and then you have the freight
and the couriers, the port, the dock workers, the couriers
on the other side, the warehouse workers. Right, it's just
a huge chain, and it's really it can't be elastic.
Speaker 2 (06:20):
It's got to be pretty rigid.
Speaker 5 (06:22):
One of the interesting ones we're seeing though, is some
of the factories from some of the companies I was
just speaking with, are beginning to adjust their terms. So
factories will allow terms of payment to be potentially partially
upfront and partially on completion of order. Some of them
are starting to adjust to frontload more of the upfront
cost or all of it. And that's because they have
(06:47):
kind of gotten scared of potential order abandonment. When companies
can't afford the tariff, they abandon the container and stiff
the factory. Yeah, and so that'll have this unseen impact later.
It's going to affect the cost of money. Companies have
to borrow money a lot of times to bring this
stuff in. They have to pay more upfront.
Speaker 4 (07:05):
Oh, so I hope be borrowing more money upfront because otherwise,
exactly the way, they won't be able to afford the
orders that are now more expensive on the front end.
Speaker 5 (07:15):
Yeah, and then they pay interest for a longer period
of time that gets factored in. So it's just really
like the more you talk to people, the more there's
all these hidden consequences that pop up. And the one
thing everyone kind of drove home was. It's not to
them the tariffs themselves that are necessarily the problem. It's
sort of the way they were being rolled out where
(07:36):
it was at least for a couple of weeks. They're
nearly daily changes and unpredictable.
Speaker 4 (07:42):
I did like during the video watching as you went
from from person to person saying, Okay, right now, this
tariff is this By the end of this conversation, it
may not be. Yeah, insane way to run global trade.
You had a few examples as well where it kind
of looked like certain things would just doubling cost for
the company, that they would just be paying effectively nearly double,
(08:05):
or like if it's one hundred and twenty bucks to
buy something, they're paying one hundred bucks on top. How
is any of this sustainable?
Speaker 5 (08:13):
I think, I mean, yeah, for the computer industry, I'm
not sure that it is sustainable. There's already there's already
been price creep that is not anything to do with tariffs.
Speaker 2 (08:29):
It's just over the last several years.
Speaker 5 (08:31):
The companies, Yeah, I mean, they've they have big markets
to sell into, and so if you're a small time
consumer or gammer, you use Adobe Premiere with the Kuduk
GPU you're just not at the top of the priorities,
and the only way to get closer to the top
is to pay a whole hell of a lot more
for the components. So like there's already been price creep.
Speaker 4 (08:52):
Well, when you say pay a lot more for the components,
who's paying more there?
Speaker 2 (08:56):
It's it's the consumer.
Speaker 4 (08:57):
I mean, yeah, so it's really the high end stuff
is the best you have. Why do you have to
buy the more expensive stuff? Is it just that it
will be the cheap ones are having to use lower
quality components or is it something else?
Speaker 5 (09:10):
Well, it's it's interesting because it's almost like this question,
I think, is it the real answer is that cheap
stuff doesn't exist anymore? Huh, Like the cheap products are gone,
and this is pre tariffs. This is like it's only
getting worse. But you look at GPUs, Nvidia, with its dominance,
(09:35):
has has managed to slowly shift the low end into
the mid range in terms of pricing, and the mid
range into the high end in terms of pricing, but
not in terms of necessarily performance scaling. And so you're
already paying disproportionately more for what you're getting versus several
years ago. And this is beyond inflation. This is beyond tariffs.
(09:59):
You stack something massive tariffs on top of it, and
people who are already kind of struggling to justify a
purchase of an expensive GPU. I was looking at RTX
fifty nineties, which are supposed to be about a two
thousand dollars video card, about a week or two ago.
I haven't checked today, but and the cards were typically
(10:20):
in the twenty nine hundred to three hundred three thousand dollars.
Speaker 6 (10:23):
Rane of Jesus.
Speaker 5 (10:24):
Yeah, that includes on shelves at microcenters, and and some
of that's going to be a tariff impact, and some
of it is just kind of price creep.
Speaker 4 (10:45):
It does kind of feel like, well, to the title
of the to the title of the video, it's like
the end of affordable computing has already kind of happened,
because it doesn't seem and for our less technical listeners,
when we say fifty seventy fifty eight fifty night, you're
referring to in videographics cards on the consumer side, so
the things you put a computer so you can see
what's on your monotone also play games. Stephen, sure you
(11:08):
love that technical explanation.
Speaker 2 (11:09):
Yeah, it's great, but.
Speaker 4 (11:11):
It's I nearly said three DFX there for a second,
aging myself, but it feels like those lower end ones
aren't even anywhere near as good as you did a
video on this as well, that the fifty seventy, fifty eighty,
the lower end or mid range ones just on nowhere
near as good as mid range and lower end used
to be.
Speaker 5 (11:30):
Yeah, it's the I think the most understandable version of
this in terms of when we were trying to figure
out how do we communicate what's happening to people was
we came to the word shrinkflation, which people are familiar with,
except instead of a bag of chips, where you get.
Speaker 4 (11:48):
Well, maybe you should explain what it means?
Speaker 5 (11:50):
Just sure, yeah, yeah, So the concept being that, and
again to breakface this, you know we're experts on hardware,
not economy, but like this, this is that it all
kind of bleeds together in a way we get familiar
with it. But trinkflation being the concept of you go
to a store to buy your bag of chips or
your bundle of toilet paper or whatever, and you get
(12:14):
fewer items for minimally the same cost as it used
to be, right, So it sort of disguises the change
in value, the cost per unit or whatever that you're getting.
Then you apply this to electronics, and the version of
it is you buy the video card or the CPU,
and maybe you have fewer lower performance relatively speaking, than
(12:38):
you would have had in previous generations, while still spending
at least the same but likely more. And one of
the things that you know, this kind of deviates from
the tariff's discussion. But one of the things I'm concerned
about is as cost for consumer electronics goes up, especially
things like computers, and especially as caused by things like
(13:03):
the current tariffs, there's an opening for companies like on
Video to push for more of a lack of ownership model.
So like they have services where you can play games
over the internet streaming kind of like Netflix, that's right, Yeah,
And this creates a great opening for these companies to
(13:25):
step in and say, we're so sorry, you can't afford
our cheapest model five hundred and fifty dollars video card
to play games or to render videos, you know, or
do three D modeling. But good news, we have something
for you, and it's fifty dollars a month and you
can use it for you know, this many hours and
(13:45):
in between, maybe we'll do ads, or maybe we turn
on and off the different services you have access to.
And so that's one of my concerns is it's it's
another step in furthering that you own nothingness of the
current consumer economy.
Speaker 4 (14:01):
Yeah, it kind of feels as well. And you hint
it hinted at it earlier as well, where it's like
these companies are Microsoft's raising the price of the Xbox,
I don't imagine that's coming down. I don't get this.
I don't get the sense that Microsoft is going to say,
don't worry everyone that everyone on Wall Street, by the way,
they the markets love it when we charge less, so
(14:23):
we're going to bring this down as an ethical company.
It just feels like a that there are the immediate
near term effects where its prices are going to increase,
but just no one is going to like, no one's
going to bring these prices back down at the end
of the tariffs. No one really understands what's going on,
so they it almost feels like they'll be able to
(14:44):
kind of push it under the rug and obfuscate what
they've actually done as well.
Speaker 5 (14:48):
Yeah, I think there's there's a couple of things going
on where there's.
Speaker 2 (14:55):
It's interesting.
Speaker 5 (14:56):
Normally we as in GN we're in a very cynical
mindset for a lot of our coverage, and that's just
the nature of it. It's not necessarily adversarial, but it's untrusting,
i would say, of what companies are saying. And so
part of that in this situation is Okay, there are
(15:18):
avenues here for companies to get the price increases they've wanted,
but they've needed an opportunity to do it. But at
the same time, unlike most the other stories we cover,
this one is so wide reaching an industry impacting with
the sort of sporadic nature of the tariff's application and
(15:39):
also the high percentage of them that there are real
consequences and it is hurting companies. So you've got this
mix right where it's like, we can't be too cynical
this time because there are real world impacts, like with height,
where they were just going to lose money for computer
cases that they sell if they continued to sell them
into the US market.
Speaker 2 (16:00):
So they've abandoned it.
Speaker 5 (16:01):
They decided we don't need to sell the US, We'll
send them somewhere else, which.
Speaker 4 (16:05):
Is crazy that's a large part of their business.
Speaker 2 (16:09):
Yeah, it was.
Speaker 5 (16:10):
I want to say the number the product director Rob
Tyler shared during the interview, I think he said sixty
five percent revenue was from the US.
Speaker 2 (16:19):
Yeah.
Speaker 5 (16:21):
But at the same time, you know, so that's a
real That's where it's it's not helpful to be cynical
because this is a real impact to this company. We've
seen their numbers. But then on the flip side of that,
back to the cynesism, you look at a company like
Microsoft where they've increased not only the cost of their
physical hardware, which is impacted by tariffs because it's a
(16:42):
lot of it does come from China, but also they've
increased the price of their digital downloads like video games,
where they're saying they're going to start moving towards an
eighty dollars per game model from typically sixty and digital
video game downloads are not currently as far as I
understand it, are not tariffed.
Speaker 4 (17:02):
No, in fact, but that's the whole point of digital downloads.
That why they hate dollars. You're saving money selling this, right.
Speaker 5 (17:11):
And I think what's happening here is they have one
real reason to increase the price, which is their cost
has gone up on the hardware, and that is giving
them sort of cover fire to also increase the price
of things that haven't gone up. Maybe you could make
(17:31):
an argument for inflation affecting development costs or something like this,
but packaging it all together and doing it at the
same time.
Speaker 2 (17:39):
I think it's also it sort of exhausts the.
Speaker 5 (17:44):
Consumer's attention where it eases the acceptance of this higher price,
because at some point you get hit with this news
so frequently, like I just I don't care anymore.
Speaker 2 (17:55):
I get it.
Speaker 5 (17:55):
It's all expensive, and you lose the capacity to be
mad at a specific company.
Speaker 4 (18:00):
It's just I truly, I'm learning about this in real time.
So Microsoft is raising the price of first party games
to seventy nine to ninety nine. That's completely insane. And
I think that there is a delineation of cynicism here
where you can be cynical about a company. But all
of the companies you talked to in this video were
very much I mean, you had competitors hanging out with
(18:22):
each other to tell you stuff. It feels like there
is a marked difference between a company saying yeah, we
are Every two minutes a wheel spins and we pay
more on staff and having a real reason to do that,
and a company just saying, yeah, games are eighty bucks. Now,
I don't know what to tell your mate.
Speaker 2 (18:41):
Yeah.
Speaker 5 (18:42):
I think the companies we spoke to and they range,
like I said, from someone with six employees who's a
sort of true small business owner like that you think
of an American small business owner, and that's exactly the
representation you think of all the way up to multi
billion dollar publicly traded course hair Components, which makes memory, keyboards, computers.
(19:06):
They even have some assembly in the US, and all
of them feel the impact in comparable ways, but where
they differ is their ability to cope with it. And
so I think it's these smaller companies that are going
to get hit particularly hard. And as actually came up
a couple times in the interviews as well. One of
(19:27):
them that we didn't we didn't include was a comment
that someone from Coursair made. I think we weren't filming yet,
but we were talking about gn and my goal with
this wasn't to insert ourselves into this story, so we
kind of kept anything about gamers Nexus out of it.
But the tariffs impact us too, and one of the
(19:50):
comments he made. I asked him who do you think
this affects the most? And he said, well, it's guys
like you, right, Like, it's small businesses and medium size
businesses because the big ones are large enough to have
levers to.
Speaker 4 (20:04):
Pull, right. And I guess I'm going to ask you
one of the most annoying questions that I possibly could,
which is, and you do cover this in the video,
why can't they just make in America? And I know
that the answer is it's going to be very obvious,
but still people are gonna want to hear it.
Speaker 5 (20:21):
Sure, Yeah, it's really It is actually a great question.
It's obviously very common. It's complicated. So the easiest answer
to that, I think if you try to boil it
down into kind of like two components. There's cost, which
are one's familiar with, and we can kind of get
(20:43):
into that. So there's things like labor costs, real estate costs,
all this, and there's maybe some greater social discussions to
have there with regard to labor cost. But then there's
also supply chain and so if we ignore the cost
component for a moment and just assume it costs exactly
the same amount of money to make it in China
(21:05):
or Vietnam or Thailand as it does in the US,
which will cost which it doesn't. It's the global manufacturing
average cost in terms of wage per hour is, according
to Courser's CEO and our interview, is two to four
dollars per hour. Because it's obviously not even close. Yeah,
and so if we just assume it's equal though for
(21:28):
take conversation, the new challenge is in China in particular,
but just that part of Asia in general, there's already
a huge factory presence. They have the tooling, they have
the people, they have supply chain, and so what that
really means is you can go to Wachambai and Shenzhen
(21:49):
right now and you can go talk to someone to
get tell them you have this brilliant idea for a
new electronic device. You can have someone designed the PCB,
you can have someone print the PCB. The printing can
be delivered same day for a prototype. And you can
also start sourcing factories for the capacitors, the inductors, the semiconductors,
(22:14):
the mos vats, the shell or case if there's going
to be one. All of that can happen in the
same spot and it can all be sourced from sort
of the same, say fifty mile radius for the most part,
and that doesn't exist in the US. And if you
want to make a motherboard, as an example, that count
in the video in the US. We didn't get too
deep into it in the video, but there's probably ten
(22:37):
to thirty major component complete component suppliers for that board.
So if you want to make that motherboard in the US,
which your CPU and your GPU go into, it's sort
of the brain stem of the computer. You bring that
over here. And what you might have first is the
assembly line. It's an automated line. It's primarily done by
machine these days. So you bring over the SMT line,
(22:59):
the Service Amount Technolology line. That line has machines that,
first of all, are made all over the world. Yeah,
so that's already a different thing. And then those machines
have reels of components like capacitors. The capacitors come from
a factory in China, so you'd have to bring that
factory over. That factory to make the capacitors has factories,
(23:19):
so it uses factories for maybe ceramics or for aluminum
or steel or copper whatever.
Speaker 2 (23:25):
They may use.
Speaker 5 (23:25):
Copper coil for inductors, you have someone doing the winding
for the coil. For things like going power supplies and
all of that is downchain factories. So this one motherboard
quote unquote factory, what they're doing is effectively equivalent to
someone assemblying a pre built computer and a pre built
computer assembly plant in the US like Lenovo, they're doing
(23:48):
the same thing. They're putting all the parts together, but
they're buying them from elsewhere, and that's fine, that's how
it works. But to just bring that over, it's not
something you can flip a switch on.
Speaker 4 (24:11):
And it seems like a big part of it as
well is that China already has this infrastructure to manufacture
these things. To your point that they have someone who
can do the prototype that they have someone I don't know,
like I assume they were like screw factories and things
that don't exist in America, or if they do, they
are geographically inefficient in comparison.
Speaker 5 (24:29):
Yeah, I think that's a big part of it is
there are factories in the US that can do various things.
I mean, certainly you get down to physical hardware like screws.
I'm absolutely certain there's factories that make screws in the US.
There's factories that make cardboard boxes in the US, but
like you said, these things are not on the same block.
And while that can be reconciled, making a company eat
(24:55):
an extra cost is basically impossible. And so if the
approach is to do some form of taxes, it would
have to be so extreme that there really has no
other choice but to start building factories in the US.
But the problem then is that this takes years. So
some of them hey, M right, yeah, it just it
(25:18):
just takes forever to start building.
Speaker 2 (25:20):
I mean, then if.
Speaker 5 (25:22):
It's also just it's an enormous amount of money, you
can't just have it, you know, you need to plan
for it. So so that's a big challenge.
Speaker 4 (25:29):
It kind of feels like that on the cynical side,
I mean, it kind of feels like it is the
case where it's so much of our economy is based
on just cheap labor that we've outsourced, are entire manufacturing
to other countries that and it all relies upon a
certain kind of discount labor that just doesn't exist and
(25:50):
probably can't exist in America.
Speaker 5 (25:53):
I think it not only can't exist in America, but
the amount of available people is probably not high enough
to create that many manufacturing jobs, especially instantaneously. One thing
that's interesting, though, I don't think I've really spoken in
(26:16):
anywhere about this side, but something that's interesting with contract manufacturing,
especially in China is, at least for the factories we've
toured and visited over the years, a lot of the
contract factories they shut down for Chinese New Year for
a while. It's it's their biggest holiday, so similar to
Christmas in the US, you have several weeks off for
(26:37):
a lot of people, and there it lasts pretty long.
The one factory work with and we've toured, they shut
down for nearly a month for Chinese New Year. And
when I want to ask them, when it was my
first time over there, you know, I asked the factory owner.
It was basically, hey, no, absolutely, no disrespect, don't take
this throng way. I'm just curious why such a long time,
(26:58):
Like as an American, right, you come from work culture
in terms of just you're always at work for four
weeks is a big stretch of time. Doesn't that effect
to your production? And he said something really interesting to
me where that factor in particular, a lot of their
laborers come from all over in China. China is very large,
(27:19):
and they come from all these different provinces, and so
they sort of migrate out to do the work locally
at the factory, and then they might go back and
maybe they're going back to work at home, or they
just bring the money home and spend time with the family.
And the interesting thing there is that kind of opened
my eyes to how can a place like sheen Gen
(27:40):
exist where almost everything you need to make a product
is in like one city. That seems insane, right, Like
the amount of people that you would need for that
is crazy. And I guess that's part of it. And
I don't you know, obviously don't claim to be an
expert in it, but just from personal experiences talking to
people and visiting these places, these are kind of the
pieces that have really clicked for me to help me
(28:00):
better understand how manufacturing works.
Speaker 4 (28:05):
Yeah, it's just every time I think about what these
tariffs are meant to do, I feel insane because it's like, Okay,
we're going to charge more for things to the people
shipping them in, which will cause them to build things
in America which they can't do but they should. Like
that feels like most of the logic here, but we'll
(28:28):
just factories will spread out to the ground like weeds.
Like it's just bizarre.
Speaker 5 (28:34):
Yeah, and even the companies that do make stuff here.
This is what's interesting too, is that.
Speaker 4 (28:40):
Yeah, because you spoke to one an actual manufacturing company
in America.
Speaker 2 (28:44):
That's right.
Speaker 5 (28:45):
Yeah, So we spoke to three companies that we spoke
to have sort of different levels of manufacturing here. So
there's one of them. The one you're probably referring to
is called Proto Case and they stamp cases, so they
assemble servers and network attached storage devices and then they
(29:08):
can stamp their own cases for those they take the medals,
they put them in a big press with their own
tooling and they press it and then they can kind
of bend the metal into a server case. So they
do some manufacturing here and they do a lot of
it in Canada. The other two companies we spoke to
are a different type of manufacturing where it's assembly, and
(29:28):
actually course here to their credit has assembly as well,
so I guess three and the assembly groups they so
CyberPower PC makes pre built computers mostly for gaming, and
they employ hundreds of people in the city of Industry
California area to assemble computers. And so those people take
(29:49):
about eight to ten components that CyberPower does not make.
They buy them from other companies and they assemble them
right into a computer. And it's really that straightforward. But
this is effectively a factory job. It's an assembly job,
and the PC that's made ultimately it's branded a CyberPower PC.
(30:11):
But just like any PC on the market Dell HP
as US, it doesn't matter. They don't make the CPU,
they don't make the GPU that's probably Intel and Video AMD.
They often don't make the cooler, the storage device, the memory.
So all this stuff, yeah, it's got to come from
other people. And for the most part, the places it
ends up coming from are going to be China, Vietnam, Thailand, Singapore, Malaysia,
(30:37):
Taiwan I don't think I named yet, and some stuff
from Japan, but that's kind of the that's where the
stuff comes from, and then they assemble it in the US.
But those companies that assemble the computers in the US,
they still get hit by tariffs because they're bringing stuff
in to complete the products. But what's interesting is it's
(30:59):
almost like the components like cps and GPS. You can
think of them as raw materials where the products the
computer can't exist without those raw materials, but they're not
blanket exempted as raw materials.
Speaker 4 (31:13):
Yeah, and it feels like you can't actually exempt any
particular industry because of the amountifold different parts. I think
Lewis Russman made the point as well, where it's customers
are going to get pissed off about the price increases,
and it's kind of like, well, you're the one buying
these things that will make with Chinese pots. It's not
like you can avoid that, right.
Speaker 6 (31:34):
Yeah.
Speaker 5 (31:34):
No, I mean that that was an excellent point by him,
where he's he's a repair shop, and as he was saying,
for the device to even get to him, someone else
has to exist before him, and that's going to be
the customer buying from the original manufacturer. If the original
manufacturer chooses to make their products let's say entirely in Detroit,
(31:58):
and they use parts and time from Detroit, than Lewis
the repair shop will probably buy replacement parts from Detroit, right,
because that's that's where they come from. And so it's yeah,
I think like him just as much as the assembly
plants that put a product together the consumer's familiar with.
They're affected by the same thing, which is there's force
(32:20):
is so much larger than you. You can't you don't
have the option to move it because it's not yours,
and so what do you do?
Speaker 3 (32:29):
Right?
Speaker 4 (32:30):
Yeah, one thing as we come to the end here,
one thing that did strike me is how did you
get all of these competing companies to actually hang out
and talk to you quite candidly at the same time.
Speaker 5 (32:43):
Yeah, it's I've known a lot of the people in
that video.
Speaker 2 (32:47):
I've known for.
Speaker 5 (32:49):
Pretty close to some of them, like twelve to fourteen years. Fortunately,
like we've run across each other at conventions a lot,
and so for like the backstory, I guess Sorry Power
and Irapower two competing pre built companies, and I pained
to them both and I was like.
Speaker 2 (33:04):
Hey, it would.
Speaker 5 (33:06):
It would be it would really send a message if
you guys agree with each other on this particular issue.
I think it would help people understand that it is
impacting both of you in similar ways, because these are
companies that they're fighting for the same market share for
the same customers, and you know, if you can get
(33:30):
them together in a room and they were even sharing
numbers with each other, how many employees they have, how
many units per year they make, Like this is crazy
information to share, but I think it was. It was
sort of a solidarity moment where the read on the
situation I had was the companies were all looking at
this as this is our opportunity to try and explain
(33:50):
why the prices are going to go up, and whether
or not it's for legitimate reasons or for the more
cynical reasons we've discussed to them. It was an opportunity
to talk about that, and I think our timing was
a big part of that, where we booked our tickets
as soon as the pause went into effect on some
(34:13):
of the international tariffs, or actually.
Speaker 2 (34:18):
It was just before that.
Speaker 5 (34:19):
It was like a day before that, so we booked
the tickets a day before the pause, right around when
they went into effect. We landed, and then some of
these changes like pauses and exemptions and non exemptions were
happening already, but because of the chaos and that four
day window, I think everyone was willing to talk to
us on record because nobody knew what was going on.
Speaker 4 (34:40):
And just to close us off, you mentioned it clost
a ton of money and a ton of time, how
long and how much money?
Speaker 3 (34:47):
Roughly?
Speaker 4 (34:48):
Because this was I do not watch videos at these
Lanth Casey Casey friend of the show case Kagawa knows
this well. But I watched the whole thing like how
much like roughly, I want to make the video?
Speaker 5 (35:00):
You wook to make the video.
Speaker 2 (35:03):
So it was probably.
Speaker 5 (35:06):
If you count my time at zero dollars, then we
should have been over ten grand in total costs. So
that's travel plus editing time. There's a lot of editing
time because we had over eight hours of footage and
the way it kind of came together and it was
interesting where you know, we got the news down the
(35:30):
wire about the new The word the government has officially
named them is reciprocal tariffs. So when those came out,
that was when we started booking the flights. And like
I said, it was right before the pause on some
of them, and so we booked the flights with no
return flight. It's a twelve hour twelve hours away till
(35:51):
we got on that first plane. We had the first
hotel booked and then vitally and I'm a camera operator,
we flew out there and we played it day by
day and for you know, I used the hotel I knew,
so it was basically like, hey, yeah, we need to
extend one more day, you know. And and then we
just kept booking them based on who I could get
(36:12):
in touch with. And I was just on the phone
constantly calling every company I knew, and they're they're kind
of on the you know, they're either in San Francisco
or they're in LA for most of them.
Speaker 4 (36:22):
Steven, it's been such a pleasure having you on the show.
Where can people find you?
Speaker 5 (36:27):
They can check out gamersaxis dot net if they want
the written adaptation of videos, or the YouTube channel. Gamers
and Axus is where everything goes, and.
Speaker 4 (36:35):
You can find me on the internet. You were listening
to Better Offline. Of course, following this will be an
extremely old line of the I swear all update one day.
Thank you for listening, and Steven, thank you for joining us.
Speaker 6 (36:45):
Thank you, thank you for listening to Better Offline.
Speaker 4 (36:56):
The editor and composer of the Better Offline theme songs, Metosowski.
You can check out more of his music and audio
projects at Mattasowski dot com, M A T T O.
S O W s ki dot com. You can email
me at easy at better Offline dot com or visit
better Offline dot com to find more podcast links and
of course my newsletter. I also really recommend you go
(37:18):
to chat dot where's youreaed dot at to visit the discord,
and go to our slash.
Speaker 6 (37:22):
Better Offline to check out our reddit. Thank you so
much for listening. Better Offline is a production of cool
Zone Media.
Speaker 4 (37:29):
For more from cool Zone Media, visit our website cool
Zonemedia dot com, or check us
Speaker 5 (37:34):
Out on the iHeartRadio app, Apple Podcasts, or wherever you
get your podcasts.
Host
Ed Zitron
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