In a statement and interview provided to TechPowerUp, watercooling specialist EK Waterblocks has announced a severe, 25% cut to its workforce. Citing lower than expected sales volume for watercooling components, around 60 of its current 200 employees based in Slovenia, the company's home base, will be dismissed. In addition, the company's 1Q2022 report outlines a 20% reduction to its quarterly earnings since October 2021, a far cry from the company's 30% growth between 2020 and 2021.
The move stands as a step back for the company, resetting its 2021 development, which led to the addition of 64 employees to its roster thanks to five consecutive years of sustainable revenue growth. EKWB even received the Golden Gazelle Award by the Slovenian chamber of commerce to recognize its management success.
EKWB seems to be cautiously approaching current and future market dynamics. In its statement, EKWB justifies its decision based on lower than expected consumer spending, which it attributes mainly to the COVID-19 pandemic, the industry's logistics and supply issues, and spikes in PC hardware prices. EKWB CEO Matjaž Krč goes further, citing the pandemic's possible sociological impact on consumers' consumption priorities as they opt to spend more on outdoors experiences and products than those that would keep them mostly indoors (such as gaming).
There is one possible cause that EKWB didn't attribute to its lower than expected revenue: GPU market dynamics following the crushing availability issues in the latest, Best Graphics Cards from AMD and Nvidia. These graphics cards are the prime candidates for EKWB's product portfolio. So it stands to reason that increased pricing on GPUs would hit the sales of specialist aftermarket add-ons due to the additional strain on consumers' budgets.
While GPU sales have experienced record-breaking revenue (something Nvidia almost provocatively touted to its investors), a significant portion of those sales were attributed to cryptocurrency miners. These customers generally don't upgrade their GPU cooling solutions due to both the nature of Ethereum mining's workloads (partial to VRAM) and the additional overhead placed on recouping their hardware investments. Scalping also does little to aid the situation, as it drives GPU purchase costs up, potentially locking consumers out of costly - yet ultimately dispensable - GPU hardware upgrades such as the waterblocks EKWB manufactures.
EKWB stated that its workforce cut has been designed to prime the company for further, sustainable growth whilst shielding it from the current market dynamics. Rampant energy and commodity prices in Europe will likely maintain a downwards pressure on the company's sales for some time.
It seems safe to say that the longer the Russian-Ukraine conflict lasts, the more specialist PC hardware companies such as EKWB will suffer. While specialists expect the industry-wide shortages to disappear throughout 2022 and towards 2023 on the back of demand adjustments, consumers spending less won't do companies such as EKWB any favors.