Since China made it clear in May of this year to crack down on Bitcoin mining and trading, a new round of clean-up and rectification of virtual currency mining farms has been launched across China.
As a significant power province, Inner Mongolia, dominated by thermal power, has always maintained an attitude of suppression. At present, some virtual currency mining-related companies have begun to seek to relocate their mining farms. Last month, Bit Digital was preparing to ship more than 20,000 miners from China to other countries.
On the other hand, the withdrawal of Chinese mining farms also means almost no room for development in the Chinese miner market. So, how do miner companies deal with the industry’s current situation with increasing supervision for miner companies?
Miner companies have “going out to sea” one after another, and self-operated mining is compliant.
Although China’s virtual currency mining industry has entered the retirement stage, the overseas business has also become the most significant profit growth point for miner companies.
On September 15th, Canaan Technology’s second-quarter financial report showed that revenue was US$168 million, a 2.6-fold increase from the previous month and a year-on-year increase of 507%; net profit was US$38 million, for comparison, a loss of US$2.605 million in the same period last year.
Canaan Technology said that the rapid increase in revenue comes from the increase in total sales. Starting in 2020, Canaan Technology has frequently received orders from outside China. For example, in August of this year, Mawson, a US-listed company, signed an order for 17,352 Avalon ASIC miners with Canaan Technology; in August, it also signed an order for 200,000 bitcoin miners with North American mining company Genesis.
According to the 2020 annual report of Ebang International, revenue was only US$19 million, a year-on-year decrease of 82.57%; from the perspective of revenue structure, 42.3% of revenue came from the sale of Bitcoin servers and related accessories, and 48.1% of revenue came from server hosting services. From the perspective of the sales market, the sales revenue of Ebang International in the Chinese market will account for 99.8% of the total revenue in 2020, and the overseas market will only account for 0.2%. Therefore, this year’s top priority is to start a business in other countries as soon as possible.
In June of this year, Canaan Technology started its self-operated mining business in Kazakhstan, and the first batch of miners have already been put into use. Furthermore, to comply with regulatory requirements, Canaan Technology has also established the primary operating entity of its self-operated mining business in Singapore. Zhang Nangeng said that the scale of self-operated mining would be expanded under the premise of legal operation in the future.
Ebang International also mentioned in its annual report that in 2020, it set up a wholly-owned subsidiary in Singapore to prepare for the establishment of transactions and successfully launched the virtual currency trading platform Ebonex in April this year.
The world’s largest miner company, Bitmain, announced on July 27 this year that it would divest its mining pool brand Antmining Pool and move the business overseas.
Going to sea has become the preferred strategy for miner companies and even the mining industry to deal with regulation.
Will the transformation to AI chips be the ultimate destination of miner companies?
Miner companies generally design as efficient ASIC chips as possible for different virtual currency characteristics for the ultimate hash rate. Bitmain has stated that ASICs are more straightforward to design than CPUs and GPUs, and are more suitable for implementing deep learning algorithms. So, in addition to the miner, they also introduced ASIC chips for artificial intelligence.
Some people in the industry said that Bitcoin miner chips and AI chips are connected to the underlying technology from a technical point of view. Still, the scene is more fixed, and it is purely a comparison of hash rate and energy consumption.
However, for Canaan Technology and Bitmain, the ratio of AI chip revenue to total revenue may not be ideal. According to Bitmain’s 2018 prospectus, miner sales and other virtual currency businesses accounted for 99.9% of total revenue. That is, AI chips have not yet been commercialized.
Canaan’s financial report for the second quarter of this year shows that the company’s overall sales of AI chips have achieved an order of magnitude growth, with an increase of 335% over the same period last year in the first half of this year. Since the beginning of 2021, Canaan Technology has shipped more than 26,000 chips to the US company VergeSense, and the confirmed demand next year will reach more than 80,000 chips. However, from the perspective of revenue structure, miners and virtual currency businesses still dominate, and AI chip revenue is embarrassing.
According to statistics, in 2018, Canaan Technology’s miner product revenue was US$420 million, and AI product revenue was only US$46,500; in 2019, miner product revenue was US$220 million, and AI product revenue was US$403,000. Therefore, behind the high growth of Canaan Technology’s AI chips is a very low base.
From the current point of view, although miner companies have all made high-profile bets on AI chips, the effect seems to be unsatisfactory after several years of development. The performance of miner companies is overly dependent on the virtual currency market, but the virtual currency is easily affected by the policies of the regulatory authorities of various countries. To maintain long-term and stable development, due to technical interoperability, the development of AI chips is the best “shortcut” for miner companies to open up new businesses.