Things You Know and Don’t about Bitmain, Threats from Rivals (II) – Innosilicon and Cambrian
Hitting the crypto miner market with a series of profitable products since 2013, Bitmain has become a dominant behemoth after its early-day competitor Friedcat mysteriously disappeared (which remains to be an unsolved mystery in the crypto space), and its Antminer had an edge over Canaan’s Avalon series in power efficiency back then.
While in the best of the past two years, Bitmain, as a fast-growing company, rolled out few eagerly-sought products after Antminer S9. It triggers our exploration on the state quo and future of Bitmain, as far as the entire crypto mining industry.
The past two years has seen bitcoin market in its very bulls as it achieved all-time-high at almost $20,000 in late 2017. Spurred by the great momentum, Antminer S9 were in great demand by eager miners.
During early 2017 to Q1 2018, Bitmain has sold more than 3 million miners (including 2 million Antminer S9), making 30 billion CNY in sales with net profit at around 60%. Its capacity has once accounted for over 10% of TSMC’s total in some month, ranking TSMC’s second largest Chinese client after Hisilicon.
As sales continues to climb, two facts worry us:
Technology update stalls
Products are out of date, and most of them fall behind its rivals technically, some even has twice of its rivals’ W/Ths.
1. BTC mining chip
Bitcoin mining chip remains to be the most critical revenue source for Bitmain. While since 2016, the company has experienced a serial failure with few success, according to people with knowledge of it,
- Feb.2017, 16nm bitcoin mining chip BM1X89 failed,
- Dec.2017, 12nm bitcoin mining chip BM1X90 failed,
- Mar.2018, 10nm bitcoin mining chip BM1X93 failed.
Under this background, Bitmain has to rely on Antminer S9 with BM1387 chip in the competitive mining manufacturing market since 2016, which actually has been surpassed by its rival miners in performance.
2. LTC mining chip
3. Dash mining chip
4. Zcash mining chip
5. ETH mining chip
6. SC mining chip
7. AI chip
Huge capital loss after chip failures
Eager to hit the market with new products, Bitmain purchased huge amount of outdated chip wafers or risk wafers which turned out to be failures one after another; it led to great losses estimated to be 6 billion CNY (US$879 million).
1. Two billion yuan loss from 1 million V9 miners
Sources told that in Q4 2017 during bitcoin bull run, mining machines were severely out of stock, and Bitmain placed an order of 1 million wafer on its BM1385 28nm chip claimed to be equipped in its new V9 miner. At that time, the industry (including TSMC) was very confused at this move as BM1385 had been out of date and off assembly line for over a year.
It was soon found out that V9 is exactly the same as its previous S7 miner, no one would like to buy it. As a result, more than 1 million V9 miners costing 2 billion yuan have been left behind in Bitmain’s warehouse.
2. One billion yuan loss from failed 12nm bitcoin mining chip
It was rumored that Bitmain took the risk to purchase untested risk wafer for 12nm bitcoin mining chip BM1X90. It failed again, at the cost of 1 billion yuan.
3. One million 10nm BM1X93 wafer
At the beginning of 2018, Bitmain continued to make big bets. It was said that Bitmain spent 3 billion yuan ordering 1 million risk wafer for its 10nm BM1X93. Once again, it failed.
4. The future of Bitmain
As we mentioned, the core competency of a chip maker lies in the R&D team. The early success of Bitmain stems from the booming market and the idea of adopting advanced technology. However, once its rivals also adopt advanced process, its advantage becomes less obvious (e.g. Antminer S5 vs Friedcat’s BE300).
It explains why Bitmain has been faltering in developing eagerly-sought products in these two years, but starting to look to artificial intelligence (AI). A thing for sure is that power efficiency is also of great significance in AI chip design, and Cambrian has took the lead in it.
It remains to be seen whether its Pre-IPO and IPO underway could support Bitmain to go far.