After Postponing Its IPO Listing, Bitmain Could Launch New 7nm Chip Miners

News and Analysis

Despite calling off plans to go with its IPO application at the Hong Kong Stock Exchange, the beleaguered mining giant Bitmain Technologies is reportedly looking forward to the Bitcoin halving in May 2020. The company hopes it will boost the sales of its new 7nm chip miners planned to launch by the end of this year, South China Morning Post writes.

According to publication, the Beijing-based company is betting that its next flagship product will turn out to be a winner in the mining gear market, capturing an expected Bitcoin price rally. Citing a company source familiar with the matter, the publication says that the launch of yet another new Bitcoin mining rig by the end of 2018 will be the first time that Bitmain has put its 7nm chips into full-scale production.

Last November, Bitmain rolled out two new models known as the S15 and T15 – the first major update to its Bitcoin miner product line in nearly 2.5 years, as well as the first time it put its 7nm chips into test. By then its smaller rivals like Canaan Creative had caught up with their own 7nm chips, prompting analysts including Bernstein’s Mark Li to conclude that Bitmain “may be gradually losing technological edge” before its IPO application.

Now Bitmain is reportedly planning to release new S17 and T17 Bitcoin miners, powered by the second generation of 7nm chips, which are about 30 per cent more efficient than the first generation.

It was the same strategy Bitmain pulled off in 2016, the SCMP’s source said, when the company launched its Antminer S9 model on the eve of Bitcoin’s last halving. The following year, the S9 accounted for an estimated 60 per cent of shipments among all Bitcoin mining hardware.

However, since the demand for mining rigs is still low, and because Bitmain’s chip supplier, Taiwan Semiconductor Manufacturing Co (TSMC), has no capacity available for its 7nm chips for now, both the 15 and 17 series are only transition products, the source added.

A TSMC spokeswoman declined to comment; Bitmain, while refraining from commenting on the issue, referred to its previous statements about the company’s adjustments.

Bitmain Delays Hong Kong IPO

Earlier this week, Bitmain has postponed its stock market listing after failing to gain approval from the Hong Kong stock exchange (HKex). Bitmain filed last September for an initial public offering on HKex, but the company said Tuesday that its six-month application period had expired without receiving approval.

“We will restart the listing application work at an appropriate time in the future,” the company said on its website.

The Hong Kong exchange has not revealed details about its review process. Many suspect that the bourse questioned the stability and sustainability of the crypto-mining sector.

“We do recognize that despite the huge potential of the cryptocurrency and blockchain industry, it remains a relatively young industry which is proving its value,” Bitmain said. “We hope regulatory authorities, media and the general public can be more inclusive to this young industry.”

Bitmain said it has taken steps for “rationalization and optimization,” including job cuts and a leadership change. The company also has integrated chip design, hardware and software operations.

Bitmain’s IPO listing was predicted to be the world’s largest crypto-related IPO, but the collapse of the application added to the news of the company’s economic retrenchments.

Samson Mow, CSO at Blockstream and one of the Bitmain’s starkest critics, stated that Bitcoin halving would not help Bitmain’s case if they were still around in May 2020. Mow argued that Bitmain’s main issue was not its failed IPO listing, but the non-competitiveness of Bitmain’s mining machines in the market.

Mow had previously explained that Bitmain’s previous marketing info was misleading. The Antminer S9 chip launched in 2016, for instance, was initially touted to be 75J/TH. However, the mining chip itself ran at 98J/TH, which accounted for a 30% increase in power consumption.

Samson Mow further raised concerns about both S15 and S17 chip’s efficiency.

The CSO of Blockstream stated that S15’s efficiency was 57 J/TH, whereas it was claimed to be 42 J/TH when announced. Now, Bitmain claims the efficiency of S17 to be 30J/TH. According to Mow, however, it will likely be closer to 41 J/TH, which is similar to Ebang’s E11++ miner chip. The advantage E11 held over Bitmain’s miner was that it was cheaper since it used 10 nm chips.

Mow believes that the S17 is likely to go down the same path as the S15 and that it would be sold at a loss like the giant’s previous products.

Focus ob Customers

The biggest change yet comes at the very top of the company. In December Jihan Wu and Micree Zhan, the two co-founders, stepped down from their roles as co-CEOs, replaced by Wang Haichao, who played a key role in expanding Bitmain’s supply chain capacity in 2017. The decision was announced in the company’s statement on Tuesday.

Zhan has a 37 per cent stake in the company, compared to Wu’s 21 per cent, according to its IPO filing.

Wang’s appointment was a compromise because Zhan and Wu found it hard to narrow their differences on Bitmain’s strategic direction. Under current arrangements, Wu will be in charge of a new venture focusing on crypto-related financial services, according to people familiar with the situation.

Zhan, meanwhile, wants to take Bitmain on a different track, namely artificial intelligence. In 2017 Bitmain launched its first specialized AI chip under the brand Sophon, which is sold as part of a developer board or server for clients who want to train neural networks for specific tasks like facial recognition. In the IPO filing, Bitmain billed itself as a “strong contender in the AI chip industry”, one that could challenge the likes of Google and Nvidia. Still, non crypto-related business accounted for just 0.1 per cent of the company’s US$2.8 billion revenue for the first half of last year.

In Tuesday’s statement, Bitmain said that after Wang’s appointment Zhan and Wu will continue to guide the company’s “strategic development.” In fact, Zhan’s role will be the chair of the board, while Wu will serve as a director, according to the internal letter.

“2019’s focus is on customers,” the company said.

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