Miners used to mine bitcoins via CPU of PC at the birth of bitcoin. Simply downloading a software, “puzzles” then could be solved automatically and bitcoins’ awarded. However, the price of bitcoin spiking 1300% close to $20,000 in 2017 greatly boosted the mining enthusiasm. As bitcoiners flooding in and hashing power online keeping increasing, the difficulty of mining went up as well, and hashing power sees explosive growth. Bitcoin mining chip thus progressed from CPU to GPU and now customized ASIC chip.

Mining chip is the key

China’s miner companies stand out from the race of hashing power. The big three- Bitmain (Antminer), Canaan (Avalon) and Ebang (Ebit) are producing the most mining machines needed by the crypto world. According to relevant data, the China-based top three producers of crypto mining machine have accounted for at least 95% of global market share. Bitmain contributes around 80% and Canaan’s 15%.

Canaan’s annual net profit was 2.24 million for year 2015, and 300 million in 2017 with increase of 125 times brutally in two years. The company is filing for listing its shares on NEEQ (National Equities Exchange and Quotations) know as China’s over-the-counter exchange for growing enterprises. As of the end of April 2017, it has sold about 160,000 mining machines of Avalon series and accounted for 22 % of the global bitcoin hashing power.

As the world’s largest mining rig producer, Bitmain’s chip sales in 2017 reached a staggering 14.3 billion yuan ($2.3 billion) and it has leaped to the second largest IC design company in China after HiSilicon. Bitmain and Canaan reportedly partner with Taiwan Semiconductor Manufacturing Company (TSMC) to manufacture mining chips. Ebang announced to release E10 18T miner with Samsung 10nm chips which could boost E10 hashrate to 18TH/S. And TSMC’s first order in 2018 is said to mass produce 7nm processing chips for Bitmain.

An anonymous chip designer said,

“It is actually not difficulty to design a mining chip. What matters is the chip’s algorithm. Many chip companies have turned to produce mining chips, but there’s yet no standards in this area.”

Gu Wenjun, chief analyst of ICWise, stated,

“To design a bitcoin mining machine is in fact not a tough task, and there’s available IP algorithm used in the chip. It is the chip’s performance and power consumption that is fiercely competed, which relies on the most cutting-edge manufacturing techniques. In this sense, mining machine manufacturers are always the first ones to adopt the most advanced technology, such as TSMC’s 16 nm and 12 nm process, and Foundry’s 22nm FD-SOI.”

So, in the case that the chip design barrier is not high, why Bitmain’s mining machine could reside world first throne all the time? What’s his secret? The chip designer above explained,

“Because the algorithm has been changing all the time, Bitmain is at the same time making continuous effort to iterate, and then it can be a monopoly of the whole industry chain from chip making to terminal sales.”

Gu said that the strong leading position of Bitmain, to some extent, credits the volatility of bitcoin price for that. At a time when the price of bitcoin was low, many miners have been phased out, and Bitmain survived and continues to develop 28 nm mining chip and more advanced ones. For big manufacturers, it is not easy for them to take the step into mining industry for legal risks shall be fully considered. While for small companies, it is not easy for them to get the capacity of advanced process from the factory.

Chip demand are increasing

Bitmain and Canaan adopt the Fabless business pattern, centering on design and sale, leaving the production sector to TSMC, the famous world’s leading chip maker, who earns big bucket from iPhone’s chips. Mining chip orders also bring it a lucrative revenue.

As mining machines are of fast iteration and hungry for ASIC chips. For a Antminer S9 of Bitmain, the number of ASIC chips needed are 189, and Canaan’s A741 needs 88 ASIC chips. Along with the lower of power consumption caused by the improvement of chip process, the consumption of chips is gradually increasing.

TSMC’s Q3 2017 see revenue of $ 350 million - $400 million, which could basically represent the market scale of fabless mining chips. Data show that in Q4 of 2017, TSMC’s chip orders (16nm process) from miner companies like Bitmain take one fifth of the quarterly revenue.