Bitmain’s Rapid Growth: The Latest Chip, Registration for IPO, & Acquiring Telescope
Beijing based mining giant Bitmain made a few sensations for the last couple of days. On September 26, an official publication document of Bitmain’s application proof was circulated on the internet. The material was required as a prerequisite for listing the company’s shares by The Stock Exchange of Hong Kong Limited or Hong Kong Exchange (HKEX). Although having the world’s largest and second largest Bitcoin mining pools regarding computing power, BTC.com and Antpool[1], the initial public offering (IPO) appeared to focus more on its chip design. “At the core of our cryptocurrency mining hardware business is the front-end and back-end of ASIC chip design, the major links in the product development chain for cryptocurrency mining hardware.”[2]
In a 438 pages long draft form, Bitmain offered six critical strengths that outperformed it more than their competitors:
1. Leader in the global ASIC chip industry
ASIC or Application-Specific Integrated Circuit is an integrated circuit (IC) customized for a specific use; in this case, a high-efficiency Bitcoin miner is an ASIC. Bitmain’s innovation in ASIC enables users to enjoy a high computing power and great power-efficient mining hardware at affordable prices.
Being focused on the design of ASIC chips, according to Frost & Sullivan, Bitmain has successfully become[3]:
· China’s second largest and among the world’s top ten fabless IC design companies in terms of revenue in 2017
· The world’s fourth largest fabless ASIC chip design company in terms of income in 2017
Earlier on September 21, 2018, the co-CEO and co-Founder of Bitmain Jihan Wu introduced BM1391 as Bitmain’s next-generation ASIC chip for mining cryptocurrencies, complete with a new generation mining machines that would be launched soon. It is reportedly more efficient than the previous ones.
According to Frost & Sullivan, a business consulting firm, the global market size of ASIC chips in terms of revenue is expected to reach US$59.7 billion in 2022, representing a CAGR of 18.4% from US$25.7 billion in 2017[4].
2. Pioneer in the thriving blockchain ecosystem
As mentioned above, Bitmain is well-known for owning the world’s biggest and second biggest Bitcoin mining pools in terms of computing power. It is no doubt that Bitmain is one of the most leading blockchain and cryptocurrency companies.
Bitmain has released cryptocurrency mining hardware covering various significant cryptocurrencies, including Bitcoin, Bitcoin Cash, Ether, Litecoin, Dash, and Zcash. Its innovation in ASIC chip development has contributed a lot to the growth of the bitcoin mining market.
3. Strong contender in AI chip industry
Bitmain is one of a few AI chips companies in the world, including Google and NVIDIA that are capable of developing chips for cloud training and inference. Frost & Sullivan stated that the global AI chip market in terms of revenue increased from approximately US$0.2 billion in 2013 to roughly US$2.1 billion in 2017; representing a CAGR of 80%[5].
4. Outstanding research and development capabilities
As of June 30, 2018, Bitmain has built a strong research and development team of 840 full-time engineers, specialized in chip design, algorithm development, platform architecture, software, and hardware[6]. Bitmain has offices throughout China, including Hong Kong, and with global offices worldwide which optimize its research and development capabilities. Its mining facilities, for example, are spread all over China and the US.
Figure 1: Bitmain’s Mining Facilities
Data Source: BABI Finance
5. Close partnership with leading supply chain partners
Bitmain has established an excellent relationship with Taiwan Semiconductor Manufacturing Company Limited (TSMC), Advanced Semiconductor Engineering Group (ASE Group), and Jiangsu Changjiang Electronics Technology Co., Ltd (JCET).
6. Visionary management team believing in blockchain technology and AI
Led by Zhan Ketuan, with nearly 15 years of experience in IC industry and ASIC chips; and Wu Jihan, one of the world’s best cryptocurrency and blockchain leaders who translated Satoshi Nakamoto’s white paper “Bitcoin: A Peer-to-Peer Electronic Cash System” into Chinese in 2011. Besides that, Bitmain hires people from various discipline background who support its business, both on blockchain and AI technology. The youngest board member is only 26; showing how diverse it is not only by skills but also by age.
Figure 2: Bitmain’s Staffing Profile
Data Source: BABI Finance
Bitmain also went public with its profit where mining hardware sales contributed the most during 2015 — June 30, 2018 period; followed by proprietary mining in the second position[7].
Figure 3: Bitmain’s Profit 2015 — June 30, 2018
Data Source: HKEX
The crypto mining mammoth hasn’t stopped here to surprise the public this week. According to Coindesk, Bitmain announced its acquisition towards a bitcoin cash wallet called Telescope. Bitmain’s Head of International Press Relations and Communications Nishant Sharma, said that Telescope brought a “simple but key innovation” to the bitcoin cash ecosystem. “Browser-embedded cryptocurrency wallets are a promising technology. The Telescope development team is doing some very interesting work and we look forward to working together with them on the Telescope project and future bitcoin cash projects.[8]”
Having Telescope as one of its business units is a strong sign that Bitmain is still very fond of investing in bitcoin cash. The public has vastly questioned this move, especially since Bitmain owns almost 6% of the total bitcoin cash in existence. Alistair Milne, CIO at Altana Digital Currency Fund, predicted that related to Bitmain’s holding in bitcoin cash, Bitmain’s IPO wouldn’t be fruitful. “The Bitmain IPO is falling apart. As one experienced VC investor said to me, their heavy losses due to $BCH over-investment is “crazy drunkenness at a roulette table” Bitmain’s valuation is going to get hammered (if they successfully IPO at all).”
However, public sentiment over bitmain is quite the opposite of Milne’s statement. Sentiment Viz shows that Bitmain is still crypto enthusiasts’ favourite, marked by green dots that demonstrate excitement.
Figure 4: Sentiment Towards ‘Bitmain’ Keyword
Data Source: Sentiment Viz
[1] Bitmain. 2018. Bitmain Corporate Introduction. [https://www.bitmain.com/about]. Accessed October 1, 2018.
[2] The Stock Exchange of Hong Kong Limited. 2018. Application Proof of Bitmain Technologies Holding Company. [http://www.hkexnews.hk/APP/SEHK/2018/2018092406/Documents/SEHK201809260017.pdf]. Page 9. Accessed October 1, 2018.
[3] Ibid, page 154.
[4] Ibid, page 10.
[5] Ibid, page 7–11.
[6] Ibid, page 150.
[7] Ibid, page 9.
[8] De, N. 2018. Mining Giant Bitmain Acquires Bitcoin Cash Wallet Startup. [https://www.coindesk.com/mining-giant-bitmain-acquires-bitcoin-cash-wallet-startup/]. Accessed October 3, 2018.
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