A mysterious Chinese start-up, which dominates the bitcoin mining industry, has probably billed as much as the chip giant Nvidia last year. Based on conservative estimates of a gross margin of 75% and an operating margin of 65%, Bernstein analysts calculate that Bitmain has achieved an operating result of 3 to 4 billion dollars in 2017. In contrast, the team in the United States United of the institute shares Nvidia's profit of around $ 3 billion for the same period.
"But Bitmain achieved this goal in just four years, Nvidia in 24", analysts pointed out in a report published last Wednesday. Bitmain was founded in Beijing by Micree Zhan and Jihan Wu, a very popular figure in the bitcoin universe, in 2013. Since then it has grown to become one of the main companies involved in mining, the process of exploiting computing power aimed at bitcoin generation.
Bitmain now sells mining rig Antminers that can cost from several hundred to a few thousand dollars each, and runs "mining pools", in which participants collaborate on bitcoin mining to reduce costs. As a result, Bernstein estimates that it accounts for 70-80% of the market share of miner and asic.
According to analysts, most of Bitmain's revenue was generated through the sale of mine equipped with its own chips. "The rest comes from mining itself and, to a much lesser extent, from mining pool management costs and from mining power rental in owned farms through cloud services." Much of the revenue growth related to the mining business is the result of the exponential increase in bitcoin prices, says the Bernstein report. Moreover, "Bitmain sharply adjusts the price of minerals based on the quotation of bitcoins". So, when bitcoin jumped to nearly $ 20,000 at the end of last year, Bitmain's AntMiner S9 came close to $ 5,000 while production costs remained the same.
To reach the final figure of an operating result of between 3 and 4 billion dollars, the analysts of Bernstein also examined the purchases made by Bitmain at Taiwan Semiconductor Manufacturing, and they deduced that the start-up contributed 2 to 3% to the total revenue of the chipmaker last year. "In 2018 Bitmain will probably head the asic industry and move to 10-nm chips and the most advanced 7-nm chips," the report said. "So in 2018 it will become one of the top five users of TSMC 7nm, with a demand comparable to that of Qualcomm, HiSilicon or AMD".
According to the analysts of Bernstein, the Chinese company can also count on a "massive liquidity" that should help in the lean periods for the sector. And in the main bitcoin mining business, it defends itself from potential serious losses due to speculation by selling chips to miners, rather than totally accepting the mining process. "Some money remained to customers, but also many risks," says the report. "The results, in our opinion, have been remarkable".
Have a good day my friends,
Musclenerd ;)