Bitcoin and cryptocurrency mining continues to represent a growing opportunity for semiconductor manufacturers, and more big players are entering the space to manufacture mining processors that are faster and use less electricity.
Cryptocurrency such as Bitcoin, Litecoin and Ethereum must be “mined” and supported with costly mining machines. These complex computers run advanced algorithms and mathematical equations to verify transactions and keep a running ledger. Advanced crypto software helps to profit from it.
According to The Balance, a mining rig can cost between $3,000 and $10,000. They also use a significant amount of power with the average energy used to mine a single bitcoin running at least $3,000 in low-cost utility markets.
As a result, semiconductor manufacturers are in what Cryptoslate calls a “ASIC arms race” to produce more powerful and energy efficient mining rigs. In 2017, a spike in shares of Nvidia and AMD were partly attributed to a rise in the price of Ethereum. In 2017, demand from Ethereum miners created a temporary shortage of some graphics cards and estimated additional sales from the crypto demand were estimated to be as high as $875 million, according to Bloomberg.
Even though Bitcoin is very volatile and is trading at less than half of what it was in December, it is still an equipment-intensive industry. Canaan Inc, a leading cryptocurrency mining rig supplier is looking to raise up to $2 billion in an IPO, according to Bloomberg. The company sold more than 300,000 mining rigs last year alone.
The crypto influence on the semiconductor market has become so strong that Taiwan Semiconductor Manufacturing (TSMC) in April noted uncertainty over cryptocurrency mining due to lower values as one of the reasons for its weaker than expected guidance for the rest of 2018. These mining chips accounted for 4.5 percent of the manufacturer’s total revenue in the third quarter, contributed to $900 million in 2017, according to CNBC.com.
Samsung also announced in January it has begun manufacturing ASIC chips used to mine bitcoin and other cryptocurrencies. “Samsung’s foundry business is currently engaged in the manufacturing of cryptocurrency mining chips. However, we are unable to disclose further details regarding our customers,” a company spokesperson told TechCrunch.
While crypto mining semiconductors would pale in comparison to the company’s phone semiconductors, the entry of a big-name player into the market was considered a notable event. Intel is also set to enter the space but recently announced a delay in the production of its 10nm units until 2019.
Patrick Moorhead, founder and president of Moor Insights & Strategy, wrote in Forbes.com that while cryptocurrency mining ASICs existed in the past, they were low volume and very expensive. The only way for prices to fall is to reduce the cost of producing the chips which are manufactured in semiconductor fabs (fabrication plants) with a mix of power, performance or price.
“With the right fab process node at the right semiconductor fab, ASIC miner manufacturers could significantly drive down the price of ASIC mining machines, and ultimately the cost of mining for everyone,” Moorehead said.
Many analysts have said that Bitcoin’s extreme energy consumption is its Achilles heel. Ars Technica noted that Bitcoin mining could consume 7.7 gigawatts by the end of 2018, roughly half of the world’s electricity consumption.