The Remarkable Story: Bitcoin Mining is Advancing the Semiconductor Industry – Trustnodes

The Remarkable Story: Bitcoin Mining is Advancing the Semiconductor Industry

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Bitcoin mining might seem like a pointless exercise in solving zeros and ones, but it is the first industry to develop 7nm chips, beating governments and giant corporations in the process.

To tell their story, what follows is an astonishing Chinese article that has been very roughly translated from Chinese with little modification.

It tells the story of the bitcoin mining industry in China like never written before, and though it is a bit difficult to follow in places, we find it fit to print in full and with the Chinese accent:

At 850 AD, a mission led by Buddhist monk Wu Zhen set off from Dunhuang and took two years to finally reach the capital of the Tang Empire, Chang’an. In the Zichen Hall of Daming Palace, Wu Zhen brought a great news to Tang Xuanzong Li Chen who was far away thousands of miles away-Shazhou Guangfu. Since the beginning of the Anshi Rebellion, Tang Ting’s border defense was empty, and the Tibetans took the opportunity to occupy the land of Hexi. When the Zhang Yichao uprising in 848 recaptured Shazhou (now Dunhuang), the Tang dynasty lost this land for nearly a hundred years.

The Tang dynasty, who had fallen from its peak, was unable to send troops to support Zhang Yichao’s Guiyi Army. However, under the leadership of Zhang Yichao, Gui Yijun has regained more than ten states, including Gua, Yi, Liang, etc., with more than 4,000 miles of land, and a family of one million households. All the Tibetan forces were expelled from the Hexi Corridor Tang Weiyi. To commemorate Zhang Yichao’s historical achievements in recovering Hexi, the local people dug a large cave (now 156 caves) at Mogao Grottoes and drew the famous “Plan of Zhang Yichao’s Army Travel”.

However, for such a hero with great achievements, he was forgotten in the official history because he was far away from the Central Plains. Regardless of the old and new Tang books, or the history of the old and new five generations, there are only a few records of Zhang Yichao. The detailed historical materials about Zhang Yichao and Gui Yijun today are more from Dunhuang’s suicide note and inscriptions, which makes people sigh.

Time returns to modern times. In the context of global trade disputes, semiconductors have become the focus of attention of the people. Whether it is a national fund of hundreds of billions in size or more than 20,000 chip startups added in the past six months, it shows that The chip industry has become the sweet and sour in people’s eyes.

However, just as people only remembered the hundreds of rivers and rivers, the prosperous Tang Dynasty of Wuhua Tianbao, but forgotten the mountains and rivers, and returned to the Yijun Army for thousands of miles. In the current domestic hot chip industry, there is also a forgotten lone army. This lone army is a mining machine chip manufacturer represented by Bitmain and Jianan Yunzhi, which has created a record of mass production of the world’s first 7nm chip. Monopoly With nearly 90% of the global mining machine chip market share, as the top ten customers of TSMC, the order volume once exceeded that of Huawei HiSilicon; but it is also this lone army that has long been excluded from the ranking list of the domestic chip industry. Besides, it is not known to everyone, and there is no policy assistance.

Perhaps many people will sneer at mining machine chips that involve cryptocurrencies, but compared to the semiconductor industry that has spent a lot of money to support but still weak in the past thirty years, domestic mining machine chip manufacturers have defeated foreign countries in less than ten years. Many manufacturers have monopolized the global market share. What else is there to ridicule this lonely army?

The success of China’s mining machine chips is by no means low in the development of mining machine chips among some populations, otherwise why have foreign mining machine manufacturers been eliminated? This is no accident, because in addition to Bitmain and Jianan Zhizhi, there are many Chinese manufacturers such as Bitwei and Wuhan Xindong. In the field of mining machine chips, we can not only see legendary stories like Bill Gates dropped out and founded Microsoft, but also the wave of the era of the past decade.

1. The Ideal Age

In November 2008, more than a month after the outbreak of the global financial crisis, Satoshi Nakamoto published a famous paper in the MIT mail discussion group — “Bitcoin: A Peer-to-Peer Electronic Cash System”; then In January 2009, the genesis block of Bitcoin was dug on a small server in Finland, declaring the official birth of Bitcoin.

Time came in 2011, and Zhang Nan Geng, who was still in school at Beihang University, first came into contact with Bitcoin. At that time, bitcoin was still the era of GPU mining — in the bitcoin world, the miners with higher computing power, the more bitcoin they mine. To this end, Zhang Nan Geng, who has a professional background in circuit design, designed the world’s first FPGA mining machine. Subsequently, Zhang Nan Geng used the ID of “ngzhang” to promote his FPGA mining machine in the Bitcoin forum bitcointalk, and began to become famous in the industry.

However, FPGA mining machines are gradually unable to meet market demand, and people have begun to turn their attention to the field of application specific integrated circuits (ASICs). For this reason, in June 2012, the Butterfly Lab in the United States fired the first shot of the development of the Bitcoin ASIC mining machine. If the Butterfly Lab’s ASIC mining machine was successfully developed, most of the computing power of the Bitcoin network will be controlled by them. With the ability to launch a 51% attack, Bitcoin will no longer be safe.

In order to break the monopoly of Butterfly Lab, Zhang Nan Geng, who claimed to be “in order to defend the peace of the Bitcoin world”, also began to develop mining machines. However, at this time, Zhang Nan Geng was studying for a doctorate, and he was unable to focus on the research and development of ASIC mining machines with heavy academic tasks. To this end, Zhang Nan Geng made a bold decision — directly drop out of school and start a business.

At that time, the news of Butterfly Lab’s research and development of ASIC mining machine also reached another talented young man in China-Jiang Xinyu. Known as the “roasted cat”, Jiang Xinyu was admitted to the Junior Class of the Chinese University of Science and Technology with the 11th place in the country, and then went to Yale University for further study in 2011. At Yale University, Jiang Xinyu first encountered Bitcoin and quickly became interested in it. He also suspended school from Yale and registered his own company Bitfountain in Shenzhen in July 2012, focusing on the research and development of Bitcoin ASIC mining machine.

In the first half of 2013, Jiang Xinyu and Zhang Nangeng’s mining machines were successfully developed, and the first batch of mining machines was delivered. But at this time Butterfly Lab is still wandering around, the chip design problem can not be solved, and the delivery date is far away. In September 2013, Avalon mining machine chips achieved mass production and large-scale shipments, and soon 800,000 chips were put on the market; Jiang Xinyu’s roast cat mining machine also occupied 20% of the computing power of Bitcoin’s entire network at this time. , Becoming the biggest winner in the field of mining machine chips. At this point, the era of ASIC mining has officially arrived, and domestic mining machine chip companies have taken the lead in this field.

Over the years, looking back on this past, many people will find it incredible-chips have always been a weak industry in my country. But why are Chinese mining machine chip manufacturers so successful in the early days? In addition to the “harmony” factors of Zhang Nangeng’s “breaking the cauldron” and Jiang Xinyu’s “brilliance”, there are more two reasons: the particularity of the mining chip market and the demographic dividend of Chinese engineers.

(1) Particularity of the mining machine chip market

In the field of chip design, there has always been a misunderstanding in the market: the bottleneck of domestic chip design lies in backward technology, and taking the Huawei incident as an example, it is pointed out that my country is currently constrained by people in terms of EDA software and underlying architecture. However, before 2018, my country’s chip design companies were not greatly affected by the use of EDA software and the authorization of the underlying architecture, but the number of chip design companies that have grown up is still small.

In fact, the development bottleneck in my country’s chip design field is not only in the field of technical barriers, but more importantly is the lack of market support. The embarrassment of most chip design companies in my country is that the designed chips are not used by customers, and the problems of the chips must be continuously applied in practice to be discovered and solved.

Take Huawei HiSilicon as an example. In 2012, Huawei mobile phones began to carry chips designed by HiSilicon. However, the performance of HiSilicon’s K3V2 chip was extremely poor at the time, which caused the Ascend D series of mobile phones launched by Huawei to be criticized by consumers as soon as they were released: severe fever and slow loading. Even so, Huawei still chooses to insist on using HiSilicon chips and continuously optimizes them. By 2018, HiSilicon’s Kirin 980 chip performance has reached the world’s top. Without Huawei mobile phones’ unconditional support for our company’s chips, there would be no Huawei HiSilicon today.

Compared with Huawei HiSilicon’s accumulated product development, mining machine chip manufacturers are more fortunate, which mainly depends on the particularity of the mining machine chip market: first, most of the mining machine equipment at that time were GPUs, and the ASIC field was still a blank market. New products and new products that belong to the market; and large companies such as Nvidia and Qualcomm do not bother to enter the field, which allows new entrants to avoid competition with industry giants and have the opportunity to grow bigger and stronger.

Secondly, mining machine chips have strong financial attributes. Ordinary chips are mainly used for various production and living activities, while mining machine chips can generate cash flow income through mining. In terms of computing power, ASIC is hundreds of times higher than the GPU of the same generation. Higher computing power means higher mining income: at that time, an Avalon mining machine priced at 8,000 yuan was able to earn nearly 70,000 yuan in income every day through mining.

As far as ordinary chips are concerned, users are more concerned about the performance of the chip; but for the early mining machine chips, as long as the user can buy a mining machine, it means considerable profit, and the performance of the mining machine chip itself At that time, it seemed less important. Therefore, as soon as the ASIC mining machine is launched, it is immediately welcomed by the market, and the mining machine manufacturers can continue to optimize the mining machine chips while selling the mining machine, thereby forming a positive cycle.

(2) Demographic dividend of Chinese engineers

A large part of the success of Chinese mining machine chip manufacturers is due to the demographic dividend of Chinese engineers. The ASIC mining machine chip is essentially the hardware implementation of the SHA265 algorithm, and the design is not difficult. Especially in the early stage of 0-1, it does not require the participation of top talents in the field of integrated circuits. In the past two decades, colleges and universities in my country have cultivated a large number of talents with a background in science and engineering, forming a demographic dividend for the group of engineers. According to official statistics, the number of graduates of science and technology in my country has risen from 20,000 per year in 2000 to 200,000 per year in 2018, with a compound annual growth rate of nearly 25%.

The large group of engineers in the past decade may not be the top in the industry, but it has obvious advantages in labor cost and efficiency. This was fully reflected in the early competition with the American Butterfly Laboratory. At the beginning of the ASIC mining machine proposal, the domestic Avalon mining machine used 110 nm process technology, the roast cat mining machine used 130 nm process technology, and the butterfly laboratory in the United States used 65 nm process technology from the beginning. As recalled by those who experienced it at that time: Compared with the domestic developers who are suffering from high fever, they develop the mining machines around the clock; the developers in the United States are all people who love life and will not focus their energy on the development of mining machines. Butterflies has been open for booking since June 2012, but there has been no delivery until a year later, and domestic mining machine manufacturers have begun mass shipments at this time.

2. The Industrial Age

In 2013, the mining machine chip market belonged to the “Gemini” era of Zhang Nan Geng and Jiang Xinyu. Domestic mining machine chip manufacturers relied on the engineer dividend to get the lead on the starting line, but this advantage is not solid because of the design of the mining machine chip at the initial stage. The difficulty is not great, and the entry barrier is very low. Due to the high profits of the early mining machine market, many new mining machine manufacturers have emerged in the country, and a lot of foreign manufacturers such as Russia, Sweden and Japan are watching. In the fierce market competition, how did domestic manufacturers win the final victory? This has to talk about a famous company-Bitmain.

Compared with the prestigious Bitmain, the experience of its founder Wu Jihan is also legendary. Wu Jihan, a graduate of Peking University in economics, worked in the financial industry in his early years. Since 2011, he has paid attention to Bitcoin and has done a lot of work for it: becoming the moderator of the Bitcointalk Chinese community, the first time he will be Satoshi Nakamoto’s Bitcoin paper Translated into Chinese, and the science fiction writer Chang Keng established the first bitcoin information exchange platform in China-Babbitt. In April 2013, Wu Jihan, who saw the right timing, resigned from the financial industry and established Bitmain with the Jenke group with a background in IC design.

Under the leadership of the Zhanke regiment, Bitmain quickly developed a 55 nm mining machine chip, and launched the Ant S1 mining machine in November 2013. With its excellent performance, Bitmain quickly occupied a part of the market share. However, the good times are not long. In December 2013, the cryptocurrency market began to enter a cold winter. The price of Bitcoin fell from the peak of $1,100 to the lowest point of $200.

In the long winter of 2014, the mining machine market was also greatly affected, and a large number of mining machine manufacturers closed down. The “genius boy” Jiang Xinyu also did not survive this winter — Jiang Xinyu launched the third generation chip BE300 in early 2014, but there were serious quality problems, which led to the slow sale of the chip, and Jiang Xinyu, which suffered serious losses, then disappeared from people’s vision. .

Unexpectedly, Bitmain began to rise in the cold winter: Ant S2 mining machine began to sell in April 2014; Ant S3 mining machine was launched in July; Ant S5 mining machine was mass-produced in December; in November of the second year The successful development of the Ant S7 mining machine…Under the fierce offensive of Bitmain, when the market gradually recovered in the second half of 2015, people were surprised to find that almost only the Antminer of Bitmain remained in the mining machine market. In 2015, Bitmain’s annual net profit reached 334 million yuan, making it a well-deserved industry giant.

Why can Bitmain achieve such great success? Many people think that the design of mining machine chips is low, which was true at the beginning, but as the mining machine market gradually matures, chip design has begun to show a trend of specialization and industrialization. The special feature of the mining machine chip is that it is mainly used for parallel computing, so the computing power is not so important. The key is the power consumption of the chip-for the two mining machines with the same computing power, who consumes less power, then Whose electricity cost is lower, and thus has an advantage in the market.

To this end, after a series of explorations, the developers of Bitmain have discovered a standard unit suitable for a large number of tubes with dynamic logic area. The special feature of this standard unit is that its trigger is dynamic. Compared with the static logic flip-flop, the advantage of the dynamic logic flip-flop is that its area and power consumption are half of the former.

Similarly, during this period, Yang Zuoxing, a Ph.D. graduate of Tsinghua University, began to join Bitmain as a part-time job, and brought a fully customized methodology. As we all know, current chip design relies on EDA (Electronic Design Automation) tools, and fully customized methodologies break this model. The fully customized methodology adopts customized and artificial design in the three design links of RTL designed fab cell library, logic synthesis and layout, and every detail design strives to be meticulously carved. Despite this inefficiency, all aspects of the chip have been custom designed, resulting in a significant increase in the power consumption × area optimization ratio of the chip.

Under the dynamic logic scheme and fully customized methodology, Bitmain completed the research and development of the Ant Miner S7 series (28 nm) and S9 series (16 nm) in 2015. The performance of these two models is far superior to other manufacturers, and the cost of their products is only half of that of their competitors.

The chip design industry is characterized by its special market structure. For the general industry, low-end products occupy most of the market share, but high-end products have a lower market share. What is special about the chip market is that there is often a “winner takes all” situation.

With the successful sales of ants S7 and S9, Bitmain has become a giant in the mining machine chip market, occupying more than 80% of the market. Under the strong technical advantage of Bitmain, foreign mining machine chip manufacturers have been out of business: in 2014 and 2015, high-profile KNC, bitfury, Spondoolies-Tech, 21 Inc. all soon declared bankruptcy or withdrew from the mining machine chip market. With the turnover of Bitmain’s employees, dynamic triggers and fully customized methodologies have gradually spread to other domestic chip manufacturers, but related technologies are still retained in China. In 2017, the Japanese GMO company wanted to enter the mining machine chip market, but its outdated technical design simply could not compete with domestic manufacturers, and soon withdrew from the market due to losses.

At this point, the mining machine chip market has become the world of Chinese manufacturers. Data show that in 2017, China’s three major mining machine manufacturers, Bitmain, Jianan Yunzhi and Yibang International, monopolized nearly 90% of the global market share, and the rest were also used by other Chinese companies such as Wuhan Xindong, Bitwei, etc. Manufacturers share.

3. The Age of Capital

In 2017, Bitcoin ushered in a bull market, with a year-on-year increase of up to 1700%. The huge investment income has attracted the attention of the world. For a time, bitcoin and blockchain became the hottest topics in the market. Many blockchain companies were born like mushrooms. The A-share market saw the rise of “blockchain concept stocks.” The venture capital circle also began to rise. “All in Blockchain”, as the most profitable mining machine manufacturer in the industry has also become a hot company.

In December 2017, when the market was the craziest, Bitmain’s sales were treated like stars, and customers gave gifts to the sales and invited guests to dinner, just to get orders for ant mining machines. The order has been placed in the spring of the second year. According to Frost & Sullivan’s data, in 2016, the market size of ASIC mining machines was only 700 million U.S. dollars, and by 2017 its market size reached 3 billion U.S. dollars; of the mining machine delivery volume that year, Bitmain 940,000 mining machines were sold, Jianan Yunzhi 290,000 units, Yibang International 50,000 units, occupying 88% of the global market share. Under this circumstance, mining machine companies have begun brewing for listing.

On September 26, 2018, Bitmain officially submitted the prospectus to the Hong Kong Stock Exchange, plus Jianan Yunzhi and Yibang International respectively went to Hong Kong to submit listing applications in 2018, and for a while, the mining machine chip company occupied the capital Market headlines, and the outside world can finally glimpse the business revenue of these mysterious mining machine manufacturers. Of course, the results are unexpected and its operating performance is better than most A-share listed companies in the same industry.

In terms of operating income, Bitmain’s revenue reached 16.452 billion yuan in 2017, and the highest operating income of A-share semiconductor companies listed in the same period was 26.158 billion yuan from Trina Solar. Therefore, from the perspective of revenue ranking, Bitmain will rank fourth among all A-share semiconductor listed companies, which is lower than the second place of Changdian Technology’s 23.85 billion yuan and the third place of Ninestar’s 21.3 billion yuan, but higher than Longji shares of 16.36 billion yuan.

From the perspective of net profit, Jianan Yunzhi and Bitmain have maintained a net profit growth rate of more than double for three consecutive years. In 2017, Bitmain’s net profit reached 4.583 billion yuan, Jianan Yunzhi’s 361 million yuan, and Yibang International’s 385 million yuan. If ranked together with listed companies in terms of net profit, in 2017, Bitmain’s net profit can be proud of the entire semiconductor industry — the highest net profit among A-share semiconductor listed companies in 2017 is Longji, but its net profit is only 3.549 billion. Yuan, a net profit of nearly 1 billion yuan less than that of Bitmain.

However, because the blockchain business is too advanced, the HKEx has doubts about the continued operating capabilities of the mining machine manufacturers, and finally rejected the listing applications of the three major mining machine manufacturers. The blockchain company’s first attempt to go public went out of business. Then the three major mining machine giants turned their attention to the U.S. securities market: On November 21, 2019, Jianan Yunzhi successfully landed on NASDAQ in the United States and became the world’s first blockchain-listed company; in June 2020, Yibang International successful listing in the United States; according to related reports, Bitmain is also preparing to go public in the United States.

(Hangzhou City’s light show to celebrate the listing of Jianan Yunzhi as the “first block in the global blockchain”)

The ups and downs of the mining machine manufacturers have not reached the end with the listing in the United States. In the near future, they will continue to express their own glory. Perhaps many people will disdain this, thinking that the miner chips are worthless except for the mining of encrypted digital currencies. This kind of erroneous view that is quite popular in the current market, but many people do not realize that the value and significance of the mining machine chip to the semiconductor industry is no less than that of the national integrated circuit fund with hundreds of billions of scale, at least reflected in the following three aspects:

(1) Cultivation of talents in the semiconductor industry

The problem with my country’s chip industry is that the industry itself is a talent-intensive industry, but it is far from attractive to talent. According to the survey of “White Paper on Talents of China’s Integrated Circuit Industry (2018-2019)”, there were 8.2 million college graduates in China in 2018, and the total number of graduates in integrated circuit-related majors was about 199,000, but only 38,000 integrated circuit-related majors Of graduates enter the industry, that is, only about 19% of graduates enter the semiconductor industry.

The main reason is that the salary level of the chip industry is not high. According to statistics, among the listed companies in China in 2019, the average salary of executives in the financial industry was 22.8 million yuan, the real estate industry was 14.78 million yuan, and the semiconductor industry was only 9.541 million yuan. Without a competitive salary in the market, it is impossible to attract talents, so there is a large talent gap. According to the “White Paper”, there is still a gap of 261,000 people in China by 2021.

In comparison, the average salary of the blockchain industry where the mining machine manufacturers are located is very high. According to the relevant data of Liying.com, the average annual salary of technical posts in the blockchain industry in 2019 is 384,000 yuan, which is higher than the 201,000 yuan in the Internet industry. Compared with before 2018, the treatment of the semiconductor industry is much lower than that of the Internet industry, resulting in the majority of integrated circuit graduates flowing into the latter, and the rise of the field of mining machine chips has attracted a large number of excellent talents to devote themselves to the design of mining machine chips. The field includes Yang Zuoxing, the founder of the current bit micro company we introduced earlier.

There is no doubt that the mining machine chip manufacturers, especially in the “national learning core” in 2018, before the upsurge of chip localization, their generous salary treatment has retained a large number of chip design talents for my country’s semiconductor industry. Even more commendable is that, compared to university researchers who have never been in contact with the “striping” link, mining machine chip manufacturers provide an excellent platform for China’s chip practitioners, whether it is the world’s leading 7nm process or the most advanced. The advanced 5nm process can be involved in the design and testing at the first time, and a lot of knowledge and experience have been accumulated in the “dry middle school”.

(2) Technology accumulation in frontier fields

A big misunderstanding of many people’s mining machine chips is that their accumulated technology is not useful in other fields. This view may have been correct in the past, but at the time when artificial intelligence is rising and Moore’s Law is becoming invalid, these technologies have shown great value and use.

The first is in the field of artificial intelligence. Due to the increasing demand for edge computing, AI has begun to move from “cloud” to “terminal”. In all kinds of platforms, the CPU is good at control, and its design determines that in order to reduce the waste of computing power during data transmission at work, it needs to accumulate a certain amount of data before calculating, which cannot meet the strong real-time nature of AI needs; GPUs only use part of the computing resources while burdening high power consumption. Whether it is in the cloud or terminal, it is not an option with a good energy consumption ratio. Therefore, in high-performance, low-power terminals, ASIC chips are becoming increasingly popular. In addition to being unable to expand, ASIC chips have advantages in power consumption, reliability, and volume.

For this reason, market analysis generally believes that with the development of edge computing, ASIC will become the core of future AI chips. The Ovum survey report pointed out that in 2016, the cloud (including enterprises, data centers, etc.) is the main revenue field of deep learning chips, accounting for 80%, but by 2025, this proportion will change, and the edge will reach 80% %, and the proportion of the cloud is reduced to 20%, ASIC’s market share is expected to rise significantly as the demand for edge computing increases. It is expected that the market share of ASIC will increase significantly from the current 11% to 48% by 2025.

At present, mainstream ASICs on the market include TPU chips, NPU chips, VPU chips and BPU chips. Due to the long development cycle of ASIC, only large manufacturers have the funds and strength to conduct research and development, and Bitmain is the leader among them, and has accumulated a lot of technology and experience in the research and development of mining machine chips. In addition, Jianan Yunzhi, Yibang International and other manufacturers also have plans for the AI ​​field.

Another application of mining machine chip accumulation technology is in the field of “Moore’s Law”. In the 1970s, Intel founder Gordon Moore proposed that “when the price is unchanged, the number of transistors that can be accommodated on an integrated circuit will double every 18-24 months.” At the same time, computer performance will usually double. However, since 2011, Moore’s Law has been difficult to continue. To this end, many semiconductor companies and professional institutions, including Intel, have pinned their hopes on “architectural innovation” to achieve “surpassing Moore”.

“Full customization methodology” in the field of mining machine chips is a brand new “architectural innovation” direction: Ant S7, Ant S9, Shenma M3, Shenma M10 designed by Yang Zuoxing using a fully customized methodology, each generation of mining machine Compared with the mining machine chips designed by the traditional method with the same process technology, the launch of the power consumption has been improved by more than 4 times in terms of power consumption × cost optimization ratio. This is far beyond the improvement brought by simply relying on advanced process technology. Therefore, as Yang Zuoxing said frankly, the fully developed methodology has brought about innovations in chip design, and it is expected to continue to advance Moore’s Law for 5-10 years.

(3) Promotion of domestic semiconductor industry

In April 2020, Changdian Technology, an A-share listed company, announced that Wuhan Xindong Technology Co., Ltd. filed a lawsuit with the Wuxi Intermediate People’s Court due to unsatisfactory packaging quality, and claimed 175 million yuan from Changdian Technology. It is worth noting that according to the financial report, the annual net profit of Changdian Technology in 2019 is only 89 million yuan.

Many people said it was incredible when they saw this news. This unknown Wuhan Xindong Company can actually claim the net profit of Changdian Technology for nearly a year. In fact, Wuhan Xindong is also a mining machine chip manufacturer in China, but it is smaller and more low-key than the market giants such as Bitmain and Jianan Yunzhi.

Of course, many people have also realized that the status of miner chips in our semiconductor industry chain has been underestimated through this matter. It is the downstream wafer manufacturers and testing and packaging plants that have played an important role, especially in advanced In the field of process technology, its role is more important.

Since 2017, Bitmain and Huawei HiSilicon have become TSMC’s two largest customers in mainland China. In October 2017, TSMC announced business revenue for the third quarter. Shockingly, demand from mining machine chips increased TSMC’s third quarter revenue by US$350 million to US$400 million. Even because the mining machine chip had a squeezing effect on Huawei HiSilicon’s Kirin chip production capacity. According to reports from Jiwei, Bitmain’s orders for TSMC’s 10nm process in December 2017 exceeded Huawei’s HiSilicon Kirin chip.

Such phenomena can also be found in financial data. According to the prospectus and financial reports of the three major mining machine companies, from 2015 to 2019, the sales costs of Bitmain [footnoteRef:1], Jianan Yunzhi and Yibang International reached 8.324 billion yuan, 1.939 billion yuan and 949 million yuan. Among the various costs of mining machines, wafer manufacturing costs are about 75%, and packaging and testing costs are about 15%. From this, we can calculate that the three major mining machine manufacturers spend on wafer manufacturing and packaging in each year The cost, as shown in the figure below, in the wafer manufacturing field, the cost of the three major mining machine manufacturers increased from 392 million yuan in 2015 to 8.409 billion yuan in 2019; the cost of testing and sealing increased from 78.48 million yuan in 2015 to 2019 1.681 billion yuan a year, the compound annual growth rate has more than doubled.

Take Changdian Technology, which provides sealing services for the three major mining machine manufacturers as an example. Changdian Technology is the largest domestic and the world’s third largest sealing manufacturer. According to the financial report, the operating income of Changdian Technology in 2019 was 23.526 billion yuan, and the net profit just turned into a profit, reaching 97 million yuan. Even so, most of Changdian’s profits actually come from government subsidies. In 2019, Changdian Technology disclosed a government grant of 103.587 million yuan. Similarly, in the three years from 2016 to 2018, Changdian Technology’s net profit was 106 million yuan, 343 million yuan, and -939 million yuan, corresponding to The government subsidies included in the current profit and loss amounted to 207 million yuan, 351 million yuan, and 155 million yuan. This also means that Changdian Technology, the world’s third-largest sealing manufacturer, largely relies on government subsidies to survive.

Obviously, for the mining machine chip, which has reached a billion level and is still growing rapidly, it is very important for domestic sealing and sealing manufacturers.

Similarly, in the field of wafer manufacturing, due to the large-scale, high-performance and low-power calculations required for mining machine chips, the demand for advanced manufacturing processes is very large. Since the mining machine chips are more concerned about performance and the need to seize the market, the price of wafers is not very concerned, so wafer foundries such as TSMC are happy to increase orders for mining machine manufacturers, even to allow mining Machine manufacturers participate in the testing of the latest process technology of 7nm and 5nm.

Taking Jianan Yunzhi as an example, according to the latest news, the current domestic wafer manufacturing giant SMIC has begun to negotiate with Jianan Yunzhi on cooperation on 14nm mining machines. So how big is Jianan Yunzhi’s demand for 14nm process chips? According to the annual sales records of various types of mining machines and the number of chips inside the mining machine disclosed by Jianan Yunzhi, Ouke Cloud Chain Research Institute calculated its annual demand for advanced process chips. As shown in the table below, in 2019, Jianan Yunzhi’s demand for 16 nm chips is approximately 76.09 million, and it is expected that the demand for 14 nm chips will also remain at the same level.

According to SMIC’s official news, as of the end of 2019, SMIC’s 14nm production capacity is only 3,000 to 5,000 wafers/month, and it is expected that it will only reach 15,000 wafers/month by the end of 2020. Considering the yield of wafers and the number of wafers on each wafer, we expect that if Jianan Yunzhi gave all orders for 14nm to SMIC, even if the capacity expansion is completed by the end of 2020, SMIC will need to spend 1 -2 months of production capacity to complete all orders.

Therefore, for domestic foundry giants, orders from mining machine chips are definitely a considerable income, which will also promote wafer manufacturers in mainland China to develop more advanced process technology.

postscript

The founder of Bitmain Wu Jihan attended Nankai Middle School in Chongqing in his early years, and the Nankai series of schools were founded by patriotic educator Zhang Boling in 1904. Nankai Middle School for nearly a hundred years has nurtured a large number of well-known scholars and political elites for China. However, in the early years, Nankai Middle School was a private school. The funds for running a school mainly came from individual donations from society. However, private donors, such as politician Cao Rulin and warlord Yang Yide, made many donations to Nankai. The students protested, and Zhang Boling said: “Beautiful flowers may be poured out of manure.”

Today’s mining machine chip manufacturers are more like Zhang Boling’s situation. As the blockchain technology is still in its early days, there are many market chaos, and people are also very vocal about the mining machine chip manufacturers. However, as the underlying blockchain technology of the encrypted digital currency, it may not be the “dung water” of some populations, but the future “mannose” — October 24, 2019, the Political Bureau of the CPC Central Committee on the blockchain The eighteenth collective study of technology development status and trends, national leaders delivered an important speech on this, affirmed that the integrated application of blockchain technology plays an important role in new technological innovation and industrial transformation, and the blockchain technology As an important breakthrough for independent innovation of national core technology. I believe that with the further development of my country’s blockchain industry in the future, people will more realize the value of mining machine chip manufacturers.

[Editor in charge: Liu Yukun PT030]

About the author: Ouke Cloud Chain Research Institute is a research institute of Ouke Group. The main research content is centered on the two major fields of blockchain industry and digital currency. It has close cooperation with governments, enterprises, universities and so on. Reputation. Ouke Cloud Chain Group is the world’s leading blockchain industry group. Headquartered in Beijing, China, it has branches or offices in more than 10 countries and regions such as the United States, Europe, South Korea, and Japan. Listed on the Hong Kong Stock Exchange.

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