Chinese Bitcoin Mining Giant Bitmain Outperformed Nvidia Last Year, Estimates Say

Ying Yi

(Yicai Global) Feb. 26 — Chinese bitcoin mining hardware giant Bitmain Technologies Ltd. achieved an operating profit of between USD3 billion and USD4 billion last year with a profit margin estimated to be in the range of 65 to 75 percent, says new estimates from Bernstein Research.

The report demonstrates the remarkable rise of the Beijing-based firm, which only came into existence four years ago. Bernstein’s estimates put Bitmain’s financial performance for last year on par with Nvidia Corp., a traditional heavyweight in the manufacture of graphics processing units, which are integral components of bitcoin mining devices.

Bitmain, which also operates the world’s largest bitcoin mine in China’s Inner Mongolia autonomous region, derives most of its income from the sale of mining hardware. Prices of its machines fluctuate with the price of bitcoin itself, with the AntMiner S9 mining machine reaching USD5,000 per unit at the end of last year, Yicai Global learned. This coincided with bitcoin hitting a peak of USD20,000.

The firm could become an industry leader in cryptocurrency hardware, Bernstein’s report said, adding that the company plans to upgrade some of its chips to 10-nanometer and seven-nanometer classes. This would make the company one of the five biggest users of Taiwan Semiconductor Manufacturing Co.’s seven-nanometer chips in 2018, Bernstein said, drawing a favorable comparison with Qualcomm Inc., Advanced Micro Devices Co. and Huawei Technologies Co. unit HiSilicon.

As the costs of mining machines fluctuate with the price of bitcoin, expenses could end up being higher than the earnings accrued from mining.

The mining hardware trade still represents the most profitable link in the entire bitcoin industry chain, insiders told Yicai Global. Demand for products in the cryptocurrency mining sector could continue to be strong this year, said Lora Ho, chief financial offer at key component supplier Taiwan Semiconductor Manufacturing Co. during the firm’s fourth-quarter earnings call last month. This puts Bitmain in a good position to potentially make further gains this year.