Exclusive: SMIC may enter the mining machine market for the first time and cooperate with Canaan to ship in Q2

Wu Blockchain exclusively learned that the products of SMIC, the largest chip manufacturer in mainland China, may be officially used in mass-produced cryptocurrency mining machines for the first time. It is reported that the 14nm mining machine chip jointly developed by SMIC and Canaan Technology has completed testing and will be mass-produced and shipped in the second quarter of this year. The specific chip type may be a small currency mining machine.

SMIC is mainland China's most technologically advanced, best-equipped, largest and most multinational integrated circuit manufacturing group, with wafer fabs in Shanghai, Beijing, Tianjin, Shenzhen and Jiangyin. The highest chip process it can currently provide is 14nm, and it is expected to start trial production of 7nm in the fourth quarter of this year.

According to industry insiders, this is not the first time that SMIC has tried to enter the mining machine field. In early 2018, SMIC once cooperated with well-known people in the Dongguan cryptocurrency circle, but due to the sharp drop in the price of Bitcoin, investors withdrew their capital. Although the chip was designed, it was not mass-produced. SMIC has been actively entering the mining machine industry and has also cooperated with other mining machine manufacturers, but there is no mainstream mass-produced model.

SMIC has very close cooperation with mining machine manufacturer Innosilicon in the field of IP. Innosilicon has won the Best IP Chinese Partner Award from SMIC for four consecutive years. However, Innosilicon mining machines do not use chips manufactured by SMIC for the time being.

SMIC has strong support from the Chinese government. The National Integrated Circuit Industry Fund is the second largest shareholder of SMIC. At the same time, local governments also provide considerable subsidies, so the product price has a certain advantage. However, there is still a certain gap in performance between TSMC and Samsung products, and there are also great patent barriers in IP licensing.

Canaan chose SMIC more out of cost considerations. In the fourth quarter of 2019, due to the decline of Bitcoin and inventory clearance, Canaan's losses increased significantly despite a year-on-year increase of 66% in revenue. Zhang Nangeng, chairman of Canaan, said that in 2020, more efforts will be made to improve the efficiency of the use of R&D budget. In terms of management expenses, this year we focus on reducing costs and improving efficiency, and through refined management methods, we can reduce overall costs and complete more projects.

As the first listed mining machine company, Canaan once said that going public would help its supply chain in terms of brand. Currently, Canaan is also a rare mainstream mining machine manufacturer that has reached cooperation with Samsung, TSMC, and SMIC. Products based on Samsung's 8nm technology have been mass-produced and shipped in the first quarter, and products based on TSMC's 5nm technology are also being intensively developed. Historically, mining machine manufacturers and chip manufacturers have certain exclusive cooperation. For example, Bitmain has a binding relationship with TSMC and cannot cooperate with Samsung. Shenma and Xindong currently mainly obtain production capacity from Samsung.

SMIC has a very legendary history and a feud with TSMC, and it also carries the hope of China's chip industry. TSMC has sued SMIC for patent infringement many times, forcing its founder Zhang Rujing to resign. In 2009, the two parties signed a settlement agreement, SMIC will pay TSMC $200 million in cash in four installments, and TSMC will also hold a 10% stake in SMIC.

In the context of the Sino-US trade war, SMIC's position has become more prominent. The US export control requires that if the technology of the product originates from the United States and meets certain standards, it is not allowed to be exported. If this principle is strictly followed, TSMC and Samsung may not be able to provide services to Chinese chip companies. Some analysts believe that SMIC will benefit from the "domestic substitution" in the context of the trade war, and cooperation with more mining machine manufacturers will be a trend in the future.

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