Canaan Technology's Kong Jianping responded positively to questions such as "stock price fell below the issue price, fundraising amount shrunk, and AI transformation"

Author: Cheng Qiu

Source: Liandede

On November 21, Eastern Time, the Nasdaq trading hall in the MarketSite building was crowded with people.

On this day, this place that witnessed countless business dreams welcomed the successful IPO of Canaan Inc., the "first blockchain stock". At 9:30 a.m., Zhang Nangeng, chairman and CEO of Canaan Inc., surrounded by the crowd, pressed the bell for "opening trading", and the stock trading screen began to scroll and update. Laughter and applause filled every inch of Wall Street.

In the Nasdaq hall, Zhang Nangeng, who looks simple and honest, clapped his hands vigorously. In his speech, Zhang Nangeng said, "Behind this is the hardship we have endured together, the blood and sweat we have shed together, the joy of overcoming scientific research difficulties together, and the pleasure of receiving customer orders together. Just like our stock code CAN, I believe we can do it, yes, we CAN!"

"CAN" is a pun. In their own opinion, it is because of the "CAN" of a generation of Canaan people that there is "CAN (Canaan Technology Stock Code)" on the Nasdaq trading market.

In China, a grand real-life light show was staged in Qianjiang New Town, Hangzhou, with the large characters of "Canaan Technology" flashing rhythmically between buildings. This is a highlight moment for Canaan Technology and also a highlight moment for the entire blockchain industry.

Canaan Inc.'s listing has attracted the attention of the global media. In the past month, there have been endless judgments and comments about Canaan Inc. Some people say, "Canaan has achieved the linkage between the price of currency and the stock price"; some people say, "Canaan has accumulated technology and is optimistic about its future"; and there are also voices saying, "Canaan is just selling mining machines, what's the point of telling AI chip stories"; and there are also voices saying, "It's still below the issue price, and American investors don't buy it."

In the eyes of almost everyone, Canaan just finished a speech of inspirational story, and everyone gave applause to its past. But in front of capital and business, most people looked at each other, not knowing where to start.

At the 2019 T-EDGE New Finance Summit and CHAINSIGHTS Fintech and Blockchain China Summit hosted by Titanium Media and co-organized by ChainDD, ChainDD "caught" the exhausted Kong Jianping, co-chairman of Canaan Technology, and conducted a tight interview with him.

"Which word do you think is better to describe Canaan's current situation?" Faced with Liandede's question, Kong Jianping lowered his head and pondered for a while, then said two words, "bottoming out."

"Now is the bottoming out, what about the past six years?"

“This is a new bottom.”

In front of the camera, Kong Jianping appeared very focused. For all Canaan people, they seemed ready to rush to the next "battlefield".

Kong Jianping, Co-Chairman of Canaan Technology, at the CHAINSIGHTS Summit

ChainDD (WeChat ID: ChainDD): The overall environment is really bad at present, so that all new economy companies have inverted valuations in the primary and secondary markets. From the perspective of newly listed new economy companies, the stock prices of those that tell future stories are not good, such as Weilai, Xiaomi, Qutoutiao, etc. On the contrary, those with solid main businesses such as Pinduoduo and Meituan have become leaders. Now capital seems to pay more attention to the endogenous growth of enterprises. How do you view the impact of this environment on Canaan, as well as the phenomenon of Canaan's reduced fundraising, stock price breaking, and investors' refusal to buy in the secondary market?

Kong Jianping: Actually, our fundraising has not decreased significantly, because our fundraising amount is around 100 million US dollars, because the market is really not good. As for why there is a report of 400 million US dollars, it may be because we paid a fee according to a relatively high standard on Nasdaq, so there are media reports about "400 million fundraising amount shrinking".

From the perspective of the overall capital market environment, it is indeed quite poor. Since July this year, no company with a particularly high fundraising amount has been listed in the United States. In fact, from our own perspective, our secondary market performance on that day was quite good in the entire second half of the US stock market, with an opening increase of more than 40%, although the closing price was slightly below the issue price.

ChainDD (WeChat ID: ChainDD): So you think the overall performance is actually pretty good?

Kong Jianping: No, the overall performance is not good. The entire market is worse than we imagined.

ChainDD (WeChat ID: ChainDD): There is also a voice that compares this year's IPO market to the IPO market in 2000, when any company with ".com" in its name rushed to go public. This year, more than 40 Chinese companies went public in the United States, setting a record high. Nasdaq said that this was the strongest year in history. This will inevitably lead to some companies having a difficult business journey in the capital market. Do you think Canaan has concerns in this regard?

Kong Jianping: I think Canaan will not have such concerns, because we have been in this industry for so long and have deep roots, so we are not worried about what will happen in the future. However, in the short term, the (mining machine) industry we are in and the stock market will definitely still have relatively large fluctuations.

ChainDD (WeChat ID: ChainDD): Do you like Canaan being labeled as the “first blockchain stock”? Is this label accurate?

Kong Jianping: I don’t think there is any accuracy or inaccuracy. In a broad sense, we can be called the “first blockchain stock” because the mining equipment we produce is used for the underlying mining of the blockchain industry; in a narrow sense, we are a listed company related to semiconductors.

Therefore, the labels you give us also reflect your expectations of us. You are looking forward to companies making new breakthroughs in this field. Just like what the vice chairman of Nasdaq told us that day, we are the company with the most live broadcast viewers in the world, which may also reflect the attention paid to blockchain.

ChainDD (WeChat ID: ChainDD): So, from the time you submitted your IPO application to the time you rang the bell for listing, and then to the stock price performance in the secondary market, which angle of the media coverage of you do you think is most offensive to you?

Kong Jianping: I think most media have good intentions. They analyze and report from a financial perspective, saying that our main business is single, that mining machine revenue accounts for too high a proportion, etc. Indeed, every company will have some fluctuations in the course of operation, but from our perspective, we think that 70-80% of the cost of the mining machine business itself is chips, so its core is still the ability of the chip business. At the same time, we are still very optimistic about the development prospects of the entire blockchain supercomputing equipment, that is, the so-called mining machine business.

Many media are not in this field, nor are they optimistic about the development of this field, so they think that the revenue of this main business is too single, or that the future prospects may not be optimistic. But we believe that this industry still has great opportunities.

ChainDD (WeChat ID: ChainDD): Following what you said, let's talk about the second point that everyone is concerned about: AI chip business. Almost all media pointed to the same unexpected problem of Canaan, that is, "AI chip". I actually support Canaan's judgment. As you said, the core of the mining machine is the chip. The knowledge system of mining ASIC chips and chips used for edge computing is consistent, and it is not difficult to achieve technology transfer. What do you think of this voice?

Kong Jianping: AI has a characteristic, that is, there may be a big difference between current AI and future AI. At the same time, this industry is in its infancy, so many people have doubts about some new things. However, everyone is still very optimistic about the overall AI industry. Our AI chips have made certain breakthroughs in some edge computing fields, such as smart audio and video recognition, smart door locks, smart access control, smart toys and other IoT fields.

ChainDD (WeChat ID: ChainDD): Which word do you think is better to describe Canaan’s current situation? “Survival by cutting off an arm”? “Walking on two legs”?

Kong Jianping: We are now in a "bottoming out" stage.

ChainDD (WeChat ID: ChainDD): Now is the time to build a bottom, what about Canaan’s past six years?

Kong Jianping: When we were seeking to list on the Hong Kong stock market, investors valued Canaan at more than 10 billion US dollars. So, compared with Canaan in the past, we are now in a new bottoming stage.

ChainDD (WeChat ID: ChainDD): The company’s current plan is to “achieve a 1:1 ratio between AI chips and mining machine business in a few years”. Since you are targeting edge computing chips, why not say “7:3” or “8:2” instead? What are the in-depth considerations behind this?

Kong Jianping: In 2015, we made a strategic plan. At that time, there were two paths to choose from: one was to lay out the entire industry chain around blockchain and Bitcoin, including mining, mining farms, and possibly encrypted digital currency trading; the other was to lay out the entire industry chain around chips, because mining machines themselves are made up of chips. Finally, based on the team's genes and our belief that if the entire blockchain or digital currency industry is particularly large in the future, it would be impossible to be the first in every field by laying out the entire industry chain. Therefore, we focused on one field in the first phase.

At that time, we thought, what fields can the same low-power, high-performance, and advanced-process node chips be used in? At that time, there was no word AI. It was only after AlphaGo defeated Lee Sedol in 2016 that many teams entered this industry to innovate. We used more words like deep learning and convolutional neural networks at that time. Then we felt that these fields needed stronger computing power to improve their computing performance. So, this is a process.

As for the 1:1 ratio, first of all, this does not mean a decline in the mining chip business, but we believe that both markets will grow. Secondly, we have also done some data analysis and analyzed the proportion of these two markets. It is not just for the sake of writing 1:1 or 7:3.

ChainDD (WeChat ID: ChainDD): You once said that you want to be the industry leader by 2020. Where does your confidence come from? (Kong Jianping once said that after Canaan goes public, it will have a better grasp of the supply chain and invest more funds, and the goal is to strive to be the industry leader in market share by 2020.)

Kong Jianping: First of all, R&D, we are doing better and better. Secondly, the layout of the supply chain, we have also given more consideration than before, and it may be inconvenient to talk about how to carry out it. Then there is capital. Because we have listed and other financing channels, when this industry is on the rise again, we will have more advantages in capital than ordinary manufacturers. At the same time, we have a relatively large advantage in the entire blockchain supercomputing ecosystem.

ChainDD (WeChat ID: ChainDD): You also have an identity as an "investor". You once joined Canaan as an investor and participated in the company's management decisions. Can you briefly share your thoughts on this decision? Why is it not a financial investment or a strategic investment, but a direct participation in the company's operations? I believe that I will have many precious memories about Mr. Zhang Nangeng and their technical team.

Kong Jianping: The earliest was in 2013, when Canaan had not yet been established. Their team crowdfunded and released a mining machine, the "Avalon", which was the world's first ASIC mining machine.

At that time, the selling price of Avalon mining machines was 8,000 to 12,000 yuan, but I bought several machines for nearly 300,000 yuan each. So, I was one of the first people who lost money in mining. At that time, I had two judgments. One was that most people who played Bitcoin were technical geeks, and few people in traditional society participated; the second was that Bitcoin did change many traditional restrictions in cross-border payments and virtual assets. I thought it was a new thing driven by technology, so I was more interested in this industry.

Later in 2014, the entire market went down, but we believe that investment should be done counter-cyclically, especially in industries that you believe will have long-term upward growth in the future.

At that time, Pumpkin Zhang (Zhang Nangeng) was probably the last one to find me, because he had contacted many friends he was familiar with before, but many people were willing to buy his mining machines but were unwilling to participate in his mining machine company.

After the contact, we helped introduce Tsinghua Yangtze River Delta Research Institute (in 2015, Tsinghua Yangtze River Delta Research Institute invested in a group of blockchain technology teams such as Canaan Creative and signed an investment incubation agreement with Canaan Creative.), and we also participated in the LP share of its fund (Tsinghua Yangtze River Delta Research Institute), and the parties came together. At that time, I was purely an investor. Although I was a member of the company's board of directors, I did not actually participate in the company's management.

Later, when the strategic planning was being done, I participated more. I mentioned several plans, including the later listing, and then I participated in the company's affairs step by step. During this process, the industry also changed cyclically. When it was at a low point, some shareholders wanted to sell some shares, but I personally chose to continue to increase my holdings. This is the overall process.

ChainDD (WeChat ID: ChainDD): Canaan currently has capital, traffic, and technical accumulation. The next step is to connect the upstream and downstream and continue to move forward. At present, what do you think Canaan lacks? What kind of help do you hope to get on this road?

Kong Jianping: The core is the judgment of the future and the layout of R&D. If it is as you said, we may have an advantage over most of our competitors in terms of attention and capital, and we have also made some breakthroughs in the field of AI. But more importantly, the future may be a result that cannot be seen now, or your judgment may be wrong, so we need to think more in this regard.

ChainDD (WeChat ID: ChainDD): Is it an industry risk?

Kong Jianping: I don't think there are risks in the industry. It's more about your future R&D positioning, product positioning, technology route judgment, and what role you play in the industry. This requires a lot of trial and error. For example, who do we need to cooperate with when making edge computing chips? What innovative designs do we need to make based on the chip? Or what kind of computing network can we make to meet more future needs.

ChainDD (WeChat ID: ChainDD): What plans does Canaan have for expanding into the international market? Currently, Canaan's customer base is concentrated in China.

Kong Jianping: Canaan didn’t do much publicity before, but our share of the international market is already around 30%, and more and more major international customers are purchasing Canaan’s chips or equipment. Therefore, we can see that the share of the entire international market will continue to increase in the next few years.

ChainDD (WeChat ID: ChainDD): What are their main uses?

Kong Jianping: One is mining machines. As the infrastructure of foreign mining farms continues to expand, they need more and more mining machines. Another is AI chips. Many of our developers are from the international community. They have strong hands-on skills, and our chips have an offline function, which means you can do AI calculations without an Internet connection, thus playing a role in privacy protection. From the perspective of the international market, their requirements for privacy protection are a little higher than those in China.

ChainDD (WeChat ID: ChainDD): Among the 30% of international market sales, what is the proportion of mining machines used for mining and chips used for AI computing?

Kong Jianping: Because the sales of the AI ​​sector are not that large, the main sales are still mining equipment, which accounts for more than 90%.

ChainDD (WeChat ID: ChainDD): 2020 is another integer threshold. If you were to set a five-year plan for Canaan, what would you say? Is it market value? Or something else? Because as early as the beginning of 2015, you told the company team that Canaan would at least become a company worth hundreds of billions in the future.

Kong Jianping: In 2015, I was actually more about encouraging everyone. Because everyone thought that there would be no listed companies in the blockchain industry, so if they could go public in the future and become worth 100 billion, the team would have the confidence to continue to operate in a more standardized manner. But now we are not really concerned about the market value, but more about how Canaan's blockchain and AI chips can be used? Can the two be effectively integrated?

As I said before, all devices in the future may be "computing chips". Can Canaan lead this next-generation computing network in the next few years instead of just making a single chip product?

ChainDD (WeChat ID: ChainDD): Let me extend this to my last question. Now everyone is discussing "digital currency", "new finance" and "blockchain technology". As an important participant in the entire blockchain industry, is it possible for Canaan to make plans, cooperate and invest in public chains or feasible applications of blockchain in the future?

Kong Jianping: From the current perspective of Canaan, we will not engage in public chain projects in the short term, and the company's main business in the future will definitely be in chips. But I will continue to pay attention to and invest in some related projects. Canaan Blockchain is currently also providing planning guidance with many institutions, including some cooperation.

ChainDD (WeChat ID: ChainDD): So it is still possible to make some arrangements through some financial investments, right?

Kong Jianping: Yes, we are very optimistic about blockchain, so both individuals and companies will actively participate in the public chain or feasible applications of blockchain that we mentioned.

ChainDD (WeChat ID: ChainDD): OK, thank you!