As competition for IPOs intensifies, the key for Canaan is to maintain its position as the “second largest mining machine company”!

Amidst the cheers from the cryptocurrency and blockchain circles, Canaan still broke the IPO price on the first day of listing, although it was only a little short of the IPO price of $9. Almost at the same time of listing, the price of Bitcoin began to plummet, falling to as low as $7,500.

Canaan's road to listing was not smooth. In the last update of the prospectus, the lead underwriter Credit Suisse suddenly withdrew and the fundraising amount was reduced from US$400 million to US$100 million.

However, there is no doubt that Canaan's IPO itself is a huge success. The market value of 1.4 billion US dollars also exceeds many current Chinese concept stocks. Congratulations to Canaan's employees and investors for finally having an exit channel.

The reason why Canaan was successfully listed was revealed by its chairman Kong Jianping in an interview with Babbitt: Canaan Creative only accepts RMB payments for mining machine sales; the company does not accept Bitcoin, is not mainly engaged in mining, and does not hoard coins.

It is said that this is also the core of Canaan's lobbying to regulators on the road to listing, which is different from Bitmain. After all, Bitmain allows the purchase of mining machines with digital currency and owns a large number of mining farms and digital currency assets. Mining machine manufacturers such as Shenma and Xindong are also similar to Bitmain.

On the 20th, Canaan purchased a large number of lighting curtain walls in Hangzhou, among which there were even many words of BTC (Bitcoin). This is very special in the context of the current Chinese government's crackdown on the virtual currency industry, and also highlights Canaan's relationship with the local government in Hangzhou.

Canaan has already done its best in terms of compliance and government relations, so what challenges will it face?

First, can Canaan maintain its second place in mining machines in 2020?

In an interview with Babbitt, Canaan Chairman Kong Jianping said that the goal is to become the industry leader in market share by 2020.

However, the reality is very cruel. In the mining machine market in 2019, Canaan has fallen behind.

Shenma Miner has risen rapidly with its excellent cost-performance ratio, while Antminer has monopolized TSMC's 7nm production capacity. The two almost share 70% of the mining machine market. In addition, Xindong has also occupied a certain market share with its excellent technical level.

Currently, the latest generation of mining machines from Antminer and Shenma have reached the level of 30-40 watts per ton. In comparison, Canaan's latest generation of Avalon mining machines still remain at the level of 40-50 watts per ton. In 2020, the output of Bitcoin will be halved, and Canaan's main 16nm mining machines may be withdrawn from the market. Miners with more powerful performance will be more favored by miners.

Some people say that miners are consumers who have no faith in brands. They will not choose to buy less cost-effective mining machines just because of the brand image of Canaan, a listed company, or the internal strife of Bitmain or the loss of contact with the boss of Shenma. After all, better mining machines can make more money.

For Canaan, instead of just talking about being the first in the industry, it is better to try to take back the industry market share of the "second largest mining machine company", whether it is from Ant or Shenma.

Second, how does Canaan prove that AI chips are not just a vanity project?

Canaan's exaggeration in external communication has been widely circulated in the chip industry. The 7nm chip promotion incident is still fresh in our minds (please enjoy the article, seeing you are so hard to praise the "Chinese chip", I still can't help but "slap your face": https://dwz.cn/h4Wbdsif), and the same method was used again in this listing promotion. In the first half of 2019, the revenue of AI chips was only 500,000 yuan, but the slogan of "the world's first AI chip stock" was launched.

Nvidia, a real AI chip company listed on the stock market, has a data center revenue that is not as high as its gaming business, but it is still close to $800 million. Rockchip, a domestic chip company that has just gone public, also has AI chips at its core. Which chip company doesn't talk about AI now? It's a bit exaggerated to hype up a business that accounts for less than 0.1% of revenue as the world's number one stock.

In terms of performance and process, Canaan's AI chips are not superior to mining chips. Canaan's AI chip planning is developing the second-generation 28nm AI chip, which will be launched in the first quarter of 2020. In addition, it is also planned to launch the third-generation 12nm AI chip in the second half of 2020. In contrast, the AI ​​chip launched by Huawei directly adopts the 7nm process. The first-generation AI chip BM1680 launched by Bitmain in 2017 is 28nm, and the third-generation AI chip BM1684 launched this year is 12nm.

Industry insiders pointed out that the AI ​​chip industry is highly competitive, has limited application scenarios, and does not yet meet the needs of large-scale commercialization. It is foreseeable that AI chips will not be able to provide Canaan with significant revenue for a long time in the future.