Ten-level interpretation of Bitmain's internal letter: Bitmain is moving towards "Jian Ketuan"

The board of directors appointed Wang Haichao as the company's CEO. Wang Haichao has served as the head of multiple departments at Bitmain and has made significant contributions to the company's rapid expansion of supply chain capacity in 2017 and has achieved excellent work results. Zhan Ketuan continues to serve as the company's chairman and Wu Jihan continues to serve as the company's director. The two founders have not forgotten their original aspirations, and they are in the same boat, working together to jointly grasp the company's strategic direction.

Author: Carbon 14

The leadership of Bitmain issued an internal letter today, officially announcing the appointment of Wang Haichao as the company's CEO, and stated that although this round of IPO application is about to expire, the listing work will be restarted at the appropriate time in the future.

If readers have read this letter, they will find that the last signatories are: CEO Wang Haichao; co-founders Zhan Ketuan and Wu Jihan. To some extent, we can understand this internal letter as the greatest consensus among Bitmain’s senior management. We might as well use this letter as a starting point to understand the current situation of Bitmain.

1. Bitmain’s Vision

The bit in "Bitmain" is the smallest unit of computer information representation and the cornerstone of building the digital world of mankind. Making the digital world of mankind better and better is the vision of Bitmain at the beginning of its entrepreneurship.

Please remember that this letter shows the "greatest consensus" of Bitmain's leadership. This "greatest consensus" is largely a consensus between the two co-founders, Zhan Ketuan and Wu Jihan, and also includes some ideas from Bitmain's decision-makers.

If readers still remember the previous article "Bitmain Hard Fork" reported by CarbonChain Value on Bitmain, they should know that the conflict between Wu Jihan and Zhan Ketuan has been difficult to reconcile. Both of them are dissatisfied with each other's strategic decision-making mistakes, making it difficult for the company to work together and reform in line with the times.

The consequences of each hard fork will be quite tragic. Not to mention that as a company, Bitmain has to be responsible to its investors and seek the greatest consensus in order to survive and make profits.

Therefore, even if Wu Jihan and Zhan Ketuan have conflicting lines and personal feelings, Bitmain as a company must find a consensus that can unify the entire company. Considering that whether it is digital currency, blockchain technology, or artificial intelligence chips, they can all be attributed to the digital world, so "making the digital world of mankind better and better" can barely become the biggest consensus. But this covers too much, let's continue reading.

2. Focus on computing chips

Focusing on digital currency and artificial intelligence chips and products and services based on them, Antminer, Suanfeng chips, AI computing power, Antmining Pool, BTC.COM, self-operated computing power and other business lines have been established.

Bitmain is a technology company. People who have been to Bitmain will find that there are a lot of programmers sitting there, and girls are extremely rare.

The atmosphere of this kind of company is quite different from that of a public chain company. In a public chain company, there are often a few people who can talk to you and speak eloquently. They can talk about trends of thought, the market, history and the future; in other words, they are people who have some faith in blockchain and can explain their faith in detail. Even if they are originally from a technical background, they often have a deeper understanding of literature, history and philosophy.

But there are very few such people in Bitmain.

The programmers in Bitmain are working hard to develop chips, which is not so fickle. They are all developing chips, AI chips are developed, and mining chips are also developed. In terms of sales, which industry has a strong demand for chips, and which industry's chips are developed, there is money to be made.

According to previous experience, it is natural to make money by developing mining chips, but this is only the idea of ​​people in the cryptocurrency circle. For chip developers who are close to integrated circuits and alienated from the concept of public chains, their ideas are completely opposite to those of people in the cryptocurrency circle.

A natural thought is: What if the blockchain industry collapses? Or, what if blockchain is just a temporary trend, and after the last round of trend, it will be a mess?

Bitmain has many chip developers who are deeply skeptical of blockchain. In their view, the so-called Bitcoin and blockchain are probably just hype, far less tangible and practical than AI chips. They conduct research and development because the company can give them enough money to support their research and development, and they can earn themselves a good salary. But as for how much emotion they should devote to blockchain, that is another matter.

"Computing power chips" meet the expectations and positioning of these people for the company. "Digital currency" and "artificial intelligence" walking together is a victory for the technical faction.

3. Unicom mining machines and AI development resources

We will also integrate all R&D resource lines for chips, hardware and software, and digital currency and artificial intelligence products will share these R&D resources.

This may sound strange to readers, but Bitmain’s mining machine R&D personnel and AI R&D personnel were clearly separated. Even if the mining machine department thinks that the AI ​​department has excellent R&D personnel, they cannot directly call them up, although Bitmain makes money from mining machines, not AI.

In contrast, Bitmain's competitor, Innosilicon, can switch personnel freely between multiple fields such as mining machine chips and AI chips. The deployment of personnel is subject to market demand, which can ensure the maximum utilization of talents and maximize profits.

Bitmain’s mining machines once lagged behind those of Innosilicon and MicroBT, which was related to the departure of core R&D personnel, but also to the rigid management measures within Bitmain. It is a wise move to link the development of mining machine chips and AI chips.

4. Officially appointed Wang Haichao as CEO

The board of directors appointed Wang Haichao as the company's chief executive officer. Wang Haichao has served as the head of multiple departments at Bitmain. He made significant contributions to the company's rapid expansion of supply chain capacity in 2017 and has achieved outstanding work results.

Bitmain originally implemented a dual CEO system, with co-founders Zhan Ketuan and Wu Jihan serving as co-CEOs.

In fact, in December last year, Wang Haichao, the director of product engineering at Bitmain, had already taken over some of the work of Wu Jihan and Zhan Ketuan. Before joining Bitmain, Wang Haichao worked at Availink, a semiconductor design company in Beijing, from 2010 to 2017, where he worked as a software programmer and product manager.

Judging from Wang Haichao's public resume, he has always been in the role of internal coordination and communication, and has no experience with external affairs. He has also been acting as a firefighter in Bitmain, able to endure the heavy load every day and coordinate things well. For Bitmain, which is in a state of division, a person with such a background can be particularly favored.

However, judging from Wang Haichao's performance in the past three months, Bitmain's expectations for such a person are obviously a bit too high. Because the core of the problem is not what kind of CEO to hire, but the irreconcilable contradiction between the two co-founders. In these three months, Bitmain broke the news that co-founder Wu Jihan established a new company Matrix alone and the internal organization was disorganized. If Wu Jihan and Zhan Ketuan did not reach a consensus on the decision, Wang Haichao would probably have a hard time making a big difference.

In addition, from Wang Haichao's personal background, he has neither managed investment nor has experience in the blockchain industry. Coming from the integrated circuit industry, he should have more in common with Zhan Ketuan. From this perspective, this is a victory for Zhan Ketuan.

5. Zhan Ketuan is the chairman and Wu Jihan is the director, jointly grasping the company's strategic direction

Zhan Ketuan will continue to serve as the company's chairman, and Wu Jihan will continue to serve as the company's director. The two founders have not forgotten their original aspirations, and they will work together to jointly grasp the company's strategic direction.

This is a sentence used in an internal letter to stabilize the morale of the troops. But it is also a relatively weak sentence.

"Jointly grasp the company's strategic direction" means that the two have not yet reached a complete consensus. Although Wu Jihan has started to set up a new company, he has not completely exited the game, nor has he left Bitmain. The two will continue to fight internally.

A person close to Bitmain told CarbonChain Value: “Wu Jihan has strong dissatisfaction with Zhan Ketuan. This dissatisfaction has been accumulated for a long time and has recently been gradually manifested.”

Another person close to Matrix told CarbonChain Value: “The new company focuses on blockchain finance and requires high professional knowledge, so not all of Wu’s people in Bitmain will join the new company. In fact, only a small number of people came to the new company, and the others stayed in Bitmain. However, these people who originally belonged to Wu’s faction are now losing their previous positions and voice little by little.”

At present, it seems that this internal conflict has not yet come to an end. Before the internal conflict ends, the new CEO Wang Haichao will not be able to fully display his power. To make an inappropriate analogy, this is equivalent to the former emperor abdicating and leaving behind a regent and two empress dowagers, who are still fighting.

6. The energy efficiency ratio of the second-generation 7nm chip is as low as 30J/TH

In February, we released the second-generation 7nm chip BM1397, with an energy efficiency ratio as low as 30J/TH, which is about 28.6% energy-saving compared with the previous generation of products. The new Antminer S17 and T17 equipped with BM1397 will be mass-produced in the near future.

Although Bitmain has experienced internal personnel turmoil, it is gratifying that Bitmain's second-generation 7nm chip BM1397 has performed well, and the S17 and T17 mining machines equipped with this chip will be mass-produced in the near future. In "Bitmain's Midfield Battle" (original time: September 26, 2018), we wrote that Innosilicon and MicroBT were ahead of Bitmain in technology. At that time, Bitmain was still using 16nm chips, and the development of 12nm and 10nm chips failed. Not only did it lose a lot of investment costs, but it was also being pressed by competitors in terms of products.

In November last year, although Bitmain developed the first generation of 7nm mining chips, the performance of this chip was not excellent, and the power consumption ratio reached 42w/TH in the laboratory. It should be noted that the Bitmain M10 mining machine, which uses a 16nm chip, also ran at a performance of 65w/TH in actual conditions. Under the circumstances at that time, we can only say that Bitmain has its own 7nm chip, but we cannot say that Bitmain has regained its technological leadership.

However, after optimization, the energy consumption ratio of Bitmain's second-generation 7nm chip has been reduced to 30w/TH. This figure is ahead of Innosilicon and Shenma, and Bitmain can temporarily breathe a sigh of relief in terms of technology.

The greater significance of this number is that more than two years after Yang Zuoxing left the Bitmain chip R&D team, Bitmain finally relied on its own R&D personnel to develop a Bitcoin chip with good performance. This is of great significance to the entire Bitmain.

7. The IPO will expire in the near future and will be re-listed at an appropriate time

Our IPO application will expire soon. However, the listing process makes the company more transparent and standardized. At present, the company has sufficient cash and the supply chain is running normally. With the launch of new products, sales performance has begun to increase month by month. The company has a strong talent pool, and the adjusted R&D organization is more efficient. We will definitely be able to develop more competitive products in the market.

At this point, the listing plans of the three major mining machine manufacturers, Bitmain, Canaan Creative, and Ebit, have all failed.

Bitmain submitted its prospectus on September 26, 2018. In the six months since then, Bitmain has not updated its documents. According to the Hong Kong Stock Exchange's listing rules: "The most recent financial period reported by the reporting accountant for a new applicant shall not exceed six months from the date of the listing document." However, Bitmain's most recent public submission only covers June 30, 2018.

Now, Bitmain's documents have been moved to the "inactive" group of applications and marked as invalid. If Bitmain still wants to go public, it can only resubmit the application and provide additional financial records beyond the initial application. According to Carbon Chain Value, Bitmain's financial reports for the third and fourth quarters of 2018 were very bad. In the third quarter of last year, Bitmain lost about $500 million.

The bull market made Bitmain successful, but the bear market eclipsed it. It is worth noting that, according to Coindesk, if Bitmain cannot find a way to go public, it may have to repay more than $700 million to investors.

8. Accurately grasped the two markets of digital currency and artificial intelligence

In the past five years, the company has accurately seized the two market opportunities of digital currency and artificial intelligence and built up solid chip design capabilities. In the next three to five years, the market space for digital currency and blockchain industries will be even larger, and the market space for artificial intelligence computing power will also be huge.

In fact, there is a practical basis for saying that the opportunity of the digital currency market has been accurately seized, and there are performance results to check. However, it is not necessarily the case that the opportunity of the artificial intelligence market has been seized. At present, Bitmain is still using the money earned from the digital currency market to subsidize AI research and development.

In December 2018, Bitmain started a massive layoff, with the AI ​​department being the hardest hit (R&D staff are just too expensive). At the time, there was a view that Wu Jihan cut off BCH developers and investment, while Zhan Ketuan cut off the unprofitable business of the AI ​​department. Now it seems that Zhan Ketuan retained his "dream", while Wu Jihan chose to make his "dream" independent.

The decision made by Bitmain's management shows that it has made up its mind to make efforts in both fields at the same time. In the future, Bitmain will not only be a company known for producing mining chips, but will also be more technological. As for where this strategy will lead Bitmain, it is unknown.

We look forward to Bitmain making further progress in artificial intelligence and walking more steadily on two legs.

9. Core competitiveness: high-performance, low-power computing chips

This is the biggest consensus within Bitmain.

In the early days of cryptocurrency, Bitmain was once a company with an extremely important position in the industry, both in terms of spirit and industry influence. The co-founder of this company was the first person to translate the Bitcoin white paper into English, and he had the temperament and appeal of a spiritual leader in the circle. However, for various reasons, Bitmain is getting rid of this image and moving towards "Jackson-ization".

"Zhanketuanization" means that Bitmain is further away from the cryptocurrency circle and trends, and closer to technology. "Zhanketuanization" also tests Zhanketuan's management ability, and this challenge should not be underestimated. We will wait and see.

Attached is the full text of the internal letter: Focus on computing chips to make the human digital world a better place!

Dear Bitmain people:

The bit in "Bitmain" is the smallest unit of computer information representation and the cornerstone of building the digital world of mankind. Making the digital world of mankind better and better is the vision of Bitmain at the beginning of its entrepreneurship.

On the occasion of Bitmain's fifth anniversary, we reviewed the company's business, organizational structure and management mechanism, and made corresponding business adjustments: focusing on digital currency and artificial intelligence chips and products and services based on them; establishing business lines such as Antminer, Suanfeng Chip, AI Computing Power, Ant Mining Pool, BTC.COM, and self-operated computing power. We decentralized management authority to quickly respond to market changes and better serve customers. We also integrated all R&D resource lines for chips, hardware and software, and digital currency and artificial intelligence products share the R&D resources after integration. In this way, the investment, delivery and quality of each project and product are better guaranteed. At the same time, engineers can also get more training and growth in different product lines.

The board of directors appointed Wang Haichao as the company's CEO. Wang Haichao has served as the head of multiple departments at Bitmain and has made significant contributions to the company's rapid expansion of supply chain capacity in 2017 and has achieved excellent work results. Zhan Ketuan continues to serve as the company's chairman and Wu Jihan continues to serve as the company's director. The two founders have not forgotten their original aspirations, and they are in the same boat, working together to jointly grasp the company's strategic direction.

In February, we released the second-generation 7nm chip BM1397, with an energy efficiency ratio as low as 30J/TH, which is about 28.6% energy-saving compared with the previous generation. The new Antminer S17 and T17 equipped with BM1397 will be mass-produced in the near future. The next-generation AI chip BM1684 will be put into production soon, and the SA5 server equipped with this chip will be delivered to the market in the fourth quarter of this year. Compared with the SA3 server based on the BM1682 chip, the performance of SA5 will be improved several times. At present, mainstream artificial intelligence algorithm manufacturers have run their algorithms and applications on our BM1682 and BM1880 chips.

Our IPO application will expire soon. However, the listing process makes the company more transparent and standardized. At present, the company has sufficient cash and the supply chain is operating normally. With the launch of new products, sales performance has begun to rise month by month. The company has a strong talent pool, and the adjusted R&D organization is more efficient. We will definitely be able to develop more competitive products in the market. According to Frost & Sullivan research, Bitmain is already the second largest fabless chip design company in China and one of the top ten in the world. In the future, we will restart the listing work at the right time.

In the past five years, the company has accurately seized the two market opportunities of digital currency and artificial intelligence and built a solid chip design capability. In the next three to five years, the market space for digital currency and blockchain industries will be even larger, and the market space for artificial intelligence computing power will also be huge. The two huge markets will overlap in the next three to five years. High-performance, low-power computing chips are their common foundation, and this is where our core competitiveness lies. We will concentrate all our human, material, financial and cultural resources on the two markets of digital currency and artificial intelligence: focus on computing chips to make the digital world of mankind better!

2019 is a year for Bitmain people to practice hard and strive for business. We are full of confidence in the future! Let us work together to create greater glory!

CEO: Wang Haichao

Co-founders: Micree Zhan, Jihan Wu

March 26, 2019