Plan to produce 400,000 mining machines per year remains a mystery, 7-nanometer chip development lags behind, and Ebang cuts production to survive

Text｜Wu Xusheng

Editor｜Hoho, Wendao

Recently, Ebang International was revealed to be planning to produce 400,000 Bitcoin mining machines in 2019. This goal is significantly lower than the 309,000 mining machines it sold in the past six months. In response, Ebang International refused to comment on the grounds that it "does not accept media interviews."

Three months ago, Ebang International, which once had its dream of listing on the Hong Kong Stock Exchange shattered, submitted its application for listing again. In the new version of the application, Ebang International revealed its own shortcomings, saying that the average monthly sales orders of mining machines in the third quarter of last year dropped significantly.

As its performance declined, Ebang International fell into the dilemma of lagging behind in the development of 7-nanometer mining machines. Its official website shows that its latest mining machine, the Wingbit E11 series, uses 10-nanometer chips, and the theoretical average payback time for mining is twice that of 7-nanometer chip mining machines.

Now two models of the E11 series mining machines have been sold out and will be shipped on April 15. In the context of the bear market, Ebang International has undoubtedly retained a place in the market. But how can this technologically backward mining giant break through in the future?

The listing encountered obstacles and the annual production plan became conservative

After Bitcoin mining machine manufacturer Ebang International resubmitted its draft IPO prospectus, the mining giant, which had been silent for three months, has recently re-entered the cryptocurrency circle. According to Yuhang Morning News, Ebang Communication Technology plans to produce 400,000 blockchain computing equipment projects annually.

The "blockchain computing equipment" mentioned in the report was interpreted by overseas media Bitcoinist as Bitcoin mining machines. According to the prospectus previously disclosed by Ebang International, the sales volume of its mining machines reached 309,000 units in the first half of last year alone. However, the annual production plan is now set at 400,000 units, which is a significant reduction.

In response, Fengchao Finance contacted the sales director of Ebang International to verify the "corporate financial data and annual production plan". The sales director refused to comment on the grounds that "the company does not accept media interviews". Subsequently, Fengchao Finance called Ebang International customer service, and the other party said "I don't know".

In June 2018, Ebang International was delisted from the National Equities Exchange and Quotations (NEEQ) and submitted an application for listing to the Hong Kong Stock Exchange. However, after the six-month application period, the mining giant failed to gain a favorable reception from the Hong Kong Stock Exchange. As the IPO application became invalid, Ebang International’s dream of listing on the Hong Kong stock market was shattered.

On December 20 of the same year, it submitted an IPO application again. The Hong Kong Stock Exchange's official website shows that the application is still being processed. The prospectus disclosed that Ebang International's financial information was as of June 30, and the data showed that it had a revenue of nearly 2.1 billion yuan in the first two quarters of last year.

Last year, Yibang International submitted an IPO application again

According to the application requirements of the Hong Kong Stock Exchange, the financial period reported by any new applicant "must not exceed 6 months from the date of issuance of the listing documents." This means that Yibang International is allowed not to disclose its third-quarter financial data.

Although the outside world is currently unable to know the sales of Ebang International's mining machines in the past year, judging from the first half sales data disclosed in the prospectus, Ebang International, which has submitted its second listing application, seems to have become conservative, from selling nearly 310,000 mining machines in half a year to now planning to produce 400,000 mining machines annually.

Some analysts believe that this conservatism stems from the overall coldness of the market and the lagging behind of Ebang International in the competition for mining machines.

Falling behind in 7- nanometer chip development

If the mining machine business is at the upstream of the gold rush in the cryptocurrency circle, then over the past year, the upstream advantage has become less obvious due to the bear market.

In the second half of 2018, the price of Bitcoin fell from $8,000 to $4,000. Mining machine manufacturers and miners who depended on the weather for their livelihoods suffered a setback in this sharp drop. News such as "mining pools shut down and mining machines sold by pound" were exposed in the market.

In the new version of the listing application, Ebang International also mentioned this incident. In the "Major Unfavorable Changes" section of the book, it stated that the average monthly sales orders of mining machines in the third quarter dropped significantly. "For the three months ended September 30, 2018, our revenue and gross profit dropped significantly compared to the first three months ended June 30, 2018."

As profits declined, Ebang International began to fall behind in the research and development of mining machines. According to its official website, its latest mining machine is the Ebit E11 series, which still uses 10-nanometer chips, while its peers Bitmain and Canaan Creative have already integrated 7-nanometer mining chips into their new generation of mining machines.

With electricity costs at 0.3 yuan and mining difficulty unchanged, the expected payback time for Ebang International's E11+ mining machine is 495 days. Canaan Creative's Avalon A921 mining machine is expected to pay back in 177 days, and Bitmain's Antminer T15 is expected to pay back in 275 days. (Data from WaChain.com on March 4)

Honeycomb Finance consulted nearly 10 miners and found that few people in the market use Ebang International's Yibit mining machine for mining. An industry insider said that good-looking parameters do not necessarily mean high cost-effectiveness, and the specific effect can only be known after running. However, from the perspective of the payback period, Ebang International's latest mining machine is obviously inferior to that of its competitors.

In 2018, Ebang International was valued at 7 billion yuan, while Bitmain was valued at 50 billion yuan.

In the 2018 Hurun List of blockchain unicorn companies, the valuation rankings of Ebang International, Bitmain, and Canaan Creative also fell far behind. Bitmain's valuation is 7 times that of Ebang International.

The breakout was blocked from the front and intercepted from the back

In 2018, mining giants Bitmain, Canaan Creative, and Ebang International went to Hong Kong for IPO with impressive financial reports. But so far, no company has passed the application. While lagging behind its old rivals in terms of products and scale, Ebang International has faced challenges from new mining machine manufacturer MicroBT.

In 2015, Yang Zuoxing, then design director of Bitmain, chose to leave due to a failed negotiation on shares, and later founded MicroBit. In September 2018, Yang Zuoxing revealed in a media interview that MicroBit's net profit in the first half of last year was 330 million yuan, and the company planned to go public in 2019.

From the development history and financial data, the speed of MicroBT's rise is eye-catching. As of now, the estimated payback time of MicroBT's latest Shenma mining machine M10 is 503 days, which is slightly inferior to the theoretical payback time of 495 days of Ebang International E11+ mining machine. However, for the newcomer MicroBT, the payback period shows that the gap between the two parties' mining machine R&D capabilities is not large.

On the other hand, although Ebang International failed to win in terms of technology, the bear market may have a greater impact on the larger Bitmain and Canaan Creative. The low-key Ebang International seems to have found a way out.

In early January this year, Canaan Creative announced that its director Liu Xiangfu had quit the senior management team. According to Canaan Creative's prospectus, Liu Xiangfu holds 17.6103% of the shares of the listed entity and is one of the actual controllers, as well as a core technical staff member of the company. Canaan Creative did not respond to this. On the other hand, Bitmain has also been hit by negative rumors such as layoffs and the departure of co-CEO Wu Jihan.

Meanwhile, Ebang International, which has been “quiet”, has left a certain market space. According to the official website, Ebit E11 series mining machines were officially pre-sold in November last year, and the official delivery date is set for April 15 this year. Now the E11 and E11+ mining machines are sold out. As of 6 pm on March 4, there are still 3,395 E11++ mining machines left in stock.

Ebang International E11 series will be shipped on April 15 this year

It now seems that in the context of a bear market, Ebang International has undoubtedly retained its place in the market with its new mining machines.