A battle for survival: nano-scale competition among miners

A tiny chip that can only be seen in the microscopic world is stirring up the huge mining machine market.

In recent months, the issue that has kept mining machine manufacturers on edge is who will be the first to launch a mining machine equipped with a 7nm (nanometer) chip. 7nm is the size of the components that make up a mining machine. Such a tiny chip is currently the most advanced manufacturing process in the mining machine industry.

Two years ago, the Antminer S9 miner owned by Bitmain, which once occupied half of the mining machine market, used 16nm chips. Subsequently, its mining machine commercial rivals successively launched mining machines equipped with 14nm and 10nm chips, but Bitmain has been slow to make substantial updates, which has made it increasingly passive.

"The smaller the component size, the more advanced the technology, and the more difficult it is to manufacture," a chip industry practitioner told Odaily Planet Daily.

Now, Bitmain is going to skip 14nm and 10nm chips and directly launch mining machines equipped with 7nm chips.

Why is Bitmain in such a hurry? Because three months ago, its biggest competitor, Canaan Creative, the world's second largest mining company, took the lead in announcing the mass production of 7nm chips. According to Canaan Creative's official website, the Avalon 9 series mining machines equipped with this chip have been launched for sale.

In addition, Nikkei reported in August that Triple-One, a Japanese listed company, is also developing 7nm mining chips. GMO, an Internet company from Japan, is the first manufacturer to invest in the development of 7nm mining machines.

7nm has become the core of competition among the world's largest mining machine manufacturers. At present, their battle for the next era of nanometers has become extremely fierce.

The battle for 7nm

On November 6, Bitmain officially released news of new products on Twitter. The two Antminer models equipped with the new 7nm (nanometer) chip are S15 and T15, which will be available for sale globally in North America, Europe and Asia Pacific in the near future. In China, the new products will be officially launched on the official website at 2 pm on November 8.

At the Global Digital Currency Ecosystem Industry Chain Summit held in September this year, Wu Jihan announced for the first time that Bitmain's self-developed 7nm chip will soon be put into mass production.

Bitmain is the industry leader, but its biggest rival seems to be one step ahead. On August 8, Canaan Creative, the world's second largest mining chip manufacturer, released the world's first 7nm mass-produced chip in Hangzhou. According to Canaan Creative's official website, the Avalon 9 series of mining machines equipped with this chip have been launched online. In addition, Nikkei reported in August that Japanese listed company Triple-One is developing 7nm mining chips. GMO, an Internet company also from Japan, was the first to develop 7nm mining machines.

Behind the word 7nm is one of the core indicators of the chip industry, the "manufacturing process" of the chip. This refers to the fineness of the integrated circuit in the process of producing the chip. The thinner the connecting wire, the higher the fineness and the lower the power consumption.

Ye Hanxin, founder of China Computing Power (Cnhash.com), gave an example to Odaily Planet Daily, saying that the difference between 10 nanometers and 7 nanometers is that they can hold more transistors. For example, 10 nanometers can only hold 60 million transistors, while 7 nanometers can hold 100 million transistors. The more transistors, the faster the floating-point operations, and the more transistors, the stronger the performance.

If this is applied to the Bitcoin mining industry, it means increased profits.

Bitcoin mining is simply a crude collision of random numbers. The increase in computing power means that you can calculate more times than others in 1 second, which means you can obtain more accounting rights and obtain more newly issued bitcoins. If miners using 7nm mining machines become the mainstream in the entire network, the probability of people using old mining machines to mine coins will drop significantly. Therefore, mining machine chips with advanced process technology are an important competitive advantage for mining machine manufacturers.

In the past, Canaan Creative founder Nangua Zhang was the designer of China's first ASIC mining machine. The reason why Bitmain has dominated for several years today is that he was the first to release and mass-produce 16nm chips in the spring of 2016, and applied them to its Antminer S9 and other models. This machine not only helped Bitmain get out of a difficult situation, but also occupied the market since then, allowing Antminer to maintain a major market share for a long time.

Until now, Ant S9 is still the main machine in the market. With the lessons learned two years ago, Canaan Creative has put a lot of effort into the research and development and promotion of 10nm and 7nm chips.

Competing for TSMC's production capacity

However, producing 7nm chips is not something that can be accomplished by mining machine manufacturers alone.

Bitcoin mining machine suppliers generally adopt the fabless model. Ye Hanxin introduced that Bitmain and other mining machine manufacturers provide mining machine chip circuit design drawings, and TSMC is responsible for production, testing, packaging, etc. according to the design pictures. "The process that can produce 7nm is the result of TSMC's technological research and development and accumulation. The world's most advanced 7nm process requires a lot of time, money, and manpower for long-term research and development, and the investment in wafer fab construction is at the level of hundreds of billions."

That is to say, the mining machines are upstream of chip foundries such as TSMC, Intel, Qualcomm, and Samsung. Moreover, since the initial production capacity of the technology requires huge investment, the product expansion will be very slow, and the upstream foundries have great say. What's more, there are not many foundries using the 7nm production process. According to a report in China Science Daily in August, among the major foundries, only TSMC announced that it will mass-produce 7nm process chips in the second half of this year.

Canaan Creative and Bitmain's foundry is TSMC, but TSMC has a bigger customer. China Science Daily pointed out that in addition to Bitmain and Canaan Creative, at least 10 chip designers including Apple, Qualcomm, Huawei, and Nvidia are eyeing TSMC's 7nm process.

How important is TSMC to the two manufacturers? We can take a look at the latter's prospectus.

Bitmain's prospectus shows: "As a fabless integrated circuit design company, we do not own any integrated circuit production facilities. TSMC has been our only third-party foundry partner... We have not received any capacity guarantee from TSMC. We have not signed a long-term contract with it, but instead obtain supplies in the form of purchase orders and prepay the purchase amount." In other words, failure to obtain sufficient production capacity from TSMC will have a very significant impact on Bitmain's business. Similarly, Canaan Creative's prospectus also has very similar words.

The first to take over the 7nm production line is undoubtedly TSMC's largest customer Apple. But mining machine manufacturers need to find ways to gain an earlier position and more production capacity.

In May this year, TSMC's Nanjing 12-inch plant officially went into mass production, and the first batch of wafers was shipped to Bitmain. According to Taiwanese media reports, Bitmain CEO Zhan Ketuan secretly visited TSMC in Taiwan in June this year to seek cooperation.

However, Canaan Creative held a press conference in August this year, announcing that the 7nm chip has been successfully mass-produced and has been developed and sold. Therefore, the outside world had previously speculated that as the leader in the mining machine industry, Bitmain was expected to launch a mining machine based on the 7nm process first, but unfortunately it was still a step behind.

Products that determine life and death

At this point, 7nm is a product that determines the survival of Bitmain.

Chen Lei, secretary-general of Peking University Blockchain Club and founding partner of BitBlue Whale, told Odaily Planet Daily: "Compared with Avalon, its 7nm chip is indeed slow. And it's not just this slow, the Ant S9 uses a 16nm chip, which means it directly skipped 10nm." Other manufacturers have developed 14nm and 10nm processes.

However, mining machines require cost-effectiveness. Chen Lei said that one of the reasons why Ant S9 can still maintain its market share is its price.

"Currently in the market, Ant S9 is already very cheap. It can be seen that they are clearing out inventory." This is Bitmain's strategy to maintain its market position and suppress its competitors.

However, since the beginning of this year, mining machine manufacturers such as Innosilicon, Shenma and Avalon have all used Ant S9 as a reference line for pricing per terabyte of computing power.

“S9 is the only dominant player now, but its performance still has problems. Its main parameters are better than S9, and its average price of computing power is lower than S9. But now S9 continues to clear its inventory and sweep the market with low prices, not giving competitors too many opportunities in channels. So everyone simply stops selling and does mining on their own. A lot of competition has taken place in the mining farms,” said Chen Lei.

A chip design engineer told Odaily that he was not optimistic about Bitmain either. “The process is indeed important for performance, but it also means higher costs.”

He emphasized that there is a product on the market, the Whatsminer M10, which has excellent performance. In addition, it uses a 16nm chip, which costs much less than a 7nm chip. Therefore, he believes that the cost performance of the M10 will not be much different from that of Bitmain's 7nm.

"S9 was made by Dr. Yang (Yang Zuoxing, current general manager of Shenma Mining Machine), but then Dr. Yang left, and Bitmain has not been able to produce any breakthrough products. M10 was made by Dr. Yang," he said.

The life and death issue is also reflected in the fact that, looking outside the circle, Bitmain faces stronger competitors. Traditional chip manufacturers such as Samsung and Nvidia have begun to enter this market.

A mining chip entrepreneur told Planet Daily that it is not difficult for traditional chip manufacturers to make mining chips, they just don’t think highly of this market.

"It's too small." Ye Hanxin believes that there are indeed great opportunities in the market. "The mining machine market is still in its primitive stage, and the Bitcoin mining machine industry has not yet reached the industrial level. When industrial-level products are available, the industry will move to a higher level."

Moreover, for large companies with decades of experience, risks such as wafer yield are more controllable and funds are more sufficient. Ye Hanxin said, "After all, Ant is a latecomer to chip manufacturing, not a chip design company with more than ten years of experience, and the investment is relatively huge."

If Bitmain does not launch any breakthrough products, Ant S9 will lose its advantage.

Undoubtedly, Bitmain is slow at the starting line of 7nm.

The reality is that the manufacturing process does not mean everything. Chen Lei said that a mining machine has two fixed indicators, "cost per terabyte of computing power" and "power consumption ratio (energy consumed per terabyte of computing power)". Miners and mining farms will make decisions based on a comprehensive consideration of cost performance. Furthermore, Caijing.com quoted industry insiders as reporting that "advanced chip manufacturing process does not necessarily mean the most advanced product performance. The newly released Shenma mining machine M10 has a computing power of 33T and a power consumption ratio of 65 (W/Ths). The performance of 16nm is better than that of 7nm."

This is also the reason why Ant S9 has been able to occupy the market for a long time. When it was launched, it did have breakthroughs in performance and power consumption, helping Bitmain accumulate a lot of advantages. Chen Lei explained that other mining machine manufacturers, even if their price-performance ratio is comparable to S9, have not been able to shake Bitmain. "You may not have so much money to do tape-out, you may not have the money to open so many production lines at the same time, and you may not have so many channels, their customers." In addition, after the new machine is launched, the mine will generally observe and test the water for 1-2 months, and only after there are no problems will it place a large number of orders according to the market.

At present, Bitmain’s new 7nm has not announced the specific parameters, which means that the power consumption ratio mentioned above is still unknown.

"Ant has been in this industry for three or four years, and its products have always had a good reputation. It has formed a brand barrier. Even if other mining machines are developed, it still takes some time to enter the market." Ye Hanxin is still optimistic about Bitmain. "Therefore, as long as Ant keeps investing in technology research and development, it will not fall behind. Ant will have more advantages, with money, reputation, and brand."

Chen Lei's attitude is cautious. He does not think that chips based on 7nm technology can bring breakthrough products, because there has not been much progress in recent years. "And in the current market, compared with the machine, the location of the mine may be more important." This means that when the market is not good, the most important thing is low electricity prices. If the cost performance of the machine is not significantly improved, using two old 15T machines to mine at a cheap location is worth buying a new 30T machine.

On the other hand, he is looking forward to it. He thinks that "Ant has been accumulating for so long, and I am still looking forward to seeing their parameters." Is this their PR strategy for the listing during this period, or do they really want to ship on a large scale? I guess they will still sell it on a small scale first. If they want to ship on a large scale, it means that they have almost cleared out the machines in their hands. "

He speculated that perhaps half of the machines currently powered on in the market are still Antminer S9. If this is true, and if the new machine has a big enough breakthrough in cost-effectiveness, there is a lot of room for elimination now. "The Antminer S9 was such a product back then."

Therefore, "if Bitmain really ships on a large scale, it means that the 7nm era has really arrived."