Wu Jihan appeared in the media with his IPO plan and AI strategy. What did he reveal?

He is 32 years old. He founded a company that is known as "the most profitable and mysterious blockchain company". He is one of the most influential people in the world of cryptocurrency. However, he is also often called a "savage predator" by the Bitcoin core development team. He was labeled as "devil" on "Satoshi's place", the most popular Twitter user online portrait graffiti board.

In the pixel art of Satoshi's Place, the word "devil" is marked on Wu Jihan's head

Wu Jihan, the founder of Bitmain, recently changed his low-key and mysterious style and accepted interviews from three international business media outlets, Fortune Magazine, Bloomberg and Bloomberg Businessweek. He talked about the future plans of Bitmain, the monopoly of Bitcoin mining machines and mining pools. He also revealed the idea of ​​listing overseas and responded to some conspiracy theories and rumors surrounding Bitmain in the market.

ChainNews has specially compiled the core information revealed by Wu Jihan's intensive overseas public relations to help Chinese readers better understand his plans and the future development direction of Bitmain.

What kind of person is Wu Jihan?

Without exception, several media outlets emphasized that Wu Jihan is young but "worth billions" and they labeled Wu as "one of the richest young billionaires in the world."

However, Fortune magazine also stated that the young billionaire was very nervous in front of reporters, "perhaps he would be more relaxed in the university club."

Wu Jihan's interview with Fortune magazine took place in mid-May in Manhattan, New York. At the beginning of the interview, the reporter asked him an open question: "How are you doing recently?" He remained silent and did not speak. So the reporter asked the question again, and Wu Jihan finally opened his mouth and answered: "Yeah." After a few seconds, the conversation really began.

Language is not a problem for Wu Jihan. He speaks fluent English. However, facing the reporters, it is clear that the young rich man cannot handle it naturally.

As a result, the Fortune reporter wrote: "Wu Jihan was very reserved in his conversation during the interview, and he seemed a bit wise but foolish."

How much money did Bitmain make in a year?

In an interview with a Bloomberg Businessweek reporter, Wu Jihan said that Bitmain achieved revenue of US$3.5 billion last year.

However, Bitmain soon changed its words. A Bitmain spokesperson contacted the reporter and told him that the number was a slip of the tongue by Wu Jihan and that the company’s revenue last year was actually $2.5 billion. This corrected number is consistent with the information provided by Bitmain co-founder Zhan Ketuan in an interview with Taiwan Business Weekly in January this year.

After that, Wu Jihan was interviewed by a Bloomberg reporter at the Four Seasons Hotel in Hong Kong in early June, and this time he insisted that the company's revenue was US$2.5 billion.

However, Wall Street investment bank Bernstein believes that Bitmain made much more than this figure last year. Mark Li, senior analyst of the semiconductor industry at Bernstein, once told ChainNews that he speculated that Bitmain's total revenue last year was between $5 billion and $6 billion, and its operating profit alone could reach $3 billion to $4 billion. According to this profit level, the scale of Bitmain's operating profit in 2017 is related to the scale of graphics card manufacturer Nvidia. However, Nvidia took 24 years of development to achieve this profit level, but Bitmain only took 4 years to reach this level.

"This is a very conservative estimate. We made the calculation based on a gross profit margin of 75% and an operating profit margin of around 65%. In fact, I estimate that Bitmain's gross profit margin and operating profit must be higher than this level." Mark Li told ChainNews. And Mark Li is very confident in his estimate. He told ChainNews that he has been tracking the development of the semiconductor industry in Asia, especially Taiwan. "Starting from information such as silicon wafer shipments and Bitmain's purchases of silicon wafers, it is easy to infer its ASIC mining machine shipments. This estimate is very conservative, and the actual profit situation will only be higher than this number."

In addition, although the investment banking community is generally shocked by Bitmain’s current profitability, many investment bankers and analysts are concerned about Bitmain’s continued profitability.

There are signs that Bitmain experienced explosive revenue and profit growth last year. The main reason is that mining machines are actually an investment product. As a capital expenditure, the pricing of mining machines is not simply based on cost accounting, but reflects the miners' expectations for future revenue growth in the mining business. Miners are willing to invest in expanding mining capacity because they have high expectations for revenue growth in the mining business. They will accept mining machines no matter how expensive they are; conversely, they will not consider mining machines that are below cost price. Last year, there was a round of soaring Bitcoin prices, which led to the take-off of the business of mining machine manufacturers such as Bitmain.

Why did Bitmain go public? Who will benefit from it?

The biggest news that came out of Wu Jihan's intensive communication with international first-line media this time was that "Bitmain is considering an overseas listing."

However, this news was only revealed in an interview with Bloomberg reporter Blake Schmidt at the Four Seasons Hotel in Hong Kong in early June. In the interview, Wu Jihan did not reveal any specific details about the listing plan, but only said that he currently has no specific IPO plan and is open to issuing dollar-denominated stocks in Hong Kong or other overseas markets, because this will give early investors such as Sequoia or IDG Capital the opportunity to cash out.

As soon as Wu Jihan finished speaking in Hong Kong, domestic media quickly broke the news that a source said that Bitmain is conducting a Pre-IPO round of financing with Sequoia, Singapore Government Fund and other institutions. The scale of this round of financing is US$400 million and will be delivered within this month. The source said that in this round of financing, Sequoia China, Sequoia America, DST founder Yuri Milner, Singapore Government Fund and others invested a total of US$400 million in exchange for 3.33% of Bitmain's shares, and Bitmain's valuation is about US$12 billion.

This message from the source did not receive a response from either party.

However, Wu Jihan rarely confirmed the equity arrangement of Bitmain in an interview with Bloomberg. He said that he and the company's co-founder Zhan Ketuan together hold about 60% of Bitmain's equity, of which Zhan holds a higher proportion.

Currently, Bitmain's operating entity in mainland China is "Beijing Bitmain Technology Co., Ltd.". The company's registered legal person is Zhan Ketuan, and it has only one shareholder - a company registered in Hong Kong, "Bitmain Technologies Ltd.". Bitmain's financing is all conducted overseas.

Is the AI ​​chip business reliable?

Bitmain has always been called by the media as "the most profitable and most mysterious blockchain company." This time, Wu Jihan faced a series of top international financial media. In fact, his main purpose was to introduce the company's development plans in the field of artificial intelligence chips to these media.

Bitmain launched the artificial intelligence chip Sophon BM1680 in October last year. The Chinese name of Sophon is "算丰". According to Bitmain's explanation, this name comes from the saying in the Book of Changes: "算天地玄空,丰認知智能". Its English name "Sophon" means "智子" in Liu Cixin's novel "The Three-Body Problem". In "The Three-Body Problem", the sophon is a super-intelligent machine from an alien planet that can develop a very strong learning ability through two-dimensional particles, which is used to monitor and lock the basic science of the earth, and has become a weapon to control the fate of mankind.

This is the Bitmain BM1680 chip

The Sophon BM1680 chip is part of a $600 accelerator board that Bitmain makes that plugs into a computer and boosts its machine learning capabilities.

At present, this product does not have more functions like high-end graphics cards produced by Nvidia or AMD, but it performs well in the single function of "machine learning" and is inexpensive.

For Bitmain and Wu Jihan, the opportunity in this field is not just because of the low price. Google's TPU is the most important leader in this field and a competitor of Bitmain. However, Google's chips are only provided to customers who use its cloud services, but Google's cloud services are not available in China. This provides Bitmain with a natural advantage.

Wu Jihan told Bloomberg Businessweek that AI chips are a natural choice for Bitmain because "AI requires a lot of computing power." He hopes to provide specialized and powerful AI chip products, and use this strategy to open up new sources of revenue in the field of AI.

He is very confident about this and said that in the next five years, 40% of Bitmain's revenue will come from artificial intelligence chips.

The following is the full transcript of the interview with Wu Jihan released by Fortune magazine, which has been partially edited:

INTERVIEW: FORTUNE'S ROBERT HACKETT

Compiled by: Perry Wang

Q: When you first heard about Bitcoin in 2011, why did you decide to invest all your money in Bitcoin? What made you make such a sudden decision?

Jihan Wu: I quickly grasped the concept of Bitcoin and understood it, and I thought it would be successful. Currency is not a binary thing, either 1 or 0. It is more like a measure of the process from 0 to 1. Some things are more like currency. This is the first thing we need to understand.

When Bitcoin came out, the only question was how many people would recognize Bitcoin as a currency. When Bitcoin was created two years ago, forums like btctalk.org already had tens of thousands of registered users. They came from all corners of the world, from Germany, Russia, the United States, China, and other countries. If there was no Internet, there would be no discussion of this concept, because you would not get any support, no one would accompany you to move forward. The Internet makes the world seem like a scale, you can find partners with the same ideas, form a consensus alliance, and form an Internet economy. I think this is a very important catalyst for the success of Bitcoin.

Q: Will you pre-mine cryptocurrencies before your new mining machines are launched?

Wu Jihan: No, we don’t do that. Like selling second-hand mining machines? If we sell second-hand mining machines, we have clearly stated that they are second-hand. We never pre-mine, and we will not let the mining machines become second-hand and then sell them as new. If it is a second-hand mining machine, we will make it clear to the customer.

In our company, it is against our principles to do such things. These are all nonsense against us. We have been transparent since day one. We have our own principles when selling second-hand goods in the market. We will not sell second-hand goods as first-hand goods.

Q: Not second-hand, I mean you have a few months before the new mining machine is released, you have a complete monopoly on this type of mining machine, because they are not publicly available. Will you pre-mine during this period?

Wu Jihan: No, absolutely not. We will have small-scale mining machine testing. But we will not pre-mine. This is not our principle.

Q: The reason I ask this question is because there have been such reports and rumors.

Jihan Wu: I have also read such reports. A small group of people have long controlled the majority of the computing power for Monero mining. What I want to say is that developing ASIC mining chips such as Monero is not a secret technology exclusively owned by Bitmain. Many people can do it. For a large company like Bitmain, especially for myself, I simply do not have the time, energy or resources to do pre-mining. We develop hardware, then release it and sell it to the market. Once our prototype works well, we will ship it to the market. We do not have the so-called monopoly advantage.

Q: What will be your focus in the next few years?

Jihan Wu: My most important job is to continue to invest a lot of resources in the research and development of mining hardware to maintain our advantages over competitors, such as the advantages over Avalon mining machines. We will also make corresponding investments based on our views on the future of the cryptocurrency market. We will also start to support the real economy in the real world and create products other than the financial market on the Internet. Bitmain will start to launch many artificial intelligence products to the market. This is a brand new business. We will sell hardware products that can achieve artificial intelligence acceleration.

Q: What kind of product would that be?

Wu Jihan: It’s very similar to Google’s machine learning chip TPU. It’s just hardware.

Q: When will your product be released?

Jihan Wu: Maybe by the end of this year.

Q: Do you communicate a lot with regulatory authorities?

Wu Jihan: Not so much. Sometimes I have met with some regulators at some conferences. We are in the semiconductor design industry. Circle, a US technology startup, recently announced that it has received $110 million in Series E financing, led by Bitmain, with a valuation of $3 billion. It takes a lot of experience to deal with regulators. This is one of the reasons why we are interested in Circle. We think it is very important to consult and cooperate with regulators in the future. We need to relax the strict regulations. But we need to cooperate with them, not fight guerrilla warfare with them.

Q: How do you think China's regulatory system will develop in the next few years? What do you expect to happen?

Jihan Wu: I’d better not talk about China’s regulatory policies, it’s too sensitive.