The mining chip industry is in decline, and the supply chain manufacturers are unlikely to continue their prosperity

AMD also expects its second-quarter GPU sales to see a modest decline due to blockchain factors.

Especially in April and May, signs of a slowdown in the supply chain have gradually emerged. In April, the demand for mining chips dropped sharply, causing the performance of many manufacturers that are highly dependent on mining chips to decline significantly. Although the performance rebounded in May, the market is no longer as optimistic about the prospects of mining chips.

GPU and ASIC chip companies shift to

The demand for mining chips has cooled down across the board. On the one hand, the decline in Bitcoin prices has led to a weakening in chip demand; on the other hand, it is also due to the tightening of regulation by governments around the world, making mining no longer so profitable.

It seems that ASIC mining chip manufacturers have anticipated this scenario early on.

Whether it is Bitmain, which ranks first in the ASIC mining chip market, or Canaan Creative, which has just applied for an IPO, a trend has been shown in recent years: expanding the scope of use of products and turning to the field of artificial intelligence.

Take Canaan Creative as an example. In addition to mining machine chips, Canaan Creative began to develop ASIC chips for artificial intelligence applications in 2016, and plans to mass produce them in the fourth quarter of 2018.

At the same time, Canaan Creative also stated in its prospectus that its future growth will largely depend on whether it can penetrate into new markets beyond Bitcoin mining applications, especially other types of cryptocurrencies that require high performance and high computing power, or the application market for ASIC chips for artificial intelligence products.

At the same time, Bitmain, which ranks first in the mining chip market, is also following a similar path.

According to Cointelegraph, Bitmain is turning to artificial intelligence to seek alternative sources of income. Bitmain CEO Jihan Wu said that the field of artificial intelligence requires a lot of computing, which is a natural choice for Bitmain. Wu Jihan predicts that AI chips can account for 40% of Bitmain's revenue within five years.

In November 2017, Bitmain "entered" into artificial intelligence and launched its AI brand "Suanfeng", as well as the tensor acceleration computing chip BM1680, the board SC1/SC1+ that is being mass-produced and shipped, and the intelligent video analysis server SS1.

Bitmain has not only moved towards the upstream of the industry chain - chips, but also acquired downstream - application service providers (such as early childhood education robot service provider Carrot Technology).

On the other hand, as mentioned earlier, GPU manufacturers Nvidia and AMD have also become pessimistic about the mining chip market.

What is the impact on supply chain manufacturers?

It is understood that from April 2017 to March 2018, GPUs were in short supply. However, Nvidia has also made it clear that mining-related quarterly revenue will drop by 65% ​​year-on-year, and the outside world estimates that the decline may be more than that; AMD CEO Lisa Su also admitted that virtual currencies have changed a lot, and the current mining demand has slowed down, and the cooling should continue in the second half of the year.

In addition, according to Taiwan's DIGITIMES, the performance of graphics card manufacturers including MSI, GIGABYTE and ASUS has also declined significantly.

Although the demand for mining chips rebounded slightly in May, it has dropped significantly compared with the previous period. Especially when the mining efficiency continues to weaken, small miners will be forced to withdraw one after another, and the procurement scale of large and medium-sized miners will be reduced, which will bring the demand for GPU and ASIC chips back to original state.

Take ASIC mining chips as an example. Previously, this market was mainly based on Bitcoin. Now, according to the supply chain, Bitmain may diversify its wafer foundry and DRAM procurement, but this is not because Bitmain's shipments have increased, but because its orders are not as expected.

In addition, the supply chain has also been affected by the reduction in ASIC mining chip shipments. Supply chain manufacturers including Faraday, Creative, ASE and TSMC will not see the benefits brought by ASICs as expected at the beginning of the year.

Take TSMC as an example. In the financial report released by TSMC on May 31, it was stated that TSMC's net profit in the first quarter increased by 2.5% year-on-year, which was lower than market expectations.

TSMC General Manager and Co-CEO Wei Zhejia said that this is due to the weak smartphone market since the end of last year, especially the demand for high-end models is not as expected, and there is also uncertainty in the demand for mining. This part of the application is the main user of TSMC's advanced process wafers.

TSMC has previously said its second-quarter earnings may fall due to slowing demand for bitcoin mining chips.

Morgan Stanley analyst Charlie Chan believes that demand and prices for bitcoin mining hardware will fall further and affect TSMC's wafer demand. TSMC currently relies on cryptocurrency mining demand for about 10% of its revenue.

Now, as the mining craze continues to cool down, in addition to wafer foundry, packaging and testing companies that have previously benefited will also be affected.