Canaan partners with SMIC in a last bid for survival

The cryptocurrency mining company Canaan has reached a new partnership with China’s largest semiconductor manufacturer SMIC. Canaan plans to install chips developed by SMIC on its cryptocurrency mining computers. According to a report by a Chinese media outlet focused on cryptocurrency, the two partners are currently testing SMIC’s 14-nanometer cryptocurrency mining chip and will go into mass production before the end of the first half. But as it is not a high-performance chip, it will be used for mining minor altcoins rather than major coins, such as bitcoin. # SMIC’s huge interest in mining market SMIC has repeatedly considered the cryptocurrency mining market as it offers positive evaluations of its potential. Although the cryptocurrency market today is struggling, the mining industry was booming in 2017. The world’s largest cryptocurrency mining company BItmain made $1.1 billion in net profit in 2011. At the time, Canaan’s net profit expand more than seven fold compared to the previous year. SMIC this year has been showing strong interest as it seems to see room for growth in the mining of cryptocurrency. # Struggling Canaan partners with SMIC as last resort Canaan already has partnerships with the world’s top two semiconductor fabrication companies, also known as foundry companies — TSMC and Samsung Electronics. Normally a mining company only signs a foundry contract with a single semiconductor manufacturer. Bitmain has an exclusive supply contract with TSMC while Pangolin Miner and Innosilicon has one with Samsung Electronics. The expansion of partnerships may have to do more with the worsening situation at Canaan. According to Canaan’s latest balance sheet, published on March 9, the company’s revenue last year shrank to $204 million from $383 million in 2018. The company’s net loss, however, surged to $148.6 million from $17.3 million. The worsening performance was largely attributed to the struggling cryptocurrency market, growing competition, investors’ lawsuits and the lack of performance in the company’s next-generation areas, such as artificial intelligence. Because the company is short on capital, it has decided to install SMIC’s cheaper chips rather than TSMC’s and Samsung Electronics’ more expensive chips. # Real competition is between TSMC and Samsung Electronics The real competition in the market is between TSMC and Samsung Electronics — evident in the chips installed in Bitmain’s AntminerS19 and Shenma M30s. AntminerS19 installs a high-performance TSMC 7nm chip. It has a hash rate of 95TH/s (Tera hash) and has a power efficiency of 34.5 ± % 5 J / TH(joules per Tera Hash). S19Pro, which has a stronger performance than S109, has a hash rate of 110TH/s and a power efficiency of 29.5 ± % 5 J / TH. The M305 that installs Samsung Electronics’ 8nm chip in performance falls behind the TSMC chip. It’s hash rate is 86TH/s and power efficiency is at 38±10J/T. However, Samsung Electronics has larger inventory and it has the competitive edge on price compared to the more expensive TSMC chip. As the competition between the two chips is fierce, there’s not much room for SMIC to join in. The mining industry is expecting major changes in May. Because profit from mining is shrinking, SME miners that fall behind in competitiveness will likely perish, and the industry will consolidate into a handful of major companies. As such, the market for mining machines is likely to change as well. Currently the main competition in the market has narrowed down to Bitmain and Shenma. While Canaan has partnered with SMIC in a last-ditch effort, in reality SMIC won’t be able to save the company. Unless Canaan comes up with another plan, it could soon be elbowed out of the market.

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