Is Crypto’s Declining Demand Affecting Mining Chip Sales?
The cryptocurrency industry isn’t the only market affected by the bearish market trends. Companies in the computing sector are also feeling the pinch, as evidenced in the decrease in demand for crypto mining equipments.
This is apparent from Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker’s lowered sales growth projections for this year. The company’s growth forecast has been lowered to just 6.5 percent, down from previously estimated sales growth of between 7 and 9 percent.
According to Zhang Jian, F1/Fcoin’s founder,
“Chip orders are down. This is a clear reflection of the continuing bear market within the cryptocurrency space. It is no secret that mining cryptocurrency has accelerated the advance and sales of computing power, but this pace has slowed significantly in Q2 and Q3.”
The reality is that investor sentiments aren’t really favorable right now. While crypto enjoyed incredible growth last year, leading to record sales growths for companies like AMD, this year hasn’t been so great.
In fact, AMD has seen its sales volume drop when compared to the same quarter last year. Bitcoin has seen a huge fall in price from over $18k at the end of January to around $6500 in October –that’s a value loss of about 60 percent.
This price drop has also dragged down other altcoins resulting in their prices now being a fraction of what they once were. Bitcoin’s and other altcoin’s cheaper state has caused miners to slow down on buying mining equipment.
This is because most are hardly breaking even, while some are even running their miners at a loss. Mining equipments typically tend to fly off the shelves when there’s a boom as was observed last year. AMD which was leading the pack in the sales of crypto mining ASIC units has seen a significant decline in their sales this year.
As a result, TSMC which manufactures these chips for them have also seen reduced sales numbers. AMD’s outlook regarding the sales of crypto mining chips for the rest of the year isn’t great, owing to the sustained bearish nature of the market.
This, combined with the increasingly more complex puzzles and smaller rewards per block of bitcoin mined has seen miners reevaluating their strategies and putting off investing in more chips on hold. With these chips becoming increasingly more expensive, miners can’t justify the expense. This is partly why there’s a lull in the demands for these equipments.
Peng Mao-Jung, a manager with Taiwan's Industrial Technology Research Institute says
“A decline in demand for cryptocurrency mining equipment has to do with the high cost of purchase. The lack of interest in mining equipment also has to do with the implosion of crypto prices.”
But, lower crypto prices less demand and high costs of mining equipments isn’t solely responsible for the state of the crypto mining sector. There’s one more possible contributor: the production of a new generation of mining equipments. There’s the distinct possibility that buyers are waiting for the release of the new set of chips running on the 7-nanometer processor, instead of the current 16-nanometer processors.
The 7-nanometer chips have the added advantage of more power and reduced energy consumption. As a result, miners may be waiting for this in the hopes of further maximizing their profits.
According Shone Anstey, Cofounder of BlockChain Intelligence Group, a Vancouver-based cryptocurrency tracking firm,
“The indicators are there that the market has been slowing down in preparation for this new family of mining chips to come into production. The increased power of these new mining chips may prompt the smaller mining operations to pool resources in order to scale up.”
While the market may have been in a slump this year, it’s possible that it might pick up next year after the release of expected key bitcoin upgrades and documents, as well as the official entry of institutional investors into the market.
If that happens, we will most likely, see an uptick in the sales volume of ASIC miners and other crypto mining hardware. As a result, crypto mining hardware manufacturers will enjoy better sales growth and profit margins.