TSMC issued a Shrinkage Limit Order for Bitcoin Mining Chips

Rumored that Bitmain grabs production capacity at high prices, TSMC issued a “shrinkage limit order” for Bitcoin mining chips

Recently, the two major virtual currency markets of Bitcoin and Ethereum have gone crazy. The price of Bitcoin has repeatedly broken through 50,000 U.S. dollars, and mining machines and graphics cards for mining have also fallen into a major shortage.


According to the official website of Bitmain, most of its products are sold out. As early as November 2020, Bitmain’s official website has revealed that the advance purchase of its flagship products, Antminer S19Pro, S19 and T19, will not be delivered until May 2021.

Also according to the official website, the latest delivery time has been scheduled to August 2021.


Canaan Technology began to feel the Bitcoin market rebound in the third quarter of last year and received a large number of pre-sale orders.

The announcement shows that as of early February 2021, the company has received orders for more than 100,000 mining machines from North American customers.

Bitcoin prices have repeatedly climbed to new highs, but a mining machine comparable to a “money printing machine” is hard to find, and the source of this shortage may be TSMC.


Bitmain once became a dark horse in the list of TSMC’s customers

A veteran chip industry with many years of mining experience revealed to Wenxin Voice that when the price of Bitcoin soared two years ago, Bitmain once became a dark horse in the list of TSMC’s customers, but then the price plummeted and the mining fever faded, resulting in mining machine customer.

It is also not soft to cut orders. TSMC internally believes that such an unpredictable customer and business model will not be the core customer group that the company wants to support. In addition, this year’s foundry capacity is extremely tight, and TSMC has begun to offer production capacity to mining chip suppliers. Restriction Order”.

Crypto Bitcoin

However, as soon as this “restriction order” came out, it was reported that Bitmain made an emergency move and immediately offered a very beautiful price that would cover the production capacity of the high-end process, but it also came with an “exclusive clause.”

The so-called “exclusive clause” does not mean that TSMC does not support other miners at all. Rather, Bitmain has already underwritten most of the production capacity allocated by TSMC to virtual currency mining chip suppliers, and the rationing of other suppliers has been squeezed out. Except for Bitmain, it is said that each mining machine factory may only get a few dozen wafers, and at most a hundred wafers.


The cascading effect of graphics card shortages

In addition to the shortage of Bitcoin mining ASIC chips, Nvidia’s graphics cards are also in short supply.

The virtual currency boom was first initiated by Bitcoin, but in recent years, fewer and fewer miners have used graphics cards to mine Bitcoin because of insufficient computing power and players who cannot mine ASICs. Therefore, Bitcoin miners now mostly use ASIC mining machines from Bitmain and Canaan Technology.

Virtual currencies other than Bitcoin, such as Ethereum, use graphics cards to mine.


Recently, the mining boom of Ether was triggered by Bitcoin, and both became popular in the second half of 2020, causing the entire graphics card market to be out of stock. Since the currency market fire, miners have aggressively invaded and robbed Nvidia’s new GPU, causing gamers to be unable to buy graphics cards.

Nvidia also began to realize that, compared with the violent characteristics of virtual currency, loyal and stable gamers will be the core group that Nvidia really wants to cultivate for a long time.


Therefore, NVIDIA deliberately rewrote the RTX 3060 software program, reducing the mining power of the graphics card by 50%, reducing the willingness of miners to grab the graphics card, and leaving the graphics card to real gamers.

In addition, in February this year, it announced the launch of the CMP series of processors dedicated to mining ether.

It is expected that this chip will go on sale in March at the earliest. Nvidia’s move is to separate gamers and miners, let GPUs belong to games, and let new products belong to miners.


It has also been reported that NVIDIA RTX 30 series graphics cards will be out of stock, which is also caused by the low yield of Samsung’s 8nm process.

The industry pointed out that the cost of Samsung’s 8nm process is nearly 30% less than that of TSMC’s 7nm process. This also makes Nvidia’s RTX 30 series of graphics cards very beautifully priced, so Samsung’s 8nm process technology was chosen.


China’s global mining machine dominance is challenged

Regarding this wave of wafer foundry capacity shortages, analysts at Lopez Research said that unless there is a major economic collapse, the current supply and demand storm in the chip industry cannot be resolved quickly.


The once-in-a-century epidemic has led to remote work, remote education, home economy, home entertainment, etc., which has increased the demand for computers and tablets. Furthermore, the conversion of mobile phones from 4G to 5G, electric vehicles and the Internet of Vehicles have also led to a multiplication of chip usage.

Bitcoin has also fallen into madness. It has bottomed out in March last year and has soared from a minimum of $3,800. It has risen by more than 10 times in less than a year.

Bitcoin Trust Fund

When there is an unprecedented chip shortage and the soaring Bitcoin market, it is obvious that semiconductor production capacity has become a major variable in the Bitcoin world. Since the second half of last year, the United States has introduced a series of regulatory policies related to digital assets, which has greatly boosted the Bitcoin market. In February of this year, Tesla purchased $1.5 billion in Bitcoin to directly boost the market.


Before the introduction of the New Deal, and afterwards, there were landmark events such as the Tesla team. The Bitcoin market was unprecedentedly hot, driving the mining demand of miners.

Since the shipments of Bitcoin mining machines are limited by the production capacity of chip foundries, the increase in the computing power of the entire network is not large compared with the beginning of 2020.

In particular, it is worth noting that the shortage of chips has also catalyzed the structural changes in the mining machine industry.


Will China dominate the global mining machinery industry?

In the long term, China will dominate the global mining machinery industry. However, due to the shortage of chips, the price of mining machines will increase the cost of mining, which will help overseas miners with strong funds to profit, which also means that the shortage of chips will indirectly accelerate the migration of mining capacity.

Prices of Bitcoin

Wayne Zhao, chief operating officer of cryptocurrency research company TokenInsight, said in an interview with Reuters that China’s bitcoin mining used to account for 80% of the global total, and now it accounts for about 50% of the world.


The cryptocurrency financial services company pointed out that all miners are now looking for mining machines and are even willing to spend a lot of money to buy second-hand mining machines.

However, due to the large ordering volume in North America, Chinese miners are now placing orders, and they will have to wait until August or September.

Another trend is that the shortage of wafer capacity, coupled with rising investment costs, has gradually seen smaller companies gradually being eliminated.


This also echoes that under TSMC’s “restriction order”, Bitmain has strong funds and is able to pay a large amount of cash to cover most of the chip production capacity, and it severely squeezes the living space of small suppliers.


How does Bitcoin affect semiconductors?

When Bitcoin’s last quotation arrived, as a major customer, the revenue contribution brought by Bitmain surprised TSMC founder Zhang Zhongmou.


In January 2018, Zhang Zhongmou said in an interview with the media that looking back on 2017, the biggest surprise of the semiconductor industry was the sudden demand for bitcoin mining chips in the third quarter…

We didn’t know much about it a year ago. What is Bitcoin? As a result, I have bought a lot of wafers with us now….

Image of Bitcoin

From July to September 2017, virtual currency-related sales reached about 350 million to 400 million U.S. dollars, most of which came from Bitmain.

The industry estimates that in this quarter, Bitmain’s revenue contribution to TSMC was even comparable to that of Nvidia. By the fourth quarter, the chip orders placed by mining chip design companies such as Bitmain to TSMC accounted for about one-fifth of TSMC’s revenue for the quarter.


In 2017, Bitmain achieved sales of 2.5 billion US dollars, second only to Huawei’s HiSilicon in Mainland China. At that time, mining machine manufacturers undoubtedly became a very present company in the camp of chip design companies and even start-up companies.


However, the mining machine business depends on the market, and virtual currency is to a greater extent an uncertain factor in the semiconductor market.


In 2018, the price of Bitcoin quickly dropped by more than 80% of its market value. Mining machine ASIC chip manufacturers and image processor GPU manufacturers faced headwinds after their performance exploded.

Over the past three years, the price of virtual currency has skyrocketed, the madness caused by miners’ sweeping goods, and the tragic lesson of full inventory caused by the collapse of the currency market.

Now large tech companies are looking at the virtual currency market with a relatively calm attitude.


From TSMC’s curtailment of its capacity supply to virtual currency companies to Nvidia’s intention to focus on the game player population, it can be seen that large technology companies will not put this kind of plummeting business in the first place, especially It is the current state of serious shortage of foundry capacity.



The number of bitcoins on the exchange starts to fall again

Recently, the total number of bitcoins on exchanges has begun to fall again.

This trend indicates that Bitcoin holders will hold their assets for a long time.

According to data from the data analysis website Glassnode, the total number of bitcoins on exchanges has begun to decline sharply and has gradually declined since the beginning of 2021.


Knowing the number of bitcoins held on exchanges can tell us a lot about the current state of the bitcoin market, and it also allows us to understand the thinking of bitcoin investors.

If Bitcoin is exiting exchanges in large numbers, this often means that investors are using their Bitcoin holdings for long-term investments rather than seeking short-term gains.


Jason Deane, a Bitcoin analyst at Quantum Economics, a market analysis company, told Decrypt: “The data clearly shows that this is a high-demand asset that seems to have traders’ confidence, further implying that the newly acquired Bitcoin will not be transferred in the short term. Sale.”


Between February 23 and March 2, Bitcoin held on exchanges fell by 2%. This is equivalent to removing 52,900 bitcoins ($2.7 billion) from the exchange.

As more and more bitcoins continue to be sucked into long-term storage space from exchanges, this downward trend has continued for a year.


There are now 2.3 million Bitcoins left on the exchange, which is the lowest level since July 2018, when Bitcoin was valued at approximately $7,400.


Deane added: “The continued withdrawal of Bitcoin from exchanges seems to indicate that buying and holding is a general sentiment among investors.”


This downward trend runs counter to history. For most of Bitcoin’s existence, the total amount of Bitcoin held by exchanges has been increasing.

Data from Glassnode shows that from August 2014 to March 2020, the number of bitcoin held by exchanges has generally increased.


But in March 2020, this historical trend changed direction, and since then, Bitcoin has been flowing out of exchanges in large numbers. Part of the reason can be attributed to the increasing popularity of Bitcoin after the COVID-19 pandemic.

However, in the past 12 months, many large institutions such as MicroStrategy, Square and Tesla have purchased a large amount of Bitcoin to keep in offline storage, thus exacerbating this trend.


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