Bitcoin investors may be losing money, but the companies that support this burgeoning market aren’t. Bitmain, a Chinese company that makes bitcoin mining hardware and operates a mining farm, raked in between $3 billion and $4 billion in profits last year.
CNBC, citing estimates from Bernstein Research, the Wall Street investment firm, reported that based on estimates for gross margins of 75 percent and operating margins of 65 percent, the company made between $3 billion and $4 billion in operating profits — which is the same as graphics chip maker Nvidia, which had operating profits of $3 billion for 2017. Bernstein pointed out that it took Bitmain four years to achieve that, while Nvidia has been in business for twenty-four years.
The report noted that Bitmain’s profits come from different parts of the bitcoin mining supply chain. Bernstein estimates Bitmain controls 70 to 80 percent of the market share in bitcoin miners and ASIC chips, and that most of its revenue came from selling miners powered by its semiconductors. “The rest was largely generated by mining itself and, to a much lesser extent, by collecting management fees from the mining pools it operates and renting out the mining power of its mining farms through cloud services,” CNBC cited Bernstein as saying in a research report. Looking out to the current year, the Wall Street analyst said that Bitmain will likely remain the leader in the cryptocurrency ASIC industry and move some of its chips to the 10-nanometer and the most advanced 7-nanometer process. By doing that, it will become one of the top five users of Taiwan Semiconductor’s 7 nanometers in 2018, noted the analyst firm.
While it’s unclear what the longer-term prospects will be, given the government in China’s crackdown on bitcoin mining in the country, the report noted that Bitmain has taken steps already to mitigate the impact. According to the report, it launched a mining pool unit in Israel in April and is opening mining farms in Canada and Switzerland. It also has a regional headquarters in Singapore, noted the report.