Large manufacturers of mining equipment are looking for new sources of income due to lower profitability.
The profits of large mining industry players are falling due to increased competition, halving, and the emergence of cryptocurrencies on the PoS mechanism. The specialists from analytics firm TokenInsight believe that the production of AI chips could be another source of income for such companies.
The conditions of the changing market make the largest cryptocurrency mining equipment manufacturers Ebang, Bitmain, and Canaan switch from production of mining rigs to AI chips in the long term. This conclusion was made by the analytics of the company TokenInsight.
The production of the mining equipment has long turned into a multi-billion dollar industry, where Bitmain alone, which accounted for 27% of the market in the second quarter of 2020, earned more than 300M dollars in the first quarter.
Market share of the mining equipment manufacturers. Source: TokenInsight report
However, after the May halving, the profitability of mining on old ASIC models dropped significantly, which certainly affected the volume of sales. Older models are either bought at significant discounts or not bought at all. And though the price of new models (the Antminer S19) has increased, the manufacturers are still suffering losses.
The share of popular bitcoin mining companies in 2020. Source: TokenInsight report
In addition, the business of large companies was affected by increased competition – new models appeared on the market, which are only slightly inferior to the products of famous brands. Sales were also affected by the emergence of cryptocurrencies, which are based on the proof-of-stake (PoS) consensus mechanism. New PoS tokens feature reduced requirements for computing power and don’t rely on mining pools.
All these factors are forcing the Bitcoin mining companies to look for new sources of income. The production of AI chips can be one of such sources.
Mining equipment manufacturers have sufficient technological and financial base to switch to the production of AI chips. Moreover, they work in a similar manner. TokenInsight believes that such companies as Bitmain and Ebang may become leaders in this area.
The specialists say that the industry will soon become an arena of mining companies.
Note that Bitmain has been interested in the production of equipment for AI industry for some time. In 2018, co-founder Jihan Wu said that profits from the sale of AI chips could be up to 40% of Bitmain’s total revenue.