Secretive Chinese startup, Bitmain now dominates the bitcoin mining industry as Wall Street Bernstein analysts estimate the startup has made as much money as the U.S GPU manufacturing giant Nvidia.
Based on conservative estimates, researchers at Bernstein calculated that the 4-year old Bitmain made $3 to $4 billion in operating profit last year. While Nvidia’s profit, at the same time, was $3 billion according to Bernstein’s U.S semiconservative team.
“But Bitmain achieved this in merely four years, while it took Nvidia 24 years to get here,” said the analysts in a report published on Wednesday.
The Beijing-based startup was founded in 2013 by Jihan Wu and Micree Zhan. Gradually growing, the company turned into one of the major Bitcoin mining firms.
Bitcoin is keeping its lips tightly shut, declining to comment.
In the starting, Bitcoin miners used simple video graphic cards to solve the mathematical equations in order to get Bitcoins, however, in 2013, a Chinese-based company introduced ASIC (Application Specific Integrated Chips) that mined BTC 50 times faster than the ordinary video graphic cards.
Well Today, Bitmain uses ASIC cards to mine BTC, sells Antiminer Bitcoin mining rigs worth between several hundred dollars to few thousand dollars and also operates “mining pools” where Bitcoin miners collaborate by sharing resources and splitting rewards.
Bernstein analysts say that Bitmain holds 70 to 80 percent market share in ASICs and Bitcoin miners, while the firm generates most of its revenue by selling mining rigs.
“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,” said Bernstein analysts.
The report made by Bernstein analysts also says that the significant surges in Bitcoin value also played a major role in the increased Bitmain revenue. The report also reads that “Bitmain shrewdly adjusts the prices of miners according to bitcoin prices”
When BTC price soared to almost $20,000 in December 2017, Berstein researchers reported that the price of Bitmain Antiminer S9 rose to near $5,000.
Another contribution to the $3 to $4 billion revenue was made by Bitmain dealings with the Taiwanese Semiconductor Manufacturing (TSMC), which supplies ASIC chips to it. According to Bernstein, Bitmain dealings with TSMC “contributed 2 to 3 percent of the chipmaker’s total revenue last year.”
“In the year 2018, Bitmain will likely lead the cryptocurrency ASIC industry and migrate some of its chips to 10nm and the most advanced 7nm,” the report said.
“That will make the company one of the top five users of TSMC’s 7nm in 2018, with demand comparable with Qualcomm’s, HiSilicon’s, or AMD’s.”
However, due to Bitcoin volatility, Bitmain is not guaranteed to show such impressive results in the future. The cryptocurrency has lost half its value in the last two months.
After Chinese government’s crackdown on cryptocurrency that included bans on ICOs and foreign exchanges, Bitmain has taken some key steps to get around the regulation by launching a mining pool subsidiary in Israel, last April, opening mining farms in Switzerland and Canada and regional offices in Singapore, as noted by the report.
The startup also aims to expand its business to other major cryptocurrencies like Ethereum.
The analysts noted that Bitmain “massive cash position” and its Bitcoin mining rigs business could help the firm easily survive through sluggish periods.