One of Bitmain’s biggest competitors, Canaan Inc., has already filed for a Hong Kong IPO that people with knowledge of the matter said could raise about $1 billion. Bitmain’s 2017 revenue was about twelve times that of Canaan’s.
Both companies design custom chips known as application-specific integrated circuits, or ASICs. These are particularly good for the brute-force number crunching required by cryptocurrency miners, who verify virtual currency transactions and earn crypto-denominated rewards by solving complex math problems. ASICs are also useful for the heavy workloads associated with some forms of AI, such as machine learning.
Bitmain controls as much as 80 percent of the market for crypto mining gear, according to a February report from Sanford C. Bernstein & Co., whose most conservative estimate of the company’s operating profit is similar to that of Nvidia’s. Bitmain’s Antminers -- server-sized boxes filled with dozens or hundreds of identical high-powered chips -- sell for a few hundred to a few thousand dollars and are typically bought in bulk by professional operators with access to cheap electricity.
Bitmain is the industry’s “800-pound gorilla,” Roger Ver, the virtual currency proponent known as Bitcoin Jesus, said in an interview.
While the company gets most of its revenue from mining equipment sales, it also runs some of the biggest mining collectives, in which members combine their processing capacity and split the rewards. Bitmain’s AntPool and BTC.com collectives control more than 40 percent of the world’s Bitcoin mining power, according to blockchain.info.
The company’s outsized role has prompted a backlash from some virtual currency purists, who disdain anything that hints of a concentration of power in the crypto ecosystem. But Wu brushes off the naysayers, pointing out that lots of rivals are angling to grab market share.
“Bitmain is trying very hard to maintain its advantage,” he said.
Stiff competition would be just one of several risks for investors in a potential Bitmain IPO. This year’s tumble in cryptocurrency prices has squeezed mining-industry profits, while the number of mine-able Bitcoins is creeping ever closer to its 21 million limit. Bitmain may be diversifying, but a successful push into AI is far from guaranteed, according to Mark Li, a senior analyst at Bernstein who says Bitmain is likely worth less than $10 billion.
Despite the headwinds, a Bitmain offering would garner plenty of attention from Hong Kong investors, who lack compelling options to bet on China’s nascent chip industry, according to Kevin Wang, an analyst at Mizuho Securities Asia Ltd.
“They’ll have a premium for their valuation because there are very few” stocks like Bitmain in Hong Kong, Wang said. “But the sustainability of the business is the question mark.”