Cryptocurrency Mining Drives Global Chip Production while IT Merchants Ration Graphic Cards
TSMC, the world’s biggest chip foundry, produces now more wafers for Bitmain than for Nvidia. At the same time, cryptocurrency mining boosts the price for graphic cards, which has become annoying for gamers. Now producers start to intervene.
Mining of bitcoin and other cryptocurrencies has become a madness and maybe the biggest global consumer of computational power.
Recently, TSMC, the world’s largest semiconductor foundry, published its quarterly revenue report for the fourth quarter of 2017. Since the Taiwan-based company is responsible for the half of the world’s chip production, a trend needs to be very huge to have an effect on the balances of TSMC.
Compared to the prior quartal TSMC raised the revenue for about 10 percent to $9.2 billion. The financial directory of the company, Lora Ho, explains that growth in fourth quarter “was supported by major mobile product launches and continuing demand for cryptocurrency mining.” For 2018, Ho also expects strong demand for crypto mining.
According to a tweet by financial analyst James Wang TSMC produces now more wafers for the world’s biggest mining hardware producer Bitmain than for Nvidia, which is one of the largest global producers of graphic cards. The magazine Quartz estimates that TSMC earned $350-400 million due to the production of ASIC miners, in the third quarter of 2017 alone.
The hard numbers seem to exceed estimations which seemed crazy just some month ago. In mid-2017 Chen Min said at the Scaling Bitcoin conference in Stanford that annually $5 billion is invested in mining. A strong part of this sum should go to the chip foundry TSMC. If you consider that demand for mining exploded in late 2017, the number of miners could be too low.
And all what has been said until now was directed to mining Bitcoin with ASICs. But there are more cryptocurrencies as bitcoin, and a lot of them are mined with graphic cards; for example, Ethereum. You can be sure, that TSMC does not only earn from mining by delivering Bitmain, but also by producing wafers for Nvidia.
Last summer BTCManager reported that Germany and other countries run out of graphic cards, because cryptocurrency mining drove up demand. This trend continues; strong graphic cards are sold out nearly everywhere.
For producers like Nvidia and AMD, this is good and bad. Good, because demand rises. The revenues of both companies in Q4 2017 exceeded every expectation, and the stock price of Nvidia almost caught up with the bull market of cryptocurrencies. The price of a share of the company did more than quadruple since 2016.
However, this demand is dependent on the crypto trend. If just Ethereum crashes hard, the high share of mining in the distribution of graphic cards could become an expensive problem, when demand drops. Ethereum alone, one analyst estimates, is responsible for half a billion dollar of graphic card sales. Many people are assumed to buy high-quality cards for gaming, but use them most of the time, when they are not gaming, to mine cryptocurrencies. So the card pays off by itself. If this demand ceases, Nvidia and AMD will have a problem.
For gamers which have no interest in mining, the hype is mostly annoying. Not only that ASIC miners take ever larger shares of the rare production capacity of foundries; the GPU miners buy all the graphic cards on the markets. German gaming magazine PCGames reports that the prices of graphic cards used for mining, like the AMD’s Radeon RX series or Nvidia’s GTX cards, have risen significantly in the last quarter of 2017.
According to reports, the miners do not only order one card but dozens or hundreds with a single order. Nearly every German online shop knows about the huge orders of mining farms. In recent times there are more and more miners from Eastern Europe who try to order at German shops, maybe because they bought all graphic cards available in their home countries.
To protect its long-term customers, the gamers, Nvidia intervened. The company asked the vendors to ration the graphic cards. Only two of the same model should be sold with one order. As PCGames writes, many prominent German shops, like Alternate, Caseking, Mindfactory or MIX, have already met this request.
However, this kind of self-regulation is voluntaristic. It will be seen, if it really helps to protect gamers against the hardware hunger of crypto miners, or if it will just help those online shops, which ignore the request, to make more money by serving the demand of miners. But there is one thing that can be said for sure; Crypto mining has turned crazy.