Is Bitcoin Mining Still Profitable?

The largest dedicated independent chipmaker in the world, Taiwan Semiconductor Manufacturing Co. (TSMC) has predicted that in the final quarter of 2018, there will be a drop in demand from the crypto mining community.

Partly due to Bitcoin miners demand dynamics, the 7-9% growth target was reduced to 6.5%. Chief Executive Officer and Vice Chairman of TSMC, C.C. Wei during the company’s third quarter 2018 earnings conference told investors that, through “continued weakness in crypto mining demand,” the growth of business will be offset.

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He said: “Moving into fourth quarter, despite the current market uncertainties, our business will benefit from the continuous steep ramp of 7-nanometer for several high-end smartphones as well as the demand for 16/12-nanometer for the launches of new-generation GPU and AI. However, this growth will be partially offset by continued weakness in cryptocurrency mining demand and inventory management by our customers.”

For the whole Semiconductor market, which does not involve memory, a growth between 5-7% has been forecasted by the company, while a growth between 6% and 7% is expected to happen in foundry. According to the Chief executive, the firm has been forced to adjust the growth estimate to 6.5% in terms of the U.S dollar, due to the reduced demand from miners of cryptocurrencies.

However, our business is also negatively impacted by further weakening of cryptocurrency mining demand. As a result, we estimate our 2018 growth rate will be about 6.5% in U.S. dollar term, which is close to the foundry industry’s growth but slightly below our 7% to 9% guidance given in the last conference.”

The main reason behind the company’s revision of its sale target in a full-year is due to the reduction in mining profits, but in contrast has cited its reason to be as a result of uncertainty in the crypto market.
In April, the Taiwan Semiconductor manufacturing company reduced its revenue guidance in 2018 from 10-15% to a 10% growth, estimating that the crypto mining demand influences about 10% of the Asian chipmaker’s revenue.

However, TSMC may be having their first real competitor in the crypto mining sector after Samsung entered the sector. This may leave the company with no choice but to reduce its sales target in years to come. At the start of 2018, Samsung began the production phase of Bitcoin and crypto mining equipment and ASIC mining chips. For miners targeting small cryptocurrencies in the coming months, the company plans to manufacture for them GPU miners.

The future trade volumes of Chinese companies producing crypto mining hardware may be hurt due to the trade tariffs of President Trump. The TSMC may eventually benefit from this as competitors from China will find the race for the U.S market very difficult.

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