Another Industry Takes Hit From Global Chip Shortages: Crypto Mining
Cryptocurrency mining has only surged in popularity heading into 2021. Like many other industries, the mining sector is now facing the repercussions of global chip shortages, notably in China.
It’s true that cryptocurrency mining is nothing new. Back in 2018, we reported on Bitcoin’s (the reigning cryptocurrency to date) then decade-long history—and how spiking valuations kicked off the mining craze.
While Bitcoin mining was accessible to individuals early on, large-scale miners are reaping the most rewards. Russia, China, the United States, and even Iceland have served as major crypto mining centers.
Cryptocurrency mining has spiked as farms have transitioned from CPUs to GPUs to ASICs. Image used courtesy of CoinDesk Research
The proliferation of cryptocurrency farms (large facilities housing specialized hardware) has uniquely strained the semiconductor industry. A single farm requires hundreds, if not many thousands, of semiconductors. That incurs massive electricity charges.
Today, Chinese cities like Dalian lead the way in terms of cryptocurrency mining power consumption. One of the country’s (and world’s) largest mines has a capacity of 360,000 tetrahashes (TH)—or 360,000 trillion calculations. It costs $1,170,000 monthly just to power this operation. It’s no wonder why these farms are hard on microprocessor supply chains.
The Role of Mega Fabs
GPUs, CPUs, and ASICs (application-specific integrated circuits) are integral to mining. With COVID-19 interrupting fabrication throughout 2020, the available chip supply has diminished. Meanwhile, mines have expanded.
CPUs have long been underpowered for mining tasks. GPUs fair better. However, high-powered ASICs are now designed specifically for crypto hashing. They also offer exceptional performance per watt. Mining collectives—including the Genesis Group—mainly leverage 7nm to 10nm ASICs. TSMC produces the vast majority of these for worldwide buyers. Under normal circumstances, total crypto mining demand would be taxing.
In light of chip shortages, TSMC is cutting its supply to ASIC crypto miner manufacturers. Image used courtesy of TSMC and Modern Consensus
But with big-name customers vying for new 5nm process semiconductors (Apple, Intel, AMD, etc.), miners face steeper odds in acquiring new chips. The future of mining depends on foundry output and allocation. It’s not so easy to ramp up production just to satisfy mining demand—and constructing new facilities certainly isn’t viable.
That said, chip manufacturers aren’t blind to the demands of the crypto market. How have they responded?
Major Manufacturers Speak Out
While chipmakers hold the cards, it appears that NVIDIA is poised to accommodate crypto miners. CFO Colette Kress shared that a dedicated cryptocurrency GPU lineup will hit shelves beginning in Q1 of this year. The lower-performance 30HX and 40HX will precede the 50HX and 90HX GPUs, which are slated for Q2. Primarily aimed at Ethereum, these units will be suitable for Bitcoin and other currencies.
NVIDIA feels it can take this risk for a few reasons. First, the cryptocurrency market is expected to further rebound following 2019’s major slump. Second, the company recently surpassed over $5 billion in quarterly revenue. Finally, the company hopes miners will flock to these four new chips, instead of commandeering popular gaming chips. Accordingly, the RTX 3060’s performance will be gimped by 50% when crypto mining is detected.
NVIDIA is releasing the NVIDIA CMP purpose-built for mining. Image used courtesy of NVIDIA
NVIDIA expects to earn $50 million this quarter from its upcoming crypto products. This move isn’t merely a cash grab. The idea is to mitigate existing shortages while pushing a chip that’s inherently easier to manufacture.
Samsung Semiconductor is also a major supplier of mining chips—indirectly or otherwise. Its 10nm chips were instrumental in powering the Dragonmint T1 mining rig back in 2018. This ASIC was ultimately a source of extra profit for Samsung’s chips division. According to a Reuters report on ongoing chip shortages, Samsung plans to maintain its focus on consumer electronics; this market is more stable than shifting crypto mining ventures.
Finally, TSMC cited crypto’s volatility when affirming its preference for the consumer market. The company was once a major chip supplier for Bitmain—a Beijing-based producer of crypto mining hardware. Despite Bitmain’s willingness to pay hefty sums for chipsets, it seems that TSMC is heading in another direction for the time being.
Uncertainty at the Epicenter
China remains the world’s premier home of cryptocurrency mining. Additionally, most mining hardware originates from China—yet chip shortages are making procurement difficult. This is underscored by Bitmain’s contractual lapse with TSMC. Mining needs are highly specialized, and smaller companies can’t fill the fabrication void. Bitmain’s units remain sold out.
The situation globally remains largely the same in China. TSMC’s future with Chinese players like Huawei, Xiaomi, and Oppo has been murky—though U.S. administrative changes could put chipset orders back on the menu. Until then, competitors like MediaTek are taking advantage. 86.4 million smartphones shipped in China in Q4 of 2020 alone, showing just how much pull that one competing industry has.
Some of the largest cryptocurrency mining farms are based in China. Image used courtesy of Stefen Chow and IEEE Spectrum
Chinese mining companies can’t keep up. Demand has risen alongside crypto—a poor combination when supply is lacking. Shortages are also forcing smaller crypto miners out of the market. Small groups and individuals don’t have deep enough pockets to outbid major players. While China’s low electricity (AKA operative) costs typically leveled the playing field, Bitcoin’s rise has led to the consolidation of mining power nationwide.
Consequently, China’s global share of Bitcoin mining has dropped by 30% in recent years. It’ll be interesting to see if Chinese fabricators like SMIC, Powerchip Technology Corporation, or Hua Hong Semi will target the cryptocurrency market.
Limited Opportunities for Engineers
Overall, global shortages also set back developers looking to break into the crypto realm. Additionally, development opportunities into mining ASICs won’t be as plentiful.
It’s possible that design efforts in crypto mining hardware as in automotive hardware will stall until chipmakers recover. The progression of the global pandemic will heavily impact this, as will the ongoing stability of currencies.