Bitmain miners to get hit by US tariffs of 27.6%
That's not what Bitmain needs right now.
In June, the Office of the United States Trade Representative qualified mining systems as "electrical machinery apparatus," subject to a 2.6% tariff, rather than the former "data processing machine."
That's been joined by another 25%, for a grand total of 27.6% where there used to be zero tariffs, the South China Morning Post (SCMP) reports.
The wrong place at the wrong time
A 27.6% price hit might make Bitmain severely unpalatable in the USA.
"All manufacturers of mining rigs based in China will likely be affected by the tariff code change and, in turn, captured by the US trade tariff," said Ben Gagnon, co-founder of LuTech, a bitcoin mining hardware developer to SCMP.
This includes other mining firms that were also aiming for an IPO right about now, such as Canaan and Ebang.
Bitmain's overseas sales contributed 51% and 51.8% of its revenue in 2016 and 2017 respectively, according to its IPO prospectus. While there was no regional breakdown, and the IPO prospectus suspiciously didn't include more recent figures, Gagnon notes that mining interest from the USA has grown dramatically over the last 18 months, so it's likely that things are even worse than the already-tough numbers would suggest.
By contrast, Canaan and Ebang say their overseas sales represent only 8.5% and 3.8% of their total revenue in 2017 respectively.
It's another heavy hit for the embattled mining outfit, which has enough on its mind, suggests Mark Li, senior analyst at Sanford C. Bernstein.
"The US tariff is probably not something on the top of the management’s minds now," he said, noting that the ongoing technological arms race between Bitmain and its competitors is probably drawing more attention.
He's probably got a point.
Bitmain's competitors in China have been pulling ahead lately, Li says, by simply producing better hardware. Plus, its key competitor outside China, the Georgia-based (the country, not the state) Bitfury recently unveiled the numerically-impressive Clarke, which might get an extra edge in US markets thanks to the tariffs.
At the same time, Bitmain has been heavily reliant on sales of its flagship Antminer S9 for about two years, which is an exceedingly long time in the crypto mining space.
And it's been busy, but perhaps not busy enough. It recently revealed a moderate upgrade with a water-cooled Antminer S9, but it's not suitable without an external water source and might still end up a bit statistically lacklustre next to its competitors.
It then followed this up with an announcement of a 7nm SHA-256 mining chip. While supposedly significantly better, experts are questioning whether it's really all that – especially next to its competitors.
Regardless of how good the 7nm might be, drastically heightened tariffs aren't going to help Bitmain right now.
Let’s take a closer look at Bitmain’s announcement at #WDMS #miningconf for their “next gen” 7nm ASIC chips. To most people this may seem like a big deal and good news, but actually the announcement shows things aren’t looking too good for Bitmain. Read on. #BitmainIPO
— Samson Mow (@Excellion) September 21, 2018
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.