In my previous post I dropped a video of how massive Bitmain minning farm looks like. In this post we going to be seeing just how profitable minning is.
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You might want to know how much bitmain makes as profit.
Now let's start with the Production cost
First things first let's talk about profit, we all know that profit is a gain, that is the difference between the amount earned and the amount spent in buying, operating, or producing something. So the amount realised on each S9 sold is actually $1200 as I write this.
Now to be frank fabrication of chip is an expensive part when it comes to miner build. Thankfully, chip fabrication costs are fairly standard for a given process and we can figure out how much they cost with a little digging and math.
Obviously Bitmain uses TSMC’s 16nm process to build their BM1387 chips. I did a little googling to knw this TSMC’s production cost per wafer of the 16nm process is around $4000. Their gross margins are around 45%, so we can deduce that the cost per wafer to Bitmain is roughly around $8000.
Now secondly Antminer chips board
If you are familiar with the size of the chip, it will be so easy for you to work out exactly how many chips you can have on each wafer.
Now Bitmain chip of BM1387 is actually lesser than 20 mm² in die size, also it looks to be around 3mm x 4mm by ascertain it from the inside actually.
You can plug in these numbers to a die-per-wafer calculator and get 5158 chips per wafer by using the 300mm/12" wafers as the industry standard.
So each S9 miner uses 189 such chips, so this wafer can make some good chips for a little over 27 S9's. Each wafer costs around $8000, so the chips for each S9 costs roughly $300.
So we can estimate the cost of production of the S9 to be roughly $500.
Of course, all this does not include all the one-time engineering costs like testing. Tape-out, ,so for 16nm processes, it's less than $10M But am looking at how many miners have been sold by Bitmain and how long the BM1387 has been on the market, S9 was $2100 at launch, so we can safely deduce that they’ve regained the costs already (probably in the first month, at the most).
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So this is profit from mining
The above calculations makes us know how much Bitmain makes from their mining operations. So now we know they’ll get roughly 100,000 BTC/yr $120M/yr if their hashing power remains at around 13.2% (500PH/s for now). Also the electricity costs plus data center costs are approximately $23M/yr.
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Generally, bitmain break-even point is at $430/BTC their equilibrium point is still remain $130/BTC. Reason why they are able to survive where most mining manufacturers went insolvent during Btc three year bear market! Yes bear market .
Now profits from Selling
With the above estimation, we can also give account on how much money Bitmain makes from selling equipment. If we evaluate that around 2/3 of the network hashing power is provided by their mining chips less or more that means roughly 53% of the mining equipment hashing right now is handled by bitmain customers, but not Bitmain.
That’s roughly 200,000 S9 units, each out of which give profit of $700 to Bitmain. That’s a total of $140M in profit from selling the equipment.
Please note that equipment sales is actually less volatile than mining operation. Because mining operation is very dependent on Bitcoin price and of which sales is not. So For a business like Bitmain, it makes much sense actually to sell equipment and get stable and less volatile earning than.
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Conclusion guys
Bitmain is probably making around $200M-$250M in profits this year just from BM1387 chip note they have other products also which include a Scrypt ASIC. So Even after including other future investment, they are likely worth over $1 Billion as a business and they are probably the most profitable and largest company in Bitcoin.
Their supremacy and dominance might not last forever. Because the margins are just too great for competitors to not come into this space. If BTC price stays at or above the current levels for a while, we should expect more companies to come into the ASIC manufacturing business.
It would be an added advantage because it will make equipment much cheaper and add more options for customers.
Let's not forget that Bitmain has gotten to where they are right now because they’re extraordinarily good at what they do. This is a good thing as this means the ecosystem is growing up the remember Butterfly Labs? So let's expect this level of order and efficiency and scale in Bitcoin going forward.