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Chinese Mining Hardware Makers Hit Hard by the New Us Tariffs Targeting Chinese Goods
(Source: The South China Morning Post)
According to an October 16 report from the South China Morning Post, Chinese cryptocurrency mining hardware maker Bitmain is bracing for harder times as shipments to one of its overseas markets have been facing new tariffs since August 23.
The Beijing-based manufacturing giant is seen as the most exposed to U.S. trade barriers, as it has filed for a Hong Kong stock market listing back in September. The listing would reportedly raise around $3 billion.
The tariffs couldn’t have come at a worse time for companies in China, as Bitmain’s competitors Canaan and Ebang International have also filed applications to list on the Hong Kong stock market. Canaan and Ebang International are reportedly seeking to raise US$400 million and US$1 billion through their respective IPOs.
Back in June 2018, the office of the United States Trade Representative introduced new categorization for Bitmain’s mining hardware called Antminer S9, filing it under “electrical machinery apparatus” which is subject to a 2.6 percent tariff. The mining gear was previously classified as a “data processing machine” and wasn’t subject to any additional import tariffs.
The reclassification brought the mining hardware under the list of Chinese goods subject to the additional 25 percent tariffs, which took effect in August.
Bitmain Hit the Hardest
The newly imposed import regulations now mean that instead of zero, all Chinese cryptocurrency mining gear makers now face tariffs on their US shipments of 27.6 percent.
However, it seems that Bitmain would be the one hit the hardest, as it’s the world’s largest maker of ASIC (application-specific integrated circuit) cryptocurrency mining hardware. Apart from the sheer volume of its production, Bitmain’s main weakness is that its overseas sales contributed to 51 percent and 51.8 percent of its revenue in 2016 and 2017 respectively.
While the company’s IPO prospectus didn’t provide a specific geographic breakdown of its sales, Canaan and Ebang International’s overseas sales represented only 8.5 percent and 3.8 percent of their 2017 revenue, respectively.
Mark Li, a senior analyst at Sanford C. Bernstein, believes that the U.S, tariffs are likely to make Chinese mining hardware less competitive than rival products made in other countries.
However, Li told the publication that the tariff “is probably not something on the top of the management’s minds now,” as the company’s board is likely more concerned about the company losing its technological edge. Competitors such as GMO and Canaan are reportedly rolling out more advanced chips and mining hardware which are faster and more power efficient than Bitmain’s Antminer S9.