# Just How Profitable is Bitmain? – Jimmy Song – Medium

Editor’s Note: I originally intended this to be an edit to my last article, but it became interesting enough to just make a entire article out of it. Thank you to my friends ter the semi-conductor industry that helped mij with this.

Te running some numbers for my last article, I ran into one petite problem ter assigning how much it costs Bitmain to run their mining pool. I didn’t know their profit margins for their miners and simply used their current retail pricing for their S9 miners (\$1200). Of course, the retail price is certainly not the production cost for Bitmain, but I had no idea what that wasgoed, so I used the easiest number I had available.

Ter this article, I’m going to estimate Bitmain’s profits and hopefully shed light on what \$2M may or may not mean for them.

### Cost of Production

Profit, spil any high schooler knows, is the difference inbetween amount earned minus the amount spent. The amount earned vanaf S9 sold is \$1200 at the time of this writing. The amount spent is the firmer part to figure out.

Generally speaking, chip fabrication is the most expensive part of the miner build. Gratefully, chip fabrication costs are fairly standard for a given process and wij can figure out how much they cost with a little digging and math.

Wij know that Bitmain uses TSMC’s 16nm process to build their BM1387 chips. A little googling will tell you that TSMC’s production cost vanaf wafer of the 16nm process is around \$4000. Their gross margins are around 45%, so wij can assume that the cost vanaf wafer to Bitmain is around \$8000.

If you know the die-size of the chip, you can figure out exactly how many chips you can print vanaf wafer. The Bitmain BM1387 chip is somewhere below 20 mm² te diegene size, and however it isn’t published, looks to be 3mm x 4mm by measuring the inwards.

Wij can buttplug te thesis numbers to a die-per-wafer rekenmachine and get 5158 chips vanaf wafer (we’re using the 300mm/12", wafers spil is industry standard). Each S9 miner uses 189 such chips, so each wafer can make enough chips for a little overheen 27 S9’s. Each wafer costs around \$8000, so the chips for each S9 costs toughly \$300.

The surplus of the parts are fairly standard and my semiconductor friends tell mij it’s most likely not more than \$200 ter bulk (power supply, fever submerges, controller, PCB, etc), wij can estimate the cost of production of the S9 to be harshly \$500.

Of course, this doesn’t include all the one-time engineering costs like vormgeving, tape-out, testing, etc (for 16nm processes, less than \$10M according to my semiconductor friends). But given how many miners have bot sold by Bitmain and how long the BM1387 has bot on the market (S9 wasgoed \$2100 at launch!), wij can securely assume that they’ve recouped those costs already (most likely te the very first month, at the most).

### Profits from Mining

With the above, wij can recalculate just how much Bitmain makes from their mining operations. Wij know they’ll get harshly 100,000 BTC/year (\$120M/year) if their hashing power stays at around 13.2% (500PH/s for now). The electro-therapy costs + gegevens center costs are harshly \$23M/year. Their mining equipment costs are a loterijlot less than my last estimate from before (40,000 * \$500 = \$20M/year). They’ll make \$77M this year at current BTC rates.

Further, their break-even point is at \$430/BTC (their equilibrium point is still at \$130/BTC). No wonder they’ve bot able to get through where most mining manufacturers went bankrupt during Bitcoin’s Trio year bear market!

### Profits from Selling

Given the above, wij can also estimate how much money Bitmain makes from selling equipment. If wij estimate that around Two/Trio of the network hashing power is supplied by their mining chips (some say less, some say more), that means around 53% of the mining equipment hashing right now is managed by their customers, but not Bitmain. That’s toughly 200,000 S9 units, each of which give a \$700 profit to Bitmain. That’s a total of \$140M ter profit from selling the equipment.

Note that equipment sales is a loterijlot less volatile than mining operation. Mining operation is very dependent on Bitcoin price whereas sales is not. For a business like Bitmain, it would make a loterijlot more sense to sell the equipment and get steadier, less volatile profits than to solely mine.

### Is Bitmain Using Covert ASICBoost or Not?

Spil I’ve shown, \$2M indeed isn’t very much for them and given their scale, they most likely have a much better terugwedstrijd on investment on other projects. Wij know for example, that they don’t liquid-cool their miners which BitFury does. If wij assume Bitmain could get the same increase ter hash rate (30%) spil BitFury does through liquid cooling, their mining profits would increase at least \$20M, a much better terugwedstrijd on investment than covert ASICBoost.

Hence, while it’s possible they are using covert ASICBoost, if they don’t it wouldn’t be surprising. Let’s just say that it’s very likely not high on their list of priorities if covert ASICBoost hasn’t bot done yet and not a high priority to keep if it has.

### Conclusion

Bitmain will very likely make around \$200M-\$250M te profits this year just from their BM1387 chip (they have other products, including a Scrypt ASIC). Even after including ongoing R&,D and other future investment, they are likely worth well overheen \$1 Billion spil a business and are very likely the largest and most profitable company ter Bitcoin.

Their dominance, however, is not likely to last forever. The margins are simply too high for competitors to not come into this space. Should BTC price stay at or above current levels for a while, I would expect more companies to come into the ASIC manufacturing business. This would make mining equipment cheaper and add more options for customers. Unluckily, semiconductor manufacturing requires long lead times so I don’t expect competitors to come te for at least 6–12 months.

Bitmain has gotten to where they are because they’re extraordinarily good at what they do. This is a good thing spil this means the ecosystem is maturing (reminisce Butterfly Labs?). Expect this level of efficiency and scale ter Bitcoin going forward.

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