Bitmain Is in Grip of U.S. - China Trade War
Main page News, China, US Market, Mining

The office of the United States Trade Representative classified the Antminer device as an electrical equipment subject to additional fees in June. This means that Bitmain-produced ASIC miners will increase in price by 25% in the U.S. market. Chinese manufacturers of crypto mines now face tariffs on their U.S. shipments of 27.6 percent, up from zero previously.

This is a very serious blow to the company, given that the share of U.S. sales of Antminer is 51%. Selling equipment for mining as a whole brings the manufacturer 91% of its profits. It is worth noting that the trade war between the United States and China has already led to nervousness in the global financial markets. Since the beginning of the year, shares of leading Chinese technology companies have lost 10% to 30% of their value. Participation in this war is probably costing Bitmain significant losses, especially since the company is not performing very smoothly.

To understand how sensitive this blow will be to a leading company in the mining industry, all you have to do is look at the financial report submitted in preparation for the IPO. The company is in the process of the initial public offering on the Hong Kong Stock Exchange. According to some analysts, such a move is associated with a shortage of working capital. Earlier it turned out that the company sold most of the bitcoins and seriously increased its position on bitcoin cash. Given the ongoing deep correction in the crypto market, Bitmain could lose a significant amount on the BCH exchange rate decline in recent months.

Bitmain Waiting for Failure?

In late September, Bitmain submitted a listing application for an initial public offering (IPO) to the Hong Kong Stock Exchange (HKEX). The application is a draft, and some of its details, in particular, the number of shares offered for sale and the immediate date of the IPO, are still in the process of editing.

Nevertheless, the document states that Bitmain's revenue last year was $2,517,719,000. This figure is higher than in 2016 ($277,612,000). As of June 30, 2018, the company's revenue was $2,845,467,000. The application says that in 2017, the mining company’s gross profit was $ 1,212,750,000, which also exceeds the figures for 2016 ($151,351,000).

“The new filing confirms our suspicion that Bitmain has been making large losses recently, with a net loss of US$395m in Q2 2018. The magnitude of wasted production costs is also revealed, with almost US$0.5 billion spent on failed chips in the last 18 months. However, the document also confirms that Bitmain successfully raised US$442m from investors in August 2018, significantly strengthening their balance sheet. At the same time, this brings the IPO closer, which is good news for Bitmain and something its rivals should be concerned about,” says BitMEX Research analysis.

There were also rumors that Bitmain lowered the company's predicted revenue in 2018 from $8 billion to $3 billion. Twitter user BTCKING555 reported this information with links to sources within the company.

Also, some crypto experts believe that the most inappropriate moment has been chosen for the IPO. China's exchanges are showing a strong decline in the face of constant U.S. pressure, so a business that is half dependent on American demand is not the best investment.

In addition, according to the testimony of Ripple strategic director Corey Johnson, Bitmain came under the watchful eye of the White House administration, which does not like the 50% dominance of the company in bitcoin and ethereum mining. Therefore, in relation to the mining giant, sanctions can be taken as well as on ZTE, limiting access to technology and limiting the spread of devices in the United States.

Earlier in April, the U.S. authorities banned Chinese ZTE from purchasing products from American technology companies for seven years and also restricted sales of ZTE smartphones and network equipment in the country. The United States accused ZTE of supplying products with American components to Iran and North Korea. This decision of the U.S. Department of Commerce had the most unpleasant consequences for ZTE. In early May, ZTE officially announced the suspension of major operations due to the U.S. sanctions.

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