How will the Bitcoin ASIC Manufacturer Market Evolve in 2020?Share Bitmain’s dominance waned while Canaan succeeded in listing publicly in 2019. As 2020 progresses, we analyse the competitive positions of major Bitcoin ASIC manufacturers and assess whether we will see a North American ASIC competitor emerge. Quick take; Bitmain remains the market leader in the Bitcoin ASIC manufacturer market but their dominance has been dwindling. A combination of superior products with internal trouble in the company makes prospects in 2020 uncertain.Canaan raised $90 million in a US IPO but their Avalon mining rig releases have struggled to match the performance and reliability of the Antminer seriesAs North America emerges as an increasingly attractive location for Bitcoin mining, we may observe a US-based Bitcoin ASIC manufacturer arise The Bitcoin ASIC manufacturing market is evolving at a rapid pace. Over the last year alone, we have seen one of the major market leaders Canaan list publicly, the release of a new generation of Bitcoin ASIC hardware, and turbulent events unfolding with the market leader Bitmain. Hardware Market Overview 2019 In their 2019 review of the mining industry, Beijing-based research firm TokenInsight estimates that more than 95% of the hardware market is controlled by the top four Bitcoin mining rig manufacturers – Bitmain, Canaan, MicroBT, and Ebang. TokenInsight further anticipates that Bitmain’s share of the market will rise to 63% in 2020. TokenInsight did not share their methodology of how they arrived at such figures but they are roughly in line with other research estimates released during the year. Whatever way you review the Bitcoin ASIC manufacturing, a clear picture emerges that the industry is strongly consolidated among a few large players. Research Estimates for the Share of Market for Major Bitcoin ASIC Manufacturers We have also observed hardware manufacturers pushing to release more efficient and powerful models of Bitcoin ASICs. In their Q3 mining report, TokenInsight anticipates that we can expect Bitmain to announce their 7nm-chip Antminer S19 series in Q1 2020. In the 2019 mining review, TokenInsight reports that ASICs with 5nm chips may be expected in early 2021. “It is reported that Bitmain is indeed a TSMC 5nm chip customer. At present, 5nm chips are already in the tape-out stage, and 5nm mining hardware may be released early next year ”TokenInsight 2019 Mining Review Bitmain Back in Business? TokenInsight believes Bitmain will grow its market share in 2020. Bitmain’s dominance has been waning over the past years, dropping from an estimated 77% in 2017. However, coming near the end of 2019, Bitmain announced several new products which will be available to their customers including hedging options, more attractive purchasing terms, and co-mining agreements. This could be viewed as holding the potential to bolster the firm’s performance in 2020 as they compete in ways which other Bitcoin ASIC designers have yet to consider. Another reason to expect increasing market share from Bitmain in 2020 is the reliability of their Antminer series of hardware. The Antminer S17 series has received strong reviews from Bitcoin miners and developments on the Antminer S19 series are expected in Q1 2020. However, on the other side, there have been turbulent conditions at the firm. The largest shareholder Micree Zhan was ousted in October as Jihan Wu returned to the helm. Furthermore, roughly half of the Bitmain workforce has recently been laid off. Only time will tell whether such internal troubles at Bitmain will prevent the Bitcoin ASIC designer from strengthening its market dominance. Canaan’s Competitive Angle While the rumoured Bitmain IPO has yet to become reality, Canaan pushed through to ring the bell on the NASDAQ stock exchange in November 2019, raising $90 million from investors. While $90 million is nothing significant in the hardware market, the event was an important development for the Bitcoin mining industry marking it the first Bitcoin ASIC manufacturer to list. Canaan (CAN) share price since IPO The share price for Canaan (CAN) has depreciated over 50% since its November 21st Nasdaq IPO. Analysis by BitMEX Research highlights that Canaan may have listed at an optimal time given their fragile position and performance in the market. ASIC manufacturer Canaan Creative successfully raised $90m in an IPO in November 2019, at a very attractive valuation from the company’s perspective. From Canaan’s point of view, the timing appears impeccable, right before the release of a set of financial results likely to show a loss in 2019, a Bitcoin price decline and the 2020 halvening which should reduce mining revenue.BitMEX Research The share price decline is unsurprising when Canaan’s competitive angle in the Bitcoin ASIC market is considered. MinerUpdate recently outlined their questionable competitive position in a newsletter release. Canaan’s next hardware release expected in February  has poorer performance than mining rig models which Bitmain currently has on the market. The February batch of Avalon A11 mining rigs has a hash rate of 68 TH/s with a power efficiency of 47 J/TH while Bitmain’s Antminer S17+ has a hash rate of 73 TH/s and power efficiency of 40 J/TH. Both are similarly priced which raises the question of why any purchaser would wait until February for hardware which is less powerful and less efficient than hardware which they can purchase now. MinerUpdate Newsletter Will there be a Major ASIC Manufacturer in North America? There has been significant development in the Bitcoin mining industry in North America over the past year. To list some notable examples: Crusoe Energy raises $70 million in financing to launch mini Bitcoin mining data centres that make use of natural gas energy which would otherwise be wasted.Layer1 raised series A financing at a valuation of $200 million with plans to launch Bitcoin mining operations in West TexasBitmain launches a Bitcoin mining farm in Rockdale, TexasBlockstream launches Bitcoin mining operations in Adel, Georgia Texas has been identified as a region with high prospects for future Bitcoin mining businesses. The region offers an attractive energy market where electricity costs can be secured at low rates for prolonged periods of time. Furthermore, clear regulation allows Bitcoin mining businesses in North America to plan long-term. However, one thing North America is lacking is a major ASIC hardware manufacturer. The absence of an ASIC hardware manufacturer in North America has material drawbacks to Bitcoin miners operating in the region. Bitcoin miners are forced to incur substantial sales tax on hardware imported from China while also being subject to long delivery times. Selling hardware on the secondary market will also be a struggle. With all major Bitcoin ASIC manufacturers based in China, Chinese miners benefit from the most liquid secondary hardware market allowing them to quickly offload mining rigs or to make purchases when there is sufficient supply in the market. With all the building blocks in place to set North America up to be a major Bitcoin mining region, a major Bitcoin ASIC manufacturer may be the last piece of the puzzle. Whether we will see such a business emerge in 2020 is a matter of speculation. North America has some drawbacks compared to China when it comes to operating a Bitcoin ASIC manufacturing businesses. Higher labour costs and longer product-testing cycles are just two of the major limitations. Nonetheless, as the Bitcoin mining industry grows, it seems like an inevitability that a large Bitcoin ASIC manufacturer will come to cater to the increasing demand for Bitcoin mining in the North American market. We have already observed some developments in North American ASIC manufacturing with companies such as Layer1 designing proprietary ASIC hardware and mining infrastructure. How Will the Hardware Market Evolve in 2020? We talked with Matt D’Souza, CEO of Blockware Solutions and Blockware Mining, regarding his views on how the competition between major Bitcoin ASIC mining manufacturers will shape up in 2020. D’Souza highlighted to us the following four advantages that Bitmain has in the Bitcoin ASIC market: Customers have lower initial down payments for hardware purchase and can pay the remaining amount seven days before shippingRepair facilities in the US with quick turnaround on repairs and partsHolds the most efficient, reliable mining rigs on the market.Increased engagement with customers Matt believes that Bitmain will remain dominant, especially as they venture into the US market. In a market with strong demand for mining rigs, Matt can see Bitmain raising prices of Antminer mining rigs and Canaan securing a strong market position by selling mining rigs at bargain prices.