Demand for Bitcoin Mining Chips Declines

Bitcoin Miners are not buying as many chips as they used to. Taiwan Chip giant Taiwan Semiconductor Manufacturing Co has since slashed its growth target to 6.5%. The world’s largest chip giant had initially predicted a growth rate of between 7% and 9%.

Taiwan Semiconductor Manufacturer Trims Growth Guidance On slowing Bitcoin Mining Chips Demand

Taiwan Semiconductor Manufacturing has since admitted that reducing demand from Bitcoin miners was the reason behind the slash. However, it is slowly emerging that the cut could also have to do with increasing competition in the sector.

Samsung is one of the companies that has also expanded its footprint into the crypto chip business. The South Korean hardware giant is a formidable competitor having started production of crypto mining equipment early in the year.

Concerned with the declining demand as well as competition threat TSMC CEO, Dr. C.C Wei, has warned of continued weakness going forward.

“Moving into the fourth quarter, despite the current market uncertainties, our business will benefit from the continuous steep ramp of 7-nanometer for several high-end smartphones as well as the demand for 16/12-nanometer for the launches of new-generation GPU and AI. However, this growth will be partially offset by continued weakness in cryptocurrency mining demand and inventory management by our customers,” said Mr. Wei.

A decline in demand for mining equipment, in one way, has to do with the high cost of purchase. Bitcoin mining equipment tends to command a fortune something that continues to bar most people from venturing into the business. The fact that no new miners are coming onboard also continues to spell trouble for chip developers.

Cryptocurrency Implosion

The lack of interest in mining equipment also has to do with the implosion at crypto prices. Crypto mining operations are no longer as lucrative as they used to be, at the peak of the crypto booming late last year.

Bitcoin, which is the most mined crypto coin, has lost more than 60% in market value from its record highs at the start of the year. Uncertainties over cryptocurrencies future also appear to have had a negative impact on interest in the crypto mining business.

Revenue Loss Concerns

Taiwan Semiconductor Manufacturing Company finds itself in a tight spot given that crypto mining chips account for a big chunk of its total revenue base. The company generates about 10% of its total revenue from crypto chips. Faced with declining demand the company has had to reduce its revenue guidance from between 10-15% to just 10%.

Lower Bitcoin mining chips demand is not the only headwind TSMC is grappling with. A decline in demand for iPhones is also slowly taking a toll on one of the company’s main revenue stream.

The company is a major supplier of iPhone core processor Chips. Smartphone saturation in recent years has seen Apple struggle to move as many products as it used to, an underperformance that is already having a ripple effect on chip suppliers.

Concerns over TSMC chip business already have a toll on investor sentiments in the stock. The stock fell by about 7% in the second quarter as investors reacted to below-par guidance going forward.