Global Chip Manufacturer Expects Lower Profit Due To Uncertain Crypto Mining Demand

Taiwan Semiconductor Manufacturing Co. (TSMC), a global chip manufacturing giant, has lowered its 2018 revenue forecast to 10 percent growth, down from its previous estimate of 10 to 15 percent, based in part on uncertainty in cryptocurrency mining demand, CNBC reported April 19.

Morgan Stanley estimates that about 10 percent of TSMC’s revenue depends on crypto mining demand. Charlie Chan, equity analyst at Morgan Stanley Taiwan, said that in their analysis, “Bitcoin mining hardware demand and price will decline further and affect TSMC’s wafer demand.”

TSMC stated that first quarter demand from cryptocurrency mining was strong and could continue in the second quarter, but the company anticipated potentially weaker demand in the 28-nanometer product line used for crypto mining hardware. Morgan Stanley gave a broader picture of the changing crypto mining landscape:

“We estimate the break-even point for big mining pools should be [Bitcoin trading at] $8,600, even if we assume a very low electricity cost ($0.03 kW/h) […] the injection of new mining capacity will further increase the mining difficulty in 2H18. Even if the Bitcoin price stays the same…we believe mining profits would drop rapidly, according to our simulation.”

Morgan Stanley noted that companies selling specialized ASIC cryptocurrency mining chips, on the other hand, could have more latitude, and continue to break even in two years time if Bitcoin stays above $5,000.

CNBC further reported that Bernstein analysts have estimated that the majority of demand for TSMC chips currently comes from Chinese mining hardware giant Bitmain.

Bitcoin is currently trading around $8,529 at press time, up 3.56 percent on the day.