Canaan Zhizhis post-listing challenges

This evening (the morning of November 21st, US Eastern Time), Bitcoin mining giant Canaan (Canaan Technology, trading code: CAN) was officially listed on NASDAQ in the United States, with an initial issue price of US$9. The initial supply is 10 million, and the fundraising amount is 90 million US dollars.

According to Canaan Zhizhi’s updated prospectus on November 14, the company plans to issue 10 million ADSs, priced at US$9-11 per share, and raise funds of US$90-110 million. The underwriters include Citigroup, Huaxing Capital, CMB International, Galaxy Digital, Huatai Securities, Tiger Securities, Haitong International Securities. There is a big gap between the fundraising amount and the previously planned maximum fundraising amount of 400 million US dollars.

In fact, as early as 2016, Canaan Creative had plans to go public. After the A-shares, the New Third Board, and the Hong Kong Stock Exchange failed to go public, Canaan considered going public in the United States.

This is not only the fulfillment of its many years of listing dreams, but also represents the markets recognition of the past performance and future development potential of the worlds second largest bitcoin mining machine manufacturer. The most important thing is that the company can complete the financing transformation before the tide recedes, without having to live in the nightmare of large fluctuations in the price of Bitcoin.

Canaan Zhizhi was founded by Zhang Nangeng in 2013 and is headquartered in Hangzhou, China. It completed its B round of financing in March 2019, with an amount of hundreds of millions of dollars. Its business line is mainly composed of blockchain products (Avalon mining machine) and AI products.

In 2013, Canaan released the worlds first blockchain computing device based on ASIC chips, leading the industry into the ASIC era; in 2016, the company achieved mass production of 16nm chips; in 2018, it realized the worlds first self-developed 7nm chips and the worlds first Mass production of a self-developed commercial edge AI chip based on RISC-V architecture.

The companys first-generation artificial intelligence chip Kanzhi K210 has two major functions of machine vision and machine hearing, and can seamlessly integrate different algorithms to handle various application scenarios, including smart home, smart energy consumption, smart retail and smart driving. It is considered by the industry as a milestone in the development of hardware in the field of artificial intelligence edge computing.

According to data from Canaan’s official website, as of June 30, 2019, the Bitcoin mining machines sold by Canaan accounted for 22% of the total computing power of all Bitcoin mining machines sold globally. As of September 30, 2019, Canaan has registered 69 patents in China, including 6 inventions, 50 utility model patents and 13 design patents.

Despite the outstanding achievements in the past and the successful listing now, the challenges and difficulties faced by Canaan are also obvious. The challenges mainly come from two aspects: 1. The fierce competition of competing products in the same industry; 2. Reduce the impact of Bitcoin prices on corporate revenue and improve profitability.

As the pillar business of Canaan Zhizhi, mining machine sales are the main source of income for Canaan Zhizhi. In the global mining machine market, Bitmain, which was also established in 2013, has always been Canaan Zhizhis strongest enemy.

Headquartered in Beijing, Bitmain has established subsidiaries in Hong Kong, the United States, Israel, Seychelles and other places. It is the worlds largest cryptocurrency mining machine company based on ASIC (application-specific integrated circuit). According to the statistics of Frost Sullivan, Bitmain is also one of the top ten companies in the world and the second largest fabless IC design company in China.

As the worlds top mining machine manufacturer, Bitmain is almost in a monopoly position in the industry. Bitmain’s prospectus shows that in 2017, Bitmain’s ASIC mining machine sales revenue accounted for 74.5% of the market share, while Jianan Zhizhi only grabbed 6.2% of the market share. Judging from the delivery of mining machines during the same period, Bitmain alone accounted for nearly 70%, and Canaan accounted for about 20%, less than one-third of the total.

Although Bitmain founder Wu Jihan admitted frankly at the staff meeting in October 2019 that Bitmains mining machine business market share is declining, and the dominance of Bitmains mining pool business is also declining. But its number one throne is still difficult to break in a short time.

Wu said the blockchain news, Bitmain’s next-generation mining machine S19 chip has been sent to TSMC’s current chip this month, and it will be back for chip verification soon. The S19 will use TSMC’s 7nm technology, and the S19PRO performance index can reach up to 30 watts per T. The advent of S19 is bound to have an impact on Canaan Avalon mining machines.

In the past two years, in the mining machine market, in addition to Bitmain, a veteran and powerful enemy, blocking the way, behind Canaan Yunzhi, there are also several opponents worthy of attention.

Microbit is one of them. MicroBT was founded by Yang Zuoxing in 2016, and its main product is Whatsminer. Industry insiders believe that the Whatsminer M20s launched by MicroBT in April 2019 has a computing power of up to 68T, which is currently the model with the best performance on the market.

Statistics show that in January this year, the cumulative sales of Whatsminer Mining Machines exceeded 2 billion yuan. Of the 9 mining machine products on the shelves, 5 of them have been sold out, and the other 4 mining machines are not in stock. In June 2019 alone, the shipment of Whatsminer mining machines reached about 300,000 units.

Recently, it has even been reported that the sales volume of Whatsminer mining machines will exceed that of Bitmain’s Ant mining machines this year. Since the sales data of the two companies has not yet been released, CoinVoice will not make a judgment on this speculation.

In addition to MicroBT, some low-key mining machine manufacturers such as Halong Mining are also trying to catch up. Their mining machine DragonMint T1 has completed the first batch of delivery in April 2018. Once the product is launched, the supply is in short supply.

There are powerful enemies in the front, and there are chasing soldiers in the back is the current competitive landscape Canaan Yunzhi is in. How to ensure the position of the second child is a matter for Canaan Yunzhi to think about, and it must be done in the short term. Think through the puzzle of the outcome. Internal strife in Bitmain, the founder of MicroBT being taken away by the police and other incidents gave Canaan Yunzhi a chance to think and breathe.

Canaan Zhizhi’s prospectus disclosed that in the six months ended June 30, 2018, Canaan Zhizhi’s total revenue was 1.9471 billion yuan; but in the six months ended June 30, 2019, Jia Nan Zhizhi Nan Yunzhis total revenue is only 288.8 million yuan.

For a company whose revenue from mining machines accounts for more than 99% of the companys total revenue, bitcoin price fluctuations are related to the companys revenue fluctuations, and even life and death. As for the future trend of Bitcoin price, no one can accurately predict. If the Bitcoin mining machine market ceases to exist or decreases in the future, Canaans business will be significantly harmed.

To this end, Canaan is actively seeking transformation. In terms of positioning, Canaan no longer positions itself as a pure mining machine manufacturer. In the prospectus, Canaan Gengzhi positioned itself as a semiconductor company and a leading supercomputing solution provider focusing on the RD and production of AI chips, and stated that the company is striving to achieve AI and mining machine business revenue in three years. Will reach the goal of 1:1.

The prospectus pointed out that the companys future growth strategy will focus on six major areas:

1. Strengthen leadership in supercomputing solutions;

2. Continue to invest in high power efficiency IC design;

3. Launch new AI products;

4. Enhance AI platform business model (plan to create AI SaaS platform);

5. Strengthen supply chain management;

6. Continue to expand overseas business.

Although Canaan has great expectations for AI, the companys current achievements in AI are not satisfactory. In the second half of 2018, Jianan Zhizhi’s AI products generated about 300,000 yuan in revenue, and only made a profit of 500,000 yuan in the first half of 2019. This is far from Canaan founder Zhang Nangengs expectation that the companys AI business revenue is expected to reach tens of millions of yuan in 2019.

People in the industry are not optimistic about Canaans bet on edge computing AI chips. The ASIC chips used in mining machines are customized chips for specific fields. The chip structure is relatively simple, and the computing power and computing efficiency are directly customized according to the needs of specific algorithms. AI chips require massive computing, high flexibility and Efficient data interaction efficiency, etc. In addition, the production of chips is divided into front-end design and back-end design. Canaan Zhizhi is currently limited to the front-end design and research and development of chips, and then finds TSMC for OEM production, and cannot independently complete the mass production of chips .”

No matter how the outside world evaluates Canaans choice, it has already started running on the road it thinks is right. It is reported that Jianan Zhizhi is developing the second-generation 28nm artificial intelligence chip, and plans to start mass production of the second-generation chip in the first quarter of 2020. In the second half of 2020, the company will launch a 12nm artificial intelligence chip.

For Canaan, going public is not the end of the story, but another beginning.

CoinVoice original, author: CoinVoice, reprint please indicate the source:http://www.coinvoice.cn/71614.html