The Bitcoin mining industry is the latest to feel the pinch of a global computer chip shortage.
Unexpected demand for automobiles at a time of high consumer electronics sales is raising prices and leaving manufacturers without components.
Mining hardware is sold out at leading companies like Bitmain, forcing miners to scour the second-hand market. The rising cost of mining units is pricing all but the wealthiest out.
Bitcoin Mining Hardware Shortage as Demand Soars
Mining hardware is in high demand following bitcoin’s recent price increases. As BeInCrypto reported, major US mining operations have recently been ordering huge volumes of hardware from leading manufacturers like Bitmain.
Cited by Reuters, Lei Tong of Babel Finance, which lends money to miners, commented:
“Purchase volumes from North America have been huge, squeezing supply in China.”
Chip demand from other industries is putting additional pressure on manufacturers. A return of social restriction measures is largely behind this demand, as consumers prepare for yet more screen time.
Simultaneously, the automotive industry, which is experiencing an unexpected recovery, also demands chips. As DW reported, Chinese car sales slumped by around 80% in February last year. But rising demand at the end of 2020 ensured the sector only fell by 6.8% versus the previous year.
A spokesperson for Continental explained:
“After the industry shut down in the early phase of the crisis and the resulting abrupt drop in demand, automobile manufacturers across all regions increased their production volumes much faster than expected by market experts.”
They state that a lead time of six to nine months in chip manufacturing had created the current bottleneck. Profit margins on consumer electronics tend to be greater, thus, manufacturers prefer to supply the industry first.
Price of Second-Hand Mining Hardware Rising
Bitcoin’s rise above $30,000 has significantly increased mining profitability. When mining profit margins are low, electricity costs are more significant in determining overall profitability. With electricity prices becoming negligible, mining is rapidly expanding into North America and the Middle East.
Wayne Zhao, COO of TokenInsight, explains:
“China used to have low electricity costs as one core advantage, but as the bitcoin price rises now, that has gone.”
However, global chip shortages are starting to price out all but the wealthiest miners. Raymond Yuan, the founder of one of China’s largest mining companies, Atlas Mining, explained that non-institutional miners ‘will be weeded out.’
All Antminer S19s and Antminer T19s are currently sold out at Bitmain. Accordingly, prices on the second-hand market have risen by 50% to 60% over the course of 2020.
Meanwhile, new equipment prices have more than doubled. At the time of writing, the asking price for a standard Antminer S19 on a European distribution site is around $7,200. When in stock, Bitmain typically sells the model for $2,767.
Mining Chip Shortage Yet to Impact BTC Hash Rate
Despite mining shortages, the Bitcoin hash rate set a new all-time high just days ago. BeInCrypto reported the hash rate’s continued rise, even amid a 25% price correction from the recently-established high near $42,000.
Hardware shortages and price corrections don’t appear to be having a significant impact on enthusiasm for BTC mining. Yuan, for example, told Reuters he plans to continue investing heavily.
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