Experts discuss the impact of chip shortages on Bitcoin miners

A chip shortage on the market, born from lower production volumes and altered supply schedules during the pandemic, has affected manufacturers of various equipment, including devices for cryptocurrency mining. According to WSJ, the shortage of semiconductors will persist into 2022.

Affected sectors are modifying devices and reverting to older models. ForkLog spoke to experts about how critical the chip shortage is for mining.

According to Sergey Trosin, head of the Six Nines data centre, hash rate growth is slower amid the global chip shortage.

“The more equipment there is, the higher the network’s hash rate and the harder it is to mine cryptocurrency. At any moment, a certain number of new devices is added to the network, creating competition. However, currently due to the shortage of semiconductors supply is lower, and this leads to slower growth in hash rate,” he explained.

Mining hardware has become more expensive, and delivery times have lengthened. This concerns both ASIC miners and GPUs.

“The price of ASICs is calculated based on a 12-month payback period excluding electricity, while GPUs are priced for an 18-month period. Proportional to hash rate growth and cryptocurrency prices, the price of equipment increases,” said Trosin.

He noted that makers of mainstream graphics cards price them with mining in mind, embedding this in their cost. Gamers have found it harder and less profitable to buy GPUs.

Demand for semiconductors is rising, and opening new production is quite expensive, said Oleg Gordiychuk, procurement manager at EMCD.

“The semiconductor shortage is so large that Chinese companies Bitmain, Canaan and Innosilicon, which have multi-billion-dollar contracts to supply about 10,000 units per month, are in fact receiving and delivering 5,000-7,000. I’ve heard that they plan to open new production facilities in China to address the issue,” the expert said.

The shortage directly affects the price of mining hardware. According to Gordiychuk, a new video card that cost 20,000 rubles three years ago now costs around 30,000 rubles on the secondary market.

“At the moment this does not hinder our company, as most clients are partially or fully immersed in mining and roughly understand pricing. But if production capacity for semiconductors does not increase in the near future, this could affect us as well. With the high cost of equipment, entering mining will become more difficult,” he noted.

Evgeny Vlasov, head of Comino, which builds liquid-cooled computers, is convinced that the chip shortage has had a positive effect on mining. Cryptocurrency prices are rising amid inflation, and margins on equipment are increasing.

“Mining and all related sectors are currently on the upswing. Given the rising hash rate—having doubled since July—there is no shortage of equipment,” he said.

Vlasov did not rule out that small players might feel the pinch, as the market concentrates around large players. At the same time, the gray market is growing, where hardware without warranty can be bought cheaper than in stores.

“If you look deeper, the potential of many current chips has not yet been exhausted—the software has developed under a paradigm of virtually unlimited IT resources,” the expert noted.

He advised newcomers to hedge their risks, since outsized profits in mining are usually temporary.

The chip shortage’s impact on mining equipment was offset by two factors, continued ENCRY Foundation co-founder Roman Nekrasov. After last year’s Bitcoin network halving, most equipment became not very energy-efficient or profitable.

“What is unprofitable in one region with the same electricity price can be profitable in another region with a lower price. As a result, large volumes of mining machines from previous generations appeared on the secondary market,” Nekrasov said.

Earlier, the mining ban in China in May 2021 led to a reduction in hash rate and a drop in bitcoin mining difficulty.

According to Bitfury’s estimates, Chinese miners shut down equipment, the aggregate hash rate of which stood at 90 EH/s, and power consumption reached 5.2 GW — the capacity of several large power plants.

In July, the hash rate of the first cryptocurrency began to recover amid the migration of miners to other jurisdictions.

On November 15, following another adjustment of mining difficulty, it rose by 4.69% — to 22.67 TH/s.

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