A tough stance on China comes at a cost for some.  In fact, increasing tensions are doing some damage to Bitcoin mining giant, Bitmain.

According to the South China Morning Post, the tariff could “be a problem for Beijing-headquartered Bitmain, which filed for a Hong Kong stock market listing in September, and is seen as the most exposed among Chinese mining hardware makers to US trade barriers.”

Reclassification Subjects Bitmain to Big Tariffs

Earlier this year, the U.S. categorized Bitmain’s mining hardware, called Antminer S9, as “electrical machinery apparatus” which is subject to a 2.6% tariff.

Before that, the goods were classified as “data processing machine.”

Unfortunately, the reclassification brought the mining hardware under the list of Chinese goods subject to the additional 25% that took effect in August. That means the company now faces tariffs on U.S. shipments of 27.6% from 0%.

In 2017, the Antminer S9 Accounted for Significant Revenue

According to Sanford C. Bernstein, the Antminer S9 accounted for more than half of the company’s $2.5 billion revenue in 2017.  In short, this latest news has got to sting.

In addition, as reported by CCN, “According to Sanford C. Bernstein senior analyst Mark Li, the new tariff is likely to make Chinese mining hardware less competitive in relation to those of rivals in other countries. Data from an October report reveals that sales of mining hardware dropped by over 50 percent to $850 million from $1.8 billion reported in the first quarter.”

However, we believe that once tensions fade, high tariffs will fade, too.

Or, at least, the company hopes.

Near-Term Bitmain Returns could take a Hit

The fact that the U.S. accounts for a huge chunk of the sales could see the company returns take a hit. This is because the increase in tariffs will make the hardware expensive.

Competitive threats could damage the company, too.  Other miners have come up with efficient miners that consume far less electricity could strip market share, as well.  In fact, we’re already seeing a pickup in demand for low electricity miners.

 

 

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