Spot prices for new bitcoin mining hardware hit five-fold premium amid global chip shortage

As the most powerful bitcoin mining hardware hits the market, spot stock prices -- the amount one would pay for immediate fulfillment -- are being quoted at a whopping five times premium compared to preorder prices for the same batch.

Based on quotes posted by various Chinese miner resellers and operators on WeChat and reviewed by The Block, spot prices for the latest batch of Bitmain's AntMiner S19 Pro are being flipped for at least 800 yuan ($123) per terahashes second (TH/s) of computing power.

For context, the standard hash rate of S19 Pro, currently the most advanced mining hardware in the market, comes in at 110 TH/s, which means a brand new S19 Pro can change hands for more than $12,000. Such quotes are even higher than the $100 per TH/s for S19 Pro tracked by mining pool Luxor's hash rate index.

Some miner wholesale distributors with new S19 Pro in stock and ready for shipment are also posting quotes on Alibaba.com with prices around $10,000 per set. 

In November, The Block reported that preorders for the newest generation of bitcoin ASIC miners made by major manufacturers like Bitmain and MicroBT had been lined up until spring 2021. The preorder prices for the March/April batch of S19 Pro at the time were just slightly over $2,500. 

Similarly, the newest batch of spot stocks of MicroBT's WhatsMiner M31S+, a slightly less advanced model compared to the S19 Pro, is being quoted for around $105 per TH/s. That's compared the preorder price of just over $20 per TH/S for the same batch last year, according to data provided by MicroBT.

That said, while some are now reselling the latest batches, others have been gradually bringing their hardware online. The bitcoin network's total 7-day average hash rate has climbed above 160 EH/s and the mining difficulty is poised to post five percent growth in its next adjustment -- due in about three days -- after months of slower increases.

The recent developments are yet another sign of heightened demand for mining equipment. But as has been reported elsewhere, a global chip shortage is in effect, and the bitcoin mining space has not been spared from the resulting impact. 

On a broader level, the premium reflects a growing level of imbalance between the supply and demand dynamics in the mining hardware market.

Market imbalance

Institutionalized capital, particularly from sources in North America, has shown a growing appetite over the past few months for bitcoin miners amid the price rally of the world's largest cryptocurrency by market capitalization. Indeed, the spot price premium of the newest bitcoin miners over their preorders is also in line with bitcoin's five-time price rally since November from around $10,000 to above $57,000.

But on the other hand, the worldwide shortage of chip supplies has also exacerbated the imbalance, which results in Chinese miner manufacturers effectively having to turn away billions of dollars in revenue. 

Indeed, with a severe supply shock of the newest generation of mining models, bitcoin mining firms have turned to the spot stocks of second-hand, years-old models.

500.com, for instance, raised some $11 million through new share issuance this month to purchase a batch of Bitmain's older models of the AntMiner S17 and T17 – which were launched around 2019 – as well as the S9, which first hit the market five years ago.

The9 City, another Chinese firm that pivoted into bitcoin mining late last year, announced in March that it planned to buy 10,252 bitcoin miners with a total hash rate of about 192,000 TH/s, which means the average hash rate per unit is below 20 TH/s. This signifies that The9 City is potentially purchasing S9 and S17 models.

Chip shortage

According to Zhou Zixue, a senior official with the China Semiconductor Industry Association and chairman of China-based fab semiconductor manufacturer SMIC, the world is undergoing an "unprecedented chip shortage" due to the COVID-19 pandemic.

“If you are an experienced player, you will remember that in 1999 there was a similar crisis in this industry, but it was way smaller,” Zhou said in March during an industry event. 

Bitcoin miner manufacturers are essentially chip designing companies, in that they develop application-specific integrated circuit (ASIC) designs for bitcoin mining. But they don't manufacture the actual chip, a core component of a miner. Instead, like smartphone makers, they rely on semiconductor factories to fabricate the silicon chips, leading on well-known firms like SMIC, TSMC or Samsung Foundry.

The ripple effect of the current global chip shortage goes way beyond bitcoin mining, affecting industries that span from smartphones, personal computers and electronic vehicles.

Per a Bloomberg report published Monday, companies such as automotive component maker Continental AG and LCD panel manufacturer Innolux have recently warned of "longer-than anticipated deficits snarling production."

In addition, Samsung is the largest company so far to flag a “serious imbalance” globally for chip supply. Even Nio Inc., a Chinese electronic car maker, announced that it will suspend production on Friday due to chip shortages.