Who's behind AGM, the little-known Chinese company that's suddenly selling lots of bitcoin mining chips?

Suddenly, and almost out of nowhere, there’s a new bitcoin ASIC chip maker in town and it claims to have already sold pre-orders for 55,000 units. 

Last week, a little-known, NASDAQ-listed Chinese software provider called AGM revealed that it had received a pre-order for its first-ever shipment of bitcoin mining chips. The 30,000 unit order, placed by Canadian Bitcoin mining firm Nowlit Solution, was followed eight days later by a second, from Canada-based hardware maker MinerVA, for 25,000 chips. The shipments for those orders are scheduled for delivery by the end of this year.

The Bitcoin ASIC mining chip market generally has a high barrier to entry, given the long lead-time for integrated circuit design, testing and mass production. Hence, it’s dominated by incumbents like Bitmain, MicroBT and Canaan. 

So who is this new player and how did it break into the market?

A sudden pivot

In fact, the two pre-orders came two months after AGM announced the launch of its KOI C16 Bitcoin mining chip, which it claims has a computing power capacity of about 100 terahashes per second (TH/s) at an energy consumption of 3.4 kilowatt-hours.

That kind of performance would be strong enough to rival top-of-the-line models including Bitmain’s AntMiner S19 Pro, MicroBT’s WhatsMiner M30++ and Canaan’s Avalon 1246. 

Per its website, AGM procures wafers from Semiconductor Manufacturing International Corp (SMIC) through the foundry’s so-called FinFET N+1 process, meaning AGM designs their chips based on the seven nanometer/eight nanometer (nm) wafer technology developed by SMIC. That’s the newest generation of chip technology that SMIC possesses. 

It should be noted, however, that SMIC was added last December to the U.S. Entity List, which means that SMIC’s American suppliers would need prior approval from the government to export components. SMIC said at the time that this would have a material impact on producing semiconductors at 10 nm in size or below. Reuters reported in March that the U.S. government “has been slow to approve licenses” for American suppliers to sell chip-making equipment to SMIC.

Regardless, what is odd is that AGM only announced its official entry into the design and manufacture of Bitcoin ASIC mining chips on August 5 — and then sold pre-orders in two months amid an ongoing global chip shortage. In the first half of the year, it was by all appearances still just a software provider — one with zero revenue. 

Whether AGM’s shipment can be on time or its chip is able to deliver the expected performance at a large scale for mining customers remains to be seen.

AGM has not responded to The Block’s interview request for this article.

AGM and HighSharp

AGM was incorporated in 2015 and went public on Nasdaq in 2018. By selling accounting and enterprise resources planning software services, AGM was able to book a $4 billion net income on revenue of $12 billion in 2017. Since then, however, it has seen sharp declines in its businesses.

Per its 2020 earnings report, AGM generated only $53 million in revenue last year while incurring a net loss of over $1 billion. The situation worsened in the first half of this year when it recorded zero revenue in its unaudited earnings report.

Amid Bitcoin’s price rally since late last year and the increasing demand for the newest generation of Bitcoin mining equipment from North American institutions, AGM has apparently turned to the ASIC chip market for its growth strategy.

In July, it changed the management team by hiring Li Chenjun as its co-CEO, who in September became the firm’s new chairman of the board. 

“Li has … 8 years of experience in blockchain-oriented ASIC and other blockchain application technologies,” AGM said at the time. “Most recently, Li was the Chief Technology Officer at Shenzhen HighSharp Electronics Ltd., leading the R&D of SMIC and TSMC [Taiwan Semiconductor Manufacturing Corp] high-performance ASIC, and the entire solutions of ASIC development.”

Along with his business partner Wang Xing, Li first appeared in the mining scene back in 2013 in China, with plans to design and develop a Bitcoin ASIC chip called Clam Miner. 

The duo revealed the plan in September of that year on Bitcointalk.org with a goal to roll out the product by the end of November. Wang, who went by victorwang on Bitcointalk, wrote in the thread that they were going to use self-funded capital to procure 55 nm chips from SMIC instead of bigger foundries like Samsung or TSMC. 

Although Wang and Li managed to ship some equipment as promised, one Bitcoin mining investor wrote in a review at the time that Clam Miner’s hash rate didn’t meet their initial targets and was “way too heavy.” 

Around the same time, Bitmain’s was rising to success with its quality Antminers and larger-scale shipments. Bitmain quickly came to dominate the market and Clam Miner’s business failed to materialize in a substantial way. 

Little news can be found in Chinese online about Wang or Li after 2014. But in 2016, they incorporated a firm in Shenzhen called HighSharp Electronics Ltd, with a business focus on integrated circuit design. Li and Wang own 65% and 22% of HighSharp, respectively, based on Chinese business registration records.

On September 27, AGM announced a strategic partnership with HighSharp, where Li most recently served as the CTO and Wang Xing remains as a general manager.

The deal was that HighSharp will prioritize supplying Bitcoin ASIC chip designs for AGM, who, for its part, is responsible for sourcing buyers for at least $100 million worth of bitcoin mining equipment by March 2022.

If both sides can hold up to their promises by then, they then plan to set up a joint venture exclusively on Bitcoin ASIC manufacturing with AGM taking 60% and HighSharp taking 40%.

It’s a deal similar to what HighSharp struck with another U.S-listed company called Sino Global, earlier this month. HighSharp and Sino Global plan to set up a joint venture to make the so-called Thor bitcoin miner, with HighSharp supplying the ASIC chips design.

MinerVA

It appears that this is where MinerVA, a Canada-headquartered miner manufacturer, comes in.

Within a month after linking up with HighSharp, AGM revealed its two bulk pre-orders — 25,000 units from MinerVA and 30,000 units from Nowlit — that could be worth well over $100 million already. 

But the two preorders, it appears, came from the same group of individuals behind the scenes. Canadian business registration records show that both MinerVA and Nowlit Solution name Ma Chong and Liu Zhuo as directors. Ma is the CEO of MinerVA.

According to AGM’s balance sheet as of June 30, it held assets worth less than $6 million. It’s unclear how it managed to fund the so-called tape-out — a process in which ASIC designers spend large amounts of capital to order wafers from foundry labs to test out its chip designs. If the tape-out is successful, the next step would be mass production and manufacturing. 

But it appears that MinerVA may have secured the necessary funding ahead of time. The firm signed a deal with U.S-based Bitcoin mining firm Terawulf on March 15, which placed a preorder for 30,000 units of miners from MinerVA with a total cost of nearly $120 million.

Per the business contract at the time, Terawulf agreed to pay 20% ($24 million) of the cost as a down payment by March 22. The miners are scheduled to arrive in Terewulf’s facilities in November, December and January batches.

In April, MinerVA signed another agreement with Stronghold Digital, which only recently completed its $127 million IPO in the U.S., to supply 15,000 of its MV7 ASIC Bitcoin miners for an aggregate price of $73 million.

"Anticipated delivery quantities and timeframe will be no less than 2,500 miners by October 31, 2021, no less than 5,000 miners by November 30, 2021, no less than 5,000 by December 31, 2021, and the remaining 2,500 by January 2022," Stronghold indicated in its IPO prospectus.

Meanwhile, the exact business relationship between MinerVA and AGM — specifically whether the former is a white label of the latter or if they are jointly developing the chips — is unclear. But there’s a sign that the two could be working more closely than merely a white-label relationship. 

In May, AGM hired Dr. Zhu Bo as its new chief strategies officer to lead its pivot to Bitcoin ASIC chip making. Zhu has a Ph.D. in Computer Science and Technology from Zhejiang University. Meanwhile, Canadian business registration records show that MinerVA also added a Zhu Bo as its director, sometime between February and March of this year. 

MinerVA and Nowlit have not responded to The Block’s requests for comment.