The recently imposed US sanctions on Chinese goods has affected Chinese manufacturers to a great extent. According to a report by Hong Kong’s English-language newspaper South China Morning Post (SCMP), just like all other sectors, China’s mining hardware producers will also have to bear the brunt.
Earlier this year, the Trump administration had slapped investment restrictions and tariffs on $60bn worth of Chinese goods. Continuing the trade war between the two nations, China also imposed retaliatory tariffs on $60 billion of US goods.
In June, the USTR categorized Bitmain’s Antminer S9 as an “electrical machinery apparatus,” subjecting it to a 2.6% tariff.
Further, the office of the United States Trade Representative (USTR) announced a reclassification of goods and services. The reclassification brought the three major cryptocurrency mining hardware makers Bitmain, Canaan and Ebang fall under a new list of Chinese goods subject to the additional 25% tariffs, with effect from August. This additional 25% tariff implied that the mining hardware manufacturers would have to face a 27.6% tariff, which previously was zero.
The new tariff came at a time when these three were looking to launch their IPOs on the Hong Kong stock exchange. Canaan and Ebang were reportedly looking to raise $400 million and $1 billion through their respective IPOs. According to statistical reports, in 2017, Canaan and Ebang’s overseas sales were recorded at 8.5% and 3.8% of the total revenue respectively.
The co-founder of Bitcoin (BTC) mining hardware developer LuTech, Ben Gagnon said:
“All manufacturers of mining rigs based in China will likely be affected by the tariff code change and, in turn, captured by the US trade tariff.”
Though the new tariff will affect all Chinese cryptocurrency mining equipment makers exporting to the US, according to analysts, Bitmain will be the worst hit. Bitmain’s overseas sales contributed 51% and 51.8% of its revenue in 2016 and 2017 respectively.
Mark Li, a senior analyst at Sanford C. Bernstein, said in a research report in August that Bitmain’s Antminer S9, launched in 2016, accounted for over half of the company’s $2.5 billion revenue in 2017.
Data for the second quarter of 2018 showed revenue from sales of mining hardware fall to $850 million, or less than half of the $1.8 billion recorded in the first quarter.
“We believe Q2 2018 marks the beginning of a very rapid deterioration at Bitmain,” Li said in the report.
Li also added that Bitmain is facing intense competition that is threatening to erode its technology edge. Therefore, it is working hard to renew its earlier position in the market with new technologically driven strategies and procedures.