China Surrenders Advantage In Semiconductor War to US

There was a time when China used to dominate mining rig manufacturing. In 2008, Beijing-based Bitmain produced 84% of the world’s Bitcoin mining equipment.

But the cryptocurrency ban imposed last Sept and the subsequent order to phase out mining completely has undermined China’s rig exports and shifted the balance in favor of the US.

Oct 2021 saw the National Development and Reform Council (NDRC) double down on China’s cryptocurrency ban by adding crypto mining to the country’s industrial blacklist.

The ban triggered an exodus of mining rig manufacturers from China, removing the country’s advantage in the semiconductor trade war.

The US now dominates the mining equipment market and is forecast to maintain the lead until 2027.

In addition, America has displaced China as the largest Bitcoin-mining country in the world. Big players, including Bitmain, have slashed $300m worth of semiconductor orders from Taiwan Semiconductor Manufacturing Company (TSMC) and are now relocating production out of China.

These developments could spell bad news for China’s trade since the global crypto mining hardware market is expected to increase by more than $2.8bn between 2020 and the end of this year.

Exodus of rig manufacturers to hit China hard

According to the East Asia Forum, most rig manufacturers are expected to move to the United States, which offers a better infrastructure for integrated circuits and is geographically closer to both producers and end-users.

The report noted that China is actually a significant importer of semiconductors as its domestic chip maker, SMIC, can only produce N+1 nodes, which are unsuitable for use in crypto mining rigs.

“Even if China had not instituted the mining ban, its dominance as a mining rig exporter could not be taken for granted, as the United States could restrict TSMC’s sales to China.

“Under both the Trump and Biden administrations, TSMC has readily forsaken Huawei, its second-largest customer, and suspended orders from multiple Chinese supercomputer companies,” the report said.

Loyalty extends beyond business and politics

TSMC’s loyalty to the United States extends beyond business and politics. The report added that the company’s machinery and intellectual property are mostly imported from American or American-allied companies such as Applied Materials.

Despite the ban, a new study published in the Joule journal has shown China has failed in reducing carbon emissions.

In fact, China’s mining crackdown has increased carbon emissions because when they abandoned the country, miners also abandoned environmentally-friendly hydroelectric power.