Taiwan’s Semiconductor Giant Set to Make Profits from Crypto Mining

Cryptocurrency mining is a very lucrative sector to aim for, at least in the short term.

In the last couple of decades, the demand for processors has increased drastically – first with computers and then smartphones. But now this hunger for processing power has reached another level thanks to the booming cryptocurrency mining industry.

In keeping with this demand, the semiconductor manufacturing giant Taiwan Semiconductor Manufacturing Co. (TSMC) is eyeing massive profits by delivering high powered chips to crypto miners.

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TSMC has been one of the major chip providers for the tech giant Apple, mainly for iPhones, for the past 10 years, and it has reportedly landed the exclusive contract to supply ‘A12’ processors for the next line of iPhones. But because of the massive demand for powerful chips in the crypto mining business, TSMC is aiming to achieve as much as 10 percent of its 2018 revenue solely from the crypto industry.

TSMC is not the first chip manufacturer looking to profit from the cryptocurrency mining industry. The soaring demand for cryptocurrency, especially Bitcoin which jumped by 1400 percent in 2017 alone, has created a massive demand for high processing power-capable GPUs made by NVIDIA and AMD, which is clearly reflected in their stock prices.

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TSMC’s recently published quarterly earnings reports shows that the company is getting about a fifth of its business from its partner Apple. But according to TSMC’s Co-CEO Mark Liu, the company has generated $350 million to $400 million of its revenue from crypto miners in the third quarter.

As quoted by Bloomberg, Mark Li, a Hong Kong-based analyst with Sanford C. Bernstein & Co., said: “The mining impact on TSMC is now akin to that of a popular new iPhone. The difference is that each new iPhone requires a huge amount of innovation and marketing. The Bitcoin contribution is automatic.”

But unlike the smartphone or computer industry, the crypto mining industry is not evergreen. Currently, the crypto mining sector is at its peak due to the soaring demand of Bitcoin, but if the value of the digital coin trembles, the mining business will no longer be profitable. Also, it should be noted that almost 16.8 million bitcoins have been mined so far, and as we near the 21 million coin limit the reward associated with mining is shrinking.

“Although some investors are bullish that Bitcoin-related chipset demand could offset soft smartphone demand in 2018, we question whether Bitcoin demand will be sustainable,” wrote Benjamin Chiang, an analyst at KGI Securities.

Bloomberg quoted Sebastian Hou, an analyst at CL Securities Taiwan Co.: “Cryptocurrency is like a call option for TSMC, which is an attractive investment on its own. If mining demand vanishes tomorrow, it shouldn’t affect the investment outlook. But if it turns out to be strong, the company will rake it in.”

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