There is more than one way for investors to ride the bitcoin wave.
With the cryptocurrency’s 916 percent rally this year increasing demand for the vast computing power used to verify bitcoin transactions, Asian technology stocks are emerging as major beneficiaries.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), specialty chip designers and graphics card makers are boosting sales to the so-called miners who are rewarded for maintaining bitcoin’s digital ledger.
Demand for the best mining gear, such as semiconductors, should only grow as more competitors enter the fray and the calculations required to validate transactions get tougher.
“There’s an arms race,” said Mark Li, a semiconductor analyst at Sanford C Bernstein & Co in Hong Kong. “The technology used is pretty intensive and you need very speedy chips to be able to mine the coin in the system.”
TSMC is still the dominant player in semiconductor production. While crypto-related sales of up to US$400 million were a mere 5 percent of its third-quarter total, the demand is promising.
Bitmain Technologies Ltd (比特大陸), the Chinese owner of the world’s largest mining pools, has been one of the top users of TSMC’s advanced 16-nanometer capacity, a report by Li said.
Companies involved in the packaging of chips include Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) and Siliconware Precision Industries Co (SPIL, 矽品精密), Li said.
Japanese producers of semiconductor manufacturing equipment, such as Ulvac Inc and Advantest Corp, might also gain from bitcoin’s rally, Nomura Holdings Inc analyst Tetsuya Wadaki wrote in a report.
Mining companies make and design their own application-specific integrated circuits (ASICs), or chips that are designed just for bitcoin mining. They outsource part of the process to companies such as Taiwan’s Global Unichip Corpa (GUC, 創意電子) and Alchip Technologies Ltd (世芯), Bernstein said.
Both stocks have soared more than 179 percent this year.
Only a few listed companies are in the mining business, but more are jumping on the bandwagon. Japan’s GMO Internet Inc has announced it will begin mining operations next year using seven-nanometer chips.
As miners switch to more competitive ASICs, graphics cards are now mostly used for mining other tokens, such as the world’s second-most valuable digital currency, ethereum, which is designed to be incompatible with ASICs.
Ethereum’s 5,927 percent surge this year has been a windfall for graphics card makers, whose products for gaming are suddenly finding a new market in miners.
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