New US-Based Competition in Mining Chips Promises to Diversify the Mining Supply Chain and Reduce the Dominance of Bitmain

The Bitcoin (BTC) mining chip and hardware industry represents a $20 billion total addressable market over the next five years

The Bitcoin BTC -4.49% BTC -4.49% See Details mining hardware industry is poised to generate a total addressable market (TAM) of $20 billion over the next five years, presenting an opportunity for U.S.-based companies to diversify the supply chain and compete on advanced chip design, according to analysts at research and brokerage firm Bernstein.

In a note to clients on Tuesday, the analysts highlighted the historically dominant role of China-based companies in the Bitcoin mining hardware market, with Bitmain holding over 80% share. However, the launch of new mining chips in the U.S. by Block and Auradine offers a chance to shift the landscape.

“We expect 15-30% growth in annual mining equipment demand led by increasing network hashrate (supported by our bitcoin price conviction) and replacement/upgrading of existing capacity to make mining more efficient after rewards are cut in half in bitcoin terms after halving,” the analysts said, adding that the hardware revenue opportunity is estimated at ~$3-5 billion annually.

Earlier this month, Block, co-founded by former Twitter CEO Jack Dorsey, announced an agreement to supply Core Scientific with its new 3-nanometer ASIC mining chips, which will reportedly provide around 15 EH/s of hashrate and be more energy-efficient than current designs. Bernstein values the deal at $300 million and expects more U.S. Bitcoin miners to follow.

The chips will be used to mine bitcoin (BTC) and other cryptocurrencies, and are designed to be more efficient than current models. Block said the chips will be available in the second half of 2023.

Meanwhile, Auradine, which is backed by Bitcoin miner MARA, recently shipped its AT1500 Teraflux miners (22J/TH) and announced new AT2880 and AI3680 models. The Teraflux 2800 series will reportedly use 3nm ASIC chips with 14J/TH efficiency. In April, Auradine closed an $80 million Series B round.

According to the Bernstein analysts, the launch of U.S.-based competition in mining chips aligns with Republican presidential candidate Donald Trump’s recent push to “make bitcoin” in America, a pledge that includes turning the U.S. into a "Bitcoin mining superpower" and providing increased electricity generation capacity for the industry.

“This is a tailwind for U.S. Bitcoin miners, with the potential to improve fleet efficiency, drive lower capex (from lower chip pricing) and spare power capacity for AI/HPC opportunities,” the analysts said in their note on Monday, adding that crypto is “no longer a bipartisan issue” amid Trump's Bitcoin promises and Kamala Harris' “late” olive branch to the industry.

Chhugani maintains long positions in various cryptocurrencies. Certain Bernstein affiliates act as market makers or liquidity providers in the debt securities of Riot Platforms.