Counting On Cryptocurrency

While cryptocurrencies may still be in the infancy of market development and adoption, the semiconductor industry has certainly felt the potential of blockchain technologies. In its fourth quarter 2017 earnings conference, TSMC commented on the strong demand from cryptocurrency-related businesses since the second half of 2017. These “mining” markets are driving leading-edge business at TSMC together with application processors, communications, and high-performance computing.

The surge of cryptocurrency prices in 2017 created unprecedented demand for crypto mining machines, which nowadays are typically powered by high-end GPU and Application Specific Integrated Circuits (ASICs). This sudden rise triggered a shortage of the GPU chips/graphic cards typically used for gaming, video processing, machine learning, and other applications.

ASIC mining hardware has taken the mining market by storm in recent years. Quite a few startups, primarily from China and some from Russia, Europe and Japan, have entered the market with an ASIC solution for specific cryptocurrency mining. Current mainstream ASIC bitcoin miners are based on 14nm/16nm processes, and roadmaps from various companies show that upcoming ASICs will continue to shrink, using 12nm, 10nm and 7nm processes from available foundry players.

Two major factors are driving the adoption of leading-edge processes for crypto mining. The first is the overall mining cost. While energy generally accounts for over half of the crypto mining costs, the energy efficiency of the mining machines is vital to the profitability of miners and investors. Secondly, as the number of miners increases, the more difficult it will be to mine cryptocurrency; therefore, higher performance hardware is essential. Better performance and lower power consumption are the two chief benefits of using leading-edge processes. The nature of mining competition also creates a faster replacement cycle for mining hardware, further accelerating new system and chip sales.

Explosive crypto mining demand has also spread from the foundry to the OSAT industry. High-end GPU- and ASIC-related packaging and test businesses have been particularly strong since the second half of 2017 and the momentum is expected to continue this year. Demand for Flip Chip Chip Scale Package (FCCSP) substrates for GPU and ASIC is booming as well. The whole supply chain from ASIC design services, foundry, OSAT to equipment/materials are all benefiting from the surge of crypto mining.

Though the legitimacy and volatility of cryptocurrencies remain to be a major risk, the underlying blockchain technology shall prevail in other areas of business. Together with machine learning/Artificial Intelligence (AI), blockchain technology could transform beyond primarily “mining” to become another major driver of future semiconductor industry growth.

For more details about the products and the latest expansion plans of foundries and OSAT companies, check out SEMI World Fab Forecast and SEMI Worldwide OSAT Database.