Editor's Note: This article comes fromA blockchain (ID: yibenqkl), Author: Ratchet Pizza, reprinted with authorization by Odaily.
Editor's Note: This article comes from
A blockchain (ID: yibenqkl)
A blockchain (ID: yibenqkl)
, Author: Ratchet Pizza, reprinted with authorization by Odaily.
On October 29, Canaan submitted a prospectus to the US SEC, planning to raise no more than US$400 million.
This mining machine company, which once failed A-share backdoor, NEEQ, and Hong Kong Stock Exchange, started its fourth IPO attempt.
Since the second half of 2018, the price of Bitcoin has been sluggish, and the mining machine market has been sluggish, and Canaan's financial data has also been dragged down.
The mining machines were sold at a loss, the company fell into a loss, and Canaan’s financial situation was not satisfactory.
The unregulated USDT has become Tether's money printing machine and requires the investment of the entire currency circle
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1 Loss of 420 million a year
On October 29, 2019, Canaan submitted a prospectus to the US SEC, planning to list on Nasdaq under the stock code CAN.
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In August 2019, Canaan executives appeared on the NASDAQ exchange
From this point of view, Canaan is expected to become the first global blockchain stock. However, the financial data in this prospectus is very bleak.
According to the prospectus data, in the first half of 2019, Jianan Zhizhi had a total revenue of 290 million yuan and a net loss of 330 million yuan.
In contrast, for the full year of 2018, Jianan Zhizhi’s revenue was 2.71 billion yuan and its net profit was 120 million yuan.
Even so, this prospectus still played a small numbers game with investors-in fact, Canaan Zhizhi began to lose money as early as the second half of 2018.
Based on the data disclosed by Canaan Zhizhi in 2018 and the first half of 2018, a blockchain calculated the company's financial status in the second half of 2018: revenue of 760 million yuan and a net loss of 94.4 million yuan.
Against the backdrop of falling currency prices and unsalable mining machines, Canaan’s gross profit margin dropped sharply from over 40% in 2016 and 2017 to 3.88% in 2019. And this data is still the result of "financial report beautification".
Since the second half of 2018, Jianan Zhizhi has written down the inventory value of its mining machines, with a write-down amount of up to 510 million yuan.
This has allowed its "cost" to drop significantly. If the inventory value write-down is not considered, but based on the actual cost calculation, the gross profit rate of Canaan Zhizhi after the second half of 2018 has become negative.
This means that Canaan’s main product, mining machines, has already begun to sell at a loss. Selling one and losing one has become a true portrayal of Canaan’s business under the background of falling currency prices.
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2 Mining machines losing money? I lost more than 2,000 when I sold one
The answer is still hidden in this prospectus.
Compared with Bitmain, Canaan’s business is more pure, and the sales revenue of mining machines has remained above 99% for many years.
In other words, the performance of mining machine sales can directly reflect the financial status of Canaan Creative.
In the prospectus, Canaan Zhizhi disclosed the company's mining machine sales quarter by quarter, and the data dimension covers mining machine cost, selling price, sales volume, etc. A block chain is organized as follows:
Canaan Mining Machine Sales Data Sheet
It is not difficult to see that in Q3 of 2018, every time Canaan Zhizhi sold a mining machine, the profit was only 74 yuan. Since Q4 of 2018, Canaan has been selling mining machines at a loss.
This situation of selling mining machines at a loss reached its peak in Q1 of 2019. In this quarter, Canaan paid an average of 2,518 yuan for every mining machine sold.
At the same time, Canaan’s sales of mining machines also experienced a sharp drop. In Q1 of 2019, Canaan only sold 42,000 mining machines; sales were only 44.22 million yuan, less than one-third of the same period in 2017.
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Canaan Mining Machine Sales Line Chart
Why does Jianan Zhizhi sell mining machines at a loss? The dumping of inventory may be the most important reason.
According to the prospectus data, Jianan Zhizhi sold a total of 546,000 mining machines in the second half of 2018 and the first half of 2019, but 468,000 of them were the old A8 series. In Q1 of 2019, the average price of these A8 mining machines was only 800 yuan.
But it is worth noting that in Q2 of 2019, Canaan Zhizhi sold 490 A10 series mining machines. These mining machines not only did not lose money, but also achieved a gross profit of 24.7%.
In terms of total sales, with the recovery of currency prices, Canaan Zhizhi also experienced a revenue recovery in Q2 of 2019.
At the same time, the prepayment amount of Jianan Zhizhi as of the end of June this year has nearly tripled compared with the end of 2018. This means that Jianan Zhizhi has begun to place orders for mining machine chips on a large scale.
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3 Financing is a mystery: the hundreds of millions of dollars in financing in March this year did not exist?
In March of this year, the "Securities Times" reported that Jianan Zhizhi completed a financing of hundreds of millions of dollars, and the company's valuation reached billions of dollars.
According to public information, Canaan Yunzhi responded to a number of media in response to this, saying that the company had indeed completed a new round of financing, but did not disclose the specific time and amount of financing.
However, in the prospectus, Jianan Zhizhi did not disclose whether it received financing in March this year. Whether this financing was completed is still a mystery.
In terms of debt financing, Canaan Zhizhi disclosed that in April 2018, it had obtained debt financing with a total value of 930 million Hong Kong dollars from China Merchants Bank Hong Kong and China Merchants Bank International.
After including the guarantee fee, the annual interest rate of this debt financing is an increase of 11.3% on the basis of Hibor (Hong Kong Interbank Offered Rate), which is about 13%.
However, the above-mentioned equity and debt financing disclosed in the prospectus all occurred before March 2019. In addition, the amount of any of the above-mentioned financing is far from reaching the level of hundreds of millions of dollars.
Where did the promised financing go? Jianan Zhizhi obviously needs to explain this problem.
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4 "Raising AI with Mining": The number of AI teams is approaching that of mining machine teams
In September 2018, Jianan Zhizhi released its first AI chip product Kanzhi Kendryte K210. In 2018, Jianan Zhizhi’s AI business generated revenue of 275,000 yuan; in the first half of 2019, the business generated revenue of 468,000 yuan, accounting for 0.2% of revenue.
As an early business, AI brought limited benefits to Canaan, but its input costs were very high.
Canaan Zhizhi also disclosed the size of the company's AI team in the prospectus. The company has a total of 127 technical R&D personnel, of which 61 belong to the high-efficiency technical team (i.e. the mining business team), and 50 belong to the AI team.
In terms of personnel ratio, the number of AI developers at Canaan is already close to that of the mining team. The salary cost of these employees must not be ignored.
This means that Canaan Zhizhi has also implemented a strategy of "raising AI with mining" similar to Bitmain. This strategy has been controversial within Bitmain, and it is also regarded as the root cause of the internal struggle between the two founders of Bitmain.
But in contrast, Jianan Zhizhi should not have to face the troubles of Bitmain. At least in terms of shareholding structure, Zhang Nangeng still holds the right to speak of Canaan Yunzhi.
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5 Whose Canaan Yunzhi?
Zhang and Li, both of technical background, jointly invested 100,000 yuan in 2013 to establish Jianan Zhizhi. It was revealed that the "Nan" in Canaan's company name comes from Zhang Nangeng, while the "Jia" comes from Li Jiaxuan.
However, Jianan Yunzhi also introduced the AB share system to protect the voting rights of founder Zhang Nangeng. 16% of the shares held by Zhang are Class B shares, which have 15 times the voting rights of Class A shares.
Based on this calculation, Zhang Nangeng holds 74% of the company's voting rights and has an absolute right to speak.
The equity model of different rights for the same share ensures the stability of Canaan Zhizhi's senior management team. But unlike Bitmain, Canaan Yunzhi's biggest crisis right now is not in the management.
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6 Where did the world's first 7nm mining machine go?
In August 2018, Jianan Zhizhi publicly released the 7nm chip - A3206. Canaan's A921 mining machine is equipped with this chip.
However, a blockchain survey found that the A921 mining machine equipped with a 7nm chip has always been thunderous and rainy. Many miners have never even seen this rig.
One of the reasons is that the TSMC factory computer was hacked in August 2018, which caused Canaan Zhizhi's 128 7nm wafers to be delayed by 9 weeks. This point was disclosed by Canaan Yunzhi in the prospectus.
Another reason makes people shudder - Canaan Zhizhi's 7nm mining machine does not have a prominent advantage in terms of energy consumption. Canaan’s prospectus shows that the performance of the first-generation 7nm chip is only 10% higher than that of the previous third-generation 16nm chip.
Compared with competing products such as Ant and Whatsmart, the performance of Canaan’s 7nm mining machine is not outstanding.
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Not only that, Canaan’s follow-up product, the A10 series mining machine, also abandoned the 7nm chip and continued to use the upgraded fourth-generation 16nm chip.
It is worth mentioning that the performance of the mining machine does not entirely depend on the chip manufacturing process. In terms of performance indicators, Canaan’s A10 series mining machines with a 16nm process can still compete with Bitmain’s 7nm products of the same period.
In terms of results, Canaan is still in the first echelon in terms of performance indicators. However, as the world's first mining machine company to launch 7nm chips, it is still a mystery why Canaan Zhizhi gave up 7nm chips.
And this mystery also exposed Canaan Yunzhi's biggest crisis right now.
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7 The Biggest Crisis: Changes in Suppliers
In October 2019, Canaan released a new generation of A11 series mining machines. But the strange thing is that Jianan Zhizhi did not disclose any information about the A11 series mining machine chips, such as chip manufacturing process and suppliers.
According to the prospectus, Jianan Zhizhi has achieved tape-out of 8nm chips in June this year, and plans to achieve mass production of 8nm chips in September this year. Similarly, Canaan did not disclose the supplier of the 8nm chip.
"Actually, the A11 series uses 8nm chips." An industry insider told a blockchain, "And only one Samsung fab in the world has an 8nm production line."
There is no doubt that the supplier of Canaan Zhizhi's 8nm chip can only be Samsung.
In the chip industry, mining machine manufacturers such as Bitmain and Canaan are called "fabless factories", that is, they only design chips and do not have chip production capabilities. In the past, most mining machine manufacturers cooperated with TSMC, and the largest supplier of major mining machine manufacturers was TSMC.
However, Jianan Yunzhi’s prospectus shows that the company’s TSMC procurement ratio dropped from 63.5% and 63.1% in 2017 and 2018 to 28.8% in the first half of 2019.
Jianan Zhizhi did not give the reason for the sharp drop in TSMC's procurement ratio. But a passage in the prospectus hints at the answer to this question:
"The industry's leading fab - TSMC has limited production capacity and will supply limited supplies to customers who pay in advance. Bitmain provides more prepayments with its financing advantages, so it can obtain more TSMC production lines. Bitmain also So more product was sold.”
If you can't make money, you can't get chips; if you can't get chips, you can't sell mining machines; if you can't sell mining machines, you can't make money. In the mining machine industry, Bitmain occupies more than half of the market share. The only way for Canaan Creative to get out of the vicious circle is to get rid of its dependence on TSMC.
And Samsung is one of the few suppliers that Canaan can choose.
Swinging between TSMC and Samsung can free Canaan Zhizhi from over-reliance on a single supplier. But at the same time, Jianan Zhizhi's mining machine chip team must also be distracted by the two different processes of 7nm and 8nm, instead of focusing on the same technical route.
