China-based bitcoin miner manufacturer Canaan has reported a net loss of $5.6 million for Q1 2020, even though it had cut down the prices for its hardware by more than half in an effort to sell more machines.
In an earnings report released on Friday, the firm said it made $9.4 million in revenue for the first three months this year with a growth of 44.6% compared to the same period last year. But it also incurred $9.3 million and $5.9 million expenses in cost of goods sold and R&D, respectively.
For that revenue, Canaan sold 0.9 million terahashes per second (TH/s) of bitcoin computing power, which accounts for less than 1% of the network's current total.
That means Canaan had cut the prices for its mining hardware sold in the first three months by more than 50% to just $10 per TH/s, reflecting an overall slowdown of the buying interest into mining hardware amid bitcoin's halving event and the COVID-19 pandemic that has disrupted global logistics.
For context, Canaan booked a revenue of $66.5 million in 2019 with 2.9 million TH/s of bitcoin computing power sold, meaning the average prices was around $22 per TH/s last year. Other major manufacturers have also taken a similar price cut strategy over the past a few months.
“The overall market situation since December last year until January had not been too good. So the unit price per TH/s was indeed lower,” Zhang Nangeng, CEO and chairman of Canaan, said in an earning call on Friday. “And the logistics in mainland China had basically stopped around the Chinese new year due to the COVID-19 pandemic. So even though bitcoin’s price was a higher point in February and early March, the pandemic largely affected our sales.”
The filing also shows that as of March 31, Canaan had cash and cash equivalents of $37 million, compared to $71 million as of the end of last year.
"The decrease was mainly due to higher short-term investments as the Company invested RMB173.4 million (US$24.5 million) in short-term investments as of March 31, 2020," Canaan said in the report.
Zhang said the firm has partnered China-based Semiconductor Manufacturing International Corporation – in addition to its existing supply chain partnership with Samsung and TSMC - to roll out bitcoin mining equipment with 14-nm chips and expects to be able to ship in larger quantity in Q2.
But the firm declines to issue a business outlook for Q2 2020 citing the uncertainty of the COVID-19 pandemic and the uncertainties after Bitcoin's halving gives itself "very limited visibility on the potential impacts to its business and the markets in which it operates."
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