China is the world’s largest manufacturer of Bitcoin ASICs and specialized crypto mining hardware, especially in producing mining chips. The two largest firms in the industry, Bitmain Technologies and Canaan Inc., both primarily operate out of the country. So why China leads the world in crypto mining chips while its conventional chips lag behind?

There are few reasons that account for the leadership of Chinese crypto mining chips.

First, the logic circuit of ASIC arithmetic chip itself is very simple. It does not require complex calculation, merely a kind of hash collision counting. ASIC’s function is very simple and it is easy to design. Though the world’s first ASIC miner was made in the United States, the industrious wisdom of Chinese people and the inflow of capital make the industry quickly iterate.

Secondly, crypto mining chips manufacture is deeply influenced by supply chain, China has the best supply chain for electronics industry, most mobile phone and UAV manufacturers in the world prefer to locate their factories in the Pearl River Delta (Shenzhen, Dongguan).

Thirdly, the crypto market in Asia (China, Japan, Korea) is developing rapidly. Once the scale effect is formed, it is not easy to catch up with, which is similar to mobile phone market.

Crypto mining manufacture can make use of China’s demographic dividend and cheap labor force. Chips with affordable price and excellent quality can easily capture low-end market, and then go to the middle and high-end market with iterated version.

On the contrary, China has dropped behind the rest of world in conventional chip production. Lack of state investment, misallocation of resources and late start are not fundamental reasons account for, there is no low-end market in the conventional chip industry. Conventional Chip updates fast, and the market always requires the high-performance chips.

The rapid development of computers has led to the increasing demand for computing power in the 1980s and 1990s. Many developed countries began to devote great efforts to chip research, but at that time, China was not able to devote all efforts to chip research with weakness in economy.

The essence of blockchain investment is a kind of financial investment. Financial investment is a very comprehensive activity. Only by collecting and understanding all aspects of information, including crypto miners can we make an effective judgment.