Taiwanese chip manufacturer United Microelectronics Corporation saw a roughly 10% decrease in revenue in the fourth quarter of 2018.

Like TSMC, who provide chips to Bitmain, they prominently attribute some of their losses to the downturn in demand for cryptocurrency. Less demand amounts to less need for mining, which subsequently lessens the demand for mining hardware.

Co-president Jason Wang said:

Looking into the first quarter of 2019, we anticipate further deceleration in customers’ wafer demand, due to a softer than expected outlook in entry-level and mid-end smartphones as well as falling crypto currency valuations. Although UMC’s ongoing transformation will need time to reach its full synergy and potential, our progress so far has enabled the company to better endure these current headwinds.

Mining Isn’t Everything

Demand from Bitcoin mining was certainly heavy throughout 2017. But chip makers have long supplied Bitmain and other mining equipment manufacturers. The continual mention of the “crypto winter” in loss reports by electronics companies seems a cop-out. “Crypto Winter” has had a far great impact on traders and retail investors than it ever could on miners.

Miners, after all, determine the daily price by and large. It is their willingness to accept a given price for newly minted coins that plays a crucial role in bear markets.

When markets take off and wildly divorce from the actual cost of mining crypto tokens, miners benefit. Conversely, they are able to tune their operations to profit even when prices drop wildly. One thing that is certain is that difficulty for Bitcoin continued to rise throughout 2018, meaning that more miners were being added to the market.

It’s unclear whether Bitmain has a relationship with UMC or not. They likely provide chips to other manufacturers.

Demand from mining equipment makers can be high when mining equipment demand gets higher. But the majority of chip business falls in other industries such as mobile phones and computers.

One thing that is not given enough credit for the drop in revenue is a stagnating demand for new cell phones. In 2017, while crypto mining demand drove up the profits of chip makers, new smartphone shipments increased less than 2%. There are more smartphones than anything out there these days, and a declining demand for them surely has a greater impact on the need for chips than does a decline in crypto mining.

Why Not Blame Peak Smartphone?

The onus is more on cell phone makers than cryptocurrency mining companies, in short. They should probably explore developing new markets in places which were previously under-connected. Developing nations have a great appetite for inexpensive technology. If we’ve reached peak smartphone, perhaps it’s time Samsung, Apple, and the others stop finding new ways to create a $1000 unit. Instead, they should explore the development of an ultra-modern $100 (or less) unit.

In any case, it’s getting tiresome, everyone blaming the “crypto winter” for stagnating businesses. Computer chips are in virtually everything, and without regard to crypto mining demand, $35 billion in revenues for a quarter is nothing to spit at. True demand for cryptocurrency will exist once tokenized projects begin to cross into the mainstream. In the meantime, speculative bubbles will come and go.