Global Chip Shortages Disrupt Bitcoin Mining Rig Production: China's Dominant Position as Hash Rate Leader Under Threat

The ongoing global shortage of chips that are used in the production of bitcoin mining rigs is now causing manufacturing disruptions. According to one report, these disruptions are causing a shortage of rigs on the market and subsequent price increases. Already, the report suggests that the prices of new mining rigs have doubled while second-hand machines saw their prices go up by more than 50% in the past year.

Chipmakers Shunning Bitcoin Rig Makers

Fueled by the rising value of bitcoin, the demand for mining rigs has been rising as miners seek to maximize returns. However, as the report explains, chipmakers are making the situation worse as they now prioritize supplying other sectors. According to the report, chipmakers like Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co are reportedly shunning bitcoin mining rig makers.

Quoting Alex Ao vice-president of Innosilicon, the report says chipmakers are choosing to serve “sectors such as consumer electronics” because their demand is “seen as more stable.” In addition to their use in the manufacturing of consumer electronics, the chips are also used in the production of automobiles, laptops and mobile phones among other products.

Meanwhile, as the report explains, the ongoing shortages could potentially reconfigure the bitcoin mining landscape. In fact, the report quotes Wayne Zhao, the COO at Tokeninsight suggesting that this is already happening. While many studies, including the latest Messari report which reaffirmed China’s dominance in the bitcoin mining space, Zhao says this has changed.

China Losing the Hash Rate Battle

According to Zhao, while “bitcoin mining in China used to account for as much as 80% of the world’s total, it now accounts for around 50%.” The COO explains:

China used to have low electricity costs as one core advantage, but as the bitcoin price rises now, that has gone.

Also, supporting Zhao’s assertion that Chinese miners are losing ground, is Lei Tong, the managing director of financial services at Babel Finance. According to Tong’s assessment, nearly “all major miners are scouring the market for rigs, and they are willing to pay high prices for second-hand machines.” Yet as he observes, it is “purchase volumes from North America (that) have been huge, (and are) squeezing supply in China.”

However, as Danny Scott, CEO of CoinCorner explains in response to written questions from News.bitcoin.com, the bitcoin mining hash rate, which recently hit an all-time high (ATH), makes it highly unlikely for miners to leave China. Still, he adds:

“So it doesn’t look like any are turning off, quite the opposite. Even if miners did leave China, this would potentially be beneficial as they may all move to different new locations, further decentralising mining around the world.”

It remains to be seen therefore if the rallying bitcoin price and rig shortages can ultimately result in China losing its dominant position.