China-based Canaan Inc., one of many world’s greatest makers of laptop gear utilized in cryptocurrency mining, is pushing forward with world growth regardless of a hunch in crypto costs and different challenges, senior vice chairman Edward Lu advised Forkast in an interview.
Talking to Forkast from a Bitcoin mining convention in Miami on July 28, Lu mentioned the U.S. is a spotlight this yr and it plans to begin its personal crypto mining within the nation, both with a associate or as a standalone.
Lu mentioned the Nasdaq-listed firm was ready for the present so-called crypto winter and that its revenues are largely pushed by long-term partnerships with giant, institutional shoppers, who’re additionally “well-prepared” for market downturns.
The U.S. has seen an inflow of Chinese language miners since China intensified its crackdown on the trade in Could 2021. Texas has been a well-liked vacation spot, although latest warmth waves pressured many miners to halt operations because the state’s electrical grid neared capability overload.
Within the first quarter of this yr, Canaan reported a surge in income progress to 1.36 billion yuan (US$213.9 million), up 236.7% year-on-year, regardless of what it known as logistical points and provide chain disruptions from the pandemic. Internet earnings expanded to 441.6 million yuan (US$69.7 million) from 1.2 million yuan.
The corporate’s inventory closed at US$3.81 in buying and selling on Aug. 2, down 42% from this yr’s excessive of US$6.52 on March 23.
This interview has been edited for language and brevity.
Timmy Shen: May you inform us extra about Canaan’s world growth technique?
Edward Lu: Canaan began specializing in world methods from 2019 after our profitable IPO on Nasdaq. Right now our organizations are extra worldwide by way of the institution of places of work and branches. We not solely have headquarters in Beijing, we have now additionally arrange regional headquarters in Singapore and different enterprise places of work in america and Kazakhstan.
Shen: Canaan began a self-mining enterprise in Kazakhstan final yr. Do you propose to construct up extra self-mining operations in different areas as nicely?
Lu: Kazakhstan is the primary nation we stepped in as a part of our world technique. Canaan began as a high-tech ASIC miner producer. We’ve all our experience, sources in R&D (analysis and improvement) and expertise in manufacturing. Mining is a brand new enterprise for us, so we began prudently — slowly to be taught from the expertise in Kazakhstan. We’re in a position, actually, now to repeat and paste that have and enterprise mannequin to different nations.
We’re doing fairly good in Kazakhstan within the scale of a startup, whereas we’re fairly profitable in shifting ahead within the U.S. market now. You’ll most likely quickly see the same sort of efficiency within the U.S. market.
Shen: May you share with us your plan for the U.S. market? What can we count on from Canaan for the remainder of yr relating to self-mining enterprise or gross sales?
Lu: Our globalization technique signifies that we’re not solely in China, we’re in Kazakhstan, we’re in European nations, we’re in North America.
When trying on the U.S. market, there are numerous fascinating points on the desk. Initially, the U.S. is likely one of the most developed nations by way of applied sciences and expertise. The authorized system can also be crucial and requires transparency as we’re a public firm.
The U.S. market may be very pleasant by way of coverage in the direction of the crypto mining enterprise, so this can be a key consideration for why we selected the U.S. market.
The infrastructure within the U.S. is superb and {the electrical} grid affords a mixture of inexperienced vitality, which is essential for the environmental [aspect] of mining. We should go inexperienced if we need to be acknowledged by mainstream industries.
And, in fact, the U.S. has expertise within the type of expert engineers and well-trained administration workers.
We plan to construct out our gross sales and advertising [capacity] within the nation and also you’ll see our providers middle constructed nearer to our shoppers in varied states.
Shen: Will the warmth waves in Texas have an effect on Canaan’s plan for the U.S. market?
Lu: Crypto mining could be seen as a person of vitality and in addition like a reservoir of vitality worth. When there’s a [weather] problem, the grid system will cut back energy to crypto mining companies in favor of standard producers and every day life wants, however when the grid has surplus electrical energy, that may be bought to crypto miners, so it turns into an environment friendly and high-tech manner of including vitality worth.
Shen: What are the foremost challenges and alternatives for crypto miners and a rig maker like Canaan in a crypto winter like we’re experiencing now?
Lu: First, we had been well-prepared. No person in our group panicked. We knew this was going to occur. It’s a cycle challenge.
Secondly, when you’re trying on the so-called crypto winter, it appears to me this time the cycle would most likely be shorter than what we anticipated.
When it comes to enterprise, in fact there’s an influence. Every time a downturn impacts the trade, there’s a clear [out]. However firms like Canaan that target R&D, strong manufacturing, strong enterprise income steadiness and don’t leverage monetary merchandise are going to remain.
This type of downturn has particularly broken these utilizing monetary leverage.
At Canaan, we’re used to [market downturns]. We’re nicely ready by way of merchandise, inventories and money circulate. We don’t see any problem that’s out of our expectation.
At occasions like this, we don’t should push ourselves to promote our rigs at a less expensive value. We will all the time use our stock to do self-mining enterprise, and when the value goes up, we are able to promote the machines. That is additionally one of many methods we’re utilizing to deal with cryptocurrency volatilities.
Shen: Canaan, together with different Chinese language firms, have been placed on U.S. SEC’s record of issuers underneath the Holding Overseas Corporations Accountable Act, and will face delisting. Are you able to convey us updated on that?
Lu: We’ve proactively responded to our inclusion on the SEC’s record on Could 5, 2022, and we’ll proceed to adjust to all related legal guidelines and rules in each China and america. We’ve seen progress in discussions between the Chinese language and U.S. governments, and we hope that the 2 events can attain an settlement within the close to future relating to inspections and investigations of auditors’ work.
We’ll preserve and enhance our sturdy company governance and compliance with native legal guidelines and rules. We’ll proceed to speak with the capital markets and actively discover doable options to guard the pursuits of our stakeholders.
