In the field of cryptocurrency, mining machines, mining farms, mining pools, cloud computing power platforms, etc. have formed a digital currency mining industry ecosystem. Among them, the mining machine manufacturer designs and produces the chips of the mining machine and assembles them into machinery and equipment to sell to the miners, as the producer of computing power, has an absolute right to speak in the industrial chain.
However, even in the upstream of the industrial chain, with a considerable degree of moat in chip design and industrialization capabilities, mining machine manufacturers are still difficult to get rid of the causal paradigm of "watching the sky and eating", and their performance is closely affected by the rise and fall of currency prices.
On the last day of 2021, the bitcoin price fell to around $45,900, a daily decline of 2.8%, and has fallen by 17% in December. Looking back at the full year, the bitcoin price rose 63% overall in 2021, outperforming the 27% increase of the S&P 500 index. From $30,000 at the beginning of the year, it rose to a high of $69,000 at one point. 2021 has also become a year of sharp fluctuations in the price of the currency.
However, in a year of coin price fluctuations, repeated epidemics, and shortages of semiconductor production capacity in different processes, Canaan Technology (CAN. US) still achieved strong performance, achieving substantial growth for four consecutive quarters, handing over a brilliant financial report card.
Best performance after going public
According to the Zhitong Finance APP, by the end of 2021, Canaan Technology has entered the third year after listing. For the full year, the company achieved revenue of RMB4.987 billion (US$782.5 million) in 2021, a year-on-year increase of more than 10 times.
At the same time, the company realized a profit turnaround in the year, achieving an operating profit of 1.828 billion yuan; Net profit attributable to shareholders was RMB2.000 billion, compared to a loss of RMB215 million for the same period in 2020, achieving the best annual performance since its listing.
Among them, the company achieved revenue of 2.185 billion yuan in the fourth quarter, an increase of 5611.9% year-on-year, an increase of 65.8% over the third quarter of 2021; Net profit attributable to shareholders was RMB1,197 million, up 114.6% sequentially, compared to a loss of RMB71.955 million for the same period in 2020. The fourth quarter of 2021 was also the best single-quarter performance since the company went public.
According to Canaan Technology in the report, the company's revenue in the 2021 and fourth quarters of the growth, mainly driven by sales final strength and the unit price per T sales have increased.
According to the Zhitong Finance APP, in the fourth quarter of 2021, Canaan Technology's hashrate sales reached 773.8TH/s, an increase of 3558.8% year-on-year, an increase of 15.5% compared with the third quarter of 2021, and a record high. For the whole year, the company completed the sales of 22.342 million T of hashrate, an increase of 238.5% year-on-year, and achieved continuous growth in four quarters.
Strong market demand and delivery capacity drove the company's high growth performance for the full year 2021, as well as the growth of the company's advance receipts and cash reserves.
As a result of the increase in down payments for sales orders in the coming quarters, Canaan Technology's advance receipts as of December 31, 2021 were RMB1,340.7 million (US$210.4 million), more than double the rmb430.4 million as of December 31, 2020, a record high. Among them, the contract capacity to be delivered exceeds 6 million T.
As a result, the scale of cash and cash equivalents held by the company has been further expanded. As of December 31, 2021, the Company's cash and cash equivalents were RMB2,684.3 million (US$421.2 million), an increase of 586.0% from RMB391.3 million at December 31, 2020.
Zhang Nangeng, chairman and CEO of Canaan Technology, said that the company's pre-sale hashrate data and the production capacity locked by the fab this year also allow the company to maintain confidence in the revenue of the future period.
The market basis behind the increase in sales volume and price of hashrate
For mining machine manufacturers, on the one hand, the production capacity of mining machines is affected by chip yield; On the other hand, unlike gold, the price fluctuations of cryptocurrencies are frequent and violent, which is also an important influencing factor for the performance of mining machine manufacturers, and one of the important tests for manufacturers' operational ability to maintain the balance of product supply and demand curves.
As a bullish option of cryptocurrency, the performance release of mining machine companies often has a lag, and the performance of manufacturers has gradually become a dilemma for the development of the industry with the rise and fall of the currency price. Canaan Technology achieved sustained and stable growth for four quarters in 2021 in a changeable environment, and it is not unrelated to its flexible business strategy to get out of the trend of rising volume and price to resist market fluctuations.
According to the Zhitong Finance APP, Canaan Technology began its layout of overseas markets earlier, and its products were sold to nearly 30 countries and regions, covering two new global computing centers in North America and Kazakhstan. Among them, the last batch of mining machines deployed by the company in the first phase of Kazakhstan was successfully launched at the end of 2021. As of December 31, 2021, Canaan has 10,300 Avalon mining machines in Kazakhstan.
Under this expansion plan, a number of crypto mining companies and large global mining institutions have reached long-term cooperation with Canaan Technology. According to Zhang Nangeng on the investor conference call, with the company's further expansion in overseas markets such as Southeast Asia and South America, the company has added customers from emerging markets such as Malaysia, the United Arab Emirates, Argentina and Peru.
It is understood that in the sales of hash rate in the fourth quarter of this year, about 41% of the sales hash rate comes from new customers; At the same time, the demand of several traditional overseas markets such as Central Asia, North America, and Europe is still strong, and the purchase power of re-purchase customers accounts for 59%.
Under the strategy of maintaining the stability of the supply chain and continuously expanding the geographical coverage of the business, the company has obtained customer recognition and increased the repurchase rate through excellent product and delivery capabilities, and expanded to meet the needs of a wider global market through market expansion, which together constitute the market basis for the stable and rapid growth of the company's performance.
Flexible operational capabilities to mitigate market risks
It can be said that excellent product strength and delivery ability are becoming the foundation of Canaan Technology's moat.
Among them, in terms of product capabilities, customers' recognition of the company's products is inseparable from the large investment made by Canaan Technology in research and development. As one of the most willing companies in the mining machine industry to invest in R&D, Canaan Technology invested about 333 million yuan in R&D in 2021, an increase of 137.7% over 140 million yuan in 2020. In the fourth quarter, the scale of R&D personnel increased by 99% year-on-year.
Under the insistence of long-term deep cultivation and research and development, the company has established a more comprehensive IP self-research system. As of December 31, 2021, the company has accumulated 156 authorized patents, 70 IC layout design rights and 105 software copyrights, which has become an important support for the core technology of the company's products. At present, a number of new generation mining machine research and development projects of Canaan Technology are also being steadily carried out.
In terms of supply capacity, Canaan Technology has always used multi-fabs as a supply chain strategy. Under this strategy, the company cooperates with several major fabs and lays out a number of advanced processes, achieving a further increase in chip yield while also achieving a further increase in production capacity.
Under the premise of maintaining stable supply, the company has further increased the unit price of sales (ASP) through flexible pricing strategies and adjusted the proportion of spot sales, which has promoted revenue growth and jointly formed a sustainable business growth path for the company.
In addition, by leveraging its existing chip design experience, Canaan Has also replicated its successful experience into a more diversified business. Among them, the company's AI business is currently on a steady development track, receiving positive feedback and continuous attention from customers in market scenarios such as smart education hardware and smart home.
Looking ahead, the company's performance guidance for the first quarter of 2022 remains high. Among them, the company expects to achieve revenue of 1.5-1.6 billion yuan in the first quarter of next year, which is expected to increase by 275%-300% year-on-year. Zhang Nangeng said that in 2022, the company will further respond to uncertainty with a pragmatic, flexible and flexible operation method; With continuous and stable supply, in response to changes in the industry market and fluctuations in currency prices, balance the mining machine sales and mining business, and maximize the income.