those guys are just grasping for straws right now, offloading as much risk as possible to the suc..err buyers, given the difficulty gap.
ladies & gents we are now finally in the endgame, expect to see many asic hardware manufacturer to start losing money by next year and fold shop. unless you have a very thoroughly understanding of what is going on and what is happening in the next few months, your best bet is just to buy bitcoins directly instead of asic hardware if want to be in the game. Personally i am just holding cash and waiting.
By fold up shop you mean mine like hell, right? :-)
I mean the r&d, manufacturing, and shipping cost basis of those hardware will no longer support a profit with the difficulty increase and instead cost more than income. Look at the asic blades, their cost basis is probably 1-2 btc, it was selling for 50 btc, now it's around 4 btc. In a few months this will no longer be profitable to manufacture.
Now look at a new manufacturer such as cointerra who has not made any profit yet from the first few asic waves like am already done, they are just hitting the market at those stressed prices to begin with and the situation will only get worse, for them it's not only the hardware cost but also the r&d cost. Yes the chips will be cheaper to make as they pack more gh, but the endgame is still bleak with THs of difficulty all coming online from various late comers trying to make the final wave.
Bitfury barely made it in to squeeze out a good profit, anything new coming out dec+ will have a very difficult time unless btc/usd increases drastically which looks doubtful.
The writing is on the walls.
EDIT: for anyone confused i am talking about asic manufacturers only in above post, for small retail miners the game is already up.
I'm going to have to disagree on several points.
First, the cost to manufacture chips is pretty miniscule. The initial cost is development, and making the mask. Once that's done, it's pretty much just the cost of the silicon and the manufacturing run. Once the NRE is out of the way, they can lower their prices substantially. If they are smart, they will do it incrementally in response to market conditions, thus making enough profit to repeat the cycle on a higher order chip next time round without having to do the pre order thing. Face it, AMD, Intel, and their ilk are NOT selling 'obsolete' chips at a loss. They have recovered their R&D costs and have continued to manufacture the chip on it's actual cost basis, then market it for what they can get. I doubt they ever get below 100 percent markup over all costs before discontinuing a line.
As for the game being up for the small operator?
I think not. I think the game for the small operator RIGHT NOW is wait and see. You are looking at an arms race for who can deliver better, faster, and cheaper $/BTC/
per GH/s or even TH/s. Sit and wait a few months and you'll see all sorts of first gen hardware in the secondary market for satoshis on the BTC initial price. Just like in the PC world, today's Badass is tomorrow's dumpster treasure. If you can get it damn near free, it WLL give you a positive ROI fairly quickly unless the cost of electricity skyrockets. Every gamer, whether in business, life, or chess, has to be able to adapt to changes in the game. This one has so many variables that I think there are still many MANY winning strategies for the little guy. You just have to fake patience.
So the thing that's not being considered here is the capital expenditure on semiconductor processing equipment.
Sure, mask sets are expensive. But there is a significant opportunity cost associated with using that 5-million dollar etch cluster tool or that 4-million dollar dep tool, to keep cranking out crappy old chips instead of the new ones. Waving off marginal costs for semiconductor production is foolish for anything except
very low volume runs, in which case mask costs dominate.
Foundries would rather use that equipment for modern process nodes (if possible). Saying "it's just the cost of the silicon and the manufacturing run" ignores just how much that manufacturing run costs. Basically, masks require the customer to buy into the cost of the equipment - which is enough to make small runs unprofitable, but it isn't going to make big runs cheap.
I agree about what is going to happen to the second-hand market though. There is serious potential for the little guy to pick up discarded, power-inefficient hardware, take it someplace with nearly-free electricity (Siberia, Washington State) and set up shop.
Yeah, I didn't mean to say those costs are trivial, though it did kind of come out that way. I'm just saying that the cost to manufacture once the NRE is covered is orders of magnitude smaller. Plus there are frequently spaces available on other runs, etc. that are offered up to make more profit per run for the foundry. There are numerous avenues for cost cutting without re-engineering the whole damn thing.
Also, from what I understand (I freely confess to being an interested amateur) the newest processes that are going into production on the photolithography side of things are going to be significantly cheaper than the dominant process right now. While I do not see Bitcoin ASIC machines going to 14nm or even 22nm in the immediate future, I do see it as a distinct probability in the mid term predicated really on just one thing. That thing is multifaceted, but still, just one thing. Widespread adoption of bitcoin. Mining speculation alone has not driven the price up from nothing to hovering around 120 USD over the short life of this experiment. Enough people have perceived it to be a less risky store of value than national fiat currencies at this point to give it a good push. It's artificial limits are such that such adoption is likely, unless something happens to totally screw the pooch. In the not so long term the huge amount of hashing power that's about to come online is good for bitcoin, and ultimately is LIKELY to be good for the miners as the coins they mine will rise in value as adoption becomes more widespread.
This is in fact where I vary with most of the "we'll never break even" crowd. Never is an awful long time. The machines are not likely to cease to function within the period that the desperate pleas for positive ROI are indicating. A 20 percent per annum ROI is likely even given the worst case generated by the most pessimistic calculations. That's the kind of return that makes real world investors drool, so I'm frankly both amused and irritated by the people who whine about not breaking even in a couple of weeks.
My background is in restaurant management, and if you break even in a decade on a restaurant, you're doing great. But breakeven isn't the only concern. Are you meeting your overhead and making a living? These are more important considerations than 100 percent capitalization ever will be. Sure, it's great to owe nothing and be fully in the black, but is it realistic business?
The answer to that is generally no. Very few companies at any level run without debt or amortization of equipment over time.
As to the secondary market, I see we agree, and I stand by it. Those who "must" have bleeding edge equipment discard the older stuff nearly immediately. I have observed and profited from this particular truth for the better part of three decades. I don't see it changing any time soon.
