Everything You Need To Know About Chip Demand And Its Effects

The rise of the popularity of mining cryptocurrencies like Bitcoin has increased the attention on the shortage of semiconductors. These semiconductors are used in computers to mine Bitcoin. While the stock of chips has escalated as the prices have increased for this important technical component, the Bitcoin mining shortage might not hold much influence over the chip. In this article, we will be discussing chip demand in Bitcoin mining for 2021. 

Bitcoin Mining Meaning

Bitcoin mining is the process of producing new cryptos with the help of computers to solve complex mathematical algorithms or formulas. As cryptocurrencies run solely on the decentralized platform they must be mined in order to function properly. To solve the complex program formula the Bitcoin mining software requires around 10 minutes. Now you may wonder that Is Bitcoin mining profitable? Yes, it is profitable if you know the best practices to mine Bitcoin or any other crypto. 

What Caused The Chip Shortage 2021?

There are various factors that led to the present Bitcoin chip shortage. One chip shortage 2021 cause is, the chip demand increased as more workers shifted to remote work from 2020 due to the Covid-19 pandemic. Along with that fire in Japan and Taiwan and a snow storm in Texas closed production at various fabrication facilities at the beginning of 2021. 

When it comes to the effect of digital currency miners on demand, there is no dramatic evidence. For example, Taiwan Semiconductor (TSMC), which produces chips that are designed by AMD and NVIDIA which often go into the system of mining, looks at the accounting of cryptocurrency for only 1% of the total yearly revenue. 

The short shelf life of the rigs of Bitcoin mining chips implies a good amount of electronic waste in the future. Various mining devices also inflame the present global shortage of chips by competing with the same chip as electric vehicles and personal electronics that plays a crucial part in combating climatic changes. 

When Will Chip Shortage End?

With chip demands that are looking unlikely to calm down, one of the analyst firms estimates that the semiconductor shortage 2021 will last well into 2022 and has also warned the manufacturers of the equipment that wafers orders can approach with a lead time of up to 12 months. 

Chip Makers Have Been Burned Before

Investors can recall that the 2018 glut of chip supply happened because of a rash in the price of the digital currencies. The Bitcoin price fell from $19,000 in December 2017 to as low as $3,200 just after a year. This crash led the cryptocurrency mining to a halt. And for the chip industry, this implied that this segment of their business disappeared overnight decreasing the chip demand. 

Therefore, there was a drastic change of attitude towards digital currency in the chip industry if compared with 2017. TSMC in their Q1 2021 earning call scantly mentioned cryptocurrency. Adding to that, NVIDIA has notably limited mining activities on its GeForce RTX 3060 GPUs, which it claims are designed for gaming. Now, ingrained software detects algorithms that are used in Ethereum mining and decreases the efficiency of those algorithms by 50%. The company in a press release said, 

“we’re taking an important step to help ensure GeForce GPUs end up in the hands of gamers.”

However, a new cryptocurrency GPU has been designed by NVIDIA solely for the purpose of mining. 

Is Chip Stocks Bought Based On Cryptocurrency?

For semiconductors stocks, investors should not include cryptocurrency for mining, given AMD’s comment on the amount of revenue that is approaching from mining and from third party estimates on how much will be paif=d to the revenue of TSMC. Also other than the mining system of NVIDIA, this industry has done less to promote mining with cryptocurrencies, and investors who weigh chip stocks should give a look at the other sectors creating chip demand. 

Conclusion

So this can be concluded that the coronavirus pandemic has been the sole cause of chip demand shortage. There has been an increase in the cost of silicon due to the mass generation of the Covid-19 vaccine. The silicon that is required to produce these vials is the same as those required to make these chips.

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Ozioma Sani

Crypto security is paramount, and so you must understand that better as there are many crypto crime news that we get to see regularly now. And there can be nobody better than Ozioma to share her knowledge on keeping your digital assets safe and secure. Ozioma’s explanation of Bitcoin news is understood easily. However, this is not where she stops. She has done her part of research in cryptocurrency bots and masternodes. She cites quality interviews from the crypto market and presents her opinion with enough justification.

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