News item: CSRC asks Canaan to IPO in China
Our take: Jiang Yang, vice-president of China Securities Regulatory Commission, has visited Canaan Creative, one of the biggest ASIC chip producers in China on April 24th. Senior officers in Canaan has introduced their chip applications on areas like Bitcoin mining and Artificial Intelligence.
After being debriefed on their M&A and IPO strategies, Jiang Yang expressed his wishes:
“No matter what your chips are used for, fundamentally, Canaan is a chip company, we hope that you can IPO in Chinese market.”
As one of the major crypto miners and chip designers in China, Canaan Creative has been focusing on the development of Bitcoin miners. The company has made more than 1.2 billion RMB in revenues and 300 million RMB in net profits in last year.
Canaan once attempted to get listed in Shenzhen Exchange in 2016 in the form of asset restructuring but failed. They tried again in August, 2017 to get listed in NEEQ, but failed again.
Yao Yongjie, one of the investors of Canaan, told press earlier this year in February that Canaan is scheduling an IPO in Hong Kong. The news reemerged in the beginning of April. If Canaan gets listed in HKEX for real, they will become the first real blockchain stock in Hong Kong.
Companies like Bitmain and Canaan are making a huge amount of money in recent years due to the surge of cryptocurrency prices. But they are operating in the dark, with little media exposure and public attention. Even the authorities are not paying attentions to them as long as they are in the line.
However, as the trade war between China and US is getting more and more intense, mining companies may have a chance to be recognized.
Because of the trade war, Chinese companies like ZTE Corp. and Huawei are banned from doing any businesses in US. Especially for ZTE, as an international telecommunication provider, they import most of their components and parts from US. Without its own chip technology, they are facing huge troubles in the future.
ZTE is not the only one with troubles. As a matter of fact, China is way behind in terms of chip technology development and relies heavily on chip imports from US.
With trade war on the door, it is imperative for China to speed up the development of its own chips. Bitcoin miner manufacturers, who used to be overlooked by authorities, are one of the most advanced and profitable entities engaging in chip industry. They have been developing their own chip technologies in order to improve mining efficiencies. So, there are a huge chance that Chinese authorities will start appreciating cryptocurrency miners and develop chip technologies with them. The wish from CSRC to Canaan shows the signal, authorities are already making moves, trying to keep the miner manufacturers in China.
It would be very interesting to see how this partnership works out. If miner manufacturers indeed make it work, we might see a new generation of tech giants in China in the future.
Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.
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