Bitcoin-Equipment Boom Benefits TSMC, AMD Sales, Report Says

January 4, 2014 Leave a comment

Bitcoin-Equipment Boom Benefits TSMC, AMD Sales, Report Says

Taiwan Semiconductor Manufacturing Co. (2330), Advanced Micro Devices Inc. (AMD) and other companies have seen more than $200 million in sales in 2013 for computing components used to create Bitcoins, Wedbush Securities Inc. said.The virtual currency, which exists as software, is created by solving complex tasks embedded in the program through a process called mining.

Bitcoins currently trade for about $875 each on the Mt.Gox exchange, up from about $13 a year ago. As their value surged, digital prospectors have rushed to create more of the digital money, boosting the market for high-powered machines, some of which cost more than $20,000 apiece. Taiwan Semiconductor, AMD and GlobalFoundries make many of the chips in these machines, according to Gil Luria, an analyst at Wedbush in Los Angeles.

“Due to the growth of the Bitcoin network, mining machines now require powerful application-specific integrated circuits (ASIC) that are designed specifically to mine Bitcoins,” Luria said in a report. “We believe the majority of these ASIC chips are fabricated at Taiwan Semiconductor and GlobalFoundries.”

The report also flagged some potential beneficiaries of the digital boom, such as EBay Inc. (EBAY)’s PayPal unit and International Business Machines Corp. (IBM) PayPal could make Bitcoin one of its payment options, along with credit cards, this year, and benefit from an influx of millions of new users, Luria said in an interview. IBM could provide software and hardware powering Bitcoin and other new digital currencies, he said.

Sending Money

As more consumers adopt Bitcoin and other digital currencies for purchases and money transfers, that could adversely impact established financial companies such as Western Union Co. (WU), Luria said.

“It’s incredibly easy now to send money with Bitcoin from one country to another,” Luria said in an interview. “But now you need to know how to do it. I expect a flurry of money transmitters to emerge in the next one to three years, and they’ll be able to do this for everybody at a fraction of the cost of Western Union and others.”

Jason Gorss, a spokesman for GlobalFoundries, said the manufacturer is working with several companies that design chips for Bitcoin mining, such as Butterfly Labs Inc.

Representatives for TSMC and IBM didn’t immediately respond to requests for comment.

Digital Payments

“We’re watching digital currencies like Bitcoin closely,” Jennifer Hakes, a spokeswoman for PayPal, wrote in an e-mail.

“Many of our consumers prefer cash,” Andrew Silver, a spokesman for Western Union, wrote in an e-mail. “We will continue to track the use of virtual currency in the market, and expect that it should comply with the same regulations and oversight that the rest of the financial services industry must adhere to, to ensure that consumers are protected.”

Bitcoins aren’t controlled by any country or banking authority, so fees on using the currency to make purchases or transfer money can be much lower. Bitcoins are being used to pay for everything from Gummi bears to smartphones on the Internet. Retailer Overstock.com Inc. (OSTK) said recently it will begin accepting Bitcoins starting in mid-2014.

“We think there’s an underserved part of the market that wants to use Bitcoins and can’t,” Overstock’s Chief Executive Officer Patrick Byrne said in an interview last month.

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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