Bitmain, the big player in Bitcoin mining hardware from China, is making a move. They’re expanding their production to the U.S. This isn’t just any move; it’s a strategy to streamline supply chains and meet the growing demand from North America. With trade tensions between the U.S. and China heating up, this decision could shake things up for the global supply chain of Bitcoin mining gear.

Supply Chain Disruptions

Why are they doing this? Well, it’s all about the supply chain. U.S. Customs and Border Protection (CBP) had been detaining shipments of Bitmain’s Antminer devices for up to two months. And why? Because of national security concerns tied to Bitmain’s relationship with Sophgo, a chip designer under the microscope for connections to Huawei, a company that’s been on the U.S. sanctions list since 2019.

By moving production to the U.S., Bitmain can dodge those pesky delays and the hefty holding fees that come with detained shipments. This means they can respond quicker and provide better service to North American customers, which in turn cuts down on the uncertainty and costs that miners face.

Efficiency vs. Vulnerability

This expansion is part of a larger trend where companies are starting to diversify their production locations to adapt to the shifting trade and regulatory environment. It’s a smart move to limit the risks associated with being heavily reliant on equipment made in China, especially with the growing geopolitical tensions.

The U.S. has become a major player in Bitcoin mining, accounting for a significant chunk of the global hashrate. By setting up shop locally, Bitmain is looking to keep its foothold in the region while addressing the needs of North American customers. Plus, it helps them sidestep potential tariffs and trade restrictions with the incoming changes in U.S. trade policies.

North America Taking Charge

This decision also aligns with the growing dominance of North America in Bitcoin mining. As of now, the region accounts for over 44.3% of the Bitcoin network’s total hashrate, according to The Chain Bulletin’s Bitcoin Mining Map. And it’s not just Bitmain; companies like MARA Holdings, Core Scientific, CleanSpark, and Riot Platforms are all making their mark in the U.S.

Interestingly, this expansion comes at a time when U.S. President-Elect Donald Trump has expressed a desire for Bitcoin mining to be centralized in the country. He even suggested in a Truth Social post that increasing domestic Bitcoin production could achieve “energy dominance.”

Of course, experts are split on whether Trump’s proposed policies, like tariffs on imports and axing the federal income tax, are feasible. Some economists say it would face legislative hurdles, which could delay any action.

Market Implications

With the geopolitical landscape shifting, Bitmain’s proactive approach could stabilize and enhance efficiency in mining operations. Their local production of Antminer S21 Pro units in the U.S. is expected to stabilize the supply chain for miners, a crucial factor considering the industry’s dependency on Chinese-made equipment and the scrutiny facing Chinese tech companies.

Trump’s idea of centralizing Bitcoin mining in the U.S. could have some serious economic implications. A report by CoinShares points out the massive economic potential of dominating the global Bitcoin mining market. If the U.S. were to capture 90% of the global Bitcoin mining market by 2028, it could bring in $30.6 billion to the U.S. GDP, which is 0.12% of the projected U.S. GDP. This figure includes $10.2 billion in direct Bitcoin mining revenue and an estimated $20.4 billion from indirect economic activity. Moreover, the industry could create over 54,000 jobs, with each mining job supporting an additional 6.4 jobs in the economy.

According to the same CoinShares report, Bitcoin mining could emerge as a powerful force revitalizing rural areas. These areas, which have suffered from globalization and offshoring, could see significant economic activity from Bitcoin mining operations. U.S. Bitcoin mining operations generated $2 billion in revenue in 2023, creating job opportunities across sectors like transportation, construction, and cybersecurity.

Bottom Line

Bitmain’s expansion into the U.S. is a calculated move to enhance the stability and efficiency of Bitcoin mining equipment supply chains in light of geopolitical trade tensions. Centralizing Bitcoin mining in the U.S. could lead to substantial economic growth, job creation, and revitalization of rural areas. But as always, the feasibility and specifics of this plan remain to be seen, with many factors at play.

The author does not own or have any interest in the securities discussed in the article.