Chinese Bitcoin Mining Machine Makers Establish US Production to Avoid Tariffs

SHANGHAI/SINGAPORE (Reuters) - The world's three top-selling manufacturers of Bitcoin (BTC-USD) mining machines, all of Chinese origin, are establishing manufacturing bases in the United States as President Donald Trump's tariff war reshapes the cryptocurrency supply chain.

Bitmain, Canaan, and MicroBT produce over 90% of global mining rigs, essentially computers dedicated to number-crunching that produces Bitcoin. Establishing U.S. bases could shield them from tariffs but risks stoking security concerns the U.S. has with China in areas as varied as chip making and energy security.

"The U.S.-China trade war is triggering structural, not superficial, changes in Bitcoin's supply chains," said Guang Yang, chief technology officer at crypto tech provider Conflux Network. Moreover, for U.S. firms, "this goes beyond tariffs. It's a strategic pivot toward 'politically acceptable' hardware sources," Yang said.

Bitmain, the largest of the three by sales, began U.S. production of mining rigs in December as a "strategic move" following Trump's presidential electoral win a month earlier. Canaan started trial production in the U.S. to avoid tariffs after Trump announced his so-called Liberation Day levies in April, senior executive Leo Wang told Reuters. The initiative is exploratory as the volatile tariff situation precludes heavy investment, he said.

Third-ranked MicroBT said in a statement that it is "actively implementing a localization strategy in the U.S." to "avoid the impact of tariffs." The trio dominates a sector analysts estimate to be worth $12 billion by 2028.

U.S. rival Auradine, backed by top Bitcoin miner by market value, MARA Holdings, has been lobbying to restrict Chinese supplies to stimulate competition in hardware. "While over 30% of global Bitcoin mining occurs in North America, more than 90% of mining hardware originates from China representing a major imbalance of geographic demand and supply," said Auradine's chief strategy officer, Sanjay Gupta.

Consultancy Frost & Sullivan estimated that the top three held 95.4% of the hardware market in terms of computing power sold as of December 2023. When it comes to Chinese mining rigs, "hundreds of thousands of them connected to the U.S. electrical grid" is a security risk, Gupta said.

Canaan's Wang said mining rigs do not threaten security because "they are useless if not applied to Bitcoin mining." Still, manufacturers could suffer "collateral damage" from U.S. restrictions on high-tech sales to Chinese firms, he said.

China once dominated the entire Bitcoin value chain - from rig-making through mining to trading - until its government banned cryptocurrency activity on the Chinese mainland in 2021 citing risk to financial stability. Miners, traders, and exchanges moved abroad. Shielded by their role as technology manufacturers, however, Bitmain, Canaan, and MicroBT continued to dominate in hardware.

The U.S. this year imposed a 10% baseline tariff on imports from many countries plus an extra 20% on imports from China. It has also said it could increase tariffs for Southeast Asian countries where Chinese rig makers have set up assembly plants.

Trump has promised to be the "crypto president" who popularizes cryptocurrencies' mainstream use in the United States. However, China's outsized role in Bitcoin infrastructure could put rig makers in the crosshairs.

(Reporting by Shanghai Newsroom, Samuel Shen in Shanghai and Vidya Ranganathan in Singapore; Editing by Christopher Cushing)