Canaan Inc (CAN) 2022 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Canaan Inc.'s Third Quarter 2022 Earnings Conference Call. (Operator Instructions) Please note that this event is being recorded.

女士們，先生們，感謝各位的支持，歡迎參加嘉楠科技2022年第三季財報電話會議。 （操作員指示）請注意，本次會議正在錄製中。

Now I'd like to hand the conference over to your speaker host today, Mr. Clark Soucy, Investor Relations Director of the company. Please go ahead, Clark.

現在，我想把今天的會議發言交給今天的主持人，公司投資者關係總監克拉克·蘇西先生。克拉克，請發言。

Thank you, Mel. Hello, everyone, and welcome to our earnings conference call. The company's financial and operating results were released by our newswire services earlier today and are currently available online. Joining us today are our Chairman and CEO, Mr. Nangeng Zhang; and our CFO, Mr. James Jin Cheng. In addition, Mr. Xiaoming Lu, our Senior VP; Mr. Leo Wang, IR Senior Director; and Ms. Xi Zhang, IR Manager, will also be available during the question-and-answer session. Mr. Zhang will start the call by providing an overview of the company and performance highlights for the quarter. Mr. Cheng will then provide details on the company's operating and financial results for the period before we open up the call for your questions.

謝謝，梅爾。大家好，歡迎參加我們的財報電話會議。公司財務和營運業績已於今天稍早透過我們的新聞通訊社發布，目前已在線上發布。今天參加會議的有我們的董事長兼執行長張南庚先生和財務長程金先生。此外，我們的高級副總裁陸曉明先生、投資者關係高級總監王利奧先生和投資者關係經理張曦女士也將出席問答環節。張先生將首先介紹公司概況和本季的業績亮點。程先生隨後將詳細介紹公司本季的營運和財務業績，然後我們開始回答大家的提問。

Before we continue, I would like to refer you to our safe harbor statement in our earnings press release. Today's call will include forward-looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future results of operations or the performance of the company. These statements speak only as of the date thereof and the company assumes no obligation to revise any forward-looking statements that may be made in today's press release, call or webcast, except as required by law. These statements do not guarantee future performance and are subject to risks, uncertainties and assumptions. Please refer to the press release and the risk factors and documents we filed with the Securities and Exchange Commission, including our most recent annual report on Form 20-F for information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call and webcast, we'll discuss both GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance. These non-GAAP measures should be considered in addition to and not a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release, which is posted on the company's website.

在繼續之前，我想提請您參閱我們收益新聞稿中的安全港聲明。今天的電話會議將包含前瞻性陳述。這些陳述包括但不限於我們對公司的展望，以及對未來營運績效或公司績效的估計或預測。這些陳述僅代表截至發布之日的觀點，除非法律另有規定，否則本公司不承擔修改今天新聞稿、電話會議或網路直播中任何前瞻性陳述的義務。這些陳述不保證未來業績，並受風險、不確定性和假設的影響。有關可能導致實際結果與此類陳述中所述結果存在重大差異的風險、不確定性和假設的信息，請參閱新聞稿以及我們向美國證券交易委員會提交的風險因素和文件，包括我們最新的20-F表格年度報告。此外，在今天的電話會議和網路直播中，我們將討論公認會計準則 (GAAP) 財務指標和某些非公認會計準則 (Non-GAAP) 財務指標，我們認為這些指標可作為公司績效的補充指標。這些非公認會計準則 (Non-GAAP) 指標應作為公認會計準則 (GAAP) 績效的補充，而非替代或與公認會計準則 (GAAP) 績效分離。您可以在我們發佈於公司網站的收益新聞稿中找到有關這些非公認會計準則 (Non-GAAP) 指標的更多披露信息，包括與可比公認會計準則 (GAAP) 業績的對賬表。

With that, I will now turn the call over to our Chairman and CEO, Mr. Nangeng Zhang. Please go ahead.

現在，我將把電話交給我們的董事長兼執行長張南庚先生。請您發言。

Hello, everyone. This is Nangeng, (inaudible) CEO of the company. Our CFO, James and I are delighted to share our quarterly results directly in English from New York. Since the beginning of the third quarter of this year, the (inaudible) block currency and blockchain industry has been experiencing a great deal of turbulence, especially during the past week. There is a lot going on in the industry. And now that we are together on this conference call we want to take this opportunity to speak openly with our investors and the stakeholders.

大家好。我是Nangeng，（聽不清楚）公司執行長。我們財務長James和我很高興能在紐約直接用英語分享我們的季度業績。自今年第三季初以來，（聽不清楚）區塊貨幣和區塊鏈行業經歷了巨大的動盪，尤其是在過去一周。行業內發生了很多事情。現在我們聚在一起參加這次電話會議，我們想藉此機會與我們的投資者和利害關係人進行坦誠的交流。

Market conditions have become more severe since the beginning of the third quarter of 2022, the bitcoin price continued to decrease, impacted by several reverses, increased rate increases and market expectations of further hikes. Meanwhile, bitcoin's total network hash rate remained at the high level and minus income decreased. We are fully aware of the great difficulties in the mining industry. The current situation resembles similar bitcoin cycles we have previously navigated through. However, the situation is different today as we are facing more challenges such as globally serving energy prices, miners' private risks and high financing costs caused by excessive leverage and high operating expenses for new miners.

自2022年第三季初以來，市場環境愈發嚴峻，比特幣價格持續下跌，受到多次反轉、升息幅度加大以及市場對進一步升息預期的影響。同時，比特幣全網哈希率維持高位，負收益下降。我們深知挖礦產業面臨的巨大困境。當前的情況與我們先前經歷過的比特幣週期類似。然而，如今的情況有所不同，我們面臨更多挑戰，例如全球服務能源價格上漲、礦工的私人風險以及新礦工過高槓桿和高營運成本導致的高昂融資成本。

These factors have led us to serious issues in miners operations. Furthermore, what has been happening in the industry has a role in industry participant's confidence. Turbulence in the industry is inevitable in the short term. On top of these headwinds, mining machine investors in some regions remain -- sorry, mining machine inventories in some regions remain high. All of these factors will negatively impact customer demand for and the pricing of our mining machines in the near term.

這些因素導致我們的礦機運作面臨嚴重問題。此外，產業內發生的事情也影響了產業參與者的信心。短期內，行業動盪不可避免。除了這些不利因素之外，一些地區的礦機投資者仍然——抱歉，一些地區的礦機庫存仍然很高。所有這些因素都將在短期內對客戶對我們礦機的需求和定價產生負面影響。

What I want to emphasize is that although currently participants in the industry are enduring a particularly difficult time. We remain confident of navigating through the discipline cycle. What we are going through now will turn into a valuable share (inaudible) for us to develop our business as the industry enrolls. During these difficult times, we continue our investment in R&D to increase our product (inaudible) hash rate and energy efficiency.

我想強調的是，儘管目前產業參與者正經歷著特別艱難的時期，但我們仍然有信心渡過這個週期。隨著產業的發展，我們現在所經歷的一切將轉化為我們業務發展的寶貴份額（聽不清楚）。在這段艱難時期，我們將繼續在研發方面投入，以提高我們產品的（聽不清楚）哈希率和能源效率。

In mid-October, we released 2 models of our new generation of mining machines, making a breakthrough in computing power and energy efficiency. Regardless of whether we are in a full or bare market environment, we will launch new products and develop our business strategy. This commitment demonstrates our confidence in the market's long-term prospects. Regarding the sale of mining machines in late October, having received the full testing results, we immediately launched our new generation mining machines, AvalonMade A13 series(inaudible). Specifically, 2 models are introduced, the A1346 and the A1366, Model A1346 features a hashrate of about 110 terawatt per second and power efficiency of approximately 30 draws per terahash. Model A136666 is increased with a tax rate of about 130 terawatt per second and the power efficiency of approximately 25 draws per terahash. Both models (inaudible) considering power and power efficiency demonstrates a significant improvement over the previous generation of mining machines.

十月中旬，我們發布了兩款新一代礦機，在算力和能源效率方面取得了突破。無論市場環境是全面開放還是空洞無物，我們都會持續推出新產品並制定業務策略。這項承諾反映了我們對市場長期前景的信心。礦機方面，我們在十月下旬進行了全面測試，並立即推出了新一代礦機－AvalonMade A13系列（聽不清楚）。具體來說，我們推出了兩款型號：A1346和A1366。 A1346的算力約為每秒110太瓦，能源效率約為每太赫茲30次抽取。 A136666的算力有提升，約每秒130太瓦，能源效率約為每太赫茲25次抽取。這兩款（聽不清楚）礦機在算力和能源效率方面都比上一代礦機有了顯著提升。

After our new products hit the market, we could then corroborate our supply chain to move forward on mass production. We expect to commence mass production and start shipments at the end of this year or early next year. Through prepayments, we have pure production capacity for the next year. This allows us to continuously provide high-performance products with reliable quality by superior services to our clients.

新產品上市後，我們就能完善供應鏈，推動量產。我們預計在今年年底或明年年初開始量產並開始出貨。透過預付款，我們擁有明年的純產能。這使我們能夠持續為客戶提供高性能、可靠品質的產品和卓越的服務。

As for our existing mining machine products, we delivered a total of 3.45 million terahash per second of computing power, generating revenues of (inaudible) RMB 940 million. Our global headquarters in Singapore continues to attract local tech talents to join us and further enhance its operations. The headquarters has already established R&D, operations, finance, supply chain and other functions. Our Singapore-based chip design team has contributed significantly to the development of our new products as well as the mass production process. The Southeast Asia supply chain headquartered in Singapore is performing well and has been (inaudible) severally fulfilling shipments since the center entered operation during the previous quarter. It provides diversified parts of our production process and the logistics chain that demonstrates our commitment and ability to continue our internationalization.

就我們現有的礦機產品而言，我們總計交付了每秒345萬太赫茲的算力，創造了9.4億元人民幣的收入。我們位於新加坡的全球總部持續吸引在地科技人才加盟，進一步提升營運水準。總部已設立研發、營運、財務、供應鏈等職能部門。我們位於新加坡的晶片設計團隊為新產品的開發和量產流程做出了重要貢獻。位於新加坡的東南亞供應鍊錶現良好，自上一季中心投入營運以來，已多次完成出貨。它為我們的生產流程和物流鏈提供了多元化的環節，彰顯了我們持續國際化的決心和能力。

Although the overall market is relatively sluggish this year, we have built a strong foundation of the trust and the cooperation with our industry-leading business partners. Meanwhile, we also insist on serving our small and the midsized customers in a variety of flexible ways. Our online store for retail customers (inaudible) Filter augmented our sales system to address demand from all types of customers. Since its launch in the second quarter, it has fulfilled customers' orders from 21 countries and regions worldwide. By the end of the third quarter, having shipped our prepared orders, our total computing power to be delivered has decreased to 1.01 million terahash per second.

儘管今年整體市場相對低迷，但我們與業界領先的業務合作夥伴建立了堅實的信任與合作基礎。同時，我們也堅持以多種靈活的方式服務中小型客戶。我們針對零售客戶的線上商店（聽不清楚）Filter 增強了我們的銷售體系，以滿足各類客戶的需求。自第二季上線以來，它已完成來自全球 21 個國家和地區客戶的訂單。截至第三季末，在準備好的訂單出貨後，我們待交付的總算力已降至每秒 101 萬 TB。

Under current market conditions, the industry is facing stronger headwinds and more uncertainty. Most customers are taking a wait and see approach. Short demand of mining machines has dropped to a low point, coupled with current macro challenges, our business is likely to face higher pressures over the next 2 quarters. At this point, facing a severe winter in the industry, profitability is no longer our first priority. We will get through this difficult time and prepare for the future by shifting our focus to the stability of cash flows, reducing unnecessary expenses and continue to invest in the (inaudible) and the development of new products.

在當前的市場環境下，產業面臨更大的逆風和不確定性。大多數客戶採取觀望態度。礦機的缺口需求已降至低點，再加上目前的宏觀挑戰，我們的業務在未來兩季可能會面臨更大的壓力。目前，面對產業寒冬，獲利能力已不再是我們的首要任務。我們將渡過難關，並為未來做好準備，將重點轉移到穩定現金流、減少不必要的開支，並繼續投資（聽不清楚）和新產品的開發。

During the current downturn, we are strengthening the operations of our mining business for long term. With our operation now (inaudible) we are propelling towards our mining business in overseas markets. Mining fraud, builder support and maximize (inaudible) 2 measures between our mining machine sales and our mining business. Notably, our mining corporations of the United States brought 260,000 terahertz per second of computing power online during this quarter. At the same time, the electricity from (inaudible) slide for our mining operations in Central Asia has further improved, delivering more stable operations for our deployed mining machines.

在當前經濟低迷時期，我們正在加強挖礦業務的長期營運。憑藉目前的營運（聽不清楚），我們正在向海外市場推廣挖礦業務。挖礦詐欺、建造者支援以及最大化（聽不清楚）兩項措施將我們的礦機銷售與挖礦業務聯繫起來。值得注意的是，我們位於美國的挖礦公司在本季上線了每秒26萬太赫茲的算力。同時，來自中亞地區（聽不清楚）的電力供應進一步改善，為我們部署的礦機提供了更穩定的運作。

Consequently, our mining business total online computing power is approximately 3.2 (inaudible) per second generating mining revenue of RMB 62 million in the third quarter, up 19% quarter-over-quarter. After using a proportion of our bitcoins to cover mining costs, we have 535.5 bitcoins in the total at the end of this quarter. The balance demonstrates an increase of 188.7 bitcoins from the end of the last quarter. We are also actively exploring the geographical diversification of our mining business to mitigate constitution risk while steadily expanding our global layout at the scale of our mining business under a bearish market.

因此，我們挖礦業務的總線上算力約為每秒3.2（聽不清楚），第三季創造了6,200萬元人民幣的挖礦收入，較上季成長19%。扣除部分比特幣用於支付挖礦成本後，本季末我們的比特幣總數為535.5枚。餘額較上一季末增加了188.7枚。我們也正在積極探索挖礦業務的地理多元化，以降低構成風險，同時在市場低迷的情況下，以挖礦業務的規模穩步擴展全球佈局。

Let's now turn to our AI chip business. During the third quarter, sales of our AI chips improved compared to the previous quarter as downstream manufacturers resume building up their inventories. As a result, our AI chips business sales grew by 52% quarter-over-quarter. However, weak end user demand for the consumer groups remained a head wind to our AI chip sales performance. On the other hand, we have achieved good progress in terms of growth in the developed ecosystem. For example, our program AI development for has been used for learning and practice development by college students from over 100 universities across China. At the same time, we have drawn many (inaudible) influential development platforms, actively participating in constructing the (inaudible) risk file ecosystem, we will continue to closely collaborate with our downstream and the technology partners in the industry, uphold our open source philosophy and prepare for exponential growth in the demand of AI skills.

現在讓我們來談談我們的AI晶片業務。第三季度，隨著下游廠商恢復庫存，我們的AI晶片銷量較上一季改善，較上季成長52%。然而，消費級終端用戶需求疲軟仍是我們AI晶片銷售業績的阻力。另一方面，我們在成熟的生態系統成長方面取得了良好的進展。例如，我們的AI程式開發已被全國100多所高校的大學生用於學習和實踐開發。同時，我們引進了眾多（聽不清楚）有影響力的開發平台，積極參與（聽不清楚）風險文件生態系統的建構。我們將繼續與下游及產業技術合作夥伴緊密合作，秉持開源理念，為AI技能需求的指數級成長做好準備。

During this quarter, we continued to make good progress on our current share repurchase program approved in March under which we may repurchase up to USD 100 million worth of our outstanding ADS or Class A ordinary shares over 24 months. We have repurchased 3.4 million ADS for a total of USD 11.2 million from August 4 to November 4 this year. As of November 4, 2022, we have repurchased over 6.2 million ADS for a total of USD 21.5 million with an average price of $3.46 over ADS. Our ongoing institution of this buyback program delivers increased value to our shareholders and shows our confidence in the company's current and the long-term prospects.

本季度，我們繼續推動3月份批准的現有股票回購計劃，並取得了良好進展。根據該計劃，我們可在24個月內回購價值高達1億美元的流通在外的美國存託憑證（A類普通股）。今年8月4日至11月4日，我們已回購340萬股美國存託憑證，總價值1,120萬美元。截至2022年11月4日，我們已回購超過620萬股美國存託憑證，總價值2,150萬美元，平均回購價格為每股美國存託憑證3.46美元。我們持續實施的股票回購計畫將為股東創造更高的價值，並彰顯我們對公司當前和長期前景的信心。

Overall, during the third quarter, we are faced a difficult environment. Under this macroeconomic and the industry headwinds, many miners encountered operating difficulties, leading to the decline in demand of mining machines, lower mining machine prices and more. To overcome these challenges, we worked diligently to deliver products and further contribute to the market, achieving our promise (inaudible) is that guidance. In addition, we successfully completed the check-in progress for the new generation of computing power chips and launched our new series of mining machines.

整體而言，第三季我們面臨的環境艱難。在宏觀經濟和產業逆風的背景下，許多礦工遭遇經營困境，導致礦機需求下降、礦機價格下跌等。為了克服這些挑戰，我們努力交付產品，進一步為市場做出貢獻，兌現了我們的承諾（聽不清楚），這就是我們的期望。此外，我們順利完成了新一代算力晶片的測試，並推出了全新系列的礦機。

Looking ahead, we see that rising increased risk and other macroeconomic dynamics continue to exert (inaudible) pressure on different prices and erode industry confidence. There is also the possibility of further energy price increases during the coming winter, considering this combined headwinds, weaker demand in the mining industry is expected. As a result, we expect our performance to come under further pressure at least during the next 2 quarters. Based on our current projections, we expect our total revenues of the fourth quarter of 2022 to be approximately RMB 310 million. Please note that this forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.

展望未來，我們看到風險上升及其他宏觀經濟動態持續對各類價格施加（聽不清楚）壓力，並削弱產業信心。在即將到來的冬季，能源價格也有可能進一步上漲。考慮到這些不利因素，預計採礦業的需求將減弱。因此，我們預計至少在接下來的兩個季度，我們的業績將面臨進一步的壓力。根據我們目前的預測，我們預計2022年第四季的總收入約為人民幣3.1億元。請注意，此預測反映了我們對市場和營運狀況的當前和初步看法，這些看法可能會有所變化。

It has been almost 10 years since Canaan's introduction, and we have navigated through multiple different cycles, regardless of macro environment. We remain firmly committed to always doing our ultimate mode to develop new products and assure (inaudible) the per of computing power and power (inaudible).

嘉楠耘智成立至今已近十年，無論宏觀環境如何，我們經歷了多個不同的周期。我們始終堅定不移地致力於以極致的模式開發新產品，並確保算力和算力的穩定性。

We have continued to push forward on our internationalization adhering to our flexible and prudent operating strategy. We endeavor to enhance synergies between our machine sales and mining business. At the same time, we will keep a conservative approach to our capital management and streamline our cash outflows, while continuing our investment in R&D under (inaudible) relations operations is paramount for us to sustain operations across the board and the bear market cycles upholding our responsibility and the commitment to our shareholders.

我們秉持靈活審慎的營運策略，持續推動國際化進程。我們致力於提升機械銷售與採礦業務之間的綜效。同時，我們將維持審慎的資本管理方式，精簡現金流出，並持續在關係營運領域加大研發投入。這對於我們全面維持運營，並在熊市週期中履行對股東的責任和承諾至關重要。

This concludes my prepared remarks. I will now turn the call over to our CFO, James.

我的準備發言到此結束。現在，我將把電話交給我們的財務長詹姆斯。

Thank you, Mr. Zhang, and good day, everyone, (inaudible) Mr. Zhang I'm with our CEO, (inaudible) Rene Citi. As we discussed in August on our second quarter earnings call, in the third quarter of 2022 as we expected, the overarching industry environment started to negatively impact our demand and average selling price. We reported a total revenue of RMB 978 million in the quarter, meeting our guidance range despite the year-over-year and sequential decrease. Specifically, as the bitcoin price further decreased to $16,000 recently, we expect the overall demand for mining machine remains constrained.

謝謝張先生，大家好！ （聽不清楚）張先生，我現在和我們的執行長（聽不清楚）Rene Citi 在一起。正如我們8月在第二季財報電話會議上討論的那樣，正如我們預期的那樣，2022年第三季度，整體產業環境開始對我們的需求和平均售價產生負面影響。我們報告本季總收入為人民幣9.78億元，儘管同比和環比有所下降，但仍符合我們的預期範圍。具體來說，隨著比特幣價格近期進一步下跌至16,000美元，我們預期礦機的整體需求仍受到抑制。

In the third quarter, we delivered total computing power sold of 3.5 million terahash per second. In response to the softening market, we lowered our selling prices leading to a certain decline in the average selling price for the quarter. As a result of the combined effect sales of our bitcoin mining machines decreased to RMB 914 million for the quarter. In a challenging market downside cycle, we take the mining business as a hedge against the weakening mining machine sales, it helps us better utilize our machine inventory and bringing additional revenues.

第三季度，我們交付的總算力為每秒350萬太赫茲。為了應對市場疲軟，我們降低了銷售價格，導致本季平均售價下降。受此影響，本季比特幣礦機銷售額下降至人民幣9.14億元。在充滿挑戰的市場下行週期中，我們將挖礦業務作為對沖礦機銷售疲軟的一種方式，這有助於我們更好地利用礦機庫存並帶來額外收入。

Specifically, our mining business generated mining revenue of RMB 62 million, representing a quarter-over-quarter increase of 19%. In the third quarter, we started mining in the United States by deploying a trial batch of mining machines. Our increased bitcoin production is also due to further improved electricity supply in our mining operations in Kazakhstan. Collectively, we have 3.2 (inaudible) hash per second of total computing power deployed for our mining business as of the end of the third quarter.

具體而言，我們的挖礦業務實現了 6,200 萬元人民幣的挖礦收入，較上季成長 19%。第三季度，我們在美國部署了一批試驗性礦機，並開始進行挖礦。比特幣產量的增加也得益於哈薩克礦場電力供應的進一步改善。截至第三季末，我們為挖礦業務部署的總算力為每秒 3.2（聽不清楚）哈希。

After paying certain direct costs, especially electricity bills with bitcoins mined, we held 535.5 bitcoins as of the quarter's end, representing 188.7 additional bitcoins compared with 346.8 bitcoins balance as of June 30, 2022. We remain prudent in machine deployment and are thoroughly exploring multiple geographical regions with favorable mining conditions to diversify our mining operations. Please also note that with the increase of our deployed machines for mining, we expect to have more machine depreciation in our total cost.

在支付了部分直接成本（尤其是挖出的比特幣的電費）後，截至本季末，我們持有 535.5 枚比特幣，較 2022 年 6 月 30 日的 346.8 枚比特幣增加了 188.7 枚。我們在礦機部署方面保持審慎，並正在深入探索多個挖礦條件良好的地區，以實現挖礦業務的多元化。另請注意，隨著我們部署的挖礦礦機數量的增加，我們預計總成本中的礦機折舊率將會上升。

Our AI revenue realizing a sequential increase of 52%, reached RMB 2.4 million in the third quarter. The total AI chip sales performance reflected the soft demand for its end user -- use consumer IoT products. Our gross profit for the third quarter was RMB 234 million, probably reflecting the impact to the top line level. Additionally, as we lowered the selling price of some old generation machines to even below their cost, we incurred an inventory write-down of RMB 221 million in the third quarter. Resulting from the complex effect of declining ASP inventory write-down and relatively flat product costs, our gross margin was further squeezed to 23.9% for the third quarter. Please note that if we had not implemented this inventory write-down, our sales margin for the third quarter would have been 46.5%.

我們的人工智慧收入在第三季度實現了 52% 的環比增長，達到 240 萬元人民幣。人工智慧晶片的整體銷售業績反映了其最終用戶（用於消費性物聯網產品）的疲軟需求。我們第三季的毛利為 2.34 億元人民幣，可能反映了對營收的影響。此外，由於我們將一些老一代機器的銷售價格降至成本以下，我們在第三季產生了 2.21 億元人民幣的存貨減記。由於平均售價下降和產品成本相對穩定的綜合影響，我們的毛利率在第三季進一步壓縮至 23.9%。請注意，如果我們沒有實施此存貨減記，我們第三季的銷售利潤率將為 46.5%。

In the third quarter, we continued to enhance our research and development. We launched our new generation mining machines in October as we propelled the commercialization of our R&D efforts. We also made upfront payments to secure the production capacity for advanced node wafers to ensure stable supply in the future. As the vast majority of our sales contracts were denominated in U.S. dollars, we recorded a foreign exchange gain of RMB 101 million in the third quarter due to the depreciation of RMB against U.S. dollars. Conversely, if RMB appreciates against the U.S. dollars. In future, we will incur foreign exchange losses correspondingly. For our bottom line, our net income reduced to RMB 61 million in the third quarter.

第三季度，我們持續加強研發投入，並於10月推出新一代礦機，持續推動研發成果的商業化落實。此外，我們也支付了預付款，以確保先進節點晶圓的產能，以保障未來的穩定供應。由於我們的絕大部分銷售合約以美元計價，受人民幣兌美元貶值的影響，第三季我們錄得人民幣1.01億元的匯兌收益。反之，如果人民幣兌美元升值，未來我們將相應承受匯兌損失。因此，第三季我們的淨利潤降至人民幣6100萬元。

Turning to our balance sheet. As of September 30, 2022, the company had cash and cash equivalents of RMB 2003 million. The decrease in cash balance was primarily due to upfront prepayments for securing wafers and payments of operating and tax expenses, which was partially offset by cash inflow from the spot sales of mining machines during the third quarter. With the rollout of mass production for the new generation of mining machines, we expect our cash balance by the end of this year may further decrease as we make additional prepayments to secure production capacity. We don't have any interest bearing debt in a downward market, it's critical for us to preserve cash and sustain cash flows. We will continue to closely monitor our cash balance and manage it prudently.

回顧我們的資產負債表。截至2022年9月30日，公司現金及現金等價物為人民幣20.03億元。現金餘額的減少主要由於晶圓採購預付款以及營運支出和稅費支出的支付，部分被第三季礦機現貨銷售的現金流入所抵銷。隨著新一代礦機的量產，我們預計今年年底的現金餘額可能會進一步減少，因為我們需要支付額外的預付款以確保產能。在市場下行的情況下，我們沒有任何計息債務，保持現金並維持現金流對我們至關重要。我們將繼續密切監控並審慎管理現金餘額。

From August 13, 2022 to November 4, 2022, we used approximately USD 11.2 million to repurchase 3.4 million ADS under our current stock repurchase program approved in March 2022 with an average repurchase price of USD 3.29 per ADS. In light of an increasingly volatile macro environment, we may reevaluate our repurchase program in accordance to our cash balance.

2022年8月13日至2022年11月4日期間，我們根據2022年3月批准的現行股票回購計劃，動用約1,120萬美元回購了340萬股美國存託憑證，平均回購價格為每股美國存託憑證3.29美元。鑑於宏觀環境波動加劇，我們可能會根據現金餘額重新評估回購計畫。

Looking into the near term, we see unfavorable factors may become even worse in the market, including constrained bitcoin prices and the U.S. rate hike and high energy costs. Recently, the bitcoin price has continued to decline after a series of industry incidents. As such, we expect lingering very soft demand in the near term for worldwide total hashrate expansion and mining machines purchase.

展望短期，我們預期市場中的不利因素可能會進一步加劇，包括比特幣價格受抑、美國升息以及能源成本高企。近期，一系列產業事件導致比特幣價格持續下跌。因此，我們預期短期內全球總算力擴張和礦機採購需求將持續疲軟。

To conclude, the third quarter was a difficult one. We strived to maintain sufficient cash balance and seek opportunities in the market downturn. As a company, while the macroeconomic factors and the industry trends are out of our control, we endeavor to control the decision and efforts we make to streamline our business operations, maintain cash flow and effectively manage our liquidity level. To sustain our operation is our minimal and optimal strategy during the hard times.

總而言之，第三季是艱難的。我們努力維持充足的現金餘額，並在市場低迷時期尋找機會。作為一家公司，儘管宏觀經濟因素和行業趨勢是我們無法掌控的，但我們努力掌控決策並努力精簡業務運營，維持現金流並有效管理流動性水平。在艱難時期，維持營運是我們最低限度也是最佳的策略。

Now I would like to briefly walk you through our financial results for the quarter. Revenues in the third quarter of 2022 were RMB 978.2 million, USD 137.5 million, representing a decrease of 40.8% from RMB 1,652.7 million in the second quarter of 2022 and a decrease of 25.8% from RMB 1,317.6 million in the same period of 2021.

現在，我想簡單介紹一下我們本季的財務表現。 2022年第三季營收為人民幣9.782億元（約1.375億美元），較2022年第二季的人民幣16.527億元下降40.8%，較2021年同期的人民幣13.176億元下降25.8%。

Gross profit in the third quarter of 2022 was RMB 234.2 million, USD 32.9 million. Representing a decrease of 74.8% from RMB 929.7 million in the second quarter of 2022 and a decrease of 68.4% from RMB 741.7 million in the same period of 2021.

2022年第三季毛利為人民幣2.342億元，約3,290萬美元，較2022年第二季的人民幣9.297億元下降74.8%，較2021年同期的人民幣7.417億元下降68.4%。

Total operating expenses in the third quarter of 2022 were RMB 275.0 million, USD 38.7 million, representing an increase of 1.7% from RMB 270.5 million in the second quarter of 2022 and a decrease 1.2% from RMB 278.4 million in the same period of 2021.

2022年第三季總營運費用為人民幣2.750億元，約合3,870萬美元，較2022年第二季的人民幣2.705億元成長1.7%，較2021年同期的人民幣2.784億元減少1.2%。

Net income attributable to ordinary shareholders in the third quarter of 2022 was RMB 61.1 million, USD 8.6 million, representing a decrease of 90.0% from RMB 608.9 million in the second quarter of 2022 and a decrease of 88.1% from RMB 512.5 million in the same period of 2021.

2022年第三季歸屬於普通股股東的淨利為人民幣6,110萬元，約860萬美元，較2022年第二季的 6.089億元下降90.0%，較2021年同期的人民幣5.125億元下降88.1%。

Non-GAAP adjusted net income in the third quarter of 2022 was RMB 166.3 million, USD 23.4 million representing a decrease of 75.8% from RMB 688.2 million in the second quarter of 2022 and a decrease of 71.7% from RMB 587.5 million in the same period of 2021. Basic and diluted net earnings per ADS for the quarter both were RMB 0.36 and USD 0.05.

2022年第三季非美國通用會計準則調整後淨利為1.663億元人民幣，較2022年第二季的6.882億元下降75.8%，較2021年同期的5.875億元下降71.7%。本季每股美國存託憑證基本淨收益為0.36元人民幣，稀釋淨收益為0.05美元。

Contract liabilities as of September 30, 2022, were RMB 300 million, USD 42 million, decreasing from RMB 1,340.7 million as of December 31, 2021.

截至 2022 年 9 月 30 日的合約負債為人民幣 3 億元（4,200 萬美元），較截至 2021 年 12 月 31 日的人民幣 13.407 億元有所減少。

This concludes our prepared remarks. We are now open for questions.

我們的準備演講到此結束。現在開始提問。

(Operator Instructions) Your first question comes from the line of Jiaji Song from Guosheng Securities.

(操作員指示)您的第一個問題來自國盛證券的宋嘉冀。

So you have the established headquarters in Singapore, have you ever thought about being a completely foreign company?

那麼，你們在新加坡設立了總部，有沒有想過要成為一家完全外國的公司？

Okay. First and for most, we are a U.S. business company. The globalization of our business -- of our business and operations has progressed along with the global divestation of our client base. The goal of our company's globalization is to better serve our clients. We established our headquarters in Singapore, we liked its business environment, local R&D and the (inaudible) technique pilots as well as the vigorous Southeast Asia's business hub. It also has open attitude for digital currencies. We have set up local R&D and operation schemes and established (inaudible) Asia's supply chain by leveraging our operations in Singapore. For a long-term perspective, we aim to grow into an international company with operations not only in Singapore but also in the U.S. and the Southeast Asia. By leveraging the geographical advantages of each market, we are pleased that in, we will better serve our customers globally and create values for shareholders.

好的。首先，我們是一家美國公司。隨著我們客戶群的全球剝離，我們的業務和營運的全球化也在推進。我們公司全球化的目標是更好地服務客戶。我們在新加坡設立了總部，我們看好這裡的商業環境、本地研發和（聽不清楚）技術試點，以及作為東南亞充滿活力的商業中心的地位。新加坡對數位貨幣也持開放態度。我們已經建立了本地研發和營運方案，並利用我們在新加坡的業務建立了（聽不清楚）亞洲的供應鏈。從長遠來看，我們的目標是發展成為一家不僅在新加坡，而且在美國和東南亞都開展業務的國際化公司。透過利用每個市場的地理優勢，我們很高興能夠更好地服務全球客戶，並為股東創造價值。

So considering the recent decline of bitcoin price we will have inventories write down, when will it occur?

因此，考慮到最近比特幣價格的下跌，我們將減記庫存，這將在什麼時候發生？

I will take this one. Thank you, Song, for this difficult question. I think you might have already noticed in this quarter, we recorded RMB 221.1 million for inventory write-downs as we determined that the estimated realizable value of our inventory will be lower than the holding costs. That was due to the lower sales price for subsequent orders. Of course, it links to the bigger picture, like bitcoin price drop and softening market demand from the miners. The inventory write-down was recorded in the course of revenues and had a material negative impact on our gross margin over the current quarter. If the severe impact of bitcoin price continue to decline in the coming quarters, we may have to consider further decreasing our selling price, which will probably lead to additional inventory write-downs and also lead to P&L losses in the bottom line. I think we should prepare the worst in balance sheet and do our best in operation. On the other hand, going forward, if we could be able to sell such inventories above their cost, the cost of sales for those machines will be net of such write-downs, which in turn will have the effect of increasing our gross profit for the period

我來回答這個問題。宋總，謝謝您提出這個難題。我想您可能已經注意到，本季我們提列了2.211億元人民幣的存貨減值，因為我們預期存貨的可實現價值將低於持有成本。這是由於後續訂單的售價較低所造成的。當然，這也與整體情況有關，例如比特幣價格下跌以及礦工市場需求疲軟。存貨減損計入了收入，並對我們本季的毛利率產生了重大負面影響。如果比特幣價格的嚴重影響在未來幾季持續下跌，我們可能不得不考慮進一步降低售價，這可能會導致進一步的存貨減值，並導致損益表中的損益損失。我認為我們應該在資產負債表上做最壞的打算，並在營運上盡力而為。另一方面，如果我們能夠以高於成本的價格出售這些庫存，這些機器的銷售成本將扣除這些減值，進而增加我們當期的毛利。

How is your spot sales and future contract sales ratio?

你們的現貨銷售和期貨合約銷售比例如何？

I think currently, vast majority of the sales are future contract sales. The spot sales are at a relatively pretty small quantity. As CEO previously mentioned, our new generation of mining machine is progressing towards mass production. We are still not 100% sure whether shipments will begin at the end of this year or at the start of next year. Therefore, we expect the sales of our new mining machines to be primarily contract sales. And we have already secured production capacity for our new generation machine for next year to maintain a stable supply.

我認為目前絕大多數銷售都是期貨合約銷售。現貨銷售量相對較少。正如CEO先前所提到的，我們的新一代礦機正在逐步實現量產。我們目前還不能100%確定是在今年年底還是明年年初開始出貨。因此，我們預計新礦機的銷售將主要以合約銷售為主。我們已經確保了明年新一代礦機的產能，以保持穩定的供應。

What is the progress of cooperation with foundries?

與代工廠的合作進度如何？

Okay. We have been seeing our market foundry strategy and utilizing our comprehensive R&D capabilities so as to prepare to capture surplus capacity advances for that node. Therefore, we continue to actively maintain productive collaborations with our foundry partners, supporting their operations to like prepayment (inaudible) holders. In return, our foundry partners are really (inaudible) let's say working with us to optimize the products' fabrication, and R&D and production. I think mining machines, supercomputing chips can serve as the vanguard for advanced process, having foundries who have stabilized their production. Our collaboration with foundries is definitely a win, win partnership. I think the current challenges across the industry, yes, on which approximately believe will be a short-term issue. We will continue to invest in advanced process and wafer procurement and we (inaudible) to capture more market opportunities and higher market share.

好的。我們一直在關注我們的市場代工策略，並利用我們全面的研發能力，為獲取該節點的剩餘產能預付款做好準備。因此，我們將繼續積極與代工合作夥伴保持高效的合作，支持他們的運營，例如預付款持有人。作為回報，我們的代工合作夥伴也與我們合作，優化產品的製造、研發和生產。我認為，礦機和超級運算晶片可以作為先進製程的先鋒，代工廠已經穩定了生產。我們與代工廠的合作絕對是雙贏的。我認為，目前整個行業面臨的挑戰，是的，相信這將是一個短期問題。我們將繼續投資先進製程和晶圓採購，並（聽不清楚）抓住更多市場機會，提高市佔率。

Our next question comes from the line of Kevin Dede from HC Wainwright.

我們的下一個問題來自 HC Wainwright 的 Kevin Dede。

I'm curious now on how much of the cash decline was attributed to foundry prepayments? And how much of the September quarter shipments were to customers versus Canaan's self-mining.

我現在很好奇，現金下降有多少是代工廠預付款造成的？ 9月季度的出貨量中，有多少是發給客戶的，有多少是嘉楠耘智自營礦機的。

Okay. We typically secure our foundry partners production capacities through prepayments. We have recently paid for production of a batch of the new generation of mining machine chips that because the wafer segregation for that will take about 5 to 6 months. Typically, we will prepare some inventories for new models, machines in the (inaudible). Yes. So I think it's really hard for us the actual numbers, but we are also actively having our production selling to better support our foundry partners, which actively managing wafer cost through flexible negotiation. Yes. And during the third quarter, we started our mining operation in the U.S., and we cooperate with local mining farm to bring the first batch of over 2,000 machines online, operating (inaudible) clients with laws and regulations. I think due to nondisclosure agreements, we are not able to disclose (inaudible). And at the end of third quarter 2022, we have 3.2 (inaudible)hash billion power online for mining. So this deployed in (inaudible) mining -- we are in has already run with the top 10 of our (inaudible) companies in U.S. Compared to our computing power sold, our mining hash is still relatively small. We have mining operations in Central Asia and North America. We are also exploring and pushing forward our business in other regions with favorable energy prices and market dynamics. Given the current growth uncertainties in the industry environment, we adhere to the prudent strategy for exploring partnership opportunities in regions with variable power supply and market policies. That has based on North America and Northeast Asia.

好的。我們通常透過預付款來確保代工合作夥伴的生產能力。我們最近支付了一批新一代礦機晶片的生產費用，因為晶圓的分選大約需要5到6個月。通常情況下，我們會為新型號的礦機準備一些庫存，這些礦機的晶圓分選週期大約在5到6個月。是的。所以我認為我們很難確定實際數字，但我們也在積極地銷售產品，以便更好地支持我們的代工合作夥伴，他們透過靈活的談判來積極控制晶圓成本。是的。在第三季度，我們在美國啟動了挖礦業務，並與當地礦場合作，將首批超過2000台礦機上線，營運客戶遵守法律法規。我認為由於保密協議，我們無法披露具體數字。截至2022年第三季末，我們擁有3.2億哈希算力用於挖礦。因此，我們部署在（聽不清楚）挖礦領域的業務——我們已經與美國排名前十的（聽不清楚）公司合作。與我們銷售的算力相比，我們的挖礦哈希值仍然相對較小。我們在中亞和北美都有挖礦業務。我們也正在探索和推進其他能源價格和市場動態有利地區的業務。鑑於當前產業環境的成長不確定性，我們堅持審慎的策略，在電力供應和市場政策不穩定的地區探索合作機會。這項戰略以北美和東北亞地區為基點。

Do you have a target for Canaan's internal mining hash rate for the end of the year?

您對嘉楠耘智年底的內部挖礦哈希率有什麼目標嗎？

Yes, I think there's still some opportunities for us to expand our mining business. And you know the demand of the market is relatively low. So I think we will move more machines from selling to start mining. Yes. But I think there's no exact number for a top target at the end of this year.

是的，我認為我們仍有一些機會擴大挖礦業務。而且你知道市場需求相對較低。所以我認為我們會把更多機器從銷售轉向挖礦。是的。但我認為今年年底的最高目標還沒確定。

One last question for me, please, if I may. Can you characterize Canaan's position on immersion and how the company might be working in R&D to develop machines particularly suited for that type of application?

如果可以的話，我最後一個問題請教一下。您能否描述一下嘉楠科技在沉浸式技術方面的立場，以及該公司將如何在研發方面開發特別適合此類應用的機器？

Yes. We have been providing immersion models to customers for evaluation. And they are ready to be mass produced if we have orders from our customers. Our (inaudible) vergesign demonstrates more stable performance under difficult conditions and the kind improvements of producing power by maybe 30% to 50% per chip unit compared to air-cooled products. Some clients will overclock for even higher computing power. Of course, I think overall purchase cost is also a very important factor for customers while choosing between immersion and air cooled products.

是的。我們一直在為客戶提供浸沒式模型進行評估。一旦接到客戶訂單，這些模型即可投入量產。我們的（聽不清楚）vergesign 在嚴苛條件下表現出更穩定的性能，並且與風冷產品相比，每晶片單元的功耗提升了 30% 到 50%。有些客戶甚至會為了獲得更高的運算能力而超頻。當然，我認為整體採購成本也是客戶在浸沒式和風冷產品之間進行選擇時需要考慮的一個非常重要的因素。

Our next question comes from the line of Tony Zhu from China Renaissance Securities.

我們的下一個問題來自華興證券的朱先生。

My first question is how do you see the bitcoin trend, especially in your down cycle?

我的第一個問題是，您如何看待比特幣的趨勢，尤其是在下行週期中？

Okay. I think in the near term, we see the (inaudible) range and the pressure from Federal (inaudible) is still driving interest rates. The recent downward trend in the compliance is severely event driven. Entering and going through the low point is the necessary parts of navigating through every cycle. However, I think -- I don't think that anyone accurate repeat the short-term bitcoin project. In regards to the price of bitcoin, I have always believed that there's no need to forecast the bitcoin in the long term. Our bitcoin becomes the most important for currency. It has increasingly large user base. Meanwhile, based on bitcoin having a mechanism, it's foreseeable that the supply of bitcoins will be lower than market demand. As a result, I remain confident in this bitcoin's long-term prospects. From the midterm perspective (inaudible) market work that we are doing now is in preparation of potential business opportunities in the coming maybe 1 or 2 years seeding each opportunities that arrive at this more in our industry

好的。我認為短期內，我們看到（聽不清楚）區間波動，Fed（聽不清楚）的壓力仍在推動利率。近期合規性的下降趨勢嚴重受事件驅動。進入並穿越低點是每個週期的必要環節。但是，我認為——我認為沒有人會準確地重複短期比特幣項目。關於比特幣的價格，我一直認為沒有必要預測比特幣的長期趨勢。我們的比特幣已成為最重要的貨幣。它的用戶群越來越大。同時，基於比特幣的機制，可以預見比特幣的供應將低於市場需求。因此，我對比特幣的長期前景仍然充滿信心。從中期來看（聽不清楚），我們現在正在進行的市場工作是為未來一兩年（或許是一兩年）的潛在商業機會做準備，為行業中出現的每一個機會播下更多種子。

My next question is we know that recently, the accusation issue has greatly impacted the industry. And just wondering what our view on this event and maybe how we react to the situation.

我的下一個問題是，我們知道最近這起指控事件對整個產業造成了很大影響。我想知道我們對此事有何看法，以及我們對此將作何反應。

I think this is a very sensitive question. So I will say something maybe from the industry side not the (inaudible) exchange. I believe private currencies such as bitcoin actually provide people with decentralized and trackless way to hold high digit assets or 100% on their own. For the operational way of these systems, some transactions trades should be completed on blockchains. However, due to technical bars for ordinary people to hold and trade for currencies, many of them tend to use centralized for the currency exchanges when they invest in trading. This performance makes many transactions switch from blockchain trading to (inaudible) chain treating during the last 2 or 3 years. As such users access and treating transaction fee, which has been a way to enhance the security of blockchains have been redirected to private currency exchanges or centralized private currency exchanges more due to lack of a really effective revolutions in this area this kind of exchange-based transaction poses strict requirements on changes management capabilities and attitude offer a more frankly, a test of human nature. I think during improving strong spare markets incidence on private exchanges similar to the issue also poker. Therefore, we are not surprised -- so we easily hope there -- through this round of equivalents the market can return to the blockchains (inaudible) private currency is (inaudible) demonstrates one figures that are far beyond a modern way of speculation. I believe that the industry will better develop with the increase (inaudible).

我認為這是一個非常敏感的問題。所以我想從產業角度而不是交易所的角度談談。我認為像比特幣這樣的私人貨幣實際上為人們提供了一種去中心化、無追蹤的方式，讓他們可以持有高額資產，或100%地自行持有。就這些系統的運作方式而言，一些交易應該在區塊鏈上完成。然而，由於普通人持有和交易貨幣的技術門檻，許多人在投資交易時傾向於使用中心化的貨幣交易所。這種表現導致許多交易在過去兩三年從區塊鏈交易轉向了鏈下交易。由於缺乏真正有效的改革，用戶存取和處理交易費用（這一直是增強區塊鏈安全性的一種方式）被轉移到私人貨幣交易所或中心化的私人貨幣交易所。這種基於交易所的交易對管理能力和態度提出了嚴格的要求，更坦率地說，是對人性的考驗。我認為在改善強勁的備用市場的過程中，私人交易所的事件發生率與撲克的問題類似。因此，我們並不感到驚訝——我們很容易就希望如此——透過這一輪等價物市場能夠回歸區塊鏈（聽不清楚），而私人貨幣（聽不清楚）則展現出遠超現代投機方式的數值。我相信，隨著（聽不清楚）的增加，這個行業將會更好地發展。

And my last question is could you give us the guidance of the ASP average mining machine, selling price, computing power sold and gross margin for next quarter?

我的最後一個問題是，您能否為我們提供下個季度的平均礦機銷售價格、銷售價格、銷售算力和毛利率的指引？

I will take this one, (inaudible). I think you just noticed from our earnings release, the gross margin decline in the third quarter. I think that this decline was partially because we adjusted down the selling price for some machine models with lower hash rates in response to market conditions. Some models or other certain sales packages were sold at a lower than cost price. So in addition, we -- our new generation of machines launched in October has just become available for preorder. Some machines may be delivered in the fourth quarter. But as of today, we are not able to give a specific guidance. The selling price for contract sales of our new model demonstrates a certain level of gross margin. So in a combination, we expect in the fourth quarter gross margin probably decreased compared to the third quarter, the ASP could be a little bit lower compared to third quarter. So I think currently, that's our prediction.

我來談一下這個，（聽不清楚）。我想您剛才從我們的財報中註意到了，第三季的毛利率有所下降。我認為下降的部分原因是我們根據市場情況下調了部分算力較低的礦機型號的售價。部分型號或某些銷售套餐的售價低於成本價。此外，我們十月推出的新一代礦機剛開放預訂。部分礦機可能會在第四季交付。但截至目前，我們還無法給出具體的預期。我們新礦機的合約售價反映了一定的毛利率。因此，綜合來看，我們預期第四季的毛利率可能會較第三季有所下降，平均售價也可能會較第三季略低。所以，我認為目前這是我們的預測。

Our next question comes from the line of Han Chung from D.A. Davidson.

我們的下一個問題來自 D.A. Davidson 的 Han Chung。

First, I was wondering how much inventory level, how much is the inventory level in the industry right now? And how long this could take for the market to digest the inventory?

首先，我想知道目前產業的庫存水準是多少？市場消化這些庫存需要多長時間？

Okay. I think it's a good question. Currently, the amount of inventory in U.S. market is relatively high. And the current market conditions each mark take -- I think it's marked at least 6 months is to digest the inventory. As many depends on how the electricity cost will decrease and the speed of mining facility structure. If this split-related issues will be solved soon than the overstocked machine -- mining machine users could be adjusted soon. So we have observed that the big client networks both of using power and showing an upward transition. But bitcoin price is around USD 20,000 for more than 1 quarter and this extend further decrease is (inaudible). I think this situation will accelerate the elimination of older models from mining machine inventories in the market and the miners will be more inclined to deploy mining machines with higher computing power and energy and a lower energy efficiency. But I think when bitcoin price return to its upward filter inventory destocking will be…

好的。我覺得這個問題問得很好。目前美國市場的庫存相對較高。目前的市場狀況下，每個礦機品牌至少需要6個月的時間來消化庫存。消化庫存的多寡取決於電力成本的下降以及挖礦設施的建造速度。如果這些與礦機分割相關的問題能夠盡快解決，那麼庫存過剩的礦機用戶就能很快得到調整。我們觀察到，大型客戶網路的用電情況和礦機價格都呈現上升趨勢。但比特幣價格在2萬美元左右徘徊已超過一個季度，而且這種持續的下降趨勢（聽不清楚）。我認為這種情況將加速市場上舊型號礦機庫存的淘汰，礦工將更傾向於部署算力更高、能耗更低、能效更低的礦機。但我認為，當比特幣價格回歸上行通道時，庫存去化將會…

So did you start to engage with the customer regarding your new A13 generation machine. And then what's the initial feedback, especially with the U.S.-based customer?

那麼，你們是否已經開始與客戶溝通新款 A13 機種的事宜？最初的回饋如何，尤其是來自美國客戶的回饋？

I followed in the new series launch late October, A13 machines still in the pre-stage for mass production, and we haven't started to ship the product in large qualities. Currently, we are still introducing our new products to the market and have started to (inaudible) of the orders, which while having many other orders for intent to discuss this with customers. I think in terms of our older fulfillment plans, we expected to ramp up the production of our 100 (inaudible) model at the end of the year. But the middle of the next year, our production will become concentrated to producing the 100 terahash (inaudible) 120 terhash follows as fabrication technologies improvements and the costs reduce over time, machines with over 130 terahash is expected to become our mainstream products. With enhanced power efficient technology and performance, our new generation of mining chips with similar performance parameters compared with our peers mainstream products. We believe that our new machines still will appear at the option for months.

我注意到，在10月底新系列發布後，A13礦機仍處於量產前階段，我們尚未開始大量出貨。目前，我們仍在向市場推出新產品，並已開始處理訂單，同時還有許多其他意向訂單正在與客戶溝通。就我們先前的訂單履行計畫而言，我們預計在年底提高100（聽不清楚）型號的產量。但到明年年中，我們的生產將集中在100（聽不清楚）和120（聽不清楚）的算力。隨著製造技術的改進和成本的降低，130（聽不清楚）以上的算力有望成為我們的主流產品。憑藉著增強的節能技術和性能，我們新一代的挖礦晶片的性能參數與同行的主流產品相近。我們相信，我們的新礦機在未來幾個月內仍將出現在市場中。

North America is a very important market for us. Previously, we haven't shipped a lot (inaudible) positive products to this region. And we had a relatively small market share there. Thus we still need some time to build up our brand recognition in this region. We have set up local teams to work on sale software cell service (inaudible) operations and other functions to provide more support for local business development. But we are seeing that many miners in the North America area are under significant pressure for financing the operation costs. This situation is likely to result in big changes to the competitive landscape in the region. We will closely monitor market dynamics to reside opportunities for market share gains. At the same time, we have been actively exploring opportunities in other regions such as Southeast Asia and the Middle East

北美對我們來說是一個非常重要的市場。此前，我們並沒有向該地區交付太多（聽不清楚）優質產品。我們在那裡的市場份額相對較小。因此，我們仍需要一些時間來提昇在該地區品牌的知名度。我們已經建立了本地團隊，負責銷售軟體、行動服務（聽不清楚）營運和其他職能，為本地業務發展提供更多支援。但我們發現，北美地區的許多礦工面臨巨大的營運成本融資壓力。這種情況可能會導致該地區的競爭格局發生重大變化。我們將密切關注市場動態，以尋找提升市場份額的機會。同時，我們也積極探索東南亞和中東等其他地區的機會。

One last question, if I may. So I was wondering that in terms of the technology roadmap beyond the A15 series, which is based on 5-nanometer process node. Given the U.S. ban on the EDA tool for 3-nanometer, I think as announced in August, how do we make sure the new technology transition and product iteration going forward?

最後一個問題，請容許我問一下。我想知道的是，A15系列之後的技術路線圖，它是基於5奈米製程節點。鑑於美國8月宣布的3奈米EDA工具的禁令，我認為我們如何確保未來的新技術轉型和產品迭代？

I think this is a tough question. I think in regards to the U.S. ban impact is still unclear. As for now, this has not impacted the R&D at our existing and new narration of mining machines. In terms of fabrication technology, our new generation of mining machines now stands at the same process now as our peers' mainstream products. So far, we are already secured a certain amount of production capacity on the advanced node. I think the ban will also take time to process from a position to execute. We will continue to monitor the (inaudible) impact. As a listed company, we will continue to operate in compliance with related laws and regulations. And over to speed solutions in aligning our product design and the manufacturer's strategy.

我認為這是一個棘手的問題。我認為美國禁令的影響尚不清楚。目前，這尚未影響我們現有和新礦機的研發。在製造技術方面，我們新一代礦機目前與同行的主流產品處於同一製程水準。目前，我們已經在先進節點上確保了一定的產能。我認為禁令從實施到最終生效還需要時間。我們將繼續監控（聽不清楚）影響。作為一家上市公司，我們將繼續遵守相關法律法規運營，並加快制定解決方案，使我們的產品設計與製造商的策略保持一致。

Our next question comes from the line of Michael Legg from the Benchmark Company.

我們的下一個問題來自 Benchmark Company 的 Michael Legg。

Just 2 quick questions. One, could you kind of go over your capital allocation strategy during this period of industry weakness? And then secondly, can you just give us your viewpoint on 2024 expecting having and its impact on the miners and rig demand?

只想問兩個簡單的問題。第一，能否介紹一下在當前產業疲軟時期的資本配置策略？第二，您能否談談您對2024年礦機市場及其對礦工和礦機需求的影響的看法？

I will take the second one, and James will take the first one. I think this point having mechanism values have been reversed for each new block generated. Thus, this will impact miners' mining revenues to some extent. We expect that this will result in considerable short-term decrease in the bitcoin's total infusion power. However, I don't see the impact lasting for long. The (inaudible) have insisted since the inception of bitcoin trading system. It was designed to decrease the supply of bitcoin over time, especially in the contest of the over source of fiat currency. The Harvey method (inaudible) brings support to bitcoin supply decreasing in the long run. For the long-term perspective, bitcoin will force miners to upgrade their devices to with higher processing power and better energy efficiency. Because of this mining manufacturers, we need to constantly upgrade our technology and that our products provide miners with pure money basically with higher computing power with better cost effective. So this is what we have been doing.

我選第二個，James選第一個。我認為，每個新區塊的機制價值都會逆轉。因此，這會在一定程度上影響礦工的挖礦收入。我們預計，這將導致比特幣總算力在短期內大幅下降。然而，我認為這種影響不會持續太久。自從比特幣交易系統誕生以來，（聽不清楚）就一直堅持這一點。它旨在隨著時間的推移減少比特幣的供應，尤其是在法定貨幣供應過剩的背景下。哈維方法（聽不清楚）為比特幣長期供應減少提供了支持。從長遠來看，比特幣將迫使礦工升級他們的設備，以獲得更高的處理能力和更好的能源效率。正因為如此，我們需要不斷升級我們的技術，並確保我們的產品能夠以更高的算力和更好的成本效益為礦工提供純粹的貨幣。這就是我們一直在做的事情。

Yes. I will set the capital strategy one. I think at the end of the third quarter, we have a cash balance of RMB 2 billion. So we do not have any interest bearing debt on our balance sheet. That's not like our peers in the other listed companies. We do not need to pay interest. We do not make any principal repayments. So about the allocation in future, I think with the release and the sales of our new generation of mining machines, I think we will definitely deploy a certain amount of cash to secure wafer capacity according to our plans. And also, this will enable us to fulfill clients' demand in time and maintain our close cooperation with foundries. We make sure we can capture more market share when the market recovers in future. That's the first thing. And second thing is that I think we will continue to invest in the R&D part to develop more advanced products. And also in addition, we will prudently carry out collaborations in mining and it's for business opportunities in different regions we may need to pay some upfront fees, but it is an investment we are willing to make to develop a new business.

是的。我會制定第一項資本策略。我認為到第三季末，我們的現金餘額為20億元。因此，我們的資產負債表上沒有任何計息債務。這與其他上市公司的同業不同。我們不需要支付利息，也不償還任何本金。關於未來的資金配置，我認為隨著我們新一代礦機的發布和銷售，我們肯定會部署一定數量的現金，以確保晶圓產能按計劃進行。此外，這將使我們能夠及時滿足客戶的需求，並與代工廠保持密切合作。我們確保在未來市場復甦時能夠獲得更多市場份額。這是首要的。其次，我認為我們將繼續在研發方面投入，以開發更先進的產品。此外，我們將謹慎地進行礦機領域的合作。為了在不同地區尋找商業機會，我們可能需要支付一些前期費用，但這是我們願意為發展新業務而進行的投資。

Last but not least, I think we will still use some of our cash to continue share repurchase to show the confidence on our business for longer term. I think that's it, thank you, Mike.

最後，但同樣重要的是，我認為我們仍將動用部分現金繼續回購股票，以展現對我們長期業務的信心。我想就這些了，謝謝你，麥克。

As there are no further questions now, I'd like to turn the call back over to the company for any closing remarks.

由於現在沒有其他問題，我想將電話轉回給公司，以便發表最後評論。

Thank you. Hello, everyone. This is Clark. Once again, thank you very much for joining us today for the call. If you have any further questions, please feel free to reach out to us through the contact information provided on our IR website. Thanks again. Thank you.

謝謝。大家好。我是克拉克。再次感謝您今天的電話會議。如果您還有其他問題，請隨時透過我們投資者關係網站上提供的聯絡資訊與我們聯絡。再次感謝！謝謝！

That concludes the call today. Thank you, everyone, for attending. You may now disconnect.

今天的電話會議到此結束。感謝各位的參與。現在可以掛斷電話了。