Ladies and gentlemen, thank you for standing by and welcome to Canaan Inc.'s third quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the management's prepared remarks, we will have a question-and-answer session. Please note that this event is being recorded. 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.
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. Xiao Ming Liu , our Senior VP, Mr. Leo Wang, IR Senior Director, and Miss 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. 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 file 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. With that, I will now turn the call over to our chairman and CEO, Mr. Nangeng Zhang. Please go ahead.
Hello everyone. This is Nangeng Zhang, CEO of the company. Our CFO, James Jin Cheng and I are delighted to share our quarter results directly in English from New York. Since the beginning of third quarter this year, the cryptocurrency 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 stakeholders. Market conditions have become more severe since the beginning of the third quarter of 2022. The Bitcoin price continued to decrease, impacted by Federal Reserve's increased rate increases and the market expectations of further hikes.
Meanwhile, Bitcoin's total network hashrate remained at a high level and miners' incomes 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 surging energy prices, miners' credit risks and high financing costs caused by excessive leverage and high operating expenses for new miners. These factors have led to serious issues in miners' operations. Furthermore, what has been happening in the industry has eroded industry participants' confidence. Turbulence in the industry is inevitable in the short term. On top of these headwinds, 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. What I want to emphasize is that participants in the industry are enduring a particularly difficult time. We remain confident of navigating through the Bitcoin cycle. What we are going through now will turn into a valuable experience for us to develop our business as the industry evolves. During these difficult times, we continue our investment in R&D to increase our products' hashrate and energy efficiency. In late October, we released two models of our new generation of mining machines, making a breakthrough in computing power and energy efficiency. Regardless of whether we are in a bull or bear market environment, we will launch new products and develop our business steadily. 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, AvalonMiner A13 series. Specifically, two models are introduced, the A1346 and the A1366. Model A1346 features a hashrate of about 110 terahash per second, and a power efficiency of approximately 30 joules per terahash. Model A1366 is equipped with a hashrate of about 130 terahash per second, and a power efficiency of approximately 25 joules per terahash. Both models' computing power and power efficiency demonstrates a significant improvement over the previous generation of mining machines. After our new products hit the market, we quickly collaborated 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 secured production capacity for the next year. This allows us to continuously provide high-performance products with reliable quality and superior services to our clients. As for our existing mining machine products, we delivered a total of 3.45 million terahash per second of computing power, generating revenues of 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 steadily fulfilling shipments since it entered into operation during the previous quarter.
It provides diversified parts of our production process and the logistics chain, and it demonstrates our commitment and ability to continue our internationalization. Although the overall market is relatively sluggish this year, we have built a strong foundation of the trust and cooperation with our industry-leading business partners. Meanwhile, we also insist on serving our small and mid-sized customers in a variety of flexible ways. Our online store for retail customers further augmented our sales systems 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 out prepared orders, our total computing power to be delivered had decreased to 1.01 million terahash per second. Under current market conditions, the industry is facing stronger headwinds and more uncertainty.
Most customers are taking a wait-and-see approach. Thus, demand for mining machines has dropped to a low point. Coupled with current market challenges, our business is likely to face higher pressures over the next two 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 research and development of new products. During the current downturn, we are strengthening the operations of our mining business for the long term. With our operational flexibility, we are propelling toward our mining business in overseas markets. Mining abroad builds our support and maximize synergies between our mining machine sales and our mining business.
Notably, our mining operations of the United States brought 260,000 terahash per second of computing power online during this quarter. At the same time, the electricity from site for our mining operations in Central Asia has further improved, enabling more stable operations for our deployed mining machines. Currently, our mining business total online computing power is approximately 3.2 exahash 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 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 concentration risk while steadily expanding our global layout and the scale of our mining business under a bearish market. 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 resumed building up their inventories. As a result, our AI chips business sales grow by 52% quarter-over-quarter. However, weak end user demand for the consumer goods remained a headwind 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 proprietary AI development board has been used for learning and practice development by college students from over 100 universities across China.
At the same time, we have joined many influential developer platforms, actively participating in constructing the RISC-V ecosystem. We will continue to closely collaborate with our downstream and technology partners in the industry, uphold our open source philosophy, and prepare for exponential growth in the demand of AI computing. 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 $100 million worth of our outstanding ADSs or Class A ordinary shares over 24 months. We have repurchased 3.4 million ADSs for a total of $11.2 million from August fourth to November fourth this year.
As of November fourth, 2022, we have repurchased over 6.2 million ADSs for a total of $21.5 million with an average price of $3.46 per ADS. Our ongoing institutional buyback program delivers increased value to our shareholders and shows our confidence in the company's current and long-term prospects. Overall, during the third quarter, we face a difficult environment. Under these macroeconomics and industry headwinds, many miners encountered operating difficulties, leading to the declining demand for 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 previously set guidance.
In addition, we successfully completed the chip in progress for the new generation of computing power chips and launched our new series of mining machines. Looking ahead, we see that rising interest rates and other macroeconomic dynamics continue to exercise downward pressure on Bitcoin prices and erode industry confidence. There is also the possibility of further energy price increases during the coming winter. Considering these combined headwinds, weaker demand in the mining industry is active. As a result, we expect our performance to come under further pressure at least during the next two 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 view on the market and the operational conditions, which are subject to change.
It has been almost 10 years since Canaan's inception, and we have navigated through multiple different cycles. Regardless of macro environment, we remain firmly committed to always doing our utmost to develop new products and pursue a superior computing power and power efficiency. We are continuing 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 and the research operations. It's paramount for us to sustain operations across the bull and bear market cycles, upholding our responsibility and the commitment to our shareholders. This concludes my prepared remarks. I will now turn the call over to our CFO, James.
Thank you, Mr. Zhang, and good day, everyone. This is James. I'm with our CEO in New York City. 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 remain constrained. In the third quarter, we delivered a total computing power sold of 3.5 million terahash per second. In response to the softening market, we lowered our selling price too, 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. This helps us better utilize our machine inventories and bring in additional revenues. 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 improve the electricity supply in our mining operations in Kazakhstan. Collectively, we have 3.2 exahash per second of total computing power deployed for our mining business as of the end of the third quarter.
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 Bitcoin compared with 346.8 Bitcoin 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 costs. 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 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 older 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 a 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%. In the third quarter, we continued to enhance our research and development. We launched our new generation mining machine 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. dollar 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. Turning to our balance sheet. As of September 30, 2022, the company had cash and cash equivalents of RMB 2,003 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.
From August 13, 2022 to November 4, 2022, we used approximately $11.2 million to repurchase 3.4 million ADSs under our current stock repurchase program approved in March 2022, with an average repurchase price of $3.29 per ADS. In light of an increasingly volatile macro environment, we may reevaluate our repurchase program in accordance to our cash balance. 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 hash rate expansion and mining machines purchase. To conclude, the third quarter was a difficult one.
We strived to maintain a 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 decisions 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 time. 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, $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. Gross profit in the third quarter of 2022 was RMB 234.2 million, $32.9 million, representing a decrease of 74.8% from RMB 929.7 million in the second quarter of 2022. A decrease of 68.4% from RMB 741.7 million in the same period of 2021.
Total operating expenses in the third quarter of 2022 were RMB 275.0 million, $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. Net income attributable to ordinary shareholders in the third quarter of 2022 was RMB 61.1 million, $8.6 million, representing a decrease of ninety point zero percent 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.
Non-GAAP adjusted net income in the third quarter of 2022 was RMB 166.3 million, $23.4 million, representing a decrease of 75.8% from RMB 688.2 million in the second quarter of 2022, and a decrease of 71.77% 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 $0.05. Contract liabilities as of September 30, 2022, were RMB 300 million, $42 million, decreasing from RMB 1,340.7 million as of December 31, 2021. This concludes our prepared remarks. We are now open for questions.
Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to two questions at a time. If you have any follow-up questions after the Q&A session, the investor relations team will be available after the call. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Please stand by. Your first question comes from the line of Shuang Sun from Guosheng Securities. Please go ahead. Your line is open.
[Foreign language]
Yes.
[Foreign language] you have established your headquarters in Singapore. Have you ever thought about being a completely foreign company?
Okay, first and foremost, we are a U.S.-listed company. The globalization of our business and operations has progressed along with the global diversification of our client base. The goal of our company's globalization is to better serve our clients. We established our headquarters in Singapore as we like its business environment, local R&D and the talented talents, as well as the status of Southeast Asia's business hub. It also has an open attitude for digital currencies. We have set up local R&D and operations teams and established Southeast Asia 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 Southeast Asia. By leveraging the geographical advantages of each market we are present in, we will better serve our customers globally and create values for shareholders. Thank you.
Oh, okay. Thank you. [Foreign language]
Please, considering the recent decline of Bitcoin price, will you have inventory write-down? When will it occur?
I will take this one. Thank you, Shuang , for this, you know, difficult question. I think that you might have already noticed, in this quarter, we recorded RMB 221.1 million for inventory write-down. As we determine that the estimated realizable value of our inventory will be lower than the holding cost. That was due to the lower sales price for subsequent orders. Of course, it links to the bigger picture like, Bitcoin price drop and the softening, market demand from the miners. The inventory write-down was recorded in the cost of revenues and, had a material negative impact on our gross margin of 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-down 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 costs, the cost of sales for those machines will be net of such write-down, which in turn will have the effect of increasing our gross profits for the period. Thank you.
Okay. How is your spot sales and futures contract sales ratio?
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. We have already secured a production capacity for our new generation machine for next year to maintain a stable supply. Thank you.
Okay. What's the progress of cooperation with foundries?
We have been continuing our multi-foundry strategy and utilizing our comprehensive R&D abilities so as to prepare to capture surplus capacity advantages for tech nodes. Therefore, we continue to actively maintain productive collaborations with our foundry partners, supporting their operations through like prepayments and orders. In return, our foundry partners are really invested 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, helping foundries to stabilize their production. Our collaboration with foundries is definitely a win-win partnership.
I think the current challenges across the industry, which I personally believe will be a short-term issue, we will continue to invest in advanced process and wafer procurement, as we strive to capture more market opportunities and higher market shares. Thank you.
Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Kevin Dede from H.C. Wainwright. Please go ahead. Your line is open.
Good morning to all of you in New York. Thank you very much for taking my question. 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 self-mining?
Okay. You know, we typically secure our foundry partners' production capacity through prepayments. We have recently paid for production of a batch of the new generation of mining machine chips that includes the wafer fabrication process will take about 5-6 months. Typically, we will prepare some inventories for new models machines in advance. Yeah. I think it's really hard to tell the actual numbers. But we are also actively enhancing our production and selling to better support our foundry partners, which actively managing wafer cost through flexible negotiation. Yeah. During the third quarter, we start our mining operation in U.S.
We cooperate with a local mining farm to bring the first batch of over 2,000 machines online, operating in compliance with laws and regulations. I think due to non-disclosure agreements, we are definitely not able to disclose the partner's name. As of the end of the third quarter 2022, we have 3.2 exahash total computing power online for mining. Through this deployed mining computing power, mining has already ranked within the top 10 among listed companies in U.S. Compared to our computing power sold, our mining hash rate 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 great uncertainties in the industry environment, we adhere to the prudent strategy for exploring partnership opportunities in regions with variable power supply and the market policy conditions that has Asia, North America, and Southeast Asia. Yes, thank you.
Do you have a target for Canaan's internal mining hash rate for the end of the year?
Yeah. I think there's still some opportunities for us to expand our self mining business. You know, the demand of the market is relatively low. I think we will move more machines from selling to self mining. Yeah. I think there's no exact number for a target at end of this year. Thank you.
Thank you very much, too. 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?
Yes. We have been providing immersion modules to customers for evaluation. They are ready to be mass produced if we have orders from our customers. Our immersion design demonstrates more stable performance under difficult conditions and can improve power computing power by maybe 30%-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 when choosing between immersion and air-cooled products. Yeah. Thank you.
Have a great day. Thank you.
Have a good day. Bye-bye.
Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Venice Xu from China Renaissance Securities. Please go ahead. Your line is open.
Oh, thank you. My first question is, how do you see the Bitcoin trend, especially in the down cycle?
Okay. I think in the near term, we see the Bitcoin price remains under pressure as Federal Reserve is still rising interest rates. The recent downward trend in the Bitcoin price is severely event-driven. Entering and going through the low point is the necessary part of navigating through every cycle. However, I don't think that anyone can accurately predict the short-term Bitcoin price change. In regards to the price of Bitcoin, I have always believed that there's no need to forecast the Bitcoin price in the long term. As Bitcoin becomes the most important cryptocurrency, it has an increasingly large user base. Meanwhile, based on Bitcoin's halving mechanism, it's foreseeable that the supply of Bitcoin will be lower than market demand.
As a result, I remain confident in Bitcoin's long-term prospects. From the midterm perspective, much of the work that we are doing now is in preparation of potential business opportunities in the coming maybe one or two years. Seizing each opportunities that arise at this point for our industry. Yeah. Thank you.
Okay. Thank you. My next question is, we know that recently the FTX acquisition issue has greatly impacted the industry, and just wondering what's our view on this event and maybe how we react to this situation.
I think this is a very sensitive question. I will say something maybe from the industry side. I believe cryptocurrencies such as Bitcoin actually provide people with decentralized and trustless ways to hold high liquidity assets 100% in their own hands. For the operational way of these systems, transactions trades should be completed on blockchains. However, due to technical barriers for ordinary people to hold and trade cryptocurrencies, many of them tend to use centralized cryptocurrency exchanges when they're investing and trading. This phenomenon makes many transactions switch from blockchain-based trading to off-chain trading during the last two or three years.
As such, users' assets and the trading transaction fee, which has been a way to enhance the security of blockchains, have been redirected to cryptocurrency exchanges, centralized cryptocurrency exchanges. Moreover, due to lack of a really effective regulations in this area, this kind of exchanges, exchange-based transaction poses a strict requirements on exchanges' management capabilities and attitude. More frankly, a test of human nature. I think during previous rounds of bear markets, incidents of crypto exchanges similar to the issue also occurred. Therefore, we are not surprised. We sincerely hope that through this round of turbulence, the market can return to the blockchains and sense of decentralization.
For cryptocurrencies represented by Bitcoin demonstrates advanced features that are far beyond a modern way of self-regulation. I believe that the industry will better develop with the increasing.
Thanks for the comment. 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?
I will take this one, Venice. I think you just noticed from our earnings release the gross margin decline in the third quarter. I think this decline was partially because we are adjusting 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. Our new generation of machines launched in October has just become available for pre-order. Some machines may be delivered in the fourth quarter. As of today, we're not able to give specific guidance. The selling price for contract sales of our new model demonstrates a certain level of gross margin.
In a combination, we expect in the fourth quarter gross margin decrease compared to the third quarter. You know, the ASP could be a little bit lower, compared to third quarter. I think currently that's our prediction. Thank you.
Okay, thank you.
Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Hans Chung from D.A. Davidson. Please go ahead.
Hi. Good morning, management team. Thank you for taking my question. First, I was wondering how much is the inventory level in the industry right now, and how long this could take for the market to digest the inventory?
Okay. I think it's a good question. Currently the amount of inventory in the U.S. market is relatively high. The current market conditions. I think it might take at least six months just to digest the inventory. It mainly depends on how the electricity cost will decrease and the speed of mining facility construction. If these supply chain related issues were to be solved soon, then the overstock of mining machine inventories could be digested soon. We have observed that the Bitcoin network's total computing power has shown an upward trend recently, but the Bitcoin price is around $20K for more than one quarter. The trend further decreased recently.
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. I think when Bitcoin price returns to its upward trend in future, inventory de-stocking will be accelerated. Yes. Thank you.
Okay. Next question. 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?
I think following the new series launch in the late October, A13 machine is still in the pre-stage for mass production, and we haven't started to ship the products in large quantities. Currently we are still introducing our new products to the market and have started to obtain small batches of pre-orders, which while having many other letters of intent to discuss this with customers. I think in terms of our order fulfillment plans, we expected to wrap up the production of our 100 terahash model at the end of this year. In the middle of next year, our production actually will become concentrated to producing the 100 terahash too, 120 terahash models.
As fabrication technology improvements and the costs reduce over time, machines with over 130 terahash are expected to become our mainstream products. With enhanced fabrication technology and performance, our new generation of mining machine features similar performance parameters compared with our peers' mainstream products. We believe that our new machines therefore will be an excellent option for the miners. North America is very important market for us. Previously we haven't shipped a large quantity of 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 sales after self-service, warehouse operations and other functions to provide more support for local business development. You know, we are seeing that many miners in the North America area are under significant pressure for financing and the operating costs. This situation is likely to result in big changes to the competitive landscape in the region. We will closely monitor market dynamics to seize 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. Yeah. Thank you.
Yeah. Oh, okay. Great. One last question, if I may. So I was wondering, like, in terms of the technology roadmap beyond the A15 series, which is based on 5-nanometer process node. Given the U.S. bans on the EDA tool for 3-nanometer, I think as announced in August. How do we make sure new technology transition and product iteration going forward?
I think this is a tough question. I think in regards to the U.S. ban, its impact is still unclear. As for now, it has not impacted the R&D of our existing and new generation of mining machines. In terms of fabrication technology, our new generation of mining machines now stands at the same process node 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 imposition to execution. We will continue to monitor and evaluate its impact.
As a listed company, we will continue to operate in compliance with related laws and regulations, and endeavor to seek solutions in alignment with our product design and the manufacturer's strategy. Thank you.
Thank you.
Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Michael Legg from The Benchmark Company. Please go ahead. Your line is open.
Thank you. Just two quick questions. One, could you kinda go over your capital allocation strategy during this period of industry weakness? Secondly, can you just give us your viewpoint on 2024's expected halving and its impact on the miners and rig demand? Thanks.
I will take the second one, and James will take the first one. I think the Bitcoin halving event will halve the reward for each new block generated. Thus, this will impact the miners' mining revenues to some extent. We expect that this will result in a considerable short-term decrease in Bitcoin's total computing power. However, I don't see the impact lasting for long. The halving method has existed since the inception of the Bitcoin trading system. It was designed to create a supply of Bitcoin over time, especially in the context of the overissuers of fiat currency. The halving method brings upward pressure to Bitcoin's price in the long run.
For the long-term perspective, Bitcoin halving will force miners to upgrade their devices to with higher computing power and better energy efficiency. Because of this, as mining machine manufacturers, we need to constantly upgrade our technology and let our products provide miners with pure mining ability with higher computing power with better cost effective. This is what we have been doing.
Yeah. I will take the capital strategy one. I think at the end of the third quarter we have a cash balance RMB 2 billion. So we do not have any interest bearing debt on our balance sheet. That's not like our, you know, 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 a wafer capacity according to our plans. 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. Second thing is, I think we will continue to invest in the R&D path to develop a more advanced products. Also in addition, we will prudently carry out collaborations in mining and you know, explore 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. 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.
Thank you. Appreciate it.
Thank you. As there are no further questions now, I'd like to turn the call back over to the company for any closing remarks.
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. That concludes the call today. Thank you everyone for attending. You may now disconnect.