The release of Filecoin could mean product shortages in the semiconductor industry

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Years after the release of Bitcoin, the semiconductor industry is in for a splash with the upcoming release of Filecoin, a block-chain based digital storage system. With many users impatiently anticipating Filecoin's release, pent up demand for Filecoin mining services and products will likely translate to a spike in demand for relevant components, such as processors, memory and storage.

Today, most data is stored on a centralized cloud storage system hosted by providers, such as Amazon and Google. Because these companies use a central cloud owned system to store everyone's data, it becomes vulnerable to data breaches and outages, such as with the 2017 iCloud hack.

Filecoin, on the other hand, builds on InterPlanetary File System (IPFS) and relies on miners to provide storage on a decentralized network. By utilizing a peer-to-peer storage system instead of cloud storage platform, data is protected from a central point of failure, rising storage costs and monitoring.

In addition to providing increased storage protection, Filecoin was created to be more accessible to the public, meaning even users without mining experience can contribute to the system easily. In return, contributors will be rewarded with Filecoin cryptocurrency (FIL), incentivizing others to store IPFS content as well.

Crypto mining activity, in general, has only continued to increase over the years. Bitcoin, for instance, gained 15 million users in 2019 alone as BTC price remains above US$10,000. Because total FIL is limited to about two billion units, its value will also likely continue to increase - especially as more users join.

Unlike with Bitcoin mining, Filecoin mines with hard drives instead of specialized machines. Thus, owning more storage does not result in more effective mining power. To gain more, miners must commit a higher amount of sealed data to Filecoin's system, resulting in a need for powerful processors and high-density HDDs.

"With the opportunity for anyone to earn FIL, manufacturers that produce DIMMs, CPUs, HDDs, GPUs and motherboards, should expect a spike in demand as users look to gain more mining power. HDD and RDIMM makers, especially, are expected greatly benefit from the upcoming release of Filecoin," states Kingsley Yao, Regional Account Manager, Asia at Fusion Worldwide.

Manufacturers may experience more orders for selected products, including newer versions of CPUs, GPUs, RDIMMs and eventually any components used in new mining machine designs. And, since high density HDD is necessary for an IPFS, increased demand could lead to shortages on and higher prices for HDDs and certain CPUs once mass production starts.

Those wanting to store their data on Filecoin will also greatly benefit from its release as well. Apart from the greater security and privacy gained from Filecoin's encryption and 'sharding' process, the system's storage cost is also transparent and negotiable. The cloud storage industry is bound to also be affected as competitive pricing will be needed to compete with this decentralized peer-to-peer system.

Though Filecoin has only released its "Testnet Incentives" program, numerous Chinese companies have already started selling cloud mining contracts and physical hardware. Multiple mining hardware manufacturers have already reported achieving millions of dollars in sales each tied to Filecoin. Currently, effective mining hardware is predicted to cost more than US$30,000 per set.

In the long run, the benefits of mining and storing data on Filecoin will lead to a spike in demand for storage and key components used to build and sell FIL mining machines. Not only will this heightened demand increase pricing for these products, but the cloud storage market may never be the same. As traditional storage data provider giants compete with companies like Filecoin, other industries may need to prepare for the rise of other cryptocurrency powered programs in their markets as well.

The release of Filecoin could mean product shortages in the semiconductor industry

Filecoin processes
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