AI chip firms seek more support in quest to rise to the top

Korean AI chip companies are seeking more support from the government, from funding to pro-domestic policies, to rise in the exploding industry.

Korean Industry Minister Ahn Duk-geun, right, gets briefed at Gaonchips' office by its CEO Jung Kyu-dong, left, on Friday. [MINISTRY OF TRADE, INDUSTRY AND ENERGY]

AI chip companies in Korea are seeking more government support in a desperate effort to form a winning pact in the astronomically expensive and competitive business.

Korea may be a powerhouse in the memory chip business, but is still a minor player in the world of AI chips.

Support is requested in diverse areas such as human resources, deal procurement and investment.

"It is hard to even penetrate the domestic market if you are not the top player in the AI chip industry," said Jung Kyu-dong, CEO of Gaonchips, on Friday, during a media tour of Korea's AI chip companies organized by the Industry Ministry with Minister Ahn Duk-geun in attendance.

Gaonchips is a Korean chip design house that bridges contract chipmaking companies with clients and runs interference. Founded in 2012, it works with notable firms like Samsung Electronics and Arm. The company recorded 63.6 billion ($47 million) won in sales in 2023, logging a 47 percent year-on-year jump on the back of the AI boom.

Despite growing business, Jung said Korea's chip designers are in quite a dire situation to get a good lead in the global competition.

"Korea has a nice ecosystem, with a lot of fabless (chip designers), foundry (contract manufacturing) and also No. 1 end users like Samsung Electronics and Hyundai Motor," he said.

"But the end users only want to use the No. 1 chip. In China, for example, there are policies that sanction products from being shipped out if they are not mounted with a certain percentage of domestically made chips. Korea lacks in that type of regulation," Jung said, adding that Korean companies need stronger inducement to use domestic chips.

Hana Micron, a chip packaging company based in Asan, South Chungcheong, also expressed hope for more government support to realize its investment initiative.

"Investment is the biggest issue because ultimately, packaging is about how much equipment you have, which is extremely expensive," said Park Jin-ho, the company's vice president, at its headquarters Friday.

"Then it comes down to how we can invest more easily. Like the U.S. and Japan, if that issue is improved, such as with investment support plans, we want to invest more and build more factories."

Hana Micron established a second Vietnamese factory in 2023 and pledged to invest an additional 1 trillion won in the country through 2025 to ramp up production there.

Founded in 2001, the company specializes in flip chip and laminate packaging solutions. Its competitiveness mainly derives from its equipment, about 70 percent of which is imported from abroad, according to Park.

"Chip packaging equipment is on the road to domestic manufacturing, such as in the field of package sawing and laser cutting," he said.

"But in order for it to pick up the pace, continuous research and development needs to be done by the equipment companies, which requires more support."

Hana Micron recently dived into advanced packaging technology for high bandwidth memory (HBM) chips in the face of the AI era. It said it would run qualification tests by the end of this year before starting mass production.

Korea is ramping up efforts to elevate its competitiveness in logic processors, a field the country lags in compared to its smooth-sailing memory chip business lead by behemoths like Samsung Electronics and SK hynix.

Korea accounted for three percent of the global logic processor business in 2023, according to statistics from the Korea Semiconductor Industry Association, while the U.S. claimed 70 percent.

As part of the upscaling effort, Korea's Industry Ministry established the Innovation Center for System IC, a comprehensive platform that supports the various activities of domestic logic processor companies, in 2022.

From providing office space for startups to funneling funds to manufacture test chips that cost tens of billions of won per unit, the platform has helped some 33 up-and-coming AI chip firms, including Rebellions and FuriosaAI.

Yoo Byung-doo, a department manager at the Innvoation Center for System IC, briefs to the press at its office in Pangyo, Gyeonggi, on Friday. [MINISTRY OF TRADE, INDUSTRY AND ENERGY]

Up to this year, the center is expected to have funded domestic AI companies to the tune of 33.1 billion won.

"For AI chip commercialization, you have to make test products three or four times," said Yoo Byung-doo, a department manager at the center.

"One eight-nanometer chip costs 20 billion won to make, which means before commercialization, it takes around 100 billion won."

Meanwhile, the Korean government recently announced a 1.4-trillion won fund to foster the country's AI chip industry.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]