As the utilization rate of Samsung Electronics' foundry (semiconductor contract manufacturing) division enters a recovery phase, earnings improvement at design house partners such as GAONCHIPS, ADTechnology, and Semifive is expected to gather steam. Earnings had been weak due to sluggish orders at Samsung's foundry, but products from fabless clients jointly won by Samsung Electronics' foundry division and the design houses are wrapping up development and are expected to enter mass production next year.
Design houses serve as a bridge connecting fabless firms and foundries. They provide design services that optimize semiconductor chips designed by fabless firms into forms suited to the foundry's production process.
According to the industry on the 23rd, Samsung foundry design house partners such as GAONCHIPS, ADTechnology, and Semifive are expected to swing to profit next year. According to the securities industry, GAONCHIPS' sales and operating profit forecasts for next year are 105.4 billion won and 2.1 billion won, respectively. ADTechnology's are 289.3 billion won and 4.2 billion won, respectively. Semifive, which is preparing for an initial public offering (IPO) within the year, also said it expects to turn profitable next year. Semifive posted 111.8 billion won in sales and a 22.9 billion won operating loss last year.
Design house revenue is largely divided into development revenue and mass-production revenue. After winning orders to develop a product a fabless firm wants to build, they support the design and receive part of the development expense as a fee. Once the fabless client's product development is completed and mass production gets underway, the fabless firm pays a portion of sales to the design house as a fee.
Korea's design house corporations have suffered sluggish results due to difficulties in securing orders at Samsung's foundry. GAONCHIPS recorded 3.5 billion won in operating profit last year, while this year an operating loss of 15 billion won is expected. ADTechnology posted a 17 billion won operating loss last year and is also expected to remain in the red this year. Although there are fabless clients jointly won with Samsung's foundry, they are still in the product development stage and have not yet moved into mass production.
GAONCHIPS plans to begin full-scale mass production through Samsung's foundry 5-nanometer (nm; 1 nm is one-billionth of a meter) process of products for Telechips, an automotive semiconductor design company that accounts for more than 50% of next year's mass-production revenue, as well as for another key client, AI semiconductor startup DeepX. ADTechnology's client Zaram Technology will also begin mass production next year of communications semiconductors using Samsung foundry's 14 nm process. Another ADTechnology client, AI semiconductor startup Soteria, will start mass production next year of its AI chip using Samsung foundry's 4 nm process. Semifive also plans for chips from clients including domestic AI semiconductor startups such as Mobilint, as well as AI and high-performance computing (HPC) clients, to enter mass production from next year using processes at or below 8 nm.
A semiconductor industry official said, "Products from fabless clients for which Samsung's foundry division and design houses began development two to three years ago on processes such as 4, 5, 8, and 14 nm will go into full-scale mass production next year," and added, "As preparations have been underway since this year and utilization rates are rising, design house profitability is also expected to improve."