The value of Gauss Labs, which SK hynix established with a full capital contribution pledging to achieve manufacturing innovation through artificial intelligence (AI) technology, was shown to have declined significantly. Gauss Labs launched in Aug. 2020, one year after SK Group Chairman Chey Tae-won said, "If we fail to leverage innovative technology, we cannot put up collateral for SK's future," calling for the adoption of AI. It began operations as the "first AI specialist corporations of SK Group," but is assessed to have failed to produce any notable business results more than five years after its founding.
Gauss Labs' de facto only client is its parent company, SK hynix. Its position is said to be shaking as SK Group teamed up with Nvidia and began building a "manufacturing AI cloud" in Oct. last year. SK hynix recently said it would implement an "autonomous factory" by 2030 using Nvidia's digital twin platform Omniverse, among others. The plan is to work with Nvidia to build a manufacturing environment in which AI understands the shop floor and independently executes optimal decisions.
According to the Financial Supervisory Service's electronic disclosure system on the 27th, SK hynix adjusted Gauss Labs' book amount downward to 25.298 billion won at the end of last year. Until the third quarter of last year, Gauss Labs' book amount was assessed at 63.544 billion won, meaning it plunged 60.2% in a single quarter. Accordingly, SK hynix recognized 38.246 billion won—the difference between the recoverable amount and the book value—as an impairment loss. The book amount SK hynix adjusted this time is also about 2.8 billion won lower than Gauss Labs' total assets (28.141 billion won).
When Gauss Labs launched, SK hynix decided to contribute the entire capital of $55 million (about 63 billion won at the time) by 2022. Accordingly, Gauss Labs' book amount sequentially increased from 30.056 billion won in 2020 to 63.544 billion won in 2022 and was maintained through the third quarter of last year.
◇ Process improvement at SK hynix with virtual metrology solutions
Gauss Labs was founded in Silicon Valley in the United States and opened a Korea office one month later, which it still operates. It began its business by developing AI solutions to boost production efficiency using data generated on SK hynix's manufacturing floors. SK hynix expected Gauss Labs' technology to enable intelligence across the semiconductor production process, including process control, Production yield forecasting, equipment maintenance, material metrology, defect inspection, and defect prevention.
It is not that Gauss Labs failed to deliver results. In Nov. 2022, it launched Panoptes, a virtual metrology (VM) AI solution that uses sensor data to predict manufacturing process outcomes. Metrology refers to measuring whether the physical and electrical properties of semiconductor devices meet specifications at each step of the semiconductor manufacturing process. Gauss Labs' Panoptes is a platform that can predict process outcomes without physical measurements.
Panoptes was introduced into SK hynix's thin-film deposition process one month after launch. By Dec. 2024, it virtually measured about 50 million wafers and improved variance by about 29%. Variance is an indicator showing the magnitude of quality variation among produced products. The smaller the variance, the lower the probability of defects. Gauss Labs also released Panoptes 2.0 with improved performance in Aug. 2024. SK hynix applied this product to the etching process in a bid to improve Production yield.
SK hynix's equity stake has inched down as Gauss Labs' employees exercised stock options. Even so, the book amount did not change for about three years after the capital contribution was completed. It can be interpreted that the book amount could be maintained thanks to Gauss Labs actually helping improve manufacturing efficiency in SK hynix's semiconductor processes.
◇ Cumulative net loss of 19 billion won… business results fell short of expectations
Still, inside and outside SK hynix, some view Gauss Labs' achievements to date as remaining at the research and development (R&D) level. The limitation, they say, is that absent business results, it is better described as being at the level of an "in-house research organization of SK hynix" rather than posting results as a separate entity. Gauss Labs has never posted net profit since its launch. From 2021 to the end of last year, its cumulative net loss amounted to 18.958 billion won.
It also failed to deliver in customer acquisition. Early on, it planned to expand not only into manufacturing affiliates such as energy and bio within SK Group but also into the global market, but currently it has no clear clients other than SK hynix.
Another cited background for the latest change in the book amount is that SK hynix is pursuing the "AI manufacturing innovation" it sought through Gauss Labs with Nvidia. This is because Panoptes, developed by Gauss Labs, shares the same direction as Nvidia's Omniverse in terms of digital twins. Both platforms are used to precisely reproduce real spaces in virtual environments to run simulations and find ways to improve product performance or process efficiency. Because Omniverse has broader capabilities, Gauss Labs' role has become ambiguous.
However, some say that if Omniverse is introduced to SK hynix's manufacturing sites, Gauss Labs' Panoptes could see greater utilization, creating synergy. That is because when Panoptes runs on Omniverse, which excels in building extensive factory infrastructure, a finer degree of process optimization becomes possible.
An industry official said, "SK hynix is generating massive revenue by supplying high-bandwidth memory (HBM) to Nvidia," adding, "There would have been no reason to shun the adoption of Nvidia's Omniverse." The official added, "Omniverse, which performs computations with Nvidia's AI chips, is regarded as having top-tier performance in the industry."
Gauss Labs has been led by CEO Kim Young-han since its founding. Kim is an emeritus professor in the Department of Computer Science and Engineering at the University of California, San Diego (UCSD) and is known as a "data science" expert. Gauss Labs' head of technology (executive vice president) Choi Byung-won previously served as a managing director at Intel Korea and has developed AI products. Richard Gottscho, former chief technology officer (CTO) at Lam Research, serves as senior advisor, and Kim Yoon, chief strategy officer (CSO) at Twelve Labs, is listed as chair of the board.
An SK hynix official said of Gauss Labs, "It is a company that has just begun to step up as an industrial AI specialist corporations within the group," adding, "Given the nature of incurring high initial investment expense rather than immediate revenue, the accounting recognition was made on the books."