The value of Gauss Labs, which SK hynix established with a full capital contribution, saying it would achieve manufacturing innovation through artificial intelligence (AI) technology, was shown to have declined sharply. Gauss Labs launched in Aug. 2020, a year after Chey Tae-won, SK Group chair, said, "If we fail to leverage innovative technology, we cannot provide collateral for SK's future," and called for adopting AI. It began operations under the banner of "the first AI specialist corporations in SK Group," but is seen as having produced no notable business results more than five years after its founding.
Gauss Labs' only de facto client is its parent, SK hynix. Its footing is said to be wavering as SK Group teamed up with Nvidia and began building a "manufacturing AI cloud" in Oct. last year. SK hynix recently said it would use Nvidia's digital twin platform Omniverse to implement an "autonomous factory" by 2030. The goal is to build, together with Nvidia, a manufacturing site where AI understands the field and executes optimal decisions on its own.
According to the Financial Supervisory Service's electronic disclosure system on the 27th, SK hynix lowered Gauss Labs' book value to 25,298,000,000 won at the end of last year. Until the third quarter of last year, Gauss Labs' book value was assessed at 63,544,000,000 won, meaning it plunged 60.2% in just one quarter. Accordingly, SK hynix recognized 38,246,000,000 won as an impairment loss, the difference between the recoverable amount and the book value.
When Gauss Labs launched, SK hynix decided to contribute the entire $55 million in capital (about 63,000,000,000 won at the time) by 2022. In line with that, Gauss Labs' book value rose sequentially from 30,056,000,000 won in 2020 to 63,544,000,000 won in 2022 and remained there through the third quarter of last year.
It is also notable that the book value SK hynix adjusted this time is about 2,800,000,000 won lower than Gauss Labs' total assets (28,141,000,000 won). An industry official said, "SK hynix effectively assessed that Gauss Labs has limited potential for business expansion."
◇ SK hynix process improvement with virtual metrology solutions
Gauss Labs was founded in Silicon Valley in the United States and opened a Korea office a month later, which it still operates. It started its business by developing AI solutions to improve production efficiency using data generated at SK hynix's manufacturing sites. SK hynix expected Gauss Labs' technology to help intelligently manage the entire semiconductor production process, including process management, Production yield forecasting, equipment maintenance, material metrology, defect inspection, and defect prevention.
It is not that Gauss Labs has failed to deliver results. In Nov. 2022, it released 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 requirements at each production step in semiconductor manufacturing. Gauss Labs' Panoptes is a platform that can predict process outcomes without physical metrology.
SK hynix adopted Panoptes for thin-film deposition just a month after its release. By Dec. 2024, it virtually measured about 50 million wafers and improved variation by about 29%. Variation is an indicator of the magnitude of quality fluctuation among produced products. The smaller the variation, the lower the likelihood 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 value did not change for about three years after the capital contribution was completed. One interpretation is that the book value could be maintained because Gauss Labs actually helped improve manufacturing efficiency in SK hynix's semiconductor processes.
◇ Cumulative net loss of 19,000,000,000 won… business results fall short of expectations
Still, inside and outside SK hynix, some say Gauss Labs' results so far have remained at the research and development (R&D) level. The limitation, they note, is that without business results, it is hard to say it performed as a corporation, and it effectively stayed at the level of an "in-house research organization of SK hynix." Gauss Labs has never posted a net profit since its launch. From 2021 through the end of last year, its cumulative net loss totaled 18,958,000,000 won.
It also failed to secure clients. Early on, it planned to expand not only into SK Group's manufacturing affiliates such as energy and biotech, but also into the global market. Currently, however, it has no clear clients other than SK hynix.
Another factor cited behind the change in book value is that SK hynix is pursuing the "AI manufacturing innovation" it sought through Gauss Labs with Nvidia. Panoptes, developed by Gauss Labs, is similar to Nvidia's Omniverse. Both platforms center on digital twins. They precisely recreate physical spaces in virtual environments to run simulations. The key is to find ways to improve product performance and process efficiency, and Omniverse offers broader functionality.
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 shy away from adopting Nvidia's Omniverse." The official added, "Omniverse, which performs computations on Nvidia's AI chips, is regarded as top-tier in the industry."
Since its founding, Gauss Labs has been led by CEO Kim Young-han. Kim is an honorary 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 (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 a senior adviser, and Kim Yoon, chief strategy officer (CSO) at Twelve Labs, serves 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, "Rather than generating revenue immediately, it has the characteristic of incurring high initial investment expense, which is why we made an accounting recognition on the books."