AD Technology’s performance in the U.S. market is ‘right before our eyes’ Gaon Chips, which has a firm grip on the Japanese market, plans to establish a sales base in China as well.
Domestic semiconductor design house companies are accelerating their overseas expansion. This is a plan to diversify sales sources by targeting overseas fabless (companies specializing in semiconductor design) beyond the domestic market.
Depending on the design house’s capabilities, semiconductor quality and sales are also affected.
According to the industry on the 17th, recently, Samsung Electronics’ foundry division’s design solution partners (DSPs), AD Technology and Gaon Chips , are speeding up their overseas expansion. Design House is a company that supports technology by adapting design drawings created by fabless to foundries. It is easy to understand if you think of clothing production. Once the costume designer (fabless) completes the drawing (system semiconductor design), the design house optimizes the purchase and finishing of fabric to produce clothes, and the sewing shop (foundry) makes clothes accordingly.
Recently, various types of drawings have been introduced, and as the design difficulty of AI semiconductors has increased, the tasks to be processed have become more detailed in large sewing shops (TSMC, Samsung Electronics). There is a trend among foundries to focus only on production by entrusting the sales of small and medium-sized fabless customers, which they cannot cover, to design houses. The analysis is that design house capabilities have an impact on semiconductor quality and sales.
The domestic fabless market is small. For a design house to grow in size, overseas expansion is essential. AD Technology expects this year to be its first successful entry into the United States. A company official explained that the US corporation established in Silicon Valley in July of last year will announce news of orders soon. In addition to the United States, this company established corporations in Ho Chi Minh City, Vietnam in 2018 and Munich, Germany in 2022. An official from the company said, “If we target overseas markets, including the fabless paradise of the United States, Design House and Samsung Electronics can achieve a win-win.”
Gaon Chips, another DSP, is making efforts in Japan. Gaon Chips, which established a corporation in Japan in 2022, signed a business agreement with Domain Devices in February. Domain Devices is Japan’s largest semiconductor trading company with annual sales of 3 to 4 trillion won. It distributes semiconductors and electronic components produced by Samsung Electronics.
The two companies plan to expand their market share in Japan. Japan has a solid fabless industry, including Sony, Panasonic, and Renesas, but the design house concept is limited. In addition , DSPs such as Semifive and Coasia are seeking to expand their influence in the United States and India.
ASIC LAND, TSMC’s only design house in Korea, has also begun entering overseas markets in earnest. The first country to enter was the United States, which accounts for 70% of the global fabless market. As a preparatory work, we established ‘Ohana’, a joint venture with a Silicon Valley startup. ASIC LAND held its first corporate information session (IR) for overseas institutional investors in Hong Kong and Singapore last month.
“The influence of design houses in the semiconductor market will increase.”
These companies are pursuing the establishment of local sales bases to secure Chinese foundry demand. In China, demand for the development of next-generation products such as AI semiconductors has increased explosively, but there are a limited number of foundries that can handle production after development. There are about 3,400 fabless companies in China, which is much more than in Korea (about 200 companies). However, the number of consignment manufacturing companies is limited. There are China’s SMIC and Huahong Semiconductor, but their ultra-fine processes are far behind TSMC and Samsung Electronics.
There are many attempts to design semiconductors, but there is no outlet to produce them, so if a domestic design house enters China, there is a high possibility that local development demand will lead to domestic production. An industry official said, “The reason domestic design houses are preparing to enter China is because there are many potential customers,” and added, “It will have a positive impact on the expansion of demand for Samsung foundry.”
The Ministry of Trade, Industry and Energy also realizes the importance of design houses and is promoting a project to establish a new R&BD (Research and Business Development) center for domestic system semiconductor companies to advance into the United States. The goal of this project is to enable domestic design houses to discover demand for system semiconductor R&D in the United States and China and to enter the market smoothly.
To this end, the center provides support to tenant companies, including strengthening networks for local marketing, identifying technology trends, and providing legal advice. The center is already operating in Shenzhen and Shanghai, China, and is scheduled to be established for the first time in the United States. Jun-gyu Park, CEO of AD Technology, said, “For a design house to grow, we need to go to a place with a large system semiconductor market.”
According to data from the Korea Institute for Industrial Economics and Trade, the size of the global system semiconductor market as of 2022 is 593 trillion won. Korea has a market share of only 3.3% at 20 trillion won. The United States took a 54.5% share with 323 trillion won. Europe (KRW 70 trillion, 11.8%), Taiwan (KRW 61 trillion, 10.3%), Japan (KRW 55 trillion, 9.2%), and China (KRW 39 trillion, 6.5%). Kim Yong-seok, professor of semiconductor convergence engineering at Sungkyunkwan University, said, “As demand for big techs to develop their own chips increases and AI semiconductors spread, the status of design houses that will coordinate design philosophy in the middle is expected to rise further.”
An industry insider said, “The rise of AI semiconductors is also prompting design houses to advance overseas. As AI semiconductor design is so complex, the role of design houses in narrowing the gap in design communication between fabless and foundries will grow.” I looked ahead.
Reporter Kang Kyung-ju qurasoha@hankyung.com