With the rapid growth of new industries such as artificial intelligence (AI) and autonomous driving after the spread of Corona 19, semiconductor demand exceeds supply regardless of fields such as DRAM and automotive semiconductors, and is predicting a’supercycle’, but a domestic fabless (semiconductor design company) Appeared to be in danger of death. In particular, small and medium-sized fablesses are struggling with a deficit and are driven to collapse.
As a result of analyzing the performance of 20 major fabless listed companies in Korea on the 15th, Maeil Economic Daily found that only six places, including Silicon Works, AD Technology, Jeju Semiconductor, Above Semiconductor, Anapass, and Telechips, exceeded annual sales of 100 billion won last year. Among them, Anapass was 101.0 billion won, and Telechips was 100.7 billion won, with annual sales of 100 billion won.
Thanks to the booming information technology (IT) industry last year, Silicon Works, the number one fabless in Korea, surpassed KRW 1 trillion in annual sales for the first time in history, and the estimated total sales of 20 fabless companies in the fourth quarter of last year Excluding earnings, it recorded 2,5483 trillion won, an increase of 15.9% year-on-year. However, this is only 70% of AMD’s sales in the fourth quarter of last year (US$3.24 billion, about 3.64 trillion won). The estimated total operating profit of the 20 locations was also in the early 70 billion won, with an operating margin of only 2.8%. Excluding Silicon Works (942 billion won), it is in the red. In fact, 9 out of 20 were in a cumulative deficit until the third quarter of last year.
A fabless is a design company that does not have a factory (fab) that makes semiconductors. These are the’heads’ of the system semiconductor industry. After designing semiconductors such as the central processing unit (CPU) and graphic processing unit (GPU) of the PC, the production is entrusted to a foundry (semiconductor consignment production) company, and then delivered to customers such as IT and finished car companies.
According to the Export-Import Bank of Korea, the global system semiconductor market is expected to grow at an annual average of 7.6% from $2269 billion in 2019 to $338.9 billion (about 374 trillion won) in 2025. Considering that fablesses typically account for more than 60% of the system semiconductor market, fabless alone will open a market worth over 220 trillion won in 2025. This is equivalent to the total sales of Samsung Electronics last year.
‘Fabless poor country’ Korea is marginalized in this huge market. In 2019, Korean companies’ fabless market share was only 3.2%, including Samsung Electronics’ System LSI Division (2.4%). However, it is less than 1% except for Samsung Electronics. It is also a shabby figure compared to Taiwan and China, as well as the United States, which dominates 65% of the total market with Qualcomm, AMD, and Nvidia.
Taiwan and China’s global fabless market share was 17% and 15%, respectively, as of 2019.
Domestic fabless companies have been doing business by supplying their own designed chips to large domestic companies such as Samsung Electronics and LG Electronics. However, it is struggling with’one-chip conversion,’ in which each chip function is concentrated in the smartphone AP, price competition from Chinese companies that have supported the government, and internalization movements to develop chips directly from customers.
The CEO of Company A said, “If you do not supply it to a large company, it is not easy to make sales, and as you go abroad, it is difficult to compete in price with a Chinese company that is strongly supported by the government.” The global foundry turmoil is also putting small and medium-sized fablesses at bay. This is because it is becoming difficult to find a foundry to accept the product even if it wants to produce it.
The CEO of Company B, which designs integrated circuits (ICs) for smartphones, said, “As orders are crowding, foundry companies are only producing products to customers who guarantee more profits for a long period of time. It is difficult to produce stable without a global fabless. As Chinese fabless companies have recently raised the price of their orders, Korean companies are being pushed further from the priority level,” he said.
[노현 기자 / 이종혁 기자]
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