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[Interview] Strategic Moves of Chips&Media to Lead the Image-Specific NPU IP Market and Strengthen its Competitiveness in the AI Era

Seoul, South Korea- July 29, 2024

Mergers and Acquisitions (M&A) for Market Expansion

Joint Venture in China, Developing IP Specifically for Data Centers 

Entry into New Markets with Recent IP Supply to India

[Seoul, NEWSPIM] Chips&Media is committed to consolidating its leadership in the video IP market while positioning its NPU IP as a vital new growth driver.

The leading global provider of video IP developed the video-specific NPU IP, CMNP, in September last year, anticipating a rise in demand for high-performance NPUs as the on-device AI era accelerates in Korea. And it is drawing the market's attention for its advanced capabilities.

Chips&Media’s NPU offers computational speeds 10 times faster than NVIDIA’s GPU while consuming just one-fifth of the power. Chips&Media is currently the only company that has independently developed a video-focused NPU.

“This NPU is designed specifically for video processing, unlike general NPUs,” explained Lee Ho, Vice President and CFO of Chips&Media, in an interview at the company’s Gangnam headquarters in Seoul on July 23. “The architecture is streamlined to include only the necessary synapses for image processing, resulting in a smaller size. When comparing the same image quality, it is about one-fifth the size, while it delivers up to five times the image quality at equivalent size.”

<Lee Ho, Vice President of Chips&Media, having an interview with Newspim at the Chips&Media headquarters in Gangnam-gu, Seoul>

The NPU IP, developed by Chips&Media, leverages AI deep learning algorithms to enhance image processing with advanced capabilities, including super-resolution (SR) for upscaling low-quality images and noise reduction (NR) for clearer visuals by removing noise in the image. Object detection (OD) will also be available in the near future for accurate object identification.

This image-specific NPU IP is expected to find applications across data centers, consumer electronics, and cameras that demand high-definition image quality as well as advanced driver support systems (ADAS) and autonomous vehicles where real-time image processing is crucial. Based on its own technology and competitiveness, Chips&Media has established a leading position in the NPU market since this year.

“We have already received interest from potential partners, and our goal is to secure our first NPU IP licensing revenue within this year,” noted Lee, the VP. “Given the strong performance of our NPU IP in video processing, we anticipate that related sales will contribute around 20% of our total revenue in the coming years. Our focus remains on further enhancing product competitiveness and driving continual performance improvements.”  

As Chips&Media expands its business portfolio, it is actively exploring mergers and acquisitions (M&A) to drive further growth. With current assets of KRW 51.8 billion as of Q1 2024, the company has a solid financial foundation to support these initiatives and secure stable funds.

“We engaged in M&A discussions with companies this year and are carefully evaluating potential candidates within our network from multiple perspectives to identify the best fit,” said the Vice President. “We remain open and ready to pursue acquisitions as opportunities arise, particularly with companies focused on video-related algorithms.”

◆ Establishment of a Joint Venture in China in the Latter Half of This Year to Support IP Demand from Data Centers

With export revenue accounting for 93% of Chips&Media’s overall performance, China remains a critical market, contributing 61% of total sales last year, or 16.9 billion won. This significant revenue has driven the company’s international growth, and the upcoming joint venture (JV) aims to further strengthen its presence in the Chinese market. 

“We’re committed to deepening our engagement in the Chinese market with this JV,” stated Lee Ho. “Partnering with a local design house will allow us to operate in ways we previously couldn’t. One of our main competitors, Veri Silicon, combines design house capabilities with IP offerings, so establishing this JV positions us to compete more effectively.”

“China’s substantial investments in its semiconductor industry, fueled by technological nationalism, play a significant role in this strategic move. With restricted access to foreign chips due to the U.S.-China trade tensions, many Chinese companies are working to develop their own data center chips. Our JV will focus on creating and providing our IP to data centers to support this growing demand,” added the VP.

In addition to China, Chips&Media continues to expand across major markets, including the United States, Japan, and Taiwan, where semiconductors drive industrial growth. The company is also exploring new opportunities in India and Vietnam.

"Businesses in India, Vietnam, Israel, and Russia are currently operating through agents," Lee said. “This year, we started to supply our IP to India for the first time by contracting with an Indian company. We are also talking to Vietnamese and Middle Eastern companies, so we plan to expand overseas countries more and more. In the future, we can also consider establishing branches in areas with growth potential.”

"Currently, our business in India, Vietnam, Israel, and Russia operates through agents,” explained Lee. “This year marks our first IP supply agreement in India, following a contract with a local company. We are also in discussions with companies in Vietnam and the Middle East and plan to steadily expand our global reach. Establishing branches in high-potential markets is also a future consideration."

◆ Stable performance growth, "in the 10 billion won range in annual royalties "

Since its establishment in 2003, Chips&Media has steadily expanded its customer base and became the first listed semiconductor IP company in 2015. Today, it serves approximately 150 clients, including industry leaders like Samsung Electronics, Qualcomm, NXP, Google, AMD, and Meta. The company’s performance has remained consistently stable, with sales reaching KRW 20 billion in 2021, KRW 24.1 billion in 2022, and KRW 28.6 billion in 2023.

Chips&Media is an R&D-driven company that generates revenue solely from semiconductor IP. Its primary income sources are the licenses from fabless companies and the royalties earned from chip production and sales. With the recent surge in interest in AI and next-generation semiconductor technology, Chips&Media is well-positioned to secure stable returns.

“When it goes into mass production, the average royalty per chip is about five cents,” he explained. “With over 200 million chips equipped with our IP each year, annual royalty income now exceeds KRW 10 billion. Our extensive experience, spanning over 20 years, has encouraged more customers to adopt our IP and contribute through royalties."

Chips&Media has sustained stable growth in its core video codec business and continues to invest in R&D to adapt to rapid technological advancements. 

“Recently, Samsung Electronics established and launched a new video standard. To support this, companies like Chips&Media are working to implement the standard in IP format, with completion and announcement planned for the second half of next year. Chips&Media will continue to lead the market by developing cutting-edge video technologies in alignment with industry advancements,” emphasized the Vice President.

(https://www.newspim.com/news/view/20240728000260)