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Chips&Media Continues Growing, Benefitting from Rising Demand for On-Device AI

Seoul, South Korea – Jul 31, 2024

Q2 Estimated Sales and Operating Profit Surge by 23% and 6602% QoQ

Hyundai Motor Securities announced on July 31st that Chips&Media (094360) benefited from the growth of the on-device AI and neural processing unit (NPU) markets and issued a 'buy' recommendation with a target share price of 36,000 won.

According to Hyundai Motor Securities, Chips&Media's estimated sales and operating profit for the second quarter of this year were KRW 6 billion, an 11% decline YoY, and KRW 600 million, a 67% drop. However, these figures represent 23% and 6602% increases, respectively, in QoQ.

In the second quarter of this year, license sales, which had declined in the first quarter, returned to normal levels, and this recovery is expected to continue in the second half of the year. The key licenses in Q2 were for smartphones in North America, global electronic semiconductor makers, and set-top box chips as well as AI system-on-chip (AI SoC) in China.

Park Jun-young, a researcher at Hyundai Motor Securities, stated, “The performance improvement is expected to be more pronounced in the second half of the year, and the establishment of a joint venture (JV) in China is likely to play a significant role in this improvement.”

Chips&Media continues delivering video codecs to China's AI chip makers this year, as it did last year. In the second half of this year, the company plans to expand its deliveries to Chinese AI chip makers through a JV established with a local distributor.

"From the second half, contracts for NPU licenses will gain momentum," Park analyzed. "Recently, advanced application-specific chips (ASIC) for AI have been emerging rapidly, and the adoption of NPUs in the AI industry is projected to become active."

He further highlighted, "Chips&Media also has a video codec licensing agreement with Qualcomm, a global fabless company, for its X-Elite chipset designed for AI PCs. This agreement has generated license sales in the PC segment, and we need to keep an eye on whether additional royalty contracts can be secured for AI mobile chipsets in the future."

“Chips&Media is expected to continue growing alongside the expansion of the AI chip market and the increasing adoption of on-device AI,” Park added. 

(https://www.newsprime.co.kr/news/article/?no=648691)