South Korea’s fabless AI chip industry has experienced a series of fundraising events in recent years due to the increasing demand for hardware to support AI applications. The industry is now showing signs of consolidation, with two major fabless AI chip startups in the country, Rebellions and Sapeon, announcing their decision to merge. This strategic move is aimed at positioning the merged entity as a leader in the South Korean fabless AI chip market, enabling them to compete with global giants like Nvidia. Fabless chip manufacturers focus on chip research, development, design, and marketing, rather than production.
Industry sources familiar with the companies’ plans, who preferred to remain anonymous, suggest that the merged entity may consider going public within the next two to three years. The companies have expressed their belief that the next few years present a prime opportunity for South Korea to establish itself as a key player in the global AI chip market. They also plan to enhance their NPU business post-merger, in response to the rising demand for neural processing units.
This merger is significant in the context of the global chip industry. While Nvidia currently holds a dominant position in the market, with over 97% share in specialized AI chips globally, companies like Rebellions and Sapeon see potential for growth by making strategic moves now. The increasing cost of computing, coupled with surging demand and chip shortages, has prompted AI companies to seek alternatives to Nvidia for their hardware needs.
Apple recently announced its plans to utilize its own chips for powering its AI data centers. This move aligns with the trend of other tech giants like Google, Amazon, and Microsoft, who are already developing their own hardware for AI applications. On the other hand, Intel, AMD, Google, Meta, ARM, Broadcom, and other companies have joined forces to establish a standard for connecting AI accelerator chips used in servers. This collaborative effort directly challenges Nvidia, which has its own mechanism for connecting GPUs in servers.
Rebellions and Sapeon have not revealed the merger ratio, but they have stated that they will commence due diligence soon, which is expected to take around a month. The transaction is anticipated to be finalized in the second half of 2024. The management of the new entity will be led by the Rebellion team, and all employees from both companies will be part of the merged organization. Rebellion currently has 130 staff members, while Sapeon has over 100 employees in South Korea and the U.S.
SK Telecom and KT, two major telecommunications companies in South Korea, will remain stakeholders in the merged entity. Additionally, SK Hynix, the second largest memory chip maker globally, will also retain its stake. Sapeon is supported by SK Telecom and SK Hynix, while Rebellion is owned by KT.
It is uncertain whether Rebellions will maintain its partnership with Samsung Electronics, a competitor of SK Hynix in the semiconductor industry, following the merger. Earlier this year, Rebellions announced that its latest AI chip, Rebel, would utilize Samsung’s 4-nanometer fabrication process and be integrated into Samsung’s HBM3E memory chips, which are utilized for constructing and operating large language models.
In the meantime, KT incorporated Atom, Rebellions’ AI chip focused on data centers, into its cloud-based NPU infrastructure in 2023. Rebellions stated that it would manufacture this specific NPU chip using Samsung’s 5-nanometer fabrication process. Atom is designed for data centers and language models with up to 7 billion parameters, while Rebel targets larger models.
This announcement comes approximately four months after Rebellions secured a $124 million Series B funding round, valuing the company at around $658 million.
