[Featured Stock] AD Tech, Best Fundamentals Among Samsung DSPs... US Market Success 'Within Reach'

AD Technology is showing strong performance. Securities firms' analysis that it has secured the best fundamentals among Samsung Electronics' design houses appears to be influencing its stock price. AD Technology is expected to make this year a milestone year by achieving results from its entry into the U.S. market. The U.S. subsidiary established in Silicon Valley last July is expected to announce new orders soon. Gaonchips has seen a significant increase in corporate value after successfully marketing to a Japanese artificial intelligence (AI) startup.

As of 10:22 a.m. on the 24th, AD Technology is trading at 42,400 KRW, up 9.0% from the previous day.

Seonggyu Heo, a researcher at Shinhan Investment Corp., stated, "The factors to judge the fundamentals of a design house are manpower and IP portfolio," adding, "Unlike TSMC, which has a completed value chain, Samsung Electronics' foundry is incomplete, and fabless orders have not been sufficiently accumulated."

He continued, "In the current situation where there is a shortage of clients, the number of engineers represents capacity, and IP signifies design competitiveness and the ability to attract clients," adding, "For a foundry to have marketability, it must secure IP that matches the applications desired by clients from the beginning."

He explained, "The securing process is coordinated by the foundry or design house, and if IP is lacking, they sometimes develop it together to meet the client's chip development timeline," emphasizing, "Since Samsung Electronics' IP acquisition is relatively slow, it is important for the design house to hold the IP."

Researcher Heo analyzed, "In projects below 5nm, an average of about 100 engineers are involved, so the proportion of advanced processes is proportional to the number of design house personnel and their efficient allocation," estimating, "The process share in 2024 is 57% for 8nm and below, and 32% for 14nm." He also emphasized, "The advanced process share is 89%, higher than Gaonchips' 80% (2023, below 20nm) and Asicland's 78% (2023, 28nm and below)."

He explained, "Even based on applications, demand for advanced processes is the highest, and the sales proportion of HPC, AI, and automotive, which are expected to have long-term mass production, is 74% in 2024, higher than Gaonchips' 70% (2023) and Asicland's 56% (2023)." He predicted, "With AI turnkey orders, the start of HPC mass production sales, and the beginning of mass production for existing AI clients in 2025, the proportion of these applications will increase over the long term."

He analyzed, "AI semiconductors use different chips for training and inference," explaining, "General-purpose semiconductor GPUs are used for training, and ASIC chips are used for inference." He added, "Compared to training, which requires learning large amounts of data, inference is more effective with faster and lower power consumption semiconductors," stating, "The growth of custom chips means growth in the foundry, IP, and design house markets." He also emphasized, "This is supported by Amazon orders for Taiwan's Alchip and the increase in multiples of North American IP companies."

Researcher Heo explained, "Among Samsung Electronics' DSPs, AD Technology is best prepared for the favorable environment of increasing demand for custom semiconductors and foundry dualization. Being a member of ARM Total Design differentiates it from other DSPs." He added, "The 2nm GAA project ordered last October includes HBM and applies 2.5D (ICube) packaging," noting, "AVP such as TSMC CoWoS and Samsung Electronics I-Cube require design experience and related personnel to provide design services." He said, "The fact that AD Technology uniquely holds references for 2.5D projects acts as a competitive advantage over other DSPs."

He stated, "ARM provides Neoverse CSS IP to Total Design members aiming to enter infrastructure markets such as data centers and cloud," mentioning, "In DSP, there are this company and Faraday, and in VCA, Alphawave Semi and Asicland." He analyzed, "Considering that Faraday specializes in UMC processes, AD Technology is the only company likely to secure meaningful Neoverse IP orders within Samsung Electronics' foundry."