[This Week's Insight] The Company Behind Galaxy Phone Sound Design... Value Up↑ Hope Up↑

Chip Design for Smartphones and More
Analog, Digital, and Power Circuits in One
Localization of Manufacturing Process Based on In-House Developed Design Assets

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There is growing market interest in IronDevice, which was listed on the KOSDAQ on the 23rd. IronDevice was founded in 2008 by personnel from Samsung Electronics and Fairchild Semiconductor. The company designs chips used in devices requiring sound, such as smartphones and audio equipment. Although the trend toward ultra-thin mobile devices has reduced the area of micro speakers, consumer demand for high-quality sound is increasing, raising the value of IronDevice's technology. Specifically, it is a fabless semiconductor design company specializing in mixed-signal SoCs (System on Chips) that integrate analog, digital, and power circuits into a single chip. Based on its self-developed intellectual property (IP), IronDevice produces smart power amplifier SoCs and supplies products to domestic global set manufacturers and various other customers. A smart power amplifier adjusts voltage according to the output needed to produce sound and can drive speakers at voltages higher than the battery if necessary. It also includes multiple IPs such as digital algorithms that precisely receive and smoothly control the physical signals of speakers. IronDevice is the only company in Korea designing related chips.

Securing Samsung Electronics as a Client... Aiming for Up to 30% Market Share

IronDevice has secured major domestic and international companies as clients. After a long R&D period, the company's core design assets were applied to Samsung Electronics' smart speakers starting in 2017, followed by smartphones, leading to large-scale mass production and design verification. Based on this proven technology, since 2021, IronDevice has been supplying Samsung Electronics smartphones with its own manufactured products, steadily increasing its market share. The internal goal is to capture a 20-30% market share within Samsung Electronics. As customers increasingly desire rich auditory experiences, demand for audio smart amplifiers is expected to grow further.

IronDevice's core technologies include ultra-low noise high-performance analog circuit technology, high-performance control and digital signal processing technology, and power electronics-based power driving and sensing technology. The company plans to expand its applied products and applications based on its high-performance mixed-signal core IP. It is diversifying applications into audio-haptic technology that combines tactile and audio sensations, and display sound amplifiers. Additionally, it is developing driving circuits for compound power semiconductors based on high-voltage, high-power IP and is currently undergoing market validation. When the application market for compound power semiconductors expands in earnest, these high-value-added products are expected to play a significant role in the power conversion device market.

The Growing Audio Semiconductor Market Presents New Opportunities

The audio semiconductor (IC) market is formed separately from the audio market itself. As of 2020, it is estimated to be about $2.3 billion (3 trillion KRW), and according to DataVines' 2023 analysis, it is expected to grow to $3.4 billion (4.5 trillion KRW) by 2027. The audio semiconductor market has its own unique characteristics and trends, distinct from the overall audio market. Traditional audio amplifier technologies, such as Class AB amplifiers, have reached market saturation, but high-efficiency Class D amplifier-based technologies are creating new markets. The high-performance audio semiconductor market features products combining the latest technologies such as smart codecs and boost amplifiers.

Among these, the audio amplifier IC industry is widely popularized through various electronic devices requiring voice output. The market targeting smartphones is active and evolving toward products that meet demands for higher output and immersive sound. Recently, products equipped with multiple speakers and amplifier ICs to realize three-dimensional sound in portable smart devices have been increasing.

Stable Performance Growth and Product Diversification Potential as Investment Points

Eugene Investment & Securities cites stable performance growth of smart power amplifiers through localization and commercialization as an investment point. This is because IronDevice is expanding its market share within Samsung Electronics products and diversifying clients to major Chinese companies. The pursuit of product diversification for mid- to long-term growth is also seen as a positive investment factor. The company is developing display sound for set manufacturer E, including laptops and monitors. Additionally, it is developing products such as audio haptic driver SoCs with set manufacturer S through a three-year development roadmap, with mass production prototypes planned for release in 2024.

IronDevice's strength lies in its software development capabilities that support running software directly on digital signal processors (DSPs) embedded in various application processors (APs) such as Qualcomm, MediaTek, and Samsung Exynos. The company not only develops mixed-signal system semiconductor SoCs but also provides software solutions applicable to various audio manufacturers' AP architectures to run predictive control software on APs.

Another advantage is the localization of manufacturing processes through contracts and production with DB HiTek and Samsung Electronics Foundry. The company has established a collaborative system for post-processing, securing a stable supply chain to mitigate risks from semiconductor industry supply chain issues such as the recent US-China trade war. It is known that the latest Samsung Galaxy S series and Apple iPhones use two or more audio amplifier ICs to implement immersive stereo sound. This trend toward higher-spec smartphones and customer demands supports the expectation of continuous market growth. However, risks include market saturation of high-function smartphones, manpower shortages in the domestic fabless industry, price competition with China, and the burden of investment in technology development, which may slow growth.

Below Break-even Point but Profitability Expected Next Year

Regarding performance, IronDevice recorded sales of 5.4 billion KRW and an operating loss of 1.5 billion KRW in 2022. In 2023, sales were 6.2 billion KRW with an operating loss of 3.5 billion KRW, and in the first half of 2024, sales were 4.5 billion KRW with an operating loss of 1.8 billion KRW, still below the break-even point. The company’s prospectus projects sales of 15.1 billion KRW and an operating loss of 1.1 billion KRW in 2024. For 2025, sales are expected to reach 29.7 billion KRW with an operating profit of 3.5 billion KRW, and in 2026, sales of 59.3 billion KRW with an operating profit of 13.4 billion KRW. KB Securities analyst Kim Seonbong from Seonghyeon-dong noted positively that "due to the performance standardization of IT devices, the number of amplifiers per device, which was previously 1-2, has increased up to 8." As risk factors, he pointed out that "continuous R&D is required, but the company has not yet achieved economies of scale to cover fixed costs, and high dependence on a single client increases performance volatility when client order volumes fluctuate."