[BizLeader] Kim Sanghyun, CEO of Chips&Media, "Dedicated Video 'NPU', Continued Performance Expected"

NPU in Talks with Domestic IPTV Companies... "Expecting Results Next Year"
Only TSMC Open Innovation Partner in Korea
"Aiming to Become a Global Video IP Specialist"

"In the case of neural processing units (NPU), we are currently in discussions with one of the leading IPTV companies in Korea, and we expect more opportunities to arise in the future."

Kim Sang-hyun, CEO of Chips&Media. Photo by Yoo Hyun-seok

Kim Sang-hyun, CEO of Chips&Media, stated in an interview with Asia Economy, "We are currently in the verification stage with the company, and we expect to report results before the third quarter of next year."

Chips&Media is a semiconductor design IP company established in 2003. It was listed on KOSDAQ in 2015. IP refers to a kind of blueprint embedded in semiconductor chips to perform specific functions. Chips&Media specializes in video IP. Video IP is embedded in multimedia semiconductor chips and is responsible for video recording and playback functions. It is applied across a wide range of fields, from mobile devices to video home appliances and automobiles.

Last year, the company developed the AI semiconductor NPU IP called 'CMNP.' It applied a super-resolution (SR) video processing algorithm that converts low-resolution video into high-resolution video. Compared to competitors' products, it is 80% smaller in size, resulting in lower power consumption and higher efficiency. In September this year, they signed their first contract with a Chinese AI system semiconductor (SoC) development company.

CEO Kim explained, "Our NPU is optimized for video and is used to enhance image quality. Since it is expected to be widely applied in on-device AI, we are actively marketing it in various fields such as home appliances and cameras." He added, "Opportunities are increasing in the automotive sector as the importance of video grows in advanced driver-assistance systems (ADAS) and autonomous driving." He emphasized, "Media cannot disappear, so we will continue to generate revenue going forward."

Chips&Media is also well-known as an open innovation partner (OIP) of TSMC. It is the only company in Korea and one of only 39 companies worldwide in the IP sector to hold this status. He said, "TSMC's OIP is an innovative technology infrastructure covering semiconductor design and manufacturing, playing a crucial role in lowering design barriers and increasing initial silicon success rates." He emphasized, "Within the semiconductor design ecosystem, customers and partners can quickly adopt new technologies, shortening the time from design to mass production, market entry, and revenue generation."

He explained, "Around 2010, TSMC expanded the OIP program to include soft IP, and we joined through cooperation." He added, "To become an OIP, companies must pass various tests required by TSMC and comply with security procedures." He further noted, "An audit is conducted every two years, and we must meet all stringent conditions set by TSMC to maintain the status."

In recent years, Chips&Media's performance has continued to grow. Sales increased from 20 billion KRW in 2021 to 27.6 billion KRW last year, and operating profit rose from 5.2 billion KRW to 7.8 billion KRW. However, the third quarter of this year was sluggish. As of the third quarter cumulative basis, sales and operating profit were 18 billion KRW and 2.4 billion KRW, respectively, down 11.01% and 56.65% year-on-year. He said, "Most of our sales come from the U.S. and China. This year, due to the economic downturn in China, sales of chips with technology applied mainly to home appliances sharply declined, reducing royalty revenue, and license demand was also delayed."

However, the outlook is bright. The number of companies seeking to utilize Chips&Media's video IP continues to increase. He emphasized, "Next year, there will be continuous licensing opportunities for existing and new global customers. We expect new royalties to arise from China, leading to 10-20% growth compared to this year."

Especially, the most anticipated part next year is contracts with global SoC companies. He said, "We are discussing IP for automotive applications with a global top 3 SoC company. After license sales occur, royalty revenue will steadily follow."

Along with this, they are also preparing to provide IP for global mobile phone companies. He explained, "In high-end smartphones, cameras are important, and we expect to receive video IP royalties for the first time. License sales with this company have been occurring since 2021, and from next year, royalties will be recorded."

Moreover, they are about to sign contracts with a Chinese company that is recently expanding its business into electric vehicles. He said, "We expect automotive sales from this company. They decided to contract with us after seeing the technology that obscures license plates during video playback."

Chips&Media's revenue is broadly divided into licenses and royalties. License revenue occurs when the company provides its designed video IP to semiconductor design companies. Royalty revenue is a commission generated when semiconductor chips incorporating the company's IP are sold.

They are also continuously targeting mergers and acquisitions (M&A). He emphasized, "By the end of the year, we expect to have about 50 billion KRW available for M&A. We are listing and reviewing multimedia-related companies connected to us, as it is necessary for growth."

Chips&Media plans to steadily develop technology for growth. He said, "Both video codecs and NPUs require continuous innovation and technological development. To proactively respond to technological advances, we have strengthened our capabilities by opening a research center in Daegu this year."

In particular, their goal in the video processing market is to become a global benchmark company. He emphasized, "Due to the rapid technological advances in AI and autonomous driving, the related video processing market will blossom in 3 to 4 years. Chips&Media aims to be a global video IP specialist company that sets the standard."