Expansion Strategy after Listing: Targeting to Strongest Fabless Market, US  

Value Chain Alliance(VCA) is the term used to refer to a design total solution partner of TSMC, Taiwan’s global No.1 Foundry. TSMC uses this name to emphasize the “value chain” in the ecosystem, which is comparable to Samsung’s Design Solution Partner(DSP).

The term VCA conveys the idea of coexistence within the ecosystem and it could be interpreted that those partners’ businesses are guaranteed and protected. Despite TSMC’s 60% of the global market share, it has only 8 VCA partners worldwide and ASICLAND is the only Korean-based company among them.

ASICLAND is preparing for an initial public offering(IPO) this year. If it follows the plan, they will apply for a preliminary listing review soon and go public in August. Jongmin Lee, the CEO of ASICLAND, which is already being hailed by the securities industry as one of the few ‘TSMC’s beneficiary in Korea, made the time for the interview.

The CEO emphasized in an interview with The Bell that “If there was no ASICLAND as the only Korean TSMC VCA, domestic fabless companies that need to use TSMC’s process would have no choice but to use Taiwan-based design houses with some reluctance. The value of ASICLAND’s presence is definitely clear. Lee also represented a vision that it will “enter to US market in earnest around the end of this year.” The interview with CEO Lee took place at ASICLAND’s headquarters in Suwon-si, Gyeonggi-do on 2nd of this month.

◇Aiming for the US Market, ‘Blue Ocean’

Lee is picturing actively targeting to theUS market this year. Even though there are semiconductor design house in US, none have a business model like ASICLAND that supports the entire semiconductor design process from the very beginning.

The CEO Lee stated that “There are currently no design house in the US that provide ‘design platfrom’; only Taiwan’s Global Unichip Corp(GUC) and another similar one are operating in this market.” He expects the US market, with a concentration of small and large fabless companies, to be a ‘blue ocean’ for ASICLAND. Going public this year will be a milestone for ASICLAND to execute its expansion strategy.

This representative emphasized that “ASICLAND will become a design house that can compete with design houses such as GUC and Alchip on a worldwide scale” and added “since ASICLAND has a stable market in Korea, it is worth taking on this challange.”

Lee said “Currently we have only domestic customers and we are solidifying our position in the domestic market. Soon, we plan to enter the US market with this business model”, and added that “we are expecting to secure quite a few companies in the US”

As explained by the CEO, unlike Korean or Taiwanese companies, US design houses generally do not provide ‘level-0’ service, which means offering the architecture to customers like fabless or finished goods manufacturers in the initial design stage. Instead, ASICLAND offers a platform that consists of commonly used intellectual property(IP), software, and other reusable architectures for fabless companies.

He continued, “In the US there are a lot of needs on this ‘level-0’ service,” and “however, even GUC (who are capable of this service) has a lack of manpower.” The US is the most powerful fabless country. The strong relationship on semiconductors between US and Taiwan presents an opportunity for ASICLAND. It can generate more business opportunities by leverage this favorable relationship.

Lee stated, “With our market entry, it's only natural that we will benefit from TSMC. US fabless companies are so pleased when a design house takes care of the entire development”, and went on to say, “As there are only 8 TSMC VCAs worldwide, we are currently receiving a lot of inquiries from many American and Chinese companies that have reached out to us by searching it.”

The representative explains, by borrowing the concept of 'operating rate', why domestic and foreign fabless companies are expecting more demand for this kind of service. If a design house takes on a part of the fabless jobs, the capability of the fabless company increases and ends up successfully with a 'win-win' situation.

He said, “Fabless is experiencing a shortage of personnel, but they hire this expensive personnel to make just one chip model a year, which means the operational rate is not high enough with leftovers.” and explained, “for this reason the global trend is changing to take on design house for a part of design.“

◇ Distributed to the growth of Korean fabless·OSAT ecosystem

There are some views that ASICLAND is just working for benefits for TSMC instead of Samsung as it is a TSMC-based design house. Lee agreed, “The most frequently asked question,” and pointed out that “but, let’s say, if TSMC has 100 factories, Samsung has around 20. There are definitely Korean fabless companies that have to rely on TSMC.”

As this, Korean fabless still needs TSMC, but if there is any connection between TSMC among domestic design hoses, there is no alternative to employ foreign design houses such as Taiwan. The AI semiconductor startup Sapeon, Mobilint, and Deeper-i, which are all ASICLAND’s customers, are utilizing the TSMC process.

Lee stated, "If even ASICLAND were absent in Korea, it would be difficult to utilize TSMC. Korean fabless companies may have to contract with other foreign VCAs with a significant cost difference and lack of on-site support in Korea." In reality, Samsung Foundry, a latecomer, still falls short of TSMC in terms of process technology or capacity and is unable to handle all orders from domestic small and medium-sized fabless companies.

To target the US market, where global fabless companies are densely concentrated, having the title of TSMC's VCA is advantageous. Despite holding 70% of the world's fabless companies, the US lacks foundries with advanced technology nodes, so fabless companies must outsource to TSMC or Samsung Electronics. In this situation, design houses play a crucial role as a bridge.

Although ASICLAND has a strong connection with TSMC in the foundry sector, it has a solid partnership with domestic companies in the back-end. ASICLAND carries out a "turnkey" business, which involves delivering chips that have been packaged and tested by OSAT (a semiconductor package and test outsourcing company) after handing over wafers produced in the foundry to OSAT, in addition to architecture design.

As design houses prioritize unit price competitiveness when selecting domestic OSAT companies, ASICLAND has room to contribute to nurturing the domestic OSAT ecosystem.

< Source: The Bell (https://www.thebell.co.kr/free/content/ArticleView.asp?key=202301230935514480107718&lcode=00&page=1&svccode=00) >