South Korean AI Chipmakers Rebellions and Sapeon Merge to Challenge Nvidia

In a move to solidify South Korea’s position in the booming global AI hardware industry, fabless AI chip designers Rebellions and Sapeon announced their merger on Wednesday. This strategic alliance aims to create a formidable competitor to industry leader Nvidia, which currently dominates the market for specialized AI chips.

Capitalizing on the “Golden Hour” for AI Chips

The surge in demand for AI applications has fueled a wave of investment in the fabless AI chip sector, particularly in South Korea. Fabless chip companies specialize in research, development, design, and marketing of chips, outsourcing the actual manufacturing process. This merger between Rebellions and Sapeon signifies industry consolidation and a collective push to capture a significant share of the global AI chip market.

The newly formed entity plans to capitalize on the “golden hour” for South Korea’s AI chip industry, as stated by the companies in a joint statement. Their primary focus will be on strengthening their neural processing unit (NPU) business to address the rapidly growing demand for these specialized chips.

Challenging Nvidia’s Dominance in the AI Chip Market

Nvidia currently holds a staggering 97% share of the global market for specialized AI chips. This dominance stems from their early entry into the data center services space and the software they provide to assist companies in building large language models and powering AI applications. However, the landscape is shifting.

The skyrocketing demand for compute resources, coupled with chip shortages, is creating an opportunity for new players. Additionally, tech giants like Apple, Google, Amazon, and Microsoft are actively developing their own AI hardware, aiming to reduce their reliance on Nvidia. This trend further paves the way for Rebellions and Sapeon’s ambitious merger.

Leadership, Investment, and Key Questions

Looking ahead, the combined entity will be led by the Rebellions management team. All employees from both companies are expected to be integrated into the new organization. While the financial details of the merger haven’t been disclosed, due diligence is expected to begin shortly and conclude within a month. The official closing of the deal is targeted for the latter half of 2024.

SK Telecom, KT – two of South Korea’s leading telecommunication companies – and SK Hynix, the world’s second-largest memory chip maker, will retain their stakes in the merged entity. Sapeon is currently backed by SK Telecom and SK Hynix, while KT owns Rebellions.

A key question remains regarding Rebellions’ existing partnership with Samsung Electronics post-merger. Samsung is a direct competitor to SK Hynix in the semiconductor market. Earlier this year, Rebellions announced that their latest AI chip, Rebel, would leverage Samsung’s 4-nanometer fabrication process and be integrated with Samsung’s HBM3E memory chips – crucial components for building and operating large language models. On the other hand, KT incorporated Rebellions’ data center-focused NPU chip, Atom, into its cloud-based NPU infrastructure in 2023, utilizing Samsung’s 5-nanometer fabrication process.

A Look Back at Rebellions and Sapeon

This merger announcement comes on the heels of Rebellions’ successful $124 million Series B funding round in February 2024, valuing the company at approximately $658 million. Sapeon, founded in 2016 and spun off from SK Telecom in 2022, specializes in NPU hardware and full-stack software. They launched a 7-nanometer AI chip, X330 NPU, specifically designed for autonomous vehicles in November 2023. More recently, the company announced plans to develop an on-device AI chip targeting the edge computing market. Sapeon secured over $45 million in a Series A funding round in August 2023, reaching a valuation of over $380 million.

The Road Ahead for the Merged Entity

The combined expertise and resources of Rebellions and Sapeon position the newly formed entity as a strong contender in the global AI chip market. Their success will hinge on their ability to capitalize on the current market dynamics and deliver innovative NPU solutions that can compete effectively with Nvidia’s dominance.