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Fabless AI chipmakers Rebellions and Sapeon merge, intensifying competition in the global AI hardware industry

TechBrunchBy TechBrunchJune 12, 20244 Mins Read
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South Korea's fabless AI chip industry has seen a flurry of fundraising events in recent years as demand for hardware to run AI applications surged, and consolidation in the sector already appears to be underway. Two of South Korea's leading fabless AI chip startups, Rebellions and Sapeon, announced on Wednesday that they have agreed to merge.

The merger is a strategic move by Rebellions and Sapeon as they aim to lead South Korea's fabless AI chip market and take on global rivals like Nvidia.

The combined company could go public within the next two to three years, said two industry sources familiar with the companies' plans, asking not to be identified discussing the matter.

The two companies said in a statement that they see the next two to three years as a “golden period” for South Korea to win in the global AI chip market, and that they intend to strengthen their neural processing unit (NPU) business after the merger as demand for NPUs is booming.

Indeed, the deal comes at a pivotal time for the global semiconductor industry.

Nvidia currently dominates the market, controlling more than 97% of the global market for AI-specific chips, thanks to its early move to offer datacenter services and software that help other companies build large-scale language models and run AI applications. Still, companies like Rebellions and Sapeon have a lot to gain by acting now: surging demand and reduced chip availability have made computing more expensive, and AI companies are already looking to move away from their reliance on Nvidia for hardware.

Apple announced last month that it would equip its AI data centers with its own chips, and companies like Google, Amazon and Microsoft are already developing their own hardware for AI applications. Meanwhile, companies like Intel, AMD, Google, Meta, ARM and Broadcom have banded together to develop a standard for connecting AI accelerator chips used in servers, taking on Nvidia, which has its own mechanism for connecting GPUs inside servers.

Future outlook

Rebellions and Sapeon did not disclose the merger ratio, but said they would begin due diligence soon, taking about a month, and aimed to complete the transaction in the second half of 2024. Rebellions' team will lead business management, and all employees from both companies will join the new company. Rebellions has 130 staff members, while Sapeon has more than 100 employees in Korea and the US.

South Korea's two largest telecommunications companies, SK Telecom and KT, will remain shareholders in the combined company, as will SK Hynix, the world's second-largest memory chip maker. Sapeon is backed by SK Telecom and SK Hynix, while Rebellion is owned by KT.

It's unclear whether Rebellions will continue to work with SK Hynix's semiconductor rival Samsung Electronics Co. after the merger. Earlier this year, Rebellions told TechCrunch that its latest AI chip, Rebel, would use Samsung's 4-nanometer manufacturing process and be built on Samsung's HBM3E memory chips, which are used to build and run large-scale language models.

Meanwhile, KT has incorporated Rebellions' data center AI chip, Atom, into its cloud-based NPU infrastructure in 2023. Rebellions said it will manufacture this particular NPU chip using Samsung's 5-nanometer manufacturing process. Atom is designed for data centers and language models with up to 7 billion parameters, while Rebellion targets larger models.

The announcement comes about four months after Rebellions raised $124 million in Series B funding, bringing its valuation to roughly $658 million.

Founded in 2016 and spun out of SK Telecom in 2022, Sapeon builds NPU hardware and full-stack software. Last November, the company launched its 7-nanometer AI chip, the X330 NPU, for autonomous vehicles, and earlier this year said it would develop on-device AI chips targeting the edge computing market. Sapeon raised more than $45 million in Series A in August 2023, at a valuation of over $380 million.



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