Fabless AI chip makers Rebellions and Sapeon to merge as competition heats up in global AI hardware industry

South Korea’s fabless AI chip business noticed a slew of fundraising occasions over the past couple of years as demand for {hardware} to energy AI functions skyrocketed, and it appears the area is already consolidating. Two of the nation’s distinguished fabless AI chip startups, Rebellions and Sapeon, have agreed to merge, the businesses mentioned on Wednesday.

The merger is a strategic transfer by Rebellions and Sapeon aimed toward main the fabless AI chip market in South Korea to tackle world rivals like Nvidia. Fabless chip makers give attention to analysis and improvement, design and advertising of chips, moderately than manufacturing.

The merged entity might go public within the subsequent two to a few years, in keeping with two business sources accustomed to the businesses’ plans who requested to not be named.

The businesses mentioned in an announcement that they see the subsequent two to a few years as a “golden hour” for South Korea to win the worldwide AI chip market. As well as, because of the quickly growing demand for neural processing models (NPUs), they intend to strengthen their NPU enterprise after the merger.

Certainly, the deal comes at a pivotal second within the world chip business.

Nvidia at the moment dominates this market, accounting for greater than 97% of the worldwide marketplace for specialised AI chips, due to its early leap into offering information middle providers and software program to assist different firms construct massive language fashions and energy AI functions. Nonetheless, for firms like Rebellions and Sapeon, there’s sufficient floor to be gained by shifting now: Compute is getting costlier as demand has shot up and chip availability has declined, and AI firms are already attempting to interrupt away from their dependence on Nvidia for {hardware}.

Apple final month mentioned it could be utilizing its personal chips to energy its AI information facilities, and others like Google, Amazon, and Microsoft are already constructing their very own {hardware} for AI functions. In the meantime, Intel, AMD, Google, Meta, ARM, Broadcom and others have banded collectively to develop a normal to attach AI accelerator chips utilized in servers, in a transfer going instantly in opposition to Nvidia, which has its personal mechanism for connecting GPUs in servers.

The way in which forward

Rebellions and Sapeon didn’t disclose the merger ratio, however mentioned they may quickly start due diligence, which can take a couple of month, and purpose to shut the transaction within the second half of 2024. The Riot workforce will lead the administration of the enterprise, and all workers of each firms can be becoming a member of the brand new entity. Riot has 130 workers, and Sapeon has greater than 100 workers in South Korea and the U.S.

Two of South Korea’s greatest telecommunications firms, SK Telecom and KT, will proceed as stakeholders within the merged entity, as will the second largest reminiscence chip maker on this planet, SK Hynix. Sapeon is backed by SK Telecom and SK Hynix, and Riot is owned by KT.

It isn’t clear if Rebellions will proceed its partnership with Samsung Electronics, which competes with SK Hynix within the semiconductor area, after the merger. Earlier this 12 months, Rebellions advised cryptonoiz that the startup’s newest AI chip, Insurgent, would use Samsung’s 4-nanometer fabrication course of and be deployed in Samsung’s HBM3E reminiscence chips, that are used for constructing and working massive language fashions.

In the meantime, KT in 2023 included Atom, Rebellions’ datacenter-focused AI chip, into its cloud-based NPU infrastructure. Rebellions mentioned it could manufacture this specific NPU chip utilizing Samsung’s 5-nanometer fabrication course of. Atom is designed for information facilities and language fashions of as much as 7 billion parameters, whereas Insurgent targets bigger fashions.

The announcement comes roughly 4 months after Rebellions raised a $124 million Sequence B that valued it at roughly $658 million.

Based in 2016 and spun out in 2022 from SK Telecom, Sapeon builds NPU {hardware} and full-stack software program. Final November, the corporate launched a 7-nanometer AI chip, X330 NPU, for autonomous autos, and earlier this 12 months, it mentioned it could develop an on-device AI chip concentrating on the sting computing market. Sapeon final raised greater than $45 million in a Sequence A in August 2023, reaching a valuation of over $380 million.