FADU joins ranks of unicorns as S.Korea’s first fabless chip firm

FADU Technology has become South Korea’s first fabless semiconductor unicorn after successfully raising funds from share sales before its initial public offering planned this year, a move that is expected to diversify the Korean semiconductor ecosystem currently centered around memory chips.

FADU announced on Monday that it secured 12 billion won ($9.1 million) in a pre-IPO funding round at an estimated enterprise value of 1.08 trillion won, joining the ranks of startup unicorns in Korea.

When a startup’s valuation exceeds 1 trillion won, which is converted into $1 billion based on a 1,000 won-to-$1 conversion rate, it is considered a unicorn in Korea. A unicorn startup is a private company worth $1 billion or more.

FADU’s latest funding round invited not only its existing stakeholder Forest Partners but also new investors including IBK Capital, the company said.

The funds also exceeded the company’s initial target, underscoring the strong demand for investment in a rare Korean fabless semiconductor company at a time when the system semiconductor market is burgeoning in line with surging demand for new technologies like 5G network, autonomous driving, artificial intelligence, Internet of Things and augmented reality.   

System semiconductors, or non-memory semiconductors, which control logic, calculations and other functions, account for nearly 70% of the global semiconductor market worth 560 trillion won.

But Korea, home to the world’s two largest memory chip makers Samsung Electronics Co. and SK Hynix Inc., lags behind other countries in system chip technology, with Korean fabless semiconductor companies controlling a mere 1% in the global market, of which nearly 70% were US developers, according to IC Insights, global chip industry research company.

FADU, AN INNOVATOR IN THE KOREAN CHIP LANDSCAPE

FADU attributed the latest successful high-value fundraising to its solid business performance despite the overall industry slump.

It swung to profit in 2022 with 4 billion won in operating profit on sales of over 50 billion won, more than 10 times bigger than the previous year. Its number of employees jumped to 230 as of February this year from 170 in July last year.

FADU’s ascent is partly owed to its different business from the big chip players, which focus on major data centers, to meet the demands of smaller data centers, creating a new semiconductor ecosystem, industry observers said.   

Founded in 2015, FADU develops flash controller architecture for solid-state drives (SSD) and storage products. It is well known for its advanced flash storage technology called non-volatile memory express, or NVMe, controller, formerly produced only by tech giants such as Samsung Electronics and Intel Corp.

Its current clients include data centers in the US and global big tech companies including META, and SK Hynix Inc. is its business partner, according to the company.

FADU’s latest corporate value is 20 times larger than that during its first funding round in 2016.

It raised 30 billion won in April last year based on an estimated valuation of about 900 billion won. A month later, the company hired a financial advisor to embark on a new funding round with an aim to put its corporate value between 1.2 trillion won and 1.8 trillion won. Its valuation stood at 450 billion won during a funding round in August 2021.

The company is expected to raise more funds before its planned IPO later this year.

FADU hired NH Investment & Securities Co. as its lead underwriter and Korea Investment & Securities Co. as the co-underwriter last year to list its shares on the Korea Exchange this year.

It has received high ratings, AA and A, for its technology, which allow it to meet the requirements for a special fast-track listing of innovative startups on the Korean Exchange.

FADU plans to earn about 3 trillion won in sales by 2030 with a wide range of new innovative system semiconductors, including network semiconductors, compute express link (CXL) products, and chips optimized for streaming and AI, said Lee Jihyo, FADU’s chief executive officer and co-founder.

Write to Joo-Wan Kim and Jong-Woo Kim at kjwan@hankyung.com

Sookyung Seo edited this article.