Rebellions-Sapeon Korea merger to challenge Nvidia’s AI chip dominance

Rebellions Inc., a South Korean artificial intelligence chip design startup, is merging with its crosstown rival Sapeon Korea Inc., an AI chip firm backed by telecom giant SK Telecom Co., to get ahead of the curve in the race to develop next-generation AI semiconductors.

“We share the view that Korea needs a leading AI chip design company to better compete with the likes of Nvidia and Qualcomm on a global footing,” Rebellions and SK Telecom said in a joint statement.

The two companies said they aim to sign a final contract sometime in the third quarter after due diligence and approval at their respective shareholders’ meetings. A merged entity will launch by the end of this year, they said.

“Rebellions and SKT see the next two to three years as a critical, golden time for South Korea to secure a strong foothold in the global AI semiconductor market. We’ll expedite the process needed to launch a merged entity at the earliest possible date,” Rebellions said in the statement.

It said the combined company will leverage the development expertise and experience that Rebellions and Sapeon Korea have demonstrated in the neural processing unit (NPU) market.

"Given the fast-evolving nature of the system semiconductor industry, startups like Rebellions will be more agile in responding to market dynamics than larger companies,” it said.

Once the integration process is completed, Rebellions will take the helm of the new entity, the companies said.

Industry officials said Park Sung-hyun, co-founder and chief executive of Rebellions, will likely be the merged firm’s first CEO.

KOREA’S FIRST CHIP UNICORN WITH $1.5 BILLION VALUE

If all goes to plan, the Rebellions-Sapeon Korea merger would see the creation of Korea’s first semiconductor unicorn, with the new firm’s corporate value estimated to be 2 trillion won ($1.5 billion), analysts said.

Rebellions is among the KT Corp.-led Korean “AI full stack” service providers, which offer AI infrastructure such as AI chips, cloud computing and other applications.

Rebellions was co-founded in September 2020 by CEO Park, a former quant developer at global investment bank Morgan Stanley and Elon Musk’s aerospace company SpaceX, and Oh Jin-wook, Rebellions’ chief technology officer (CTO), who previously designed AI chips at IBM.

Rebellions came into the AI tech world spotlight in April 2023 when it beat much bigger rivals in a chip performance test, MLPerf.

In the MLPerf test, Rebellions’ AI chip ATOM performed the best, proving itself fastest in processing large language and vision models.

ATOM’s processing speed was up to 3.4 times faster than the same class of chips by Qualcomm Technologies Inc. and Nvidia Corp. This means that ChatGPT, operated on an ATOM-fitted computer, delivers the quickest answers to its users.

Unlike general-purpose system chips such as central processing units (CPUs) and graphics processing units (GPUs), an AI chip such as Rebellions’ ATOM is an integrated circuit designed to run machine learning programs, a key function in generative chatbots.

Last September, Rebellions forged a partnership with US tech giant IBM to cooperate in generative technology development.

As part of the partnership, the Korean fabless chip designer said it would test-run its AI chip, ATOM, on IBM’s systems at the US firm’s data center in Albany, New York.

Rebellions is currently working on a next-generation AI chip, REBEL, which it aims to unveil by the end of this year.

SAPEON KOREA

Sapeon Korea was spun off from SK Telecom in January 2022.

Last November, Sapeon said it developed the X330, an advanced AI chip for data centers, which it said showed roughly twice the computational performance and 1.3 times the power efficiency of its competitors' products.

The product, which supports large language models (LLMs), a type of AI software used to create services like ChatGPT, is set for mass production later this year.

Sapeon designs AI semiconductors for data centers, which require huge amounts of data processing. The X330 chip is manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker.

SK Hynix Inc., the world’s second-largest memory chipmaker and an SK Telecom affiliate, is one of Sapeon's major shareholders.

(Updated with the size of the new entity, its likely CEO and background throughout the article.)

Write to Kang-Ho Jang at callme@hankyung.com

In-Soo Nam edited this article.