Government to Establish 'Joint IP Platform' to Support Domestic Fabless Companies

Ministry of SMEs and Startups Develops 'Support Plan for System Semiconductor Small Fabless Companies to Implement K-Semiconductor Strategy'
Comprehensive Support for Small Fabless Companies from Startup to Growth Including Bundle Ordering and Large-Small Win-Win Council Establishment

Minister Kwon Chil-seung of the Ministry of SMEs and Startups.
[Photo by Yonhap News]

[Asia Economy Reporters Kim Jong-hwa and Lee Jun-hyung] The government is establishing a 'Common IP Platform (Common IP Bank)' to support domestic fabless companies. The Common IP Platform will operate as a platform that purchases and provides overseas intellectual property (IP) to fabless companies that rely on foreign firms, and supports the localization and development of IP.

To protect small and medium fabless companies whose survival is threatened due to low order volumes, the order method will be changed to 'bundled ordering,' where multiple fabless companies place orders jointly. To this end, a 'Large-Medium-Small Win-Win Council' in the system semiconductor sector, involving all domestic foundry companies, will be launched from January next year.

'Fabless' refers to design-specialized companies that focus solely on chip design in the system semiconductor industry, where semiconductor chip design and production are divided. Chip production is mainly outsourced to foundries operated by large corporations. Fabless companies are considered key to creating future growth in the system semiconductor sector, which is more than twice the size of the memory semiconductor market and whose demand is rapidly increasing due to the Fourth Industrial Revolution.

On the 18th, at the '16th BIG3 Innovation Growth Promotion Meeting,' the government discussed and decided to actively promote the 'Support Plan for Small and Medium Fabless Companies in System Semiconductors for the Implementation of the K-Semiconductor Strategy,' prepared by the Ministry of SMEs and Startups.

The Ministry of SMEs and Startups estimated that due to the global semiconductor supply shortage, fabless startups with innovative capabilities have hesitated in developing new technologies because of high additional investment costs and lack of stable sales channels, resulting in a decrease in the number of domestic companies from over 200 in 2009 to about 150 this year. With the expected reduction in prototype processes at domestic foundries from next year, the fabless industry has continuously demanded expanded government support, leading to the preparation of this support plan.

The core of the government support measures is to create conditions for small and medium fabless companies to enter the ecosystem, secure order volumes through 'bundled ordering' to increase survival chances, and establish a cooperation platform with large and medium-sized enterprises to support growth.

'Establishment of Common IP Platform'... Purchase and Provision of Overseas IP

The government will first establish the 'Common IP Platform (Common IP Bank)' next year, operating it as a platform for IP localization development and purchasing and providing overseas IP. Institutions with expertise in IP or semiconductors will be designated and operated as the Common IP Platform.

A short-term training course for cultivating entry-level personnel will be newly established in the first half of next year, and a 'Fabless Lab Hub' linking fabless startup incubation and practice spaces in one location will also be built. The Fabless Hub will be installed at the Ministry of SMEs and Startups' startup incubation centers, with practical support provided by the Ministry of Trade, Industry and Energy's Semiconductor Design Education Center.

Kim Hee-cheon, Policy Officer for SMEs at the Ministry of SMEs and Startups, said in a briefing, "The fabless industry has expressed that training design personnel is a major difficulty," adding, "From next year, we will create a program to train 100 design personnel annually using the Ministry's Venture Startup Academy."

The government will promote fair valuation of fabless companies' technology development outcomes to facilitate financing and expand support such as commercialization funds for promising startups. Next year, operating funds will increase from the current 500 million KRW to 1 billion KRW, and the technology evaluation manual will be improved by expanding the application of intangible asset valuation.

Policy Officer Kim explained, "Currently, overseas IP is purchased and provided at low cost through the Innovation Startup Package project," adding, "While the existing project was limited to ARM's IP, from next year it will expand to high-priced overseas IP required by fabless companies." He further expressed expectations that "through strengthened government support for fabless startups, the number of domestic fabless companies will double to about 300 by 2030, and the global market share will increase to 10%."

'Bundled Ordering' Introduced Next Year to Alleviate Foundry Supply Shortages for Small and Medium Fabless Companies

Fabless companies specialize only in design without owning production plants. Therefore, to produce semiconductor chips, they must outsource production to foundries operated by large corporations. However, with the ongoing global foundry supply shortage, small and medium fabless companies with low order volumes face survival threats.

Accordingly, the Ministry of SMEs and Startups will introduce 'bundled ordering' next year, where multiple fabless companies jointly place orders instead of individual foundry orders. Design houses that have cooperative relationships with foundries will participate. Design houses are companies that redesign fabless semiconductor design drawings into manufacturing design drawings.

Additionally, a 'Large-Medium-Small Win-Win Council' in the system semiconductor sector, involving all domestic foundry companies, will be launched from January next year. Through this council, annual prototype outsourcing demand from fabless companies will be regularly surveyed and reflected in foundry processes, and cooperation projects between small and medium fabless companies and foundries will be discovered, serving as a continuous communication and cooperation channel.

The function of public nanofabs, established with government support for facilities and equipment, will also be enhanced. Once the function upgrades of the Nano Convergence Technology Institute (Daejeon) and Korea Nano Technology Institute (Suwon), scheduled for the second half of next year, are completed, some prototype demand from small and medium fabless companies is expected to be met.

Policy Officer Kim said, "Bundled ordering is a plan to survey annual demand through organizations such as the Korea System Semiconductor Forum, which includes about 70 small and medium fabless companies, and deliver it to foundry companies," adding, "It can increase bargaining power by bundling order volumes at once and reduce process costs for design houses." He added, "It is expected to partially resolve the difficulties faced by fabless companies that had difficulty accessing foundries due to low order volumes."

Establishing Cooperation Platforms with Large and Medium Enterprises... Creating Success Models

System semiconductors required for home appliances and finished vehicles face difficulties in joint development with large corporations due to high performance verification requirements, making it hard to secure demand channels. As a result, there is a lack of success models through joint commercialization domestically.

Accordingly, the Ministry of SMEs and Startups will expand the 'Large-Star Solver Platform' to the system semiconductor sector. Six projects for BMW's mobility semiconductor development and two projects for i-SENS's diagnostic device semiconductor development, totaling eight projects, have already been identified and will be actively supported from next year.

The Large-Star Solver Platform is a project that involves small fabless companies possessing technologies, products, or services needed by large corporations from the development stage, providing selected small fabless companies with commercialization funds, testbeds, and mentoring.

A 'Consortium-type Technology Development Project,' where up to four small fabless companies jointly participate in R&D projects of mid-sized fabless companies that have secured demand, will also be introduced next year. This aims to complement the limitations of short-term and small-scale individual company support. The Ministry of SMEs and Startups will select 10 projects next year and support up to 4 billion KRW in R&D funds over four years.

Policy Officer Kim said, "We have tried to reflect the difficulties faced by small fabless companies and the policy tasks suggested by the related industry as much as possible," adding, "We will strengthen efforts for large-medium-small win-win cooperation to ensure this support plan is properly established on the ground and will closely coordinate with related ministries to implement it without setbacks."

This content was produced with the assistance of AI translation services.