[News] South Korean Fabless Sector Hit by 2025 Losses as AI Lifts Foundry Costs and China Competition Grows

While the memory sector thrives, South Korea’s fabless firms are reportedly struggling with mounting losses. According to ETNews, based on tentative 2025 operating profit figures for major listed South Korean fabless companies, more than half—14 of 22 firms, or roughly 64%—posted operating losses. The analysis covered revenue top-30 companies that have already released their 2025 earnings.

As the report indicates, several fabless firms—including flash storage company Fadu (-61.7 billion won) and ADAS SoC designer Nextchip (-12.9 billion won), along with HiDeep, ICTK, Sapien Semiconductor, and others—have posted losses for three consecutive years, signaling prolonged underperformance.

Seven companies that were profitable in 2024 fell into losses last year. The report highlights that Gaonchips, Samsung Electronics’ official Design Solution Partner (DSP), saw its operating results deteriorate sharply—from a 3.5 billion won profit to a 16.7 billion won loss.

Even the top firm is experiencing performance pressure. According to the report, LX Semicon, the revenue leader, did not post a loss but recorded an operating profit decline of more than 30% (approximately 58.2 billion won) compared with 2024.

The number of loss-making firms could rise further. The report notes that among major listed companies yet to release full-year 2025 results, four had already posted losses for three consecutive quarters.

AI-Driven Foundry Costs Add to Structural Margin Pressures

Behind the weakening performance of South Korea’s fabless firms, the report points to mounting structural cost pressures. As semiconductor processes become more advanced, licensing fees for electronic design automation (EDA) tools and R&D labor expenses rise accordingly. At the same time, the growing price competitiveness of Chinese chips has intensified market competition, further squeezing margins.

Notably, the report also highlights that foundry pricing has been trending upward amid surging artificial intelligence (AI) demand and increasing process and packaging complexity. Together, these factors have compounded cost burdens for fabless companies, placing additional strain on profitability.

South Korea Rolls Out M.AX Alliance to Support Fabless Ecosystem

In response, the South Korean government has acknowledged the sector’s challenges and begun introducing targeted support measures. As the report notes, starting in the first quarter, the Ministry of Trade, Industry and Energy will roll out a full-cycle support framework under the “M.AX (Manufacturing AI Transformation) Alliance,” designed to stimulate early demand for domestically developed AI semiconductors.

A ministry official cited by the report said a semiconductor manufacturing support task force will be set up within the M.AX Alliance to reinforce prototype production capabilities. Over the mid to long term, authorities are also exploring the establishment of a cooperative foundry.

Meanwhile, the government will also launch the “K-on-Device AI Semiconductor” joint development and commercialization project in March, allocating roughly 1 trillion won over five years, as noted by HelloT.

Read more

• [News] China Reportedly Promotes Domestic Chip Tool Adoption Under 50% Rule, Pressuring Korean Suppliers
• [News] South Korea’s Firms Reportedly Posted 14% North America Sales Growth, SK hynix Soared 65%

(Photo credit: FREEPIK)