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Hyundai Motor Securities Applauds “Chips&Media’s Profits Amid On-Device AI Boom”

Seoul, South Korea – Feb 2, 2024

On Feb 2, 2024, Hyundai Motor Securities stated that Chips&Media is the only company among beneficiaries of On-Device artificial intelligence (AI) to be profitable. They recommended a buy rating with a target price of KRW 39,000.

“Recording an all-time high performance, Chips&Media reported revenue of 27.6 billion won, and operation profit of 7.8 billion won for the previous year. Despite incurring one-time expenses due to the loss on the valuation of RCPS (Redeemable Convertible Preferred Stock), resulting in a net loss in Q4, 2023, the company experienced no cash outflow during the period, and the conversion to common stock was successfully completed on December 29,” analyzed Park Jun-young, a researcher at the institute.

“In the annual performance of 2023, there was a significant increase in license sales within the industrial sector, amounting to about four times the previous figures. This surge in video codec sales has played a pivotal role in driving up the sales figure, particularly those required for NPU (neural processing unit) and GPU (graphics processing unit) used in AI applications.” He added, “Since 2023, there has been a remarkable growth trajectory in the industrial sector (NPU and GPU for data centers). These shifts underline substantial changes in the primary sources of revenue.”

He remarked, “Chips&Media stands out as the sole company struggling to demonstrate its performance amidst the flourishing On-Device AI and NPU market. Meanwhile, it is receiving significantly lower valuation multiples compared to similar companies operating in the On-Device AI domain.”

“Intel and Qualcomm are anticipated to dominate the AI PC chip industry,” he stated. “Chips&Media currently supplies codecs for Qualcomm’s AI PC chips, and further agreements for NPU IP and video codecs are expected in the first half of the year to meet the demands of the fabless-oriented AI chip market.”

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