Sapeon was spun off from South Korea’s SK Telecom in 2022 and is taking up outside investment. The company wants to take on Nvidia in the field of artificial intelligence.

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BARCELONA, Spain – Sapeon, a South Korean artificial intelligence chip startup headquartered in California, is raising a funding round that puts its valuation above $400 million, its CEO told CNBC.

The startup is backed by major South Korean companies SK Telecom, memory chip maker SK Hynix and SK Square, an investment company spun off from SK Telecom.

Sapeon designs artificial intelligence semiconductors for data centers, such as those operated by cloud companies. These AI chips are required for AI applications that require huge amounts of data processing.

Currently US company Nvidia dominates this market. But a number of established players such as AMD and startups like Sapeon, want to challenge Nvidia.

“AI solutions will grow a lot thanks to the development of AI services like ChatGPT,” Soojung Ryu, CEO of Sapeon, told CNBC in an interview at the Mobile World Congress that aired Wednesday.

ChatGPT is the viral chatbot developed by OpenAI. It has caused a stir in the tech world, with giants from Google to Chinese company Baidu trying to unseat their own rivals. Tech executives say ChatGPT has put AI applications on the map.

Analyst at Bernstein expect ChatGPT to be a multi-billion dollar boon for chipmakers looking to power these AI models.

“We would like to build this kind of system (AI chips) to have an opportunity for the business,” Ryu said.

Sapeon was created in 2016 within SK Telecom, one of South Korea’s largest telecommunications companies. SK Telecom then spun off the company last year and took up outside investment.

Ryu said the company is currently raising money at a $400 million valuation.

South Korean semiconductor companies including Samsung and SK Hynix have typically been strong on memory chips that go into devices like computers. Sapeon is one of the first companies in South Korea that tried to crack the market for AI chips.

Ryu said Sapeon is targeting the US market which would pit it against Nvidia. When asked if Sapeon can challenge Nvidia, Ryu replied “yes.”

Currently, Sapeon has a chip on the market called the X220. It is based on so-called 28-nanometer technology. The nanometer number refers to the size of each individual transistor on a chip. The smaller the transistor, the more of them can be packed on a single semiconductor. Typically, reducing the nanometer size can provide more powerful and efficient chips.

Ryu said the company will launch a 7-nanometer AI chip this year and that it will be manufactured by TSMC, the world’s largest contract chip maker. That would bring it closer to the current technology on the market.