The Chip Industry's Comeback Kid

By pairing key partners with a hardware niche, Korea's Hwang Ki Soo has bounced back to make Core Logic the hottest handset-chip maker in Asia

by Moon Ihlwan

Sometimes failure is the handmaiden of later, sweet success. It was for Hwang Ki Soo. Back in 1997 he had hit a career wall. He had clearly lost the confidence of Hyundai Electronics' top management over his stewardship of the company's logic chip business, and with good reason: His unit had been bleeding cash after a nine-year quest to develop image sensors, microcontrollers, smart-card drivers, and image compression and other specialized chips.

Hwang simply wasn't making his numbers. The chip unit—which later merged with the LG Group's semiconductor business, was rechristened Hynix Semiconductor (HXSEY), and was spun off from the Hyundai Group—is now the world's second biggest memory-chip maker. But the market wasn't ready for the more specialized chips Hwang had in mind.

"With all the top management focus and attention on money-making memory chips, I was pushed to the corner," says Hwang.

ON A MISSION.

So Hwang left one of the most powerful jobs in South Korean high tech and launched Core Logic in 1998, smack dab in the middle of the Asian financial crisis that had caused a severe recession throughout much of the region.

Hwang, who earned a PhD in computer engineering from the University of Texas at Austin, staked his severance payment of $208,000 on a mission that even the country's semiconductor powerhouse Samsung Electronics could never quite manage. His company aimed to compete and win against big name players such as Texas Instruments (TXN) or Qualcomm (QCOM) in the rapidly evolving logic chip market.

Hwang has a long way to go. But for now the Korean startup is the fastest-growing mobile multimedia chip company in Asia. And local technology conglomerates such as Samsung Electronics (SSNGY) and LG Electronics (LGEIY) are relying on his company's chips for their camera phones and multi-functioning handsets.

A PLACE OF ITS OWN.

Indeed, Core Logic's recent expansion has been staggering. Sales of its chips for camera phones and multimedia handsets jumped to $169 million in 2005 from $43 million in 2003. The company forecasts revenues this year will top $240 million.

"It has carved out a unique technological edge for audio, video, and other multimedia application chips for mobile phones," says Kang Shin Woo, chief investment officer at Korea Investment Trust Management. "With handsets looking to be increasingly the center of information technology, Core Logic is poised to continue rapid growth in the foreseeable future."

Core Logic's success has a two-pronged explanation. First, the company has developed an innovative way of designing chips. Instead of relying on the software and computing power of a handset's main central processing unit, Core Logic engineers created dedicated blocks on its chip to carry out specific functions such as video decoding. This "hardware-centric solution" is somewhat inflexible but cuts costs, is super-fast on certain applications, and is extremely energy efficient.

FASTER FUNCTIONS.

Says 54-year-old Hwang: "For mobile devices, you need to find an optimal balance among flexibility, power consumption, cost, and performance."

Such a method will make it impossible for handsets using these chips to handle such complex applications as spreadsheets; then again very few would be interested in crunching numbers on their mobile phones. Yet these chips are well-suited to features in highest demand. They quicken decoding and encoding of audio and video signals needed to cope with MP3, camera, camcorder, and gaming functions.

The biggest advantage, though, is lower power consumption. For example an ultra-thin Samsung phone, the SGH-D830, equipped with Core Logic's chip has 17.