Chips&Media (KOSDAQ: 094360) H1 2026: the half-year in which royalties began to grow again
Chips&Media (KOSDAQ: 094360)
H1 2026: the half-year in which royalties began to grow again
Who wrote this, and why
A private analysis of public regulatory filings, written to set out what the filings say so that a reader can follow the sources and either agree or disagree. It was not produced for, or at the request of, any company, client or sponsor.
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- Built from public filings (DART), company materials and press reports, as cited in the text.
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- As of 2026-09-15. Filings and results after that date are not reflected, and the author does not undertake to update this document.
Section 10 sets out scenarios for 2027, and other passages describe possible futures. These are the author's estimates built on stated assumptions. They are neither forecasts of what will happen nor company guidance, and actual results may differ materially.
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An English version of a Korean-language report. Where the two differ, the Korean original prevails.
Currency
Converted at a single rate of USD 1 = KRW 1,400. "KRW bn" means billions of won and "USD m" means millions of US dollars. Figures are rounded, so components may not sum exactly to totals.
- What it does: lends video-processing designs (IP) to chip companies without owning a factory, and is paid through license fees, royalties and services (Section 1)
- Where it trades: KOSDAQ, Korea's growth-stock board (ticker 094360)
- Reporting: consolidated statements; fiscal year = calendar year; filings on DART, Korea's electronic disclosure system run by the Financial Supervisory Service
- Who it sells to: chip companies, mostly outside Korea — exports were 97.7% of revenue in H1 2026, led by China and the US
- Korean-specific terms used below: corporate value-up plan, designated audit, DART filing numbers
- Currency: KRW figures with fixed-rate USD conversions (see Currency above)
How to read this report
| Tag | Meaning |
|---|---|
| FACT | Content directly supported by the original source, such as the text of a filing |
| COMPANY | What the company (or a competitor) said about itself — not separately verified |
| VIEW | Content or interpretation reported by journalists or media outlets, or an interpretation or estimate |
Glossary
- IP (Intellectual Property) — a functional design placed inside a chip · AI (Artificial Intelligence) · NPU (Neural Processing Unit) — a circuit dedicated to AI computation · ISP (Image Signal Processor) — a circuit that turns camera signals into photos and video · FBC (Frame Buffer Compression) — compression of the memory that temporarily holds video frames
- Video compression standards — H.264 (AVC, Advanced Video Coding) · HEVC (High Efficiency Video Coding) · VP9 (a Google standard) · AVS2 (Audio Video coding Standard 2, used in Chinese broadcasting) · AV1 (AOMedia Video 1) · AV2 (AOMedia Video 2, the generation after AV1) · APV (Advanced Professional Video, for professional use) · JPEG (Joint Photographic Experts Group, for photos) · UHD (Ultra High Definition)
Company profile
FACT Founded in March 2003 to develop semiconductor design IP, the company is based in Gangnam-gu, Seoul; as of Jun 30, 2026, 72 of its 87 employees worked in R&D, and it moved its listing to KOSDAQ in August 2015. Its technology widened in this order: UHD-class HEVC, VP9 and AVS2 decoders (2016) → an AV1 decoder (2019) → deep-learning image-quality enhancement (2020) → NPU (2023) → AI ISP (January 2026).
FACT Its subsidiaries are entities in Shanghai, China and in the US (100% each), and it separately holds a stake in a joint venture in Suzhou, China, Dongsimmae Science and Technology (Suzhou) Co., Ltd. (the stake is shown as 40% in the half-year report and as 33.89% at end-2025 in the annual report notes, so the two disagree). The CEO is Kim Sang-hyun, and the largest shareholder is Hantu Semiconductor Investment with 31.15% (34.12% including related parties). Source: Half-year report (Jun 2026) Sections I, VII, VIII, XII-3, DART filing no. 20260814000789 · Annual report (Dec 2025) consolidated notes 15 and 31, filing no. 20260311004380
Part 1. What does the company do?
Question for this part — What does it provide to earn money, and how solid is that business?
1. Business model — lending out designs and getting paid at three points
Key point — FACT Without a factory, the company lends video-processing designs to chip companies and is paid once when a contract is signed (license), each time a chip containing the design is sold (royalty), and when it provides technical support (services).
1-1. What it sells, and when it gets paid
FACT What it sells centres on functional blocks that record, play back and compress video inside a chip (video codec IP), with NPU, AI ISP and FBC IP being added. Because it makes no physical products, it purchases no raw materials (purchases of KRW 1.99bn (USD 1.4m) in 2025 were design software, test boards and outsourced development).
| Revenue stream | When it is paid | 2025 | Share | H1 2026 | Share |
|---|---|---|---|---|---|
| License | When the design is handed over (once) | KRW 17.07bn (USD 12.2m) | 59.9% | KRW 6.6bn (USD 4.7m) | 51.3% |
| Royalty | Each time a chip containing the design is sold (recurring) | KRW 10.05bn (USD 7.2m) | 35.3% | KRW 5.24bn (USD 3.7m) | 40.7% |
| Services | Paid technical support | KRW 1.35bn (USD 0.96m) | 4.7% | KRW 1.03bn (USD 0.74m) | 8.0% |
| Total | KRW 28.47bn (USD 20.3m) | 100% | KRW 12.87bn (USD 9.2m) | 100% |
Source: Annual report (Dec 2025) II-4, 20260311004380 · Half-year report (Jun 2026) II-2, II-4, note 18, 20260814000789
- FACT License and royalty revenue is recognised "at a point in time" (translated from the Korean filing), while services revenue is spread over the service period. License fees differ from contract to contract, depending on the number of chip production runs and the royalty terms.
- FACT Exports were 93.2% of revenue in 2025 and 97.7% in H1 2026, and the company had at least 46 customers in 2025 (the top 6 plus 40 others).
VIEW License fees are large but have to be won anew every year, while royalties are recurring income that keeps flowing in as long as customers' chips keep selling. This report uses "how much of revenue is recurring money" as its most important yardstick.
1-2. Who buys, and which countries the money comes from
FACT If chip companies design video functions themselves, development time, cost and the risk of failure rise, and handling video in software alone adds power and heat burdens, so they acquire dedicated designs instead. In 2025, demand came from general industry (data centres, AI chips, security cameras) 48%, automotive 31%, TVs and set-top boxes 13%, and mobile 8%. The customer base widened from fabless companies (companies that design chips without a factory) to large IT platforms (supplying a data-centre chip in 2019) and design houses (companies that design custom chips on behalf of others). Source: Half-year report (Jun 2026) II-2, 20260814000789 · Annual report (Dec 2025) IV-3, 20260311004380
| Region | 2024 revenue | 2025 revenue | 2025 share | H1 2026 | Share |
|---|---|---|---|---|---|
| China | KRW 12.42bn (USD 8.9m) | KRW 10.97bn (USD 7.8m) | 38.5% | KRW 5.53bn (USD 4.0m) | 42.9% |
| US | KRW 9.42bn (USD 6.7m) | KRW 10.13bn (USD 7.2m) | 35.6% | KRW 4.88bn (USD 3.5m) | 37.9% |
| Japan | KRW 1.29bn (USD 0.92m) | KRW 3.44bn (USD 2.5m) | 12.1% | KRW 840m (USD 0.60m) | 6.5% |
| Korea | KRW 2.3bn (USD 1.6m) | KRW 1.92bn (USD 1.4m) | 6.8% | KRW 300m (USD 0.21m) | 2.3% |
| Taiwan & other | KRW 1.64bn (USD 1.2m) | KRW 2bn (USD 1.4m) | 7.0% | KRW 1.32bn (USD 0.94m) | 10.3% |
Source: Annual report (Dec 2025) consolidated note 5, 20260311004380 · Half-year report (Jun 2026) note 5, 20260814000789
- FACT Of 2025 royalties of KRW 10.05bn (USD 7.2m), China accounted for KRW 5.02bn (USD 3.6m) (about 50%) and the US for KRW 3.55bn (USD 2.5m).
- VIEW With about 40% of revenue and about half of royalties coming from China, two views follow the company side by side: "a beneficiary of US–China decoupling" and "a casualty of Chinese regulation".
1-3. A design already in a chip is hard to remove, but the next chip is chosen afresh
VIEW A design already built into a chip is hard to replace while that chip is on sale, so royalties continue. But when a customer designs its next chip, it can move to a competitor or to in-house development, so the company has to be chosen again every time a standard changes. This is the starting point for the moat assessment in Section 3 and for the future paths in Section 10.
FACT The company is widening its product range to prepare for this re-test — first NPU license revenue in H2 2024, FBC marketing starting in 2026, and three new licenses through the Chinese joint venture. However, revenue from the new products is not disclosed separately in filings. Source: Half-year report (Jun 2026) II-1, II-2, II-4, 20260814000789
2. Market and demand — the framework lasts, the amounts follow the cycle
Key point — VIEW The backbone of demand is long-lasting trends such as standard transitions, in-house chip design and on-device AI, but royalty amounts rise and fall with the chip sales cycle, and the size of the video IP market in which the company actually competes has not been confirmed.
COMPANY The company cited a MarketsandMarkets forecast that the overall semiconductor IP market, i.e. the TAM (Total Addressable Market), will grow from about USD 9.3bn in 2025 to about USD 18.6bn in 2032, a CAGR (Compound Annual Growth Rate) of 10.2%. FACT However, it wrote that for the size and market share of the video IP market "there is no authoritative data", and also that "for video IP, the share that chip companies build themselves is still higher than the share sourced externally" (half-year report II-1). VIEW So, as much as market size, what matters is whether the share of external sourcing changes.
| Category | Detail | Tag and source |
|---|---|---|
| Lasting force ① standard transition | AV1 → AV2 (compression efficiency improved by about 20–30%), arrival of APV for professional use | COMPANY Company press release May 12, 2026 |
| Lasting force ② spread of in-house chip design | IT platforms and telecom operators plan their own chips; design houses become a new customer group | COMPANY Annual report IV-3(c) |
| Lasting force ③ on-device AI | The trend of running AI directly on smartphones, cars, cameras and robots → demand for low-power video AI circuits | COMPANY Annual report IV-3(c) |
| Lasting force ④ US–China decoupling | US customers avoid China-linked IP, while China hurries to replace GPUs (Graphics Processing Unit) | COMPANY Annual report IV-3(c) · VIEW Aju Business Daily Jul 31, 2024 |
| Fluctuating force ① chip sales volume | Royalties are linked to the number of customer chips sold | FACT Annual report IV-3(b) |
| Fluctuating force ② exchange rate | Exports are in the 90% range; the company stated that the high exchange rate in 2025 was positive for results | FACT Annual report II-4 · COMPANY IV-3(b) |
FACT US company CEVA, which has the same license-plus-royalty structure, also reported Q1 2026 revenue split 66% license and 34% royalty (10-Q filed with the SEC (Securities and Exchange Commission)). VIEW A license-heavy mix appears to be common in this industry.
3. Competition and moat — not a monopoly, but a re-test with every standard
Key point — VIEW The moat (a defensive wall that competitors cannot easily breach) is "customer references + switching costs that make an installed design hard to remove + speed in releasing new standards"; it shows up in customer numbers and revenue retention but only weakly in margins and royalty growth, so it is seen as 'a narrow moat, re-tested with every standard'.
3-1. Who it competes with
| Competitor | What kind of company | Recent moves |
|---|---|---|
| VeriSilicon (China) | FACT Mainly a chip design-services company that also offers video, NPU and ISP IP | COMPANY Announced supply of AV2-capable IP on Jun 9, 2026 |
| Allegro DVT (France) | FACT A codec IP company that started out in video test streams | COMPANY Announced a real-time AV2 decoder on Jun 16, 2026 |
| ARM China | FACT Arm's joint venture in China, with a history of acquiring video codec IP | Not confirmed |
| In-house development · bundled offers from large IP vendors | FACT In-house development is more common for video IP, and Arm, Synopsys and others bundle video IP with CPUs (Central Processing Unit) and GPUs | — |
Source: Half-year report (Jun 2026) II-1, II-2, 20260814000789 · each company's press releases
3-2. If there is a moat, it should show up in the numbers
| Moat candidate | Evidence | Does it show in the numbers? |
|---|---|---|
| Customer references | FACT 46+ customers, supplying a large IT company's data-centre chip, listed in a foundry's IP catalogue · COMPANY its IP used in a cumulative 2 billion chips (Seoul Economic Daily Apr 28, 2026) | Partly confirmed — customer numbers are holding |
| Switching costs · recurring revenue | FACT Royalties ranged from KRW 10bn (USD 7.1m) to KRW 13.1bn (USD 9.4m) over five years · VIEW A North American customer signed for AV2 following AV1 (Newspim Jun 17, 2026) | Partly confirmed — holding, but not growing |
| Breadth and speed of standards support | FACT H.264, HEVC, VP9, AV1, AVS2, APV and JPEG commercialised · COMPANY AV2 decoder development completed (May 12, 2026) | Competitors also announced AV2 in the same month — the speed gap is narrowing |
| People · patents | FACT 72 R&D staff (37 with master's degrees, 5 with doctorates), 28 domestic and 43 overseas patents | Insufficient evidence — no history of price increases |
| Pricing power | FACT Operating margin 26.0% → 30.3% → 28.2% → 19.5% → 24.5% (2021–2025) → 10.2% (H1 2026) | Does not show |
3-3. Will it last?
| Reasons to think it will last | Reasons to think it could weaken |
|---|---|
| VIEW The AV2 (large North American customer) and APV (Company G in the same region, Edaily Jul 2, 2026) contracts read as cases of references carrying over to the next generation | VIEW With three companies starting on AV2 in the same month, the gap in "speed to market" has narrowed to a few weeks |
| VIEW The more standards there are, the harder it is for chip companies to develop them all in-house, which creates an incentive to source externally | VIEW With royalties 23% below their 2022 peak (2025), it is also possible that the pull of contracts turning into royalties has weakened |
| VIEW The interpretation that US customers' avoidance of China-linked IP is a windfall (Aju Business Daily Jul 31, 2024) points the same way as the +47% in US royalties | VIEW NPU had one customer as of March 2026 (TheElec Mar 24, 2026) · VIEW Filings cannot tell whether the US increase is due to avoidance of China-linked IP |
Next — Part 2 uses the numbers to show what it means for the moat to appear "only weakly" in margins and royalties.
Part 2. What do the numbers say?
Questions for this part — Is growth recurring money, does profit arrive as cash, and where did the money earned go?
4. Revenue — the growth came from one-off license fees
Key point — FACT Revenue grew by about 9.3% a year from 2021 to 2025, but the growth came from licenses (about 19.7% a year), while royalties declined after peaking in 2022 and began to grow again in H1 2026.
| Year | License | Royalty | Services | Total | Royalty share |
|---|---|---|---|---|---|
| 2021 | KRW 8.3bn (USD 5.9m) | KRW 10.71bn (USD 7.7m) | KRW 970m (USD 0.69m) | KRW 19.98bn (USD 14.3m) | 53.6% |
| 2022 | KRW 10.05bn (USD 7.2m) | KRW 13.07bn (USD 9.3m) | KRW 970m (USD 0.69m) | KRW 24.09bn (USD 17.2m) | 54.3% |
| 2023 | KRW 15.65bn (USD 11.2m) | KRW 10.74bn (USD 7.7m) | KRW 1.18bn (USD 0.84m) | KRW 27.57bn (USD 19.7m) | 39.0% |
| 2024 | KRW 15.19bn (USD 10.8m) | KRW 10.52bn (USD 7.5m) | KRW 1.37bn (USD 0.98m) | KRW 27.08bn (USD 19.3m) | 38.8% |
| 2025 | KRW 17.07bn (USD 12.2m) | KRW 10.05bn (USD 7.2m) | KRW 1.35bn (USD 0.96m) | KRW 28.47bn (USD 20.3m) | 35.3% |
| H1 2025 | KRW 6.99bn (USD 5.0m) | KRW 4.38bn (USD 3.1m) | KRW 610m (USD 0.44m) | KRW 11.98bn (USD 8.6m) | 36.6% |
| H1 2026 | KRW 6.6bn (USD 4.7m) | KRW 5.24bn (USD 3.7m) | KRW 1.03bn (USD 0.74m) | KRW 12.87bn (USD 9.2m) | 40.7% |
Source: Annual report (Dec 2023) II-4, 20240313000433 · Annual report (Dec 2025) II-4, 20260311004380 · Half-year report (Jun 2025), 20250814002409 · Half-year report (Jun 2026), 20260814000789. For the 2023 total, the corrected figure from later reports (KRW 27.57bn (USD 19.7m)) is used.
- FACT Royalties fell by about 23%, from KRW 13.07bn (USD 9.3m) in 2022 to KRW 10.05bn (USD 7.2m) in 2025.
- FACT In H1 2026 the trend reversed, with royalties +19.6% and licenses −5.6%, and the rebound was led by US royalties (KRW 1.32bn (USD 0.94m) → KRW 1.94bn (USD 1.4m), +47%). Chinese royalties rose 18%. Source: Half-year report (Jun 2026) note 5, 20260814000789 · preliminary earnings 20260728900271
- VIEW The direction has changed, but the evidence so far covers only two quarters, and there is a seasonal pattern of large licenses bunching at year-end (operating profit of KRW 3.86bn (USD 2.8m) in Q4 2025 → KRW 180m (USD 0.13m) in Q1 2026), so it is too early to call a trend from quarterly numbers alone.
5. Profit — costs are people, so a small wobble in revenue shakes profit a lot
Key point — VIEW Because most costs are fixed costs for R&D staff, changes in revenue fall almost straight through to operating profit (operating leverage), and net profit has moved separately from operating profit because of non-operating items.
| Item (KRW bn, USD m in brackets) | 2021 | 2022 | 2023 | 2024 | 2025 | H1 2025 | H1 2026 |
|---|---|---|---|---|---|---|---|
| Operating profit | 5.20 (3.7) | 7.30 (5.2) | 7.77 (5.5) | 5.28 (3.8) | 6.96 (5.0) | 1.58 (1.1) | 1.31 (0.94) |
| Operating margin | 26.0% | 30.3% | 28.2% | 19.5% | 24.5% | 13.2% | 10.2% |
| Net profit | 6.27 (4.5) | 9.96 (7.1) | −26.69 (−19.1) | 10.01 (7.2) | 5.92 (4.2) | 0.12 (0.09) | 3.47 (2.5) |
| R&D expense ÷ revenue | — | — | — | 39.4% | 39.6% | — | 42.8% |
Source: Annual reports (Dec 2023, 20240313000433) and (Dec 2025, 20260311004380), income statements and II-6 · Half-year reports (Jun 2026, 20260814000789) and (Jun 2025, 20250814002409), income statements and II-6
Why net profit moved separately
- FACT The 2023 net loss was caused by a valuation loss of KRW 38.55bn (USD 27.5m) on redeemable convertible preferred shares (preferred shares that can be redeemed for cash or converted into common shares) issued to the largest shareholder, and no cash went out. VIEW Excluding this, net profit would have been around KRW 11.8bn (USD 8.4m).
- FACT The company stated that the fall in 2025 net profit was due to an equity-method loss (its share of the losses of a company it has invested in) of KRW 3.18bn (USD 2.3m) on the Chinese joint venture and a loss on disposal of KRW 440m (USD 0.31m) (20260203900356).
- FACT Of H1 2026 pre-tax profit of KRW 3.96bn (USD 2.8m), operating profit was KRW 1.31bn (USD 0.94m), and the rest was other income of KRW 1.34bn (USD 0.96m) and finance income of KRW 1.81bn (USD 1.3m). VIEW As a result, net profit for the last 12 months (about KRW 9.28bn (USD 6.6m)) looks larger than the strength of the core business, and it is safer to judge the core business by operating profit.
The pace of costs
- FACT Operating expenses rose by +KRW 2.01bn (USD 1.4m) / +KRW 3.01bn (USD 2.1m) / +KRW 2bn (USD 1.4m) in 2022–2024 and fell by KRW 290m (USD 0.21m) in 2025, an average increase of about KRW 1.68bn (USD 1.2m) a year over the four years.
- VIEW Unless revenue grows by about KRW 1.7bn (USD 1.2m) or more a year, profit tends to fall. In H1 2026, costs rose 11.2%, faster than revenue (+7.4%), and if that pace continues in H2, full-year 2026 costs would be about KRW 23.9bn (USD 17.1m) (the starting point for the cost assumption in 10-2).
6. Customers — concentration, and a joint venture revealed at the end of the notes
Key point — FACT Concentration among top customers is high (top 6 at 59.1% in 2025, top 5 at about 56.9% in H1 2026), and one of the customers accounting for 10% or more of revenue in 2024–2025 was a Chinese joint venture in which the company itself had invested.
| Customer (anonymised) | 2024 | 2025 | H1 2026 |
|---|---|---|---|
| Company A | KRW 4.04bn (USD 2.9m) | KRW 3.42bn (USD 2.4m) (12.0%) | KRW 2.07bn (USD 1.5m) (16.1%) |
| Company B | KRW 2.19bn (USD 1.6m) | KRW 3.34bn (USD 2.4m) (11.7%) | KRW 2.01bn (USD 1.4m) (15.6%) |
| Company C | KRW 4.86bn (USD 3.5m) (18.0%) | KRW 2.98bn (USD 2.1m) (10.5%) | Below 10% |
Source: Annual report (Dec 2025) consolidated notes 5 and 31, 20260311004380 · Half-year report (Jun 2026) notes 5, 7 and 25, 20260814000789
- FACT The joint venture's revenue in the related-party transactions table (2024: KRW 4.86bn (USD 3.5m), filed as 4,862,950 thousand won; 2025: KRW 2.98bn (USD 2.1m), filed as 2,975,189 thousand won) matches Company C's revenue down to the thousand-won digit. VIEW Company C is therefore judged to be the joint venture, meaning about KRW 7.84bn (USD 5.6m) over two years (about 14% of revenue in that period) came from an entity in which the company holds a stake.
- FACT Receivables from this joint venture were KRW 4.98bn (USD 3.6m) as of Jun 30, 2026 (trade receivables and contract assets of KRW 4.62bn (USD 3.3m) + other receivables of KRW 350m (USD 0.25m), with a rounding difference); the carrying amount of the KRW 3.59bn (USD 2.6m) investment was zero at end-2025, and its 2025 net loss was KRW 2.31bn (USD 1.6m). VIEW The joint-venture partner has been reported to be China's Innosilicon (Joongang Economy News Sep 4, 2026).
- FACT The fact on the other side — in H1 2026, total revenue rose 7.4% even though revenue from the joint venture was zero.
- VIEW With annual revenue on the scale of KRW 28.5bn (USD 20.4m), one or two licenses worth KRW 3bn (USD 2.1m) can swing a year's operating profit substantially.
7. Quality of earnings — the gap that opened between profit and cash
Key point — VIEW Over five years combined, profit was broadly converted into cash, but the last three years show a clear deterioration, and because the cause is only partly explained by rising contract assets and receivables from the joint venture, a 'caution' flag is attached.
| Year (KRW bn, USD m in brackets) | Operating profit | Operating cash flow | Operating cash flow ÷ operating profit | Free cash flow (after capex and leases) | Of which interest received |
|---|---|---|---|---|---|
| 2021 | 5.20 (3.7) | 9.85 (7.0) | 189% | 8.59 (6.1) | 0.30 (0.21) |
| 2022 | 7.30 (5.2) | 15.18 (10.8) | 208% | 13.34 (9.5) | 0.63 (0.45) |
| 2023 | 7.77 (5.5) | 5.53 (4.0) | 71% | 3.12 (2.2) | 1.42 (1.0) |
| 2024 | 5.28 (3.8) | 6.76 (4.8) | 128% | 5.27 (3.8) | 1.66 (1.2) |
| 2025 | 6.96 (5.0) | 3.34 (2.4) | 48% | 0.97 (0.69) | 1.12 (0.80) |
| Five-year total | 32.51 (23.2) | 40.66 (29.0) | 125% | 31.29 (22.3) | 5.13 (3.7) |
| H1 2026 | 1.31 (0.94) | 2.66 (1.9) | 203% | — | — |
Source: Calculated from the consolidated cash flow statements in the annual reports (Dec 2023, 20240313000433) and (Dec 2025, 20260311004380) and the half-year report (Jun 2026, 20260814000789)
- VIEW "Core free cash flow" excluding interest averaged about KRW 5.2bn (USD 3.7m) over five years, but about KRW 1.7bn (USD 1.2m) over the last three years.
- FACT Contract assets (revenue already recognised but not yet billed) rose from KRW 8.44bn (USD 6.0m) at end-2024 to KRW 10.79bn (USD 7.7m) at Jun 30, 2026, and 22% (KRW 4.98bn (USD 3.6m)) of total receivables of KRW 22.27bn (USD 15.9m) relate to the joint venture. Source: Half-year report (Jun 2026) notes 7, 9 and 25, 20260814000789
- FACT Under a USD 5m contract signed with a Chinese semiconductor company in September 2024, product delivery has been completed but only USD 2m has been received; the third instalment (USD 1.5m) is due "two years after the first payment + after delivery of Product B", and the fourth (USD 1.5m) "three years after the first payment". Source: Half-year report (Jun 2026) XI-1, 20260814000789 · 20240925900373
- VIEW The widening time lag is read as the result of more contracts that book license revenue at once while collecting payment over several years. The lag itself is not a fault, but the fact that a large part of the money still to be collected is tied to a loss-making joint venture raises the collection risk.
- FACT The audit opinions for 2023–2025 were all unqualified, but both auditors named revenue recognition ("occurrence of revenue", "revenue recognition for IP and royalties") as a key audit matter. Source: Annual report (Dec 2025) V-1, 20260311004380
8. Financial strength and capital allocation — no debt, but commitments remain
Key point — FACT The company has no borrowings from financial institutions and financial assets of KRW 67.99bn (USD 48.6m), but a KRW 10bn (USD 7.1m) exchangeable bond and an obligation to make further investment in the joint venture remain, and the treasury shares it acquired have not been cancelled.
| Net cash (Jun 30, 2026) | Amount |
|---|---|
| Cash KRW 11.92bn (USD 8.5m) + deposits KRW 37.72bn (USD 26.9m) + discretionary investment accounts KRW 11.61bn (USD 8.3m) + other equity securities KRW 6.73bn (USD 4.8m) | Financial assets KRW 67.99bn (USD 48.6m) |
| Exchangeable bond (face value) | −KRW 10bn (−USD 7.1m) |
| Net cash | KRW 57.99bn (USD 41.4m) (KRW 51.26bn (USD 36.6m) excluding other equity securities, which may not be easy to turn into cash quickly) |
Source: Half-year report (Jun 2026) consolidated balance sheet · notes 8 and 23, 20260814000789
Remaining commitments
- FACT Exchangeable bond (a bond that can be exchanged at a set price for shares held by the company) of KRW 10bn (USD 7.1m) — exchange price KRW 19,541 (USD 13.96), 511,744 treasury shares (2.40% of issued shares), 0% interest, maturity Dec 17, 2030, investors' early-redemption (put) right exercisable from Dec 17, 2027.
- FACT Stock options (rights to acquire shares at a set price) for 342,600 shares (1.60%), exercise price KRW 8,374 (USD 5.98).
- FACT The remaining investment in the joint venture (about half of a total of CNY 36m, which was KRW 6.75bn (USD 4.8m) at the time of the acquisition decision) has been postponed by mutual agreement, and the scheduled date for 100% payment is Oct 20, 2026. Source: Half-year report (Jun 2026) note 24 · XI-1, 20260814000789
- FACT Deferred tax assets (amounts that can be deducted from future taxes) stand at KRW 7.9bn (USD 5.6m). VIEW The 12% tax-rate assumption presumes that such tax credits continue.
Where did the money go?
- FACT The largest shareholder, Hantu Semiconductor Investment, is 100% owned by a private equity limited partnership, and 2,554,683 shares (about 12% of issued shares) are subject to a pledge agreement.
- FACT In 2024 the company acquired 766,187 treasury shares for KRW 12.93bn (USD 9.2m) but did not cancel them, and assigned 511,744 of them as the shares underlying the exchangeable bond. A plan for the remaining 254,443 shares must be decided by Sep 5, 2027 (half-year report I-4).
- FACT The dividend policy is 20–25% of separate (parent-only) net profit; the 2025 consolidated payout ratio was 40.18% (DPS (dividend per share) of KRW 116 (USD 0.08)), and the corporate value-up plan (a voluntary filing under Korea's "Value-up" program) of Mar 25, 2026 stated only "gradual expansion", with no numerical targets. The company set up an audit committee on Mar 24, 2026, and on Dec 5, 2025 an executive disposed of 20,000 of their own shares on the market.
- VIEW Being debt-free, raising dividends and setting up an audit committee are positives, but taken together with the use of treasury shares for financing rather than cancellation and a largest shareholder owned by a private equity fund, the alignment of interests with shareholders is judged 'medium'.
- FACT A review of all 30 filings over the last 12 months found no rights offering, convertible bond, change of largest shareholder, litigation or emphasis of matter in the audit report; the three items worth noting are the exchangeable bond issue (20251208000387), a correction to the joint-venture investment filing (20251017900336 — stake 47.75% → 33.89%) and the executive's share disposal (20251211000390).
Next — the facts from Parts 1 and 2 are sorted into four boxes, to see how the boxes connect.
Part 3. Interim summary
9. SWOT (Strengths, Weaknesses, Opportunities, Threats)
| Strengths (S) | Weaknesses (W) |
|---|---|
| ① Next-generation standard contracts — AV2 (large North American customer) and APV (Company G) (Section 3) | ① Stagnant royalties — KRW 13.07bn (USD 9.3m) in 2022 → KRW 10.05bn (USD 7.2m) in 2025 (Section 4) |
| ② Broad customer base — 46+ in 2025 (Section 1) | ② Customer concentration — top 6 at 59.1% (Section 6) |
| ③ Financial capacity — no borrowings, financial assets of KRW 67.99bn (USD 48.6m) (Section 8) | ③ Cost burden — R&D expense at 42.8%, H1 operating margin of 10.2% (Section 5) |
| ④ Royalty rebound under way — H1 +19.6%, US +47% (Section 4) | ④ Weaker cash conversion — operating cash flow ÷ operating profit of 48% (Section 7) |
| Opportunities (O) | Threats (T) |
| ① AV2 commercialisation begins — launches by major IP vendors in June 2026 (Section 3) | ① Competitors launch AV2 at the same time — VeriSilicon, Allegro DVT (Section 3) |
| ② APV ecosystem expanding — VIEW Samsung Electronics, Google and Qualcomm taking part, planned for Company G's flagship (Edaily Jul 2, 2026) | ② In-house development and bundling — in-house development is more common (Section 2) |
| ③ A local channel in China — three new licenses via the joint venture (Section 1) | ③ China factor — 42.9% of revenue, joint-venture losses and receivables of KRW 4.98bn (USD 3.6m) (Section 6) |
| ④ VIEW US customers' move away from China-linked IP (Section 3) | ④ Factors outside the business — private-equity largest shareholder, 2,554,683 shares pledged (Section 8) |
How the boxes connect — VIEW
- Strengths: ① and ② were built up over time, ④ is the first sign of them starting to turn into royalties, and ③ is what lets the company hold out through the 2–3 years in between.
- The weaknesses share one root. As royalties shrank, the company came to rely more on licenses that must be won anew every year (①); being driven by a few large contracts increases concentration (②); development costs keep flowing out in the meantime (③); and more contracts with payments spread over time mean cash arrives later (④). If ① eases, the others may loosen along with it.
- Opportunities and threats interlock. Opportunity ① is the same opportunity for competitors, making it the other side of the coin from Threat ①, and Opportunities ③ (into China) and ④ (avoidance by customers outside China) are winds blowing from opposite directions, so it may not be easy to benefit strongly from both at once.
Part 4. Where is it heading?
Question for this part — How many paths are open to the company, and what will show which path it is taking?
10. Three possible futures — Bull, Base and Bear
Key point — VIEW The next 3–5 years will split on two questions — "Do new standard contracts turn into royalties?" and "Do video AI circuits stand up as a second pillar?" — and translated into 2027 numbers, revenue spreads between KRW 27bn (USD 19.3m) and KRW 39bn (USD 27.9m), and operating profit between KRW 2.5bn (USD 1.8m) and KRW 13.5bn (USD 9.6m).
10-1. The three paths and their confirming signals (3–5-year view)
| Path | One-line picture VIEW | Core moat × environment VIEW | Confirming signals VIEW |
|---|---|---|---|
| Upper = Bull | New standard contracts turn into royalties, and video AI circuits stand up as a second pillar | Stronger moat × change in industry conditions (standard transition + on-device AI) | Double-digit royalty growth for two years in a row · royalty share recovering to 50% or more · two or more new NPU/AI ISP contracts |
| Middle = Base | The core codec business keeps winning contracts with each standard, but AI circuits stay in a supporting role | Moat maintained × ordinary environment | Royalty share 35–45% · top customers 50–60% · R&D expense around 40% — read together with amounts (10-2) |
| Lower = Bear | Next-generation standard slots are shared with competitors and in-house development, and the China burden and costs pile up together | Weaker moat × headwinds (regulation, slowing demand) | Licenses down two years in a row · R&D expense staying above 45% · larger equity-method losses · early-redemption claims on the exchangeable bond |
VIEW Royalties are used as the signal because they only arrive when customers' chips are actually sold, so they show most directly "whether contracts have become products", and a fall in licenses is used because it is the earliest sign that "the power to win new contracts" has weakened.
10-2. In 2027 numbers
| Item | Bull | Base | Bear |
|---|---|---|---|
| Assumptions | Royalties from the North American customer's smartphone and automotive chips ramp up in earnest, two or more new NPU contracts | Royalties recover by 10–15% a year, year-end seasonality repeats, joint-venture receivables are collected normally | Loss of one large customer + Chinese regulation, flat royalties, impairment of joint-venture receivables |
| License / royalty / services | KRW 21.5bn (USD 15.4m) / KRW 15bn (USD 10.7m) / KRW 2.5bn (USD 1.8m) | KRW 18bn (USD 12.9m) / KRW 12.5bn (USD 8.9m) / KRW 2.5bn (USD 1.8m) | KRW 14bn (USD 10.0m) / KRW 11bn (USD 7.9m) / KRW 2bn (USD 1.4m) |
| Revenue | KRW 39bn (USD 27.9m) | KRW 33bn (USD 23.6m) | KRW 27bn (USD 19.3m) |
| Operating expenses | KRW 26bn (USD 18.6m) | KRW 25.6bn (USD 18.3m) | KRW 24bn (USD 17.1m) (cost cuts) |
| Operating profit | KRW 12.5bn (USD 8.9m) to KRW 13.5bn (USD 9.6m) (about 33%) | About KRW 7.4bn (USD 5.3m) (about 22%) | KRW 2.5bn (USD 1.8m) to KRW 3.5bn (USD 2.5m) (about 11%) |
| After-tax operating profit (12% tax rate assumed) | KRW 11bn (USD 7.9m) to KRW 11.9bn (USD 8.5m) | About KRW 6.5bn (USD 4.6m) | KRW 2.2bn (USD 1.6m) to KRW 3.1bn (USD 2.2m) |
| Royalty share (calculated) | About 38% | About 38% | About 41% |
Source: VIEW estimate
- VIEW The rule behind the Base scenario's operating expenses of KRW 25.6bn (USD 18.3m) — "for 2026, the H1 pace (about KRW 23.9bn (USD 17.1m)); for 2027, the four-year average increase (about KRW 1.68bn (USD 1.2m))".
- VIEW The time horizons differ. The "royalty share recovering to 50%" in 10-1 describes the picture 3–5 years out, and even in the 2027 Bull scenario the share is about 38%. According to the company, AV2 and APV royalties are 2–3 years away, so almost none are included for 2027.
- VIEW Shares alone cannot separate the scenarios. In the Bear scenario, licenses fall more sharply, so the royalty share actually rises to about 41%; Base-scenario signals must therefore always be checked together with amounts.
10-3. What recent news adds
VIEW There have been no new filings since the half-year report, and all recent news consists of company announcements and press reports without amounts, so what can be confirmed in numbers still only runs to H1. Even so, signs of a widening customer base and wider uses add material to the Bull side.
| Date | News | Tag |
|---|---|---|
| Jun 10 | 8K-class video IP license agreement with Nasdaq-listed Ambarella (amount undisclosed) | VIEW Newspim |
| Aug 20 | Wider adoption of 'WAVE-J', IP for photo and video storage, and launch of 'WAVE-JP', which adds APV functions | COMPANY Newspim |
| Sep 3 | Automotive video IP obtained ISO (International Organization for Standardization) 26262 ASIL (Automotive Safety Integrity Level)-B automotive functional-safety certification; being adopted by 3 of the world's top 5 automotive semiconductor companies | COMPANY Pinpoint News |
| Sep 4 | Receiving video IP royalties from China's Rockchip and D-Robotics (chips for robots) (remarks by a company official) | VIEW Joongang Economy News |
| Aug 14 – Sep 16 | No further filings after the half-year report | FACT DART filing list search |
- VIEW The automotive and robot news points the same way as the Bull scenario's "second pillar" in 10-1, but there are no amounts, and automotive IP tends to take a long time to reach royalties, so it is too early to count them as signals. VIEW The certification article also noted that actual customer adoption and mass production need to be confirmed separately.
- VIEW Royalties from Chinese robot chips are good news, but they push the China share (42.9%) higher, so they share a root with the regulatory and joint-venture receivables risks (Section 7). Whether the company's IP is in the small robot chips mentioned in the article has not been directly confirmed.
10-4. Where it stands now
VIEW The company appears to stand on the Base path with two doors to the Bull path open (the AV2 and APV contracts), and recent news of automotive certification and robot-chip royalties (10-3) has been added, but none of it has yet been confirmed in amounts. However, it will take 2–3 years for those doors to turn into revenue, and competitors have opened the same doors at the same time, so the possibility of the Bear path needs to be watched with equal weight.
Part 5. The other side, and what to check
11. Seen from the other side — the bear case and the size of the risks
[VIEW — in the role of a bear] "Royalties have fallen for three years in a row, and about KRW 7.8bn (USD 5.6m) of the licenses that propped up revenue in that time went to a loss-making joint venture the company put money into, with about KRW 5bn (USD 3.6m) still uncollected. Operating cash flow shrank to a fifth in three years, and both auditors named revenue recognition as a key audit matter. In AV2, the weapon of being 'first' has been blunted, 43% of revenue comes from China, and the largest shareholder is a company 100% owned by a private equity limited partnership."
| Bear argument | Can it be rebutted? VIEW | Evidence |
|---|---|---|
| Royalties down three years in a row | Can be rebutted | FACT H1 2026 +19.6%, US +47% · COMPANY Q1 +31.6% (Seoul Economic Daily Apr 28, 2026) |
| Revenue owes itself to the joint venture | Can be rebutted | FACT Revenue +7.4% in H1 2026 despite zero joint-venture revenue |
| License-heavy revenue | Can be rebutted | FACT CEVA, with the same structure, is also 66% license |
| Three-year decline in cash conversion · joint-venture receivables | Cannot be rebutted | VIEW Filings alone cannot determine whether they will be collected |
| Chinese regulation | Not a matter of rebuttal but of probability | VIEW A variable the company cannot control |
| Narrowing speed advantage in AV2 | Not yet known | VIEW Contract amounts are not disclosed |
| Risk | Impact if it happens (rough) |
|---|---|
| Business — delay of a large license or loss of one top customer (around KRW 3bn (USD 2.1m) a year) | VIEW Operating profit about −KRW 3bn (−USD 2.1m) = about 40% of annual operating profit |
| Regulation — US export controls extended to IP bound for China | VIEW If even half of China revenue of about KRW 11bn (USD 7.9m) is blocked, operating profit falls to around KRW 1bn (USD 0.71m) or below |
| Quality of earnings — failure to collect joint-venture receivables of KRW 4.98bn (USD 3.6m) | VIEW A one-off loss of up to about KRW 5bn (USD 3.6m) (about 70% of annual operating profit) |
12. Checking calendar — dated items only
| Date | Event | What to check |
|---|---|---|
| Oct 20, 2026 | Scheduled date for 100% payment of the joint-venture investment (postponed by mutual agreement) | Whether further investment is made, any filing extending the postponement, subsequent equity-method results |
| Around October 2026 | Conditions for the third payment (USD 1.5m) under the September 2024 contract fall due | Whether it has been received, per the Q3 report XI-1 (date of the first payment not confirmed) |
| Early November 2026 · around Nov 16 | Q3 preliminary earnings · Q3 report | Cumulative royalties, contract assets, joint-venture receivables |
| Early February · March 2027 | Full-year preliminary earnings and dividend · 2026 annual report (the last of three years under a designated audit, i.e. an auditor assigned by the regulator) | Whether royalties exceed KRW 11bn (USD 7.9m), customer concentration, audit opinion |
| Sep 5, 2027 | Deadline for a plan for the remaining 254,443 treasury shares | Whether they are cancelled |
| Sep 24, 2027 | End of the September 2024 contract (fourth payment) | Whether the full amount is collected |
| Oct 18 – Nov 17, 2027 | First early-redemption window for the exchangeable bond (redemption date Dec 17) | Likelihood of KRW 10bn (USD 7.1m) being redeemed |
Source: Half-year report (Jun 2026) XI-1, I-4, note 24, 20260814000789 · Annual report (Dec 2025) IV-4, V-1, 20260311004380 · estimated from last year's filing dates (earnings schedule)
13. Evidence that would change the view
| Direction | Evidence | Where to check |
|---|---|---|
| Positive signals | Cumulative royalties through Q3 2026 holding at +20% or more year on year | Q3 report |
| Receipt of the third payment under the September 2024 contract + lower joint-venture receivables | Q3 report XI-1 and notes | |
| 2026 operating cash flow ÷ operating profit of 70% or more | 2026 annual report | |
| Two or more new NPU/AI ISP licenses announced | Filings and company announcements | |
| Negative signals | Full-year 2026 royalties below KRW 11bn (USD 7.9m) | February 2027 preliminary earnings · annual report |
| Bad-debt or impairment charges on joint-venture receivables, or non-receipt of the third payment for a stated reason | Q3 report notes and XI-1 | |
| Operating cash flow below 50% of operating profit for two years in a row | 2026 annual report | |
| US export controls blocking licenses bound for China, or a sharp drop in China's share of revenue to below 25% in a half-year | US Department of Commerce announcements · revenue by region | |
| A rights offering or convertible bond issue, or a large discounted disposal of the largest shareholder's stake | DART material-event reports | |
| Serious negative signal | A modified audit opinion or correction filing related to revenue recognition | Audit report · correction filings |
14. Three questions
14-1. Three closing questions
| Question | Short answer | Details |
|---|---|---|
| 1. What success requires | VIEW Double-digit royalty growth for two years in a row and cash conversion recovering to 70% are essential; collecting receivables and holding on to China revenue are what cushion the lower end | |
| 2. What would cause failure | VIEW The royalty rebound proving short-lived, with receivables impairment and weak cash conversion arriving together. If regulation or a discounted disposal is added, the Bear path | Sections 11 and 13 |
| 3. Evidence that would change the view | VIEW The positive- and negative-signal table in Section 13 | Section 13 |
Appendix A. Sources
DART filings — Half-year report (Jun 2026) 20260814000789 · Preliminary earnings (Q2 2026) 20260728900271 · Quarterly report (Mar 2026) 20260515000396 · Preliminary earnings (Q1 2026) 20260428900323 · Corporate value-up plan 20260325900274 · Results of annual general meeting (corrected) 20260324900952 · Appointment of independent director 20260324000748 · Annual report (Dec 2025) 20260311004380 · Submission of audit report 20260311901619 · Executive shareholding report 20260204000097 · Preliminary earnings (Q4 2025) 20260203900355 · Change of 30% or more in revenue or profit/loss structure 20260203900356 · Cash dividend decision 20260203900340 · Results of securities issuance 20251217900745 · Results of treasury share disposal 20251217000539 · Executive shareholding reports 20251211000377·387·390 · Decision to issue exchangeable bonds 20251208000387 · Decision to dispose of treasury shares 20251208000389 · Quarterly report (Sep 2025) 20251114000310 · Preliminary earnings (Q3 2025) 20251104900065 · Decision to acquire shares of another company (corrected) 20251017900336 · Half-year report (Jun 2025) 20250814002409 · Decision to transfer shares of another company 20241227000652 · Single sales/supply contract 20240925900373 · Annual report (Dec 2023) 20240313000433 · Filing list search (Aug 1 – Sep 16, 2026)
Press and press releases — Newspim Feb 4, 2026 · May 12 · Jun 10 · Jun 17 · Aug 20 · Edaily · Etoday Jul 2, 2026 · Pinpoint News Sep 3, 2026 · Chips&Media press release May 12, 2026 · VeriSilicon press release Jun 9, 2026 · Allegro DVT press release Jun 16, 2026 · Seoul Economic Daily Apr 28, 2026 · Joongang Economy News Jul–Sep 2026 (Rockchip and D-Robotics, Sep 4) · Aju Business Daily Jul 31, 2024 · TheElec Mar 24, 2026
Market and peers — CEVA 10-Q (Q1 2026) and press release (Aug 10, 2026) · MarketsandMarkets (as cited by the company)
Source conflict — Newspim (Feb 4, 2026) reported "Q4 2025 revenue of KRW 7.1bn (USD 5.1m) and operating profit of KRW 900m (USD 0.64m)", which differs from the DART preliminary earnings filing (revenue of KRW 9.87bn (USD 7.0m), operating profit of KRW 3.86bn (USD 2.8m)), so the original filing was used.
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