System-on-chips.

Core Logic is a small a company with just 90 or so employees housed in a tower block in southern Seoul. It isn't what you'd expect of a leading Korean technology company like Samsung Electronics, LG Electronics or even Hynix. It doesn't have huge manufacturing plants nor is it part of one of

the giant Korean chaebols. Yet, it is one of the hottest semiconductor firms not only in Korea but in all of Asia. Core Logic designs chips that are embedded with feature-rich systems, or software, in mobile phones and PDAs. Its chips are installed in 70 percent of all mobile phones sold in China and nearly 40 percent of cell phones sold in Korea. Core Logic symbolizes Korea's arrival as a serious player in the System-on-Chip (SoC) arena.

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Essentially, SoC is a non-memory integrated circuit where solutions are embedded, written on or built into the chip itself, instead of using software to drive the chip and the product itself. Korea has long been a leader in commodity semiconductors, such as dynamic random access memory chips (DRAMs), while U.S. companies Intel and AMD have dominated the higher-end semiconductors like microprocessors. Taiwan's semiconductor foundries TSMC and UMC have dominated made-to-order or customized chips. Now, this neat compartmentalization of the semiconductor industry is about to end.

Korea wants to be at the cutting edge of semiconductors and that means taking a page from the U.S. model. There, many of the newest players are "fabless" design companies, which means they don't have a silicon wafer fabrication plant of their own. These companies, such as Broadcom and PMC-Sierra, design semiconductors that are then custom-made by foundries in Taiwan, Singapore and Malaysia.

The "sweet spot" that all these designers are aiming for are system-on-chips because they dramatically enhance not just the value of the chip but also the value of the product that the chip drives. "SoC is a misnomer in some ways because there is more than just a system etched on to the chip that we design," says Kang Young Tae, vice president of Core Logic. "We actually integrate different functions and features as well as customized solutions for our customers on the chips." Because applications like third-generation mobile communications devices are becoming so complex, there is a need to provide more than just a chip for Nokia, Samsung or Motorola to slap into their newest phones.

The Korean government's game plan in the SoC area is to develop multimedia chips for mobile phones, PDAs and other communications devices and make Korea one of the world leaders in the field by the end of 2007. Since the key to SoC is design and architecture, Korean universities and research centers are devoting resources to train local semiconductor designers who can create their own intellectual property instead of buying patents from U.S. or Japanese firms.

The government and industry are helping build a local cluster of chip design, testing and manufacturing activities. The industry also is working closely with foundries inside Korea and elsewhere in Asia to develop SoC technology. Kang says his firm and others like it are working on SoCs that will empower handsets for WiBro, digital multimedia broadcasting devices and other multimedia devices. As more functions get added and there is convergence between all sorts of consumer electronics technology, there will be a need to develop more function-rich chips, he says.

The competitive landscape is truly global. Core Logic already competes with Texas Instruments, STMicroelectronics of Europe and Japan's Renesis, a joint venture between Mitsubishi and Hitachi. What differentiates the smallish Core Logic, its executives say, is that it understands exactly what customers want from a video-ready 3G phone or a camera phone. Of course, they have the Korean market in which to experiment.

How big will this sector become? The Ministry of Information and Communications sees it as a key growth driver for next-generation semiconductor manufacturing as giant DRAM makers like Samsung Electronics and Hynix jump into the game. The MIC projects that by 2010, the SoC market in Korea is expected to create $75 billion in production. From the current modest start, great things could come.