LG seeks to be major fabless chipmaker

LG Electronics is moving to transform itself into a major fabless chipmaker by hiring more qualified chip designers and giving authority to related divisions.

The Korea's technology giant has strengthened fabless semiconductor manufacturing in a bid to gain a competitive edge in core technologies.

Under "fabless" production, instead of making the chips in-house, manufacturers farm out the manufacturing to outside fabrication facilities, many of them in Asia.

On Friday, LG officials said that the combined number of its chip designers for use in smartphones and Web-connected televisions exceeded 900 because the company's chief executive Koo Bon-joon has stressed the importance of more independence and dignity in the parts and finished-goods businesses.

But it seems unclear how soon LG Electronics will be able to compete with major fabless chipmakers such as Broadcom.

One interesting point, however, is that LG has decided to use LG-branded system chips in its upcoming Web-enabled TVs to better power the premium sets.

According to the officials, LG Electronics' research center has completed the development of its latest system chips for use in Web-based TVs. The chip has been named the H13. H stands for home entertainment division at LG, while 13 means the year 2013 as LG's home entertainment handles TV business.

The new chip will be exhibited in January's International Consumer Electronics Show (ICES) in the U.S. desert city of Las Vegas, according to the officials.

Since LG doesn't have its own chip-making facilities, Taiwan's TSMC will produce the LG-designed chips with using a finer 28-nanometer processing technology.

TSMC is the planet's biggest foundry chipmaker. Foundries became the cornerstone of the fabless model, providing a non-competitive manufacturing partner for fabless companies

An LG spokesman declined to comment about its renewed partnership with TSMC citing the sensitivity of the issue.

''This is really impressive because LG Electronics spends more for core technologies such as chip designs to gain more leverage and to lower parts supplement risks. In a real sense, LG has already became as the nation's top fabless chipmaker in terms of workforces,'' said a high-ranking executive from one of LG's local suppliers.

In a related note, some 550 number of its chip designers for use in smartphones not televisions is very close to developing the in-house mobile application processor (AP), which is a crucial component to power smartphones. LG's partner for its mobile APs will also be TSMC.

''Selling finished goods with good pricing is an old strategy. We should sell solutions and core technologies. That's why LG is investing more for in-house technologies for balanced business structures regardless of market situations,'' said the unnamed executive.

But the main problem is LG-branded chips for smartphones and televisions are being entirely used in LG products.

If LG wants to grow its parts-related business, should the company expand its client bases like its rival Samsung Electronics.

Maybe, this is why LG Electronics CEO Koo Bon-joo has given more authority to chip developers as part of a mid-to-long-term strategy.