Foxconn Joins Forces With Kneron In $49 Million Bid To Rival Nvidia's AI Dominance

The semiconductor industry has emerged as one of the biggest pandemic-era winners, as the demand for chips skyrocketed in tandem with the rising use of electronic gadgets. 

The gradual shift toward electric vehicles and integration of artificial intelligence (AI) across industries worldwide has allowed the semiconductor industry to remain spirited in the face of global recession fears. 

Nvidia Corp. NVDA is the most successful semiconductor manufacturer post-pandemic, with the company's shares surging more than 230% over the past year, crossing the coveted $1 trillion market cap. Nvidia's artificial intelligence computing chips have been a game changer. 

But many claim that Nvidia's stock is grossly overvalued, with billionaire polymath Elon Musk stating that the company's monopoly in the AI chips market will likely end soon. 

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Kneron: Rivaling Nvidia's Market Dominance  

Founded in 2015, Kneron is an up-and-coming full-stack edge AI chip manufacturer based in San Diego. The startup is one to watch, as its chipsets have the potential to compete with Nvidia's graphic processing units (GPUs), challenging the latter's monopoly in the artificial intelligence sector. 

"The need for chips in the automotive market is robust, and the rapid growth of AI in generative applications is driving the need for AI chips," Kneron Founder and CEO Albert Liu said. "Kneron is strategically positioned with unique advantages in these areas."

Nvidia specializes in producing graphics processing units (GPUs). The GPUs are employed in servers and data centers to manage the substantial computational demands necessary for training artificial intelligence systems with vast datasets. Numerous AI services, including ChatGPT, are hosted in the cloud.

In contrast, Kneron focuses on developing chipsets designed for use in consumer electronics and automobiles, enabling AI processing at the "edge." This implies that AI operations occur directly on the device rather than relying on cloud-based processing. Many industry experts lauded Kneron's approach, stating that its chipsets are better in terms of security and speed because AI applications don’t have to depend on cloud-based resources.

Kneron's chips, termed neural processing units, are cheaper than GPUs, which gives the company a significant advantage over Nvidia. 

"So that will force people to switch into the more low-cost (NPUs)," Liu said.

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Latest Funding Round 

Kneron announced on Sept. 26 that it secured additional funding to accelerate the commercialization of its artificial intelligence chips. 

In an extension to its Series B funding round, the company raised an additional $49 million from several renowned venture capital firms and industry giants such as Horizon Ventures and Foxconn Technology Group, among others. In total, Kneron raised $97 million in its Series B funding round. 

Kneron aims to leverage the substantial investor enthusiasm surrounding artificial intelligence and the foundational chip technology driving it. 

The company's latest funding round comes on the heels of its latest KL730 chip launch, engineered for automotive applications with the potential to facilitate autonomous driving.

"With this tranche in funding, Kneron is specifically focused on expanding its efforts in enabling AI to make autonomous driving a reality," the company stated in a press release. 

Foxconn Partnership 

Taiwan-based Foxconn, the world's largest electronics contract manufacturer, invested in Kneron in its latest funding round. 

As part of Foxconn’s investment, the companies are joining forces to expedite the implementation of advanced AI solutions across various domains, notably in the automotive industry. 

Together, they intend to develop an exceptionally lightweight AI chip capable of running generative pre-trained models, commonly known as GPT models, directly from the cloud. The GPT models serve as the foundation for a wide range of AI applications, including technologies like ChatGPT.

"Powerful GPT models are mostly still running out of cloud data centers. This results in a slew of issues, including high latency, high data transfer costs and inadequacies in user privacy and security protection," Liu said. "Kneron's solutions resolve these industry bottlenecks by creating hyper-efficient AI chips. We're thrilled to announce the completion of our Series B funding announcement to continue our work in making AI technology more secure, accessible and energy-efficient." 

Headwinds

Kneron's chips are produced by Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest chip manufacturer. But with only one supplier, Kneron is exposed to the ramifications of the rising tensions between the U.S. and China. 

Ongoing concerns revolve around the potential for China to take over Taiwan, where TSMC is headquartered, and disrupt the global supply of the company's semiconductors.

To reduce this risk, Kneron plans to diversify its production footprint to manufacturers across the U.S. and Europe. 

Kneron, a relatively new startup, faces stiff competition with leading industry giants including Qualcomm Inc. and MediaTek Inc., which are designing their own versions of AI-powered on-device chips as the AI industry heats up. 

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