[Gangnam Perspective] Technology Is Not to Blame

Recently, the Korea Composite Stock Price Index (KOSPI) hit a historic 5,000-point milestone, and the Korea Securities Dealers Automated Quotations (KOSDAQ) also surpassed 1,000 points for the first time in four years. Together, these moves mark another milestone showing that Korea’s capital market has stepped up to a new level.
A so‐called bull market is meaningful not only because it raises the potential for individuals to grow their assets. It also provides a structural foundation that can drive a virtuous cycle in the ecosystem of small and medium-sized enterprises and venture businesses. Companies that have strong technology but are struggling with temporary cash shortages or deteriorating management can use the liquidity of the capital market to put out immediate fires and prepare mid- to long-term growth strategies.
Even amid this positive mood for small and medium-sized enterprises and venture businesses, there is one painful exception: Fadu, which went public on KOSDAQ in 2023 through the Technology Exception Listing (TEL) system.
Fadu has been under suspicion of failing to disclose, at the time of its listing, that major customers had halted orders. As a result, late last year the Seoul Southern District Prosecutors' Office’s Joint Financial and Securities Crime Investigation Unit indicted Fadu and its management on charges of violating the Financial Investment Services and Capital Markets Act (FSCMA) after more than a year of investigation. The Korea Exchange (KRX) has suspended trading of Fadu’s shares, saying grounds have arisen for a substantive review of its eligibility for listing, and has placed the company under review. Trading has been halted for more than a month.
The venture industry argues that the alleged FSCMA violations by Fadu’s management and the company’s technological substance should be viewed as entirely separate issues. They stress that a company deemed capable of going through the TEL system has, by definition, been recognized for its technological strength, and that this technology should be acknowledged. With trading still suspended and the eligibility review moving forward, there is concern that the case could end up weakening the competitiveness of domestic players in the fabless company sector, where entry barriers are already high.
In fact, Fadu is reportedly working to sign a supply contract with Amazon.com, Inc., currently the largest AI data center operator. On top of this, Fadu recently disclosed that it had signed a 20.3 billion won supply contract with a global NAND Flash Memory manufacturer. Since last year, the company has been building up large-scale orders related to solid-state drive (SSD) products, and the SSD controller supply contract is said to be the largest of its kind to date.
What worries small and medium-sized enterprises and venture businesses most is that, in the wake of the Fadu case, public sentiment toward the TEL system itself is turning negative. The TEL system allows a KOSDAQ listing even when a company falls short of financial requirements such as revenue or profit, as long as its technology meets certain standards. If a company receives ratings above a specified level from two designated evaluation agencies, it can proceed with an initial public offering (IPO). Industry voices say this system is indispensable because it enables early-stage, technology-driven companies to take a major step forward.
Channeling venture capital into companies that may lack immediate financial performance but possess technological competitiveness, and helping them grow into innovative firms, should be an ideal goal for our industrial ecosystem. Institutional safeguards and tighter oversight to protect investors are, of course, necessary. However, many warn that excessively strict standards could end up clipping the wings of growth companies. Some also argue that the issue should be approached from the perspective of protecting and fostering the System Semiconductor industry ecosystem in Korea.
In this context, the Padu Shareholders Alliance recently issued an official statement. It reaffirmed its unwavering trust in Fadu’s management and employees despite the extension of the KRX’s substantive review period on Fadu’s listing eligibility, and urged the exchange to make a swift and reasonable decision.
The Padu Shareholders Alliance also argued that, given the structural characteristics of the initial public offering (IPO) market, discrepancies between projected and actual earnings should not be treated merely as an individual company’s problem. Instead, it called on authorities to uphold the original intent of the TEL system.
Any misconduct, corruption, or criminal acts by individual corporate managers should be thoroughly uncovered through investigation and legal procedures. At the same time, in an era of intensifying competition in the global semiconductor market, regulators should refrain from imposing excessive rules that could undermine the industry’s overall competitiveness. It is a crucial moment to recognize that the technology a company possesses is not itself to blame.
kim091@fnnews.com