Chip Deals Hit Record in 04

Last year was an historic period for semiconductor related startups. More than 220 different startups received over $3 billion in venture financing in 2004, easily eclipsing the $1.7 billion that 138 chip companies raised in 2003, according to data compiled by PE Week.

It’s the largest amount of venture capital invested in semiconductors since 2000, when 156 companies raised $2.6 billion, according to data supplied by the Fabless Semiconductor Association.

Investments were made in five sub-sectors of semiconductors: fabless; packaging and manufacturing; electronic design automation (design software and services); materials; and novel technologies (such as processors).

Walden International was the most active investor, as it backed 12 startups last year. Walden also made the most semiconductor investments outside of U.S. borders. At least half of its 12 investments had a significant portion of thier business in China. Indeed, China may have surpassed Israel as a destination for semiconductor investing outside of the United States by U.S.-based venture firms.

While most semiconductor experts maintain that the United States maintains technology leadership in semiconductor manufacturing, “the volume business is all moving to China,” says Kevin Fong, managing partner at Mayfield. Mayfield currently has two China deals in stealth mode.

In 2004, the bulk of funding went to cutting-edge startups in materials, EDA software and analog/digital design companies in the United States.