Last year was a brutal time for many industries, but among the hardest hit was semiconductors.
“When people stop buying products, semiconductor sales just totally stop,” says Rich Redelfs, a general partner at
“It’s even worse for the manufacturers of semiconductor equipment,” he notes.
Overall, semiconductor revenue dropped 13% last year, according to a report published in November by market researcher Gartner Group.
This year, expect a growth spurt. Driven in large part by strong consumer goods sales, semiconductor revenue in 2010 is expected to match 2008 levels, at $255 billion annually, and to tick upward from there, Gartner reports. Some forecasts are even rosier. The industry trade group SEMI recently predicted that the semiconductor equipment market is positioned to grow 53% this year and another 28% in 2011.
Investors are taking notice, and it’s little wonder. Though a smattering of semiconductor companies have gone public in recent years (Santa Clara, Calif.-based Atheros Communications went IPO in 2004 and Mountain View, Calif.-based Cavium Networks debuted in 2007), several venture-backed semiconductor companies have registered to go public in recent months.
One chip company on the IPO launching pad is six-year-old MaxLinear, a Carlsbad, Calif.-based maker of analog and mixed signal semiconductors for broadband communications applications. MaxLinear has raised $27.6 million in venture funding, primarily from
In addition, Telegent Systems, founded in 2004 in Sunnyvale, Calif., has also registered for an IPO. Telegent has raised $49 million from
Ambarella, which makes video compression and image processing semiconductors, is rumored to be filing soon. The Santa Clara, Calif.-based company has raised $38.5 million in funding over the last five years from
“We’ve consistently invested in semiconductors, including funding a still stealth-mode company last year,” says Redelfs, who served as the CEO of Atheros before joining Foundation in 2004. “But many investors are also saying right now, “If there are exits, maybe [semiconductors] isn’t such a bad place to invest after all.’”
Jim Jones, a managing director at
“We’ve had a long-term focus on semiconductors,” Jones says. “But over the last couple of years, it’s been hard to find compelling opportunities.”
He adds that 2010 will be a “great year for exits in the space and we’re continuing to look at related deals at a consistent pace.” —Constance Loizos