People have been worrying for ages that the game isn’t worth the candle in backing semiconductor companies.
After all, if it costs $20m to spin a chip, and another two or three years of marketing time to introduce it to potential customers, you’re not going to get a lot of change from $100m.
And VCs need to see at least the possibility of getting ten times their money back.
For a start-up to be worth $1bn, it needs to be addressing a pretty big market, and they’re aren’t so many of them around.
One, of course, is baseband processors for handsets, and Icera of Bristol has, in fact, received over $100m in venture capital to pursue digital baseband microprocessors, and talks about a $1bn IPO.
Now, however, comes this week’s IPO of a Chinese company doing baseband processors.
Spreadtrum Communications of Shanghai has IPO’d on the Nasdaq and raised over $100m, and venture capitalists are taking note of the fact that it might be a business model worth following.
This is not good news for digital semiconductor entrepreneurs in the West. For analogue engineers it’s not so bad as analogue stat-up costs are lower and headcounts fewer.
But for the digital guys it could be a sign of things to come.
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