Thus Spake the Chip Gurus –

“The semiconductor industry as we know it today would not exist had it not been for venture capitalists. For more than 40 years, venture capitalists have helped visionaries turn innovative concepts into real companies and real products that changed the world for the better.”

George Scalise

President, Semiconductor Industry Association

“The massive federal investment in the [National Nanotechnology Initiative] and additional funding into universities will increase the rate of invention as we search for new ideas in a post-CMOS world.”

Bill Siegle

Chief Scientist

Advanced Micro Devices

“NEA has been looking for and finding investment opportunities in CMOS mixed signal startups that seem to be more compelling and surprising than purely digital innovation efforts. We count integrated MEMS and digital as mixed signal.”

Forest Baskett

General Partner

New Enterprise Associates

“Power and heat are the real showstoppers to continued progress, and appear to be the areas where industry roadmaps lack pat answers. As such they represent areas of considerable opportunity. Design tools, new architectures (such as multi-core), and new materials all have the potential to mitigate the power/heat problem.”

Mike Boich

General Partner, Alta Partners

“The Feds have cut the funding that creates the technology and product ideas for startups, so VCs are getting less to fund. Here I can offer no hope, with enrollment in science and engineering down, and our policy to keep foreigners out of our universities. Silicon Valley was built from the talent coming especially from China and India. So get used to watching continued decay in our relative technological position.”

Gordon Bell

Fellow, Microsoft Research Center

“The VC industry can certainly help create startup semiconductor companies that can indeed become important players, but in order to be meaningful they will need to use foundries to process their designs. It is too late to enter the microprocessor business as an integrated company. The capital expenditures are too great.”

Arthur Rock

Founder, Arthur Rock & Co.

a”Capital-efficient semiconductor manufacturing essentially has moved to the Far East. I envision innovation and therefore venture capital-funded companies as originating globally, not in North America and Europe alone.”

Babu Ranganathan

General Partner

Apex Venture Partners

“We believe there may be swing for the fence’ opportunities in markets where startups have traditionally avoided: storage and programmable logic. Storage is now the key technology in many applications for both the consumer and enterprise. The history of venture-backed PLD startups is littered with the remains of failed startups, but incumbents are saddled with legacy architectures that may leave the door open a crack for startup entrants going after the right niche.”

“The recent impact from venture-backed semiconductor companies has been stunning and has been accelerating. We see venture-backed startups having the most significant impact in the next five years in the following areas: mixed signal RF CMOS designs; semiconductor processing, through technologies such as strained silicon and advanced semiconductor capital equipment developments; memory, through the use of innovative MEMS manufacturing techniques; consumer electronics integration, with the consolidation of RF communications with media processing and display technology; and high-speed communications.”

Jim Jones

Managing Director

BA Venture Partners

“The convergence of semiconductor technologies, engineering, chemistry and biology offers a number of potentially interesting markets, such as environmental, energy and medical applications. Nanoscale semiconductors will find new applications in the world of diagnostics, medical devices and drug discovery.”

Zeljka Matutinovic

General Partner, JVP

“We believe that the semiconductor area is as lucrative and exciting as it has been over the past 35 years of our firm’s existence.”

Drew Lanza

General Partner

Morgenthaler Ventures

“An important trend that will likely bring about fundamental changes in the semiconductor industry is the move away from application-specific integrated circuits to high-performance, catalog system-on-chip solutions.”

Madison Pedigo

Manager, TI Ventures

“Silicon Valley doesn’t have dominance over innovation any longer. It doesn’t matter whether you’re producing a $400 Pentium or a 10-cent power surge chip, the only thing that counts now is volume. Cell phones, televisions and PDAs are all the big users of semiconductors. And where are those things going to be made? China. So as VCs we ask ourselves: Where are there opportunities to sell 500,000 units or more per year? The conclusion is that the industry has to be influenced by China, and if you broaden that thought to include IT, then you add India.”

Kevin Fong

Managing Director, Mayfield

“New material advances ranging from silicon-on-insulator, strained silicon and FinFETs are being pursued by IBM. A longer-term solution could be molecular electronics, such as carbon nanotubes that can be used as transistors to build chips. Unless the major U.S. semiconductor companies wholly embrace this shift, the geographical center for innovation in semiconductor technology will no doubt shift to Taiwan and China.”

Allan C. Thygesen

Managing Director, The Carlyle Group

“The future of Moore’s law is not CMOS transistors on silicon. Within 25 years, CMOS transistors on silicon will be as obsolete as the vacuum tube is today. Molecular electronics is the next paradigm that has the potential to dramatically extend the miniaturization that has driven the density and speed advantages of the integrated circuit phase of Moore’s Law.”

Steve Jurvetson

Managing Director

Draper Fisher Jurvetson

“I foresee a shift toward software-dominated system design efforts in a number of different market sectors driven, in large part, by system-on-chip architectures now emerging. While software has always played a significant role in most design efforts, it will grow increasingly dominant from a resource perspective, due to significantly reduced requirements for extensive hardware design in many applications.

Hal Calhoun

Managing Director

Menlo Ventures

“New semiconductor materials will impact other markets. Having discovered that silicon can emit light when engineered at the nanoscale may fundamentally change the lighting industry.

Alex Wong

General Partner, Apax Partners

“Semiconductor startups are at the mercy of the foundries: They dictate the availability of the processes. Differentiation cannot be process based, so startups rely on innovative architecture and clever circuit design. The push to tighter tolerances enables the implementation of very complex functions, but development costs-in particular EDA tools and masks-have skyrocketed. These factors will limit present and future VC-funded semiconductor companies to niche markets.”

Pierre Lamond

Managing Director, Sequoia Capital

“Soon, it will make no sense to design a chip unless you have a sure win market of 10 million units, therefore a new way to make chips needs to emerge.”

Julien Nguyen

Managing Partner

Applied Materials Venture Capital

“There will continue to be interesting investment opportunities in equipment companies to enable smaller geometries, such as Extreme Ultraviolet Lithography, and novel materials companies for interconnects on the component. In addition, new architectures, standards and stacking techniques will play an important role in allowing companies to address a wider range of applications with the same components, thereby aggregating greater unit volumes necessary to make advanced processes affordable on a cost-per-component basis. The conclusion: There are solid opportunities in semiconductor investing, but running the same plays from an old playbook is not likely to be the winning game plan.”

John Miner

President

Intel Capital

“Can the venture industry continue to make money by investing in the semiconductor industry? Is there enough innovation to make it worthwhile? My answer continues to be yes, but we must use increasing caution and discipline to control the focus and scope of the projects in which we invest, such as targeted programmable technologies, new processor architectures for networking, storage, imaging or video processing to name a few.”

Philip “Flip” Gianos

General Partner

InterWest Partners

“Risks and the amount of money needed [for semiconductor startups] are much higher today. VCs must back the right team with the right potential customers. Leading-edge digital is out of the reach of VCs today. It takes $30-plus million just to fund a project up to tape out.”

John Michaelson

General Partner

Needham Capital Management

“The electronics industry is looking for future memory technologies that can address the needs of portable devices, specifically, technologies that offer the benefits of all three memory technologies without the increase in power or cost. Several next-generation memory technologies are being studied, including MRAM, NROM, FERAM and OUM. One or two of these could displace today’s and we don’t expect the innovation to stop anytime soon.”

Rob Chaplinsky

General Partner, Mohr Davidow Ventures

“Trying to compete with Intel in the X-architecture microprocessor is like tilting at windmills. So where are the opportunities? First the human machine interface: voice sensors, 3D vision sensors, tactile sensors, display devices, input devices, etc. are all ripe for new innovative silicon solutions. Second, support infrastructure-like cooling and connector technologies, bus and clock speeds-is also hitting the limits of conventional barriers.”

Tony Sun

Managing General Partner

Venrock

“In recent years semiconductor investments have become more challenging for the venture capital community. Cutting-edge technology products that require 130nm or 90nm geometry nodes sometimes do not return enough value to provide a meaningful VC return. One opportunity is semiconductor projects that address consumer electronics or wireless projects that have the potential to ship tens of millions of units prior to taping out of a next-generation part.”

Ben Yu

Venture Partner

Sierra Ventures

“Innovation in the semiconductor sector is now driven more by application than technology, hence more by implementation than invention. An example lies in the continuing attempts to find new processor architectures. This is an area theoretically ideal for VC investment, but to date few of the new architectures have been enough of an improvement over their Moore’s Law-powered’ established competitors to drive widespread adoption.”

Peter van Cuylenburg

General Partner

Crescendo Ventures

“Development costs combined with increasing commercialization costs equal semi projects with more than $70 million total capital required over four plus years. The total capital required becomes all the more challenging when less than 40% of these projects are successful. These challenges are difficult for the venture community, but increasingly challenging for large diversified semi companies that must report quarterly.”

Chris Albinson

Principal

JPMorgan Partners

“There are many innovations creating new markets. For example, using silicon not for its logic processing capabilities but for its mechanical properties. Several startups are hot on the heels of Texas Instruments’ DLP technology, which created a new multibillion dollar market leveraging silicon to switch light.”

Tim Wilson

General Partner

Partech International

“The classic fabless deal in the U.S. is dead and investors will have a hard time finding lucrative business opportunities. … U.S. investors will have to seek opportunities in semiconductor companies that have an Asian angle in order to take advantage of labor costs in Asia (especially in China) and to enhance proximity to customers.”

Marko Maschek

Director

3i Venture Capital

“Even the leading players like Applied Materials, IBM, Intel and TSMC cannot afford the investment required to tackle myriad problems. Startups and venture investors will play a significant role in new design tools-both hardware and software-and manufacturing and test equipment.”

Winston Fu

General Partner, U.S. Venture Partners

“The best opportunities for new ventures will be in novel uses of the technology [already] created by the semiconductor industry: DNA micro-arrays made using silicon process technologies, MEMS devices used for cell phone filters and airbag sensors.”

Jim Hollenhurst

Director, Molecular Technology Laboratory

Agilent

“A few venture firms are venturing into China to leverage the lower cost infrastructure in that country. While finer geometry designs are increasing the design cost of next-generation semiconductors, [venture capital] funding of larger and new foundries in China and other East Asian countries is helping bring these fabrication costs down.”

Ed Masri

General Partner

Matrix Partners

“We must innovate and reach high volume manufacturing capabilities for feature sizes of single digit nanometers. This will open up a whole new world of new applications far beyond chips if we can produce certain structures like proteins the same way we produce chips.”

Adriaan Lightenberg

President and CEO

Takumi

“Technologies such as multi-core processors and reconfigurable logic, combined with new development and test methodologies, will drive the semiconductor industry for the next decade and are ripe for VC investment.”

Rick LeFaivre

Venture Partner

OVP Venture Partners

“The trend toward configurability and multi-core logic has been around since 1995, but today it’s different in these technologies are headed into [low cost] consumer products. We have lots of opportunities there, even against China, although in 10 years, when today’s young [Chinese] engineers are better trained, we’ll be challenged.”

John Burgoin

Chief Executive Officer

MIPS

“As CMOS scaling nears its limits, economic pressure may well slow down Moore’s Law enough to leave startups with a fighting chance. I believe a number of successful startups will emerge based on flexible processors, adequate funding and above all a keen sense for their markets.”

Soren Hein

Principal

Doughty Hanson Technology Ventures