VC funding to semiconductor industry continues to decrease

As a result of the weak economy and the increased cost and time required to go public, for the third consecutive quarter, the semiconductor IPO market, which includes fabless/IDM companies, semiconductor suppliers, and solar suppliers, saw no venture-backed companies go public, the Global Semiconductor Alliance reports.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 11/4/2008

Venture capitalists are investing less in fabless and IDM (integrated device manufacturers) companies because of higher design costs and consolidation, according to the Global Semiconductor Alliance's (GSA) Q3 2008 Semiconductor Funding, IPO and M&A Report, released this week.

The GSA report states that the number and value of fabless and IDM funding deals has declined for two consecutive quarters.

According to GSA's data, 21 fabless and IDM companies raised $231.6 million in Q3, a dollar amount decrease of 44% quarter-over-quarter and 57% year-over-year. The total number of fabless and IDM transactions closed in Q3 decreased 13% sequentially and 45% compared to Q3 2007.

When analyzing M&As (mergers and acquisitions) involving fabless and IDM companies, GSA found the volume and value of announced deals accounted for 55% and 34% of the overall Q3 semiconductor M&A total, respectively.

According to GSA, 35 fabless companies, IDMs, semiconductor suppliers, and solar suppliers raised $511.7 million in Q3, a dollar amount decrease of 4% quarter over quarter and 36% year over year. The total number of semiconductor deals closed in the September quarter decreased 10% sequentially and 44% year over year.

"As a result of the weak economy and the increased cost and time required to go public, for the third consecutive quarter, the semiconductor IPO market, which includes fabless/IDM companies, semiconductor suppliers, and solar suppliers, saw no venture-backed companies go public," GSA said in a statement, adding that, however, one semiconductor company, Avago Technologies, did file in Q3.

Meanwhile, for the third consecutive quarter, M&A activity continued to decrease with 31 M&As involving a fabless company, IDM, or semiconductor supplier down 11% on Q2, but a 15% increase on Q3 2007.