Industry Expert Blogs

Silicon Valley needs a drastic revitalization of its founding semiconductor industry -- the industry that transformed the region from a major fruit grower to the world's premier high-tech ecosystem.

Investments in fabless semiconductor startups have been steadily decreasing in both number and dollars since 2000. There are two primary reasons why total investments and investment dollars have dropped off in that time, which happen to be the same two reasons why software startups are popping up like corn kernels on a hot stove.

1. The number of M&A exits dropped precipitously since a high in 2000 with a little over 120 acquisitions to a low in 2009 of just over 40.
2. Similarly, the number of IPOs has dropped from about 26 in 2000 to none in 2002, 2008, and 2009. Last year, fewer than five fabless semiconductor companies went public.

Summarizing those two reasons, it can be said that the exits for fabless semiconductor companies are becoming both harder to come by and less lucrative. The mass consolidation in the semiconductor industry has led to fewer companies in a position to acquire. The turmoil in the financial markets has reduced the number of IPOs generally, but particularly in the semiconductor space. Moreover, the meteoric rise of much-lighter VC-funded or "capital lite" opportunities in the consumer software space attracted both the investment dollars and the entrepreneurial talent.

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