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August 15, 2005

Intel loosens purse strings in China

Intel Corp yesterday said its venture capital arm had for the first time dipped into the company's new $200m China Technology Fund by investing in three companies there.

By CBR Staff Writer

While Intel did not disclose the amount it had pumped into the three China-based companies, the investments did not appear sizeable, leaving plenty in its kitty for future spending.

The company hopes its China VC fund, which it set up two months ago, will grow the IT industry and help breed entrepreneurship in the country.

Rapid growth of the local technology industry and the high quality of local entrepreneurs and innovation make China a prime place to invest, said Duane Kuang, director of Intel Capital China.

For more than seven years, Intel Capital already had invested in about 50 companies in mainland China and Hong Kong. But that has been just a drop in the company’s VC ocean of more than $4bn that it has invested in more than 1,000 companies around the world.

Now it’s stepping up the pace, on the heels of several high-profile technology investments in the country in recent weeks. When Chinese Internet search company Baidu went public in early August, for instance, it was reminiscent of the dot-com mania of the late 1990s. And Yahoo’s announcement last week that it had invested $1bn in Chinese e-commerce firm Alibaba is being hailed the largest US investment in a Chinese company.

Last year, venture capitalists ploughed about $1.3bn into China, or 29% more than the previous year, according to local researcher Zero2IPO. Several heavyweight Silicon Valley-based VCs, including Draper Fisher Jurvetson, Global Catalyst Partners and DCM, have opened offices in China to be closer to potential deals.

China is a force for technology innovation in the worldwide marketplace, said Intel Capital president Arvind Sodhani.

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One of the new Intel Capital China investments is in Chipsbrand, parent of Chipsbank Microelectronics Co Ltd, a fabless semiconductor design company that targets digital audio/video processing, mobile storage, network communications and consumer electronics applications.

Designers from US and Europe who had returned to China founded ShenZhen-based Chipsbank in early 2003. Their former employers include Broadcom, Lucent and Philips.

Intel also spent part of its new fund on Onewave Technologies Inc, which enables broadband content delivery to TV set-top boxes and streaming media and video-on-demand to PCs.

Intel Capital invested in Onewave to support digital home ecosystem development in China and our belief in the fundamental opportunity this new market segment provides, said Glenda Dorchak, vice president of Intel’s digital home group.

Beijing-based Onewave claims to be the first company to deploy IPTV network infrastructure in China and that it has 70% market share of content delivery networks in the country.

Onewave would use the new funds to build on its IPTV and content delivery network market share by boosting product developing and sales, according to a company statement.

Also Onewave, along with Chunghwa Telecom, has deployed video-on-demand in five US cities, and has an office in Santa Clara, California – just down the road from Intel’s headquarters.

Verisilicon Holdings Co Ltd, a fabless maker of ASICs or application specification integrated circuits, was the third company Intel Capital invested it. It too has a Silicon Valley-based presence while being headquartered in China.

Verisilicon, which sells semiconductor intellectual property and design and manufacturing services to more than 400 customers, raised a total of $13.5m in its second round of financing, of which Intel was a participant among at least nine other firms. HSBC Private Equity (Asia) Ltd, International Finance Corp and IDG Technology Venture Investment also kicked in some money.

The latest round brings total investment in Shanghai-based Verisilicon to $20m since it founded in 2001. The company will spend its new funds on R&D and engineering expansion internationally.

Full service fabless design is an important part of the semiconductor ecosystem, said Intel’s Kuang. Our investment in VeriSilicon is another example of Intel Capital’s commitment to support the growth of the domestic semiconductor industry in China.

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