Applied VC arm sets sights on optical communications

By Christina Bruns

WaferNews Associate Editor

With the goal of aiding optical communications start-ups, Applied Materials Ventures I was created by its equipment leviathan namesake to provide funding, know-how, and experience to up-and-coming component and subsystem manufacturers.

“We are focused on investing in anything that would make the optical IC possible,” Julian Nguyen, managing general partner of Ventures I, told WaferNews. “The goal for us is to encourage optical communication and to really enable the deployment of optical integration and communications on a large scale.”

Ventures I will help startups with partnerships on both the development and production levels with semiconductor and optical foundries, hoping that by providing access to critical technologies such as deep sub-micron CMOS, III-V, LiNbO3, InP, etc., will help give the startups a competitive edge. In return, Applied will also have first hand knowledge of cutting edge technology.

“[It gives Applied] early access to new technology and that’s a benefit for us. We see it as very important,” said Jeff Lettes, director of media relations for Applied Materials.

Industry analyst Dan Hutcheson of VLSI Research noted, “It’s an incredibly inexpensive way to develop technology.”

So far, Ventures I has invested in Zepton Networks to the tune of what Nguyen said was “a few million dollars.”

He noted that Ventures I has “a couple of startups in the pipeline” including one company that provides chipsets for routers, and another that manufactures optical ICs. One of the companies is in Silicon Valley, the other in Israel, but Nguyen wouldn’t reveal more than that.

“We like to invest in early stage companies – usually first round financing because that’s where we can bring the most value to the companies,” Nguyen added.

With this new venture entity, Applied is using the Intel way of doing research, according to Hutcheson.

“I think that’s a smart way to do it,” Hutcheson said.

He explained that Intel’s model is to “blend everything.” Intel doesn’t do basic research, he said, but instead lets the government, consortiums, and R&D companies do that while it funds venture capital companies that will in turn support the company.

“If [Ventures I] invests in optical communications, they can develop things at a lot lower cost and they can do it internally. And if it doesn’t go anywhere, they can shut it down a lot easier,” Hutcheson explained. “You’re developing something outside the corporate structure that gives you the reactiveness of a small startup. A large company may have a hard time doing that.”

As for the reason behind the Santa Clara toolmaker’s latest move, Hutcheson speculated that Applied may have been pressured by customers that want it to pick up the R&D ball and invest more heavily in research.

“Customers [may] see Applied as making a lot of money and may want it to fund some of the research,” Hutcheson said. “Applied Materials will have the advantage of understanding what to invest in. They understand what the requirements are better than a seasoned technologist working at a VC may.”

While Applied isn’t looking for an immediate ROI from its venture investments, the timing is right to make this move, Lettes said.

“It’s a good time because the availability of VC funding is pretty limited. It’s more cost effective during a downturn to invest in start-ups,” Lettes said.

Added Nguyen, “We don’t know when we will be able to achieve cost reduction for the optical space, but our time frame is five to 10 years. I don’t expect results will be widely deployed until then. This is a long term investment and will not give an immediate return to Applied Materials.”



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