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February 1, 2005 – Worldwide sales of semiconductors reached a record $213 billion in 2004, a year-on-year increase of 28% from the $166.4 billion recorded in 2003, the Semiconductor Industry Association (SIA) reported.

Chip sales declined in December by 3.5% sequentially to $18.4 billion from the $19.0 billion reported for November, in line with historical seasonality. December sales were 14.6% higher than in December 2003. Fourth-quarter sales, at $55.1 billion, declined by 0.8% from the immediate-prior quarter sales of $55.5 billion.

“Strong demand from a very broad spectrum of end markets propelled worldwide semiconductor sales to a record $213 billion in 2004,” said SIA president George Scalise. “For the first time since 2000, global chip sales surpassed $200 billion. The industry’s growth over the past three years is even more remarkable when viewed in a broader perspective. Worldwide sales of semiconductors fell to $139 billion in 2001 following the collapse of the dot-com boom, the 9/11 terrorist attacks, and a mild economic downturn.

“Fears that high gasoline prices would seriously dampen sales of consumer electronics during the holiday season did not materialize,” Scalise said. “A moderation of gas prices coupled with good economic growth appears to have bolstered consumer confidence, an increasingly important consideration for the semiconductor industry, as purchases by individual consumers now account for more than half of all chip sales.”

Scalise noted that very strong year-on-year growth during the first half of 2004 drove worldwide sales growth at a faster rate than the earlier SIA forecast of 19% growth for the year as a whole. Global chip sales grew by 36.5% year-on-year during the first half of 2004 compared to 21% in the second half. “By any standard, the 21% year-on-year growth in the second half of 2004 was very robust, but did not match the extremely strong first-half growth rate,” Scalise continued.

“We expect that global sales will decline by 4-6% sequentially in the current quarter in part due to continuing efforts by the entire supply chain to reduce excess inventories and a very competitive market environment. A seasonal decline in consumer spending patterns in the first quarter also contributes to our forecast of a modest decline. We believe factory utilization rates will continue to decline modestly in the first quarter. Our outlook for the year as whole continues to project essentially flat sales at the record level of 2004,” Scalise concluded.

The Asia-Pacific Region, which includes China and Taiwan, once again led the world in sales growth with a year-on-year increase of more than 41%. At $88.7 billion in total semiconductor sales, the Asia-Pacific Region was nearly double the size of the second-largest market, Japan, with total sales of $45.7 billion. Chip sales in Europe grew by 22% year-on-year; in the Americas by 21%; and in Japan by 17.5%.

By David Forman

Feb. 1, 2005 — Two river routes lead to Wall Street in lower Manhattan. Sailing down the Hudson provides a wide, smooth ride, not to mention breathtaking views of the wooded cliffs of New Jersey — in short, a classy way to sail downtown.

The East River, by contrast, is a narrow, bumpy ride. The water is dark and oily from barge traffic. The stretch past LaGuardia airport is deafeningly noisy. And the currents are so dangerously tricky in one narrow spot that it’s officially known as Hell’s Gate.

Nanotechnology startups are likely to try both routes this year in their quest to land an IPO. Some will look for a classy ride with a large, established bank — think Nanosys’ aborted IPO, led by Merrill Lynch in 2004. Others will ply the somewhat less romantic route aboard a boutique bank willing to underwrite a more modest sum.

Retrenching for ’05

The nanotech business community appears to be gearing up for another run at the Street. For starters, experts continue to see nanotechnology’s potential for game-changing innovation and locate some of that innovation in the nanotech startup community. The World Economic Forum’s list of technology pioneers, unveiled in December, was replete with nanotech — Konarka Technologies, Polyfuel, Arryx, Molecular Imprints, Nanofilm, Quantum Dot and ZettaCore — that is, nearly 25 percent of the 29 companies selected as pioneers.

Investment banks have quietly continued to build up nanotechnology practices. Small investment banks have been bringing on nanotechnology analysts while big firms are continuing to initiate research. The latest is Citigroup Smith Barney’s London semiconductor equity research group, which put out a nanotech report in December.

Meanwhile, startups are retrenching. Nanosys recently completed a new building for manufacturing at its Palo Alto, Calif. headquarters, putting to rest speculation over whether the company intended to manufacture its own product or only license intellectual property to others.

Other startups have begun positioning themselves for a higher profile. For example, Austin, Texas-based Molecular Imprints has begun issuing regular news announcements, recently sold a tool to Hewlett-Packard and opened offices in Germany and Japan. In December, the firm hired a new executive vice president and chief financial officer, David Gino, who was involved in leading two previous companies through IPOs.

Late 2004 had its moments, even if they were modest. MicroEmissive Displays Group, a Scottish developer of polymer organic light emitting diode based microdisplays, floated 17.1 million shares on Nov. 30 under the symbol MED. The offering occurred on the Alternative Investment Market of the London Stock Exchange.

Reading the VC tea leaves

At first glance, private nanotechnology funding appears to be contracting. But that’s not necessarily the case. By the end of the third quarter, only $122.1 million had been invested in the field in the U.S., according to a Small Times analysis of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. That puts funding on track to be well below $200 million for the year, a far cry from the $301 million invested in 2003.

While the dollar amount has come down significantly, there has actually been a dramatic uptick in deal volume. By the end of the third quarter, investors had already invested in 30 nano companies, on pace to significantly outstrip the total of 34 funded during the entire year of 2003.

Beneath those numbers are essentially two generations of startups. The more mature of the companies founded in 2001 and 2002 raised fat rounds in late 2003 in anticipation of a possible exit window in 2004 or 2005. Consequently, they had no need to raise venture dollars last year.

At the same time, a new generation of nanotechnology companies turned to venture backers in 2004. That new crop sought earlier stage funding, which accounts for more deals but smaller rounds. The two trends led to more funding activity, but fewer dollars invested.

Nanotech’s leading entrepreneurs know the adage that luck comes when preparation meets opportunity. So expect that they’ll ply both routes to the public markets in 2005, plumbing the depths and gauging the currents all the way. But as 2004 showed, even if the approach is smooth sailing, there’s still no saying which way the winds will blow on Wall Street when they get there.


For nanotechnology, the percent of funding events classified as expansion stage or later stage steadily increased from 2001 to 2003. In 2004, however, the trend seemed to stall out as more rounds were classified as early stage.

Sources: Small Times and PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey. Research by David Forman.

IMT raises $17 million


January 26, 2005

Jan. 26, 2005 — Innovative Micro Technology (IMT), a MEMS manufacturer, announced it raised $17 million in institutional venture capital. The round was led by Investor Growth Capital Ltd. BA Venture Partners and Miramar Venture Partners also participated. WR Hambrecht + Co. acted as financial advisor to IMT.

IMT will use the investment to expand its facilities and tool set as it ramps into production on multiple customer programs, according to a company release. It will also direct funds toward the expansion of its sales and marketing efforts.

In conjunction with the financing, Jose Suarez from Investor Growth Capital and Eric Sigler from BA Venture Partners will join IMT’s board of directors. Also joining IMT’s board will be Barry Waite, former president and CEO of Chartered Semiconductor.

Jan. 26, 2005 — Dendritic NanoTechnologies Inc. of Mount Pleasant, Mich., The Dow Chemical Company (NYSE: DOW) of Midland, Mich., and Starpharma (ASX: SPL) of Melbourne, Australia, announced yesterday they reached an agreement that provides Dendritic and Starpharma with access to what the companies say is the world’s broadest patent portfolio in the field of dendrimers.

Under the deal, Dow will assign its entire intellectual property portfolio and associated royalties in the field of dendrimers (196 patents comprising 41 patent families) to Dendritic in exchange for an equity stake in the company. Starpharma, which already held an interest in Dendritic, will make an additional cash equity investment in the company in exchange for exclusive rights to intellectual property for polyvalent, dendrimer-based pharmaceutical applications.

“This move consolidates a great amount of the important intellectual property in the dendrimer field into one company. It will be very positive for developing the applications and further demonstrating the value of this technology,” said Mike Pirc, manager of intellectual property for Dow Chemical in a prepared statement.

Dendrimers are a class of nanostructures with physical properties that make them potential vehicles for targeting diseases and delivering drugs to fight them. Dendrimer technology was first developed at Dow when Dendritic founder Donald Tomalia was a Dow employee. Today, Dendritic sells and licenses more than 200 variations of dendrimers to pharmaceutical, biotechnology and diagnostics companies.

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Jan. 21, 2005 — As a new year begins, it seems to be a good time to ask: What will 2005 bring? Within the MEMS industry, there’s always something interesting afoot, so let’s answer that question by exploring 2004’s accomplishments and developments that could shape 2005.

Accelerometers got their foot in the door with cell phones in 2004 — a huge accomplishment. But, will the use of accelerometers for peripheral applications, such as pedometers and game controllers, really catch on? Or will it take a truly feature-rich function, such as display scrolling, to make their use ubiquitous?

Either way, how much momentum can we really expect to see in terms of their integration into cell phones in 2005? Perhaps an even more intriguing question is: What impact might the newly launched tri-axis accelerometers have on this particular space?

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Gyros have become a near standard in European cars for use in electronic stability. Now it’s up to American automakers to follow Europe’s lead to maintain that momentum. But will they? Legislation in the United States could help here by mandating the use of rollover detection systems. The auto industry’s need for small and lightweight components could make MEMS gyros a top candidate in such systems.

But legislation takes time, and mandates sometimes are scheduled to kick in several years after passage to accommodate automakers’ development cycles. In the meantime, this might be the year that MEMS gyros make a breakthrough for use in camcorders.

It also may be the year for pressure sensors. The National Highway Transportation Safety Administration is expected to make its final ruling in March advocating the use of the direct (i.e. MEMS) method of monitoring tire pressure. NHTSA alluded to this last summer, but the market didn’t take that as a green light. An official ruling should result in a spike in sales of pressure sensors.

As for other MEMS sensors, about half a dozen companies are diligently working to develop sensors for the detection of biological and chemical weapons, but as the war in Iraq drags on, it appears that the urgency has abated somewhat. Don’t expect breakthroughs of significance this year because there is still a fairly large disconnect between what’s technologically feasible and what the market expects.

In the meantime, will this be the year for wireless sensing networks? It’s probably a bit soon here, too, although great strides are being made to a critically important piece of that puzzle, the operating software. Now, if only there were a power source small enough to allow end-users to take advantage of the tiny form factor of these sensors. …

There’s no doubt that microphones will have a breakout year in 2005 — probably in the second half — as they become integrated into cell phones. The question is, what’s next? MP3 players look like the next logical choice, but don’t count out automotive telematics.

Several optical MEMS companies are doing very well, but a real sales breakthrough isn’t expected until optical networking gains traction, which may take another year or so. However, watch for optical MEMS to make their move as the new technology core for cell phone displays in 2005. Even though it may be for only one or two handset models, it would be an auspicious start. In addition, the competition for optical MEMS in digital TV is expected to start heating up this year, although we may not see tangible results until 2006. While Texas Instruments may have portable projectors and home theater wrapped up, digital TV is still a wide-open race.

Overall, it appears that growth in the automotive and computing markets, longtime mainstays of the MEMS industry, may be cooling. The good news is that the consumer and communications segments are ready, willing, and (almost) able to pick up the pace, as the above indicators point out. Interestingly enough, robotics is another area to watch in 2005 — not for industrial applications, bur rather, for consumer end-uses.

MEMS product development clearly occurs in waves, and the next wave of products on the horizon became much clearer in late 2004: cooling chips and fuel cells. Although In-Stat/MDR doesn’t expect to see any technological or commercial breakthroughs in 2005, it’s quite possible that more companies may enter the market, as is typical for emerging device segments.

Although the point of this column was to look ahead to 2005, I can’t help but look back at 2004 and designate my pick for the most novel product of the year: Pria Diagnostics’ Element, an over-the-counter male fertility indicator for in-home testing. It uses an optical MEMS component in conjunction with an LED to read fluorescent chemicals that bind to a sample of sperm.

While the end-user is men, of course, it should be marketed to women, too. I have no doubt that they’ll be the ones who will ultimately buy the $40 kit, which is currently awaiting Food and Drug Administration approval. What will the industry think of next?

Jan. 21, 2005 — Veeco Instruments Inc. (Nasdaq: VECO) announced the introduction of a new optical profiler to address metrology challenges in the printed electronics industry.

The WykoNT4800 profiler is intended for applications in organic light emitting diode (OLED) displays, radio frequency identification tags (RFID), biosensors and other flexible circuit devices.

It combines high-speed, high-resolution optical profiling with large format staging and is intended for critical R&D and production metrology applications, such as surface shape and texture measurement, according to a company release.

Jan. 6, 2005 — Alexza Molecular Delivery Corp., a Palo Alto, Calif., developer of a novel drug delivery technology, announced today the completion of a $52 million second round of institutional funding.

The company issued Series D preferred shares. Alloy Ventures and Delphi Ventures led the round. New investors included Abingworth Bioventures, MDS Capital, Pacific Rim Ventures, T. Rowe Price and WestRiver Capital. Previous investors who also participated include Alejandro Zaffaroni, Frazier Healthcare, Versant Ventures, 5AM Ventures, Burrill & Co., CMEA Ventures, New Enterprise Associates and clients of the Zesiger Capital Group. Montgomery & Co. LLC served as the exclusive placement agent for the company.

The funds will be used to accelerate the development of the company’s product candidate portfolio and to further expand its technology base. The company plans to have four product candidates in clinical trials during 2005.

Alexza’s technology platform, known as Staccato, rapidly delivers drugs to the body and brain by mimicking the effect of smoking. A small device modeled after a cigarette vaporizes and releases a drug upon inhalation by the patient.

The firm previously raised $45 million 2002. Along with the current round, it appointed Deepa Pakianathan of Delphi Ventures and Leighton Read of Alloy Ventures to its board of directors.

By Janice K. Mahon, Min-Hao Michael Lu, Universal Display Corp., Ewing, New Jersey

VTE has been the leading technology for OLED production, but OVPD, IJP and LITI have the potential to drive display performance and manufacturing efficiencies in future device generations. For OLED technology to advance in FPD applications, its production technology must continue to achieve device performance advances and manufacturing cost reductions.

An OLED typically consists of a stack of organic layers sandwiched between two conductive films deposited onto a substrate. Within the organic stack, the emitting layer (EML) is critical. This layer determines the color of the light emitted, typically red, green and blue (RGB) for full-color displays; this layer also plays a major role in device efficiency. In 1997, researchers at Princeton University and the University of Southern California discovered that by adding phosphorescent dopants to the EML, the resulting phosphorescent OLEDs (PHOLEDs) could be up to four times more power-efficient than conventional, fluorescent OLEDs.

Universal Display Corp. then developed a class of new materials and device technology to enable the commercialization of this approach. Based on the demonstrated performance from phosphorescence, Pioneer introduced the first product containing PHOLED technology in a commercial product late in 2003. Since then, OLED manufacturing capacity has been quickly increasing (see “OLED opportunity”).

Read the complete article in a pdf format.

Other January 2005 SST Online Exclusive Features

If you have any questions or comments, please contact:
Julie MacShane, Managing Editor, SST at email: [email protected].

“Worldwide sales of semiconductors surpassed $19 billion in November 2004, led by strong growth in sales of microprocessors, digital signal processors, DRAMs, and flash memory devices,” says SIA President George Scalise. “Sales of personal computers typically peak in the fourth quarter. Strength in microprocessors and DRAMs indicate that PC sales reflect normal seasonal patterns. The wireless handset market has been somewhat stronger than recent forecasts, as evidenced by growth in DSP and flash memory products.”

(January 03, 2005) Palo Alto, Calif. &#8212 Agilent Technologies announces that it has shipped its 100 millionth FBAR (film bulk acoustic resonator) filter since its release in December 2001. Demand has been so strong that Agilent has increased its shipments to six million per month. FBAR filters are used in mobile phones, data cards, and other wireless products operating in the U.S. PCS frequency band.

January 3, 2005 – Worldwide sales of semiconductors grew to $19.02 billion in November, an increase of 1.3% from the $18.8 billion in October, and an increase of 18% from the $16.12 billion in October 2003, the Semiconductor Industry Association (SIA) reported today.

“Worldwide sales of semiconductors surpassed $19 billion in November, led by strong growth in sales of microprocessors, digital signal processors, DRAMs, and flash memory devices,” said SIA president George Scalise. “Sales of personal computers typically peak in the fourth quarter. Strength in microprocessors and DRAMs indicate PC sales reflect normal seasonal patterns. The wireless handset market has been somewhat stronger than recent forecasts, as evidenced by growth in DSP and flash memory products.

“Capacity utilization declined modestly, but remains above 90%,” Scalise continued. “Actions taken by both customers and semiconductor manufacturers to address excess inventories in some market sectors appear to have been effective. We expect that excess inventories will not be a significant concern by the end of the first quarter of 2005,” Scalise concluded.

Sales were up in all geographic regions except the Americas, where sales declined by 1.6% from October.

The SIA’s Global Sales Report (GSR) is a three-month moving average of sales activity. The GSR is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, which represents approximately 66 companies. The moving average is a mathematical smoothing technique that mitigates variations due to companies’ financial calendars.