Convergence chips cometh?

Venture capitalists have a new found passion: convergence chips. (Okay there is no such thing as convergence chips, but it is a generic phrase I am going to start using to describe silicon that is used in audio, high-definition television and video devices of all shapes and form.) Earlier this month, Cisco Systems invested in Equator Technologies, a start-up that is developing programmable system-on-a-chip processors for networked video entertainment and communications.

Today, Silicon Optix, a San Jose fabless semiconductor company focused on advanced digital video and image processing nailed $40 million in Series C financing from investors such as Interwest and Apax Partners. Silicon Optix chips can be used inside virtually every projection display, HDTV and high-end DVD player.  The company’s chips perform digital signal processing (DSP) functions that convert and enhance incoming signals to improve image quality and overall system performance – for example, the per-pixel video image conversion from NSTC and PAL to High Definition (HD). 

I think the situation here is pretty much like the early days of communication revolution, where we saw a lot of dollars flow into network processor makers. A few of them thrived, a couple survived and well we know how this story ends. Having said that, I think the convergence revolution is a “mega trend” and offers a major opportunity for start-ups. Consumer Electronics Association expects 2004 sales for consumer electronics to gallop past $108 billion in total sales for 2003 mostly from the sales of MP3 players and digital television. And all those damn devices, well they will need chips!

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