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11 November 2009


GigOptix acquires ASIC firm ChipX to complement opto ICs

GigOptix Inc of Palo Alto, CA, which designs modulator and laser drivers and transimpedance amplifier (TIA) ICs based on III-V materials as well as polymer electro-optic modulators, has acquired ChipX Inc of Santa Clara, CA, a privately held fabless supplier of analog and mixed-signal custom application-specific integrated circuits (ASICs) including standard cell, structured ASIC and hybrid ASIC technology.

ChipX’s investors (which include Elron Electronic Industries Ltd, Wasserstein Venture Capital, UMC and Needham Capital Partners) will receive 3.5 million common shares of GigOptix (about 26% of its fully diluted share count). The acquisition is expected to broaden the ownership of GigOptix’s common stock with the addition of new strategic and institutional investors.

In parallel, GigOptix has entered into a new commercial banking relationship with Bridge Bank N.A. of San Jose, CA (a full-service professional business bank) that includes a $4m asset-based line of credit.

The existing GigOptix management team will continue to lead the combined firm (with Dr Avi Katz as CEO & chairman), and the new ChipX (CX) product line will be jointly managed in the interim by ChipX executives Ophir Nadir as VP engineering and Elie Massabki as VP sales & marketing, respectively.

Combined revenues for the first nine months of 2009 would have been more than $25m. GigOptix expects that the scaled-up company will be better positioned financially to mitigate the infrastructure cost of being a publicly traded small-cap company.

Both firms are based in Silicon Valley and, to bring organization and financial benefits, will be consolidated into GigOptix’s headquarters in Palo Alto (ChipX’s lease in Santa Clara expires in two months). GigOptix and its subsidiaries will have about 95 staff (down from 115 pre-merger), of which about 40% are in R&D and 15% in sales & marketing.

The firm believes that, as with its previous three acquisitions — iTerra Communications LLC (a manufacturer of amplifiers and modulator driver ICs) in July 2007, Helix Semiconductors AG of Zurich, Switzerland (a manufacturer of transimpedance amplifiers, limiting amplifiers, and VCSEL drivers) in January 2008 and Lumera Corp of Bothell, WA, USA (a manufacturer of polymer electro-optic modulators) in December 2008 — it will achieve significant financial efficiencies after consolidation. Cost synergies should contribute to improving the bottom line as soon as first-quarter 2010. GigOptix plans to improve the annual revenue per employee from about $230,000 prior to the acquisition to more than $300,000 in 2010.

Katz says that the acquisition of ChipX continues GigOptix’s vision of gathering complementary technologies so that it can enrich the features offered while reducing the cost to customers. “ChipX brings a loyal portfolio of tier-one customers who use the first class design services and IP of ChipX to create their own truly differentiated custom products,” he adds. “We will bring our own IP together with that of ChipX to bring new standard products to market faster, and at a lower investment by leveraging their excellent design capability... This acquisition fits into our continuous rollup and consolidation growth strategy.”

ChipX is expected to bring benefits including:

  • A revenue stream from more than 60 active customers, and more than 100 custom mixed-signal ASIC products in production and five in development.
  • Strong customer relationships due to the level of engagement required during the joint development of custom ASICs (focused particularly on the vertical markets of defense & aerospace, industrial, communications, medical and test & measurement, where GigOptix can offer complementary products for cross-selling opportunities).
  • A rich portfolio of intellectual property and complementary skills that will enable GigOptix to develop new products to expand its offering to the optically connected market (the alternative of organically developing and building such a portfolio of about 70 silicon-proven IP cores would take several years and millions of dollars to achieve).
  • Increased presence in the defense and instrumentation market, which is supported by ChipX's ITAR certification and the addition of ChipX’s R&D subsidiary in Haifa, Israel (which is located to facilitate support expansion of GigOptix’s product sales to the defense market there and around the world).
  • As a fabless high-volume silicon IC supplier, ChipX brings strong relationships with semiconductor foundries and sub-contractors and increased purchasing power (which can be leveraged to further improve GigOptix’s operating margins and enhance supply chain accessibility).
  • Continuing the roll-up of entities that have invested millions of dollars in developing sophisticated technology and products for a fraction of their investment, to support GigOptix’s build up of technology and products.

With the ChipX acquisition, GigOptix gains high-volume silicon design expertise to complement its III-Vs, silicon germanium and electro-optic (EO) polymer technologies. This will support its strategic move into higher levels of integration of analog and mixed-signal system-on-chip products, such as clock & data recovery (CDR) and serializer/de-serializers (SerDes). Similar to the acquisition of Helix, the ChipX acquisition supports GigOptix's plan to expand its product portfolio into high-volume optically connected markets such as consumer electronics, data centers, and high-performance computing, as well as to reduce the time and cost of developing new products, customer relationships and vertical markets. The transaction also delivers increased scale, with an existing revenue stream from complementary product sales.

“The combination of standard products and custom ASICs is an effective model in many successful semiconductor companies due to the ability to leverage the valuable customer channel and investment in IP across a larger number of products,” comments Nadir. “It makes sense to add new intellectual properties to the custom ASIC tool kit from the GigOptix product base,” he adds. “ChipX has a healthy pipeline of new customer designs ongoing and expects to see growth in ASIC sales in 2010.”

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