3i Identifies Trends Transforming the Semiconductor Market In Latest Issue of 'iSight'; Focus is on Innovation by Small Companies.

Business Editors/High-Tech Writers

MENLO PARK, Calif. & BOSTON--(BUSINESS WIRE)--April 12, 2004

The global market for semiconductors is expected to reach over $200 billion by the end of the year, and between 2003-2008, the Gartner Group predicts a compound annual growth rate of 10.6%. However, increasing design and manufacturing costs, coupled with decreasing profit margins, are creating a fiercely competitive and challenging market.

That is among the initial finding of the latest issue of iSight magazine (http://www.3i.com/us/3i_research/isight/issue4.html). iSight is jointly produced by 3i, a world leader in private equity and venture capital, and Infoconomy, publisher of Information Age magazine. iSight profiles venture-capital backed emerging technologies for businesses.

"The downturn in the semiconductor industry has taught customers to seek out more flexible and cost-effective solutions," says Martin Gagen, CEO & President, 3i U.S. & Asia Pacific. "The constant pressure to improve efficiency and profitability has created real opportunities for innovation. At 3i, we see much of that innovation coming from smaller, focused companies. With a world-wide semiconductor portfolio of over 100 companies, we keep a close eye on trends and cycles. We expect that demand will be driven by the convergence of IT, entertainment and communications -- and the need to make it easy for the consumer to use the proliferation of devices in their lives."

The Worlds of IT, Entertainment and Communications Are Converging

The rapid growth of the consumer electronics market is also changing the landscape of the industry; the digital revolution will soon touch every aspect of our lives through a myriad of niche applications.

As a result, says Gagen, "The semiconductor sector is evolving into a complex ecosystem made up of a number of consolidating big players, complemented by a growing number of smaller specialist companies able to exploit the numerous market opportunities." Examples of companies filling such a niche are Canada-based SiGe Semiconductor, Inc. and U.S.-based SyChip and Forte Design Systems.

"We have achieved success in the current market climate through diversification of our product line, as well as through partnerships with major suppliers of complementary products. As a result, we enable consumer device manufacturers to capitalize from our strengths in delivering low cost, high performance and integration to the front end while having access to complete, easy to implement solutions," said Jim Derbyshire, president and CEO of SiGe Semiconductor.

SiGe designs radio frequency (RF) integrated circuits and chip-scale front-end modules that enable high-performance wireless in home and small office equipment, mobile computing devices and personal communications systems. Through its strategic relationships with industry-leading fabrication companies, as well as chip packaging and testing companies, SiGe has the capacity to meet high volume production demands. "In many cases, being a smaller company is becoming an advantage," says Mikko Suonenlahti, partner with 3i and Board member of SiGe. "Innovative small companies are better at responding to the evolving needs of the market," concludes David Silverman, with 3i and Board member of Forte.

SiGe Semiconductor announced at the 3GSM* World Congress at the end of February 2004 that it has achieved a technology breakthrough with its RangeCharger(TM) SE5120 -- a new amplifier for cellular handsets. The 3GSM show is the most active and significant wireless show in the world. All the private companies that won awards are 3i backed, including Sonim Technologies (U.S.), Kineto Wireless (U.S.), Argo (U.K.), and Bitfone (U.S.).

SyChip, another 3i-backed semiconductor company, is getting rave reviews for introducing a secure digital (SD) form factor Network Interface Card (NIC) small enough to enable WiFi features in small devices such as cameras, Smart Phones, PDAs and Media Players.

"Our goal is to enable high speed Internet connectivity on mobile devices," said George Barber, CEO of SyChip.

SyChip offers manufacturers of mobile devices highly integrated plug-n-play chip-scale Radio solutions that have the smallest foot print and use as little power as possible. The company's products include a secure digital (SD) form factor wireless network interface card (NIC) and a family of the world's smallest 802.11 wireless LAN embedded modules.

"Sychip has taken a leadership position as a systems company," commented Marko Maschek, partner with 3i. "They add tremendous value to ODMs that require significant RF systems know-how."

Forte Design Systems, a leading provider of electronic design automation (EDA) software for semiconductors and electronic systems, automates the high level design process increasing productivity and improving the performance of designs.

"Systems and semiconductor companies designing the next generation of electronics must move beyond traditional design methodologies to new levels of abstraction if they are to succeed," said Jacob Jacobsson, president and CEO of Forte. "We enable these companies to manage the growing challenges in complexity, performance, and cost by providing innovative products and methodologies such as behavioral synthesis, allowing them to breakout of the traditional electronics design methods."

"SiGe and Sychip, and Forte are just a few examples of smaller companies offering niche applications," concludes 3i's Gagen. "We expect to witness tremendous innovation in the semiconductor industry over the next few years -- innovation that will revolutionize the industry."

3i will follow up the release of this iSight issue with a 3i-sponsored Semiconductor Conference to be held late June in California. If you would like to attend this free event, please send an email to [e-mail]. The latest edition of iSight can be found on 3i's website at http://www.3i.com.

Trends in the Semiconductor Industry, iSight

-- Semiconductor market growth will be especially strong in the

Asia Pacific region, which is expected to grow by 23.4% to $75

billion in 2004.

-- Overcapacity is one of the major problems in the industry,

along with the relentless drive towards faster, smaller,

cheaper chips.

-- The "fabless" trend continues to be on the rise. In 2002,

fabless production accounted for $16-$17 billion, or 11% of

the semiconductor industry's estimated $160 billion in output.

The U.S. Fabless Semiconductor Association predicts that the

market shares of fables companies will jump from just over 10%

today to 50% by 2010.

-- By 2013, the Gartner Group predicts that half of all the

semiconductors produced will be used in consumer products

compared to approximately 40% today.

*3GSM is the latest addition to the GSM (Global System for Mobile Communications) family. Its goal is to promote the availability of third generation (3G) mobile multimedia services.

About 3i

3i is a leading international venture capital company with U.S. offices in Menlo Park, Calif. and Waltham, Mass. Operating since 1945, 3i has invested worldwide over $26 billion, including co-investment funds, with a total staff of 800 employees operating out of over 30 offices in 14 countries. 3i leverages this worldwide presence to add value to its portfolio companies and investment partners. In the United States, 3i concentrates on early and late stage technology investments in companies with the potential to be leaders in their markets. Outside the USA, 3i invests broadly in buyouts, growth capital and venture capital.

Since opening its U.S. businesses in 1999, 3i has become one of the most active early and late stage VCs in the U.S. Visit 3i and its portfolio at http://www.3ius.com.