The global computer chip shortage is not just causing headaches for laptop- and smartphone-makers. It also appears to be pushing significant venture capital dollars into a space often shunned by investors fixated on the next big software play or social app.
Already this year, chipmakers and designers have hauled in massive venture funding rounds, as a combination of factors have thrown the industry into disarray.
In April, Palo Alto, California-based SambaNova Systems, a hardware and integrated systems developer, raised a $676 million Series D at a $5 billion-plus valuation. That same month, Mountain View, California-based Groq, an AI chipmaker, closed a $300 million round co-led by Tiger Global Management and D1 Capital. And on May 20, Toronto-based startup chip designer Tenstorrent announced it had raised $200 million at a $1 billion valuation.
Those in the industry say the new interest is due to a push to find a differently designed chip that can handle new, AI-driven, data-heavy workloads while the industry grapples with a shortage brought on by an increased demand from new verticals that rarely needed silicon in the past — such as automotive — and uncertainty due to the COVID-19 pandemic.
The global chip supply shortage is so severe it has reached even the highest levels of government. In March, President Joe Biden said $50 billion of his proposed $2.3 trillion infrastructure spending plan would go to address not just the semiconductor shortage, but to also shore up the supply chain of chips in the future by bringing more R&D onshore — including possibly building modern foundries in the U.S.
Although the shortage continues to garner headlines, those familiar with chips say this is rather par for the course in the semiconductor industry.
“The idea of an imbalance is not a new thing,” said a former executive at Tesla and now a partner at Palo Alto-based Eclipse Ventures, Greg Reichow, who invested in Tenstorrent. “It’s been like this forever.”
The money pouring into the industry now represents an attempt to create a little more flexibility. Since new foundries are not going to spring up overnight, more focus is being brought to chip design, as more optimized chips can lessen the numbers needed for devices and appliances.