Another small piece in the plans of Intel Corp. (Nasdaq: INTC) to become a big player in optical networking may have clicked into place yesterday when its venture arm, Intel Capital, signed off on a deal that gives Compound Semiconductor Technologies Ltd. (CST) another $5 million in funding (see Compound Semiconductor Gets $5M).

CST, based in Glasgow, Scotland, is an interesting outfit in that it’s a combined incubator and semiconductor foundry, specializing in making gallium arsenide and indium phosphide chips -- materials that hold out a lot of promise in the field of integrated optics.

Neil Martin, CST’s CEO, says his facility can help startups get products to market much faster than would normally be the case, because CST has a ready-made library of processes for making and testing prototype chips.

A couple of startups -- Kamelian Ltd. and Intense Photonics have already got a flying start with CST. Kamelian made its first samples within a few months of being set up, thanks to having CST’s foundry on its doorstep, according to Paul May, Kamelian’s CEO (see Scotland Spawns Component Startups).

Both Kamelian and Intense Photonics have now flown the nest and set up their own foundries (see Kamelian Gets Green Light and Intense Photonics Puts on a Show).

CST is also providing foundry services for a lot of other startups developing opto-electronic chips. Martin says 60 percent of the company’s revenues come from outside the U.K., mainly from American startups but also from outfits in Canada and Ireland.

Up until now, CST has been owned by Glasgow University, Strathclyde University, and Scottish Enterprise, a government development agency. It was founded in 1998 but has only been operational for the past 18 months, according to Martin.

”It was always in the original plan that this company would be converted into a commercial operation,” says Martin. The new funding round was led by European Digital Partners (EDP), a Swedish venture capital company formed in early 2000. The investment consortium also included Intel Capital and some private individuals. Martin declines to say on what valuation the funding was based but says that no one group of investors has a controlling interest.

“The guys that are forming the consortium are bringing some real optical experience to the table,” Martin adds. In particular, he expects to gain expertise that will help startups speed up packaging of their chips.

A number of early-stage startups coming out of Glasgow and Strathclyde universities are likely to use CST to develop their first samples, possibly giving EDP and Intel opportunities to check them out before other venture capital companies. There’s no agreement to give EDP and Intel first refusal on investing in these startups, according to Martin.

For Intel Capital, this is just one of many, many investments in startups. Right now, it has stakes in 179 companies involved “networking and communications” according to its Website. Click here to check out the list. See Intel Still Seeking Startups, Intel Capital Still Looking for Deals, and Intel's Optical Attack Makes Waves for more on Intel’s optical strategy.

— Peter Heywood, Founding Editor, Light Reading
http://www.lightreading.com