Broadcom Challenger Raising $10M More

SAN JOSE, Calif. -- Centec Networks (Su Zhou) Co. Ltd. , a China-based Ethernet chip startup with ambitions of taking on Broadcom Corp. (Nasdaq: BRCM), expects to close a $10 million round of funding at the end of June, only its second round in six years.

The money is coming from investors in China, CEO James Sun told Light Reading at the Linley Tech Carrier Conference, being put on this week by The Linley Group .

Broadcom dominates the market for Ethernet switch chips, and that's left equipment providers craving an alternative supplier, Sun says. But the switch fabric is a key element of a system's design, and they're reluctant to hand that to a startup.

That's made Centec's progress slow. "When they use Broadcom, they don't do all the tests. But when they look at us -- you know how much testing they do?" he says. "You can test silicon like this forever."

To sustain itself, Centec has been selling designs and/or completed systems to original design manufacturers (ODMs) that then relabel the work as their own.

Sun, who speaks with an animation you don't always find in the semiconductor industry, doesn't shy away from the fact that Centec can live on the cheap because its staff of 140 is based in China. "Doing it in the U.S., you can easily spend $10 million to $20 million a year," he says.

Even though the company has been selling products for revenue and expects to reach break-even this year, the second round of funding wasn't easy to come by. Venture capitalists in Silicon Valley were skeptical of investing in a Chinese chip startup.

Ironically, fundraising in China was hard because investors thought Centec was too much of a U.S. company. Sun spent a lot of his career in the U.S., working first for FORE Systems and then moving to Cisco Systems Inc. (Nasdaq: CSCO) in 1998. He was later part of the team at Greenfield Networks, an Ethernet Chip company that Cisco acquired. (See Cisco Goes Greenfield.)

Being in China has helped Centec catch the ear of Chinese carriers and equipment vendors, Sun says, and the company does seem to be making a name for itself. One Linley conference attendee said Centec had turned down an acquisition offer by HiSilicon Technologies Co. Ltd. , the semiconductor subsidiary of Huawei Technologies Co. Ltd. Sun says he's talked to HiSilicon but won't confirm anything further.

— Craig Matsumoto, West Coast Editor, Light Reading