1

Venture Capitals Across the Pacific – Today and Beyond

Brian AnnHotung Capital Management,

Inc.San Jose, California

2

Looking Back at Silicon Valley

1937HP Founded

1951StanfordIndustrialPark (FredTerman)

1955SchockleyTransistor

1958FairchildSemiconductor

1976AppleComputer

• Silicon Valley was coined by journalist Don C. Hoefler in 1971 in a series of articles for ELECTRONIC NEWS

1981First PC by IBM

1993First BrowserMosaic

1994Netscape

1971Fist uPIntel

1984Cisco

3

The Scale of Technologies

1960 -The first planar integrated circuit by Fairchild Semiconductor.

1971- The 4004, Intel's first microprocessor

Today – Pentium 4

4

From Start-Up to Giant Intel:

Founded in 1968 with employees of 78,000 now Revenues: $34.2 billion (2004) 40% of revenue in 2003 came from Asia Pacific Went public in 1971. The total fund raised was $5.16

M. Its market cap is $156.55 B as of 5/17/05. Cisco went public in 1990 with $2.2 million of

private capital was invested Its market cap is $122.36 billion as of 5/17/05.

5

Venture Capital – A fact of life in SV

60 semiconductor companies were founded from 1961 to 1972 including NS, AMD, Intersil.

Other notable VCs include Don Valentine (funded Apple, Oracle, and Cisco), John Doerr (funded Compaq, Lotus, Sun and Amazon), and Michael Moritz (funded Yahoo!.)

And yet, a lot of companies were drowned by the busted bubbles.

6

US Venture Activities in #

VentureOne, Ernst & Young

Industry Group 1999 2000 2001 20022003

2004

Healthcare 616 817 614 540 492 496

Information Technology 2490 3624 1913 1348

1234

1235

Products & Services 1445 1798 664 396 302 271

Other 35 48 55 56 64 65

Grand Total 4586 6287 3246 2340209

2206

7

7

US Venture Activities in $ M

VentureOne, Ernst & Young

Industry Group 1999 2000 2001 2002 2003 2004

Healthcare　

$5,069.3

$9,415.4

$6,622.4

$5,759.7

$5,941.9

$6,578.4

Information Technology

$28,721.1

$59,143.5

$23,449.8

$13,131.5

$10,421.1

$11,342.7

Products & Services

$15,601.1

$25,552.2

$5,743.1

$2,523.6

$2,207.6

$2,162.0

Other 　 $137.4 $447.8 $338.2 $401.4 $338.0 $325.3

Grand Total　

$49,529.0

$94,558.9

$36,153.6

$21,816.2

$18,908.6

$20,408.3

8

US IPO in #

VentureOne, Ernst & Young

1999 2000 2001 2002 2003 2004

Healthcare 15 57 11 8 8 39

Information Technology 177 108 10 5 10 16

Products & Services 56 34 1 7 4 12

Other 2 3 　 　 　 　

Grand Total 250 202 22 20 22 67

9

US M&A Statistics

1999 2000 2001 2002 2003 2004

# of Deals 304 458 402 379 335 376

Amount Paid ($M) $43,116.5 $98,102.5 $21,792.1 $10,782.9 $12,920 $22,643.5

Median Amount Raised to Liquidity ($M)* $11.30 $10.38 $14.73 $16.50 $19.00 $21.70

Source: VentureOne

10

Taiwan VC at a glance

1999 2000 2001 2002 2003

# of Deals 1499 1850 614 603 1159

$ in NT$100M

295.92

308.03

81.46

117.4

165.4

TVCA Website

11

US vs. TW in # of Deals

0

1000

2000

3000

4000

5000

6000

7000

1999 2000 2001 2002 2003

US

TW

12

US vs. TW in US$M Invested

$100.00

$1,000.00

$10,000.00

$100,000.00

1999 2000 2001 2002 2003

US

TW

13

The SV Characteristics

The Entrepreneurship The Capital Structure and Support The Infrastructure – hard and soft The Free-spirited Mindset

Anything is possible. The world is bigger than US. Failure is acceptable.

14

Innovations to Inventions From tubes to silicon, to PC, to networking,

and to Internet, Silicon Valley has re-invented again and again to continue its technology lead.

The innovations that created the fortune in SV also facilitated the outflow of jobs and assets.

The Internet is especially crucial as it breaks down the barriers of intellectual assets.

15

Silicon Valley in Transition

Internet changed people’s behaviors, and expedited the globalization.

It also created the bubbles and wealth in Silicon Valley.

However, SV is facing unprecedented challenges into the future as a result of the Internet.

16

Before and After

1996 2000 Now

Nasdaq 1058.65(Jan 1996)

5048 (3/10/2000)

2070.61 (3/4/2005)

IPO of SV Companies

67 78 17 (2004)

Ave. office rent/sq. ft.

$1.75 $4.2 $1.79 (2004)

Median house price

$270,000 $485,000 $610,500 (12/04)

Jobs in SC County

921,700 1,084,500 864,600 (12/04)

17

Challenges

A new ecosystem including many of the Asian countries

Outsourcing beyond just manufacturing

China becoming increasingly important in technology and market

Can Silicon Valley continue to lead?

18

A New Ecosystem

• Efficient and flexible manufacturing capabilities

• Strengths in application engineering and productization

• Successful OEM/ODM business model

• Technology transfer or licensing from U.S. and Japan

• Backward Integration based on OEM business

• Global logistic channels

• Quality engineering resources

• China connection - backyard

• Low-cost, high-volume manufacturing capabilities

• Increasing domestic demand and brands

• Improving Infrastructure

• Government support and foreign investments

• Qualified engineers & well-trained labors

• Industrial standards defined by China

• High-saving rate vs. consumption

• Innovations in technologies and marketing

• Leading position in high-tech development

• Multi-cultured talents

• Seasoned management and professionals

• Well-established capital markets

• Industrial standard development

• Huge market and brand names

19

The New Ecosystem - Taiwan The power house for semiconductor and

IT related products An important customer for many global

device and equipment firms, and a key supplier to the big OEM’s

Strong inroads into the value chain on cost sensitive consumer devices

Uniquely positioned in west meeting the east

Potential limited by the small domestic market.

20

The New Ecosystem - China The world factory in almost everything A key player in the global hi-tech value chai

n as a result of the huge talent pool, government subsidies, and foreign investments

Big domestic market fostering brand names like Huawei and Leveno competing with other global firms

Concerns on the politics and financial disciplines

21

Going Forward US and Taiwan face similar threats from

China and have no other choices but to leverage China and build own strengths to differentiate and win.

China will need continuous foreign investments and support to build the infrastructure.

However, the “hard” infrastructure will not be “hard” to build. The “soft” infrastructure will take generations.

22

Opportunities - SV SV has to invent again in nanotech, clean

energy, life science (e.g. stem cell), new internet business models/applications, and new enterprise applications.

The unique characteristics for innovation is hard to be found elsewhere.

The increasing productivity and outsourcing in Asia will result in a jobless recovery.

23

Taiwan at a Crucial Junction Move up or move out

Micro-profit not sustainable 3C is converging to just 1C- consumer

Cost pressure and commoditization Brands! Brands! Brands!

China in the center stage Cheap production and market potential Global venture capital interest Threats and opportunities

24

Opportunities – Taiwan Well positioned for the emerging 1C

trend Knowledge, leverage and differentiation

Expand upon the existing foundation Eye on the world with China as backyard New business models

The “soft” infrastructure New business practices Methodology, productivity, and efficiency M&A, 1+1>2

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Q&A

THANK YOU!