Venture Capitals Across the Pacific – Today and Beyond

1. Venture Capitals Across the Pacific – Today and Beyond Brian Ann Hotung Capital Management, Inc. San Jose, California

2. Looking Back at Silicon Valley • Silicon Valley was coined by journalist Don C. Hoefler in 1971 in a series of articles for ELECTRONIC NEWS 1937 HP Founded 1951 Stanford Industrial Park (Fred Terman) 1955 Schockley Transistor 1958 Fairchild Semiconductor 1971 Fist uP Intel 1976 Apple Computer 1981 First PC by IBM 1984 Cisco 1993 First Browser Mosaic 1994 Netscape

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

7. US Venture Activities in $ M VentureOne, Ernst & Young

8. US IPO in # VentureOne, Ernst & Young

9. US M&A Statistics Source: VentureOne

10. Taiwan VC at a glance TVCA Website

11. US vs. TW in # of Deals

12. US vs. TW in US$M Invested

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

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 • 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 managementand professionals • Well-established capital markets • Industrial standard development • Huge market and brand names • 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

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 chain 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

25. Q&A THANK YOU!