VentureBeat

You can blame the popularity of YouTube for the success of Solarflare Communications. Because demand for internet video keeps on growing, the need for infrastructure to handle the growth is also on the rise.

Solarflare Communications has raised $26 million in venture capital for its high-speed networking chip business as part of an effort to create more energy-efficient data centers.

The Irvine, Calif.-based company is creating 10GBASE-T chips, which can transfer data at 10 gigabits a second over the Ethernet protocol. Such chips are used in servers and switches inside data centers to boost the transfer of data from one piece of hardware to another with the lowest power consumption.

The company is in a good spot because it is the first to capitalize on a generational shift in networking, as network speeds move from 1-gigabit-per-second to 10-gigabits, said Russell Stern, chief executive of Solarflare (pictured below).

The round includes previous investors such as Oak Investment Partners, Foundation Capital, Accel Partners and Amadeus Capital Partners. The round slightly exceeds the amount raised by rival chip company Aquantia, which raised $25 million in March.

Solarflare was started in 2001 as a chip design firm focused on 10-gigabit Ethernet networking. In 2006, it merged with Level 5 Networks in Cambridge, England. It started shipping a low-power 10GbE vNIC controller/MAC chip in February 2007.

Solarflare said it will use the new money to launch its next-generation products, including a low-power 10GBASE-T PHY. The company hopes to dominate 10-gigabit networking the way that Broadcom and Marvell have dominated 1-gigabit networking.

“The interesting thing about networking is that no player has dominated more than one generation of product,” Stern said.

The U.S. Environmental Protection Agency (EPA) reports that national energy consumption by servers and data centers could nearly double by 2011 to more than 100 billion kilowatt hours, representing a $7.4 billion annual electricity cost.

With technologies such as Solarflare’s networking chips, it becomes easier to shift data to outlying sites with greener energy sources, such as solar or wind power. The computing of data can happen at those locations in a more energy-efficient manner than inside a power-hungry data center, said Andy Hopper, a fellow at Corpus Christi College and head of the Computer Laboratory at the University of Cambridge, Cambridge, UK.

The latest investment brings the total amount raised by Solarflare (and its acquired entity, Level 5) to over $126 million in seven years. Solarflare’s partners include Accton, Citrix, Delta, Ixia, Panduit, SMC and VMware. The company has 125 employees.

Chip start-ups have always viewed the communications/networking market as prime territory to launch a new semiconductor chip. Cswitch in Santa Clara, Calif., is coming at the market with a different approach. And it is raising a new round of cash to do so.

Doug Laird, CEO of Cswitch, said in an interview that his company is seeking its third round of funding to complete production of its chips, which have been under design since 2004. The company has finished the design and has produced engineering samples. To date, the company has raised more than $41 million in two rounds.

Here’s its unique approach to the market. Like eASIC, which recently received $48 million in funding (our coverage), Cswitch seeks to exploit the gap between two major markets: the $20 billion custom chip (application specific integrated circuit, or ASIC) market and the $3.7 billion FPGA market (field programmable gate arrays). More on the gap in a sec.

Internet, particularly video on the web, is creating the demand for Internet infrastructure — the same demand helping eAsic. That, in turn, creates demand for communications chips that can process data at ever higher rates. But Laird says: “There is a growing gap between FPGAs and ASICs.”

The ASIC chips (like those being designed by Aquantia, our coverage) are cheap to produce but come with high upfront design costs. They are used for volume production of cihps. FPGAs are expensive but they can be programmed at the last minute. Thus, they are useful as prototype chips and can be used to get a product to market quickly, albeit expensively.

Laird says his company is designing chips with high-speed switches that are customized for the communications and networking markets. But they’re also programmable, just like FPGAs. Hence, Laird says the chips combine the best of both worlds for customers in the communications market. eASIC, by contrast, focuses more broadly on all sorts of markets. Read the rest of this entry »