Chip startups are rare these days. But Samplify Systems has managed to raise another round of $11.2 million in funding for its analog chip design business.

The company focuses on analog chips that can make the processing of real world data such as sound more efficient and thereby less costly. If Samplify’s technology catches on, it could sweep through a lot of electronics devices and make them cheaper.

Venture capitalists and entrepreneurs have stayed away from chip startups because they’ve become very capital-intensive, with a few chip companies raising more than $100 million. But Santa Clara, Calif.-based Samplify can get by with a smaller amount of money and a smaller team by focusing on one sector of the analogy chip business that requires a lot of engineering expertise but not a lot of bodies.

Investors include Integrated Device Technology, Charles River Ventures, Formative Ventures, and Schlumberger. Woodside Capital Partners acted as an advisor.

Samplify creates chips that convert analog data to digital data. In other words, they convert things like sound into the ones and zeroes of digital computerese. These chips are necessary for everything from baby ultrasound pictures to wireless communications infrastructure. They’re also being used in industrial and defense markets.

Normally, analog chips just convert data and pass it along. But Samplify’s chips can convert data and then compress it too. This may result in cheaper and more accurate products for consumers. This kind of task requires expertise in “mixed signal” technology, or the combination of analog and digital functions on the same chip.

The analog chip market is normally dominated by big chip companies such as Texas Instruments, National Semiconductor, Maxim Integrated Products, Linear Technology, and Analog Devices. But Samplify figured out how to make the chips better in a way that takes a lot of cost out of a system.

Typically, analog chips are built in old, depreciated chip factories that use old chip-making processes (such as 0.35 micron or 0.25 micron features, a measurement of the width between circuits). Those older plants are fine for analog circuits and they’re really cheap. But it doesn’t pay to put digital circuitry on the same chip, because the process for the digital circuitry is really inefficient.

Consequently, many data converter chips have a lot of analog and just a little bit of digital circuitry on them. Or they simply do the analog processing and then pass the data on to a second chip (dubbed a field programmable gate array) that handles the digital compression. The problem is that moving data in uncompressed form is far more inefficient than moving it around in compressed digital form. The transmission side and the receiving side need sophisticated circuitry that can handle a lot of analog data movement. That’s costly.

Tom Sparkman (pictured), chief executive of Samplify, said in the past that the company has figured out a way to put a lot of digital circuitry together in the same chip as analog circuitry with its Prism IQ signal compression technology.

“For us, this is a game changer,” Sparkman said.

A system that once needed the ability to send 200 gigabits of data throughout the system each second might now get by with just 60 gigabits a second. An example is a wireless antenna in a train station or an airport. It often requires a fiber optic cable to move data in analog form. That expensive infrastructure could be eliminated if the data were moved in digital form.

By doing this, Samplify can dramatically reduce the costs of electronic gadgetry. The company is focused on markets where this kind of solution matters a lot, such as chips for ultrasound machines or cat-scan machines. The chips can also be used in cell phone infrastructure, military equipment, test equipment, and data acquisition equipment.

The technology was dreamed up by Al Wegener, chief technology officer of Samplify. Wegener started working on the technology in 1999. His bosses at Texas Instruments didn’t want the technology, so he got permission to take it to a startup. He received initial funding from Charles River Ventures in the fall of 2006. The company raised a second round in March 2007. Besides Charles River Ventures, Formative Ventures and angels also invested. With the new round, Samplify has raised $22.5 million.

At first, the company sought to license its technology to others. It has been showing the technology to potential customers or chip makers in the past year. But there is more money in making chips. So the company is now designing its own chips, which will be fabricated by a contract chip manufacturer, Taiwan’s United Microelectronics. Sparkman said earlier that the company was able to get its first sample chip done on a budget of $5.6 million.

“Capital efficiency has been our hallmark from day one,” Sparkman said in an interview today. “We are not going to go out and hire 100 people. We are able to do this in nine months.”

In 2009, Samplify introduced its SAM1600 family of analog-to-digital converter chips. It also introduced its AutoFocus “beamforming” technology for the ultrasound market. Taiwan’s UMC contractor chip manufacturer fabricates the chip for Samplify. Samplify says it has more than 30 customers in medical imaging and wireless infrastructure. The company will use the proceeds from the new round to bolster its customer service and accelerate its expansion into new markets.

This year, Sparkman said the company will finish a “beamforming” chip and start selling it soon.