There is a fundamental problem in Silicon Valley - creating custom silicon has become very expensive because of the complexity in designing and producing chips. Yet custom chips are the way all types of digital products, from iPods to routers--differentiate themselves and delay commoditization.

The high cost, as much as $65m, has led to fewer and fewer custom chips, and greater reliance on standard chips customized with software. The goal of eASIC is to bring down custom chip costs to just a few hundred thousand dollars through the use of a unique design and production approach.

The company today announced a new family of devices called Nextreme-2 that can be built using 45 nm technology--these chips are tinier than the company's 90 nm family, and by shrinking designs by one-half, the chips use less power and they run faster.

The new family also provides faster design time in as little as six weeks for the first silicon devices compared with a couple of years for conventional custom chip designs. And there is no minimum order quantity--which further reduces the cost of custom chips.

"We are hoping to bring silicon back to Silicon Valley," said Ronnie Vashishta, CEO of eASIC. "Because design costs have been so high, most companies have been trying to differentiate their products in software but doing it in hardware is far more efficient."

Chartered Semiconductor is eASICs manufacturing partner for the 45 nm family.

eASIC DELIVERS 45nm ZERO MASK-CHARGE NEW ASIC FAMILY

Foremski's Take: This is a company to watch because of the serious money and the serious smarts behind it. Vinod Khosla, the legendary Silicon Valley VC, has been an early supporter and is on the board of directors. And it has managed to raise significant amounts of capital. In March 2008 eASIC raised $48 million for a total of $80 million.

The financing round was lead by Advanced Equities Incorporated. Also participating in the round were previous investors Khosla Ventures, Kleiner Perkins Caufield and Byers, Crescendo Ventures and Evergreen Venture Partners. The eASIC Chief Financial Officer, Craig Klosterman, also invested in this round.

eASIC is in a very good position to capture a significant share of the $80 billion custom logic market. And its success will lead to faster development of innovative hardware by hundreds of other companies. eASIC could become a potent accelerant for innovation in silicon, and in Silicon Valley.

An additional market opportunity is that eASIC can use its own technology to quickly develop custom chips for emerging markets. In this way it can seed markets that other companies can then build upon with their own custom designs. The market opportunity for its own designs could be very significant.