Aussie chipmaker banks huge raise from Japanese giant

Co-founder and chief executive Michael de Nil said the strategic investment by MegaChips would turbocharge Morse Micro’s sales pipelines into Japan and shore up part of its manufacturing needs.

“As well as being a customer, they have very strong experience on the manufacturing side and in quality control,” Mr de Nil said of his new major shareholder and partner.

“And the Japanese market is pretty massive, with the strongest demand from industrial IoT applications that deploy thousands of devices in warehouses which use sensors and actuators.”

MegaChips designs, develops, manufactures and sells “large-scale integrations”. This is the process of embedding thousands of transistors on a single silicon semiconductor microchip.

Listed on the Tokyo stock exchange, MegaChips has a market capitalisation of ¥61.64 billion ($650 million), and booked nearly ¥15 billion in revenue last year.

Earlier this year, Mr de Nil met Megachips executives in Silicon Valley, San Francisco, where a meeting around chip production soon turned serious.

“We weren’t looking to raise at the time, as we’d just done an internal round,” Mr de Nil said.

“But as we got to know each other, we found there was a strategic kind of partnership, and it turned into this very large series B, which gives us a very significant runway.”

The deal will significantly boost the numbers for tech company investment in Australia, which has taken a significant hit since the end of the first quarter of 2022.

More leverage

On Tuesday The Australian Financial Review revealed data showing the amount of capital flowing to Australian start-ups is now consistently down about 50 per cent compared to the same month last year.

However, some tech-related deals have continued to happen, with two new venture capital funds closing investments in recent weeks, in seed-focused RealVC and a $140 million fund for OIF.

Mr de Nil said he expected the MegaChips deal would give it more leverage, in a semiconductor industry under severe strain but dominated by a few large players.

“We’re no longer going to be a small Australian start-up buying chips from these large companies,” he said.

“Instead, we’ll be working together with a large, established company that has been around for more than 20 years.”

Despite an environment where interest rates are nudging higher, depressing the valuation of high-growth start-ups banking on future earnings, Mr de Nil said he was not in the market to acquire any other companies.

“Probably not at this stage,” he said.