Jun. 13–RALEIGH, N.C.–Kyma Technologies, a semiconductor materials company, closed on $4 million in new venture capital this week and will add to its staff and production facilities by the end ofthe year.

Kyma makes substrates, or wafers, of gallium nitride for use in semiconductors for light-emitting diodes, lasers and wireless base stations.

Ed Pupa, the chief executive, said the company would add six employees to a staff of 16 by the end of the year and add fabrication space at its offices near the Angus Barn off U.S. 70 in Raleigh.

The investment round was led by Digital Power Capital of Greenwich, Conn., and Siemens Venture Capital of Germany.

Harald Kirchner, a partner with Siemens Venture, said the investment in Kyma was prompted in part by the fact that Kyma is supplying gallium nitride wafers to Osram Opto Semiconductors, a subsidiary of Siemens AG. Kirchner said such wafers, called GaN for short, are hard to come by.

“The market for them is just starting,” Kirchner said. “So far, nobody could really deliver this kind of material. So we’re at the beginning of a new area.”

“We’re as far ahead as anybody in the marketplace,” Pupa said. He said there are a few other companies working on GaN substrates, but the process of making them is still being refined. Kyma is shipping 2-inch GaN wafers to semiconductor companies that are using them in new devices. Once those devices go into production, demand for Kyma’s wafers will increase. Pupa declined to give a revenue forecast.

Kyma, named for the Greek word for wave, is a potential supplier of wafers to two local companies that use GaN in their semiconductor devices, Durham’s Cree and Nitronex of Raleigh.

But being the first to make GaN wafers does come with risk. Companies such as Nitronex use an easier process, apply the gallium nitride to silicon. Mike Slawson, a venture capitalist with Alliance Technology Ventures in Atlanta, is an investor in Nitronex and knows the semiconductor industry. Slawson said he thinks the ability to produce high-quality, purely GaN wafers in bulk is still a decade away.

“If you could take advantage of gallium nitride while using another substrate and do it for much cheaper, why would you not?” Slawson asked.

Still, the demand for GaN materials for use in the optical-electronic and micro-electronic fields is expected to grow, according to a study coming out today from Strategies Unlimited, a specialized market research firm in Silicon Valley. According to its research, the market for gallium nitride devices is expected to grow from

$1 billion in 2003 to $4.5 billion in 2007. GaN-powered LEDs have been on sale since 1999, but the first electronic devices with GaN devices will start shipping in 2004, according to the report.

Kyma, which was formed in 1998, received $2.6 million in venture capital in 2001.

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