When a relatively young, small, R&D-based compound semi industry company quietly files for bankruptcy and someone sends me an email with the local article stating the situation, a little alarm goes off in this industry historian's head. What's at the heart of the problem? Did some scoundrel from a foreign land renege on financing again? Was the startup poorly managed? In this case the blame is being put on the USA government citing the fact that "the military has scaled back research programs in order to spend more on the war effort." After reading that, the little alarm in my head instantly grew. As an industry commentator and veteran advanced technology journalist, I feel a heads up to our readers is in order.

The company that filed for Chapter 7 bankruptcy in the USA state of Pennsylvania is three year old Caracal Inc., headquarted in Ford City. The company is in the silicon carbide (SiC) business and made its claim to fame via a lucrative Navy contract worth over $1 million to supply SiC-based semiconductors for use in what was to be an all-electric powered warship. News of the bankruptcy filing was in the Tribune Review, Wednesday edition, April 23, 2008. (Link to article) It noted that the Navy was 90% of Caracal's customer base, which doesn't surprise me at all. Unfortunately, most startups chasing after government funding put all their eggs in one basket, and most hatch rather well, providing the USA is in a pro-R&D funding mode.

Looking back, whenever the USA goes into anti-funding mode due to some perceived priority or another, I visualize major government CS industry R&D advocates at the various funding agencies standing before their beleaguered program managers and asking: "Which puppies shall we drown today?" Government program managers hate losing funding for their programs, especially when they've already been allocated the funds and assured the contractors that the funding is secure and the program will surely go ahead. The only thing they hate worse is having to tell their contractors that they won't be renewing.

Caracal is evidently now a casualty of war, according to defense policy analyst John E. Pike, director of GlobalSecurity.org in Alexandria, Virginia who was quoted in the Tribune Review article that "the all-electric ship project 'comes and goes,'shifting in priority on the Navy budget," noting also that... "Anything related to shipbuilding is going to be in a really tight space these days and that research and development spending in general is flat."

According to a follow-up Trib article, Caracal plans to liquidate its assets. That article notes that "the borough" that encompasses Ford City and the Caracal plant is extremely concerned about the impact the bankruptcy will have on the community since Caracal pays the town about $228,000 in rent each year under its lease, which the borough uses to pay off debt service on the industrial development project. The local hope is that some entity will step in that is able to utilize the infrastructure as well as the skilled labor.

After over 30 years advising semiconductor startups how best to succeed, I have to confess that I can't guarantee success. I can, however, identify signs of possible failure. One blatant sign of potential trouble is when the startup instantly goes out and buys fancy furniture to impress would-be customers (and themselves). The next is to get themselves willfully into patent litigation, which eventually transfers their precious venture funding into the pockets of patent attorneys. The next obvious mistake is to put total faith in an ever fickle USA government.

I remember when diamond technology was the brief rage. The naïve went hell-bent for diamond-based ICs. Dream on. We couldn't even make a good GaAs IC back then! The sensible dabblers in diamond balanced their offerings with diamond heat sinks, and by the time diamonds were declared dead... mostly by the government... the sensible dabblers were already into other products, many of which were destined for commercial applications.