PHYWORKS TAPES OUT FIRST CHIP DESIGN & STARTS B ROUND FUND RAISING

Phyworks On Schedule To Launch Products in Q1, 2003, delivering 10Gbps performance over 2.5 and 1Gbps infrastructure

London, 16th December 2002: Phyworks Limited, a Bristol-based fabless semiconductor company, today confirmed that it had successfully taped out its first chip design as scheduled and has begun its Series B Equity Round fund raising. Talking at Phyworks headquarters, in an area rapidly becoming known as Silicon Gorge, Stephen King, CEO, expressed his excitement about the prospects for Phyworks in 2003.

Said Stephen King, With our first chip successfully taped out, Phyworks is looking forward to being the first company to market with products that significantly reduce the cost of 10Gbps optical deployment on existing Metro, LAN and SAN fibre infrastructures. Phyworks products are true enablers for 10Gbps and we believe the most advanced products of their kind in the world. Recent reports that revenues in the semiconductor sector will reach $171.8 billion in 2003 confirm that Phyworks is well positioned to take advantage of this upturn next year."

King went on to say: When we launch our first products in Q1 2003, this next generation technology will allow optical module vendors to dramatically improve the performance of their products, in terms of power consumption and transmission distance, while at the same time reduce size and cost. At last it will be possible to deliver 10Gbps performance over existing 1Gbps and 2.5Gbps infrastructure."

Phyworks successfully raised over $11million in seed and First Round funding and is now beginning discussions with a number of European-based VC funds to raise a further $15million from the B Equity Round which will take the company to profitability. Existing investors, Atlas Venture, Add Partners and Prelude Ventures fully support the second round of fund raising and have confirmed that they intend to participate.

Phyworks develops integrated circuits that extend the performance of existing high data rate optical networks. By designing these chips in advanced CMOS fabrication processes, Phyworks engineers are able to deliver this performance at a fraction of the cost and power consumption of competing solutions. This low cost, high performance approach is desperately needed by an industry struggling to support continuing demand for increased bandwidth and services, at the lowest possible cost. Phyworks technology allows carriers to transmit optical signals further and faster without expensive fibre upgrades, thereby driving down the cost of their services to end users. The founders of the company, who previously worked together at another successful UK startup, Microcosm Communications, are veterans of the semiconductor and optical industries and responsible for many cutting edge communications chip designs.

The management team is joined on the Board of Directors by Stan Boland, and Gary Steele. Stan was formerly CEO of Element14, which was sold to Broadcom in November 2000 for $641 million. Gary was formally CEO at Microcosm which was sold to Conexant Systems in January 2000 for $160 million. The Technical Advisory Board to Phyworks includes Professor Ian White, Director of Optical Communications Lab, Cambridge University, and Dr. Peter Sweeney, Research Staff, University of Surrey, a specialist in Forward Error Correction (FEC) technology and Richard Pentry, Assistant Director of Research in the Photonic Communications Research Lab, Cambridge University.

About Phyworks Ltd:
Phyworks Ltd. is a fabless semiconductor company that is developing electrical solutions, including Electronic Dispersion Compensation and Forward Error Correction, for 10Gbps optical problems. Phyworks products are targeted at the physical layer of both telecomms and datacomms markets: Local area networks (LAN), storage area networks (SAN), metropolitan area networks (MAN) and wide area networks (WAN). Phyworks addresses the four key issues that equipment and optical module manufacturers always struggle with: Size, Cost, Power and Performance using low cost, single chip CMOS solutions.

Phyworks products protect investment by delivering increased 10Gbps performance over 2.5 and 1Gbps infrastructure.
For further information or to request an interview, please contact:
Phyworks Press Office
Cass Stainton/Narda Shirley
+44 (0)207 313 4770
cass@nashpr.com, narda@nashpr.com