Sigma Designs Buying Smart Network Chipmaker Zensys

California chipmaker Sigma Designs (s SIGM) is getting into the smart device and energy management market. The company announced today that it signed an agreement to buy Zensys, which makes wireless mesh network chips for residential and light commercial building control systems. Sigma, which makes multimedia chips for TVs, DVDs and computers, said it’s an all-cash deal but did not release the financial terms of the agreement.

Zensys, also based in California, makes single-chip radio frequency (RF) systems using its proprietary Z-Wave communications protocol, which Sigma says has already been used in more than 250 smart products around the world. Wirelessly networked devices can be monitored and controlled for energy management, helping to lower energy costs by controlling lighting, heating, cooling and other systems in buildings.

Many other startups in the smart energy device market, including Trilliant, Tendril, and Adura Technologies, are using the ZigBee protocol, part of an industry-wide collaboration. ZigBee is a formidable competitor for Z-Wave; today, we hear that CenterPoint Energy has received approval from the Texas Public Utilities Commission to roll out 2.2 million ZigBee-enabled smart meters. And in late July, the Texas PUC approved a similar plan from Texas utility Oncor, which will add 7 milliion ZigBee-enabled Landis+Gyr smart meters by 2012.

Zensys started its own industry consortium, the Z-Wave Alliance, with members including heating and cooling systems manufacturer Danfoss International; climate control, industrial and security technologies company Ingersoll-Rand (s IR); and Leviton Manufacturing, which makes electrical and electronic components. According to Sigma, Zensys is currently shipping more than a million RF chips per year.

Zensys is backed by some big names in the electronics industry, with its latest investment coming from Japan’s Panasonic (s PC) in March. The size of that investment was not disclosed, but Bessemer Venture Partners led a $16 million third round for Zensys in 2005. Other investors include Intel Capital, the investment arm of Intel (s INTC); Cisco Systems (s CSCO); Palamon Capital Partners, and Sunstone Capital.

With the acquisition, Zensys’ headquarters in Fremont will be merged into Sigma’s head office in neighboring Milpitas. Sigma said the Zensys research and development center in Copenhagen, where most of Zensys’ workers are based, will remain in place. Zensys has 33 employees, including 23 engineers. Sigma said the deal, which is subject to standard closing conditions, is expected to close by the end of this year.

Stacey Higginbotham and Celeste LeCompte provided additional reporting for this story.