With the sales boom of Apple Inc's iPad around the world, domestic and foreign venture capital companies have increased their investment levels in Chinese tablet computer makers, hoping that domestic companies will ride on the sales boom in portable computer devices.

Ouyang Xiangyu, managing director of Legend Capital Ltd, one of the first Chinese venture capital companies, said tablet PCs have a huge potential in the domestic market, because "the tablet PC just fills the gap between smartphones and notebooks".

Legend Capital recently injected an undisclosed amount of capital into Beijing ErenEben Information Technology Co, a tablet PC company.

It was the second injection of funds by the venture capital company within a year, pushing total domestic investment by all venture capitalists to 56 million yuan ($8.25 million). The aim of the investment is to enable Legend to maintain its market lead and help it to quickly enhance its technological advantages.

"I believe that more and more venture capital companies will enter this market, and if we find new technologies or good companies in this industry, we will invest more," said Ouyang.

He said his company has already contacted at least five companies in the tablet PC market about possible investment.

Tablet PCs have become a hot topic among venture capital investors in China. Total sales of 3 million iPads have alerted venture capitalists to the business opportunities in the industry, especially in China.

"China's domestic tablet PC sales are expected to reach 4 million units by the end of this year, not including iPads," said Vincent Gu, an industry analyst from iSuppli, an Internet market analysis company.

The increasing demand has attracted about 400 Chinese companies in the information technology industry, including Lenovo Group Ltd (China's largest personal computer maker), China Greatwall Computer Shenzhen Co and Hanwang Technology Co Ltd.

"Almost all the big venture capital companies in China have indicated an interest in investing in us," said Chen Feng, chief marketing officer of Fuzhou Rockchip Electronics Co Ltd, a Chinese tablet PC chip producer. Its chips have a market share of about 70 percent in China.

The company has produced 5 million chips for tablet PCs since April. "The market is heating up and next year investments in tablet PCs will become red hot," said Chen. He said Rockchip will accept venture capital when they find the right partner.

Industry estimates show that sales of tablet PCs will surpass netbooks in 2012 and, by the end of this year, the number of tablet PC products will reach 12 million units, said Bai Weimin, secretary-general of the China Video Industry Association at the 2010 International (Beijing) xPad Industry Forum on Aug 20.

"Tablet PCs have caught the attention of investors," said Gu from iSuppli. "I think hardware and software will become the highlights in the near future."

Given the market situation in China, investing in hardware such as chips will become more profitable than investing in existing name-brand tablet PC products, so capital investors are seeking opportunities among those companies, according to Gu.

"In addition to investing in the final product, tablet PCs, our next target may be upstream products such as chips, or applications and software," said Xue Jun, general manager of Tuspark Venture Capital Management (Beijing) Inc.

He pointed out that the industry has a diversity of investment potential, and his company is in discussions with other companies to locate further investment.