Chip alternative to HDTV emerges

Electronic News, March 16, 1998 by Peter Brown

San Jose, Calif.--The high prices and large television screens required for first generation digital televisions (DTVs) might make sense to those well-heeled people who always want to be at the forefront of new technology. However, for others, spending $8,000 on a TV will be viewed as a bit impractical. For semiconductor start-up TeleCruz, the upcoming DTV market is viewed as an opportunity to cash in on a potentially lucrative alternative in the form of the TC701 interactive TV chip.

TeleCruz believes the market opportunity for televisions does not lie in the 70-inch-and-up high-definition television (HDTV) market, but more at the 27-inch level where mainstream units are sold and money is made. Industry observers believe HDTV won't work at the 20-and 25-inch television levels because the viewing area is too small. This is where TeleCruz wants to capitalize.

The TeleCruz TC701 chip features a 70MHz, 32-bit MIPS 3900 RISC processor, a proprietary graphics engine, digital signal processing (DSP) functionality, flicker reduction and 16-bit audio on a single chip for embedded interactive TVs. Toshiba America manufactures the device on a 0.35-micron process. Toshiba also supplied TeleCruz with the MIPS architecture. The 701 chip supports HDTV, NTSC, PAL and SDTV formats in all sizes.

The interactive TV chip is targeted at televisions that won't be able to support HDTV, and digital standard definition televisions (SDTVs) and basic analog NTSC and PAL analog TVs. TeleCruz claims there are 80 million households without Internet connections but 98 million households with televisions. With an average household watching 7.5 hours of television per day, the company believes it can combine these two needs into a chip that will go in any television and add Internet and other data streams at a low cost.

"We can offer Interactive TV for less than $20 incremental cost, compared to $300 for a set-top box or $2,000 for PC TVs. For interactivity this is a real viable market," said Ramon Cazares, director of marketing for TeleCruz.

The 701 chip is sampling and Mr. Cazares said the company already has two agreements in place with TV manufacturers. Telecruz is currently working with other TV OEMs as well and, by the end of this year, expects to see some of these OEMs roll out TVs with the interactive chip inside.

Founded in May of 1996 by former members of Cirrus Logic--Kris Narayan, president, CEO and co-founder and Vlad Bril, chief architect, CTO and co-founder--TeleCruz was initially formed as a design services company targeted at consumer electronics companies. Approximately one year ago, TeleCruz made the strategic decision to begin development on a product and drop out of the design services business altogether.

"Design services was something we did not continue because we felt it was not a way to make a strong company," said Mr. Cazares. "That business would have kept a half-dozen people busy for years but not as a growing business, and TeleCruz's founders had something more substantial in mind. In interactive TV we saw a market opportunity that we couldn't resist and so we made the change."

TeleCruz recently completed a second round of financing with its primary investor, BancAmerica Robertson Stephens. The company initially was financed through private investors who were familiar with it or worked for the company. TeleCruz has gathered a total of $8.2 million in total investment thus far. This enabled it to staff up to the 25 people currently working at the start-up. The company will be seeking to increase this funding to approximately $10 million by the end of the summer.

Helping TeleCruz's proliferation of Interactive TV is the movement of enhanced broadcast functions from companies such as Wink and OpenTV.

Cable networks are also making waves to begin offering Interactive content in their programming. CNN, NBC, TBS, MTV, ESPN and other cable networks are starting some momentum in this area.

In addition, Microsoft has made significant investments in Interactive TV with its HD-0 effort that utilizes Windows CE. HD-0 utilizes progressive scanning rather than interlaced scanning so its entire bandwidth is not used on high quality pictures. In theory, those using HD-0 could then use the remaining digital bandwidth for multiple channels or data streams for Interactive TV. Microsoft has already garnered support from cable giants TCI and ComCast, who seem to be leaning toward adopting Interactive TV rather than full resolution HDTV.

"TV OEMs are very receptive to what we are doing because we are going to be hitting several different television markets with our chip," said Mr. Cazares. "Although the PC is moving down in price, a lot of people will still not have access to the Internet and other services. The entertainment value of PCs is just not there. (With) Television you have a large entertainment value and if you offer these other value-added propositions we have the makings of a very good potential business."