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Ex-LSI Logic Execs Target Digital TV

A coterie of former LSI Logic executives are out chipping
on their own, with digital television products as their target.

Last week, the executives -- led by Peng Ang, formerly vice
president and general manager of LSI's Consumer Products Division -- emerged last
week under the Mountain View, Calif., shingle of TeraLogic Inc.

So far, TeraLogic is only talking in generic terms about
what kind of silicon they'll spin: chips for digital TV receivers and set-top boxes
that carry a sub-$400 retail price.

'The introduction of digital television technology is
about to usher in a new era of consumer electronics products,' said Ang, adding that
TeraLogic's strategy is to make chips for original equipment manufacturers (OEMs),
starting next month.

In March, Ang said, TeraLogic will release specifics about
the first member of a planned family of chips, as well as an architecture and reference
architecture for set-top and consumer electronics manufacturers.

Kishore Manghnani, vice president of marketing for
TeraLogic and another former LSI executive, said that TeraLogic firmly believes that the
digital TV area 'is the biggest portion of all consumer electronics items' going
forward, spanning video CDs, direct-broadcast TV receivers, cable set-tops, digital
cameras, recordable digital versatile discs and more.

'We're making semiconductors that target all of
these end products,' Manghnani said. 'The market is very huge, and it's
just getting started.'

TeraLogic's view is that the convergence of favorable
international regulatory environments, technological advances and market forces will
combine to quickly make its business plan profitable. The company said it has already
received $15 million in venture capital funding.

Manghnani said TeraLogic is already in discussions with
several consumer electronics and cable set-top manufacturers.

'We're very much involved in OpenCable, and we
talk to players and box manufacturers almost on a weekly basis,' he said.

But the two primary cable set-top vendors -- General
Instrument Corp. and Scientific Atlanta Inc. -- said last week that so far, they've
not heard of the chip start-up.

Manghnani said TeraLogic will differentiate itself from
other chip vendors -- like C-Cube Microsystems and LSI Logic on the MPEG-2 side, and
Broadcom Corp. on the demodulation side -- by 'focusing on one-stop shopping.'

'We're going for single-chip
implementations' that notably do not include QAM (quadrature amplitude modulation)
products, he said. 'For example, we expect to support multiple transmission formats,
display formats and audio formats' all on one chip, he said.

Manghnani said that based on TeraLogic's business
plan, manufacturers can expect to go retail with products that are priced at under $400 by
next year.

But one set-top manufacturer immediately dismissed
TeraLogic's $400 target as behind the times.

'We always want to encourage new chip suppliers to
focus on our industry and our applications, but after hearing their preliminary pubic
comments, it sounds like they have ample opportunity to learn more about our industry, its
specific applications and required economics,' said David Robinson, vice president
and general manager of GI's Digital Video business unit.

Historically, set-top manufacturers rail against any
component supplier publicly discussing bills of materials, and in GI's case, the
tenet holds true.

'It sounds like some of their economic assumptions are
outdated,' Robinson said. 'With the new volumes we have for digital in the
industry, they'll have to take their pricing down a notch.'

Manghnani described TeraLogic as a 'fab-less'
company, meaning that it designs the chips, then hands the designs off to a larger
fabrication facility to produce. Currently, TeraLogic employs about 50 people, and will
grow to 90 employees by year-end.

Ang is its chairman and CEO, joined by Jon Caster as
president, and Charles Chui, an expert on wavelet technology, as TeraLogic's chief
technology officer.

David Auld, Leo Vainsencher and Murray McLachlan, all
former LSI Logic executives, are also on board as vice president of engineering, vice
president of VLSI and vice president of technology licensing, respectively.

Sitting on TeraLogic's board of directors: Charles Wu,
vice president of venture capitalist Vertex Management; Keisuke Yawata, former president
of Applied Materials Japan and LSI Logic Japan; and Bud Tribble, vice president of Sun
Microsystems and a lead executive in Sun's recently successful negotiations with
Tele-Communication Inc.