April - 1999 - issue > Cover

The prestige of Flat Panel Displays today is in most part due to their inflated price – they are considerably more expensive than the traditional CRT monitors. As the prices of flat panel display (FPD) monitors fall, it’s only a matter of time until FPDs will be more readily available to ordinary folks. But before they can become true mass-market products, certain limitations must be overcome. FPD monitors require special graphics interface cards that allow the users to painlessly replace their existing CRT displays with FPD monitors. This issue has been resolved by the innovations at Sage, Inc., a young company that has become one of the leading suppliers of embedded electronics for the FPD industry under the dynamic leadership and vision of its founder and CEO, Chandrashekar Reddy.

A Dream Come True

To Reddy, “It was a dream come true.” Ever since he graduated with an MS in Electrical Engineering from University of Wisconsin, Madison, Reddy had an entrepreneur’s vision. Always on the lookout for new product ideas that would click in the market, he finally decided to test his entrepreneurial mettle in May of 1994 by launching controllers for FPD monitors.

While managing a design team for notebook controllers at Intel, it occurred to Reddy that FPDs would be the ideal future monitors for PCs and workstations. This was, however, sometime in 1988, when the flat panel technology was just emerging in the notebook market. The technology was still nascent, and such displays were no match to CRTs in terms of quality and price.

But Reddy, having noted the trend of the microprocessor industry and the rapid progress in technology, correctly assumed that it was only a matter of time till the FPD technology would be perfected. Finally, in 1994, the advent of Sharp’s 13.3” flat panel monitor manufactured convinced him that the time had come. At the same time, the Koreans had entered into this market with Samsung and Goldstar announcing the production of FPDs that were hitherto manufactured only by Japanese giants Sharp, Toshiba, Hitachi and Sanyo.

FPD monitors require specialized electronic circuitry that no other companies were addressing at that time. The possibility of a huge niche market loomed — close to 200 million units if all the CRTs that existed then were to be eventually replaced by FPDs – and no competition was cluttering the roadway. Reddy calculated that it would take about a year to develop a controller circuit for FPDs, by which point the market would be mature to consume his product. Acting quickly, Reddy quit Intel and founded Sage, Inc in May 1994.

Raising Capital

Reddy discussed his idea with a couple of possible financiers only to hear responses like, “There’s no market,” or “Only notebooks consume flat panel displays.”
Reddy kept the faith. He decided to finance the company through his personal funding through 1996, when he secured additional funds from family and friends.

Because his own funds weren’t unlimited, to survive, the company to generate revenue as soon as possible. Though Reddy’s goal was to develop an IC-based product, he decided shift focus to developing a system-level product that would fetch revenues. Within six months of inception, Sage introduced its first system-level product to address industrial, medical and instrumentation markets. A few major distributors signed on, and revenue started flowing in.

For additional funding, Reddy decided to approach angel investors rather than venture capitalists. He secured $500,000 from a couple of angels to add to his initial investment of about the same amount.

Reddy used the “proof of concept” of his first product, which he calls “quick and dirty silicon,” to garner additional investor interest in Sage. This laid the foundation for others to follow up in investing in Sage. Soon the company raised another million dollars from angels. Lastly, in mid-1998, Sage raised another six million dollars in an investment round led by San Jose based VentureStar.

Gaining Market Share

After demonstrating its proof of concept, Sage launched a project to manufacture an IC-based controller for FPDs. But there was a hitch: the factory that Sage was using to manufacture ICs developed technical snags, as a result of which Sage lost six months. To recover the lost time, the company began work on its second-generation IC-based product, the Cheetah II. In the meanwhile, the production had to be migrated elsewhere, and by the time the first generation product was out in the market, competitor PixelWorks had introduced a slightly superior product. Though Sage had successfully manufactured and introduced a product, it was not yet a market winner.

To gain its market position, the company looked to feedback from its customers, who were mostly Japanese companies, trendsetters of the FPD market. Their views and requests were incorporated in the design of the Cheetah II, that was introduced in June 1998 and grabbed a 20 percent market share for Sage.

Indian Ingenuity

Sage was one of the first companies to launch design operations in India. Its world-class design center in Bangalore employs some of the brightest brains to come out of engineering schools across India. “We have been able to attract good talent because we provide an environment where there is not mere consulting but actual production as well; where the designers can see their products reach the market.” says Reddy.

The team at Santa Clara architects new products, the design and specifications of which are based on feedback from customers, marketing and sales. The design specifications are sent to the Indian team at Bangalore, where the actual development takes place. First and second generation products were mainly developed at Bangalore, and work is in progress for the third and fourth generation products. The field-force of Sage also consists of mostly India-trained engineers, who are positioned at customer sites.

Reddy himself is a product of IIT, Madras — though he stresses that it is more than academic credentials that make a successful entrepreneur. “To succeed, you don’t necessarily have to go to a good school. As long as you have the dream and perseverance, I think you can make a successful entrepreneur,” says Reddy.

The Korean Crisis

Recently, Japan’s leading manufacturers of FPDs announced a price hike of about 30 percent in response to a current high demand and limited supplies, due in part to the Korean economic crisis.In 1998, we saw a reduction in prices of FPDs because companies were in need of cash due to the same crisis. Other companies, like Hyundai, stopped investing in manufacturing plants. The resulting imbalance in demand and supply has been responsible for the price hike. The good news is that Taiwanese manufacturers are stepping in to introduce 14” and 15” FPDs in a few months. And that should see a reduction in prices of FPDs.

The Future

The success of Cheetah II has established Sage in the second position in the market. The company aims to be a top player by the end of this year by continuing to simplify monitor circuit design an area in which it has already pioneered several features and innovations. Its goal is to design products that would result in an ideal monitor - one without switches and buttons, with true plug-and-play features.
Sage currently focuses on FPDs that use liquid crystal display (LCD), though its technology can drive any type of FPD. Several new technologies for FPDs are coming up that may result in cheaper and larger screens not just for computer monitors but for large TVs used in home theater systems as well. FPDs are also ideal for high definition televisions (HDTV). Sage is watching these emerging trends and is developing chips to address these markets. “The way we see it, flat panels are the future displays. Five years from now these will be the predominant displays,” says Reddy.
Until then, PCs will have to be sold separately.