Texas Instruments sticks to basics with its lines of
semiconductors, turning out analog and embedded processors, the
workhorses of the industry. The company's analog chips manage power
in electronic equipment. Its embedded processors handle specific
tasks and can be tuned for performance, power, and cost. TI's chips
are used in a diverse range of applications that include autos,
industrial machinery, consumer electronics, communications devices,
and calculators. The company puts its customer count at about
100,000. The company also sticks to basics in production, operating
it own manufacturing plants. Another TI basic: TI engineer Jack
Kilby is credited as co-inventor of the integrated circuit.
Texas Instruments operates through three segments: Analog,
Embedded Processing, and Other products.
The Analog business, which accounts for about two-thirds of
sales, includes high-volume analog and logic products, power
management semiconductors, and amplifiers and data converters.
Analog product lines are High Volume Analog & Logic (HVAL),
Power Management, High Performance Analog (HPA), and Silicon Valley
Analog (SVA). The company's analog products are used in the
personal electronics, automotive, industrial markets, and other
The Embedded Processing segment, which generates more than a
fifth of sales, makes application specific integrated circuits
(ASICs), digital signal processors (DSPs), and microcontrollers.
The product lines are Processors, Microcontrollers, and
Connectivity. TI's embedded processors range from low-cost
microcontrollers used in products such as electric toothbrushes to
complex devices used in automotive applications such as
infotainment and advanced driver assistance systems.
The remaining revenue comes from the Other segment, which
includes digital light processors (DLP), which are used in
projectors to create high-definition images, and calculators,
custom semiconductors, and royalties received from licensing of the
company's patent portfolio.
In terms of markets, TI gets about a third of revenue from
industrial, about 25% from personal electronics, about a fifth from
automotive, about 10% each from communications and enterprise.
TI operates 15 manufacturing sites in nine countries.
China is the biggest single market for Texas Instruments,
accounting for about 45% of revenue with other Asia/Pacific
countries (including Japan) accounting for more than 20% of
revenue. The US generates about 12% of TI's sales. The company has
facilities for service, sales, and other functions in the US,
Europe, and Asia.
Sales and Marketing
Texas Instruments markets its products through a direct sales
force, as well as via distributors and third-party sales
representatives. Distributors generate about 60% of sales. About
two-thirds of revenue comes from some 100 customers.
Texas Instruments has posted five straight years of higher
revenue and profit. In 2016, revenue rose 3% to $13.4 billion from
2015 and profit jumped 20% to $3.6 billion. TI's 27% net profit
margin was second only to Linear Technology's 33% among its
The Embedded Processing unit paced the company's revenue
increase, adding more than $235 million (8% higher). The bigger
Analog unit's sales rose nearly $200 million (a 2% increase).
Automotive was a key market for TI in 2016 with sales rising 22%.
The company ships products from the analog and embedded units for
automotive applications. In TI's Other segment, DLPs were the only
products with higher year-over-year revenue.
Higher revenue and lower cost of revenue and restructuring
charges helped drive net income to $3.6 billion, a 20%
Cash flow from operations rose to $4.6 billion in 2016 from $4.3
billion in 2015 on higher net income and lower costs in several
areas including depreciation and stock compensation.
TI highlights free cash flow as a financial measure. It rose to
about $4 billion in 2016 from $3.8 billion in 2015. Free cash flow
is cash flow from operations minus capital expenditures. It is
money than can be invested back into the business or returned to
shareholders through dividends and stock buybacks. TI spent about
$3.8 billion on stock buybacks in 2016.
Texas Instruments focuses on its Analog and Embedded Processing
units. The company believes that analog and embedded processors
offer diversity of applications, long product life cycles, and
lower-cost manufacturing processes.
TI has identified two markets that offer growing sales over a
long time: industrial and automotive. More and more functions are
handled by semiconductors in industrial machinery and vehicles. In
2016, automotive and industrial combined to provide just more than
half of TI's revenue, up from 42% in 2013. TI is investing heavily
in processors for those markets, shifting resources from products
for other markets. It reduced overall R&D in products for the
personal electronics market, but is making selective
On the manufacturing end, TI is moving to produce more chips to
300 millimeter wafers, which hold more chips than 200 millimeter
wafers. Making chips on the bigger wafer reduces costs 40%. The
company has 300 mm capacity in its Dallas and Richardson
fabrication facilities and is adding more.
Unlike its rapidly consolidating competitors, TI has not made
recent acquisitions nor has it been a serious target for
acquisition. Its last major deal was to buy National Semiconductor
in 2011. Other semiconductor companies have spent billions on
mergers and acquisitions in recent years to amass market share and
diversify product lines.