Checking TI's web site, I found the following speech, given Monday in Laguna Niguel at the JP Morgan Equity Conference. While it doesn't mention Twinstar, it does give a good overview of the company's plans.
Pat
<<<
Last week in Dallas, TI held it's annual analyst conference. The banners on the wall and the presentations to those attending focused on one thing - the new TI. TI is a new company. The changes we have experienced in the past year have been dramatic and our focus has become much clearer. And you can see it not only in the way we operate and the businesses we are in but also in the attitudes of TI people.
In total, we divested 12 operations - both large and small - in the past 20 months. We have acquired seven others. We've gone from a diverse company with many businesses to a semiconductor company focused primarily on digital signal processing solutions. We have worked to refocus TI's energies and resources in areas where we have industry leading positions - and we have the ability to not only sustain those leads, but to widen them as well.
We feel DSPS is the best opportunity in the semiconductor industry. The world of electronics is going digital - and digital signal processing solutions are what make it possible.
DSPS-The Industry's Best Opportunity
<Picture: View Slide>(view original presentation graphic 24KB)
The fastest growing part of the semiconductor market is digital signal processing. One of the largest and most profitable is analog/mixed-signal. Together, they give you DSPS. Together, you have TI.
By the end of 1997, TI has positioned itself unlike any other company in the industry. We are the world leader in digital signal processors. We are the world leader in analog -- up from the number five position in 1995. This makes TI the world leader in the two semiconductor components that hold the key to the digital age in electronics. You could make a strong case that this is the best opportunity in the semiconductor industry.
That is what I plan on doing today. I'd like to talk with you in detail about this unique position and how we plan to take advantage of its potential in the marketplace.
Revenue Breakout
<Picture: View Slide>(view original presentation graphic 24KB)
First let's start at where TI stands today.
In the fourth quarter of last year, TI's semiconductor business accounted for 85 percent of our total revenues, and Digital Signal Processing Solutions accounted for about 45 percent of our semiconductor revenues. Memory, made up primarily of DRAMs, was less than 20 percent of Semiconductor. The remainder of semiconductor revenues came primarily from a broad range of advanced products, including ASIC's, SPARC microprocessors, microcontrollers and standard logic.
Semiconductor Market Outlook
<Picture: View Slide>(view original presentation graphic 24KB)
Industry wide, the market outlook for 1998 is expected to reach 10 percent growth with a total market of $150 billion. The primary drivers for this growth will be the Americas and Europe. We are seeing near-term caution in the United States but the fundamentals remain sound.
In Europe, we are seeing continuing strength in the SC market, primarily driven the wireless communications but also a strong showing in the automotive sector.
Although, the recent slowing in Asian economies is expected to have an impact, the outlook remains positive for longer term growth in semiconductors. TI, as well as other companies, are approaching this in a sensible way. We are in a watch mode in the Asian Pacific region. We are still seeing a continuation of strong growth in greater China - China, Taiwan and Hong Kong.
Japan is a weak spot in the SC market. Slow domestic growth and a higher dependence on exports into Asia Pacific drive it's growth rate down.
DRAM Market Environment
<Picture: View Slide>(view original presentation graphic 24KB)
In DRAMs, the story continues to be the same as it has been for the last 18 months. Continued pricing pressure combined with incredible bit growth. The industry average unit price per megabit fell 48 percent from the fourth quarter of '96 to the fourth quarter of '97. It continues to be a challenging environment - although bit growth remains at a high level - 94 percent in 1997 and an expected 70 to 80 percent growth this year.
In recent weeks, we have seen the market fall slightly from February numbers but still higher than January figures.
DRAM Strategy
<Picture: View Slide>(view original presentation graphic 24KB)
Some of the best evidence of change at TI is what didn't happen in 1997. In a year when memory prices declined, TI, for the first time in a DRAM down cycle, improved operating margins. In the past, any downturn in the memory cycle hit TI hard. But our lessening dependence on memory and the power of differentiation through digital signal processing solutions has changed that story.
In the near term, our approach is to emphasize aggressive shrinks to decrease costs and transition to new synchronous DRAMs. No doubt - memory is our greatest challenge. This business can and does provide value over the life of a cycle. What we have to figure out is how to deal with the volatility - and that is something we are putting a great deal of effort into and is a priority for TI.
Last week we took one step by selling our share in the TI-Acer memory chip joint venture to the Acer Group. This agreement opens the door for Acer to acquire one of the most advanced wafer fabs in Taiwan which is capable of producing a variety of advanced integrated circuits.
Broad Range of Advanced Products
<Picture: View Slide>(view original presentation graphic 24KB)
In the advanced products area of our semiconductor business, the outlook is bright. Products such as microcontrollers and ASICs made good progress and profitability during 1997. More and more, these product lines are linked to our digital signal processing solutions.
Just to cite one example, TI's next generation products are winning wide acceptance in the automotive industry due to increased automotive systems performance requirements. We're meeting these needs with higher-speed, more powerful devices, such as 32-bit RISC microprocessors that include DSP peripherals on the same integrated circuit.
Strong DSPS Market Growth
<Picture: View Slide>(view original presentation graphic 24KB)
The biggest story in 1997 and beyond is our primary focus on Digital Signal Processing Solutions. In fact, we expect both the DSP and mixed-signal categories to outperform overall semiconductor growth by a significant margin in 1998. This combination should grow about 30 percent during the year. That's an attractive curve, but it's not really surprising. The global market for digital signal processors has grown at more than 30 percent per year since 1988. In fact, this market is developing along a faster track than the one the microprocessor followed in the 1980s and '90s.
In part, this growth is driven by the fact that digital signal processors and analog/mixed-signal products target a broader range of end-use markets than microprocessors. You'll find these chips not just in personal computers, but also in cell phones, networking equipment, consumer electronics, office equipment and automotive components to name a few.
DSPS End-Equipment Markets
<Picture: View Slide>(view original presentation graphic 24KB)
Because the applications are so diverse and growing, you can build an exceptionally broad customer base around digital signal processing and analog/mixed signal technology. In TI's case, no one end-equipment market represents more than 15 percent of our total semiconductor revenues. And no one customer accounts for more than 4 percent of our overall semiconductor business.
In 1997, we gained market share in a number of end-equipment categories where we offer solutions that combine digital signal processors with analog/mixed-signal products. These categories include digital cellular phones, high-speed modems and LAN networking equipment. As a result of those marketplace wins, we finished the year with record revenues and profits in both digital signal processing and analog/mixed-signal. Naturally, the next question is, how do we intend to further strengthen our position?
DSP Superior Position
<Picture: View Slide>(view original presentation graphic 24KB)
TI's strategy for broadening our lead focuses on performance. Our C6x fixed point and C67x floating point digital signal processors set the performance standard in the industry. TI's technology lead is still years ahead of any competitors most powerful chip. Our technical skills also can be seen in the level of systems integration in TI DSPS. We have all the critical components needed to develop and deliver systems on a chip technology.
We also are developing our position by making our products accessible and usable by a broad range of customers. TI sells to a broader range of customers than any other digital signal processing manufacturer. We currently serve more than 30,000 customers worldwide - most of whom buy our standard digital signal processing products. We're now making it even easier for these mass market customers to buy from TI.
We recently established a business unit which is focused exclusively on the needs of mass market customers. Its mission is to develop products and to introduce tools that fit the way these customers do business. Experience shows that the next big end-equipment applications always start out as low volume sales -- products built with semiconductor components ordered from the catalog. Then, as the end-equipment category grows, it creates opportunities for us to develop strategic relationships with key players in the segment.
Within our semiconductor business, we've also set up a number of strategic business units, focused on growing markets. This approach has helped TI score some impressive wins in areas such as wireless communications, networking and mass storage. Let's take a look at each.
Worldwide Industry Acceleration
<Picture: View Slide>(view original presentation graphic 24KB)
In 1997, worldwide shipments of digital cell phones hit an estimated 86 million units, up from less than 50 million in 1996. In fact, 1997 marked the first time ever that cell phone volumes surpassed PC shipments.
We continue to see strong growth for the wireless market this year. Sales of digital wireless phones are expected to hit the 125 million mark in 1998. And within five years, digital cellular phones will exceed 300 million.
TI - The Platform of Choice
<Picture: View Slide>(view original presentation graphic 24KB)
What's significant about this for TI, is that more than half of all the digital cell phones made today use one of our digital signal processing solutions. We now offer a single-chip digital signal processing engine tailored to the needs of digital cell phone makers. Our product minimizes power consumption . . . reduces the size . . . and enhances the performance.
We're working on semiconductor products for next generation wireless phone and have already demonstrated in ultra-low power 1-volt chip that will lead to continued improvements in battery life and cell phone size. Additionally, our digital signal processing software platforms will make it possible to offer tomorrow's cell phone users a wide range of advanced features such as Internet access. More importantly, we're designing our wireless technology platforms to be flexible, scaleable and programmable.
But wireless isn't the only growth opportunity in today's market.
Network on Chips
<Picture: View Slide>(view original presentation graphic 24KB)
Networking also has been strong. By networking, we mean any equipment used to link computers together. Sales of networking products are expected to grow 20 percent per year through the year 2000.
TI has introduced successful DSP Solutions in both segments of the market - Local Area Networks or LANs used primarily in business, and high-speed modems, used to link individual PCs over wide-area networks.
<Picture: View Slide>(view original presentation graphic 24KB)
The LAN segment is currently the bigger of the two. It's estimated that about 60 percent of all operational desktop computers are connected via LANs today. TI revolutionized this market in 1996 by introducing the industry's first complete Ethernet switch on a chip. Since the, our ThunderSwitch family of products has been designed-in by many of the top LAN equipment makers. Within seven months of introduction, our product had eclipsed the two million port mark. That's from a base of zero.
ADSL Market Dynamics
<Picture: View Slide>(view original presentation graphic 24KB)
Now, let's take a look at the modem segment. We are the market leader in the high end of this business. We shipped more of our high-speed voiceband modem chipsets for 56 K devices than any competitor in 1997. But DSL technology, the next generation of modems, may represent an even more exciting opportunity.
Here again, it's a bandwidth story. This new technology promises to turn ordinary phone lines into high-speed, digital pipelines, delivery up to 8 megabits of bandwidth. From our perspective, what makes the business attractive is the fact that there's a digital signal processing socket on both ends of the telephone wire. That comes to about 1.5 billion sockets worldwide. Within 10 years, this market is expecting to grow to $6 billion. We're well-positioned to go after this emerging market thanks to our acquisition of Amati.
Earlier this year, we announced a new chipset technology that will allow equipment makers to begin to develop DSL products for both customers and service providers. That chip set will be in production in the second quarter. Ours is the first technology to offer a fully-programmable digital signal processing-based solution. Programmability provides a number of advantages, such as the flexibility to add new features, scalabilty to handle future growth, and extendibility to enable new applications.
You may have noticed that several players in the computer and communications industry have formed a Universal ADSL Working Group to develop standards for DSL technology. We are participating in this effort as a core technology provider and we will be leveraging our experience to help the industry move toward an affordable, easy-to-use and standards-based DSL technology.
Leading the Way in Mass Storage
<Picture: View Slide>(view original presentation graphic 24KB)
TI has continued to solidify its position in the mass storage market. TI ranks number one worldwide in revenues from integrated circuit components sold to the makers of high-performance disk drives.
The removable storage has become another focus of TI's efforts. High density floppy disks, DVD and advanced optical recording are emerging storage markets. TI's mass storage solutions use the superior processing speed of digital signal processors to outperform microprocessor-based products.
In addition, our single-chip digital signal processing-based solutions can often replace two or more processor and memory components inside a disk drive. Digital signal processing-based products are programmable, allowing disk drive makers to introduce products without having to completely redesign the underlying chip architecture, improving time to market.
TI strengthened its leadership position in mass storage by acquiring Oasix and Arisix Corporations, two innovative digital design companies for hard disk drive products. This additional expertise can provide greater levels of density, integration and performance in the mass storage market.
Investment for Future Growth
TI continues to funnel financial resources in areas that support the growth objectives of the company. Our capital spending will be constrained to about $1.4 billion in 1998 up from $1.2 billion in 1997. We also plan to increase our investment in R&D to $1.3 billion, up from $1.1 billion last year.
A solid 1997 has put TI in a strong financial position. Thanks to last year's divestitures and our strong cash flow from continuing operations, we're well-positioned to take strategic actions even in a cautious global economy.
As the world leader in digital signal processing and the world leader in analog/mixed-signal, TI holds the prime position in the digitization of electronics. As you can tell, we serve a wide variety of markets whose diversity provides growth and opportunity.
The attractiveness of the digital signal processing solutions market draws many competitors. So we are paying attention to not only keeping our leadership position but to broaden our lead as well. We have increased our installed base of software that make our DSP architectures compatible. We're also working to develop new markets with programs such as our $100 million DSP venture fund and $25 million education research fund. And we also are making significant progress in our mass market strategy. This is the market - where we serve thousands - and from which tomorrow's Nokias and 3Coms will emerge.
We are a new TI. We have what it takes to win. We are the leader in DSP Solutions and are not satisfied with resting on our laurels. We are committed to expanding our advantage in digital signal processing solutions and will do whatever it takes to achieve that objective.
Thank you.>>> |
