Texas Instruments 2008 Annual Report Download - page 39

TEXAS INSTRUMENTS 2008 ANNUAL REPORT [ 37 ]
Management’s discussion and analysis of financial condition and results of operations
The following should be read in conjunction with the Financial Statements and the related Notes that appear elsewhere in this document.
All dollar amounts in the tables in this discussion are stated in millions of U.S. dollars, except per-share amounts. All amounts in this
discussion reference continuing operations unless otherwise noted.
Overview
At Texas Instruments, we design and make semiconductors that we sell to electronics designers and manufacturers all over the world.
We began operations in 1930 and are incorporated in Delaware. We are headquartered in Dallas, Texas, and have design, manufacturing
or sales operations in more than 30 countries. We have four segments: Analog, Embedded Processing, Wireless and Other. We expect
Analog and Embedded Processing to be our primary growth engines in the years ahead, and we therefore focus our resources on these
segments.
We were the world’s fourth largest semiconductor company in 2008 as measured by revenue, according to preliminary estimates
from an external source. Additionally, we sell calculators and related products.
Product information
Semiconductors are electronic components that serve as the building blocks inside modern electronic systems and equipment.
Semiconductors come in two basic forms: individual transistors and integrated circuits (generally known as “chips”) that combine
different transistors on a single piece of material to form a complete electronic circuit. Our semiconductors are used to accomplish
many different things, such as converting and amplifying signals, interfacing with other devices, managing and distributing power,
processing data, canceling noise and improving signal resolution. Our portfolio includes products that are integral to almost all electronic
equipment.
We sell two general categories of semiconductor products: custom and standard. A custom product is designed for a specific
customer for a specific application, is sold only to that customer and is typically sold directly to the customer. A standard product is
designed for use by many customers and/or many applications and is generally sold through both distribution and direct channels.
Standard products include both proprietary and commodity products.
Additional information regarding each segment’s products follows.
Analog
Analog semiconductors change real-world signals – such as sound, temperature, pressure or images – by conditioning them, amplifying
them and often converting them to a stream of digital data so the signals can be processed by other semiconductors, such as digital
signal processors (DSPs). Analog semiconductors are also used to manage power distribution and consumption. Sales from our
Analog segment accounted for about 40 percent of our revenue in 2008. The worldwide market for analog semiconductors was about
$36 billion in 2008. According to external sources, we have about a 12 percent share in the fragmented analog semiconductor market,
which is a leading position. We believe that we are well positioned to increase our share over time.
During 2008, we discussed our Analog business by reference to high-performance analog and high-volume analog & logic.
High-performance analog products: These include standard analog semiconductors, such as amplifiers, data converters, low-power
radio frequency devices, and interface and power management semiconductors (our standard analog portfolio includes more than
20,000 products), that we market to many different customers (nearly 80,000) who use them in a wide range of products across the
industrial, communications, computing and consumer markets. High-performance analog products generally have long life cycles, often
10 to 20 years.
High-volume analog & logic products: These include two product types. The first, high-volume analog, includes products for specific
applications, including custom products for specific customers. The life cycles of our high-volume analog products are generally
shorter than those of our high-performance analog products. End markets for high-volume analog products include communications,
automotive, computing and many consumer electronics products. The second product type, standard linear and logic, includes
commodity products marketed to many different customers for many different applications.
Beginning with the first quarter of 2009, we will discuss power management semiconductors as a separate category of Analog
products, separating it from the high-performance category.
Embedded Processing
Our Embedded Processing products include our DSPs (other than DSPs specific to our Wireless segment) and microcontrollers. DSPs
perform mathematical computations almost instantaneously to process and improve digital data. Microcontrollers are microprocessors
that are designed to control a set of specific tasks for electronic equipment. Sales of Embedded Processing products accounted for
about 15 percent of our revenue in 2008. The worldwide market for embedded processors was about $17 billion in 2008. According to