Texas Instruments 2010 Annual Report Download - page 37

TEXAS INSTRUMENTS 2010 ANNUAL REPORT
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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
We design and make semiconductors that we sell to electronics designers and manufacturers all over the world. We began operations
in 1930. We are incorporated in Delaware, 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 2010 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
multiple 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 custom and standard semiconductor products. Custom products are designed for a specific customer for a specific
application, are sold only to that customer and are typically sold directly to the customer. The life cycles of custom products are
generally determined by end-equipment upgrade cycles and can be as short as 12 to 24 months. Standard products are designed for
use by many customers and/or many applications and are generally sold through both distribution and direct channels. They include
both proprietary and commodity products. The life cycles of standard products are generally longer than for custom 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 that can be processed by other semiconductors, such as digital signal
processors (DSPs). Analog semiconductors are also used to manage power distribution and consumption. Sales to our Analog segment’s
more than 80,000 customers generated 43 percent of our revenue in 2010. According to external sources, the worldwide market for
analog semiconductors was about $42 billion in 2010. Our Analog segment’s revenue in 2010 was about $6 billion, or about 14 percent
of this market, the leading position. We believe that we are well positioned to increase our market share over time.
Our Analog product lines are: high-volume analog & logic, high-performance analog and power management.
High-volume analog & logic products: High-volume analog includes products for specific applications, including custom products.
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.
Logic and standard linear includes commodity products marketed to many different customers for many different applications.
High-performance analog products: These include standard analog semiconductors, such as amplifiers, data converters and
interface semiconductors (our portfolio includes nearly 16,000 products), that we market to many different customers who use them in
manufacturing a wide range of products sold in many end markets, including the industrial, communications, computing and consumer
electronics markets. High-performance analog products generally have long life cycles, often more than 10 years.
Power management products: These include both standard and custom semiconductors that help customers manage power in any
type of electronic system. We design and manufacture power management semiconductors for both portable devices (battery-powered
devices, such as handheld consumer electronics, laptop computers and cordless power tools) and line-powered systems (products that
require an external electrical source, such as computers, digital TVs, wireless base stations and high-voltage industrial equipment).
Embedded Processing
Our Embedded Processing products include our DSPs and microcontrollers. DSPs perform mathematical computations almost
instantaneously to process or improve digital data. Microcontrollers are designed to control a set of specific tasks for electronic equipment.
Sales of Embedded Processing products generated 15 percent of our revenue in 2010. According to external sources, the worldwide market
for embedded processors was about $18 billion in 2010. Our Embedded Processing segment’s revenue in 2010 was about $2 billion, or
about 11 percent of this fragmented market. We believe we are well positioned to increase our market share over time.