Texas Instruments 2012 Annual Report Download - page 42

ANNUAL
REPORT
TEXAS INSTRUMENTS40 • 2012 ANNUAL REPORT
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.
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 35 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 2012 as measured by revenue, according to preliminary estimates
from an external source.
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 products, more than 100,000 orderable parts,
are integrated circuits that 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. This broad portfolio
includes products that are integral to almost all electronic equipment.
We sell catalog and, to a lesser extent, custom semiconductor products. Catalog products are designed for use by many customers
and/or many applications and are sold through both distribution and direct channels. The majority of our catalog products are
proprietary, but some are commodity products. The life cycles of catalog products generally span multiple years, with some products
continuing to sell for decades after their initial release. 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.
Our segments represent groups of similar products that are combined on the basis of similar design and development requirements,
product characteristics, manufacturing processes and distribution channels, and how management allocates resources and measures results.
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 in every electronic device, whether plugged into a
wall or running off a battery. We estimate that we sell our Analog products to more than 100,000 customers. These sales generated
about 55 percent of our revenue in 2012. According to external sources, the worldwide market for analog semiconductors was about
$39 billion in 2012. Our Analog segment’s revenue in 2012 was about $7.0 billion, or about 18 percent of this fragmented market, the
leading position. We believe that we are well positioned to increase our market share over time.
Our Analog segment includes the following major product lines: High Volume Analog & Logic (HVAL), Power Management (Power),
High Performance Analog (HPA) and Silicon Valley Analog (SVA).
HVAL products: These include both high-volume analog and logic products. High-volume analog includes integrated analog products
for specific applications, including custom products. End markets for high-volume analog products include communications, automotive,
computing and many consumer electronics products. Logic includes some commodity products marketed to many different customers
for many different applications.
Power products: These include both catalog and application-specific products 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 basestations and high-voltage industrial equipment).
HPA products: These include catalog analog products, such as amplifiers, data converters and interface semiconductors, 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. HPA products generally have long life cycles, often more than 10 years.
SVA products: These consist of products that we acquired through our purchase of National Semiconductor Corporation (National) in
2011. These include power management, data converter, interface and operational amplifier catalog analog products, nearly all of which
are complementary to our other Analog products. This portfolio of thousands of products is marketed to many different customers who
use them in manufacturing a wide range of products sold in many end markets. SVA products generally have long life cycles, often more
than 10 years.