Texas Instruments 2013 Annual Report Download - page 41

TEXAS INSTRUMENTS 2013 ANNUAL REPORT • 39
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 35
countries. We have three segments: Analog, Embedded Processing 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.
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 application-specific standard semiconductor products, both of which we market to multiple customers.
Catalog products are designed for use by many customers and/or many applications and are sold through both distribution and direct
channels. The vast majority of our catalog products are differentiated. We also sell catalog commodity products, but they account for
a small percentage of our revenue. The life cycles of catalog products generally span multiple years, with some products continuing
to sell for decades after their initial release. Application-specific standard products (ASSPs) are designed for use by a smaller number
of customers and are targeted to a specific application. The life cycles of ASSPs are generally determined by end-equipment upgrade
cycles and can be as short as 12 to 24 months, although some can be used across multiple generations of customers’ products.
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 embedded
processors. 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. Our Analog products are used in many
markets, particularly personal electronics and industrial.
Sales of our Analog products generated about 60 percent of our revenue in 2013. According to external sources, the worldwide market
for analog semiconductors was about $40 billion in 2013. Our Analog segment’s revenue in 2013 was $7.2 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 high-volume integrated analog products for specific applications and high-volume catalog products.
HVAL products support applications like automotive safety devices, touch screen controllers, low voltage motor drivers and integrated
motor controllers.
Power products: These include both catalog products and ASSPs that help customers manage power in electronic systems. Our
broad portfolio of Power products is designed to enhance the efficiency of powered devices using battery management solutions,
portable power conversion devices, power supply controls and point-of-load products.
HPA products: These include catalog analog products that we market to many different customers who use them in manufacturing
a wide range of products. HPA products include high-speed data converters, amplifiers, sensors, high reliability products, interface
products and precision analog products that are typically used in systems that require high performance. HPA products generally have
long life cycles, often more than 10 years.
SVA products: These include a broad portfolio of power management, data converter, interface and operational amplifier catalog
analog products used in manufacturing a wide range of products. SVA products support applications like video and data interface
products, electrical fault/arc detection systems and mobile lighting and display systems. SVA products generally have long life cycles,
often more than 10 years. SVA consists primarily of products that we acquired through our purchase of National Semiconductor
Corporation in 2011.