TI expands lead in analog

Matt Scherer, Databeans

USA: With the final 2010 sales numbers in, Texas Instruments remained in firm control of the Analog market with $6.19 billion in global sales or 14.6 percent of the total $42.29 billion Analog industry. This was an impressive 42 percent increase from 2009's company totals, which helped it even further increase its lead over its next closest Analog competitor, Europe's largest chipmaker: STMicroelectronics.

In the fourth quarter alone, Texas Instruments announced highly profitable Q4 2010 revenue of $3.53 billion, with net income of $942 million. Most of TI's Analog demand came from industrial markets, which were especially strong, while consumer demand cooled, impacting markets such as computing and televisions. High Performance Analog products, along with HVAL and Power Management, accounted for most of TI's fourth quarter Analog growth.

More significantly, also during Q4 2010, TI raised its inventory by more than 25 percent, to $1.5 billion, from $1.2 billion in the comparable 2009 quarter, and the company is not done with building up its inventory, either. All in all, the fourth quarter capped an important year in TI's transformation into a leaner, more profitable company.

Texas Instruments' strategy over the past year has been the pursuit of using its significant cash reserves to build new fabs, buy out other companies' fabs, and increase its sales and engineering forces in China and India.

For example, in July 2010, TI purchased two additional fabs from Spansion in Japan, one of which is 200mm to initially produce data converters and amplifiers on TI's precision HPA07 process technology. This was in addition to the 300mm wafer manufacturing equipment also purchased from Spansion, which was sent to the new fab recently open in Richardson, TX. The facility, known as RFAB was, and still is, the world's first 300mm analog fab. The completion of Phase II at RFAB will provide the capability for an additional $2 billion of Analog revenue per year. According to TI, all combined, the company has acquired or added enough manufacturing capacity to support $5 billion a year in new sales.

These moves helped TI increase its market share in Analog even further ahead of its competitors. When many firms were still scrambling just survive the recession, TI used the downturn to replenish its inventory, return product lead times to normal and ramp up production quickly with its three new fabs. As markets began to grow again, the company was well positioned to pounce on returning consumer demand.

TI learned a difficult lesson a couple years back when OEM's requests for Analog ICs skyrocketed its lead times, which is the period between when a buyer places an order and when the supplier is able to deliver the product. In some cases TI's lead times grew to six or more months for certain products, in comparison to normal levels of around 6 to 8 weeks. In response, TI went on a buying binge, buying up fabs during the recession, many at a discount, and building up the buffer inventory it needed to reduce its lead times.

TI is counting on the market's growth continuing through the rest of this year. But the question now is will TI's move pay off in the long run? In the past a dramatic rise in inventories has long been a problem in the industry because it highlights a gross imbalance between demand and supply, which in turn puts pressure on ASPs. As inventory levels continue to rise, many are worried that a similar inventory overstock situation will develop in the next year or two. However, at least in the near term, TI's success will continue to speak for itself.

2010 and 2009 Worldwide Analog Revenue Share by SupplierDatabeans Estimates, Company Reports.