Texas Instruments on Tuesday said that it would shift research and development (R&D) focus away from chips aimed at smartphones and tablets onto various embedded applications. Despite of the fact that TI has secured design wins with numerous ultra-portable devices with its OMAP system-on-chips, the company believes that in the future its profit margins will suffer from heavy competition.
Even though the market of smartphones and media tablets is growing rapidly, leading players - Apple and Samsung Electronics - develop chips for their gadgets in-house, whereas others need either low-prices or very high-performance, which calls Texas Instruments to design a very broad lineup of system-on-chips, which automatically reduces profit margins. As a result, TI now thinks it makes a lot more sense to concentrate on various embedded applications as well as on "Internet-of-things" solutions, where there are more opportunities for further expansion.
"If you look at the dynamics in that market, you look at it being dominated by a couple of players, you look at the fact that vertical integration has become a very significant factor in the marketplace, the truth is that it's just a less attractive opportunity for us," said Gregory Delagi, senior vice president and general manager of embedded processing.
For example, in the embedded processing space, TI's OMAP and connectivity solutions generate about $400 million in revenue annually from a base of about 4000 customers, whereas in smartphones and tablets, OMAP and connectivity chips generate about $900 million from roughly 10 customers, according to EETimes web-site.
"We are re-profiling our investments. We do not have any details to share with you today. We are working through the answers to those questions. The R&D profile for those businesses needs to look different, and we are working through those, but no announcements on what we are doing there. As soon as those plans crystallize, we will communicate. The focus of today is where we're going in embedded," added Mr. Delagi.
Texas Instruments will continue to support existing smartphones and tablets OMAP customers and will continue offering the system-on-chips for those manufacturers, who want to use them for mobile applications. However, the SoCs will be designed with embedded applications in mind.