Monday, March 17, 2008
Last fall, I presented a deep-dive analysis of the world’s leading mobile semiconductor company, Qualcomm (QCOM). More recently, I looked at the fortunes of Broadcom (BRCM), the company involved in several legal battles with the San-Diego based Qualcomm. Over the next few weeks, I will look at Texas Instruments (TXN) as I continue to dissect mobile chipset vendors to understand the convergence devices eco-system.
Texas Instruments (TI in short), was the revenue leader in the mobile handset semiconductor space until Qualcomm took the lead in 2007. TI had about 16.5% of the mobile semiconductor revenue share to Qualcomm’s 18%, according to an iSuppli report. On a related note, Forward Concepts Analyst, William Strauss estimates that TI was the leader of the mobile baseband chipset business with about 40% of the market share.
Wireless is only one part of TI’s semiconductor story. The company’s total semiconductor revenue for 2007 was $13.3bn. The corresponding wireless revenues were at $4.91bn, about 37% of the total. TI’s semiconductor revenue comes from other markets such as broadband communications, computing, consumer electronics, industrial and automotives as well. In fact, iSuppli reports that TI is ranked 4th in the world among all semiconductor companies. Only Intel, Samsung and Toshiba were ahead of TI. (Incidentally, Qualcomm also appears in the list advancing to the 12th position.) The company is also the market leader in both analog and DSP semiconductor solutions, which together account for 80% of its semiconductor revenue. The semiconductor giant’s position is further bolstered by another $526mn in revenue (about 4%) from the education technology business, the source of the ubiquitous TI calculators.
So, when you talk of breadth and resilience, what applies to Broadcom (BRCM), applies all the more to TI. So, while I will throw extra light on TI’s wireless business in the sequels, I will also take a look at the key components of its semiconductor business. This will give a more holistic perspective of the company’s economics and help in its valuation.