Texas Instruments (NYSE:TXN) makes and sells standard or catalog embedded processors as well as custom embedded processors that are used in specific applications, such as communications, infrastructure equipments and automotive. Embedded processors generated 15% of TI’s revenue in 2011 and presently contribute around 13% to our current price estimate of $45.29. The product performance combined with excellent support are the top-selling points for TI’s embedded division, where it competes with companies such as Renesas-NEC, Microchip and Atmel.
Despite witnessing a decline in its overall revenues in 2011, TI managed to retain its position as one of the top four semiconductor vendors (in terms of revenue) with a 3.8% market share.  TI continues to focus on investments to enhance its product line and maintain a strong sales force and a field application team to ensure design wins.
Recently, the company added two new product lines to its portfolio, which reinforce our belief that its market share in embedded processors will grow slightly in the near term.
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1. Scalable Development Platform for Real-Time Analytics Applications
Last week, TI introduced its Digital Signal Processing (DSP) development kit for real-time analytics applications such as fingerprint recognition and face detection, which empower systems to sense and analyze biometric information. The kit is also ideal for audio and communications applications. Available for a low price of $195, this scalable development kit enables fast and easy development on the floating and fixed point DSP.
2. Fully Integrated Ultrasonic Signal Conditioner for Automotive Parking Distance Applications
More recently, the company announced a fully integrated, programmable solution for driving ultrasonic transducers in automotive parks distance, blind-spot detection and other similar object detection applications. The applications give flexibility in implementing any needed communication protocol.
The company offers a suite of state-of-the-art semiconductor products that allow manufacturers and suppliers to deliver world-class features to the automotive market. Whether enhancing system efficiency or safety or designing a vehicle that is more informative, TI’s product portfolio helps customers succeed in the competitive automotive marketplace.
TI’s broad platform provides a variety of performance, power, peripheral and price options enabling developers to create a varied product portfolio of their own. In addition, we believe that a huge sales force, which is three or four times the size of any of its competitor, will help it to continue penetrating this market. We estimate its share in the embedded processor division to increase slightly to 12% by 2013 and remain at that level for the rest of our forecast period.
However, if TI’s market share was to increase to 14% instead of our forecast of 12%, there could be a 2% upside to our price estimate.
Our price estimate of $45.29 stands at a premium of around 56% to the current market price.Notes:
- Worldwide Semiconductor Revenue Reached $307 Billion in 2011, Gartner Press Release, April 17, 2012 [↩]