TI Set To Showcase A Range Of Consumer Devices At The 2015 CES

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TXN: Texas Instruments logo
TXN
Texas Instruments

In a press release this week, Texas Instruments (NASDAQ:TXN) announced that it is enabling the newest consumer products on display, ranging from next-generation advanced driver assistance systems (ADAS) to innovations for the Internet of Things (IoT) and wearable technology, at the upcoming 2015 International Consumer Electronics Show (CES) next month. The company, in collaboration with its technology partners, will showcase over a hundred product demonstrations at the event.

Since  its exit from the smartphone and tablet market in September 2012, TI has been focusing on transitioning its operations to become a pure analog and embedded processing company, segments that it believes will offer long-term growth and less volatility compared to the past. With a market share of 17%, TI is one of the leading players in the analog semiconductor market and derives around 60% of its revenue from this division. On the other hand, the company derives only 20% of its revenue from the embedded division. However, the fast expanding embedded market offers significant growth opportunities for TI.

TI has considerably expanded its embedded product portfolio over the past year. In August this year, the company announced that it has shipped more than 15 million ADAS System-on-Chip (SoC) devices so far, confirming its leadership position in the automotive market. The automotive segment is a large market and is going through a transition to more compute-intensive electronics systems. Specialty Analytics expects the market for ADAS to be worth around $15 billion by 2016, with a CAGR of 23%. [1]

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TI is also focusing on expanding its footprint in microcontrollers, a segment where it is currently under-represented. (TI has a 6% market share in microcontrollers). Microcontrollers are general purpose, low-cost integrated circuits which are used in a wide range of applications requiring an automoated control function. According to Grand View Research, the global microcontroller market is expected to reach  $27 billion by 2020, driven by growing demand from industries, such as automotive and consumer electronics, and the advent of the Internet of Things (IoT) coupled with declining microcontroller prices.(Read: TI’s Future Growth Likely To Get A Boost From An Increasing Focus On Microcontrollers) This year, the company launched two new variants of its Hercules microcontrollers, which offer a 50% increase in computational performance over any of TI’s current MCUs, for industrial, medical, automotive and transportation design applications.

With increased investments in this growth area over the past few years and new product launches, TI continues to expand its embedded portfolio every quarter. TI’s embedded processing division reported its eighth quarter of consecutive year-on-year growth in Q3 2014 (reported on  October 20th) as the company’s investment over the past few years in strategic areas yield favorable results. We expect the addition of new products to its portfolio will help TI retain its market share in embedded devices over our review period.

Our price estimate of $42 for TI is at an approximate 15% discount to the current market price.

See our complete analysis of Texas Instruments here

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Notes:
  1. Nvidia’s CEO Discusses F4Q2014 Results – Earnings Call Transcript, Seeking Alpha, February 12, 2014 []