Texas Instruments Takes Steps To Strengthen Its Analog Business By Tapping The Emerging Markets

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TXN: Texas Instruments logo
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Texas Instruments

Texas Instruments (NASDAQ:TXN) has recently taken a plunge to quicken its chip development cycles and penetrate speedily in new markets such as automotive and industrial machines. As a part of this plan, TI is looking to partner with start-ups in India as the company believes that with trends like Internet of Things (IoT) catching up, start-ups could help speed up TI’s growth. TI is already a leader in analog chip design and this can help the company leverage on its own technology by using its R&D facility in Bengaluru. At the same time, the company also believes that partnerships are important to be at the cutting edge of innovation and TI is constantly looking at ways to expedite the chip development process. [1]

While not much has been disclosed in terms of the areas TI is targeting for partnerships, company sources said that commodity semiconductor design work such as designing PCI-Express card slots in devices will be one of the areas that it is looking at start-ups for help. PCI-Express, USB- interfaces have become commodity areas and companies like Texas Instruments can focus on their strength areas by leveraging small vendors for such commoditized work.

With opportunities flooding in India, especially the heavy automation kicking in, this could be an apt time for TI to enter into untapped markets and gain potential from its early emergence. In the current Indian automation scenario, islands of automation have created several challenges because the lack of integration has impacted operational excellence improvements. While developed countries have already started focusing on the integration aspect, the Indian manufacturing sector is still nascent with regards to the current levels of adoption of manufacturing solutions. If India is to supersede the current advanced economies, the capital investments in manufacturing automation should touch USD 2000 million by 2016. TI could very well leverage on its early entry into the market and gain immensely, if these numbers were to come true.

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Moreover, TI has transitioned into a pure analog and embedded processing player, where its major revenue contribution comes from analog chip designing. TI accounts for over 18% of the analog market. With the acquisition of National Semiconductor, a strengthening product portfolio and growth in high volume analog and logic segments, we believe that the company is well-equipped to leverage increasing demand for analog products. TI’s analog product portfolio consists of high volume analog & logic, high-performance analog and power management circuits. It caters to over 80,000 customers from various industries such as computing, wireless communication, infrastructure, automotive, telecom, etc. TI is the market leader in voltage regulators, which is expected to be a strong growth driver for the analog market. The segment contributes around 30% to TI’s total analog division revenue.

Our price estimate of $50 for TI is at an approximate 7% discount to the current market price.

See our complete analysis of Texas Instruments here

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Notes:
  1. Texas Instruments mulls partnerships with start-ups, Business Line, July 13th, 2015 []