Early this week, Texas Instruments (NYSE:TXN) which is a leader in analog semiconductors, introduced its new successive-approximation-register (SAR) analog-to-digital converter (ADC) which enables system designers to simulate and characterize the full analog signal chain in software for the first time. With a 55% weightage in our overall valuation of $45.29 for TI, the analog semiconductor division is the most important holding in the company’s portfolio and even a marginal variation from our forecast could lead to a significant impact on TI’s overall valuation.
TI Launches Industry’s First SAR ADC
The SAR-ADC comes with a downloadable TINA-TI(TM) SPICE model that enables system designers to simulate and characterize the full analog signal chain in software for the first time. The model is available for the new 12-bit, 1-MSPS, 8-channel ADS 8028, a highly integrated SAR ADC featuring a low-drift internal voltage reference, wide external analog voltage reference range, wide analog and digital supply ranges and an internal temperature sensor.
Previously, designers could only simulate, model and test up to the SAR ADC, requiring them to invest time and resources building the ADC circuit in hardware. With a downloadable model available, they will now be able to fully verify ADC driving circuitry which in turn will enable speedy product development. Being the first company in the industry to introduce such ADC’s reinforces it’s leadership in the market.
Analog Semiconductor Global Market
The analog semiconductor market tracks the worldwide semiconductor market which is expected to grow at 6.3% till 2015.  Thus, we estimate the growth in analog semiconductor market to be at the same level as the growth in overall semiconductor market and reach $60 billion by then end of our forecast period.
TI’s Dominance in the Analog Segment
The Analog segment continues to be the most valuable segment for TI, generating around 50% revenues and profits for TI in 2011. With a current market share of around 15%, it remains the market leader in analog semiconductors. Based on its superior product offerings and bigger sales and field application staff, we expect TI’s market share to further increase to around 19% by the end of our forecast period. Factors such as the addition of National Semiconductors portfolio in its kitty combined with its mainstay product – the voltage regulators growth outpacing the overall analog market, reinforce our belief of an overall increase in TI’s market share over time.
You can see the impact of a deviation from our estimate on the total valuation, by changing the values in the graph above.
Our price estimate of $45.29 stands at a premium of 57% to the current market price.
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