As recently reported by Reuters, Texas Instruments announced that it will no longer be devoting as much effort towards smartphone and tablet chip production as it did in the past. Instead, the company will now concentrate on its “embedded processing” division, and will direct the majority of its attention towards cars, dishwashers, robotics, and other basic consumer electronic appliances.
While the announcement may come off as somewhat surprising, several ongoing trends indicate that, sooner or later, TI’s decision was bound to happen. Amongst the most significant reasons cited by the tech company’s representatives include the dwindling, “less attractive” opportunities within the smartphone/tablet markets. To be specific, TI vice president Greg Delagi pointed out to tech giants such as Apple and Samsung, both of whom have been showing increased preferences towards using their own chip designs, but have little tendency to seek out those created by third party manufacturers. Taking into account the lack of revenue generated from the two major tech giants, and considering the resulting negative market outlook for several independent chip makers, the idea of TI making a gradual exit from the wireless chip business, in a way, was far from a totally unexpected outcome.
In addition to Apple and Samsung’s behaviors, factors such as the increased burdens related to patents license fees and the potential risks manufacturers face with regards to fixed operating costs are also worthy of noting, according to The Register and Safe Harbor. In addition, news sources like UDN also made a mention of the potential competitors currently overshadowing TI, the most notable of which are Qualcomm—known for its powerful Snapdragon processor series— and Samsung. The presence of these aforementioned factors, in essence, understandably makes it difficult for TI to continue investing in the tablet and smartphone industry without stumbling onto major obstacles and incurring potential financial losses.
With TI’s shares recently dipping by 3%, it is clear that investors are not just concerned, but also slightly anxious about the chip company’s future. Despite all the surrounding uncertainty, though, there are still glimmers of hope for the company. Texas Instruments, for one, has about 11.5% share in the embedded processing market, which according to Delagi is worth about a total of $18 billion USD. The market, according to UDN, also does not have a lot of strong competition, and should have plenty of room for technological development to emerge, given TI’s known experience in these fields.