DLP ‘Flirting’ With $1 Billion in Annual Sales, TI’s CEO Says

TI’s DLP business soared with the growth in rear projection TVs, but struggled to regain its footing as CE manufacturers, save for Mitsubishi, abandoned the market. But with a growing presence in high-end digital cinema front projectors and lightweight pico models, as well as the emerging market in automotive head-up displays, DLP revenue is rising at an unexpectedly fast pace, Templeton said. Smaller DLP chips in the 0.34-inch and 0.17-inch range have found their way into pico and micro projectors, including Optoma models that are sold through Apple stores. TI also has introduced a 0.98-inch DLP with 2,048 x 1,080 resolution. “As the DLP era wound down three or four years ago, everybody tended to commiserate that no growth would occur,” Templeton said. Yet today, that business now “is back to prior record highs in terms of revenue,” he said.

Meanwhile, TI’s OMAP-4 processor has gained design wins in a number of tablets and cellphones, including Google’s Nexus Prime, Motorola’s Droid Bionic, Samsung’s Galaxy S2, Barnes & Noble’s Nook and Amazon’s Kindle Fire. TI also is developing an OMAP-5 chip that’s expected to start sampling in 2012 featuring two ARM Cortex A15 processors capable of encoding and decoding 1080p video at 60 frames per second, industry executives have said.

TI executives have visited 400 to 500 customers and briefed about 1,000 sales representatives in laying the groundwork for cross-selling an expanded array of analog ICs, including the broad line it acquired when it bought National Semiconductor, Templeton said. The purchase of National Semiconductor, which includes 200mm wafer plants in Portland, Maine, and Greenock, Scotland, will strengthen TI’s hand in low-power data converters and high voltage power management chips for industrial applications, analysts have said. With National now in tow, TI may seek to introduce power management ICs capable of handling “hundreds of watts,” they said. TI also will consider buying Fairchild Semiconductor or International Rectifier to further round out its analog product roster, they said. TI’s portfolio of analog chips, which includes D/A converters, has grown to 42,000 SKUs with the $6.56 billion acquisition of National Semiconductor. National, since renamed Silicon Valley Analog, added $18 million in sales to TI’s revenue in the seven days before the Sept. 30 close of Q3, TI said. The acquisition closed on Sept. 23.

"One of the things that we wanted out of the National deal was to take us closer and deeper into the industrial market and everything that we are seeing is saying they are going to be able to do that for us,” Templeton said. TI is “going to go sell to load up” National’s plants, which have been operating at 60-70 percent of capacity, Templeton said. There are “some things we can do” at the Maine and Scotland facilities to “get their cost per wafer better, but the sites are competitive and we think we have an idea of how to fix those issues,” he said. In addition to the factories and a test center, National also added about 5,000 employees, TI has said. TI’s analog group’s Q3 operating income narrowed to $414 million from $520 million as revenue dipped slightly to $1.55 billion from $1.58 billion when the company cut manufacturing capacity to meet weaker customer demand, TI said.

National lost market share in cellphones in recent years because of “hardline pricing decisions,” FBR Capital Markets analyst Craig Berger said in a research note to clients. He blamed those decisions on “predetermined gross margins and ASP goals with management determined to price chips depending on market characteristics and value to stem share loss,” TI is cross-selling its cellphone ICs with National power management chips, Berger said.

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Broadcom’s shutdown of its DTV and Blu-ray processor businesses stemmed from weak sales and lower-than-expected consumer adoption of Internet-capable TVs, Chief Financial Officer Eric Brandt told us. Broadcom entered the DTV chip business in 2008 with the $192.8 million purchase of an Advanced Micro Devices division that itself grew from AMD’s acquisition of ATI Technologies two years earlier. Reports say Broadcom is laying off 180 workers at its operations in Yardley, Pa., and Toronto, but Brandt declined to comment. Broadcom is taking a $23 million restructuring charge, including $17 million incurred in Q3, to discontinue the DTV and Blu-ray processors businesses, Brandt said. Those processors generated “tens of millions of dollars” in Q3 revenue, but fell to half that amount in Q4, Brandt said. The businesses will be a “very small part” of Broadcom’s 2011 sales as the company sells off remaining inventory, Brandt said. Broadcom had about $15-$20 worth of chips built into the average Internet TV it supplied components for, the company has said (CED June 2 p1). “It’s a tough market for everybody whether it’s smart TV or not,” Brandt said. “We had a vision of a form factor where people would be surfing the Internet and the connected TV would enable us to get the type of operating margins we wanted and that didn’t happen. You are going to surf the Internet on your iPad and watch TV so the TV is not going to be as smart a device as we had thought it was going to be.” At one point, more than 100 models of Blu-ray players and Internet-capable TVs contained Broadcom chips (CED Dec 16 p1), including those from LG Electronics and Samsung. Meanwhile, Taiwan Semiconductor Manufacturing Corp. (TSMC) has started volume production of Broadcom’s decoder/processor chips capable of decoding two separate 3D 1080p streams simultaneously. Broadcom has secured customers for the IC, which is expected to start appearing in video gateway set-top boxes in 2012, Brandt said. The BCM7422 and BCM7425, the latter adding a transcoder, feature dual-core 1.3 GHz multi-threaded MIPs processor and are compatible with H.264/MPEG scalable video coding. Broadcom’s move into baseband cellphone processors is “making good progress,” having secured a design win in a low-end Nokia model that sells for $135 to $145, Brandt said. “We are establishing ourselves based on the relationships we have with vendors as a player moving up the capability stack as it relates to baseband processors,” Brandt said. Broadcom also expects to start sampling LTE baseband modem chips by second half 2012, building on its acquisition last year of WiMAX chipset developer Beceem. Broadcom expects to complete its $3.7 billion purchase of NetLogic Microsystems (CED Sept 13 p6) by early 2012, Brandt said. NetLogic develops multi-core embedded processors and front-end technology for wireless base stations.