San Francisco, Ca. – At a Texas Instruments' analysts meeting this week, market executives were told that the company would re-focus its OMAP application processor R&D investment on the embedded market and less on smartphones and media tablets. www.ti.com
“If you look at the dynamics in that market, you look at it being dominated by a couple of players, you look at the fact that vertical integration has become a very significant factor in the marketplace, the truth is that it's just a less attractive opportunity for us,” said Greg Delagi, TI's senior vice president for embedded processing, in a presentation to financial analysts.
Instead, he said, the company plans to re-orient its R&D investment to focus on the embedded market, where he said the company could bring OMAP and its connectivity technologies to a much broader set of customers serving applications like industrial automation, automotive and the “Internet of things.”
To date, OMAP has been successful in securing design wins in smartphones and tablets, including Motorola Droid handsets and Amazon's Kindle Fire tablet. Facing stiff competition from companies such as Qualcomm Inc. and Nvidia Corp., the fact that market leaders Apple Inc. and Samsung Electronics Co. Ltd. use their own internally designed processors makes the mobile market less attractive to TI management.
“We have a lot of work to do to re-profile the investments that we've got as we shift our focus from our historical space in wireless and smartphones and tablets and focus on the embedded area for both OMAP and connectivity,” said Delagi.
He said that in the embedded market, TI's OMAP and connectivity products generate about $400 million in revenue annually from a base of about 4,000 customers versus about $900 million from about ten customers in smartphones and tablets.
TI currently ranks second in sales of embedded processors with 12 percent market share. “That, by definition, says that there's 88 percent of the market that we still have a chance to grow. It's a huge opportunity for us,” said Delagi.
He said TI has been shifting OMAP investment over the past five years to pursue more opportunities outside of smartphones and tablets. The market for embedded processing is worth about $18 billion per year, and he thinks TI has an opportunity to leverage its strength in analog to sell OMAP processors to the embedded market, he said.
“I think we have a really big opportunity with the OMAP processors and with the connectivity technologies to be used in the embedded space, and this is what we'll spend time on,” Delagi said.
While some analysts expressed concern over the strategic shift, Delagi emphasized that TI would continue to support existing smartphone and tablet customers that use OMAP, but that it would not be investing in the development of OMAP for mobile applications to the same degree as in the past.