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2004 Summary of Operations
Company revenue increased 28
percent in 2004 while operating profit grew 129 percent.
Semiconductor
Semiconductor revenue increased 31 percent led by wireless, high-performance
analog and DLP products. TI particularly benefited from demand in the
digital communications and entertainment markets, where TI’s products
are well-positioned in electronics systems that are in the early stages
of strong product cycles.
For a third consecutive year, TI’s revenue growth outpaced the industry.
In the global semiconductor market without memory, where TI does not compete,
TI achieved its highest share since 1986. In analog, TI reached its highest
share since 1975, and the company’s DSP market share set an all-time
high. Higher share for analog and DSP products was achieved in all major
geographic regions.
For several years, TI has been increasing its portfolio of proprietary
products for a broad range of applications. Simultaneously, the company
has steadily reduced its exposure to the commodity market.
 In
addition to standalone products, TI combines DSP, analog and systems expertise
to create chipsets, single-chip solutions and reference designs for specific
end equipment such as cell phones and digital cameras. Integration reduces
customers’ bills of material while increasing TI’s penetration
into key end equipment.
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Analog: The company’s analog revenue grew 28 percent. About
40 percent of Semiconductor revenue came from analog products. Revenue
from high-performance analog products, a subset of total analog, grew
40 percent despite inventory reductions that affected demand in the second
half of the year, especially for products sold through distribution channels.
By sharply reducing factory loadings, TI was able to finish the year with
internal inventory at desired levels.
Using new, proprietary manufacturing processes, TI is creating high-performance
analog products with performance and power-consumption characteristics
that are differentiating TI from competitors. The company introduced about
400 new high-performance analog products in 2004. Despite the long product
life cycles intrinsic in this market, about half of TI’s high-performance
analog revenue came from products introduced in the last few years. This
indicates the market’s positive response to TI’s rise as an
innovative and reliable high-performance analog supplier.
Among significant
developments, TI introduced a new Impedance Track™ technology for
“gas-gauge” chipsets. This technology calculates a device’s
remaining power with up to 99 percent accuracy throughout a battery’s
total life cycle. A digital still camera, for example, could use this
technology to display the number of pictures that can be taken with the
remaining battery charge.
DSP: TI’s DSP revenue grew 35 percent led by demand
for wireless products as well as catalog and broadband products. About
35 percent of Semiconductor revenue came from DSP.
DSPs deliver the computational performance required to digitally manipulate
analog and other real-time signals. These products are a catalyst for
innovation in a wide variety of applications ranging from cell phones
to consumer electronics and industrial robotics. Demand for DSP capabilities
will only grow as digital technology expands its reach into daily life.
TI began volume production of 1-GHz DSPs, the world’s fastest DSPs
and the first DSPs to be manufactured in 90-nanometer process technology.
Already shipping to more than 70 customers, these chips enable developers
to pursue innovative applications such as self-navigating vehicles, complex
vision systems and portable medical-imaging equipment.
Key End Markets:
In wireless, revenue grew more than $1 billion to a record $3.8 billion.
Almost $500 million of growth came from the emerging market for 3G cell
phones. TI retained its position as the world’s top provider of
cell-phone modem DSPs and application processors. The company’s
products powered the majority of cell phones shipped in 2004.
 Nokia
said it will use TI’s single-chip cell-phone solution for high-volume,
entry-level handsets. Customers are sampling OMAP 2 products for advanced
multimedia handsets. Samsung chose an OMAP processor for the industry’s
first hard-disk drive camera phone. TI also announced a single-chip solution
for digital broadcast TV on cell phones.
DLP product revenue increased 79 percent. By year-end, TI had shipped
5 million cumulative units of DLP products. DLP technology held almost
40 percent of the market for projectors.
In televisions, more than 75 different DLP-based models were on the world
market from manufacturers such as Samsung, RCA, Mitsubishi, Toshiba and
LG. By the end of 2004, DLP products’ share of the North American
market for big-screen TVs had more than doubled compared with the end
of 2003.
In broadband, revenue increased 46 percent. TI became the leading provider
of DSL solutions for customer premises equipment and maintained its leadership
position in VoIP (Voice over Internet Protocol) solutions.
Manufacturing:
TI has shipped 5 million units of advanced 90-nanometer products. This
process technology provides major performance, power consumption and integration
benefits. TI is among very few semiconductor companies that can provide
this highly advanced capability.
The company broke ground on a new manufacturing complex in Texas. The
facility will use next-generation process technology to build some of
the world’s most advanced semiconductors on 300-millimeter wafers.
TI’s strategy is to build internal manufacturing capacity to a level
that can meet estimated sustainable demand. When demand periodically moves
above this level, TI supplements its in-house capacity with production
from external foundries. Over time, this strategy should increase the
company’s flexibility to meet surges in demand while also reducing
the amount of capital expenditures required for TI’s factories.
This approach should keep the company’s internal manufacturing assets
more fully utilized, resulting in better financial return on these assets.
Sensors & Controls
TI’s Sensors & Controls segment turned in a record year with
more than $1.1 billion in revenue due to broad-based demand. Operating
profit also set a record at $281 million, which was 24.9 percent of revenue.
Target markets include automotive, heating and air conditioning, home
appliances, industrial controls and radio frequency identification (RFID)
systems.
Education Technology
The Education Technology segment collaborates with
educators on the development and deployment of classroom technology, including
graphing and scientific calculators. Record revenue of $518 million was
primarily led by demand for graphing calculators. Operating profit was
a record $176 million, which was 34.0 percent of revenue.
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