Texas Instruments

TEXAS INSTRUMENTS 2010 ANNUAL REPORT 


To our shareholders
 
   

2010 was the year we began delivering on our potential – the potential for growth and market share gains, as well as the accompanying benefits to our shareholders that result from our strategy focused on Analog and Embedded Processing.
     The numbers tell a clear story of transformation at TI, the result of targeted investments into high-opportunity businesses. This year saw incremental improvements become notable, credible gains. When we began this strategic journey in 2006, 52 percent of our revenue came from our core businesses of Analog, Embedded Processing and the part of Wireless focused on smartphones. By the end of 2010, that number had jumped to 67 percent, and it will continue to grow in the years ahead as almost all of our R&D dollars are funneled into these targeted areas.
     What benefit have we gained from this focus? First and foremost is growth. TI revenue grew 34 percent during 2010, led by robust gains of more than 40 percent in each of our core businesses. Analog grew 42 percent; importantly, each of its key product lines – high-volume analog & logic, power management and high-performance analog – contributed to that growth. Embedded Processing grew 41 percent as our significant investments in microcontrollers over the past years are now paying off and combining with solid growth in digital signal processors. And in Wireless, our applications processors and connectivity products were up just over 40 percent as we focus our resources on differentiated products for the fast-growing smartphone market.
     Each of these core businesses significantly outpaced their respective markets, which resulted in across-the-board share gains. We also gained share in each major region of the world. Notably, we again gained share in China – the world’s largest semiconductor market and one of the fastest growing.
     Combined, these gains translated into solid financial performance, with TI delivering record operating profit of $4.5 billion, record operating margin of 32 percent and record return on invested capital of 31 percent.
     Our strong cash position enabled us to invest in TI’s and our customers’ futures by launching more than 900 new semiconductor products and acquiring new manufacturing capacity at low cost. While other companies were opting to shutter manufacturing plants in the uncertain economic climate of the past couple of years, we were able to buy new capacity at a fraction of its original cost. These investments will support more than $5 billion of additional annual revenue from customers around the world. For example, we equipped and began production in the world’s first 300-millimeter analog wafer fab in Texas; we opened our first wafer fab in China; and we added a new wafer fab in Japan. With this new capacity, we can give our customers what they need, when they need it.
     As our business continues producing significant cash, after investing for growth we’re returning substantial amounts directly to our shareholders. In 2010, we repurchased $2.5 billion of TI stock and paid dividends of nearly $600 million. We also increased our quarterly dividend rate by 8 percent, the eighth increase in seven years.
     Time has proven the strategic soundness of our focus on Analog and Embedded Processing. Both are large, fragmented markets in which TI enjoys strong positions yet has ample room to grow. Both use less capital-intensive manufacturing technologies, resulting in strong profits and cash generation. Both have diverse customers and applications, so we aren’t tethered to any single market. Both are pervasive technologies that underpin the electronics of today and, more importantly, are the enablers of the electronics of tomorrow.
     Our future is full of promise. Our near-term challenge is to demonstrate that our 2010 performance was not an anomaly; rather, it was a new standard by which to measure ourselves moving forward. With our strategy, our people, our products, our capacity and our will to win, we’re committed to delivering on that promise again in 2011.
 


Richard K. Templeton
Chairman, President and
Chief Executive Officer







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