So I'd like to welcome you to our second of a series of 3 investor meetings this year. As you might recall, in May, we had an investor meeting in the same location with our CEO, Rich Templeton and CFO, Kevin March. The focus of that meeting was to describe TI's overall company strategy as well as our performance objectives. Just as a quick summary, Rich described a process of transforming TI, where we were really getting the company focused on better opportunities that require lower capital and deliver higher returns. He also described that our transition to a company focused on analog and embedded processing was nearly complete.
A couple of considerations there was that our portfolio is now nicely positioned for growth versus some of the transition we've gone through over the past few years. Rich described that we had a strong and healthy and diverse customer base. I think at the time, he described that our largest customer was just a little bit over 5% of TI's revenue, which is a mix and a diversity that we look very, very favorably on. And then finally, he talked about the track record that we had established of share gains in analog and embedded processing, a good track record yet one that we believe has plenty of room for improvement. In today's meeting, we're going to build off of that session and do a deeper dive, provide more insight into our strategies and embedded processing and wireless.
And then on November 1, we're going to have our final meeting that will focus on analog. That meeting will be held at our Silicon Valley analog facility out in Santa Clara, California, and details will be forthcoming soon on that meeting. If we can pull up the agenda slide quickly, I'm just going to run through today's meeting. We're going to start with Greg DeLagi, providing a strategic overview of what we're doing in embedded processing and wireless. You'll recall that I believe it was in May, we combined our wireless and embedded processing activities and organizations, and Greg is the overall manager.
Following Greg, Haviv Ilhan will talk about what we're doing in wireless connectivity, specifically for embedded processing. We'll have a short break, after which Scott Roller will talk about our activities in microcontrollers, Dipti Vashani will talk about what we're doing in digital signal processing, and Brian Glensman will wrap us up with TI's work in communications infrastructure. Our format is going to be after each presentation, the presenter will take Q and A. We should have plenty of time for that. Also at the end of the meeting, you're all invited to participate in a reception that we'll have back overlooking Times Square that will give you a final opportunity to ask any open questions, or I should say an additional opportunity.
This meeting is being webcast live, and if you're interested, the archive will be available on the web. The meeting will also include some forward looking statements for which our actual results may vary. Please refer to the Safe Harbor statement in your books or post it on the web for a discussion of some of these risks and uncertainties. And with that, I'll turn it over to Greg DeLaghi.
Thank you, Ron. Good morning, everybody. It's a pleasure to be here for this session. As Ron said, my name is Greg Delagy and I manage the embedded processing business at TI. Again, just to reiterate what Ron said in May of this year, we actually combined our wireless unit with our embedded processing business into one unit that we call embedded processing.
Just to provide a little bit of background for people, I've spent the last 7 years running our wireless business and the 10 years prior to that running our DSP business. So really a good cross section. I'm really excited about the opportunity to lead our embedded process and focus. I think we have enormous opportunities and I look forward to sharing that with you today. I think one of the most important things is we're going to provide some depth today as we go through.
You're going to get to see the actual business managers who run those businesses and give you an opportunity to go a little bit deeper in terms of each of the strategies, the results and where we're going. So let me start just by framing a little bit here. We've got, we believe, a good embedded processing business. We've got a strong position. It's something we've been working hard at.
But I think we have an opportunity to make it even stronger. If you look at our performance and I'll walk you through those details, I think we're starting from a base where we've been pretty consistent. We've been very consistent gaining market share over the last several years. I think if you look at our customer base and our positions and our product portfolio, that's probably been the single biggest area of focus for us over the last few years, really building out and accelerating our product positions in these spaces. And I think we've made some really good progress and I think you'll get a great sense for that as we go through today.
I also think it's an excellent complement to analog. If you think about TI, you think about our presence in analog, you think about analog as a technology that can be sold to virtually every customer on the planet. You start to look at what we're doing with embedded processing, it's a very nice complement to that and I'll develop that thought a little bit more, but I think it's one of the very key topics. Lastly, the focus of today is going to be on what we're doing with embedded processing. If you think about our traditional focus in wireless and you think about where we've been focused historically in terms of the smartphone and tablet markets, I guess what I would describe to you is that we believe that that opportunity is less attractive as we move forward.
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. But if you go back to when I was here in May and we held the conference and we talked about what we were doing with our wireless investments, if you go back to Barcelona, if you even go back to Santa Clara last December, you saw a very strong theme of the fact that we thought that there were some very big things changing in the world as it related to the role that OMAP and connectivity could play in these broader spaces and we've been hard at work repositioning those businesses. And that's what we will focus on today, those products as they relate to the embedded space. We are reprofiling our investments. We do not have any details to share with you today.
We're working through the answers to those questions. The R and D profile for those businesses needs to look different and we're working through those, but no announcements on what we're doing there. As soon as those plans crystallize, we'll communicate. The focus of today is where we're going in embedded. If you think about our current segment reporting, if you look at how report things today, we talk about our embedded processing business and we talk about our wireless business.
And I'm providing a little bit more visibility here to try to give you a flavor for what the magnitude of these businesses are. So this is first half data too. It's not a projection for the year, but it was really the best way to show this. So we've got it first half run rate. We've got an $800,000,000 microcontroller business and a $1,200,000,000 business in DSP.
Those are the things that you've traditionally thought of when you thought about our embedded processing business. And then we've got wireless, which over the last several years, we have been reporting our baseband as we end of life the baseband engagements separate from our OMAP and connectivity businesses. I think the change in view that I want to try to project today is to try to give you some additional color on where we're investing as we move forward. So in addition to the strength of what we're doing in microcontrollers, the tradition to the strength we're doing in this DSP, 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 again, this is what we'll spend time on.
I hope that it's a little bit surprising to you when you look at some of these numbers that that embedded piece of our OMAP and Connectivity business, the embedded piece of what we're doing in wireless based on the results over the last couple of years, we've already got a $400,000,000 business with 4,000 customers. So again, we have been hard at work at this for a long period of time. I think it is a perfect combination with what we've been doing in EP and I'm very, very excited about what the future holds there. Back to the market share gains, we're very proud of this chart. With some variation in terms of market performance, We think that this is a very consistent trend of improved performance.
It takes us up to 12% for last year. And again, as Ron said, I think we've got a lot of headroom to be able to expand this position as we move forward and really want to try to help you understand where those opportunities are as we move forward. I also want to provide some color when we think about that embedded processing business. We think about what is the entitlement, what is the business model we're trying to drive to. And again, the way I would describe this is with 3 dimensions.
Number 1, if you look at revenue growth, we believe that the embedded processing market, because it is so broad, it is so diverse, it grows at about semiconductor industry rate. So everybody has their own feeling about what that is. It's somewhere in the 7% to 8% compounded annual growth rate if you think about it. I believe with our portfolio, what we're aiming at is that growth plus continued share gains. I think that's the opportunity that we have.
From a gross margin standpoint, and it differs, our catalog businesses will tend to be a little bit higher. You'll see businesses like some of the more vertical segments, things like automotive that will be a little bit lower than this. And then you'll see things like our communication infrastructure, which are kind of in between. But in total, we believe that the opportunity we have is for the business to run-in the 55% to 60% range. And also operating margin as we continue to drive the growth and market share gains and take care of our operating costs, we believe that we can have operating margins approach the 30% range.
I'm not going to commit to a time frame to do this. I know I may get a question or 2 on the break, but I also wanted to just be very upfront with people to understand, so you could understand more about where we're trying to drive this business in the years to come. So with that, let me transition and remind I just want to spend one slide trying to remind people about embedded processing and why we believe this is a great opportunity and attractive business opportunity for TI. First, we've talked about this. Embedded processing an $18,000,000,000 market in total.
You start to look at the complement to analog and I highlighted that point just a minute ago, but let me try to put some more color around that. We believe that our analog customer base is about 90,000 customers today, 90,000 active customers. When you take a look at the number of those customers that are also using similar technologies to what we have in our embedded processing portfolio, it is the majority of those customers. So it is a really big opportunity. If you remember the number I used on the previous slide, we talked about us having about 30,000 customers in embedded processing.
You can start to see the magnitude of the opportunity that we have just by leveraging the footprint we've got out in the marketplace with analog and doing a better job of penetrating that broader customer base with embedded processors. It's a very profitable market. If you look at its history, because of the profile, because of longer product life cycles, because of the way we handle our manufacturing operations, this business can be very profitable. It can leverage generator of cash for the company. The fundamental focus, we some custom work inside of this portfolio, but the majority of our effort and focus is on the catalog areas.
So standard products sold to a broad set of customers. I think we I'd also say we have a strong position today. We're number 2 in embedded processing at 12% market share. That by definition says that there's 88% of the market that we still have a chance to grow. It's a huge opportunity for us.
I'll spend some time trying to give you color when we talk about this market and how it's positioned. There's a big focus in industrial. You'll see a focus in automotive and you'll see a lot of things when we start to talk about some things that are emerging in terms of things that will drive the industry in the next 10 years. We talk about the concepts of Internet of Things and the role cloud computing is going to play. So if you remember my wireless presentation in May, we highlighted a lot of those areas, still feel very, very strongly about the opportunities that those are going to drive for us.
Spend just a minute talking about why we win. If you think about it, the product portfolio is key. This broad customer base, lots of customers, lots of applications, the strength of the product portfolio is very, very important. We have been driving this very, very hard over the last few years. If you look at our product range, we talk about products from $0.25 to 16 gigahertz.
So $0.25 really is down in the microcontroller range. It basically says that we can go into pretty much any application on the planet. And then conversely, what we've got is the absolute performance leadership in the market in terms of what we're doing with high performance. There is nobody else out in the marketplace capable of and bringing that kind of product range to the market. Again, 90,000 customer relationships that we talk about embedded processing being 30,000 huge number of incremental customers that we can focus on bringing those technologies to.
Number 2 is analog and you may have heard that analog is important to TI. It's important to TI as a standalone business, but the fundamental TI, the competencies we have in analog, the capabilities that we have in analog play a fundamental role in terms of what we're doing in embedded processing as well. So not just when we sell an embedded processor, we're sweeping up the content, we'll do that. But what you'll see increasingly and the flavor of this will come out in some of the presentations today, we have opportunities to integrate analog capability to drive differentiation in our products. And that is a very critical point because what that helps our customers drive is more integrated solutions, which means lower cost, lower leveraging the DNA we've got inside of TI and the strength of our analog capability even inside of our embedded processing business.
Again, we talked about it, the manufacturing footprint and the technology advantages we have, very, very strong capability. When you start to talk about process technologies, you start to talk about packaging technologies that cover this broad range. And the capacity issue, I'll tell you as I spend a ton of time out in the marketplace, the thing we get enormous credit with customers is how aggressive we've been in our manufacturing footprint, the capability and the confidence our customers have in our ability to support them through their total product lifecycle and to take care of big volume ramps and just be able to depend on TI as a supplier. We have the largest footprint. And again, we talk about what we are doing in analog and EP.
I think those are absolutely hand in hand. We've got the largest sales and applications force in the industry, 2,500 sales and applications people. That is significantly higher than any competitor that we have. We have invested aggressively in emerging markets like China and India and feel that we are very well positioned there and growing ahead of the market rate. And what we've been trying to do is get very close to customers geographically.
And we've been hard at work at that for the last few years. The last thing we do is we try to reach all the way upstream and this is I would tell you is really, really important when you think about a business like embedded processing. Embedded processing meaning that these are processors that customers are going to write software on. What we're doing is we'll work all the way upstream and Scott will talk about this in his presentation on microcontrollers because the team has done an amazing job. We'll work with universities so that the first experience someone gets programmed on microcontroller or a DSP or frankly even as we move into the connectivity areas, we want those experiences to be based on TI products.
So when they go out into the workforce, they already have the familiarity with TI, very, very important part of the strategy in total. You take a look at the product portfolio and this is not exactly how we're organized from a business unit standpoint or anything else, but this is more of what I would say is the external view of how we're positioned with customers. If you're a customer and you think about Texas Instruments embedded processing, what does that mean? Number 1, if you look at our microcontroller business and Scott will dive into that in more detail, we've been expanding that product portfolio over 1300 products that range from $0.25 to $25 so a tremendous dynamic range of what we're doing. We believe that we've got competencies and it's a core part of Scott's focus is what we're doing in low power and he'll talk more about that.
We also optimize solutions for some applications specifically when we talk about safety and motor control, where we think we have some very compelling things that we're doing as those markets explode. And the analog integration, the pairing with our connectivity technologies is key to what we're doing there. DSP, as I said, dollars 1,200,000,000 business for us, a great business, a business I grew up in. You think about what we're doing across our single core line and multi core line, tremendous reach in terms of those capabilities. You're familiar with a couple of things that we talk about here, base stations, obviously, we've got a strong position there.
But we're seeing some of these really high performance solutions start to gain hold in a much broader set of markets. We'll talk about medical imaging, machine visioning, test and measurement. There are a whole section of new applications that are being driven because of some of the unique things that DSP can do. And lastly, what I'll also talk about and Dipti will spend some time developing this when she talks about DSP, The role that analytics are going to play is very, very significant and I think will have a is going to be a fundamental driver for us in the next 5 years in terms of new applications, new customers, new segments. Lastly, when you think about application processes, you probably think of what we're doing with our own map technology and I'll show you a little bit of the positioning of those products in a minute.
But we also have a line of products called Satara, which are ARM based microprocessors that we build. And when you think about that whole range of things we do from kind of standalone ARM implementations through the complex SoCs, I think it is a very unique position in the marketplace and our ability to deliver that with to customers. The nature of the applications here, we talk about high quality video, we talk about vision. There are a whole host of applications. But to me, the biggest thing is that what you start to see is the role that a high level operating system is going to play and I'll talk about that in a little bit more detail.
The role high level operating systems are going to play in an increasingly broad context in the marketplace is providing an amazing opportunity for us in terms of what we're doing with application processors. We've got great momentum and very visible things in terms of what we're doing with in automotive infotainment specifically. You start to look at radar systems, you start to look at robotics, you start to look at visioning applications, we see a list that's growing very, very dramatically. So with those three technologies at the top, under or supporting that is what we're doing in connectivity. And again, the theme you guys have listened to me over the last couple of years, we see a really significant opportunity with this concept of the Internet of Things and the fact that everything is getting connected and we have been working very hard in Habib's business to position our products to enable that trend.
And he will develop that and talk about that some more. But we have 14 individual wireless technologies, the broadest lineup of anybody in the world. We got over 130 products in production today. That business is gaining momentum as people try to get things connected, whether it's in your home, in your enterprise, in your car or on your person. The trend that we're seeing in wireless is phenomenal and Haviv will develop that in some more detail.
If a picture is worth a 1,000 words, I hope that this starts to give you an image of why I get excited about the EP embedded processing opportunity at TI. This is a reference design that we do for a market segment. This one happens to be for smart metering. So we work with a smart metering customer. We will actually use this board.
The sales guys will use this board. The customer will buy this board to develop their product and to experiment with new concepts. So really, if you take a look at this and walk around, what you basically see is the heart of this system, It's either a microcontroller or a microprocessor and we tend to be at the heart of that system. But what's important is you start to walk around this board and look at the role that MCU and analog play in metrology that's basically doing the computation inside of the metering application. You look at what's happening in terms of adding power line communication because sometimes those meters want to be connected through power line into the house.
You come up and think about things like NFC. We're looking at people that are thinking about NFC as prepayment mechanism for meters where I'll go buy a chip, I'll come up, I'll touch it to the meter and I've got so many kilowatt hours worth of power. You look at things like wireless links for automatic meter reading and so on and so forth. Some people like low power RF, some people like ZigBee. We've got little modules that can get plugged in and plugged out if the customer wants to be able to do some of that.
And we talk about Wi Fi increasingly and Habib will talk about this a little bit. You see the role that the wireless technology is exploding. So when you look at this and this is only one of hundreds of examples we have of how we're crafting the value proposition, the whole selection of parts specific to applications And this is what I get really, really excited about because we can do a better job of solving these problems for customers market segment by market segment. So with that, let me transition in and talk a little bit about some of the markets that we get really excited about. The industrial market, and the industrial market is a large market and it covers a ton of stuff.
We think of that as over a $4,000,000,000 market. And again, you can see things here. White goods, automation, robotics, human machine interfaces are changing as everybody has been influenced by some of the things that have happened with tablets and computers over time. Motor drive and control really explosive opportunities in terms of a bunch of different segments across automotive. If you think about the drivers of growth, there are significant increase in safety regulations and we'll talk about that a little bit more as the following presentations go.
These devices are getting connected even in industrial applications like controlling cranes in a factory setting. People are looking to do that wirelessly as opposed to having wires connectivity and wireless technologies making just a huge change in that market. And again, the whole dynamic of more intuitive, more machine the human machine interface is changing in a material way, lots of opportunities. Terms of the products that we've got positioned in this space, we'll talk about our Sitara line of application processors. We'll talk about what we're doing with the connectivity products.
And you think about some of the things we've done from a motor control standpoint, one of the strongest segments inside of Scott's business is we can drive significant benefits to the customer in terms of reducing power associated with all these motors. Automotive, over a $6,000,000,000 opportunity. And I think if you look around this chart and I won't talk about each of these systems specifically, but there is an absolute explosion of where electronics are being used in cars. If you think about it, we really see chips everywhere in the car. And as I guess since I'm in North America, I'll make the statement.
If you watch the TV commercials that you see and you watch how Ford is already positioning electronics as a fundamental of the technology that they've got in every new car, I see that same trend when I go to GM, when I go to BMW, when I go to Audi, when we go to VW, anywhere you go in the world, the automotive manufacturers are putting enormous focus on the role that electronics are going to play moving forward. We can talk about that in terms of the infotainment systems. We can talk about that with safety systems in terms of radar systems, parking assist, lane change detection, lane change avoidance. There are just a whole host of things that are happening and there are very rich opportunities right in the focus of the kinds of things that we do with our embedded processors. And really the emerging safety regulations,
things like the backup cameras
being required, car black boxes,
there's just an products that we have positioned here, you go in and talk about In terms of the products that we have positioned here, you go in and talk about the things that we've got with our Hercules line of microcontrollers, Scott will touch on this a little bit, tailored specifically for automotive applications, tailored specifically with the details of that architecture specifically for safety apps. You see things in terms of keyless entry and start with our RF430 line. You see things with our motor control products in C2000 with the DFINO architecture. And again, you see this combo denominator as we go through where wireless is changing the nature of what's happening in automotive standpoint. And Aviv will talk about that in some more detail.
This concept of Internet of Things, I just want to spend a minute on. It is literally everywhere and Habib will talk about this in some more detail. I've got a figure here of 24,000,000,000 connected devices by 2020 and this is the GSM Association came up with this figure. If you have seen any of the things that the Ericsson team is positioned out in the market, the Ericsson guys will talk about 60,000,000,000 connected devices by 2020. So I don't know whether you want to believe GSMA or whether you want to believe Ericsson, whether it's 24 or 60.
The point is it's an enormous trend and we're talking about I think a fundamental explosion in the role that wireless is going to play in everything we do in our lives. I've got a bunch of different devices that are listed up here. I would give you an example. I think the simple way to think about this is you've got things with 660,000,000 smartphones shipped on an annual basis, people with developing products that are going to connect to those cell phones and that's how you're going to get those devices connected. We've all got wireless LAN infrastructures in our houses.
More and more devices are being done to attach to that. And you think about mesh networks, which Haviva will develop lots and lots of opportunity. You see these technologies proliferating across all markets. And again, there are lots of advantages to wireless. You can think about them in terms of reducing weight in application like cars.
You can think about ease of installation. If I want to install a security system in my son's apartment, I don't have to pre wire anything. I can just put the devices up, significant benefits to wireless technologies. What we've been doing is we've been revamping our product offering in these areas across what we do with our MSP 430 microcontrollers and our SimpleLink technology, which is a very easy to use Wi Fi technology and also Bluetooth low energy. We've specifically developed products for these embedded markets and we feel really good about the momentum that we're building in the market with design ins and revenue growth.
So with that, let me shift gears. I want to just I want to talk a little bit about the cloud computing and really talk a little bit about what we're doing in application processors. If you think about the concept of cloud computing, what you see here, I've listed some names of players. You hear what about what Apple is doing. We talk about Amazon.
We talk about Microsoft, Google, Facebook. If you spend time internationally, you go to China, you'll see people like Baidu. What all of these guys are trying to do is they're trying to take their user experience and they're trying to take it across a number of devices. Started with a PC in a Google context, but then a PC in a smartphone and then a tablet and then a car and then an enterprise and then a home. And so what you're seeing, what they're all trying to do is figure out a way to get each of us to get tangled up in that web of capability where I can start to get a seamless user experience and maintain all of through advertising revenue, Amazon through purchases online, just as an example.
We believe that the battle is going to be over how do I deliver that scalable platform across a number of different areas. And really what that's what we get very excited about when start to think about what we're capable of doing with our application processor lineup, we think we're in a unique position to be able to scale that across multiple devices in that system. And there are some common threads here. Number 1, it's a big transition to high level operating systems because these devices become more complex. They're connected.
They have advanced features and they're really trying to deliver rich user interfaces. So we think this is a really significant trend happening in the industry and one that we're well positioned. The common denominators here is that these opportunities are somebody like Google and we're working with someone like Texas Instruments. Google's model is that they're going to define something and they're going to want that to be built broadly. We've got a unique capability to be able to once that idea is competencies we had that we focused on in application processors that is bringing more performance inside of a power budget is still a fundamental and still something that is very, very important to what we're doing and plays in other markets.
Obviously, when we talk about mobile markets, you care about power. But when you start to talk about even a market, think about a market like automotive, think about a radar system and think about that radar system being up in that rearview mirror that you have in your car or a heads up display or a cluster. The size that those systems can become are a function of power more than there are of anything else. So this theme on the importance of driving lower and lower power solutions you'll see woven into everything we do. And again this idea of a scalable platform.
We've been building this over the last several years. We have over 100 products in the marketplace today. These products tend to start at about the $5 range and scale up from there. And we've got a pretty good footprint already. Over 1,000 customers have designed in these products.
And you will see these in everything from thermostats to just a very broad selection of opportunities. You scale that platform up and start to think about the capabilities of something like OMAP can deliver to that broad set of applications as we've talked about. Again, we have a much smaller product portfolio in OMAP with only about 20 products because we've been fairly focused on a couple of verticals that is expanding and we are putting more of our R and D dollars in the products for the embedded space. The price range on OMAP is somewhere between $20 or $10 $30 and we have 150 engagements today with OMAP. So we feel very, very good about what the scalable platform can mean.
We feel great about how the industry is changing. We feel good about our position. I wanted to try to come up with an example to try to show you how that scalable platform can be leveraged. And this is an actual customer example of the decisions that they made across their product line. So if you look down at the bottom, they've got a relatively simple appliance and they're using one of the Sitara lines, our AM335X, relatively simple function.
As they scale up and they add capability to that device, it's got a larger display, it's connected differently, it's capable of doing some additional things. They scale up and get to leverage that software and they get to leverage an OMAP processor. And then again continue that up to an even higher end of that product portfolio where that same scalable architecture can be used with a device that has even higher performance kinds of capability or multifunction capability. So this is again just a single example, but we see this theme recurring again and again and again. The leverage of a platform, these are complex products that the customers are developing.
It's a whole new game for them and we've got a significant opportunity to drive that in the market. I won't go through this in detail, but I think it does. It's intended to give you a kind of a little bit of a cross section for how broad this opportunity is. And these are not made up opportunities. Everything that we've got pictured on this chart are existing engagements that we have either the customer is already shipping the product or in design with them and they're planning to bring that product to market.
So you start to look at automotive and industrial point of service, consumer, enterprise, think about how the landscape in each of those segments is changing, think about the capabilities of these different devices and how different it is today from what they've done in the past. Sometimes it's a new device with new capability. Sometimes it's a brand new device that is only it's a new kind of function when you think about some of the things that we see happening in retail establishments and the role that electronics are playing in retail. So really big opportunity for us in total. In summary, I'll leave you with 3 points.
I think number 1, I believe with every fiber in my being that the embedded processing opportunity is a great opportunity for us. I think it's a great market. We've got a great position. I couldn't be more excited about that. We have a strong position.
We built momentum, but I still believe that there is an amazing opportunity and what the future is, it's strong, growing and just really, really good. We have a lot of work to still to do and we are hard at work doing this stuff today. We have to we've got we've built out our product portfolios. We need to take the existing products we have and we need to drive them into more customers and more applications. That example of the metering application taking all those products that exist bringing them into new applications, showing a customer how to sell those, expanding our reach into the marketplace and our penetration with products that we have.
We've been investing ahead and we'll continue to do so. When you look at what we've done in sales and apps and you'll hear more about that. When you look at new products, we'll continue to build those out. Our commitment to even doing things upstream with universities is very, very vigorous. And lastly, we have a lot of work to do to reprofile the investments that we've got as we shift our focus from our historical space in wireless and smartphones and tablets and we shift that focus into the embedded area for both OMAP and connectivity.
So with that, I'll be happy to answer any questions. Please wait for the microphone.
Yes. I was just going to say, we'll have plenty of time for Q and A. So Dave Paul has a microphone as well as I will have one. Wait for the mic to ask your question. And I'll also ask so we can keep things moving quickly.
Limit yourself to a single question. And if we have time, we'll get back through. Vivek?
Thank you, Greg. Thanks for the presentation. I'm trying to understand the time frame of this reprofiling. You're going from a market where you have few customers, but those customers have very large opportunities that can ramp up fairly quickly to this new market where there are lots of customers, so obviously less customer concentration. But these are longer cycle markets in terms of how the product is designed in.
So should we expect to see a dip in that $1,000,000,000 smartphone and tablet revenue before these other markets take off? What are you telling your smartphone, tablet customers, right? What are the I know you're not talking about cash costs of restructuring, etcetera. But I'm just trying to understand the time frame of this repo profiling and how we should look at your revenue trajectory as that happens? Thank you.
Yes. I mean if you look at our existing product let me start by saying just look at the existing product portfolio we have. We've got members of the OMAP4 family, our initial OMAP5 device that we've been working on design ins. We will support all of those customers regardless of what they're building. Really, the most important thing is when we start to think about where we're putting our R and D dollars moving forward, the new products that we're developing, we're going to shift our we are shifting.
You already see existence proofs of this. We're shifting our investments to those products being developed for the embedded market. So if you're a customer today in one of those markets and you're using the existing TI product, we are going to support those and the bias that we're putting on products for the embedded space. That's the way I would think about it. And the bias that we're putting on products for the embedded space.
That's the way I would think about it. In general, there will be a reprofiling of the investment. The investment will look different for embedded than it does for the major verticals. And I guess the simplest way I would look at that is more of the major verticals that demand kind of a product refresh every 12 months or every 18 months whatever you want to call that period that causes you to do a lot of things in parallel. And so what we're doing with that as we start to pursue the embedded markets, what you're really doing is you're starting to do a little bit more serially.
You still are going to spend money on R and D. You're still going to spend money on new products, but your focus has now shifted to I need to do more derivative products, the role software is going to play and ease of use and documentation and sales and apps and all of those things because now what I'm trying to do is I'm trying to go to a much broader customer base. So a couple of ways to think about how that investment shifts. But it's about number of derivative products. It's about rounding out those product portfolios.
It's about going more broad to more customers. The market in total in embedded will grow slower. If you look at that proxy of 7% to 8% or whatever that number is, whatever you associate the semiconductor business, I believe that that is the opportunity we've got. It will be slower growing than what we typically think about with some of these major verticals. But it will be fundamentally more stable.
The product life cycles are longer. The customer product life cycles are longer. And it's just going to generate a much more stable, much more profitable, much better long term business for us.
So should we expect to
see Into the mic, please. Oh, we took it away.
Sorry. So should we expect to see a dip in OMAP revenues over the next 12 to 18 months as you go through that transition?
Yes. I mean, I think if you look at the numbers, we shift our focus. We have existing business at existing customers that we're not going to be investing in the roadmaps to the same degree. That is a transition that we'll go through. But what the profile of that is, we don't have anything new to say today.
We'll move to Chris Caso.
Thanks. Greg, just as a follow-up to that, is there and I understand you prefaced your comments by saying you weren't prepared to talk a lot about it. So
Just think about it. Just think about what would happen if I didn't preface it with that.
Exactly, exactly. So it's your second question, I think you didn't want to talk about. But the any help you can give us with the level of investment that's in these businesses today, perhaps looking at it from sort of the margins you see in that business now and what I'm getting at is the potential impact to margins from the reprofiling. And as a follow-up to that, is divestiture of these businesses on the table as part of the reprofiling?
Yes. And Chris, I'm not willing to comment in any more detail. I just don't have anything else to add. We're working on these plans vigorously. As soon as they crystallize And we can talk about them, we will talk about them.
Okay. And I would just say if you get multiple questions
like that, consider it
multiple choice and then
clarifying the operating margin target of 30%, is that an average over the cycle or a peak expectation? And then my real question is on revenue growth, if I look at over the last 7 years, including this year, you guys have clearly gained share 6% a year. And when I look at the WSTS data, which you referenced a couple of times here, it's been flat for those markets for the DSP and microcontroller markets. I guess my question is, given that as a backdrop, what's changing such that you think that these that your primary markets are going to grow at the 7%, 8% kind of growth rate you've referenced a couple of times? Can you kind of give us a flavor on what would cause that to change versus the last 5, 7 years?
Thank you. Yes. I
mean, I think it differs as we go through the segments. It may be a question you want to revisit with some of the speakers that follow because each of the businesses has got a different profile. Brian, when he talks about communication infrastructure, you'll get a different flavor for that and why we think we can grow there. Scott and Microcontroller still with all the progress we've made in the share gains, we're still in the 6% range from a share standpoint. So we believe through there's an opportunity, significant opportunity to gain share through penetration increases.
As we go broader into the market, more customers, more dollars per those engagements, we've got an opportunity to drive growth that's above the market. And so I think as we go through the presentation today, you should see a theme of why do we believe we can grow in these areas, what are we doing about it, what's the new product piece, etcetera, etcetera, as we go through. 30%. Yes, 30%, it is a target that we have to drive the business. I haven't been very specific on whether exactly what that time frame is going to be.
I think the business absolutely has that kind of entitlement. I think it has that entitlement.
Okay. Jim Cabela.
Great. Thanks, Greg. Sort of a high level strategic question. If you look at one of the things TI has done well over time, it made the decision to exit businesses at a very good time going back to memory and then baseband and now sort of a similar situation with OMAP. Within the business that you're running, are there any other segments that you can see today that, sure, we're going to take advantage of this opportunity today as it grows, but there is a scenario down the road where it may not be as attractive as an opportunity.
Because the issue with OMAP, we've talked about for 5 years, right? You guys have said for a long time, we're going to take advantage of the opportunity as it exists, but it may one day become commoditized and we'll repurpose the business and that's kind of what you're doing today. Is there anything that you could say today, any of the business you could say that about today that you said about OMAP 5 years ago?
Yes. I think the as we've talked about this over time and I think I've been very consistent is, as we shifted our focus in wireless away from baseband to apps, processors and connectivity, the thesis was that one of the reasons we like those markets is because they were going to be in the fastest growing segment of the handset market, but that had some risk associated with it. But both of those technologies we thought had a broader appeal in the broader market. And so I mean, if you go back over the last 5 years, there have been investments. We have been shifting investments to go off and start to pursue more of these horizontal opportunities.
So the reality of what's happened in the smartphone market today, looking at the dynamics with vertical integration and the dominance of a couple of players, we're not flat footed on this, Jim. We have been investing in these technologies, obviously, to have 150 customers in OMAP and to have basically an embedded wireless business with connectivity in OMAP that's $400,000,000 and 4,000 customers, we've really been working really hard at that. So I think those markets are good opportunities for us. Anytime you're in a vertical market, there's some whether it's commoditization that happens or there's just some it's just a more fragile position to be in. And that's why we've been working so hard at some of these horizontal businesses.
I will tell you with the combination of these businesses now the energy I get when we start to look at that total portfolio and pulling that together and what we can bring to our customers and our sales force, it's astounding. And not that we couldn't do some of those things in the past because we were doing some of those things, but it's an opportunity for us to accelerate the great work we've already done in EP and now accelerate what we're doing with the OMAP and connectivity in the embedded spaces. I think it's a breathtaking opportunity for us.
Okay. David Wang. Greg, the reprofiling away from smartphones and tablets, does this result in any actual cost savings? Or do you use the same people and just reposition them in other things? And is there anything in your smartphone and tablet operations that can be sold products or groups?
Ask the last question again just to make sure I got this.
Is there anything that might be you might decide to sell?
I might decide to sell. Yes, I mean the investment is as I said and I'm not going to get specific here. The investment is different for the embedded market than it is for the vertical And the profile of that is going to be different. So I don't have anything else to add to that. There are a number of options that we have as we look at what we're going to do to reprofile it.
And again, I just don't have anything specific to announce today. I think in the Dave, I think in the back.
Okay. John Pitzer.
Greg, a couple of questions just relative to the synergies between the embedded space and the analog space. First on the negative, it's my understanding today where you have OMAP chips, you tend to have a big percentage of the analog on those boards because you're kind of working with the customer early. As you re profile, how do you protect that analog revenue stream as you start to invest less in tablets and handsets? And then conversely, when you think about the embedded opportunity, how is your footprint in analog leverageable within the embedded opportunity?
You faded out at the end.
How is your footprint in analog today leverageable with the embedded opportunities you're going after?
Yes. So I think the opportunity, while it's different, if we've got the embedded processor and I'll step back away a little bit from even the OMAP specific question. One of the nice things is if we get an embedded processor play in any customer, whether it's a microcontroller or a microprocessor and OMAP, etcetera, etcetera, you tend to be early in that customer's design cycle. And so it's not necessarily a leverage that I've got a $10 device and therefore I can get everything else. It's just insight as the rest of that system gets defined.
And we've done very, very well in that kind of a mode. I don't believe that that fundamentally changes. I think when you look at our lineup of processors, whether they're DSPs, ARM based products, microcontrollers, I think we've got a really strong position to continue that focus. And from the entire management team, as we spend time with the customers, we spend time out in the marketplace, that is something that we spend a lot of time on. We ask customers for the analog business.
We ask the sales guys to make sure they're sweeping up the rest of those boards. That's just how we operate. I also think you would look at and maybe it's a question for the November session, but we tend to do very well. The nice thing about analog is you can sell something to just about any customer. And you go into these systems that are non OMAP based.
If you go off and look at you open a cell phone that's got Qualcomm in it, that's got NVIDIA, that's got any processor you want to think about, there is analog opportunities inside of all of those devices. And the analog team does not shy away from going off and penetrating as much content as we can in the system depending, irregardless of what the situation is from a customer standpoint. So again, I don't think it's going to materially make a huge change in terms of what we've got an opportunity to do.
Okay. All the way in the back there.
Greg, could you highlight some of the low hanging fruits in the embedded market for OMAP? And also, how do you expect the competitive landscape to shape out in this market? I mean, is your sales force reached the main competitive advantage? Or is there anything else that will prevent other competitors to get in this market?
Yes. I mean, I think the high level operating system piece of it is an important ingredient, right? I mean, we literally there was a design that we won earlier in the year with OMAP where the customer basically just came in and said, I need a dual core processor that runs ice cream sandwich a flavor of the Android operating system. That was almost where they started. So I mean, number 1, to have a dual core processor in the lineup and then number 2, to have an Android offer were important.
And as we move forward, we think as Windows happens and the Windows embedded is built off of the Windows 8 kernel and you think about other operating systems like QNX and you think about things like just into a high level operating system. So I think the software piece into a high level operating system. So I think the software piece of it matters a lot. And I think again, as I tried to develop in my presentation, this idea of the scalable architecture, so that the Yes, we have to have local people that know what they're doing. We have to have not just say, Yes, we have to have local people that know what they're doing.
We have to have not just salespeople, but applications people because these are complex products. We have to improve our documentation. We have to improve our collateral. We've got to do more of these EVMs that demonstrate the concepts. Those are the kinds of things we have to do.
If you think about the landscape in terms of how well prepared we are versus others, when you think about the traditional people and application processors,
I think
we're in an infinitely better position because of our orientation at a company level to being broad. You think of the sales force, you think about the applications force, our ability to execute a broad strategy, contrast it with an NVIDIA or a Qualcomm or a Broadcom or go down that list, I just think we're in a fundamentally different position to be able to do it. Lots of work to get there, but our bias, our disposition, our understanding and our footprint and infrastructure is really very well placed to enable what we're trying to do.
Okay. Steve Smiggy?
Hi, Greg. Thank you. With regard to the Sitara product line, could you talk about how large that is in terms of revenue? And second, just in terms of OMAP, can you talk about the road map in terms of technology progression, like how many cores can you go to? Does that even matter as you're going into the embedded market?
Thanks.
The second part of the question?
I'm just wondering, do you keep driving greater number of cores in OMAP or does that not matter as you're going to the embedded?
Yes. So first for the Sitara line, we're not breaking out revenue. We gave some detail there in terms of customer base. We gave some detail in terms of the number of products. We think we've got a good footprint, but we've not provided any detail in terms of a breakout there.
And that's a question we can come back to, but not something I'm prepared to do today. In terms of the OMAP roadmap, again, what I would say is that we've got, I believe, tremendous capability with our OMAP5 product. It's a dual core processor. We've got lots of design in processor. It's a 28 nanometer implementation of a dual A15 device that is very well positioned in terms of power and performance and has made its way into a number of embedded applications.
The roadmap that follows as we go through that, you start to talk about devices tailored for more of those embedded applications. And we tend to be agnostic. Is it 1 core? Is it 2 cores? Is it 4 cores?
What else is in that chip and how else is it balanced with graphics capability and DSP etcetera, etcetera. Ultimately, the needs of the markets will define the chip level implementations. Okay. But again, the orientation will be for those
market. Hey, Craig Berger. Hey, Craig. Thanks for taking the question. Wanted to understand in your connectivity business, sort of what's the relative split between OMAP versus connectivity in the investment area?
And then what are you seeing from competition? Usually, I think of Broadcom as the guy in connectivity.
Mix of investment, I'm not prepared to go there today. In terms of the competitive landscape, and I mean, I don't want to steal any thunder from Haviv, because I assume he's going to have a question and answer period. Again, what I feel strong most strongly about with the connectivity stuff is, number 1, hopefully, you start to see a little bit of the opportunity we see in the market. Number 2, the lineup of technologies we have is the broadest in the industry. Number 3, and it's broader, contrast what we have in connectivity with those 14 different radios and how we're positioned in the market, contrast that with what Broadcom has, what CSR has, with any competitor you want to name, we are dramatically stronger in terms of the fundamental capability.
I think we're also stronger when you start to look at the fact that we're doing products specifically targeted for that market. And we start to talk about if you want to take wireless LAN and you want to take it into thermostats and dishwashers and everything else, you got to design the products differently to make them easy to use. Habib will talk about that in some more detail if there are more questions. But then lastly, the footprint that we have with our sales and application space is extraordinary. And I think Habib will provide some color on the size of the opportunity we see, how many customers are thinking about or using these connectivity technologies.
So let's come back and see if those questions get answered in Habib's presentation and we can go deeper if there are more questions.
Okay. Our last question for this session will be Joe Moore.
Thank you. You guys have an awful lot of building blocks now that you can attack these embedded opportunities with between OMAP and connectivity. What's your thinking about doing SoC types of solutions? How much are you willing to invest in those versus sort of more standard off the shelf solutions?
Yes. I would tell you that the line of what an SoC is, is really pretty blurry today. I don't know exactly how I would define it. I would tell you that any of these devices that we're crafting for specific applications go into Scott's world and look at what we're doing for motor control, I think any customer that you would hand in a C2000 Delfino architecture would tell you that's a system on a chip for motor control. I think if you look at SimpleLink and what we're doing with Wi Fi, that's an SoC implementation specifically to add make wireless LAN easy to use in that system.
Classically, we think about it as these big chips like what Glinsman does or what we do in the OMAP area.
But I
tell you everything we're doing today is collapsing systems on a chip. They're just of varying sizes. And I think that's the key to the future is application specific, solve the customer's problems, find tangential markets around those, leverage that flywheel moving forward for more
Habib Ilan talking about wireless connectivity.
Good morning. My name is Ravi Bilan. I've joined Texas Instruments in 1999 as part of the Butterfly acquisition in Israel. I've been dealing with connectivity technologies for more than 20 years now and I've been running the connectivity business for Texas Instruments for the past 6 years. As you've heard from Greg, I'm going to focus my presentation on wireless connectivity for the embedded market.
And I'll start by saying that I see that opportunity as a very exciting and a big opportunity for Texas Instruments. If you look at the market, it's broad and it's rapidly growing. If you look at the way we are positioned to play in the market, we think that we are uniquely positioned with the most complete portfolio out there. And as Greg mentioned before, this is not a new thing for us. I'll show in the previous in the coming slide what we've been doing in the past several years, but we are already generating momentum and growth in the market.
And maybe the most important point, we see wireless connectivity for the embedded market as strategically fit to our focused NPI on analog and embedded processing. I've been traveling around the world in the past several years looking at the opportunity. And everywhere I go whether it's in Asia, in Europe, in the U. S, I see wireless connectivity everywhere. You take one example, my previous trip to Europe, we've been reviewing with the TI sales force or the TI sales team, the local team, the overall opportunity for the current customers that we serve in that area.
We found out that more than 50% of the customers that we are already serving with analog and embedded processing in that area have at least one connectivity product in their portfolio, one project that they are thinking about doing. You think about the size of the sales force that we have in TI with more than 2,500 people. You think about the number of microcontrollers and now you can add connectivity to that, that opportunity is very, very broad. Moving to our results and this shows our shipments into that market over the past 4 years for wireless connectivity. If I kind of look at the 2012 bar over here, this is really our actual shipment in 2012 for the 1st 2 quarters times 2.
But when we look at the momentum we have right now during that year, we are planning to leave the year with more than 40,000,000 units shipping in the 4th quarter. So overall that momentum is accelerating and will carry out for the years to come. Now you look at the way this revenue is split and the diversification of the revenue, in 2012, that's data from this year, we are shipping them to more than 4,000 customers for the embedded market. The largest customer we have is only at 4% of our revenue. So overall, a very diversified set of customers.
That diversification means stability and we think that together with the growth we already have we can achieve sustainable growth in the coming years. I want to move and talk a bit about the market and I think Greg said it nicely. Wireless connectivity is everywhere. It's in buildings, in stationary environments like our enterprise, our homes. It's moving with us in a portable manner where things that we carry with us are connected usually through the mobile phone or the smartphone to the cloud and it's in the car.
And again with multiple wireless connectivity technologies that make these links work. So again, a very diverse set of applications. But if you look at what's common between all these connected devices, it all starts with adding intelligence into the application. And when I say intelligence, I mean a microcontroller or a microprocessor. Once you have that intelligence in the system, the next logical thing is to add wireless connectivity.
Why? You can control now your application from remote, maybe from the cloud. You can receive information from your system or you can monitor and send what's going in the application and you can also update and service your system with software updates and easier ways to service these different applications. You add to that all these new concepts of the Internet of Things and people inventing new devices as cloud connectivity is everywhere and that really opens the market for more application and more products out there. I want to zoom in and talk about the different markets that we see and I'll start with the in building market or the in home or enterprise market.
These are usually industrial type of applications. We are already serving these customers, as we said before, with micro controllers, with analog products. And all these examples are real examples that TI is already shipping into or engaged in an FVO or design in. If I zoom into one example that Greg has mentioned, the smart meters, it starts with a sub-one gigahertz connection to the utility for AMR automatic meter reading. You add Zigbee to the system to connect the meter to your home environment, whether it's a home display and maybe the meters are connected between themselves in a mesh networking application and also Wi Fi for cloud connectivity, for monitoring, for control.
Moving to the portable market. Again, that market is being driven by the fact that each and every one of us carries either a smartphone or a tablet. And these are serving as what we call mobile hubs. They are a bridge to the cloud. Around these mobile hubs, we see an explosion of connected devices out there.
And all these examples by the way are real including the golf club example. And what we see out there is that power consumption or the power level of the system is very important. Integration of microcontrollers are very important and also analog front end integration. And this is where we focus our investment. Let me give you another example here, which is a real one.
And we talk about a smart bandage or connected bandage here. And why would we want something like that? So just imagine a sick child and mom wants to monitor the child's temperature overnight. If the temperature reaches a certain level, you get an alert on your smartphone and you can go check on the child. And that's an example that can tell you where is the future going.
If we can take the power consumption of that system to a very low one or ultra low power, power consumption, then you can imagine systems that are harvesting the energy, whether it be from heat or from light or from movement. And then you can even think about disposable patches that are going to be out there one day. And that's going to be a very big opportunity for Texas Instruments specifically in the medical market. Moving to the car. When people think about the car, it's all about the infotainment systems as the Wi Fi, GPS and Bluetooth are added to our cars.
But that's not the only opportunity inside the car. I think Greg mentioned the fact that wires are costly and they weigh a lot. So if you can remove this wire, you can save cost and the weight of the car. And there are many, many control and sensing points inside the car. If we can transform these points into a wireless link, can bring a lot of efficiency in this market.
And we see these trends happening today with multiple technologies. Take just one simple example, a tire pressure and monitoring system, 4 tires per car, 14,000,000 cars being sold in the U. S. This year, but that's only 1 of 4 sensing points in the car. There are many, many others that look at a low power wireless connectivity to replace these wires inside the car.
When we summarize all these different examples, what we see that there are going to be very different market requirements for these connected devices. First, there are different processors out there, very low power MCUs to very high end and capable microprocessors. There's going to be a range of performance, features and data rates that are going to be required. Some platforms are going to be low power, driven for battery and maybe battery less one day. Some applications are less care about power consumption.
And also the topology of the system, I think Greg touched and mentioned mesh networking. Think about 100 of nodes like a lighting in this building that are connected in a mesh networking application or think about a point to point communication link like this connected bandage. So bottom line, there is not going to be one solution fits all. You will need a set of diversified products and diversified technologies to serve this market. If you look at what we bring into the table and what TI's capabilities, I'll start with our technology around wireless connectivity.
Now I've been leading that team for many years and we've created a sea of IP in 60 5 nanometer, in 45 nanometer for their mobile market in a set of technologies. This IP is now ready to be deployed into the embedded market. The R and D in essence was already done. You add to that TI technology around microcontrollers that Scott is building around analog front end that we are building in the analog team and power management IP including power management for harvesting and you have a very, very strong foundation of technology. You add to that our different our support for 14 different wireless technologies.
And it's not about counting technology. This is really important for customers. As we've said before, there is not going to be one solution fits all. So when we go and see a customer, we don't need to impose a specific solution for the problem according to what we have inside the AI because we have a very broad portfolio and we can find the optimal solution for the customer problem. That's a unique advantage for Texas Instruments.
But that's not enough. You have to take all that IP and all these technologies and re architect them really in a smart way. And that's what we've been doing over the past several years, taking all this complexity of a wireless network or a wireless solution with all the protocol stack and embedding it in a solution that makes it easy for customers to adapt wireless to their system. For me, wireless is something that I know a lot about. But when you go and see the engineers or the many, many customers that we serve, they never used the wireless solution in past.
So our job is to bring that solution or to make that solution for them easy to use and for us also to support so we can really go thousands to a number of 1,000 customers other than few customers out there. And we've been doing this with our SimpleLink solution. So we have that solution for example for Wi Fi, for ZigBee and for other technologies when you need a very thin layer of software to add the wireless connectivity solution to your system, a very differentiated architecture for Texas Instruments. So if I summarize all that and I kind of look at where we are with wireless connectivity and what we've been doing, I would say that first we have the we are uniquely positioned with the most complete portfolio out there. I'm excited about the fact that we are kind of right now strategically fit to what we do ETI.
We have a large sales force. We can finally use it as many, many customers add connectivity to the portfolio. We now can add yet another element in the system that we can sell to these customers. And maybe the most important thing, this is not a new thing for us. We are now I feel excited about where the market is going.
I feel excited with our position. And I believe that growth that you've seen over the past 4 years to be continuing for the next years for Texas Instruments. Thank you.
Questions for Habib, please. Steve Smiggy.
Thanks, Aviv. When I do checks on your technology in these areas, I get pretty good feedback. But when we look at some of the major smartphone platforms out there, not seeing you guys on Apple, Samsung, recent wins on some of the leading Nokia handsets that they have out. Can you talk about in your bake offs, what's the feedback you get as to what you need to improve on? And when does it change that you start to maybe pick up some of the wins on some of the leading handset vendors?
And this is specifically for the combo change.
I'm not sure I got the part again.
What does it take to change that? And when do you expect to see potentially wins on some of the major handset providers? And that's primarily around the combo WiFi, Bluetooth, NFC, GPS connectivity.
And again, what I would answer for that is that our focus right now is in different markets. As Greg said, that opportunity is less interesting for us. You've mentioned a couple of customers that really dominate that market. And our plan is not to invest into that market. I believe very strongly that we have very good technology that we have created over the past years for that market that we can now redeploy into the embedded market.
And the embedded market is different. There are many, many customers out there. You saw the size of the portfolio or the size of or the number of customers we have. It's a very different business model. These guys, they don't need the next from 11 gs to N to AC etcetera.
This is not a 5.4 throughput or anything like that. That's about adding a capability to your system. It could be Wi Fi. It could be ZigBee. It could be Bluetooth low energy.
That portfolio is very important. And again, the only way to touch such a broad set of customers is to have the large sales force that we do have today and having a very large portfolio of products. So I think the game is changing between what happens in mobile and what's going to happen is happening and is happening today on the embedded market.
Okay. Other questions? Sean?
Thanks. Yes, just a couple of quick ones. So you talked about how your leading edge investment in Wi Fi chips for smartphones and tablets was a strength and that you're able to leverage that into the embedded space. If TI decides to take the path where they're not going to do the leading edge Wi Fi investments, does that affect the embedded Wi Fi business model where you have to ramp up research and development to keep the product lines going there? And then a second question is, are the competitors you run into in the embedded space different than the ones you run into in the smartphone and tablet space?
Thanks.
So for question 1, in essence, I believe not. I think that the fact that Wi Fi is now added to a microcontroller system that needs a different solution to what our competition is building for the mobile market. So over time, I think that actually we can be more differentiated and have a better fit with our solutions with low power, with the embedded microcontroller in the system to play in the embedded market. So I don't see that as any issue for us. Of course, when you think about the embedded markets, there are going to be some vertical applications that maybe we will not have the best fit, but I don't see that as the majority of the opportunity we have in front of us.
If you think about what was the second question again? Yes. So the answer is yes. And I will also say that we for each technology that we saw other, we see a different competitor. So when I say that we are uniquely positioned to play in that market, we do see different competitors for ZigBee, for RF, for CE, for sub-one gigahertz, for Wi Fi.
And I think this is really an advantage for Texas Instruments because when we talk to customers, they are not always sure what technology would they need. Should I start with Zigbee or RF or CE? What happens if it moves to BLE, etcetera? When we have a portfolio of technologies with the same API that customers can move between technologies very, very quickly, that's an advantage for Texas Instruments. We can really not only find you a solution today, but we can if the market changes or you need a different set of technologies out there, we are able to provide them.
So again, different competitors. And I believe the fact that we have a large portfolio helps us a lot here.
Thanks. Just a follow-up, maybe just take a little bit deeper with the question earlier. And you asked about when you were going up against the smartphone other vendors on the connectivity side, I know you're going to be refocusing that. But what gives you the sense that you'll be able to have a more competitive product than some of the other folks in some of these other standards? You think maybe you weren't able to win because of some incumbent players on the Wi Fi connectivity side in the smartphone segment, but what gives you the confidence going into some of these embedded markets?
Again, I think the main answer was kind of given in the presentation, think about the set or the number of customers out there. To reach these customers, to really to touch all these customers, I think we have a competitive advantage in Texas Instruments with our footprint, with our large sales force. So that's point number 1. Number 2, if you look at the smartphone market and again the our play there, it was all about 2 guys that took off and took a very big market share. We were not playing with them.
And also the fact that we have not built a platform for that market. We don't have NPI. If you think about the smartphone maybe the way it evolves in terms of volume, we didn't have a platform that was vertically integrating application processors and modem. This was not our focus, frankly speaking. This was not our direction.
If you look at the embedded market, we are playing there with embedded processing. We are playing there with analog and that's going to sustain. We are not going to go away from microcontrollers or microprocessors or analog. So when I talk about the strategic fit, I think this is a big advantage for us. I really believe that, that growth can be made as layers and layers of growth for the year for the years to come because of our strategy around embedded processing and analog.
So it's a different game for us.
Chris Caso. Thanks.
Just as we look over sort of the next 1 or 2 years with the business, I think there's already been a reset in your part of the business because you're a customer profile in the handset space now. As we look forward, has that business been reset already, so that as we look at kind of modeling this business go forward that today's revenue and then your business is sort of a baseline? Or is there still some legacy business which likely rolls off over the next, say, 12 months or so?
I think very similar answer to what Greg said. The message today is the investment areas that we have. I think that you can already appreciate the fact that we do already have substantial results around wireless connectivity for the embedded market. So I cannot comment when exactly that other business rolls off, but I would say that we are well into that play in embedded processing. We have started that or focusing in that direction several years ago.
And I think that when I look at the momentum and the acceleration of the future growth in the embedded market, I feel very comfortable about our position and the number of steps we've already taken towards that market.
But Chris, there is smartphone connectivity revenue today as well. It's not all just embedded. Okay. Another question for Haviv. Okay.
And with that, let's go ahead I'm sorry, Steve, did you have a question?
I just wanted to follow-up. You mentioned ZigBee on there as one of the radio technologies and it seems to be a technology that's had promise for a long time, but then it seems struggling a little bit here to get some pickup. Can you talk about it? Are you seeing significant adoption, for example, in the model where you talked about where you have the home where you have all your appliances maybe hooked up to ZigBee giving feedback to some central metrology unit? Or is that actually developing?
Or is that still in the stage where you're hoping for that to take off? Thanks.
The answer is that yes, we see momentum around ZigBee specifically in 2012 even. We see that trend going up. Around ZigBee lighting, metering, ZigBee RF or CE for remote control. So that technology is not going away. And if you think about it, it's the only real solution for matched networking.
There is no other better way to connect hundreds of nodes together. And there are more and more applications out there. And I don't know if you noticed the ESL, the electronic shelf labeling application. Think about a store where you have hundreds of price tags wirelessly connected in a system, the best way to do it is through mesh networking. And ZigBee is today the only real solution that is a viable one.
So yes, we do see ZigBee picking up, and I think that momentum continues for the coming years, especially on the industrial market. That business where we see it the most.
Any other questions for Habib? You don't have to apologize.
One last question. On pricing, so not the absolute levels, but what have been the pricing trends in your markets? So of course, in smartphone, tablet, right, we have all understood those competitive aspects. But as you look at the embedded side, is generally your content more than what you might have seen on the mobile side? Is it similar?
Are the pricing trends different? So as we look out the next few years, should we think of fewer units but higher content? Or how should we think about that? Thank you.
First, I would say that the design cycles of these markets are much longer at the customer. So it has a different dynamic to what we see on the kind of naked kind of naked transceivers, even discrete at the time. They formed up into a network processor, means maybe a stack and a transceiver and then an SoC. And when we think SoCs and wireless connectivity for that market, we talk about microcontrollers, flash, connectivity, analog front end. So there is a play for content increase and volume increase in my mind.
Okay. And with that, Habib, thank you. We're going to take a 20 minute break and restart at 10:45. There's coffee and drinks and snacks over here. You move over into the area overlooking Times Square.
The restrooms are through here that can be accessed through the back as well. Thank you.
Just to glance away, a warm embracing dance away. The summer wind The summer wind. The summer wind. Back on top in June. I said that's life.
Deny it. I thought of quitting, baby, but my heart just ain't gonna buy it. And fly. I've been a puppet, a pauper, a pirate, a poet, a big ball. I face the final curtain.
My friend, I'll say it clear. I'll state my case of which I'm certain. I've lived a life that's full. I traveled each and every highway and more, much more than this. I did it my way.
Again, too few to mention. I did Yes. It was my with anyone she hate. And that's why the lady is a tramp. Won't go to Harlem, less than Ermine and Pearl.
We'll not dish the dirt with the rest of those girls. And that's why this chick is a tramp. Chick is a tramp. She loves to freeze, find wild, knocked out cuckoo, groovy wind in her hand. This is a song about a couple of adult people who have spent, oh, quite a long time together.
Until one day, one of them gets restless and decides to leave. Whether it's the man or woman who left is unimportant, it's a breakup. It's a lovely marriage of words and music written by Stephen Sondheim. Are we up there? Send in the clowns.
Making my absence again with my usual flare, sure of my lines. Nobody's there. Don't you love a farce? My fault I fear. I thought that you'd want what I want.
Sorry, my dear.
Okay. If you'll take your seats, we'll go ahead and continue the show. Okay. We'll go ahead and start. Before we go though, I've been told on the webcast some people were having difficulty accessing Scott Roller's presentation material on microcontrollers.
And I've been told that's been reloaded. And if you're having trouble accessing it or seeing it, you should refresh your browser and you should be able to access it. And with that, we'll move over to Scott Rollard, Microcontrollers.
All right. Thank you, Rod. Good morning, everybody. Thank you for giving me an opportunity to talk to you a little bit about our microcontroller business at TI. I've been with TI since 1996 and I've spent 12 of the last 16 years in the microcontroller space.
So I want to give you a little bit of perspective on where the business is and why we're excited about the growth opportunities moving forward. Microcontrollers, we've been investing very heavily in this business for the last 3 years in particular, and we're just beginning to see those investments yield positive results. You will see in a moment that we have consistently gained market share over the last 5 years, something we're very proud of. But more importantly, we are continuing to expand that portfolio to address the growth drivers in the market we're playing in. And I'll talk more about that
as we go.
First, the market we play in, embedded processing in total, as Greg mentioned, it's about $18,000,000,000 in size, absolutely massive. When you really boil down what is the microcontroller piece of it, it is the largest segment. We estimate it at $15,000,000,000 also incredibly massive. If you look on the right hand side, what you see is consistent market share gains by TI in the microcontroller space. But at 5.8%, there is still a lot of room to grow.
And by the way, while I like the consistent growth, I think the investments we're making will also help accelerate the rate at which we gain share in the out years. So, 5 key drivers, I believe, will drive growth in microcontrollers over the next coming years. The first is ultra low power. This is something we as a company have been focused on for a very long time and we lead in a very big way. Our MSP430 products inside of microcontrollers have pioneered this space for many, many years.
And with our controllers have pioneered this space for many, many years. And with our latest announcements, we offer a product that is twice the power efficient as anything else on the planet and something we're very proud of. At TI, we have a fundamental belief that if you lower the power consumption of our microcontrollers and our processors and our connectivity solutions, our customers will find new markets and new products to innovate around. And that's something that we've proven to ourselves time and time again, and we're seeing it happen in this latest generation of product as well. We have a vision of someday products running without a battery.
They use extremely small batteries today, but if we can figure out a way to enable products to harvest the energy around them, the light, the solar, RF energy, perhaps thermal energy, vibrational energy, lots of opportunities to drive products that don't even need a battery, perpetual machines. 2nd trend is in compute. Of course, that means things like notebooks and ultrabooks. It also includes industrial PCs and server applications. That world is changing and it's changing fast.
Sensors in particular are coming into these products and the form factors are changing. And I believe it presents a huge opportunity for us with our microcontrollers in a world that is changing and there is a discontinuity, we have If you go look at the numbers, it will show you half of the energy we consume in the world is consumed by motors. So our ability to improve the efficiency of the motors and how they operate will have a dramatic impact on the efficiency at which they run and that is a big deal as we all know. We care a lot more about energy efficiency now than we ever have in the past. Some of the products we're developing in this space are absolutely revolutionary and we're excited about the opportunities there.
4th is safety. We have a long rich history in the automobile with things like airbags and braking systems, now moving into things like electronic power steering, blind spot detection and other radar applications. All of those systems must be safe. You're driving a car, you need to be able to control the environment in which they live. And that safety expertise that we've developed over a number of years is also finding its way into medical and industrial applications.
So what we offer are specific devices optimized for safety with the documentation, the design methodologies, the processes, the software that our customers need to enable certification in their system. The last, but certainly not least, is connectivity. Aviv already touched on it. I see it as a huge growth driver for not only Aviv's business, but my business too. What I tell Aviv all the time is his connectivity products and my microcontrollers are like peanut butter and jelly.
They go together perfectly And I see a massive opportunity across a wide array of end equipments and customers who all they want to do is add wireless connectivity to our portfolio and our ability to make it easy presents a huge opportunity for us to together drive a lot of growth. As I mentioned upfront, we've been making a lot of investments in this business. I want to talk about 4 specific areas where we have been spending the money. The first is in our field application engineers. This is part of our sales force.
We've increased the number of FAEs around the world to 65% since 2 1,000 customers buying TI microcontrollers. That is up 60% in only the last 3 years. So you want to talk about the impact a sales force that is focused around the microcontroller technology can have on our ability to expand the product and the customer base, that's a great example. 2nd, technology and specific process technologies inside of TI. We've been designing a number of very unique process technologies that don't exist any other place on the planet except with TI.
So things like 65 nanometer flash, we are the 1st and only company in this world with volume production on 65 nanometer flash. Everybody else is up FRAM, and I'll a little bit more about that on the second slide or the next slide, but FRAM is the ultra low power memory technology and offers some incredible differentiators versus flash and other nonvolatile memory technologies in the marketplace today. We are the only company to offer that with embedded microcontrollers today. 3rd is we've taken these processes at TI and we've come in and we've optimized them for ultra low power, and by the way, also for analog integration. And by doing so, that gives us that foundation on which we can build a massive platform that is incredibly differentiated and our competitors don't have access to that same technology.
3rd, we've just flat out increased the number of development teams we have building microcontroller SoCs. Microcontrollers are very much a system on a chip. As I told someone at the break, we don't get paid for the core. We get paid for the system level integration that we do and that typically means the analog integration, the non volatile memory and the system expertise that is required to build parts that are optimized for specific end equipments, but then can very easily branch to adjacent end equipments with similar needs. That's a strategy that we've used in microcontrollers for a number of years.
It's worked fantastic and that's something we continue to do and we try to accelerate it. What we've done here from a development team point of view is we've added some very unique capabilities that also do not exist at least at the scale at which we have inside of TI. The first is analog design. You can see we quadrupled the number of analog designers within the organization over the last 3 years. We now have over 60 analog designers designing analog integrated analog peripherals, the A2Ds, the op amps, the power management modules, specific analog front ends for things like power line communications and blood glucose meters, some really innovative analog integration.
The other area is software. Some of you may remember back in 2,009, we acquired a small company called Luminary Micro. They, to a very large degree, taught us what it meant to write software on a microcontroller platform and how do you enable that to truly differentiate your products. With all of that, we've expanded our portfolio. We have 1300 products today.
But more importantly, we've got unique and differentiated products that are solving customer problems in ways they've never been solved before. And last, but again certainly not least is the university program. We have put a lot of intensity and energy around training that next generation of engineers that will use TI microcontrollers. And you can see some of the early results. We now have 1,000 labs in universities around the world.
We've tripled that number in the last 3 years. In China alone, this year, we will train 100,000 students and over 100,000 worldwide on TI microcontrollers. So as this next generation comes up, the most obvious choice for them will be the architectures in which they have learned to program on while they were in school. So hopefully, that gives you a sense of where we've been spending the money, some of the early results at a high level. What I'd like to show you next is a flavor for the type of products we're starting to deliver to the market.
On the left, you see a new product that's optimized for real time allows our customers to easily achieve that allows our customers to easily achieve the energy efficiency they're looking for without having to invest their own R and D in software. They can take our base and invest their own R and D on top of it to customize their products. 2nd is FRAM. I talked a little bit about it already. With their first FRAM family, what we allowed our customers to do, specifically for data logging applications, lots of sensors need to record data.
And with FRAM, it is 250x more power efficient than Flash is today. So if you want to go do a data logging system and one of my favorite examples here is a company called Volt Tree. They're building a wireless mesh network to predict forest fires. And these nodes run off the power of a tree or more specifically, a tree trying to get in balance, pH balance with the soil around it. And by doing so, you're running without a battery and you're taking advantage of the power of FRAM for that particular application.
3rd, we took an ARM Cortex M Processor, combined it with our digital signal processing capabilities and enabled a whole new level of real time control, where our customers could do the human machine interface with the ARM and you could do the real time control for maybe digital power or power line communications in a smart grid application or perhaps a motor drive. And that sort of integration and differentiation does not exist anywhere else in the world and we were the 1st to bring
it to
market. Our next product is around safety. We call it Hercules. We have 2 cores that operate, as we describe, in lockstep. So they're executing that same code every cycle.
And every cycle, they're checking each other to make sure that what they're executing isn't incorrect. And if there is a failure in the system, the hardware is built so that you can fail safely and report accordingly. There's nothing else like it in the market. This is built around the ARM Cortex R family, but the secret sauce is not the core. The secret sauce is in the system level
That has been a very popular product for us.
That has been a very popular product for us. We've ramped that this year for the first time and we've shipped over 8,000,000 units to that particular family products, something we're extremely proud of. Wolverine is the lowest power microcontroller by a factor of 2 over anybody else in the industry. We have lots of competitors that are trying to catch up. We keep pushing that bar and raising that bar higher and higher.
And Wolverine is just the beginning. We've got a lot more planned around Wolverine and across the entire portfolio to drive new innovations, new differentiation and change the game in each of those growth driver areas for the industry. The last thing on this chart I want to show you, we call it Launchpad. We introduced it 2 years ago. It looks like this.
Totally simple board. It's got a dip package of all things, makes it easy for the individual to do some totally simple development. But more importantly, it's a low cost tool that is driven across a wide array of customers. We talked about going 25,000 customers today, growing by 60% over 3 years. Our sales force and this launch pad are the one two punch that have enabled that.
Because we have shipped over 300,000 of these in the last 2 years, that means engineers around the world have these in their desks, have them in their offices, have them in their homes, have them in their pockets. And they're developing on TI technology by using the LaunchPad. Then we came up with this idea for what we call a booster pack. And this booster pack plugs into the launch pad here. And this booster pack in particular has one of Habeeb's CC110 radios, sub-one gigahertz radios on it.
So now what a customer can do, simply plug them together, leverage the software we've developed and now they have a wireless sensor node for $4.30 of a Launchpad and something around $10 for this little guy. And so what we're enabling is a broad ecosystem of customers to very quickly and easily be developing on TI embedded processing platforms. I will give you another antidote. I talked about the 65 nanometer flash. That product was introduced.
We opened up pre ordering 2 weeks ago. We had 20,000 pre orders placed. We begin shipping those devices today. And another great step in the LaunchPad ecosystem in building out that portfolio. Lots of competitors, there's no doubt about it.
The microcontroller industry is a very large industry. It's also fragmented. The largest is Renesas. Renaissance clearly has a dominant position in Japan and also very strong in automotive. When you look at their portfolio, they're extremely fragmented with over 12 different architectures there today.
And we see a lot of customers coming to us asking about using TI as not only a second source, but an alternative source to what Renasant is offering them today. Microchip has a great following in the 8 bit space, but in my opinion has not done a very good job converting to the 16 and the 32 bit world and that's a challenge for them. Atmel, fantastic around capacitive touch in particular, very consumer oriented. But like consumer businesses, they go up fast and they fall down fast. And I think they're challenged to go beyond just that capacitive touch space.
Freescale, long rich history in microcontrollers. And you look at FreeScale and what they're able to do, very fragmented customer or product portfolio. They are making good progress in the ARM space and that's something that we watch very closely. ST also has a good ARM portfolio, but they really lack the sales and the support required for a broad customer play. And lastly, but certainly not least, TI, a very strong portfolio, one that's growing.
We're focused around driving value from an end equipment point of view and expanding what we believe is a very loyal customer base. So in summary, our investments in microcontroller are just beginning to pay off. We do believe we have a portfolio that is optimized for the growth drivers in our industry. And this large, diverse and growing customer base is a key to our growth moving forward. Thank you.
Okay. Very good. Questions for Scott. Do you have anything else in those pockets, Scott?
Nothing I can share.
I didn't want to go there. And Scott, you remind me. I think for those in the audience that are electrical engineers, you can appreciate this. I heard Rich describe the other day that you can't spell geek without double E. So Scott, you fit right in, buddy.
Jim Covello.
Scott, thanks for the presentation. Yes, you showed gain of about 100 basis points in market share over the last couple of years alone. Any estimate on what the 2012 share could be? And then who are the share who's ceding the share to you as you guys gain share amongst that competitive slide that you showed? Thank you.
Yes. Good question, Jim. I think the first I'm not going to comment specifically 2012. Our goal is to gain share each and every year, and that's what we're marching towards. In terms of who we're taking share away from, clearly, Renaissance is at the top of that list.
But I see us taking away share from people like Microchip, Atmel and even freescale and ST.
Vivek?
Thanks. How should we think about synergies in your business versus with OMAP and the connectivity side? I think you gave a very good example of how you're wireless capabilities in your products. Can you talk a little bit more about that? So as you think about the position that you do have, in what proportion of these applications are you already sitting beside a processor or some other capability on their side?
And how would their reprofiling their R and D help you?
Yes. Good question. I think the reprofiling of the R and D that Habeeb is doing in particular is going to benefit our microcontroller and our microprocessor business tremendously. When I look at historically, a lot of those investments were gone into build combo radios for handsets. What we're now doing is building platforms that can be used in the embedded, specifically in the industrial environment.
In terms of the number of customers that have an RF chip sitting next to my microcontroller today, it's relatively small. But the number of customers that are talking about adding RF connectivity to the products that have our microcontroller today is extremely large. It's hard to put an exact number, but if I had to guess, I would say 60% to 70% of the customers we're engaged with are looking at adding RF connectivity to at least one of their product platforms.
Got it. And just as a follow-up, I think you mentioned that just the core is not sufficient that your systems expertise and other things differentiate you. But how much of your growth has come from getting towards more of the 32 bit microcontroller space? And if you ex that out, have you really gained share in these markets? Like what specific applications do you think you are actually gaining share and have a competitive advantage?
Right. I think just I had a question earlier about 8, 16, 32 bit, how do you kind of partition it out? The majority of our products are 32 bit. Our MSP430 product family is 16 bits. But to be honest, I don't think that's an antiquated way, in my opinion, to look at the market.
I think what you have to look at instead is where are the end equipments that are driving the growth, and I'll give you some examples. For MSP, portable medical, flow meters and electricity meters drive about half of the total revenue for that business across a wide set of customers. But then you get into a very broad set of industrial sensors, smoke detectors, other building automation products that drive a lot of good growth for MSP in the 16 bit space. For our 32 bit products, end equipments that seem to be doing really well for us lately include motor control for end equipment such as air conditioners, washing machines and drives. And motor drives include everything from just standard drives to also specifically textile machines used in manufacturing environments in places like China.
But beyond motor control, that same architecture is being used for other real time control applications like digital power, like solar inverters and wind inverters, like power line communications and even radar applications. Safety, we've got a lot of business in automotive makers for interlock brakes, in particular, and vehicle stability systems. What we're seeing is a huge opportunity in places like China, Brazil and India to bring those safety solutions to a broader set of automotive suppliers. And then last, but certainly not least, is compute. We've seen a lot of good growth in the, call it, the laptop or notebook and Ultrabook spaces this year, and we think there's more to come in the future.
Thanks. Touch controllers are actually in your division, are they?
We have some of our MSP430 products have the ability to do touch, but we have a touchscreen controller that's part of analog. And we tend to focus on what we call buttons, sliders and wheels. We're not as focused on the touchscreens that you'll find in handsets.
Great. Thank you.
Hey, Sean Webster. So a couple of questions. I was wondering if it's possible to quantify. I'm interested in the analog integration topic. Is it possible to quantify for us at all how much that exists today and what the trends would be?
And then also on the ARM processor side, what the mix today is of your microcontroller portfolio that contains ARM
processors and what that could look like going
forward? Okay. Thanks. We'll take a look at the Well, you talked about how you've been ramping up your analog engineers because you're seeing more integration in parts of your portfolio in the microcontroller business. And I was just wondering if it was possible to quantify like what the mix today is of highly integrated analog microcontroller products and what it is going forward, if there's any way to quantify it?
Yes. It's kind of hard to quantify. I mean, what I would say more anecdotally is the MSP430 team has always had a really good set of analog engineers, design engineers, and the reason being is the low power problem is very much an analog problem. In areas like our real time control and our safety, we haven't had as much analog integration or analog capabilities. And that's where this new set of analog designers are coming in and adding more analog.
We've always had analog integrated, but it wasn't as high quality and as differentiated. It's more standard. Here's a 10 bit A to D, right? Now you can bring a 12 bit A to D that runs at 4 megasamples per second and has the right offset capabilities to measure currents and voltages directly without any sort of external analog front end, right? So it's the quality of the analog that is increasing dramatically.
And by the way, the first products with that new analog capability are just starting to come to the market now. In ARM. So today, if I think about it, I would say about a third of our total revenue is ARM based. Can I go in but and I think it will grow over time, but I don't think it will ever be the only I think, again, the value for us is around that system level solution and the expertise?
Okay. Thank you, Scott. And John, I'm going to ask that you hold off on that if you can, so we stay on schedule. Thank you, Scott. And we'll move over to Dipti Vashani to talk about digital signal processing.
Amazed to get out of there. Good morning. My name is Sify Bachani. I manage the single core processing business. Let me get to my presentation.
And today, I'm going to talk to you about digital single processors, better known as DSPs. We at TI will celebrate our 30 year anniversary on innovation at DSPs this year. And if we look at where we are in the DSP business, we have a dominant share at 41% market share. It's impressive. If you look at why TI is winning, there's a number of reasons why we've been successful in this market and I'll refer to those and talk to them throughout the presentation.
But number 1, we have a broad array of products. Over 600 products of DSPs in the market today in the DSP space, the lowest product being a $2 Ultra, the lowest power DSP product in the market as you see them to a 10 gigahertz processor with multi course for ultra high power performance. So again, this vast array of products enables us to go after many different end equipments, many different spaces and grows our market share to where we are today. Secondly, system level solutions. So you've heard Scott talk about his booster pack.
We also have a audio booster pack that goes with that space that enables us to take that MCU product and add an audio feature to it. These reference designs enable our customers to get to market fast. The purpose of these reference designs and I've said this a few times is to trigger our customers' innovation Because really we take it so far. We show them how it can be done. We give them example codes.
We give them ways to get value added algorithms to get them to market fast. And then they take this and make create new products and that enables innovation, not only at our customers, but at with TI as well. Thirdly, you'll have Brian come up next and he's going to talk about our communication infrastructure business. That business has a 16 gigahertz multi core processor, Brian, I believe you're going to be talking about. We can take that investment that we have in business and rapidly create products in the DSP space and the broader market DSP space.
This technology is called Keystone and we're very proud of Keystone. But what Keystone enables us to do is rapidly create products in this space. In the last year and a half, we've created 13 high performance products, DSPs, for the broad space. That's within a year and a half quickly changing the products and the investment we're making in the communication infrastructure space.
I'll talk a little bit about what that enables in our space and new end equipments
that we can see that going into. Embedded analytics. I'm going to talk about embedded analytics more in the next couple of slides. But what I want you to think about is embedded analytics is the new growth area for DSP. The ability to take real time analytics and when I say analytics, what I'm talking about is real time data processing, getting lots of data in real time and making a decision very, very fast.
And so those are I'll show examples in end equipments where we do that. The largest field sales and application, most of all of us have talked about the largest field sales that we have at Texas Instruments. We also have a huge university program around DSP. If you look at countries like China, where there is a lot of innovation going on, most of the engineers coming out of school have learned on a DSP, a TI DSP, C5000, C6000 named the usual culprits there in our portfolio. You've seen us in the DSP space for quite some time and these are probably the typical end equipments that you've seen us in headsets, home audio equipment.
We are dominant in that space and we clearly have a value proposition in that audio voice space. Test and measurement, video infrastructure, you've seen the normal products that TI plays in. We have a great share in these end equipments and we continue to play in these end equipments. But as the future comes, the world is at our doorstep. The end equipments that we can go into with our DSP products with a very differentiated feature that a DSP has.
And again, I'll go into the differentiation. We can take large amounts of data and make decisions really fast. And let me make this real for you. Imagine you're driving a car down the road and your car is going to decide on whether it's going to stop based on something running out in front. Do you want that real time or do you want that to be kind of real time?
I think you can relate to that, right? We want that decision being made real time. It's getting a lot of data. The vehicle is getting a lot of data all at once And it says, I have to decide, do I stop this car or not? That's going to be a DSP.
So those are those that's one example. Another example you can think of is in the it's not. Imagine cameras. We've had cameras, it's not. Imagine cameras.
We've had cameras for quite some time in this space, right? We've video security cameras, you see them. Now, we not only want video from these video security cameras, we want the ability to make a decision based on that data. So, I see a face, who is it? Is it someone dangerous and do I need to lock my doors, right?
Those decisions need to be made real time as it's getting lots of made large amounts data and making a decision quickly. So this is how we can differentiate. Voice recognition is another one that's everywhere. Our TVs are going to start voice recognition on them. No more remote controls.
Maybe you got to actually tell the slide to go next. That would work too. So areas of innovation or key growth areas within DSP, I will always talk about audio and voice. Audio and voice is clearly where we can differentiate with the DSP. The clarity that you get out of the DSP in that space is like no other.
And those customers that are trying to differentiate in their quality and the lowest power. Remember, when you see audio and voice end equipment, very often, they also worry about power. And that's where we differentiate with our products, not only to other processors that are out there, but other technologies that are out there. Real time performance and I'm also going to talk about real time imaging. So I talked about real time performance.
You need to make real time decisions in a DSP environment and that's where we differentiate. Also think about imaging. Imaging requires large amounts of data. This is where the high performance DSPs comes into play. Because again, I talked about the fact that we've a communications infrastructure business that creates 16 gigahertz parts.
We can take that technology and enable consumer markets to leverage that. So imagine a imaging, a medical imaging device that you can now not only have accurate imaging, more detail, actually can do some level of diagnostics and you want an accurate if you're getting a medical image done, trust me. And then you can also make it portable. So now you can take it with you and doctors can take it out into areas within remote areas of India or remote areas of China. This is enabled through our high performance DSPs.
Embedded analytics, I spoke about that. Again, we believe that with the need and the demand of real time embedded analytics, our DSP business is going to continue to grow. The cornerstone of our DSP business is innovation. The innovation that we create through DSPs has enabled many new businesses within Texas Instruments and will continue to. And the challenge for me and the challenge for our organization is how do we create that next big business?
How do we make growth exponential through new end equipments and embedded analytics? And as you saw a vast amount of opportunities in that space. That other slide that I showed with all the different end equipment, those are real. Those are opportunities we have today that we're working on. So again, these aren't concepts in air.
These are real ideas and real customers that we're working with today. As we go into the future, again, innovation being our cornerstone, the world around us changes and the demand for real time analytics is also changing. We're expecting biometrics information. We have a biometrics reference design. How do we take biometrics data to make decisions on security?
Those things are real time and a DSP is no better is best qualified to do something like that. Large amounts of data, lots of computation make a decision, right? Surveillance systems, I talked about that with regards to the computer, the cameras that are around and ability to make decisions based on the data that you're getting from those cameras. Natural user interface, The world is changing. Our gaming devices are expecting real time decisions being made.
The user interface that's real it's real time it almost feels like you're in the environment. Everything around you is reacting to your movement. That's a DSP. Inspection, talked about the automation line. Again, this is all the way around us.
This is going to be the innovation in DSP. We believe we can continue to grow our market share in with these new end equipment and the innovation that we create through our DSP business. So I'll summarize with, we have strong momentum in our DSP business, 41% market share. We're very proud of that number. We believe we can continue to grow it and it's about innovation.
You're going to find new markets and you're going to grow the market. And that's the way to grow in DSP, new end equipments and new areas for us to innovate in. Real time signal processing, again, that is the value proposition. We can do the highest performance within a DSD with the lowest power. The performance per power ratio that you get out of a DSD is bar none.
And that's why we can continue to win market share. And again, I will emphasize the investment that we make in the communications infrastructure business and the ability to spin off devices very, very quickly, 13 devices just in that space within the last year and a half through taking that technology back across all end
Okay. Any questions for Dipti? Thanks.
Just a technical question, maybe more an ignorant question, which is how do I draw the dividing line between stand alone DSPs versus, for example, OMAP also has some DSP capabilities. Then at the high end, you have FPGAs that also are planning to add more DSP capabilities, additional course. We have other embedded companies, AMD, who are talking about hybrid system architectures and adding more DSP. So where does it make more sense to have these standalone DSPs? Where does it make more sense to have those other products?
And are they cannibalizing your business in any way? Okay. Thanks.
So first of all, in the single core processing business, we only we have the DSP business and we have the ARM business and I run both of them. And so we are agnostic when it comes to those two processes. The DSP is distinctly different. And the market that I talked about today is about single core DSPs and multi core DSPs. So the high performance computing that you see has large amounts of DSPs on board.
Yes, our OMAP technology has DSPs. And when I talked about innovation and the ability to grow new end equipments out of OMAC device. You'll see DSPs on board. FPGAs have been around since the beginning of time, 30 years in our well, we've been managing time. And where FPGAs win is when you want to create a system, customized system solution.
Power is high, time to market is longer and it costs much more. And so where you're trying to do that, I can see the FPGA play, but where you want truly programmable, when you want real time and you want low power, these DSPs that we're talking about are what enables this market.
And just as a follow-up, I think you showed some market share data before. Your market share just took off from 2,009. Yes. Was there a specific reason for that?
There's many reasons for that market share. We our DSPs were already in products like automotive and consumer products that took that ride up in those last few years. And so through our automotive through the all the opportunities in the business that we've won in the automotive space, we enjoyed that ride up. So that's one of the areas where we've seen that market share growth. But that stuff doesn't happen accidentally.
You have to be in those products ahead of time and foresee that they're going to grow and help their market share growth. This is exactly why I'm talking about embedded analytics because we believe that's the next wave of that write up.
Okay. Thank you, Vivek. Is it, Praag? Praag, you have a
Yes. Can you quantify how big your single core DSP is within the whole DSP business, STI? And also could you comment on the competition from traditional DSP players like ADI?
I can't see who's asking the question. I think, okay, got to see a face. So let me ask a second. The first one was, can you quantify the single core DSP versus the overall DSP? We don't break that number out.
It's a $3,000,000,000 market of which we have 40% market share, about $1,200,000,000 that's our DSP business. And so very proud of those numbers. Secondly, our traditional we are clearly the number one DSP player in this market. 2nd to us would be NXP and 3rd would be ADI. According to some data, you could vary that up a bit.
We see ADI in the consumer space. We do believe that they have a DSP market. The difference between what ADI can do and us is we have the ability to put general purpose processors. I think Vivek led us into that question with OMAP and some of our ARM plus CSP technologies. That's where we can leverage our strengths against ADI.
NXT, honestly speaking, I haven't seen them out in the consumer. When I go visit customers, I haven't seen them out as much. I believe obviously they're out there. I know that they have some automotive products and some wireless products, maybe that's where they get their market share. But again, I don't see them out there at my customer
base as much. Praag, I might be
able to provide some help on
of our total embedded processing segment revenue, about 25% is communications infrastructure. And even though the multi core is going broader than communications infrastructure, that probably represents the largest piece of it right now. So that may you may be able to get there from there. Okay. Did somebody else have a question?
Sean?
Thank you. I was wondering if you could comment on the market itself. When I look at the historical data from the WSTS, it's been showing pretty significant declines over sustained periods of time. And now that and I recognize that there's a part of that, that you guys don't compare yourselves to. But can you talk about what it has been for the businesses that you're in?
Because when I look at the last 5 years, there's only been 1 year the DSP market's been up and the other years, it's been down like double digits, including this year. What's changing going forward, specifically that could kind of stop the declines and maybe even show some growth looking forward?
I believe it's possible that the numbers you're looking at include baseband, and that's why you're seeing the decline. If you take baseband out of the numbers, the numbers for DSD have been growing about the same rate as the EP market. And so and that's been pretty stable as well. I think the next again, I talked about analytics as the next growth for DSP. It's about growing that market share.
It's growing that TAM and where we can go into and new markets where real time processing is required. That's how we're going to differentiate. The DSP plays where you can clearly differentiate with its features of real time performance. That's where we'll win and it'll continue to win. We've seen that over 30 years starting with audio and voice.
Are there alternative chip technologies such as FPGAs and others that you would run into as you're trying to do more of the analytic processing and embedded processing?
Possibly. Again, but when you talk about the highest performance with the lowest power, more and more of these end equipments are starting to become portable or require low power even if they're not portable. The smart energy and those kind of waves that you see in Europe and other where it's forcing our products to be in lower, lower power. And as a result of that, DFP compared to DFPGA is clearly the winner. So you'll see those technologies out there.
They're out there. But again, we've shown we can win when we focus on where D and C's strength lies, real time processing and the lowest power with the highest performance.
Okay. Any other questions for Dipti? Okay. With that, thank you very much, Difei. And we'll move on to Brian Glensman and Communications
you and lunch or you and a nap. And unfortunately, I don't have cool band aids and golf clubs. I have equipment that's meant to be stashed away in a closet or a fiberglass shelter. So this is going to be a challenge, but bear with me. It's a pretty good story if I move forward.
I came to TI through an acquisition and since for the last 8, 9 years have been managing some portion of the business associated with communication infrastructure. Today's presentation will focus mainly on wireless infrastructure because it seems to be one of the hotter markets, but I will gladly entertain questions on any facet of communication infrastructure when we get to the end. And with that, let's get started. So why is this such a compelling business for TI? TI plays in every segment of it.
So we started out being the DSP when we were in this back in 2000. And over time, we have grown our revenue from DSP to SoC to go from the layer 1 to the layer 2, 3, 4 of the base station and other components to add in the analog signal chain, and then all that needs power. And I look at some of the large OEMs when I started, and we had a good position with the digital signal processor and almost 0 analog content. I look at them today, and the revenue from the digital side and the analog side is pretty close to even, and has been growing very rapidly on both sides. So for us, we've been a market leader in the DSP.
We've taken that stance and we've moved it into market leader in SOC. And we've taken that and moved into the market leader in analog. And it's a really nice position. And what I'll talk about a little bit towards the end is how we've taken that and we've created the multi core DSP segment and some other multi core processor segments with the same R and D investment. So is this a great market?
Absolutely. Is it a market that will eventually have issues? All markets eventually end. So what you want to be able to do is remove that investment across. So what's the basic problem out there?
Well, I suspect many of you have iPad 3s. The day iPad 3s went on sale about, I don't know, whether it was 6 months ago, a year ago. People got it. They had their brand new screen, had their LTE modem. Life's great.
Let's download a Blu ray movie or high def movie and watch it. Great. Let me get my second movie. No data plan for 30 days. One high def movie is equal to 2 gigabytes of data transfer.
AT and T capture plan or Verizon capture plans, 2 gigabytes. So the problem we have here is, no matter we could put numbers on this, it really doesn't matter. The demand for data over the mobile networks far outstripes the revenue increase and consequently the willingness of operators to spend on CapEx. So what do we do here? Well, we try to close that gap.
So what you've seen in the industry
is over the
last 2 years, AT and T and Verizon have both gone to kept plans. That means they're only going to let you have so much data and then you need to pay more money. So they want to grow their revenue. As they grow their revenue, they will be able to grow their capital investment. However, that's not going to solve the problem.
It is a start to solving the problem, but people would like to use more data than they're willing to pay for. And that doesn't matter whether you're in the United States, where you're paying on average about $90 a month for the service or whether you're in China, where you pay an average of $8 a month or India, where you pay an average of $4 What it means is those operators are constrained by how much capital they can expect. So how do you solve this problem? Well, the main way that people are trying to solve it today is people believe that 4 gs or LTE will be part of the solution. People believe small cells and when I speak small cells, just a disclaimer today, I do not include home femtose.
That's a whole different market to me than what I consider a small cell. So people are looking at trying to go in and install small cells. And a small cell is something that you would put in this building or you would put in Times Square, and it will cover just Times Square, 100 meters, 500 meters, but it has the capacity of a full macro base station and it reuses the same spectrum as a macro base station and coexists. But the cost to an operator is 10x cheaper for installation. And that's how they start getting more money per dollar CapEx.
To do this, you need multi standards because you have to be able to do 2 gs to listen to where's get information about location and the data network and the legacy network, you need to be able to be 3 gs or what AT and T calls 4 gs. In case anyone missed it, we renamed WCDMA WCDMA to 4 gs as soon as it went above 1 megabit per second. So you get these wars from Verizon, AT and T about 4 gs and then 4 gs LTE. 4 gs includes WCDMA, if it's over a certain speed. So you need to be able to operate in all these technologies.
And we believe we're the only ones shipping in volume, both WCDMA and LTE SoCs into the macro and small cell position. And lastly, this really comes down to getting more bits through the air effectively, whether that's a smaller radius, whether that's more information per megahertz, however you want to look at it, that's a signal processing problem. Great news for us. We're the world's leaders in signal processing. More importantly, we actually really understand this technology and have spent a lot of money in going to the standards meetings, meeting with operators and understanding their problem.
And this is enabling us to create SoCs that use digital signal processing so the customers can differentiate. But the basic stuff that you have to do, no matter what you do, we put that in hardware because that's the most efficient cost and power profile.
Okay.
So who's out there? Who are the customers? Well, it gets down to really fast. There's Ericsson, there's NSN, there's Huawei. When you look at shipping product, it doesn't matter what chart you look at.
This is what it's going to look like. Some charts will have Huawei being bigger, some charts will have Huawei being smaller. I suspect it takes into account a little bit of future looking. Huawei will be growing faster and NSM will be shrinking some. But today, this is what Infinitiks says.
We believe that the small cell, which is a great opportunity for us to expand into, will be a similar market share breakdown. There are some new players out there and they have some interesting propositions. But if you're AT and T or you're China Mobile, you want your small cell to interoperate with your macro cell. They must talk. They must mitigate interference.
They must be able to do handoffs. And when you put all that together, the incumbents are going to be there. We have excellent market share at the big three in macro, and we have excellent market share designed in at the big three for small cell. So how do we expand macro? So macro, look at most charts, it's going to grow for 5 years.
Is it now single digit growth when it's been 30% growth per year? Maybe. Small cell will decelerate macro expansion. But there's still a great opportunity for TI in this, because today in many shipping base stations, the architecture for the physical layer is you have a DSP, you have an ASIC or an FPGA, in some cases both. That does your physical layer.
Then you've got interface chips for aggregation of intended data, Ethernet data, serial rapid IO. And then you have a network co processor that does your Layer 2 and 3. So what can we do? Well, we can create a chip that does all of this. It's all integrated.
We are shipping those chips. Okay. This isn't fantasy. This isn't out of there. As a matter of fact, this is the year that we'll ship more SoC that integrates the entire base station than we'll ship DSP.
So we're out there, we're shipping,
it gets bigger, okay?
When you look at this, this gives us opportunity to grow from about 25% of the digital content of a base station to about 60% of the digital content of a base station. So even if macro slows down, as we make this transition at the big three and even the smaller ones, you will see that we have the ability to more than double our revenue. And you can expand the base station by adding more. Sorry about that animation, you need to remember. So small cells, why small cells such a big, big buzzword these days?
Again, it's the fact that if you look at and I've seen different studies that say from $300,000 to $500,000 is the cost of 1 macro base station with capital and OpEx over an 8 year period. So if you fully depreciate the capital, it's somewhere around $500,000 If you do the same for a small cell, it's under $50,000 So there's a huge advantage to installing small cells. How many are you going to see? It depends, because you've got the retail shops, maybe it's a smaller, you've got stadiums, maybe it's 20:one. I think pretty much every analysis you see says there'll be 5 to 10 small cells per macro.
You still need the macro because the macro has to give you the ubiquitous coverage. It has to enable mobility. And wherever you go, you need base station coverage. But when you're in Times Square, there's no problem if you're standing here for 10 minutes, 15 minutes shooting video using a small cell to enable you to upload that without impacting the macro coverage. So it's a great area for us.
And on top of which, we're able to take all that technology we have from the macro, scale it down and enable you to have a single chip, small cell digital baseband. So basically, we can capture even a higher percentage of the TAM here. We have those parts out and shipping today. We have new generations coming shortly. And where this really helps us is, it's a whole new market, macro is not going away, now we can grow onto this market as well.
The other thing that has really helped us in this market is our base station, whether it's a small cell to a macro, are software compatible. So if you're one of these large OEMs and you've spent 1,000 engineers writing code for 10 years, you can just port that code with almost no effort to the small cell. And now you get all your advanced features, whereas if you're coming at it from a home femto up, you're working with a very immature stack provided by the providers. That doesn't mean we won't do any software. We're actually doing more and more software every day.
But we do the software on the things that have to be and we let the customers differentiate where they see the value at. So what is it that excites me? Well, when you look at the macro side, over the last decade, we've shipped over $2,000,000,000 of DSPs into this market. It's a big number. We've already shipped $1,000,000,000 of SoC, meaning we have integrated that FPGA and that ASIC, so it's layer 1.
We barely touched the surface of getting layer 2, layer 3 and layer 4. So today, what we're shipping is layer 1 integrated. And tomorrow, as we go into production with these new SoCs, they're fairly impressive. If I look back when I was doing communications, I worked for GT, which is now Verizon for many years. We had entire racks of equipment.
And the latest chip takes what I was familiar with in the late '90s, it takes 3 7 foot racks of equipment and puts it on a single chip, and I'm not kidding. In the satellite world, it took 3 racks to do 120 megabit TDMA system. We're down to 1 chip that does everything that's on there, including putting the VAX inside. So it's pretty remarkable, the change. We have brand new generations coming out that have quad core A15s, 8 DSPs, and that's a third of the chip.
The rest of it is acceleration in IO. In small cell, we have our 1st generation out. It's designed into all the top manufacturers. And we're seeing good progress. I don't think small cells are quite here yet.
We'll see a lot of trials next year. I don't think we'll see a lot of revenue till 2014 and beyond. And we've got new products coming out that will take the integration from both on the RF and analog side as well as chipsets solutions. So it's pretty exciting. In summary, this is a competency that we're set.
We know how to address this market. We understand the customers and we understand their customers' customers. We have a significant lead in terms of revenue today, and this is not an R and D light environment. To play in this market, you do spend some R and D. The trick is to learn how to use R and D to expand other markets for TI, and we're doing that.
The revenue will continue to grow as we do the SOC. We've only got maybe about 25% of the market using SOC for layer 1. So we've got 75% of the market to go. And then we've got add layer 1 I mean go from layer 1 to layer 2, 3. Small cell, we got all the right design ins and it's revenue.
It's just in my markets, unfortunately, from the time I release a product to when I start seeing real revenue is 3 to 4 years. So it's going to take a little bit of time, but we've got the right place. So I think ultimately, our customers rely on us to do this. And not even that, we're starting to get the relationships with the operators around the world. And they're asking us to put things in chips because they know it's going to take a couple of years.
And they're concerned that maybe there's fuzziness in pipeline of us talking to OEMs, then OEMs talking to them. So we're starting to have direct meetings with pretty much every major operator in the world. One operator went far recently to basically say, if it wasn't the TI small cell chip in there, don't bother bidding. So that's where we want to get to. And with that, I'll take questions.
It's a great RFQ package when the operator specifies TI. Okay, questions for Brian.
Great, thanks. I had a few questions. The first is, you mentioned that you had the leading share in the combo LTE and 3 gs for small cell. My understanding is that LTE is not even going to start shipping until some of the Korean guys are putting that in Q4. So is that revenue, I guess, you're talking about just samples you've shipped?
Well, when I say leading in the combos, on the macro side, we're shipping LTE and we're shipping it in reasonable volume. I mean, you've seen deployments at SoftBank, you've seen deployments at Verizon and AT and T. T Mobile announced in March April that they're making a $4,000,000,000 investment over 3 years to deploy LTE. So the macro is occurring. In terms of small cell, you are correct in that it's only trials so far.
Where I say that we have a leading position is basically at the I showed who the top 3 are. Those top 3, we have significant design in. And sometimes they use more than one vendor, but I believe we're in the leadership position at all three vendors and that will enable us to be the market leader.
Okay. And if I could just follow-up. In terms of your discussion about the software, could you clarify a little bit why you think that coming up from the FEMTOcell doing software that way is not going to work versus you guys coming down from the macro? And why would the customer want to invest doing software if somebody else could do it for them for free? Thanks.
So it's not so much that you don't have to have software, we do. And we have a complete LTE PHY and a complete WCDMA PHY. So the software is if you're one of the leading macro providers in the world, you don't want new software. You have field hardened software. It when you look at a 3 gsbp spec, it says you need to do sounding somewhere between every 2 microseconds and 10 seconds.
And what you'll find is, if you're coming up from the home, you do sounding every 10 seconds. If you're coming from the macro station down, you've been doing sounding every 5 milliseconds. And there's a huge difference in the performance of the SOC when you make changes of that magnitude. Also, the 3GPP will say you need to collect 16 stats every 2 seconds. Great.
Optionally, there's another 2,000. On the macro side, they collect all 2,000. On the home femto, they don't. So on the software side, the robustness of the software to be able to handle what a macro operator is expecting to have operability and serviceability versus is good enough is big. With that said, we're investing heavily in software because we do believe, as time moves on, we know how to make our physical layer the best and most efficient and our customers want that.
The last piece on why it's hard to come up from the bottom is if you look at the predominant suppliers, some of my competition, basically what they did is they turned a handset chip around. Now you all have so say you have 4 gs modems or WCDMA, LTE, it doesn't matter. They can run up to 42 megabits on the WCDMA today, and they can run up to 150 megabits on the LTE today. Great. But your phone never gets more than about 5 to 10 megabits.
The operator won't allow you to dominate that channel, you get a piece of it. When you turn it around, the chip that they're selling can clock at 150 megabits, but its throughput is 5 to 10 megabits. Our chips throughputs 150 megabits. And so if you're going to put out a small cell in Times Square, you don't want to be limited to 10 megabits. You want to get that full 150.
And coming from the home up, those chips just don't do it. And it's a huge architectural change to take the cell phone chip and make it a macro base station, whereas it's very easy to take a macro base station and make it a small cell since you care about the same thing, not clock speed, but throughput.
Other questions for Brian?
Hey, Brian. You indicated that you don't expect the small sand market to take off immediately. Any guess as to when we see an inflection point in the revenue from the small sand market?
Again, it's customers' and operators' time. So what we're seeing is most of the major players have their 1st generation small cell available. They're in field trials or lab trials with the major operators. There's the 2nd generation coming probably over the next 12 months. I would expect that if you talk to any operator, they're going to tell you that we're going to have big shipments starting in first half of next year with full ramp in the second half of next year.
I believe the reality is initial shipments into production at the second half of next year with a ramp all the way through 2014 and we don't hit steady state volume till 2015. I could be wrong, but that would be twice as fast as any ramp of macro. And you've got the OEMs involved, you've got the operators involved. It's just hard for them to move that fast. Even when they'll do an initial burst of saying deploy 200,000 small cells.
They'll pause, they'll digest it, they'll say, is this working the way we thought? So I just don't see significant revenue until 2014, and I expect it will continue to ramp all through that year with steady state for small cell coming in 2015 and beyond.
Chris Casa.
Brian, listening to you in the past, I think what you said in the past is generally, the customers will start with discrete solutions and then kind of move to SoC as technology matures. Can you talk about where we are with that migration for LTE now? And maybe to give some metrics over, say, SoC penetration, the LTE versus where we were at this point with WCDMA?
So we're just moving off of 1st generation LTE systems at most of the operators. And those typically consisted of they took things like my WCDMA SoC and just turned everything off and used the DSP and then a big FPGA next to it. And then there's 2 vectors. A couple of the big guys still do their own ASICs, and their 2nd generation will be DSP plus ASIC. And a couple of them use SoC, and they'll be all SoC.
I expect those products will start shipping in volume first half of next year, but they're not today, it's really Gen 1. And then Gen 3 will probably be about 2 years behind that. And I firmly believe that all or maybe there's one holdout is SOC and no more ASIC. But I think you in terms of shipping product, we haven't even touched the surface of SoC yet, that's next year. And it's probably 2 years to even 3 to get 90th percentile to SoC.
John Pitzer.
Yes. Brian, when you think about your content in small cell versus the macro cell, what do you think the ratio needs to be of small cell units to macro cell units for your TI dollars to be somewhat equivalent? Is there a rough ballpark of kind of ratio we should think about?
Yes. That's a pretty easy answer. It's 1. And you're probably looking at me like I'm crazy. I believe if you look at the operator spend, for every dollar they spend on the digital side, I get about 0.5¢ to 0.75¢ of that capital dollar.
And what happens is, as you move to small cell, I believe that we well, 1st of all, the capacity of small cells up there, I guess, no, it's not 1, it's 5, I'm sorry. But I believe the operators are going to buy 5 times more. And so the consequence is with the same capital dollar. So the consequence is we move up from maybe 0.5 dollars to 0.0 $0.025 to 0.03 dollars So I did misspeak, it's about 5 small cells to 1 macro for me to have the same dollars. And I think the operators are going to buy in that ratio to maybe even a little higher, that what happens is they're spending less on towers.
For a small cell, there's no UPS, there's no generator, there's no power conditioning, there's no air conditioning. All that money buys more small cells. And that's why it's compelling to the operator is they're getting 5 to 10 times more bits per dollar, But consequently, I get more revenue as well.
And then your small cell conversation excluded Femto. What is the opportunity for you in Femto?
Well, today, we are not designing a specific chip for femto. And the reason is that today, people want a
$10 chip. And quite frankly, I
don't know how to build a quality device that's throughput, I know how to do, but there's a big difference. And, throughput I know how to do, but there's a big difference. And I think there is an opportunity for us because we're seeing a lot of our customers, the big ones as well as some of the small ones we've announced, that are targeting home, but they're targeting with a service provider owned box and a quality of service agreement. And whether you're talking the box is going to cost $100 or the box is going to cost $200 if it's operator provided, meaning there's an install, there's a truck roll and they've got to worry about replacement when it fails, dollars 100 extra for the box is not going to make or break it. So I think when the operator owns the home unit, we have an excellent opportunity.
When it's mail order, install it, no. But quite frankly, I believe that's better suited to WiFi. Not everyone would agree with me, but that's my belief. So we're not really focused there because of that.
Okay. Vivek?
Can you talk about the general market environment, even though we are starting to see a lot of these 4 gs smartphones and tablets come on the network? Why haven't we seen carriers spend more money? Is it because they are having to spend less than 3 gs? What's the general market spending environment?
Well, so general market, I would say that it's been fairly anemic in the last year, and it's really related to a couple of things. One is India, there's no capital. They spend all the money on spectrum. They're leveraged up to the hilt and the operators just don't have the money. So that's part of it.
China, the Chinese government has put the just basically said no 4 gs. Their 3 gs deployments have halted, mainly because TDSCDMA, it's a failure. I'm sorry, the Chinese government won't like me, but it is a failure. China Mobile is only allowed to deploy that technology. They've been able to lobby the government to halt 3 gs deployments because they're at a disadvantage.
So until they authorize LTE, it's rumored, but it's been rumored many, many times that that starts in Q1 that China Mobile, they put out their 6 tender for tedious CDMA that must be upgradable just right about now. And that's another 100,000 base stations. When China Mobile goes to LTE, they need to deploy 500,000 base stations to cover the country. And at that point, China Unicom and China Telecom will spend more on their 3 gs technologies and LTE. So but so far, China has been extraordinarily disappointing.
You'd have to talk to AT and T and Verizon, but they've definitely slowed down. They were in the marketing race and horse race and deploy, deploy, deploy over about 18 to 24 month period. They've definitely slowed down. And Europe, Europe's combination of their pricing plan is extraordinarily expensive. So it discourages utilization.
And until that changes, which the operators aren't no one's breaking ranks and saying, well, let's make it cheaper. Plus which with the euro crisis, capital is pretty hard to get. So right now, it's not so much that they're spending on something else, it's they're not spending. Now there's always a DC steady state. So you always get CapEx only modulates plusminus10% typically in any given year.
So we're down. We're not it's not like we're half. But will next year be the year CapEx goes back up 10%, 15%? I certainly hope so. But you guys probably have a little more insight than I do to that.
But it has been disappointing, not market share, but just overall revenue. We started the year low. We were forecasting a lot of back half would be growth. I think Ron can state what we said in our earnings, but we're not seeing that right now.
All right. And just as a follow-up, do you see any of your customers developing their own silicon? I think you touched upon it. And is that just an isolated case? Or do you see that becoming a trend over the next few years?
I think it goes the other way. I think like all things like you can look at TI with our manufacturing strategy or some of the other things that we've done. When it's a value differentiation and you're getting extra money or extra sales from your customer because you're doing something internally, you should do it. But when you're just me too, a simple example is most of our chips have USB on it, right? We used to design USB controllers.
We buy them from the EDA tool vendors now. Why? Because when I go out to whether it's at Ericsson or whether it's whatever, Cisco or whoever, and you say, I've got my USB controller, it's better than the other guys, you get a check. Do you have a USB controller? Yes.
Do you have or no? There's no mine's better than yours. And so what's happening is on the PHY, I think all the senior executives of these companies would agree that they're spending a tremendous amount of their R and D on this radio PHY layer. And they don't see over the next 5 years getting a lot of revenue for that. They see getting revenue for interoperability of Wi Fi with small cell, with macro, with facilitating interoperability, facilitating billing systems that give them creative ways to get additional revenue, that they can sell.
I have the best radio in the world. It works. Yes, you have a radio, check, right? So what we're seeing is definitely
a
Okay. Thank you very much, Brian, and good luck on that next trip to China. I think I'm going to be traveling separately. And with that, we're going to wrap up. For those of you on the webcast, thank you for joining us.
For those of you here live, I hope you'll be joining us for a light lunch and further discussion with the TI managers.