Analog Investor Meeting, both for those of you that are here in person at our Silicon Valley analog facility, as well as those of you that are joining via the webcast. I know especially for those on the East Coast, I had quite a few messages saying that people were having travel difficulties or didn't have power or water or whatever at their homes and we're going to join via webcast. So we welcome you as well. This time we'll do something a little different because of the impact the weather had on travel. And for those of you that are joining via the webcast, if you have questions, if you will e mail me your question, then I will be do my best to try to represent you.
Okay. And so this is again is our 3rd and final investor meeting of 2012. The first one was with Rich Templeton and Kevin March in May of this year up in New York. At that meeting, they really were outlining the overall company strategy and our execution to that strategy. Many of you also joined us in September in New York, where Greg DeLaghi and our embedded processing team outlined our strategy for embedded processing and also how we're re profiling our investments in OMAP and connectivity to address broader market opportunities with those product lines.
In today's meeting, we're going to talk about analog, which is, TI's largest business. It's well over 50% of TI's total revenue now. And in this meeting, Brian Krutcher and our analog management team will talk about our strategies for growth in analog and also how we're executing to those strategies. Just a second. I forgot my slide advancer here.
Okay. And so from an agenda standpoint, we're going to start off having Brian provide a strategic overview, Neil Zanderskopf, who manages our high volume analog and logic business, will overview what we're doing in that area. We'll take a short 15 minute break at that point. And then Steve Anderson will talk about what we're doing in high performance analog. And then Dave Heacock, who manages this operation in our Silicon Valley analog operation will discuss that activity and then Sami will talk about power management.
We've structured it such that for each presentation, each presenter will spend about half of the time we've allotted in each of those areas in go reviewing slides and presentation material and they've reserved about half of their time for Q and A. So we should have plenty of time to be able to get to all of your questions. The webcast is being live. Sorry, the meeting is being webcast live. And for any of you that are interested in archive, it will be available on the web as well.
Finally, this meeting will include forward looking statements and of course, actual results may vary. So please refer to the Safe Harbor statement in your books or post on the web for a discussion of some of these risks and uncertainties. With that, I'll turn it over to Brian.
All right. Thanks, Ron. I appreciate the introduction. Thanks, everyone, for joining us here locally as well as on line. I'll spend the next 20, 30 minutes giving you a quick update on analog and then I'll give another 15, 20 minutes for you to ask questions.
So please feel free to do that. So let's start with the opportunity we have in analog and why we think it's so attractive. 1st and foremost, large market, over $42,000,000,000 worth of opportunity that we're chasing. You can see on the graph on the left side of the screen, the red piece of the pie chart is basically 2011 combining the previous national piece of the pie plus TI giving us about 18 percent share of the market. I love analog because every customer I go to and over the last 4 to 5 months in the job, spending time with customers, if their product has a piece of electronics inside of it, we have the opportunity to sell them something, an analog.
And as you can see by the number of customers on the screen, more than 90,000 customers around the world that we have active engagements with, it is an absolute pleasure and it's a lot of fun to be able to spend time with these kinds of customers. We love it because it's also very profitable, and we've got a great history of showing strong cash generation from the product line, low capital investments, low depreciation over time because we can use this capital and equipment for manufacturing 10 plus years, and I'll talk a little bit more about that in just a few minutes. The catalog products sell 20 plus years. I'll show you a few examples where we even have some products that are maxing out their revenue in a given year or quarter, actually 20 years later from the day we put them in the marketplace. So, great opportunity for us to leverage the profits and the revenue from those kinds of catalog products.
The one thing you may not know is there's actually probably over 200 different competitors in analog, actually 31 of those actually comprise about 80% of the market. And it's a very fragmented base, and we like that because there's a lot of great opportunities for us to attack. You can see on the left hand side of the screen as well quite a few of the competitors that we see in those customer lobbies when we're visiting customers around the world. So a great opportunity for us not only to continue to grow but to leverage the strong position we have and to really go after an attack and capture more of the $35,000,000,000 of analog TAM that we don't have today. So again, a great opportunity for us at TI and analog.
If you switch now to our customer base, I'll give you a bit of a feel of this. This graph on the left hand side shows you the percentage of the TI analog revenue that our top customers represent. So I think you can tell by this and from my previous comments of having over 90,000 customer engagements, our success really depends on how well we execute as a company, not necessarily a single customer or a single marketer application. You can see here the top customer last year represented only about 5% of our analog revenue. And you can see how the chart comes down as you move across the right side of the screen.
So again, not dependent on a single customer, a large breadth of customers and applications that we can sell our broad portfolio into. The nice thing about that as well is you look at the sales and apps team, largest in the industry, really gives us the capability to touch these customers, not only touch a lot of customers, but actually penetrate deeper into customers like the ones on the screen where they represent a higher piece of our revenue. So that does give us a great opportunity that no one else in the industry has for us to leverage on a day in and day out basis. The product portfolio. We've talked about being broad, large as well as innovative and differentiated.
But the fact of the matter is, is and I mentioned just a quick second ago, is our products have really, really long product life cycles, and that generates really high returns. And if you look at the slide and the graph on the left hand side of the screen, this actually shows you the revenue by device age. So to sum this all up, about 85% of our revenue comes from products that are actually greater than 3 years old. So again, a great, great foundation to build upon. And as you see, the 15%, 20% of the revenue coming from products that are less than 3 years old really allows us to layer that growth on top as we continue to grow the base foundational revenue as well.
This also makes it extremely difficult for new competitors to enter in this market. We've got a broad scale of portfolio, and we can we have a broad leverage of revenue that we can actually go in and keep small competitors out by moving resources around very rapidly. And the ability to duplicate this size of portfolio in a short amount of time is going to be extremely tough. Also, if you look at the overall commitment we've had to this marketplace and you look at the equipment life and how long we continue to make these components, customers and applications and things like industrial, automotive and other applications of that nature that require long life cycles really want to work with TI. We've been in the industry for a long time and we're still making devices that are 20 plus years old.
So that fits in their model and their product life cycle very, very well. A few products on the bottom, just to give you an example, that are really hitting their stride over the last couple years. There's an amplifier that really is used in a lot of instrumentation applications, audio applications. Revenue actually peaked in 2010, 21 years after it was released into the marketplace, okay? You look at the Simple Switcher portfolio of products, all the SVA team here.
There's a regulator that's been in that family for over 16 years, and it's actually generating over $10,000,000 the last 3 years and eclipsed the revenue peaks it's had in the past. So again, these products last for a long time. Customers use them for a long time, and it's a great opportunity for us to leverage the portfolio that we have. Let me now break down just quickly, I would call, probably the 3 major areas where TI is really competitively advantaged by our scale. So the first one I've talked a bit about is the breadth and the depth of our portfolio, and it allows us to sell more chips to every single customer in the marketplace.
We're also in a leadership position, number 1, number 2 position in all the major analog product categories. You combine that with the high performance, some of the integrated solutions as well as the design environments that we give engineers at our customers to use online and on their PCs to be able to really select, design and simulate the chips in their end products that they're working on, unmatched by anyone else in the industry. The second area and I'll talk about each of these in a little bit more detail in the next few slides. The second one I would spike out would really be the size of our sales and applications teams. We are 3x to 4x our nearest competitor.
And we're actually advantaged in China and India, and we keep growing that. If you look since 2,005, we've actually quadrupled the number of sales offices that we have within the Asia, China, India region. And this really gives us a great advantage to be close to customers, local to them, not only to sell more products, of course, that's the ultimate goal, win more sockets on every project at every customer, but it also gives myself and my product teams a lot of great insight into road map devices, new technologies that we need to go invest time, energy and effort on to continue to penetrate these customers not just today but for years to come. I would say number 3 would be our manufacturing and technology advantages. You look at when we announced the industry's first 300 millimeter analog fab, great innovation and we continue to move new technologies into that fab today.
You look at the analog process technologies that we own inside of TI, we have over 75 of those and those give us a lot of flexibility to put the best highest performance devices that meet the customer's requirements and specifications in their hands regardless of the device and regardless of the product line. Last but not least, as I mentioned before, customers view the open capacity and the capacity we've put on as a real advantage because that supply continuity as the market turns and when it turns and when they need product, they know TI has the capacity to go deliver that to them. Okay. So those are kind of the top level 3, I would say, competitive advantages we have in terms of scale. So if you look at the first one and how we actually leverage the broad portfolio that we have, we're doing it in something that we call winning combos.
And so we've been doing this for about the past year to really jump start the customer's design. And what this is, is really a unique combination of multiple devices, usually more than 4 devices for a specific application that really solves a customer's problem. You can see the 4 boxes down on the bottom right hand side of the screen gives you a few example applications like motor drivers or even smart metering, where we've put out these winning combos. And the rate in which customers have been adopting these has been extremely high. If you move to the left hand side of the screen, look at the graph real quickly.
The first two bars, the smaller bars are actually when we promote a single leadership device on its own. So we come out with, let's say, one of those new simple switchers I mentioned to you just a few minutes ago and we bring that out by itself as a leadership promotion into the marketplace. That gives you a bit of an example of how many samples actually get ordered from customers. However, when we do winning combo promotions and really leverage the entire portfolio across TI to go address a specific application, a specific problem the customer is working on in the marketplace, we actually ship 14 times as many sample kits into the marketplace from that customer demand. So customers desire a solution and TI has the opportunity with their broad portfolio to really give that to them.
If you look at the second piece and this is I think, one of the great innovations that we received through the national acquisition. They have a great design center called WebBench. It's online and really gives the analog designer a great opportunity to design, pick devices and simulate these ships all in one environment very, very quickly. And I would have to say it's probably one of the top design tools of choice by the analog engineering community. What we've seen over the last year since the acquisition of National and having them on board, we've actually increased the number of new web bench registrants.
These are customers, people using this tool online by more than 27,000 in the past year. That's amazing. And we've also leveraged our internal devices that we've had and increased the number of devices, particularly things like switching regulators in the system. We've actually increased over 30% in the last year by loading and adding more models and ability to simulate our new devices inside of WebBench. So not only we're just taking a tool and just letting it sit there and get great new customers from it, we're actually adding more capability and more devices to continue to expand the customers that come online to design with our chips.
You can see the last bullet on the screen gives you a bit of a sample of how the use has been growing in many regions around the world. You can see here 19% increase in Asia Pacific region and over 42% increase in Japan in the last 12 months. Great online tool they can access at any time for free and really get to work on really great designs that help their products. All right? So now let's move to the second one I talked about, which is really the scale of our sales and applications force around the world.
As I mentioned before, more sales and application engineers calling on customers than anyone else on the planet. We arm them with great products like I showed you as well as tools like WebBench and other product tools to enable them to be effective in front of customers. But I think if I look at some of the process that we're putting in place to ensure that we're getting the full leverage out of this large sales team is something called project level selling. This is a very formal process we've just started and it really is to use to identify new customer projects. We amass and pull in technical resources whether those are the application engineers sitting in the cubicle or office next to them or even members of our team, my team that's here as well.
We have engineers calling in and getting involved in these new projects at customers. So this means they go to a customer, they find a new design, they're starting a new project at customer X, they come back, they pull all the right technical resources together in this very strict process, we kick the program off. We identify every potential opportunity in that space. And then our number one job as a team is to go win the entire board together. And so this is tracked rigorously.
It's a very strict best products we have in our portfolio into these new customer applications when they come up. So it's a great opportunity for us to work together as well as close more deals. So great opportunity to leverage and continue to expand on the size of our sales force.
So let me give
you a couple of examples of how this project level selling has been working, okay? It's easy to talk about, but let's show you an actual example. So this is an example of an auto infotainment system, probably the first thing you look at when you buy a car. I know it is me. I go in and look at the dash, what's the radio look like, all that good stuff.
This is actually a great example where before we are doing this project level selling process together, you can see by the red blocks inside of the system, we had a processor, we had some power and some interface products in the system. But if you fast forward through the new way we're approaching these systems, we actually, as you can see here, took over the vast majority of this system. Through this process, through the portfolio, we continue to grow as well as if you looked at some of the finer detail here, even some of the devices we now have in our portfolio with SVA that we didn't have a year ago. So you look at this, the relevant content on the board, we have pretty much all of it. It's about $50 per system, about half of that being analog.
And these platforms, depending on the customer, run between 500,000 to 1,000,000 units a year, depending on the customer OEM, etcetera. So big, big opportunity. And if you look at just from that simple process from the previous design to the new design and process that we used, we increased our penetration dramatically. So if you look at another one here, this is a great example of a space that we all love. Everybody has cell phones, smartphones.
And this is a picture of a base station. You can see here, we pretty much own everything that we make today in our portfolio. And if you look at even a few of the devices on here that start with like an LMH, the power of the SVA portfolio really enabled to basically double the amount of dollars we have in the system now, which we didn't have even 12 months ago. So in total, we won about $200 and won the entire high speed signal chain. And depending on the customer, you could expect to see 200 1,000 plus units a year around this type of application using this exact system that we helped put together for the sales team.
So again, a great opportunity for us to continue to grow in these kinds of applications. Now let's move to a little bit different one. And no, this isn't a robot. So for the folks looking online, this is not a little robot. It's actually a flow meter.
And if you look at regulations around the world and the ability to measure the flow of liquid whether that's water, whether there's pollutants in the water, oil, any types of liquids, the amount and needs of this inside of industrial process control systems continues to go up in pretty much all regions of the world. And you can see here where we don't have all the silicon. But the day we started with this program, we had 0. Through the project level selling process and pulling our teams together, we actually won about $10 of this system and about 65% of that is analog. And you can see if you look at the types of flow meters whether that's electromagnetic, maybe that's ultrasonic, there's 5000000 to 10000000 static flow meters shipped annually around the world.
So this is a great opportunity where we didn't win every socket here. But since our teams were engaged, we now know the requirements that we missed, the specifications and road map devices we must go work on moving forward. And now the next time around when this project comes open, we have a better opportunity to win all of this solution, not just the red blocks you see in here today, okay? Just a couple of examples to give you a feel of how we used to run it to the results we're actually producing in some of these systems today. I would say the third one is really around manufacturing as a competitive advantage.
I talked about RFAB, our 300 millimeter analog fab capability, really the only one in the industry and provides us a lower diaconess but also supports growth because our ultimate goal here is to grow revenue and gain share in the marketplace and supports up to another $5,000,000,000 of growth for the business. We also have our own in house analog process differentiation as well, process technology where we have 75 different baselines and hundreds of derivatives. As I mentioned upfront, this gives us the capability that many other analog companies and even new entrants in the market don't have. We can tweak a flavor of the technology to meet a very specific spec that a market needs or a very specific cost point that we need. So we have the flexibility to move whether it's for differentiation, for cost points or other reasons to move across different technologies to meet those customer needs.
Last but not least would be packaging, right? You need to manufacture this. You need to have great process technology and you need to have great packaging. And we have our own packaging technology inside, but also have multi source capability in many places around the world that really enables us to put some of the smallest packages in the world in the marketplace to actually some of the more innovative packages that let us handle higher voltages to even stacking several die inside of a single package. So we do have capabilities that spanned all applications and really give us a differentiated advantage here in packaging as well.
Okay? So let's move to results. We talk about the scale advantage that we have. So how is that translating into how we're doing in the marketplace? This gives you a quick snapshot of how we're growing faster than the market.
This gives you from basically a 2,006 time frame through 2011. And as you can see here, over the last couple of years, we've gained share. And over the first half of this year, we're on track to gain share as well again in 2012. So again, just a pictorial view of how we're doing in the marketplace versus the analog TAM. So now if you look at how we're doing versus competitors and give you a quick snapshot on this.
So we basically took the previous cyclical peak back in Q3 'eight and we normalized it at 1 there. And you can see on the right side of the screen some of the key competitors that we meet in the lobby every day. If you look at the bottom, you start with Intersil. You can see the analog market has moved back and forth and about flat or just above flat. You can see analog devices than linear tech.
And then if you see the TI kind of the light red or pinkish line is actually the TI HPA plus power plus HVAL, the traditional organic business of TI, growing just under 20% there, and you can see Maxim just above that. You add the total TI analog portfolio, including SVA, and you can see where we've landed on top there. But the fact of the matter is, is even if you look over the last 3 to 4 quarters, 3 of the last 4 quarters, we have actually outgrown Maxim. So the only reason I point that out is we always look for whoever is right close to us and our nearest competitor, and our goal is to be number 1 and to be on top of this chart. And so you can see kind of where we land today with the whole intention to even move up farther as we move through 3rd Q4, all right?
So definitely outperforming the competitors and the marketplace very dramatically over the last few years. So then what are some of the newer opportunities or newer applications that we're excited about that we truly can believe can fuel even more growth as we move forward. We talked a little bit about auto infotainment systems earlier, and we're in a lot of different automotive applications from airbags to braking to things like infotainment systems, the cluster units. So we're in a lot of different places inside of the car. But as that content continues to go up, we continue to win more and more in an automobile.
But imagine the market opportunity and you start to see this on certain automobiles where cars can actually keep us safer. They can eliminate accidents completely. You can already see active braking today. And these are really an opportunity for us as we move forward as these extra features move into the car to really expand the business into a larger opportunity inside of automotive. If you look at more of a consumer application or even giving someone that has a vision impairment the opportunity to actually read braille on any touchscreen, any e book in the world.
Steve Anderson is working on some of that technology that goes in there today called haptics that will actually enable you to feel when you touch a flat screen. And I'll let him talk more about it in just a little while. But imagine just the market opportunity for that type of advancement and the way we can actually help people potentially with a vision impairment to really read an e book or a flat screen. Then if you look at something maybe not quite as cool, but a great market opportunity are things like factory automation. Mean factory lines will begin running on their own, diagnosing their own problems and actually fixing their own problems over time.
We're at the heart of that technology with our embedded processing portfolio as well as our analog portfolio to really enable these types of advancements to move forward over time and really increase the opportunity for TI in the marketplace. So now I'm going to start to transition here in just a second to really the 4 team members that run the 4 analog engines. And these are really the 4 engines that fuel the growth. And if you look at our first half revenue, this gives you a quick breakdown of what the revenue split is. If you're looking at the largest business is Neils' business, the high volume analog and logic business, we call HVAL about 35% power management, 25 percent HPA or high performance analog at 20% and Silicon Valley analog around 20% as well.
So these are the 4 growth engines that we're fueling to see us grow even more market share and growth over time. So just quickly, a quick summary. Gave you a quick update on why the market is so attractive. It's a big market. Every piece of electronics uses this technology, and we get great, great margins and returns from the devices and the longevity of the portfolio we have and continue to sell for 20 plus years in many, many situations.
The breadth and depth of the portfolio is second to none in the industry. We can put some of the best innovative technology in customers' hands and really fuel a field sales force that's the largest on the planet. Gave you a couple of examples of how we actually leverage this large portfolio into promotions and campaigns like winning combos that really are what customers are looking for. They're not looking for one off devices. They're looking for solutions and system solutions that really solve their problems.
And our ability to attack all those spaces and really hand them the solution is showing true results, as I showed before, a 14x increase over single promotions. Extensive manufacturing. I think the technologies we've talked about really support our ability to really go after high performance to a low cost platform as well. And I think the integration of our manufacturing, our packaging as well as our process technology really, really gives us a differentiated advantage along with the confidence from our customers that we're going to be there when they need the product. And at the end of the day, that's what we're here for is to meet those demands.
So I'm excited about the opportunity in analog and truly believe that a few of the things I showed you today are just a sample of some of the ways that we believe we'll continue to gain share in the analog marketplace. So with that, I will open it up for a few questions.
Okay. And as we normally do at these meetings since we're being webcast, I'll ask that you wait until you get a microphone. Dave Paul has mics as well as I do. And then also so that we can kind of just keep it moving and fast pace, I'll ask that to only ask a single question. And I think we'll have plenty of time to make multiple rounds.
So but try to do a single question at a time.
Thank you, Ron. Tore Sommer from Stifel Nicolaus. Brian, about 5, 6 years ago when Rich talked about really getting big in analog, I think he mentioned the growth estimate or expectation of analog of about 20%. I don't think he ever said whether that was going to be organic or not. But from your perspective, given everything you've seen so far, what's your growth estimate for TI's analog business going
forward? Thanks.
Good question. Thanks. I can't refer to what Rich said in 2,005 or whenever that was, so I won't comment on that one. I think if you look at what we're expecting, I'm expecting myself and the team to significantly outgrow the market while we turn in returns that even outpace the growth of our revenue. So that's really the charter we're on.
If you look at history, we've typically the analog market's typically grown at a growth rate very, very similar to the semiconductor market, a 7 to 9 percentage points rate over a longer period of time. So our goal is to grow significantly faster than the market. I don't have a specific percentage I'm going to give you on any given time period.
Hey, Brian. Brian Carbo here with Credit Suisse. So over the last 2 years, you guys have done a good job at growing analog revs about 14% since 3Q 'ten. But your op margin numbers are down about 800 bps. Could you help us with some of the drivers for why you've seen op margins come down over that period of time and what you guys are going to be able to do to get those op margins back up?
Yes. I think if you look at our overall margins, we've been increasing a lot in manufacturing over time, right? So we are seeing hits in our GPM line that, at the end of the day, roll down as well. I think those the increases that we've had in manufacturing are going to help us over time. So I'm excited about that.
We've also the revenue hasn't come in as we thought it's going to happen. As we've watched the downturn and come back out of it, we're expecting it to move quicker. So those things those hurt the bottom line. But at the end of the day, we're driving to increase that bottom line every single day, at the same time driving our revenue up into the right as
well. So I would just also note that all of the new factory capacity that we purchased, RFAB, Chengdu in China, Aizu in Japan, all of that capacity we consider analog factories and Brian is carrying all of it inside of his P and L.
Good point, Ron. Thanks. Sean?
Yes. Thank you. Sean from Macquarie. On the market share gain theme, I was wondering if you could I'm just trying to get more, I guess, detail on where you think you're gaining share, where you have been gaining share and where you'd like to do better in the future in terms of your market share specifically for application areas or device types? And then the 3rd piece would be, are there areas where you think you've been losing share and that you're not interested in?
Okay. Thanks. Good multiple question. Let me see if I can answer all those. So I wish I could tell you that there's 1 single competitor or 1 single application that's driving all of our share gain.
There's not. I think you can tell by the breakout of our customers and the number of competitors that we have, as I mentioned, there's 200 plus competitors in the world and 31% or 31 of those make up 80% of the marketplace. So I can't attach x amount of revenue to one competitor. I wish I could, but we're not quite that good. But I do think if you look at our continued focus in industrial, some of the devices and applications, which I don't want to steal these guys' thunder, that they're focused on and really winning in, are pretty impressive.
But I think if you look across whether that's consumer to some of the telecom or communications segments I showed you here in terms of the wireless space station to even automotive with infotainment systems that I showed you. All those are very critical areas that we have been increasing investments and are actually winning even by showcasing some examples I showed you earlier. Stacy?
Great. Stacy Rasgon, Sanford Bernstein. If I go back to the growth off of the last peak where it shows you the share gain. So you gained quite a bit of share off the bottom, but it really looks like I guess through middle of 2010 you really haven't outgrown the market at all if you were to start it from that point. And even into 2012, I would almost venture that the performance has been below the market.
And my guess is if I put Q3 on here, that trend would continue. I was wondering if you could give us a little bit of color on maybe what's changed over the last, say, 6 to 8 quarters that's maybe different on this cycle versus what we saw before. How can investors get confidence that the share gain trajectory that you were on can repeat? I guess what's changed between now and then? And what should we be looking for to get some confidence that share gains are actually going to begin again?
Okay. Good question. So we only give you so much data there. That's why I tried to give you a kind of a 5 or 6 year period. If you pick any point in time, I understand, and that one, you can't pick just a single point in time and just extrapolate it from there.
So we tried to give you from the peak to where we are today. I'd have to say, and you could see it in the data, we gained share last year. We gained share the year before, and we're going to gain share this year. So whether it's 0.5.5.6.
Sameer Pilotsky, I work
with Chris Danelye from Morgan. Quick thing on end markets, if you can kind of help us understand what is the wireless focus on the analog side of things? And would defocusing your wireless business have any impact on analog sales?
Okay. So from a wireless handset perspective is your question?
Overall wireless as well.
Yes. Good question. So I think so I'll put it in 2 segments maybe for you, see if I can do it that way. If I look at wireless infrastructure, I would say we continue to increase our position in wireless infrastructure. If you look at handsets, we've been selling analog into handsets for many, many years ever since they've been around.
But we treat all chips I mean, all our chips are basically judged independently. So we work with all the chipset providers that you see that go into handsets. We engage with a lot of these different players around world. So we don't only just work, for example, with our wireless OMAP team. Yes.
Do we work with them when they have chips they sell with our devices? Yes. But again, those devices stand on their own when it gets to a customer implementing that into their phone. Same goes for any other chipset that goes into a phone today, and we spend time, energy and effort at every OEM around the planet that actually works on the cell phone. So there's I can't really give you a dollar amount on impact relative to that, but just that we are working with many of the chipset players around the world and the devices stand on their own regardless if it's on an o map or something else.
Arnav?
Thanks. Arnav Chanda, Avian. So I have a question for the 4th slide that talked about the long product life cycles. Can you talk a little bit about what are your product development costs over that life cycle? I think we understand for a digital chip, when you move mass down, you're going cost X number of dollars over every 2 years.
Is it I mean, this is probably a stupid question, but is it one time you design and it's done or you have to shrink it every 5 years? Do you have if you could talk holistically about what it costs in general for the mediumship and how you look at returns over time? Is there a metric you look for?
Thank you. Sure.
Yes, good question. Yes, that's a multifaceted let me see if I can get you a multifaceted question. Let me see if I can get you a simple answer. Yes, my background in embedded processing, you're absolutely correct. In the more of the digital world, you're moving technology nodes every couple of years with intention on moving all of your products moving forward on those platforms.
Moore's Law is not coming through like it used to, and the benefits you get from that may actually slow that down. But the cost of that is actually very expensive, as you mentioned. You flip over into the analog world, whether it's the size of the team, I needed to design one of these chips, it could be 10x to 100x the size to do a digital chip than it is to do an analog chip. We have chips that are done with a couple of engineers to chips that maybe take 40 engineers, right? So it's a pretty wide range of engineering talent you must put on these chips.
If you look at the longevity of some of these process nodes, the device that I told you about that we shipped that simple switcher, we didn't every 2 years go put it into a new process node. It's still shipping on the same technology it was on when we introduced it 20 years ago. Does that mean newer families or newer generations may have it? Of course, maybe on a new technology node, no doubt. But we still ship on the very first technology node, it was generated on 16 plus years ago.
So that's kind of how we play it out. And that's why I mentioned, if you look at the manufacturing equipment and how long you can keep manufacturing these devices, the return on those parts is fantastic. And that's what we like.
Thanks
Thanks. Ambrish with BMO. I actually wanted your perspective on something that a competitor is doing, Maxim.
Sure.
And we've all seen the other side of that, which is having a 20 plus percent customer. They've done a great job at Samsung. Yes. But what I'm getting to is that they have made the integrated solution the cornerstone of this strategy. And we all know it's not new, you guys have been doing that as well, not keeping it as a cornerstone.
But just your perspective on how do you see that integrated approach? And do you take that and open up look at new markets that you're opening up or not?
So just that
would be helpful. Thanks.
Yes. Great question. So you're absolutely correct in your comment. Integration isn't something new. Actually, Neil Sanderskopf will talk about his business, the largest piece of our business that actually does a lot of integrated devices similar to what you're talking about.
But as you said, integration is not new. I think the luxury that we have is we can go to a customer and offer them various solutions. Not all applications need integration. Not all customers want integration. And so we can show them a portfolio of devices that they can integrate in a system today with chips that are in production today, and they can get to market extremely quickly.
We can also look at I think you mentioned Samsung. We could go to a handset consumer application and do exactly the same thing that you mentioned that Maxim is doing. So we have the capability to do both, and we go to customers and offer both. It doesn't necessarily have to be the cornerstone of what we put in the press and what we name our company or is our cornerstone, okay? We do that every single day, and we make trade offs based off applications and customers' needs to determine what needs to be more integrated or less integrated.
For example, some of those systems that I showed you, the blocks, you could argue they should be integrated. Why don't you just integrate those? Maybe if Maxim was saying up here, they would say they're going to go integrate all that stuff. May not be the right answer because the technology nodes across those 5 or 6 chips may all be different. So if you try to integrate all 5 of those on a single technology node, you're more than likely going to decrease the performance or decrease the specs or not hit the specs that the application really needs.
So there is a specific time and place where integration can and will make a lot of sense. Totally agree with that. But I don't think it can be your only position when you go to a customer because many times, like the example I just gave you, it really doesn't make sense.
Okay. Thank you, Brian. And I think with that, we'll move on to, at TI, a gentleman we refer to as Mr. Integration, Neil Zanderskopf, who manages our HVAC business.
Thanks, Ron. Good afternoon. So my name is Nils Anderscoff. Like Ron just said, I run our high volume analog and logic business. Met some of you before, but just for the ones that I haven't met before, I'll give you a little bit of my background information here.
I came to TI in 2000 with an acquisition of a small start up that I ran or I actually owned and ran as the President and CEO back in 2000. After joining CEI, I spent the 1st 5 years managing business with high performance analog. After that, I spent 5 years leading our DSP business. So and in March time in March 2012, I came back to analog and took over the high volume analog and logic business. I'm excited about being up here today to talk to you about the high volume analog and logic business.
And I'd like to start out talking a little bit about what is the high volume analog business about. And if you look here at the first slide, we are basically based on 6 business areas. And I'd like to start out on the right side of the slide up here, talking about our linear and logic business. Our linear and logic business is probably one of the most complete linear and logic portfolios in the world. It's a very interesting portfolio in that we ship into every single application that you can find in the world and we have opportunities at almost every single customer in the world with this portfolio.
Left of that, you see our storage products business. This is focused on motor drivers for hard disk drives and preamplifiers for hard disk drives as well. We've been in this business for a long time. It's a business that's focused on highly integrated motor drivers to spin the disc and it's a business that's focused on highly integrated preamplifiers to read what is on the disk or on the multiple of disk in the hard disk drive. Left of that you see our multi driver business, very exciting business that we established.
I think it was Dave who established this about 3 years ago. And he was running high volume analog logic, basically targeting a TAM of more than 10,000,000,000 new motors that are being spun every year or shipped every year in the motor industry. We focus in here on the low voltage motor drivers and in on the integrated motor control. Made very good progress. I mean, within the last 18 months, we released 25 new devices for this space, very good traction.
We are basically doubling the number of new business opportunities and shipped EVMs and samples. We are more than doubling year on year as we keep on growing this motor drive business. So some a lot of excitement here for what the future will bring. Left of that, you see our integrated business unit really focusing in on 2 things, integrated power management, ICs and integrated sensor front end. So you see again here a high degree of integration in this business.
These devices goes into mobile applications, consumer applications, computer applications and even into some industrial applications as well. So pretty broad range here for these products. High volume linear is a very exciting business where we are focused on integrated touchscreen solutions. We're seeing good traction there in many of the portable spaces. Switches, this is both power and signal switches.
That again goes into equipment that needs the optimal power and signal performance. Integrated ESD protection devices and finally interface devices out of the high volume linear business. And lastly here on the left side, you got our mix signal automotive business, very exciting business for us. This year, it's estimated that the average semiconductor content in each car, and this is from the cheapest car to the most expensive car in the world, average semiconductor content is estimated to be $2.77 per car in 2012. And as you know, it continues to grow rapidly.
The 3 businesses we're focusing on in Mexican Automotive are really safety, it's infotainment and it's powertrain. And these 3 market areas in automotive are some of the fastest growing areas. So again, integrated products for these three spaces. So what you probably have noticed by now with Ron's introduction as me as Mr. Integration and with all the talk about integrated products that you see up here in the 5 of these 6 businesses, we do have a large portfolio of integrated devices in high volume analog and logic.
So on the next slide, I'd like to talk to you a little bit about what our advantage is within TI and why we believe we have a good integration business. So basically, when you look at my business, it is the analog integration engine. We are leveraging more than 30 years of IP, process technology and expertise within our engineering team. Of course, we're in power management. We have all the technology from Sammy's side of shop on the DC DC converters, references, LDOs, any power management technology you can think of whether it's process or IP or design skills, we are leveraging within our high volume analog and logic business.
You also see in the signal chain side, leveraging data converter, technology, interface, clocks, logic, even the Class D amplifiers are being leveraged within my business. And last year, you see we're leveraging more than 45,000 catalog parts that we have released within TI over the last 20, 30 years. So lots of IP to take from here and lots of IP to reuse for integration within my business. On top of that, we are leveraging close customer relationships with automotive, a space we have played in for more than 20 years and have very long standing relationships, consumer, mobile and computer. We have very deep relationships in those areas too that of course are very helpful when you want to come up with having the right system spec and system design for these new devices.
Some examples of new and exciting integrated high volume applications that we're working in, you see up here the touch screen control area, it's an area we're very excited about. Automotive Infotainment and Automotive Safety are 2 other areas where we're seeing a big need for integrated products that we're very excited about. And lastly, the mode applications and these applications like electronic locks, point of sales, printers, toys, camera, optical, lens drivers and those kind of things. And lastly, we're leveraging of course the manufacturing and technology model to ramp the customers' growth. And basically with high volume analog and logic, we're using 10 of the fabs.
We're almost 100% internal from a manufacturing standpoint, utilizing 10 factories and more than 35 of the analog processors that Trusha talked about in the introduction. So there's a lot of stuff for us to leverage here within the analog integration. And the next couple of slides, I'm going to give you a couple of examples of areas where we have done analog integration. So some real product examples coming up here. So starting out with the first one, basically growing our power management portfolio for automotive.
We just released a few months ago our first automotive safety power management IC. And it actually provides ISO 26,262 compliance. And basically this power management chip integrates our standard compliant functional safety architecture to enable ASIL D, which if you're familiar with these things, is probably one of the is one of the most stringent safety requirements that you can find in the automotive industry. On top of that, on top of integrating the safety and making taking care of that for our customers, it also this device also reduces sports base. It integrates multiple power supply rails for seamless operation with our automotive microcontrollers.
It also has increased flexibility in that it integrates additional internal sensor supplies on the same device. And on the next slide, I'm going to show you a little bit I'm going to show an example of a solution. So back to what Brian talked about at the beginning, we're beginning to take full advantage of actually selling solution across the portfolio we have. You will see a solution on this next slide here where the power management device is part of an electronic power steering application.
This is
an application where we have very good traction with NCI. And what you see up here is the power management chip sitting over here. And you see this oval here, circle here, the power supply chip, the safety MCU from our Hercules family in MCU and the motor driver chip, safety motor driver chip. What you see down here in these boxes are the safety features that are integrated in these devices, basically to enable our automotive customers to take these solutions and integrate them at a much higher pace because the safety is being handled for them at the solution level. When you look at this solution, what makes this very exciting is that electronic power steering is estimated to ship 49,000,000 units in 2012 and it continues to grow at an estimated 14% compounded annual growth rate.
So pretty sizable opportunity here. And when you add to that that our content in these applications typically range between $11 $22 You can see that this is a sizable term for TI that we're going after in this space. So that was one application within the automotive space and one solution that we put together in the automotive space. The next one I want to talk about where we have done a lot of integration is with motor drive. And again, this is back to the motor drive market with 10,000,000,000 new motors being shipped every year.
What you see up here is one of our integrated motor drivers. It's actually the world's smallest brushed DC motor driver. It's 75% smaller than competition. This really matters in a lot of applications. If you think about toys, you think about the toothbrush, if you have one of those from Braun or Phillips, you think about meters, size really matters and you can make these designs very sleek and very small.
So some of the typical applications we are in here are gas and water meters, electronic locks, industrial micro printers for point of service or ATMs, in cameras and in toys. You get better performance. Our customers get better performance out of these devices because the efficiency is much higher on these devices compared to competition. And also, I want to talk a little bit about the easy to use tools that comes with this device. So we basically spend time together between our MCU team and our analog team here on the motor drive side developing tools that basically enable our customers to spin a motor within minutes.
So while this could have taken you days or maybe sometimes weeks in the past, you can actually now spin your motor within a few minutes as an engineer by using these tools. So pretty excited about the progress we're making here and pretty excited about the integration that we've been capable of getting in. You will see, if you can read it down from where you're sitting, you will see that this device actually includes the full protection of the device, which means there are almost no discretes sitting on the outside of this device. It's all integrated into 1 piece of silicon. So in summary, you know, we're in a strong position in high volume applications.
We are leveraging more than 30 years of analog signal chain and power management expertise and leveraging deep application insight from close customer relationships. We are the analog integration engine, the TI. Our capabilities are around reducing size, design complexity and of course solution costs for our customers. And as why we do that, we also increase efficiency. Obviously, leveraging the technology and manufacturing scale to support our customer growth.
And we feel we are very well positioned to grow with customers as these applications ramps to volume. So with that, I want to thank you and I think we are going to open it up for Q and A, Ron, on the High Wire Analog and Logic Business.
Neils, when it comes to integration, there's some customers out there that are looking for a very high level of integration in analog and even to the extent that these are analog ASICs or highly customized solutions. Just philosophically, what's TI's view on targeting more ASIC type of a business model in analog? Because I know historically it's been more of an ASSP model.
Thank you. Yes. We haven't really attacked the ASIC business model yet. We're very happy with where we're playing right now. We have a good balance if you when we get the other guys up here to talk about the catalog businesses.
There's a very good balance between what we do in those spaces where we enter much earlier typically when applications are new. And then as those things go to higher volume, integrating that into the high volume ASSPs that I do in my shop makes us continue to grow that revenue on top of what we have on the catalog side, right. So we're pretty happy with the focus and the business model we have around that today.
Stacy? Thanks.
So you talked about having 10 fabs that you're making H valve products in. And you have a big 300 millimeter fab that's primarily being used as far as I understand for H valve that is mostly empty. What are some of the barriers that stop a greater degree of fab consolidation at this point? Is it customer qualification requirements? Is it just keeping the capacity to serve future growth?
Or what? Why isn't that possible or desirable?
In some aspects, it's actually desirable to be in multiple fabs. And you had a couple example of this in the last few years with the Thailand flood and some of the other natural disasters we have seen. So we actually have customers, very high volume customers who find it to be a great advantage that we can actually run their devices or my devices for them in 2
or 3 different factories. And that way, if one factory gets hit by
a natural disaster, we can sweep factories. And that way, if one factory gets hit by a natural disaster, we can swap over to the other one and continue to ship the volumes that they need, right? So
For 10?
For 10 is because you're asking whether we need 10. Again, I think when you look at our volume across high volume analog and logic, we ship about 12,000,000,000 units per year. So just to drive that kind of volume, I think I prefer to be across all 10 fabs, yes. I don't see a need for consolidation at this time. I don't think it will help us
much. David, go ahead. Got a question. The you have MEMS technology in DLP and I see that a lot of applications for MEMS in automotive. Is it possible to move that technology over?
And if not, do you need to buy your way in?
Brian, do you want to talk about what we're doing in DLT on some of that?
Do you want to turn my mic on? Sure. Yes. So if you look at DLP, it's still a great business for us, dollars 800 plus 1,000,000 a year. We are actually moving into areas like automotive.
So things like heads up displays to even the consoles to use the DLP technology. As far as just the pure MEMS technology, we do use that and integrate it in multi chip modules and a few of the products, the catalog products that we have here. But really, I've been focused on keeping the core DLP engine as our expertise and not necessarily leveraging outside the MEMS capability, but definitely places for us to expand with DLP. You can buy today, you can buy for your iPhone, month on the table. You can actually buy a sleeve that has a small Pico projector in it that you can display on a wall to things like automotive, to many other applications where we're seeing in a broader market space for DLP.
So a lot of opportunity in DLP, not necessarily in terms of just taking pure MEMS as a standard product out to a lot of different markets. Okay.
Brian? Just thinking maybe the other side of Stacy's question, How different are the analog processes? And I guess if you think about sort of growing into your analog capacity, how difficult would it be to potentially grow that inorganically? Meaning, there's 20% of the market that's sort of other that's in analog. I mean, what's your capability from an analog process perspective to be able to potentially grow your analog business inorganically and integrate other types of products or other people's technologies potentially into your processes?
Yumi, are you talking again like MEMS technologies or you're thinking
No, I'm thinking just sort of a sort of market consolidation if you guys were to consider growing analog inorganically similar to the National. Obviously, National had capacity, but if you wanted to say acquire somebody who was fabless and move that capacity internally to grow your business inorganically, how difficult would that be?
I probably am not the right person to answer that question. I don't know, Brian, do you want to take that too? Yes. I'll touch
it a bit. So I'll try to use the example that you used. You said if somebody was if we acquired a company and they were, let's say, doing all their manufacturing at a foundry, unless we have access to that specific technology from that foundry, you could not legally pull that into one of our factories. So you'd have to get an agreement with the company that owns the technology. However, if you acquired a small company and they did their own manufacturing, we would look at the equipment types, whether we have some of that equipment on our own or could move that equipment into some of our own facilities.
Very similar in some of the equipment and manufacturing equipment that we bought over the last few years for pennies on the dollar, we actually found equipment that we could reuse in some of our own process nodes to expand our capacity. So it would really depend on the match. But again, we'd have to have full access to that technology to be able to actually pull it into our own fabs. So there are some things legal things around that. Okay.
Yes. I think to add to that, from a product development standpoint, what you typically will see is probably you would get that new business on the internal TI processes and get advantages out of that based on the efficiencies we have on our own process technology too. So that will be on the new products, right? But you were talking about the existing products before, yes.
Good. Andres?
Thanks. Just
a little bit detail, but wanted to understand the business better. Among these various segments that you've laid out, could you help us get a feel for how big the various sub segments are? And then the other two questions are also where some of these, if you allow me, look like heading the way of that bird that got extinct, the dodo bird. And so where exactly are you focusing your resources on? So that's the second part.
The third is you talked about Automotives, which I said you said north of $200 How much of that is addressable by TI specific analog products? And then where are you in that? I know linear talks a lot about that. Other companies talk about that as well. So those three questions.
Thanks.
That's a lot of questions. But thank you very much. They're good questions. In terms of where we focus our investments, we try to move more and more investments into the differentiated part of the portfolio. So we are going for the higher performance and higher integration products within high volume analog and logic.
So that's where most of our resources are moving to we're also moving to areas like automotive that you saw up here. It's a very fast growing area for us that we continue to want to beef up from an investment standpoint. And industrial is also an area that we continue to increase our investments in. So those 2 are exciting areas for us. From an automotive standpoint and TAM standpoint, I think the easiest way is to maybe talk about a car and maybe walk through what a car consists of today, right?
And you start out with something like electronic power steering. In average, there's probably $15 in that. It's almost in 2 thirds of all cars today and it's probably going to be in all cars within a few years, right? You then look at something like an infotainment system on the embedded processing side. If you were there a few weeks ago, you probably heard about our Jacinto family and how that's getting in the middle of infotainment.
All the analog stuff that goes around that, you're probably looking at a $30, $40 easily in an infotainment system. We then get into something like the new driver assist systems that are based on imaging and radar technologies. And again, same thing, embedded processing process analog adds up to tens of dollars in those systems. Then you start looking at some of the more old fashioned airbags, ABS systems, all the motors that you have in a car. You have motors in your sunroof and in your seats, all the fans you have.
So that it probably we probably get pretty high up on that on the ratio that we can cover on that time, I would think. Well, I just went through some of the sizes of how much dollars you see in each, right? And the total was 2.70, right?
That's your business.
Between the businesses, I don't think we talk about that, do we?
Ron is saying no, I think.
I'm sorry.
We don't break down the businesses within the SPEs, right?
That's correct. Okay. Doug Freeman. Great. Thanks.
Could you talk a little bit about the drivers of gross margin in your business? How should we think about that? Is it driven by how much high volume business you do at your largest customers? Is it driven by the mix by end market? Is it driven by pricing?
And can you talk about what you see on each one of those specific items in the marketplace?
Yes. I don't think my business differs substantially from all the semiconductor business. It is all about pricing. It is all about the cost that you can get to. In many of these applications, it's all about integration.
And the more you can integrate, the more you can charge for these devices. It's obviously about having a good manufacturing footprint that gives you the right scale. So as these things go to volume, you can ramp them and you can ramp them at entitlement. So you don't want to come out of the chute with your margins in the wrong place because ramps in my space happens very fast, right? So I think it's the usual bottoms and knobs that you're used to from other businesses.
From a margin standpoint, a contribution standpoint, high volume analog and logic business is contributing well to the TI level.
Any other questions? Okay. With that, we're going to take a 22 minute break and we will resume at 3 pm. Take your seats. We're going to get started.
Wow, it went quiet so fast. Okay. Next up is Steve Anderson, who manages our high performance analog business. Steve?
Thanks, Ron.
Okay. Good afternoon. As a way of introduction, my name is Dennis Steve Anderson. I joined TI in 1999 from acquisition they made of a venture capital funded startup called Power Trends up in Chicago, power management company. 2008, 2010, I ran TI's power business.
And then in 2010, I took the high performance analog business over. So let's talk about the HPA business. HPA, in a couple of words, looking for a summary, catalog, analog, very key, but very diverse portfolio and very differentiated. Talk a little bit over here with my audio, and these are 5 different business units that make up my HPA business. Inside those 5 BUs business units, we have 18 different product lines.
Inside the audio and imaging business, we have a little more of a consumer focused business, audio amplifiers, converters, catalog touchscreen controllers, a whole portfolio of sensors, whether it be temperature, current, optical sensors and our haptics business. Brian had a slide on this and it's the haptics technology that we have is the technology that enables this braille reading in the e book, and it actually does quite a few other things too, very interesting technology. Moving over here to high speed, this is a business that differentiated with high speed data converters and high speed amplifiers, integrated analog front ends, RF products, integrated transceivers. So big focus for this team is wireless infrastructure, communication infrastructure, aerospace defense, test and measurement, looking at different methods of communication backhaul, DSL line drivers, all sorts of different equipment there. Interface products, any interface you can imagine that would exist, telecom data center, test measurement, medical imaging, whether it be video data, we probably have a part.
So very standards driven business where you have to develop something for HDMI or USB 3.0 or Thunderbolt, you're going to find something like that in this business. Medical and high roll business, we do medical imaging and health and fitness center sensor solutions. And then in our high reliability business, extended temperature, we like to call almost enhanced analog, enhanced industrial products where applications maybe in a small box don't get a lot of airflow. They need parts that can actually perform well over an extended temperature range. You'd find those products here in the Hyrell business.
And then finally, our precision analog business. This is differentiated. These data converters and op amps are different than our high speed stuff. This is high speed. This is high precision, high resolution.
So you're going to find many, many customers in many different industrial and equipments that would utilize our portfolio in the Precision Analog business. So not only do we have a lot of parts, HPA tends to have a lot of customers. This little pie chart here is actually all our customers. We ran out of some colors here because we have 70,000 customers in the HPA business. We have 70,000 different customer relationships.
Our top customer is not more than 5% of our total revenue. You marry that up with our very broad portfolio, more than 18,000 products. We introduce more than 200 new cores a year into this business. So really, our success here is not dependent on a single customer, but it's really dependent on our ability to execute, get those products out there, address those opportunities. And if we look for opportunities, one that jumps up for me in the industrial area, it's this area of industrial motor drives, a great opportunity for us.
A block diagram here of a typical industrial drive system. The TI parts are in red. MCU, a big part of the solution as well. So working with the MCU solution to drive a total solution here. And this type of the possible TI content in a system like this could be $30 with $25 of it coming from the analog shop.
So these are general purpose motors and all types of factory automation equipment, conveyor belts, automation, robots, all sorts of stuff. We think the market for this kind of end equipment is 20,000,000 of these a year. So lots of possible opportunities for us. And TI can address most of the Board in typical industrial solutions. So a great opportunity for us.
So industrial is very important for the high performance analog business. And not only do we have this broad portfolio of products, but we also inside the businesses have very deep technical expertise. We have analog engineers that have been with us for many, many years. So what we're trying to do, and Brian talked a little bit about this project level selling, but we've kind of taken it to a different level inside the business, where we've been embedding our signal chain experts from the business into the field, spending months at a time working with clusters of small industrial customers looking for opportunities to, number 1, help them solve their problems number 2, make them aware of everything we can bring to the table, not only in HPA, but across the analog portfolio. And number 3, get more intel on what they're up to.
I mean, understanding our market in industrial is very important. So we've been had pretty good success over the last couple of months of embedding these experts into the field, allowing them to deeply get very deep with our customers and actually work on problems at the engineers bench. So actually have them at the desk working on different drawings and designs. So we gain the customers gain insight into TI. We gain better insight into our customers.
And it really creates a situation where we identify new business opportunities. So another part, another method for us to grow is through the idea of innovation and integration. Neil has talked a lot about integration in his pitch and so did Brian. But for us, a great example of innovating and integrating comes out of our precision analog business. Recently introduced this ADS 1299, a 24 bit, 8 channel EEG analog front end.
It's used in non invasive brainwave monitoring in a portable medical application. What's so unique in the integration part of this is complete analog front end subsystem, 8 gain amplifiers, 8 high resolution data converters integrated into one package. Highest performance product in the market, today 75% lower noise than our competitors, smaller footprint. So it's great this integration lends itself to saving size and driving system costs lower for our customers. So hardware and software tools simplify the use of this inside our customer base, but a great example of our ability to innovate and integrate at the same time.
In summary, HPA engages a very large diverse customer base. Largest customers, that 5% of our total revenue and customers spanned all end equipment. HPA is really it's critical for us to leverage TI's sale scale in the sales and marketing area. We can take most advantage of that. Portfolio is very broad and differentiated, complete signal chain solutions in areas across the board from industrial automation, audio, metering, medical and base stations.
And finally, innovation delivers performance, size and power breakthroughs that are critical for our customers as they can drive better performance in their end equipments, actually use less board space, they can drive a smaller form factor, and they can actually improve their cost. Finally, tremendous cross sell opportunities across the HPA and the rest of TI portfolio, working together with the other businesses. And you saw in these examples, us partnering with MCU, us working with Power, us working with HVAL to drive more business opportunities. Okay. With that, I guess we'll
Okay. Questions for Steve? Dave is slowly working his way over there, Torrey.
Thank you. I was hoping you could talk a little bit about what is that TI is missing in HBA? And maybe touch upon a little bit what you got with National because obviously National had a big industrial business. They were also very strong in high voltage. So what's TI missing today?
And what did you really get with National to fuel the HPA business? Thanks.
Yes, it's a really good question, Tore. And I think it actually goes together. What some of the things we were missing in the HPA product portfolio, we got through the acquisition of National. And Dave and I, we find ourselves our precision analog businesses actually working very close together. We're in the process now of doing some system block diagram solution work where we can take application notes into the field, into our customers, drive and deliver a total solution by working through areas we didn't have coverage in HPA and supplementing what Dave didn't have with the national business combined, we have an unstoppable portfolio.
So it really works together. Those two pieces actually work together. The other area that we've seen the really nice synergy is in our high speed area where we're able to go into the wireless infrastructure markets and deliver a total analog signal chain solution to our customers, something we couldn't do on our own and National wasn't able to do it either. But the combined portfolio for us has been really awesome.
Other questions for Steve?
David?
Is your growth rate, if you go back to the chart where you mark off Q3 as the one. Have you grown faster on HPA side than the comparables like a Lineartech or Analog Devices. Because I think those are the 2 closest comparables.
Yes, I don't think we break out any of the SBE or the HP or HVAL or Power or SBA individual growth. We only look at it at an analog level, at Brian's level.
We only disclose it at the analog level. Oh, well, of course.
No, no. We look at it
quite a bit actually, but
correct. Other questions?
Steven? Hi. A question on your data converter products and I guess any other components that go into sort of high value industrial equipment. How's the more recent demand trends from that market, especially given that there's a lot of demand from China and with the PMI up recently in the most recent reading of it, it seems like it may be turning. Just kind of wondering how that's looking for TI's business?
Yes. Well, I visit customers a lot. So I think the general sentiment could be summed up as being a lot of uncertainty with our customers. They're not sure what's going on. That being said, I do see a lot of design activity continuing to happen.
And I think waiting for maybe global economic conditions to change a little bit, so they start getting orders for their end equipments. We'll see things maybe change there, but the design activity is still very strong. Some of these design cycles, especially where you have the high resolution data converters, are sometimes much longer. And it takes them a long time, so they could be in the midst still of a next generation design cycle. And by the time they're ready to release, who knows what the economy would be like.
So we still see long design cycles with industrial, but also a long tail and long life as well. Stacy?
Thanks. I remember sitting in an Analyst Day in 2,008 where you broke out historical growth for HPA. And back then, it was you were very specific that that business was growing in the high double digits 20% a year. I think that's where the old 20% targets for the business as a whole came from. Certainly, we're not seeing that anymore.
But is there any I guess, Bethan, you seem to be growing the business significantly faster than the overall market. Right now, again, if you're looking at share gains of the analog business as a whole, it seems to be active maybe slightly above the rest of the market. So maybe if you could give us some feeling for, I guess, number 1, what might have changed between then and now? What are the prospects going forward? And then maybe some color on whether or not HPA right now is either growing about the same above or below the overall business?
Is it still a growth driver of the business as a whole?
Yes. Well, I mean, I think Brian talked about the analog business and gaining share and continuing to gain share. So I think the gain share topic is covered in Brian's comments. The HPA business is a wonderful business. It addresses a market that is incredibly diverse.
I mean, if you look at our spread, 70,000 plus customer relationships that we have across just unbelievably different end equipments. So definitely a very it's a very good business for TI and a very exciting business.
But it used to grow a lot faster than the overall business in literally 20% a year and we're not seeing that anymore. So what's has anything changed? I mean, what are the expectations going forward from here?
For us to significantly outgrow the market, that's the expectation. So and Brian said it, I mean, we have gained share. We have moved forward. So I mean, it's for us to continue on that trajectory.
I moved faster, so. Ryan? Hi. Ryan Kramm with Charter Equity. Just curious about the SBA.
I think within analog, it comprises about 20%. And you guys have said that looking out over 2013, it's going to continue to represent about 20%. Is that the right characterization still? And I guess what's going to grow those products further out into 2014 because I think that was mentioned on the last conference call?
Yes. Was that SVA you asked about or?
Yes. So like that.
That's Dave. So he'll be up, I believe, next.
So, okay. Other questions for Steve?
Doug?
Thanks. So I think building on Stacy's question a little earlier, when we the investor concern with the analog market is that we're reaching maturity. We're not growing at the rate we used to grow. As a result of that, are you finding yourself having to do business in any way, shape or form differently than you did 3 to 5 years ago? Are you finding that you need to do things to defend your IP more than you used to?
Where is sort of the leak in the boat to growth in the HPA business?
Yes. Well, I don't think HPA is very unique in that I believe our customer designs and wins are actually done on the engineers' desks. So this is a very technical win. So I don't think anything has changed there. I mean, we talk about our high speed data converters.
We're talking about high precision data converters. We're being selected because of performance, and that is key. So I don't think that has changed at all. In fact, I believe our opportunities continue to grow, frankly. I mean, we have many, many different end equipments in the industrial area that we continue to look at and create solutions.
And if anything, we get stronger with the addition of the national business, where Dave and I can take that precision analog portfolio and walk in with even a totally covered solution into our customers. So they love it. I mean, it's being able to deliver that total solution and solve big problems for them, allows us to win and grow. So I don't think any of that's changed.
I guess I have a question for you along the similar lines. Do you believe over that time period or going forward, Steve, there's been a shift in the market dynamics that would favor, let's say, an HVAC or an integrated solution type of business versus a more catalog or standard product type business or is just fundamentally at certain points in time, one area will grow faster than the other, but nothing fundamentally shifting.
I don't believe anything is fundamentally shifting. What we do bring to the table, those choices. So we can go to a customer depending on what kind of end equipment it is and offer them choices. Neil said it. He does a lot of integration.
That a lot of the IPs integrating is coming from the power of the HPA business. He's being able to put that all together into a package that makes sense for that customer and for their own equipment. But as Neil has also said and Brian has mentioned it too, sometimes solutions require a discrete implementation of those chips for driving better performance and where performance matters for those end equipments, that's what the customer wants to have. So I think for us to be able to offer options, I think is awesome. I mean to be able to go in and give them choices.
Other questions for Steve?
Hi. Just one quick follow-up. In terms of the products that you have and the new products you're introducing every year, how much of that is innovation on the packaging front and maybe assembling different types of components into one package as opposed to a new analog process that's driving the differentiation?
Yes. Well, okay. So a couple of different things. I mean, a big differentiator for us is our process technology, clearly. For us to be able to run that in our own fab and us to be able to tweak that process technology and for us to be able to drive some differentiated product performance through that process technology, that's key for us.
The other part of that is packaging. Packaging is very, very important for us. Whether we again, this is offering our customer options, choices. If we can offer a multi chip module and maybe they want to move from a
discrete solution to a multi chip module, having
that flexibility with our packaging opportunities for us. As that moves forward and our customers' end equipment evolves, we stay right with them with maybe the next generation package. So, it's really a great opportunity.
I guess just to follow-up on that, just referencing the one of the slides that you have here where you mentioned greater than 200 new products each year. Just roughly speaking, is that half from a packaging innovation, half from process innovation
or?
No, those are cores. So those are actually 200 new cores. So we'll get we'll do different package spends of those 200 cores. So those 200 cores will branch out into 600 to 800 orderable parts. So yes, that would not include a package.
Great. Thanks.
Thanks. Other questions? Ellen also just reminded me just a point that might be useful. It was in 2,008 that we broke out our power business, our power management business separate from our high performance analog business. So pre-two 1008, Power was part of HPA.
And then since then, they've been run as separate businesses. So that also when you go look at history, and I can't Stacy, I can't remember specifically at that 2,008 analyst meeting what we were showing in terms of historical data on each of those. But in any okay, but in any case, that was the year that we did break those businesses out separately as well. Okay. Any other questions for Steve?
Okay. And with that, thank you, Steve. Next up is Dave Heacock, who manages our Silicon Valley Analog business.
All right.
So good afternoon. Again, I'm Dave Heacock and I manage Silicon Valley Analog. And Silicon Valley Analog or SVA is comprised of the former National Semiconductor Business Unit. So you can think of SVA equals national. I came into TI in 1999 through the Unitrode acquisition.
I managed the battery management business and then the portable power business. 2,007 took over high volume analog and just recently earlier this year moved over to manage the Silicon Valley Analog Group. Before I get into talking about all of the products and more details of the portfolio of SVA, I did want to spend a few minutes around the acquisition and what's really been going on over the last 12 months or so and what are some of the things that we're seeing. So first and foremost, the customer response has been very enthusiastic. We have been able to take this portfolio, add it to the existing products with TI and have been able to go off and drive some additional share and additional solutions out to the many customers that are there, reengage with a lot of customers from the former national side of things and be able to take the national portfolio into a lot more places, a lot more customers worldwide.
When I look at the as Brian mentioned earlier, he talked about that winning combo, that system solutions and everything like that. The ability now to be able to take the former national portfolio and be able to use that to really emphasize certain aspects of our existing TI portfolio now got much bigger, much broader, and we're able to then drive a lot more systems and solutions. You heard it from Steve when he looked at the wireless base station. We're able to again cover it front to back and up to down with this type of portfolio combination. Culturally, these companies are really similar.
As you all know about analog, domain knowledge is very, very critical. You have to know about the details and the nuances of the process. You have to understand the end application, the problem to be solved. You have to be able to innovate between those two to really deliver the right performance, the right product to go off and solve the customer problem. We have been able to find that with the experience and the longevity of the former national group inside of TI now.
You heard Brian mention about the WebBench. This is a great tool, one where customers can quickly simulate and evaluate different system parameters to really choose the right solution for their system, be able to look at a bill of materials and be able to get samples and really move that product into production faster and with less engineering effort. So really that longevity, that experience all came around with the acquisition. Relative to the manufacturing and sales, those are fully integrated to the TI structure. So that very seamless now in the manufacturing and the sales front.
In terms of cost synergies, we talked about being able to obtain $100,000,000 of cost synergies between the integration of the two companies, and we've been able to do that. In terms of IT systems integrations, you heard in our quarterly call that, that's now complete and that's done. The great news there is the ordering, the way the parts are shipped, the systems that are used by the field and what the customer sees. We now look like any other business inside of TI. So that's really helping out and adding some good benefit.
And then finally, the distribution network changes are all complete. We're moving into that consignment program that's proceeding as planned. And again, it makes the SVA business and our products look very equivalent to the other businesses inside of Texas Instruments. Going into the acquisition, we kind of had this model around year 1, probably the national portfolio would continue to lose share. Year 2, it would kind of flatten out and perform with market.
And year 3, begin to grow at a rate that was equivalent to the other businesses inside of TI. I can say that that looks like that's on track for that. So let's what's inside our business? Well, we have 4 business units. The first one is the signal and data path.
These are high speed data converters, high speed amplifiers, low noise clocks, retimers, excuse me, Internet or excuse me, Ethernet, industrial Ethernet products, video interface, all of these go around to be used inside of telecom, in the wirecoms market, inside of test and measurement, automotive infotainment and driver assist. So the lane departure systems would utilize these type of products, security, video surveillance, factory automation, so that highly industrial area, perfect portfolio of building block components to go into that marketplace. Very complementary to that is our precision signals path that has low power and low voltage amplifiers, very much complementary to what you see in HPA. We have data converters. We have integrated sensor analog front end.
So these are very much optimized for particular sensors that you see out in the marketplace, as well as electrical fault and architect type products, again, industrial automation, metering, sensing applications, tablets, telecom storage and medical equipment, typical markets for these type of products. Over on the power side, we have a great business there and a power business that's very complementary to what you see in our power division. We bring in the simple switcher brand of products. This is more than 16 years, as you saw from Brian earlier. It's a great brand that's out there.
It's a little higher input voltages. So it's very complementary to the existing power portfolio that TI was able to offer. We're now able to go in with wider ranges of choices and a much deeper and broader portfolio out into the marketplace. Again, system isolation, system protection are all new parts that are part of the portfolio focused at energy, high voltage applications, computing and automotive. And then finally, we have the mobile product business unit, and that's really focused on kind of that mobile lighting, the LED backlighting, display bias power.
Part of this also includes a very specialized technology around powering the RF power amplifier into smartphones. So again, the markets there are going to be wireless smartphones, they're going to be tablets, they're going to be that infotainment and also entertainment. And we've actually seen some traction of these type of products now over in the automotive space as these type of displays are becoming more prevalent in the automotive market, and we've been able to adopt these type of parts to that type of marketplace. So what's the portfolio look like? If you look at the first half of twenty twelve and the overall market, we got some data from a company called DataBeans.
They looked at the entire analog market and about 31% of that portfolio comes out of the industrial space. When you map the same the revenue from SVA during that same period, 42% of our revenue comes from the industrial space. And it's one of the things that was very interesting for Texas Instruments when we looked at National is that portfolio was being sold to and being pushed into a space that was dramatically different than what the business makeup was of the current TI analog. So in fact, our 42% industrial average is up TI Analog's penetration into the industrial segment. Why is that interesting?
A lot more customers, a lot more applications, places where we can leverage the entire Texas Instruments product offering, embedded processing, a full range of analog products into these customers, into this segment. We've got a large sales force with both sales and application engineering support worldwide, very much aligned to the industrial segment. And we got we're able to jump in and get some new customers some new applications for TI to go off and service. A good example of this is the LMP 9,100 hundred family of integrated sensor analog front end. This device takes the small building blocks necessary to really be on the front end of the sensor, combines it into a single package, much smaller footprint, much lower power, much higher performance.
The great thing about this is now if you're in a nondispersive infrared sensor, you can utilize this system, 1 chip, without having to go off and spend a lot of time and energy taking those building blocks and trying to bring it together. You can use the single device, get you out to the market much quicker. This leverage is in our web bench tools. So the customer can evaluate and simulate the solution before they actually make the PC board and be able to make the final selection of the part. It's the first device that really goes out there and senses carbon dioxide and greenhouse gases and some other gases.
Applications could be like building ventilation and making sure you steer air in the right directions and also can be used to measure alcohol breadth analysis, so maybe an automotive application there. It's a first of a family of parts, so we're going to be expanding it into other gases to detect water pH, humidity, pressure and temperature sensing. So it's a great building block and we've got a great family of parts coming out in this area. So what you want to look at on this one is you think of each part or die as a product. It can come out into multiple forms.
You heard different voltage ranges for this base product or different packages or different temperature options. But when you look at the SVA portfolio on a single part basis, you can see that we have no part that's really driving more than 1.3% of our revenue. In fact, you look at the top 25 parts and that's only 20% of the SVA revenue. So it's a long, long tail of parts out to lots of customers and lots of different packages, lots of different options. And that's really defines what the industrial market is.
It's a very stable portfolio. It doesn't jump up and doesn't jump down. It's down in the back of one particular sector or one particular customer, but it's lots of parts to lots of people. That's what makes the national portfolio so interesting and so compelling to bring under the TI umbrella. You ought to talk about how the sales force and how the sales force is helping leverage the SVA portfolio.
Day 1, we were out there in the industry pushing, pushing, pushing what's this portfolio. What we did here is we took a snapshot of the activity of just Q3 of 2012. And what you see here is kind of a heat map across the world, and each one of those little red pins you see represent a new opportunity at a new customer that SVA wasn't working with in the past. The gold pins represent a new opportunity at customers that National was doing business with in the past. So really quickly, visually, you can see that the larger sales force and the larger sales footprint has really taken these products to a lot of new customers across the world.
In fact, we've gotten, not surprisingly, a lot of interest and opportunities in North America, Europe, the emerging industrial segment in China, Taiwan, Japan, Korea, all have opportunities for this particular portfolio, and we were able to go out and find these opportunities and really drive it. In fact, we even got some going in South America. Really, the opportunity now for us is to take these opportunities, convert them into design ins and then eventually design wins and growing portfolio revenue into the future. Takes a little bit of time to take these opportunities and move them forward. But as you can clearly see, having a larger sales force out there is one that's really helping out to drive a new capability to this Nationals portfolio versus what they were able to do as a standalone company.
So really, in summary, integration is on track. We have a diverse signal chain and power portfolio of over 12,000 products. We have the added strength of this very stable industrial market. The product revenue is very diverse. There's no one product is driving more than 1 beginning to drive results.
We're rapidly expanding the contacts and where this portfolio is going. We're seamlessly now integrated with the rest of the TI systems to the field and to the customers. They're all getting parts from Texas Instruments. This customer diversity really means that we're not dependent on growth on any particular segment or any particular one customer to drive our results. We're really going across the whole board and really just getting into the 90,000 plus customers that TI have with now a new and interesting portfolio.
And I believe that we're well positioned to be able to grow and add profitability to Texas Instruments in the years ahead. So with that, I guess I'd like to open up the floor to some questions.
Okay, Sean.
Sorry, Tore.
Sorry, 2 part question. Okay. About Integration and gross margins, starting with gross margins. Is there anything that has changed structurally with the Old National's gross margin structure under the TI umbrella in terms of where they're sitting now or where they could sit relative to where they were sitting before they got acquired? And then the second one is on integration.
Is there any reason why the products and people within SBA wouldn't be just reallocated to some of the other business units that already exist?
Okay, thanks. Very good question. So first on the margins, as you saw, we were able to achieve some cost synergies between bringing the companies together. We're able then to leverage the input buy price for all the wafers, the chemicals and all this kind of stuff and be able to take care of the greater part of TI and have that in our manufacturing spot. So really fundamentally nothing's changed in that structure.
And I think it's one that as we continue to look going forward, it's a big leverage point for us is to make sure that we're getting the lowest and best cost around. So that hasn't changed. Relative to just dispersing this among the existing businesses, one of the important aspects of the national culture, I mean, it's more than 50 years of capability in the analog space. They learned a lot. They know a lot about analog.
In fact, they brought WebBench into us, which is a great tool for us. They got a lot of domain knowledge that we don't want to lose. And by holding this SBA here, we've got a high degree of accountability. There's a lot of passion and excitement around the team and the group here in Silicon Valley. We've got a great feature and as you see building a large space here that we want to keep around and we want to make sure that we're growing the site and we're growing the capability of the team.
And it's really about holding them accountable for the results. And I think that given the excitement and the energy and the focus that we have on these teams, it really doesn't we're all growing Texas Instruments. It doesn't really matter if it's under HPA or if it's under SVA. Our sales force looks at it as TI products, our customers look at it as TI products and we want both of them to be able to grow.
Tore? Thank you. About a year ago, Greg Lowe was on the same stage and he talked quite a bit about National's pricing strategy that it was just simply wrong. It wasn't working out and that was going to be the first thing that SVA changed. Could you talk about that?
And is there any way to quantify if that change has resulted in anything accretive, maybe percentage of increase in design wins or just trying to understand if that's having a positive impact now on SVA? Thanks.
Well, I've been out in the field and I can tell you firsthand knowledge at customers where they were able to re gauge with us as Texas Instruments with the same portfolio that was essentially banned or blocked by the purchasing department inside of the companies that we're dealing with just because of those pricing strategies. So all that's gone. In the end, you got to price the part to the function and to what the market and what the features it provides. We compete on the performance of the parts, and I'm very confident in the team and their ability to deliver high performance devices out into the marketplace. We're able to leverage a greater cost structure that TI has.
So that helped change the equation a little bit. And we're getting a lot of positive customer feedback versus what was happening in the past. So I think that's behind us and I haven't heard of any situation there where the past practices are still blocking us from getting in there. What I found is kind of interesting is because of this industrial segment that we're in, there are several customers out there that are now we've lit up real nicely. That was a good business for the former National.
We've been able to come in and leverage greater TI portfolio at those customers and earn even more of the system and more of the board. So we're really kind of going in with that solution cell and doing it where we're not trying to beat each other up, but we can able to come in and put the right components at the right place and be able to get more of the application TAM than we were able to do in the past. So that's really how I'm seeing and looking at this going forward. Hard to quantitize this right now, but I think in the end, as we get TI analog growing and this contributes to that, you'll be able to see those turn up in some results.
Stacy?
Thanks,
Ron. So you talked about you mentioned briefly your lower cost position with your manufacturing is being attractive to customers, so did Neil, so did Brian. This is always a controversy with the manufacturing footprint. I think when you get this whole question of do you use price as a weapon either to fill it or simply just to drive some volume. And it does sound like from the commentary that, that lower cost that you can offer has been sort of an attractive point to customers.
So can you talk a little bit about how you're using your manufacturing advantage with lower cost and conceivably to offer price in order to drive volume or win business?
And we always compete on functionality of the part and that's what the application demands. We go out there and price it to the market that way. We've got cases where parts and I was talking earlier on this, there were some devices, just roughly a couple dozen parts that were actually the same part number from TI and SVA and the pricing was different. And some of the questions were around, why aren't they all the same? Well, a lot of these parts are designed in the system.
Some of them are going into medical systems. They've got agency approval on that. They are not going to change the BOM. And a lot of times, in the analog side of things, it's not the biggest component of the cost of the system of what the amplifier costs, whether it costs $0.10 or $0.20 it doesn't really make much of a difference at the end equipment. So that's part of it is where we go in and we value price it.
We make sure that it's for the right application and all that. And we just don't get into this trying to number our way into it or trying to say, well, XL says this is what it's supposed to be the price and run it that way. And I know you saw a little bit of that in the past with National, which was trying to force it to a particular corner. For us, we let the product compete on its own merits and make sure that we price it appropriately for the marketplace.
But it's fair to say that in some parts of the market, I mean, certainly cost is not the only thing that drives the purchase, but it becomes one part of a purchase decision. And are you able to pull that are you willing to pull that lever for those parts of the market where it may make sense to you?
Well, our goal is to outgrow the market and our goal is to return above average operating results out of the analog segment. So in essence, we're going to grow and we're going to be able to do that. So if it what it takes to do that, we have that open to us and we will use that as we need to. But I want to really get down to this isn't just to push of pricing lever or a pricing point that is not really what grows market share in this business. What grows market share is great customer interaction, great customer support, great products, being able to bring the whole solution in.
Because when they're doing that then, a lot of these applications have a little bit of power management, a little bit of high performance analog, a little bit of embedded processing. Any one competitor can just do a little bit of it since we're able to cover the entire board. All of a sudden, it's a very significant customer for us because we have a broad portfolio in which to bring in there where we can leverage and really provide solutions where our competitors can't. And I think that's really where the strength of TI comes in and how we've been able to leverage that into market share gains.
I know it seems like ever since we opened up our 300 millimeter factory, we consistently get the questions from analysts and investors, not if, but when are you going to pull that price lever because you have a cost advantage, so why don't you take advantage of it? And we've tried to pretty consistently say this really analog really is not a very price elastic market. You have to be competitive, but you don't win on price. And we're not trying to be virtuous here. If we thought we could pull a price lever and take down a lot of market share and at the same time grow earnings consistent with that revenue growth, we absolutely would do it.
But it truly is our fundamental belief and experience in the marketplace that price is not the lever you pull to grow market share. It's the products you put out, it's the support you put out and you have to have prices that are competitive.
I'll make sure not to ask the pricing question. Can you give us a little insight into maybe some of the special training that might have been required to get the national people to learn about the TI product portfolio and vice versa. So it's been a year now. So I'm sure and where you are in that process.
Sure. And we spent a lot of time with that training the field. The great news about the field is they're very much business unit and product line agnostic. They're all compensated on just selling Texas Instruments. So they sell the portfolio and they're looking around where the revenue comes from, which group it comes out of, has no bearing to them.
It's all just TI. So I think that's really helped the sales force. In other words, they're embracing the portfolio very quickly because it now gives them some additional devices that they didn't have in the portfolio before to be able to offer out to the marketplace. We also have some very unique integrated tools that allow us to deploy key roadmaps and the key product roadmaps. And during the 1st couple of months, we kind of color coded, okay, here's what the existing parts were, here's what the former national parts looked like and you're able to see that.
We've gotten away from the color coding now and it's all just Texas Instruments moving forward. And we just really treat this as just like any other business inside of TI. The fact that we're now on the same systems means evaluation board, samples, how you get a price quote, all of that stuff is the same across all the businesses. So from our distribution partners and how they look at us and how the field will react to us, it's very, very equivalent. Lots of training on our design engineers and the different processes because they can use the former national processes or they can use the Texas Instrument processes.
And we have some groups that have moved over and are designing parts on the traditional TI ones. We have some groups inside of TI that are designing ones on the traditional national. So again, it's just added capability for our teams so that they can go off and deliver the right product to the right customer at the right time. So it's really, I think, quite well and we'll continue to do that, but really there's no fundamental training or anything that's in our way going forward.
Great. Thanks for all that color. To follow-up sort of on that same general gist, you talked a bit about trying to align the roadmaps there. How do we think about sort of the long term strategy for SVA and completely integrating it? Because there is a lot of risk for you have a power product team within National, you have it or SVA, you have an amplifier.
You have very similar talents within SVA as you have in HBA, as you have in Power. Why is there not a benefit from just getting them all together and what's the longer term roadmap to make that happen?
We've got $35,000,000,000 of market TAM that we haven't got under the Texas Instruments umbrella yet. And it's really all about what are we doing with the new product efforts and making sure that our new product investments are not going at the same socket at the same time, so that we're not duplicating effort. Granted, we've got lots of teams that do power, but it's very clear that no one group can service this wide diverse analog market that's out there. And having teams that have that domain knowledge and that they understand sensors really, really well, they understand a non dispersive infrared sensor, it requires that additional infrared sensor. It requires that additional effort to go off and learn that and we've got teams that have done it.
They understand it. They know where that market is going. They've got a lot of trust and build up throughout that whole supply chain for that particular product. So they know where it's going. Which SBE it in is very arbitrary, it doesn't matter.
We have the product lines fully enabled with test, design, marketing, product definition, application support to go off and attack the variety of these applications out there. And that's really what they're being promoted and being pushed to do. We look at the roadmaps and we just make sure that we don't have 2 teams doing the same chip for the same guy. The way we're able to find that pretty quickly is it's all one sales force. So when they walk in and they see 2 teams doing the same thing, they raise their hand, they'd call quick time out, we figure out who's doing what and the team that's got the best capability and the best chance of winning is the one that goes off and does it.
We always have more products, ideas than we have people to do it. So we just get that other team working on the next part on their roadmap and they work together quite well. So I think that's really how we have a high degree of accountability to the design teams as well as still make sure that we're not duplicating effort. And as I mentioned before, there's $35,000,000,000 of additional market out there for us to go after and that's really what we want to point our people at.
Arnab. So this is maybe a Ron or Brian question. So I apologize if my processor is a little weak here, but I think I may have totally misunderstood the message. So, so far I heard TI is going to do great, gain market share because you have all these fabs, you have great manufacturing capability and you have a lot of salespeople. Yet there's no it's not a price elastic market.
So what's the benefit of having all this great manufacturing capabilities that you got it for cheap and that's great. You didn't tell us that you've got the largest number of analog design engineers, you're going to get these great products out. So could you explain that a little bit? I mean, what
is Well, we're planting a lot of seeds out there and we're winning a lot of sockets and we're going after the systems where we literally sweep up all of the analog content in a particular system. All of these products grow asynchronously. What's ramping over in the automotive segment may be different than what's ramping in a consumer electronics or a new x-ray machine that's going out. And these things tend to run-in cycles. And if they all hit at the same time, we're going to want to be able to service that.
We don't want our ability to ship to limit the market share that we're able to get. So even umbrella now that's much wider than that, we have the ability to ramp into that very quickly. We've shown that even with very unusual market situations where flooding or something comes in to disrupt the supply chain, we've been able to respond and react to that with very flexible manufacturing capability and therefore really deliver into these sockets and into these systems when customers want that. That's what they're looking for us. And when they kind of entrust us with their systems, they want to be able to know that they can do that.
And that's where I think that with the amount of designers and the product lines that we have and the portfolio that we have, we're planting these seeds for future growth right now. Steven?
Yes. Two questions. First one in terms of the growth strategy for SVA, I remember one of the last analyst days that they had prior to the acquisition, alternative energy, power electronics and also LED lighting so on and so forth. Those were some of the key cornerstones of the growth that they were talking about previously. Just wondering how that strategy has played out in the past year or 2 and if that is still a big part of growth for
SVB? The LED lighting is underneath Sami's group. So he'll kind of talk about that under the power side of things. As we look out where our growth drivers are, you kind of saw the integrated AFEs, you saw the sensor and data path where huge number of cameras that are being put into automotive now. So in order to get that information from around the car, you have to have a high speed interface to be able to bring that around.
That's something that National was very famous for in the past and have that good capability with our type of focus, then we can be able to use that to help drive growth. I'm confident that we've got the right portfolio in place and the right focus in place now to be able to grow this unique portfolio. We knew it was going to be a little bit of time just to kind of integrate them inside of TI. We've now got growth into 2013 and you heard about our announcement of a little bit of change in revenue recognition around the distribution side of things. We get that to me it's just a little bit foggy, but once we're through that, then I think we're well positioned to be able to grow the SBA portfolio, say, at the end of seeing those results turn up at the end of next year.
Okay. Thanks. And the other question I had, sort of along the lines of Arnab's question. I think it's hard to dispute the technology, the capacity and the product portfolio that TI has. But my question is more in terms of that TAM growth that you guys keep referring to.
Is there sort of a natural percentage of the analog BOM that any of your customers are willing to give to one supplier? Because obviously you guys can pick up a lot of business here, but is there sort of like a natural limit that your customers feel is not kosher to go beyond?
Sure. We've been in a lot of systems and this is across all that where you kind of hear about some of our analog competitors saying, hey, we're sole sourced in this particular socket and stuff. But when you're sole sourced, that means if you don't ship, then end equipment doesn't ship. That system doesn't go out the door. And a lot of times, there's no other equivalency in the marketplace.
So there's a high degree of trust that's being built that says, hey, they're going to be there when I need them. So when customers look at TI and they look at the investments we've made in capacity, they look at the fact that we can run the same product in multiple fabs and kind of have that seamless movement among those to make sure that the supply continuity is maintained, they actually have a lot of confidence that we're they're able to give us the business and they're able to trust the future of their end equipment with our particular product mix, where they might not be so not a similar feeling on a smaller company or one that doesn't have that kind of manufacturing footprint. So I haven't seen anything where people are hesitant to give us that because again, the key to making these products work and for them to be successful in the marketplace is the ability of these analog components to perform as expected.
Just a clarification on the point you raised about growth. So the targets that you guys have laid out for SBA is this year undergrow the market, next year kind of catch up with the market and year 3, which would be 2014, you would outgrow the market kind of in line with DI. So when you took over the helm, did you look at that and say, my God, Rich and Kevin, why did you put the target up? No. Okay, fair.
So then what are the milestones that we should be watching that you're willing to share with us that gives you the confidence if we ex out the revenue recognition change? What are you looking at that you can help us at least feel some confidence because we're right around the corner that you should be growing?
Right.
What I look at is we have OEM revenue along with our distribution revenue. So we should be seeing some things happening in that place. You saw our heat map there of the opportunities that are out there in the field, and it's really important for us to touch those opportunities, to drive them from an opportunity into a design in, into a design win and eventually revenue. So we're going to have a huge amount of effort and focus on making sure that once we see it and we're starting along that path that it's not more than a passing interest, but it's one where we're being able to drive revenue. So I think for us and what I'll be using internally as a proxy is just looking at that OEM type revenue because that stuff I can see and it's irrespective of how our revenue recognition is going on the through the distribution channel and everything.
That said, we combine those together, analog results, they'll have some mention and color on a quarterly basis. We got a little bit of headwinds with the distribution revenue recognition, but we expect that to be over the next couple of quarters and then be moving ahead after that. So you should start seeing this show up in results, as I said, towards the end of the next year.
So that means you're on track, right, Dave?
I'm on track, yes.
Okay. All right. Thank you, Dave. Next up is Sami Kiriaki with Power Management.
Good afternoon, everyone, and thank you for being here. Just a quick introduction. My name is Sami Kiriaki. I manage the Power Management business. I've been with TI for over 28 years.
I started in the technical area as design and system analog engineer, then grew through the managed area ladder, managed few oops, I'm stepping too quick here, managed few product lines, businesses and now power business for Texas Instruments. So just from a top level power business is very exciting business for TI simply due to the simple fact that it goes into each and every application in the world and it affords us the chance to really engage with each and every customers out there. And that is really, really powerful guys. So that's one. We have a history of outgrowing or significantly outgrowing the market in Power Business.
We have great growth opportunities ahead of us and TI is well positioned to really take advantage of it and continue that growth journey. So with this, let me step through and talk about our product portfolio. As you can see on the left hand side, we have power management products in the battery area. So those products that require a single cell or that's like wireless handset, 2 cells, maybe tablets, 3 cells, ultra book, 4 cells, notebook, 25 sales is e bike, maybe power tools, 100 sales is electric vehicles maybe and more than that is again bigger trucks and so on that are electrically operated. All of those require battery management solutions that we have whether it is charging, gauging, authentication, monitoring, balancing, protection, we've got those advanced solution in place and really continue to grow our business in this space.
Now we have also DC DC converters that tap into the battery voltage and bring it down to the application voltage required with the highest efficiency and smallest footprint and high power density. Such applications perhaps is backlight for handheld devices and maybe display LCD bias and OLED. This type of application need the efficiency and the low power so you can get higher operating time out of those battery, out of single charge in battery. Then you've got application that plugs into the wall power. Those application require technology, the controllers that really interface with the AC high voltage and convert this voltage into DC level.
Those controllers again has delivered the high efficiency, they are digital power in nature or maybe analog, we've got variety of those controllers in place, very, very high power density and high efficiency. Some of the examples are AC DC adapters for wireless handset, for tablets, notebook and also for power supplies that we have delivered thousands of watts capability. Then we have a very broad point of load solution in conjunction with a simple switcher from Dave's business. Together we can really put bring solutions into the consumer market like digital TV, maybe gaming, set top boxes, DVRs into computing like notebook, ultrabook, servers into industrial like solid state LED lighting, e meters and solar type applications into communication areas or like communication infrastructures and many, many more. So the broadness of our product portfolio is very powerful here.
We deliver the efficiency required out of power devices, the power density and the footprint as a tight fit solution for the application intended. So now let me turn your attention to our position in this market. As you can see on your left hand side there is a pie chart. The size of this pie chart for power management is roughly about $9,000,000,000 in 20.11. Our market share position is a leadership position with 27% market share.
The combined next 5 competitors together form another 27% of this market. But what's exciting about this pie chart is the white space that you see on the left hand side. This is again about 46 percent and comprises out of very diverse customer base and very fragmented supplier base. And this gives us a huge opportunity to really continue to grow in this space as well as continue to grow our share from the existing competitors. Now the question you may ask yourself, why does TI have market share leadership in this space as well as will TI continue growing in this space?
I think the simple answer to these two questions is the scale advantage that we have at TI that no one from our competitors has today. And to start with our product portfolio, scale and the size of that product portfolio over 9,000 products that really service all type application that operates off a battery or operates off the wall power. We have scale in terms of the talent engineering that we have in place over 30 design centers around the world, the U. S, Europe, India, China, Japan works very closely with our customers move at their speed and compete against local competitors in those regions. We have also scaled in terms of generating new products over 200 products each and every year.
This product some of this product goes into new emerging market, new technologies and helps us again propel the growth for this business. And overall with the size of our product portfolio, we don't only deliver a point solution, we deliver total power solution. So we've got over 10,000 reference designs that work together with our customers to really deliver total power solution. Also we have scale advantage in terms of the sales force as Brian mentioned. We've got sales force distributed around the world and more specifically in the areas where we have highest growth like China for example.
And they take our product portfolio and drive it deep into our customer sockets. And then we have scale in terms of our manufacturing. Of course, the capacity that we have purchased over the past years is very advantageous to us. In addition, we have over 18 core process technologies and very many spins of those cores along with the packaging technology together with the talent we have, designs we have we form very differentiated product in this market. And we make it very easy for our customer to use our product and find them first, able to download data sheet, able to order samples, order EVMs and design them into the application as Dave and Brian mentioned about web bench designs.
And this is very, very popular. So that's the reason why we have this leadership position and that's the reason why we will we feel strong about our continuing growth going forward. So again, let me talk about few trends that are driving the market and helping us propel our growth forward. Some of this trend is in the area of portability. Those equipments that used to plug into the power now operates off a battery just like vacuum cleaner perhaps, lawnmower, hedge trimmer and those products require battery management solutions that we already have.
Other products, other areas in portability is the increased demand for handheld devices that are smaller, thinner, lighter, you them in your pocket, you can take pictures, you can make phone call, you can download maybe your favorite music and so on. This particular product requires highly efficient converters that tap into the battery voltage and can operate and deliver the required power at the highest efficiency and lowest standby power and lowest quiescent currents. The other trend that we have is the efficiency trend.
There are a
couple trends called regulation that is mandated by our government here in U. S. And Europe and around the world really trying to reduce dependency on foreign oil and reduce emission of greenhouse gases into the air. This means more efficiency requirement. For instance, in Europe, last month they have banned the selling of all incandescent light bulbs, the 25 watt, the 40 watt, all the way to the 100 watts.
As a replacement technology could be of course the CFL light bulb, but the more powerful replacement is the solid state LED lighting that we believe over time that will take place and there are 35,000,000,000 light bulbs to be replaced in the next 10 years or next decade. Another area of efficiency trend is really hitting the pocketbook of some of our customers where efficiency is important to reduce the heating or the air conditioning belt. For instance 90% type efficiency for instance, on some of the power product means that we have 10% out there that translate to heat. And this heat requires air conditioning and fans to really cool it down. So a point of efficiency or 2 point of efficiency means reduction of the wasted power or the heat by 10% to 20% reduction and that means a direct impact on pocketbook of our customers.
Another area where I like to point out here,
just make
sure this works, is area where is just growing new technology called wireless power. This is simply I call it convenient power. The fact that you can take your wireless handset, place it on the countertop and it can charge your battery whether you are at home, in your car, in restaurant or perhaps in a hotel or at the airport. This is very convenient and is gaining traction as we speak and we have very good position in this area. Let me talk about an investment that we're making especially in the area where we're integrating IPs together and bringing differentiated technology into the market.
This is a product called TPS56 to 21. It's 25 amp step down converter aimed at telecom and industrial type applications. But what's exciting about this product is simply the fact that we're bringing 1 of highly efficient controllers along with our FET technology that is special recipe where we can bring resistance, the switching frequency quite high such that we can make them together on a single substrate in a single package to deliver the highest efficiency, the high switching speed and the highest power density and more importantly make it easy for our customers to really build a complete almost complete point of load solution in their applications. This is one exciting design that I like to mention. There is another one here that is related to AC adapter controller for mobile charging.
We announced back in June timeframe one of our control codes, the UCC28700 that has 30 milliwatts of no load power, below 30 milliwatts. This product meets all the regulation in the U. S, China and Europe. Now the UCC28710 that we'll be announcing shortly actually in the next few days taps into TI first high voltage technology 700 volts brings the power, what we call no load power down below 10 milliwatt, that's the lowest that I've heard about, with the highest efficiency capability. Again, new technology, new product innovation and lowest and best performance that we believe we're bringing out.
Now what's exciting also about this product is together with 1 of our product that is USB power charging TPS-two thousand five hundred and eleven, together they form a complete solution for charging, we call it is a universal USB charger. Together they form a solution as you can see here on the left side of this picture, complete solution that is small, highly efficient and can charge majority of the wireless handset that you see out there today. All right, in summary, I do believe strongly that Power Market presents significant growth opportunity for TI as we go forward. We've talked about the broad product portfolio that we have, over 9,000 products and ability to really generate 200 new product each and every year. Some of this product will go into emerging markets as well as into new technologies like LED lighting, electric vehicles, wireless charging and many more.
We are definitely advantaged by scale in sales and in manufacturing to support our customers. And overall, we have history of growing this business over the past decade. We have great opportunities of growth and we are positioned well to really continue accelerating our growth as we go forward. Thank you.
Okay, questions for Sami? Tore, Dave, can you speed up?
Thank you. So just looking at power management, can you just first of all just explain a little bit how the structure is between you and the other product lines because obviously there's a lot of power management both in HP and HVA. So I mean is this sort of more of like an R and D type business units or just explain a little bit how it's all set up? Thanks.
It is complete business unit with its own P and L that we report into Brian. We definitely work very closely. So me, Nils and Dave work very closely to make sure every dollar that we invest, we're investing in new differentiating solution either to expand our roadmap, existing roadmap or maybe to get into new markets. Now nice thing about power management, like I said, it goes into each and every application in the of
course
and be able to and understand of course and be able to contribute and grow is significant. Now we're organized at the again not just in power at the analog level down into product lines. And the idea there is to really get agility and scale at the same time. So down at the product lines, we make sure we have the right strategies, we have the right roadmap, we coordinate across different SBEs, businesses and we make sure that we are attacking the market broadly.
If I could just have a follow-up. Sure. So you talked about a new 700 volt process and these are your new products. Can you talk a little bit about what the market opportunity is there? What's the size?
And when do you expect some early revenue from the market? Thanks.
Great. Actually 700 volt technology allows us to really tap into the wall power directly. Some of it is really you can think of the light bulb replacement that's ACDC direct and the size is tremendous. We don't know how big, but I think there is 35,000,000,000 light bulbs to be replaced in the next decade and want to position ourselves take advantage of it. That's one space.
The other space is really charging wireless handsets and tablets. We see that market continue to grow and having efficient adapters that can really deliver the power efficiently is very important. And regulation is helping us there to replace the existing adapters with new and efficient ones. And we're coming up with new technologies, new innovations that allows us to win in this space. Other questions?
Stephen?
Thanks. Hi, Sami. Hi.
A couple
of questions on the LED side. So do you actually have LED lighting products out in the market today or? Absolutely.
We have probably the widest portfolio in the market today attacking the variety let me let you finish your question first.
Sure. Are those dimmable or non dimmable solutions that you have out there? And secondly, how are the LED bulb OEMs looking at these merchant solutions given that some of the bulb makers have their own in house driver IC designs?
Good. Great question. Many questions actually in one. So let me start out. We do have a very wide product portfolio in the area of solid state LED lighting.
And just quickly about the market space, light bulb replacement, that's residential indoors. And then you have outdoors, that's high bay parking lights, street lighting. We've got solution, those are DC type converters that we have in place. And we do have signage type drivers as well as architectural lighting capability. So all in all, this is a new emerging market and it continues to grow and we have a very good position in this market now.
That's one part of the answer. The other piece is dimmable solution. Yes, we do have dimmable solution. Our goal with the new technology that we're bringing on board the high voltage is to bring it all together in a very cost effective way and also small footprints and of course highest efficiency to reduce the heat dissipation and improve its basically the thermal requirement and longevity in a sense. So all in all, I think we've got the technology, we've got the broad position.
We're working with many suppliers in this market. Some of those light bulb replacement customers of ours, they don't have the technical skills to really understand how to work with solid state LEDs and also with ASIC type designs. So we have significant number of application engineers work very closely with those customers to really bring this solution to bear and allow them and help them with reference designs to really bring their solution to market faster. And so there is a great learning among some of our customers. Of course, the big customers, the Philips, of course, the GE and the Azram, they have their own local capabilities.
We work very closely with them and we try to understand their needs and try to build special products that can really fit those needs as we go forward.
Great. And then on the ACDC side, so you mentioned the sub-ten milliwatt standby power products. Do you also have products that qualify as 0 milliwatt standby power as long as you
guys are This is one of them probably. This is no load power, relatively almost zero power that's what's called when it goes below 10 milliwatt.
Okay. And finally, there's a number of actually for a while now, I think a lot of companies in the digital space have been trying to enter the power management market with digital controller based power management products. I was wondering what your current view is on some of these CMOS based solutions and what kind of I guess cost competitiveness and also performance how their performance stacks up against yours, especially given that with some of the newer process nodes, I think just hearing what some of the foundries like global foundries and TSMC you're talking about some of the sub-twenty nanometer CMOS nodes may actually be pretty decent for analog products.
Yes. We have a digital solution, but our digital solution is that then start with digital core supervisory digital solution that existed before. We started with the analog controller, brought in mixed signal design where we brought in all the drivers, all the controllers, the converters onboard the silicon and we added the digital control capability and digital filtering on board. That's how we brought in a solution that is differentiated from that point of view. We have 1st generation that was released back in 2,008 and it's gaining a lot of traction.
We've got new solution that is coming on board. Actually as we speak, multiple design ins and design wins that we have achieved and most of those will gain traction as we go forward. Now how does it compare? I think it compares only in number of design wins that we're gaining with the key customers and we continue to engage at this point and grow that piece of business for us.
And in terms of CMOS as a potential competitor for traditional analog processes?
This is actually by the way the digital power we're talking about is this CMOS based, okay. Now the UCC controllers that are analog in nature, those are also CMOS based. So there isn't any different from process technology point of view, but the differences here we're talking about is in terms of performance and what's on board those chips in terms of mixed signal and tight solution to specific application like power supply. That's the difference between solution that we provide and the garden variety solutions that you see out there in the market.
Okay. I think I have a question over here.
Yes. Just regarding power management for handsets, are you guys investing in technologies like envelope tracking or technologies like envelope tracking that control the power of the RF chain? Because I noticed in Dave's presentation he had mentioned RF power and I wasn't sure if that was power amplifiers that he was talking about and that's kind of complementary to your business.
Yes. The answer is yes. We are investing. We have position out there that is differentiated on that front. We have multiple solutions on the TI side prior to the acquisition.
We've had those. And now with SVA, we have even more advanced solutions on that front and David is driving it as we speak.
And was the products within mobile, is that RF power amplifiers
as well? Yes. Okay.
And are those CMOS based amplifiers? Those are CMOS, right?
That's what he meant.
Okay. Just want to clarify that. Okay.
Other questions? Okay. With that, thank you, Sami. And I thank all of you for coming. Hopefully, we've been able to give you some insight into our strategies and analog and drivers of growth.
And with that, we'll let you go. Thank you.