By Natasha Lomas
Chipmaker Texas Instruments (TXN) has announced it's cutting 1,700 jobs as part of a business restructuring move. The company says it's shifting its historical focus away from mobile chips because it's become too resource and investment intensive to play in this space, blaming large customers "increasingly" developing their own custom chips. Apple (AAPL) and Samsung (SSNLF.PK) both develop their own mobile processors for products such as the iPhone and iPad, and the Galaxy SIII smartphone and Nexus 10 tablet.
Reuters reports that TI is expected to continue selling existing tablet and phone processors for products already using its chips, such as Amazon's Kindle Fire tablets, for as long as demand remains but that it will stop developing new chips. Last month there were rumours Amazon was in advanced talks to buy TI's mobile chip business - however today's restructuring indicates any talks that took place failed to come to an agreement.
TI's move away from mobile chips is not a surprise as the chipmaker has previously said it plans to focus its OMAP processors and wireless chips on a "broader set of embedded applications with long life cycles" and "greater potential for sustainable growth" - applications such as cars and home appliances, according to Reuters. TI also previously provided the following statement to TechCrunch flagging up areas where it believes its processors are "a perfect fit"
o OMAP: automotive (rich visual displays for infotainment systems and rear-seat displays), industrial (fluid, responsive touchscreens for human-machine interfaces and home automation), enterprise communications (high-definition video experiences for video IP phones and video conferencing) and robotics (cutting-edge vision analytics technology for intelligent home and industrial robots).
o Connectivity: in-building (connected smart meters, intelligent appliances that automatically place a service call, electronic shelf labels at retail where pricing can be updated instantly across all stores), portable (smart bandages that sense body temperature, blood glucose meter, health and fitness monitor), automotive (tire pressure sensors, wireless rear view cameras, wireless seat adjustment systems to eliminate cost and weight)
As a result of the job cuts, which Reuters notes is around five percent of TI's global workforce, the company said it expects to make annualized savings of around $450 million by the end of 2013. It will take a hit of around $325 million in total charges - most of which will be accounted for in the current quarter, it said.
We have a great opportunity to reshape our OMAP processor and wireless connectivity product lines to concentrate on embedded markets. Momentum is already building with new embedded applications and a broad set of customers, and we are accelerating our efforts in these areas," said Greg Delagi, senior vice president of Embedded Processing, in a statement. "These job reductions are something we do with a heavy heart because they impact people we care deeply about. We will work closely with all employees affected by these changes to provide a range of assistance related to compensation, benefits and job search.
According to recent Strategy Analytics report, TI was fourth in the smartphone market chipmaker rankings - trailing far behind market leader Qualcomm (QCOM), which grabbed a whopping 48 percent revenue share in the first half of the year. Intel has also entered the mobile market recently, albeit taking only a fractional portion so far with only around half a dozen smartphones launching with its Atom x86 Medfield chips inside this year. Intel is lining up the next generation of its mobile chipset - which will include LTE support - and appears committed to its second crack at the smarphone market, so the arrival of additional competition into an already difficult market may also have contributed to TI's decision to focus elsewhere.
TI's release follows below
DALLAS, Nov. 14, 2012 /PRNewswire/ - Consistent with previously stated strategic plans, Texas Instruments (TI) (NASDAQ: TXN) announced today it will reduce costs and focus investments in its Wireless business on embedded markets with greater potential for sustainable growth. Cost reductions include the elimination of about 1,700 jobs worldwide.
TI previously outlined intentions to focus its OMAP processors and wireless connectivity solutions on a broader set of embedded applications with long life cycles, instead of its historical focus on the mobile market where large customers are increasingly developing their own custom chips. These changes require fewer resources and less investment.
"We have a great opportunity to reshape our OMAP processor and wireless connectivity product lines to concentrate on embedded markets. Momentum is already building with new embedded applications and a broad set of customers, and we are accelerating our efforts in these areas," said Greg Delagi, senior vice president of Embedded Processing. "These job reductions are something we do with a heavy heart because they impact people we care deeply about. We will work closely with all employees affected by these changes to provide a range of assistance related to compensation, benefits and job search."
As a result of these actions, the company expects annualized savings of about $450 million by the end of 2013. Total charges will be about $325 million, most of which will be accounted for in the current quarter. TI's fourth-quarter outlook, published on October 22, did not comprehend these restructuring charges.