Texas Instruments will mass produce “ultra-low-price” handset chips from October 2006, with Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) to be among its foundry service providers, while Silicon Lab has sent samples of its equivalent products to customers in Taiwan and China and mass production will commence in July 2006, according to the Chinese-language Commercial Times.
Silicon Labs , whose $2.2 billion market cap reflects a whopping 55x P/E multiple, may seem an unlikely candidate to take on industry behemoth Texas Instruments, which makes more than half of the chips used in cellular handsets. However, SLAB has a history of taking outsize share in handset components. Its original Aero transceiver was at one time the go-to chip for handset manufacturers.
SLAB got sidelined by the 3G transition, as its expertise is making existing technology cheap rather than developing leading-edge systems. But now it appears to be regaining some traction.
Plus, it is not hard to figure out that each point of market share will mean much more to SLAB’s fundamentals and share price than it will to Texas Instruments'. Even a strong second place would be a good position for SLAB.
SLAB 1-yr chart: