Texas Instruments' Management Presents at Citi 2013 Global Technology Conference (Transcript)

Sep. 4.13 | About: Texas Instruments (TXN)

Texas Instruments Incorporated (NASDAQ:TXN)

Citi 2013 Global Technology Conference

September 04, 2013 11:15 am ET

Executives

Greg Delagi - Senior Vice President and General Manager, Embedded Processing, Texas Instruments Incorporated

Analysts

Glen Yeung - Citigroup Inc

Glen Yeung - Citigroup Inc

Good morning, everybody. It is Day Two of Citi's Global Technology Conference for 2013. I am Glen Yeung. I am Citi's Global Head of Technology Research and the U.S. Semiconductor Analyst. We are very happy to have Texas Instruments here to speak to us.

On behalf of Texas Instruments is, Greg Delagi. Greg is specifically in the embedded part of the market, so we are going to focus primarily on that. I don’t know if I will be able to sneak a few questions or not. I won’t try.. But let's start out with Greg just giving us a little bit of commentary about the overall state of business.

Greg Delagi

Okay. Good. Glen, it's pleasure to be here. I appreciate to having the opportunity. I guess, if I just step back and think a little bit over the last five quarters that we formed this Embedded segment and so on so forth and there were a couple of big things.

Number one is, there were a lot of things we had to do in terms of reshaping our investments in the wireless space and really getting the portfolio tuned to this embedded opportunity that we see moving forward. I think, we made great progress with that.

I think, if you looked at the second quarter results you saw that the legacy wireless stuff is down to about 5% of the revenue with the company level. I think, we forecasted the 2 range for the third quarter, so you can see there's a lot of work, but that is largely behind us. All the focus and intensity is on the business moving forward.

Again, when we talk about embedded processing at TI, it really refers to three specific product areas. Microcontroller business, our Processor business and our Connectivity business, and as we go through, I may describe those in a little bit more detail.

I think if I step back and reflect five quarters into this deal where we are, I am pretty bullish and I feel really good about the progress we are making. First, I guess, I would start with growth. Then if you have looked at any of those, performance of the Embedded segment as a part of Texas Instruments, we've got growth. We grew in first quarter and we grew in second quarter. Not just the growth by itself is enough, but we got the businesses growing.

I think the commentary I would make on growth that make me feel good is, you go inside of those product areas and all three of the product areas are growing. Then if you look at what we call, what I would refer to as the primitive in terms of how we run the businesses, the product lines, there are individual product lines under each of those three areas.

If you look at those, there are 10 product lines in the Embedded Processing segment. If you look at those 10, we got all of them growing and we've got six of them that are growing in double-digit rate, so I look at that and say, I like the diversity. This isn't just single business that's driving this performance. It's relatively broad. We also look at our business in terms of more rich in terms of automotive as well as industrial.

We talk about those two segments or my business specifically being over 60% of our revenues in total, brings a lot of diversity, it brings a lot of stability, so we are growing. I feel good about the stability. I feel good about the diversity we've got in terms of the growth.

Number two, in terms of why I feel good, I would probably spend some time talking about, as we get the growth, we've also been trying to improve the financial performance…

Glen Yeung - Citigroup Inc

Right.

Greg Delagi

…of the segment. It's certainly the very important step forward in second quarter with the PFO for the segment approaching 9%, and getting operating profits, we think we will be able to continue to expand on this as we go through the year, so we are really starting to point this place in the direction to get it much more in sync with the current expectations that you guys have for us at the company level.

The last area I would talk about is, just if you look at the new products. Again, I look at R&D spending and we have made a pretty significant ratchet up in terms of our R&D spending a couple of years ago with things like accelerating our position in microcontrollers as you watched us do that.

Inside of that spend looking at where we are spending it on which markets and the class of products we are building across processor and microcontroller and connectivity. I am incredibly excited about what those investments should yield for us in the years to come, so those are kind of the pieces why I feel good about the momentum in general.

Glen Yeung - Citigroup Inc

Yes. Let me ask you a question, because I had a discussion with you once again before, where we talked about your view that, for TI as a corporation, one of the success factors that's been a big sales force. That sales force for a long time led with an analog sale. Then we formed this Embedded division.

Do you feel like the sort of cross-selling or probably you get an attach rate of an analog to an embedded product is at an appropriate level at this point, now how much rooms we have left to get that sales force to change maybe leading with embedded sometimes?

Greg Delagi

I think the synergy that we have, the opportunity we have got between Analog and Embedded at company levels is, there really is, it's really a symbiotic relationship. The analog position that we have in the breadth of that portfolio gives us tremendously broad exposure to the customers in the marketplace. We talk about 100,000 customers in analog.

Every electronic device that's manufactured uses some kind of an analog component. We got 100,000 relationships with customers today. If I take that 100,000 and I break it down into how many of those customers are using some kind of an embedded processor, a microcontroller or processor, et cetera, you are probably in the range of 60,000 or 65,000 of those customers that are using some host processor.

Our broadest customer base in Embedded Processing is our Microcontroller business at probably 30,000 customers, so that has by definition the reach and the exposure we get in analog leads me to another 30,000 customers that we already have the relationship with.

Next time if those sockets come up on the processor side, or on the Embedded processor side, we have got an opportunity to participate, so that's one dimension. The other dimension is that, when we went with an embedded processor, whether I am talking about an automotive infotainment application or a communication infrastructure, or any of the products in the products in the broad category of industrial and things that we are doing are the sales forces' ability to go up and pull through the rest of the signal chain is extraordinary and the company spend a lot of time with the sales force focusing on the customers who are calling on, having a project oriented mentality and really looking at how many sockets per board can we get which really is tough to talk about getting that leverage from that scale that we have got in terms of the sales force across our total portfolio of analog embedded processor.

Glen Yeung - Citigroup Inc

How often is it the case that Embedded is the first when you are calling analog, versus analog is the [first] calling embedded?

Greg Delagi

I don't know what kind of rate I would put on that. I think, pretty much every customer we could call on, you've got an opportunity with analog. I think with the breadth of our portfolio, you have got something to sell.

On the Embedded side, there are clearly place where, again, two-thirds of those customers are using a host proxy that had the conversation. You may have to wait for that design cycle to reappear and in the meantime we have an opportunity to penetrate from the analog side. I don't know what ratio I would put on that though.

Glen Yeung - Citigroup Inc

It sounds to me that the ability to attach Embedded to analog is partially what helps grow Embedded, right?

Greg Delagi

Yes. I think so. I wouldn't say attach. I think, attach is a little bit strong, because you don't go in and sell a signal chain device and then pull through a processor. What will tend to happen is, we will get visibility into that customer what they are building. Through that knowledge, we can then be in position where we could try to craft the value proposition how we can help the customer to solve a problem from an embedded processor standpoint.

The converse though is, when we do in the embedded processor socket typically tends to be the first chip in the system that's designed and so that you can pull through a lot of the content. The only place in analog we really have that dimensioning component that the device is picked and then the rest of the signal chain is designed with these data converters, so it's kind of the Embedded Processing and data converters that give you that early visibility into the customers.

Glen Yeung - Citigroup Inc

Okay. Sort of just almost I think at the level when we think about the profitability, yes, you made progress in the last quarter in terms of profitability, but what's lapped and where is the target in Embedded and how you get there ultimately?

Greg Delagi

I think it's pretty simple. I mean, the top line growth is something that has been very, very important. We stepped up our investments. You watched that microcontroller.

Glen Yeung - Citigroup Inc

Yes.

Greg Delagi

Now, it's turning that into revenue. Turning that into revenue and turning in the margin, so I think having the breadth of engines or the number of cylinders and the engine that we are trying to build now gives me confidence about the fact that we are going to have a much more sustainable machine.

I think, if I look at new design and the momentum we are building in the product areas are very encouraging that then the next wave of products that are coming. Part of the operating process transition that we have been through is we had stepped up that investment. I mean, number one, we have been in a little bit of a weak market.

Number two, there has been some mix or maybe we were overly dependent on a single segment of the business. Something like Communication Infrastructure for too much of a financial contribution and so we needed more diversity there. Then lastly, just talk about we had scaled up our investments because of the opportunity with radar that stuff is coming into balance now as the businesses grow and the margins improve, we should chill the operating leverage and that's what we are working on.

Glen Yeung - Citigroup Inc

If you sort of then, you have made the investment, you are sort of balancing out by end market a little bit. Where you see the greatest growth opportunities in Embedded, and recognize that it's bit of a nebular terms if you...

Greg Delagi

Yes. Let's talk about on a business-by-business if you look inside of the microcontroller space, a place where we've dramatically stepped up the investment in the last couple of years. Investments in new products and also investments in terms of field and resources, the field application engineers close to the customers to support the design-in from the customers, the customer design process.

The business is growing. It's been growing consistently and we feel, we are gaining share, clearly gaining share. In fact, if you look at our microcontroller, I don't we have broken it out in percentage terms, but we look at our performance versus free scale, we look at it versus ST, we look at it versus Renesas, we look at it versus Microchip, and if you rack up those guys and contrast with our performance, we feel very clear that we have gained significant share this year and we will continue to do so with the wave of new products that are coming.

Our Microcontroller business, we are coming from a smaller position in that market. We got a lot of work to do to go up and expand. It's a huge opportunity. We've got a combination of both, proprietary architectures with our C2000 and MSP430, and we have augmented that with investments in ARM based microcontrollers, so that's been a great part of the expansion. You see us doing very differentiated things in terms of low power, analog integration of both flash and a DRAM, again, I feel very, very good about the fact that we are competing in a landscape, where our products are getting stronger than some of our competitors someone like Renesas, probably weaker than they were historically, and at the TI scale from the sales force standpoint, I think it's a winning combination.

Glen Yeung - Citigroup Inc

It does seem that perhaps this is probably is somewhat obvious source of from whom you are gaining share. If you were to think about it from an end market perspective in what end markets or what applications you have been taking the share?

Greg Delagi

Yes. I mean, you see, I think that's a general term. It's not an end market, but I think low power franchise that we built with the MSP430 and how we are extending that today. You find microcontrollers getting designed in increasing number of devices. All those devices tend to care about power, whether you are talking about the variable trends, whether you talk about things like blood glucose meters, there is a whole host of applications that care about power.

The other big area I would talk about is in the control space and it's tough to talk about things like motor control, where you are really trying to get into a close loop control systems, where microcontrollers can bring a significant benefit. That is a business that has done very, very well for us and that we have been investing.

Again, the leadership position in terms of analog integration, what you are doing with the system even more important than what is the microcontroller core in those solutions. How we are solving that control system in terms in terms of what you are integrating from an analog and accelerator and other system components inside of that system. Then you have got a broad swath of. Then you've got automotive which is obviously a target-rich environment. Then you have got a broad swath of just what we general refer to as catalog, lots and lots of different customers building a very, very broad variety of things.

Glen Yeung - Citigroup Inc

Can I turn your attention just for a second to this variable idea? I know it's a nascent business. From what you do can see now what's happening, what's just your general opinion about that? Do you think this is going to do real business?

Greg Delagi

I think, I mean in general I may define variables differently than you do. I guess, what I would, let me transition to the connectivity piece of the business, because I think it's important. When I look at the fact that increasingly more and more devices are wanting to get connected, I would refer to them as some of them are going to get connected to via Bluetooth or Bluetooth low energy, so I want to use my smartphone as the hub. Things like my fit that I have on today and other devices watches and so on and so forth, those are all demanding very low power microcontroller architectures as they are all demanding the connectivity solution with Bluetooth as the primary connection vehicle. I think that that is an area that is exploding based on the things that we are seeing. It can be weight scale, it can be personal devices that I wear. It can be watches. There are a whole host of things that want to get connected and will use my cell phone as a hub to be connected. That's Bluetooth low energy. That's really that's the core of what we are doing from a connectivity standpoint.

The second area is, when you think about things like Wi-Fi, and now how do I use Wi-Fi as a vehicle to connect my device the different way and I have and I have been called [for this], but I actually counted the number of devices I had at home that are connected on the wireless LAN network and I have 39 devices hanging off my wireless network at home, so I maybe a geek, but if you run through and count them I have got five children, so I get a little bit of a less lift off of that, but you count up the smartphones, you count up the tablets, you count up the laptops. I have got a pool controller, I have got a dozen light switches that I can turn them on and off remotely. I got thermostats that operate with wireless LAN connection. I can control anything in my home to my smartphone or tablet now that I have already got this installed network and I can just hang additional device stuff at. That whole area is exploding, so that gives me the capability not to be within 10 meters of the device like a Bluetooth connection. It gives me the capability to be anywhere on the planet and control something. That's the role Wi-Fi plays.

Then you would also talk about things like ZigBee, which are matched networks and much more complicated and you've also got some of the sub stuff, so this everything connected thing is absolutely explosive and why we have kept the connectivity investments that we had shifted then from smartphones specifically into these markets and I think we have got an unparallel position with the products that we have combined with our sales force and our ability to reach this broad set of customers when I think about who we typically competed within those spaces. In like smartphone, it's very, very difficult for others to compete with us there.

Glen Yeung - Citigroup Inc

Now, in smartphones, with respect to Wi-Fi, you recently licensed Wi-Fi to a smartphone company. I know it's hard to get a color too, but I might as well ask. No?

Greg Delagi

You can ask.

Glen Yeung - Citigroup Inc

…but is that a trend? Is it? Do you think why licensing is a trend that TI can TI can deploy to other areas?

Greg Delagi

Yes. I would tell you that I have no desire to be in a licensing business and the business model and put a machine go up that says we are going to do it. I think this was a perfect example of an ability to monetize an asset that we have. We have very cutting edge technology. Obviously as evidenced by $315 million purchase and that was a transparent asset as I think the actual words we use and that was because it was licensed with some transfer of databases and other materials, but the thing that was good about this is that we basically did that and it was being used by an end customer, not a competitor and it has no restrictions associated with it, so we are free to operate with no encumbrances and we are continuing to focus 100% our effort on our connectivity vision for everything getting connected.

We monetized an asset that we had in the wireless context and didn't create a competitor, so it was a no brainer for us to do. Is there someone else that will knock on our door and want to do that? I am more than open to the conversation, but licensing as a business model that's not what I am trying. As it comes to us, if there are opportunities, if there's a $20 bill on the ground, we will usually stop to think about.

Glen Yeung - Citigroup Inc

Okay, so let me think about the idea that in that segment of market to be clear, which you guys don't ultimately aggressively participate in. there's a platform of ours that's forming, right? You need to have Wi-Fi connectivity along with (Inaudible), but that concept of that platform approach in smartphone, does that stay in concert as far as some of the changes seeing in embedded and it's an advantage for you to need to go and acquire things to build [platform].

Greg Delagi

Yes. The platform stuff does apply when we start to talk about the internet of things and how to go up and address that market. It's a different kind of definition of the platform. The first thing you need to do is on the connectivity technologies, I believe that there are things yet to do. Number one is, you got to make this stuff easy to use, because you are not dealing like we did in the smartphone context, where [customer] and exit the RF engineers.

I may be work with a guy designing a thermostat who can't spell RF, so I have got to make this stuff very easy to use. I have got to be able to package it up so that we eliminate the complexity for people that have wireless system.

The second thing is you got to continue to drive these continuities in terms of power. Every time we cut the power by half, you will find new applications and my variable will last for a month or a week, I can take cost out of the system, because I can use smaller batteries, whatever. It's fundamental, huge opportunity, but that's what you are going to focus on.

The combining piece of that from a standpoint is the MCU, right? If you look at what's happening in the industry now, you watch and Microchip within SMSC, watch Silicon Labs, with Energy Micro, everybody who wants to take part in this internet of things is scrambling the to try to bring together the capabilities of the microcontroller and the wireless technologies and build that portfolio, because it's not just enough. We got to have the two of those pieces and so you look at the time and attention we are paying to both of those businesses and the similarities between them and what we can be doing mark those products together, I think we are in a very good position to take advantage of...

Glen Yeung - Citigroup Inc

How important is process technology to sort of moving that technology forward?

Greg Delagi

I would tell you, I think process technologies are very important, but it's a little bit counterintuitive. If you look at them, I use this example from a connectivity standpoint, when we were in the smartphone space, we had pushed ahead with some generations that product down to the 45-nanometer node and it's an industry leading things in terms of collapsing RF functions like PAs on chip and five radios on a single chip.

As we go into some of these spaces that care more about power than they do maybe on integration, which are actually defined as sort of 65-nanometer or 90-nanometer, because of what you can do to tune those processes, specifically for analog integration or specifically for ultra low power, we actually get a better, more definitive solution by backing up a node in terms of what you can achieve from low power analog integration in both, in microcontroller and connectivity that's really the sweet spot of I got to low power. I have got to be able to integrate analog, so then process certainly as we get into we tweak things inside the TI from a process standpoint to be able to enable some of that.

Glen Yeung - Citigroup Inc

Okay. Let me shift the discussion to an area that was specific and specificity to be fair, but the idea of wireless infrastructure, which is I guess in the processor part of your business. One, just describe what is TI's embedded businesses position in the wireless infrastructure?

Greg Delagi

Okay. Just before I talk about that inside of our processor group there are really two vertical markets that we are pursuing. One is our communication infrastructure investment that I think you are familiar with them and I will talk about in a minute.

The second area, and when I say vertical , what I really mean that we are tuning SOC system on a chip implementation specifically for those kinds of applications. The second area would be automotive. When we talk about infotainment and advanced safety specifically, we got solutions chip level processor solutions that are tuned specifically for those applications. Those are then complimented in our processor group with what we do generically and DSP single and multi-core, even ARM based processor products that we have like our (Inaudible), so that's really the composition of our processor business and I think the combination of those four is a pretty strong position.

Back to your question on communication infrastructure, it's a good business for us. It has been a good business for us for a long time, one that we have been investing for over a decade. There are changes happening inside of that market and as the role of macro growth, macro base stations are more plateauing from a growth standpoint. There is probably strength then that we are seeing and the market close today in terms of the communication infrastructure market, but probably the biggest variable that we've got in terms of where things go is the role small cells will play into qualities of the networks.

We believe that we are very well positioned in both, macro and small cell and uniquely positioned in terms of being able to provide that platform that allows the common software across macro and small cell, which is integral to what the operators want to do in terms of quality of service.

If you look at our design-in base on small cell, you look at our position in macro, it's a great business for us. My key point is, it's a great business for us. We are continuing to invest in it. I think we have got a very good outlook in that business, but it's not the only business when you talk about diversity of what we are doing in embedded processors.

Glen Yeung - Citigroup Inc

Now, let's talk about the other part of that which is automotive, I just want to bring up point that came up in a car you had earlier actually with Freescale, and we are talking about barriers to entry to other chipmakers trying to get into automotive, which really sounds like everyone is trying to get into automotive at this point. It's the great market to be in.

One of the things that they said was, you do development work and you want to [take] all five, six, seven and there is a financial barrier. If you are a small company with not a lot of cash, you kept virtually doing developments for seven years, so, one, do you agree with that? Then two, where is the opportunity more broadly for your business in automotive.

I guess, we like the automotive market. We've been in it for 25 years. It is a very interesting market because of the use of electronics in cars. I will also take a little bit of the shine of it in terms of it an unbelievably hard market. If you look at the magnitude of the long-term reliability, how we have to service any line fallout, the structure and responsibility to serve that customer base, we got a bunch of people showing up saying they want to be in the automotive business. I would maintain that they don't have a clue.

Glen Yeung - Citigroup Inc

Correct.

Greg Delagi

What it takes.

Glen Yeung - Citigroup Inc

Right.

Greg Delagi

Even passed the product development cycle about the cost and infrastructure has to be built to meet the expectations of that market, so it's a tough market big aggressive customers, huge reliability concerns, et cetera, et cetera and that's we are very experienced and that we are going up and we are trying to build from.

To me, there are barriers of entry is, you start to look at a couple of spaces that we are focused on in a very material way and there are a lot of things we do in some of the standard product areas, but the two biggest areas of focus on processor are on the infotainment socket, so you think about that center of console and what that console does and trying to make that be a much more most of user experience.

The second area is in ADS, which is advanced driver safety. Think about lane change, lane departure adaptive cruise control, collision avoidance, all of these kinds of systems and both of those offer tremendous opportunities. The chips have to be customized for those opportunities. You have got to make a commitment and investment to do chips specifically for that market, you got to meet the long-term reliability, you got to deliver a roadmap, because increasingly the customers are writing more and more software on top of these platforms and they have got to support these products in the marketplace more even longer than the model year.

These companies have got to be able to support a car sold in 65 countries around the world for the next 10 years in terms of software upgrades or so on and so forth, so there's a ton of complexity there, but a huge opportunity and significant of software that is written on those platforms.

Glen Yeung - Citigroup Inc

Is there any risk that things like infotainment get commoditized in a car or I have an aftermarket radio in my car that's actually android, right? I mean, basically it's a cell phone that's embedded into my car and other companies have used [frankly], right? Could that become a wave or is there more to it? I mean, the sensors you need to ultimately feeling that…

Greg Delagi

I think there are two dimensions I would talk about. First one is, there is no guarantee. Every market goes two phases, so standing over there and say it will network commoditizer that's something that we should never be thinking about. I think, we would be irresponsible, number one.

Number two, I think the balancing point is that today and I believe for the foreseeable future, the automotive manufactures still feel very, very passionate about user experience. Then when I get into my BMW that is going to have a look and a feel. When I get into my Mercedes, it's going to have a look and feel, when I get into my Ford, my GM, whatever those, they want to own and control that user experience and they have to own a control that platform over the long-term. That all adds up to the fact that there is significant investment that's happening on top of those platforms, so then to build that user experience and then for them to differentiate. As long as those components are there, I think it can be alive and healthy and there's great opportunity.

The second that starts to shift to where those investments aren't made, then I think the opportunity looks different. I also think the dynamics of what's happening inside of the car, it's not a static function. What is happening in my center Stack Infotainment System, how it integrates with the cluster, how it's going to integrate with the heads up control, how is it going to integrate with the safety features, because you can have this big fancy infotainment system, but now I want to integrate with the sensors. I have gone out there from safety standpoint, so do I display speed limit signs, do I display other warnings and the intricacy of those systems to me are a barrier that says that there are probably some things there that should keep it a very, very positive opportunity for a longer term.

Glen Yeung - Citigroup Inc

Yes. Frankly, I mean, most infotainment systems, they are pretty bad, so you are trying to imagine that there's not much low-hanging fruit.

Greg Delagi

Integration with the safety stuff is a megatrend, because it's not just that you've got all the stuff, all the tad capability and stuff that's got to be offered to you from a safety standpoint either to your heads up display or on your dash and all the auto manufacturers and I spend a ton of my time out in the marketplace dealing with these customers and talking to them about the long-term, which is very interesting to see the conversations about the between the cluster, the heads up display, the infotainment and ADS, all the different policies that are getting leveraged, complicated metrics of things that are going on.

For our position, we've got a great business, we've got an expanding business. I like our win ratio now. It will take time for the revenue to come. I think one of the biggest assets we have is, when you pick any major automotive manufacturer any major Tier-1, we are in the conversation with our customer about where this technology is going to evolve to over the next five years, so if another competitor shows up and say I am interested in automotive, they are not in that conference room, they are not in the current system, they are not defining what their roadmap needs to look like over the next five years. That doesn't guarantee us success, but it certainly gives us position of relationship and insight that I think we can leverage.

Glen Yeung - Citigroup Inc

Right. Let me see if there's any questions from the audience. Anybody have any questions at this point? One over here.

Question-and-Answer Session

Unidentified Analyst

Within your embedded business, can you talk a little bit about what you are seeing in the wireless infrastructure market? Specifically, by the three goes, U.S. Europe and Asia, particularly China?

Greg Delagi

Yes. I think, we are and I think we said some of this when we talked about our second quarter results and we've got a mid-quarter next week, so Dave has promised me that I wouldn't steal any thunder from that or he would kill me I think is what he said.

I think the way I would categorize, if you look at wireless infrastructure over time, we again had a very strong position and it's been up and down in terms of what's happening in the market in terms of capital spending and deployments and so on and so forth.

We have seen strength in the U.S., we've seen you read the same papers as I do. You see what's happening in terms of China deployment. I would characterize that as a strengthening environment. It was positive for us in the second quarter and I would say look at the back half of the year as a strengthening environment is the guidance that I would provide.

What it looks like in terms of 2014, it's anyone's guess. I think the segment in total will continue to, there will be some volatility as capital dollars are spent and deployments happened. We think secularly, it's still a great marketplace and there is continued expansion in terms of the opportunity, again, macro plus small cells. Over the long-term, we think it's a great market, but there are going to be some ebbs and flows depending on CapEx expenditures by the operators and so on and so forth and how that ripples through to the regions, but today my comment would be take one away, I think we would say that it's a strengthening environment today.

Unidentified Analyst

(Inaudible)

Greg Delagi

Well, I am not familiar with the specific comment that may have been a macro TI comment. I don't think that is a comment that would hold through on the embedded portion of what we are seeing in automotive today. Again, when I think about how I spend my time, where I was last week, dealing with customers, winning new designs. There's a long lead time between winning those designs and having those go into production. I feel very good about what we are winning today and what that means for the future.

I think, if you look at attach rates and dollar content for ADS systems and infotainment, there is still a dramatic opportunity in front of us in terms of the semiconductor content in those systems for the next 10 years. I think, it is a dramatically expanded opportunity from where we are today.

Unidentified Analyst

(Inaudible)

Greg Delagi

Yes. I think it's part of the opportunity is trickle down, part of the opportunity is that a lot of the stuff is options, and so you got to look at option, take rates and what are penetration rates. I'll take it from a personal standpoint back to my five children analogy, when I buy a car now for my kids, it's got more safety features in it so that they, I didn't have the eight, small accidents that have happened, because they haven't been paying attention and probably my bias would be to spend the money on some of those options in the next cars that I buy, because I think the capability is absolutely compelling.

Glen Yeung - Citigroup Inc

We have time for one more question if anybody has one.

Unidentified Analyst

I don't remember if the ARM 64-bit processor business falls under embedded at TI, but if it does, can you talk about your design wins, the pipeline and how do you differentiate KeyStone versus some of the other ARM processors that are out there?

Greg Delagi

If you look at our ARM investments and you said 64-bit, but you just look at generically what we are investing in from an ARM technology. We haven't made any announcements on 64-bit or anything else, but in the A15, A8, A9, A15 class devices inside of the KeyStone architecture. That platform and the platform where it is very, very important, what we are doing with those products is a combination of general purpose capability which is ARM in this context along with other element by particular problem, so in our hawking device which we have announced actually has four A15s and 8 DSPs, eight of our C6000 DSPs.

That chip is actually at the core of the HP Moonshot, so what you see there is it's not just an offering of ARM versus an x86 class architecture. It's the benefits of what I can do with the other integration with some of that capability to kind of transform the power for performance power points that we can hit by leveraging the DSP technology as well, so there are all system on a chip class implementations that we are doing. ARM is an ingredient of that technology, but it's balanced with other factors.

I am very bullish on that business in total. I will get our power per watt, power per dollar, performance per dollar numbers that we can hit with those class of products and you put them up against x86s, you put them up against power PCs, you put them up against FPGAs for those who still want to do their own architectures, I think we are incredibly competitively positioned to have that being expanding part of our business as we move forward, but again it's not necessarily attacking market that exist. There may be markets that are being served with other technologies.

A6, FPGAs, for those who still want to do their own architecture. power PCs, x86, that's our product line in total is an opportunity for us to expand dramatically into the embedded space.

Unidentified Analyst

(Inaudible)

Greg Delagi

I think it remains to be seen in terms of exactly how big an opportunity that is. What I will tell you is that we are not playing. It's just is an ARM consolidator where anybody can do it with an ARM license and a founder relationship. We are bringing a higher level of solving a system level issue where people are going to invest to try to take advantage of what the architectures could do.

Glen Yeung - Citigroup Inc

We are out of time. Greg, thanks so much. I appreciate.

Greg Delagi

Thank you.

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