According to Strauss, the inevitability of re-focusing OMAP has been a foregone conclusion by at least some people within TI for some time. In his remarks on the strategy earlier this week, Greg Delagi, TI's senior vice president for embedded processing, stressed that the company had been shifting R&D investments in OMAP for several years in preparation for this move. He insisted that TI had not been caught "flat-footed" by the market trends.
The primary reason for the change cited by Delgai is also relevant. Apple and Samsung are the dominant players in smartphones and tablets, and they make their own applications processors. That leaves a smaller pie for the likes of TI, Qualcomm, Nvidia and Intel.
But as has been pointed out by analysts and others, that smaller pie is not that small, and TI may suffer as its roughly $900 million in annual revenue from OMAP and connectivity chips in smartphones and tablets declines along with its R&D investment. But, according to Strauss, without the baseband capability, TI wasn't going to be able to hang on to the smartphone and tablet sockets it has for much longer.
"The clear trend is toward an integrated baseband," Strauss said in an interview this week.
This is by no means the end of the line for OMAP. As Delagi stressed, OMAP has a real opportunity to grow share in the $18 billion embedded processor market, where there are many more customers, but smaller volumes. TI can also leverage its strength in analog to improve its position in embedded processing, where the company already claims 12 percent market share and the No. 2 position.
"It's a reasonable market for them," Straus said. "It's really they only approach they've got. That [OMAP] can be a profitable product line. It just won't be a 1 billion unit product line."
About Apple, they are one of the biggest price-bargainers. That is the main reason, they dont get along with any big semiconductor companies, and that is the main reason for them to start their own Apps Processor Integration. I dont think TI would have ever won that business from Apple, without changing much of its personality (and be on its knees). I am sure Apple would gradually will do their own modems, and even do their own non-ARM-processors, because they wont get along with ARM for too long, since ARM is developing its personality now. And Apple is not getting along with Qualcomm, but sticks to it since no other choice.
One biggest missing point is the "margin". It looks like the profit margin on these chips became extremely low over the decade. For a company like TI, which is more familiar with "huge" margins in Analog and other components business, smartphone/tablet was becoming more of a "NoGO" year-by-year.
Remember TI came to this business, when it was a completely different story. Nokias/Samsungs/Motorolas were literally "stuck" with each chip vendor, and transition from one chip vendor to another was not easy, which kept the semiconductor profit margin high. In the days of Android, that is not the case.
Now combine that low-profit margin with reducing "space" of market with Apples/Samsungs going with their own chips.
@ravan- I can't speak specifically to what happened with MXC. As you mention, Freescale decided to get out of baseband around the same time TI did, and I know that Rich Beyer and others were absolutely 100 percent sure it was the right move. Freescale has the i.MX apps processor, which I believe has been pretty successful in some applications like e-readers. But Beyer told me Freescale was happy aiming i.MX at these less glamorous sockets and was not interested in competing with Nvidia and Qualcomm with a cutting edge apps processor, simply because of the massive R&D costs involved.
Dylan, why Freescale (Motorola) didn't make it with their MXC processor? They integrated the modem and the app processor on the same SoC. If I am not mistake, RIM was one of the biggest consumers for MXC chips. And that was 5-6 years ago. But somehow, that technology didn't make it to have a big success and Freescale dropped wireless communications division (cellular).Somehow, Qualcomm benefits by all this key player that made an exit from the bussiness.
Glad you asked, Frank. I posted the original TI-OMAP story, but it's just as relevant here. I asked Will Strauss that very question. Here, in a nutshell, is what he said:
Apple, obviously, has no baseband. They will have to buy somebody who has one to integrate the two. But that won't happen until some company comes up with a baseband that can match Qualcomm's capabilities. Qualcomm has a virtual lock on CDMA modems (little Via Telecom can field a CDMA-only modem), a technology necessary to serve Verizon, Sprint, and some smaller operators. So Apple is stuck with Qualcomm for that big U.S.-centric CDMA market. CDMA will be with us through the rest of the decade (for over half of the U.S. market), so Apple will remain the exception to the integration trend.
Samsung has an LTE baseband and is coming up with one that is LTE/HSPA/3G/2G and will integrate it with their own application processor. However, to serve the U.S. CDMA market, they will probably tack on a CDMA modem from Via Telecom (as they did for Thunderbolt and other handsets for that market).
For the record, TI declined a request for an interview on this topic. A spokeswoman said via email that, as communicated during the investor meeting this week, the smartphone market has become a less attractive long-term opportunity for OMAP, primarily because of market consolidation and vertical integration. "We are reprofiling our investments accordingly, but have no additional details to share at this time."
The spokeswoman went on to say that TI remains committed to the OMAP platform and its customers. "We are accelerating the expansion of OMAP processors into a broader set of embedded applications such as automotive, industrial, enterprise communication, vision and robotics, to grow the OMAP footprint beyond mobile. We will share further advancements with you as we move forward in this process."
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