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GREAT-Terry
I personally think this is a smart strategy. Having over 100 customers with ...
dylan.mcgrath
The plan is to continue supporting all existing customers. However, anyone using ...
TI steering OMAP to embedded
Dylan McGrath
9/26/2012 3:36 PM EDT
Analysts worried
Delagi emphasized that TI would continue to support existing smartphone and tablet customers that use OMAP. But Delagi said TI would not be investing in the development of OMAP for mobile applications to the same degree.
Delagi said TI has been shifting OMAP investment over the past five years to pursue more opportunities outside of smartphones and tablets. The market for embedded processing is worth about $18 billion per year, he said. TI has an opportunity to leverage its strength in analog to sell OMAP processors to the embedded market, he said.
"I think we have a really big opportunity with the OMAP processors and with the connectivity technologies to be used in the embedded space, and this is what we'll spend time on," Delagi said.
Some analysts expressed concern over the strategic shift. Craig Berger, an analyst with FBR Capital Markets, said the shift of focus could lead to a decline in the $900 million of revenue from OMAP and connectivity chips in smartphones and handsets. Oppenheimer & Co. analysts downgraded the rating on TI's stock to "perform" from "outperform," saying revenue from the wireless segment—which accounts for 10 percent of TI's sales—is likely to dwindle over the next several years as a result of the shift.
Analysts from Nomura Equity Research said in a report that TI's sales have underperformed for the past five years, largely due to declining sales to the wireless segment as TI winds down its baseband chip business. "TI's update today would suggest that this trend continues in 2013, driven by lower OMAP and connectivity sales." Nomura reiterated its "neutral" rating on TI's stock.
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Delagi emphasized that TI would continue to support existing smartphone and tablet customers that use OMAP. But Delagi said TI would not be investing in the development of OMAP for mobile applications to the same degree.
Delagi said TI has been shifting OMAP investment over the past five years to pursue more opportunities outside of smartphones and tablets. The market for embedded processing is worth about $18 billion per year, he said. TI has an opportunity to leverage its strength in analog to sell OMAP processors to the embedded market, he said.
"I think we have a really big opportunity with the OMAP processors and with the connectivity technologies to be used in the embedded space, and this is what we'll spend time on," Delagi said.
Some analysts expressed concern over the strategic shift. Craig Berger, an analyst with FBR Capital Markets, said the shift of focus could lead to a decline in the $900 million of revenue from OMAP and connectivity chips in smartphones and handsets. Oppenheimer & Co. analysts downgraded the rating on TI's stock to "perform" from "outperform," saying revenue from the wireless segment—which accounts for 10 percent of TI's sales—is likely to dwindle over the next several years as a result of the shift.
Analysts from Nomura Equity Research said in a report that TI's sales have underperformed for the past five years, largely due to declining sales to the wireless segment as TI winds down its baseband chip business. "TI's update today would suggest that this trend continues in 2013, driven by lower OMAP and connectivity sales." Nomura reiterated its "neutral" rating on TI's stock.
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- TI says OMAP not for sale
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dylan.mcgrath
9/26/2012 5:48 PM EDT
Personally I was surprised about this, as OMAP appears to be scoring design wins, particularly in tablets. But the more I think about it, the more this makes sense. It's a crowded market, Apple and Samsung aren't buying, and the development is expensive. Seems OMAP could have more upside in embedded.
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dylan.mcgrath
9/26/2012 6:10 PM EDT
PS- Will Strauss of Forward Concepts just reminded me that he has been predicting this since 2010. The trend is toward integrating the apps processor with the base band in smartphones, and with TI stopping development of baseband, the company has no chance. Qualcomm is already shipping Snapdragon with integrated baseband, and Nvidia plans to ship a Tegra with integrated baseband starting next year.
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andyroyduh
9/26/2012 11:53 PM EDT
Apple and Samsung don't seem to agree with Will Strauss' prediction. Do we really have a trend toward app processor/baseband integration if the top two suppliers (representing 49% of smartphones sold) don't participate. The real trend here is vertical integration.
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dylan.mcgrath
9/27/2012 3:52 PM EDT
@andyroyduh- you bring up a fair point. I bounced this off Will Strauss. Here is what he said, in a nutshell:
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).
BTW, for more on Strauss's take on the OMAP shift, see new article:
http://www.eetimes.com/electronics-blogs/semi-conscious/4397281/Why-OMAP-cant-compete-in-smartphones?cid=NL_EETimesDaily
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shub
9/27/2012 5:37 PM EDT
Completely agree with Strauss, this is now a platform game for all ASIC vendors, all major competitor has full flatform (AP + Baseband + RF). TI had blown their chance in 2007 itself but were selling AP story to financial analyst and they were bying it as they don't have any technical idea. Once they realized this is not working they are trying to tell people they will make $1B from selling OMAP in embeded market again big dream.
The matter of fact and truth is this is complete management failure who blew $4 Billion revenue which used to come from Wireless in 2006 to $0.
How come a company who invented AP only business for smaprtphone goes out, this is same as Lehman going out of investment banking. Give a thought on this and njoy your evening.
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DSJIANG
9/26/2012 11:14 PM EDT
How about Qualcomm?
If Apple and Samsung use their own AP, it means Qualcomm also loses business in high end smartphone. Moreover, MTK have won the business in China for low price of smartphone.
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casual3
9/27/2012 12:31 AM EDT
I guess TI's internal discussion ran like this:
in 2015, smartphone market will be 1B+ units,
Apple/Samsung will be 500M, Huawei will be 100M, all 3 are vertically integrated with their own OS and AP, so 600M units is already out of the question.
for the remaining 400M units, at least 80% will be integrated baseband+AP for the mid-to-low-end, so TI is out.
for the last 80M units AP, TI should compete with half a dozen strong competitors including Qualcomm, Mediatek, Spreadtrum, Broadcom, Nvidia, Marvell, etc. And I just forgot Intel.Also RDA will be a strong low-end AP competitor in 2015.
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Navaneethan
9/27/2012 2:22 AM EDT
This is actually great news for the broader embedded (non-smartphone) market. TI had some great hits in the broad embedded market with the OMAP3 and earlier products. But in the last few years, TI's innovations in OMAP4 and OMAP5 have only been available to the 10 or so customers and in many cases even datasheets of these products were not public.
OMAP+FPGA combination for example is very popular in many non-consumer applications - industrial, surveillance, etc. This is where Xilinx Zynq is beginning to take market share.
Going forward OMAP5-style chips (with ARM Cortex-A15, etc) will become broadly available to lots of customers via Avnet and Arrow. It should be interesting...
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Fredrik.Nyman_0623
9/27/2012 12:00 PM EDT
Also, there is a HUGE unserved market opportunity for low-cost Wi-Fi for the embedded market. TI has a significant opportunity here since the OMAP chips for smartphones already have Wi-Fi.
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Quickembed
9/27/2012 8:35 PM EDT
omap is good solution giving good UI on arm and good data processing on dsp. yet the system is complicated for engineer to use. most new customers want to use it but don't know how and ask us for help. and some give up, they use omap as an arm.
we supply omap evm kit and arm dev kit at the same time on our website, www.quickembed.com, customer interest for omap platform and arm platform is about 1:100
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Quickembed
9/27/2012 8:39 PM EDT
not only supply chip but also total solution is very important. industries move so fast that common user is difficulty to catch the study line. they like easy evm and dev kit, fast prototype ODM service, www.quickembed.com
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rick.merritt
9/28/2012 12:57 AM EDT
Its often stated if you can't be one or two dont play.
TI was actually behind Qualcomm, Nvidia, Samsung and Apple. Fifth is a pretty bad position. Freescale's iMx was there once too and then went embedded.
I wonder what Moto, Amazon and others will do with a diminished Omap road map?
BTW, integrated baseband/apps processor is good for the low end but the high end products still wants separate big chips methinks.
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rick.merritt
9/28/2012 11:01 AM EDT
I also wonder what will happen to the two OEMs I believe TI was working with for Omap-based Windows RT systems?
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dylan.mcgrath
9/28/2012 12:21 PM EDT
The plan is to continue supporting all existing customers. However, anyone using OMAP in a smartphone or tablet is going to have to prepare for eventual transition to another apps processor.
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GREAT-Terry
10/3/2012 1:03 AM EDT
I personally think this is a smart strategy. Having over 100 customers with $400M business is better than only having 10 customers with $900M business. When you lose a design in one of these customers, you are digging a big revenue hole that is hard to be filled back up. The stock price of TI may suffer for a while as wall street people aren't really in the semiconductor business and they just focus on the revenue at the time being. For a long term development of a company, I think it is still better to expand the customer base in order to lower the risk of revenue fluctuation!
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