Alan, I can't disagree too much with your reasoning and, on a lighter note, I love numbers (as long as they are accurate) and can't but admire someone who spices comments with data. Thank you for the brief but quite reasonable analysis.
Whether TI's revenue drop in the 2nd quarter was caused by higher fab capacity and shorter component lead times, leading to lower ASPs - is debatable. Time-to-market is a competitive differentiator, so ASPs can actually be higher for shorter lead times. If TI's lead times are too long, customers may move on to competitors(assuming they are not proprietary parts). So price needs to be kept down.
It's more likely, like TI says, that the revenue shortfall in 2Q had to do with a "customer specific issue" at a Wireless customer, rather than a drop in ASPs.
TI's Wireless segment only grew from $717M in 1Q10 to $727M in 2Q10, which is just a 1% increase. While the business units of Analog, Embedded Processing, and Other (DLP, custom ASIC) grew by 11, 17 and 9% respectively.
And in Wireless, higher revenue from connectivity products was offset by lower revenues from baseband and OMAP. TI's wireless business is still vulnerable to specific products at specific customers, and this will continue to cause business turbulence.
It is now a norm that investors push firms to do good and also move into very difficult spots. Despite this good result to me, TI could not get it with many of the shorters. TI must focus on its long-term and never be overly worried by most of these investors. It is the same thing that happens when people complain that US is not creating jobs when actually investor demands are pushing firms to outsource jobs in order to beat estimates. Owing your strategy over short-term investors must be a priory for TI.
TI is in very tough market when optimization of inventory and demand is very critical. Getting it right in most cases is tough. Nonetheless, they have a good Q.
Concerns about a possible overcapacity situation down the road may have some legitimacy, but the hit to TI's stock seems to me to be due to a reactionary strategy by short-term investors. It seems like some people were ready to dump TI at the first hint of supply loosening up, even though its a better situation for the company's long-term prospects.
Jay-K, TI sells a lot of proprietary parts. Second sources are not easily available so often a manufacturer must wait on TI. The company knows this hence the decision to add capacity. These are cyclical trends and one day, TI may be glad it responded so quickly to its customers' needs.
As to your question on design sockets, it depends again on whether or not there are good second sources for the components. If these are not available, you sit, wait and hope your customers won't move on to rivals' products.
I wonder what the future impact will be of losing sockets due to frustration with lead times. It's tough for everyone right now, but availability seems to be significantly worse with TI than with some of their competitors.
What the analysts may be concerned about is the overcapacity and the aggressive expansion of fabs (like the recent 'TI buys two fabs from Spansion Japan' story posted July 14, which should impact costs at least initially. The impressive part is that 300mm fabs with small to medium complexity analog translates into a lot of chips...It is an analog world for sure with no slowing down in sight is what I sense.
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