Texas Instruments Incorporated

views updated May 29 2018

Texas Instruments Incorporated

13500 North Central Expressway
Dallas, Texas 75243
U.S.A.
(214) 995–2011

Public Company
Incorporated: 1930 as Geophysical Service
Employees: 75,685
Sales: $6.3 billion
Stock Exchange: New York London Switzerland

The history of Texas Instruments (TI) is the history of the American electronics industry. TI was one of the first companies to manufacture transistors, and it introduced the first commercial silicon transistors. It was a TI engineer who developed the first semiconductor integrated circuit in 1958, and TI’s semiconductor chips helped fuel the modern electronics revolution.

Texas Instruments traces it roots to Geophysical Service, a petroleum-exploration firm founded in 1930 by Dr. J. Clarence Karcher and Eugene McDermott. Headquartered in Dallas, Geophysical Service used a technique for oil exploration developed by Karcher. The technique, reflection seismology, used underground sound waves to find and map those areas most likely to yield oil. When Karcher and McDermott opened a research and equipment manufacturing office in Newark, New Jersey—to keep their research and their seismography equipment operations out of view of competitors—they hired J. Erik Jonsson, a mechanical engineer, to head it.

Toward the end of the 1930s, Geophysical Service began to change its business focus because of the erratic nature of the oil exploration business. The company was reorganized: an oil company, Coronado Corporation, was established as the parent company and a geophysical company called Geophysical Service, Inc. (GSI), was formed as a subsidiary. McDermott and Jonsson, along with two other GSI employees, purchased GSI from Coronado in 1941. During World War II, oil exploration continued, and the company also looked for other business opportunities. The skills GSI acquired producing seismic devices were put to use in the development and manufacture of electronic equipment for the armed services. This experience revealed marked similarities in design and performance requirements for the two kinds of equipment. Jonsson, encouraged by GSI’s expansion during the war, helped make military manufacturing a major company focus. By 1942 GSI was working on military contracts for the U.S. Navy and the Army Signals Corps. This was the beginning of the company’s diversification into electronics unrelated to petroleum exploration.

After the war, Jonsson coaxed a young naval officer named Patrick E. Haggerty, a man of exceptional vision, to join GSI. At a time when many defense contractors had shifted their focus from military manufacturing to civilian markets, Haggerty and Jonsson firmly believed that defense contracts would help them establish GSI as a leading-edge electronics company. They won contracts to produce such military equipment as airborne magnometers and complete radar systems. Haggerty, who was general manager of the Laboratory and Manufacturing (L & M) division, also set about turning GSI into a major electronics manufacturer. He and Jonsson soon won approval from the board of directors to build a new plant to consolidate scattered operations into one unit. The new building opened in 1947.

By 1951 the L & M division was growing faster than GSI’s Geophysical division. The company was reorganized again and renamed General Instruments Inc. Because its new name was already in use by another company, however, General Instruments became Texas Instruments that same year. Geophysical Service Inc. became a subsidiary of Texas Instruments in the reorganization, remaining as a subsidiary of TI until early 1988, when most of the company was sold to the Halliburton Company.

The next major change came late in 1953 when Texas Instruments went public by merging with the almost-dormant Intercontinental Rubber Company The merger brough TI new working capital and a listing on the New York Stock Exchange, and helped fuel the company’s subsequent growth.

Indeed, the 1950s were a heady time for Texas Instruments. In 1953 alone, TI acquired seven new companies. Sales skyrocketed from $6.4 million in 1949 to $20 million in 1952 to $92 million in 1958, establishing TI as a major electronics manufacturer.

A major factor in TI’s astronomical growth in the 1950s was the transistor. In 1952, TI paid $25,000 to Western Electric for a license to manufacture its newly patented germanium transistor. Within two years, TI was mass-producing high-frequency germanium transistors and had introduced the first commercial silicon transistor. The silicon transistor was based on research conducted by Gordon Teal, who had been hired from Bell Labs to head TI’s research laboratories.

Teal and his research team had developed a way to make transistors out of silicon rather than germanium in 1954. Silicon had many advantages over germanium, not least of which was it’s resistance to high temperatures. The silicon transistor was a critical breakthrough.

It was Pat Haggerty who was convinced that there was a huge market for consumer products that used inexpensive transistors. In 1954 TI, together with the Regency division of Industrial Engineering Associates, Inc., developed the world’s first small, inexpensive, portable radio using the germanium transistors TI had developed. The new Regency Radio was introduced in late 1954, and became the hot gift item of the 1954 Christmas season. The transistor soon usurped the place of vacuum tubes forever.

During all this, Haggerty and Mark Shepherd Jr., then manager of TI’s Semiconductor-Components division and later chairman of TI, had been trying, with little success, to persuade IBM to make TI a supplier of transistors for its computers. But Thomas Watson Jr., president and founder of IBM, was impressed with the Regency Radio, and in 1957, IBM signed an agreement that made TI a major component supplier for IBM computers. In 1958, Patrick Haggerty was named to succeed Jonsson as president.

From 1956 to 1958, Texas Instruments’ annual sales more than doubled, from $46 million to $92 million. In 1957 TI opened its first manufacturing facility outside the United States—a plant in Bedford, England to supply semiconductors to Britain and Western Europe. And in 1959, TI’s merger with Metals and Controls Corporation—a maker of clad metals, control instruments, and nuclear fuel components and instrument cores—gave TI two American plants as well as facilities in Mexico, Argentina, Italy, Holland, and Australia.

One of Texas Instruments’ most important breakthroughs occurred in 1958 when a newly hired employee, Jack S. Kilby, came up with the idea for the first integrated circuit. The integrated circuit was a pivotal innovation. Made of a single semiconductor material, it eliminated the need to solder components together. Without wiring and soldering, components could be miniaturized, which allowed for more compact circuitry and also meant huge numbers of components could be crowded onto a single chip.

To be sure, there were manufacturing problems to be overcome. The chips had to be produced in an entirely dust-free environment; an error-free method of “printing” the circuits onto the silicon chips had to be devised; and miniaturization itself made manufacturing difficult. But Texas Instruments realized the chip’s potential and, after two years of development, the company’s first commercial integrated circuits were made available in 1960. Although the electronics industry initially greeted the chip with skepticism, integrated circuits became the foundation of modern microelectronics. Smaller, lighter, faster, more dependable, and more powerful than its predecessors, the chip had many advantages, but it was expensive—$100 for small quantities in 1962. But integrated circuits were ideally suited for use in computers, and together, chips and computers experienced explosive growth.

Semiconductors quickly became a key element in space technology, too, and early interest by the military and the U.S. space program gave TI and its competitors the impetus to improve their semiconductor chips and refine their production techniques. Under Jack Kilby, TI built the first computer to use silicon integrated circuits, for the air force. Demonstrated in 1961, this ten-ounce, 600-part computer proved that integrated circuits were practical.

Chip prices fell to an average price of $8 apiece by 1965, making the circuits affordable enough to use in consumer products. Another importantant breakthrough came in 1969, when IBM began using integrated circuits in all its computers. Soon the government was no longer TI’s main customer, although defense electronics remained an important part of Texas Instruments’ business. Within ten years of Kilby’s discovery, semiconductors had become a multi-billion-dollar industry.

Early on, TI’s management anticipated a huge world demand for semiconductors, and in the 1960s the company built manufacturing plants in Europe, Latin America, and Asia. TI’s early start in these markets gave the company an edge over its competitors.

In 1966 Haggerty was elected chairman of TI’s board when Jonsson left to become mayor of Dallas. He had already challenged a team of engineers to develop a new product: the portable, pocket-sized calculator, to show that integrated circuits had a place in the consumer market. In 1967, TI engineers invented a prototype hand-held calculator, which weighed 45 ounces. It was four years before the hand-held calculator hit the stores, but once it did it made history. Within a few years, the once-ubiquitous slide rule was obsolete.

In 1970 TI invented the single-chip microprocessor, or microcomputer, which was introduced commercially the next year. It is this break-through chip that paved the way not only for small, inexpensive calculators but also for today’s ubiquitous computer-controlled appliances and devices.

TI formally entered the consumer-electronic calculator market in 1972 with the introduction of a four-ounce portable calculator and two desktop models, which ranged in price from $85 to $120. Sales of calculators soared from about 3 million units in 1971 to 17 million in 1973, 28 million in 1974, and 45 million in 1975.

Despite this early success, TI was to learn many bitter lessons about marketing to the American consumer. Even early success was hard won. Bowmar Instruments had been selling a calculator that used TI-made chips since 1971. In 1972, when TI entered the calculator market and tried to undercut Bowmar’s price, Bowmar quickly matched TI and a price war ensured. TI subscribed to learning-curve pricing: keep prices low (and profits small) in the early stages to build market share and develop manufacturing efficiencies; competitors who want to enter the market later will find it difficult or impossible to compete.

But after a few years, competitors did begin to make inroads into TI’s business; by 1975, as increased competition in the market led to plummeting prices, the calculator market softened, leading to a $16 million loss for TI in the second quarter of 1975.

But TI rebounded and again sent shock waves through the consumer-electronics world in 1976 when it introduced an inexpensive, reliable electronic digital watch for a mere $19.95. Almost overnight, TI’s watches grabbed a large share of the electronic watch market at the expense of long-established watch manufacturers. A little more than a year later, TI cut the price of a digital watch to $9.95.

When low-cost Asian imports flooded the market in 1978, however, Texas Instruments began to lose its dominant position. TI also failed to capitalize on LCD (liquid crystal display) technology, for which it held the basic patent. It had not anticipated strong consumer demand for LCD watches, which displayed the time continuously rather than requiring the user to push a button for a readout. When sales of LCD watches exploded, TI couldn’t begin mass-production quickly enough. The company’s digital-watch sales dropped dramatically in 1979, by the end of 1981 TI had left the digital watch business.

Meanwhile, in TI’s mainstay business, semiconductor manufacturing, orders for chips became backlogged—Texas instruments had spread its resources thinly in order to compete in both the consumer and industrial markets, and worldwide chip demand had soared at the same time.

Despite these problems, TI grew at a rapid rate during the 1970s. Defense electronics continued to be highly profitable and semiconductor demand remained strong, buoyed by the worldwide growth in consumer-electronics manufacturing. The company reached $1 billion in sales in 1973, $2 billion in 1977, and $3 billion in 1979.

Mark Shepherd was named chairman of the board upon Patrick Haggerty’s retirement in 1976, and J. Fred Bucy, who had worked in almost all of TI’s major business areas, was named president and remained chief operating officer. Haggerty continued as general director and honorary chairman until his death in 1980.

In 1978, Texas Instruments introduced Speak & Spell, an educational device that used TI’s new speech-synthesis technology, which proved quite popular. That same year, TI was held up as Business Week’s model for American companies in the 1980s for its lead in innovation, productivity gains, and phenomenal growth and earnings records.

In mid-1979 TI announced the introduction of a home computer, which reached the market that December. Priced at about $1,400, the machine sold more slowly at first than TI had predicted. In 1981 sales began to pick up, though, and a rebate program in 1982 kept sales—and sales predictions—very strong. In April, 1983, TI shipped its one millionth home computer.

Then suddenly sales of the TI-99/4A fell off dramatically. By October, TI’s overconfident projections and failure to predict the price competitiveness of the market had driven the company out of the home computer business altogether. By the time the 99/4A was withdrawn from the market, TI’s usual competitive-pricing strategy had reduced the computer’s retail price below the company’s production cost, causing TI’s first-ever loss, of $145 million, in 1983.

Of course, TI’s consumer electronics never had been a consistent money-maker. The company has often been accused of arrogance—of trying to find mass markets for new TI inventions rather than adapting its product lines to accommodate customers’ needs—and TI’s aggressive price-cutting was often insensitive to dealers and customers alike. In addition, TI’s pursuit of both consumer and industrial markets often caused shortages of components resulting in backlogged or reduced shipments.

After experiencing its first loss, TI found regaining its former footing difficult. A slump in semiconductor demand during the recession of the early 1980s made TI’s heavy losses in home computers particularly painful. Cost-cutting became a high priority, and TI trimmed its work force by 10,000 employees between 1980 and 1982. In addition, management decided that its matrix management structure was strangling the company and so began to modify the system to revive innovation. Although the company’s engineers continued to lead the semiconductor field in innovations, increased competition both in the United States and overseas meant that technological superiority was no longer a guarantee of success.

TI President Fred Bucy was roundly criticized for being abrasive and autocratic, and the disappointments of the early 1980s hastened his demise. In May, 1985 Buey abruptly retired and Jerry Junkins was elected president and CEO. Junkins, a lifetime TI employee with a much cooler and more conciliatory management style, has proved a popular chief executive. Junkins continued a campaign started by Buey to refocus TI on its forte, semiconductor development, as part of his strategy to place less emphasis on market dominance and concentrate more on margins. In addition, Junkins recognized that TI needed to improve relations with its customers and eliminate the company’s reputation for arrogance.

A recent development has been TI’s aggressive defense of its rights to its intellectual property—the patented technological developments of its employees. In 1986 TI filed suit with the International Trade Commission against eight Japanese and one Korean semiconductor manufacturers who were selling dynamic random-access memories (DRAMs) in the United States without obtaining licenses to use technology that belongs to TI. TI reached out-of-court settlements with most of the companies but, more importantly, demonstrated that infringements on its patents would not be tolerated.

In late 1988 Texas Instruments announced plans to join Japan’s Hitachi, Ltd. in developing 16-megabit DRAM technology. Although this decision came as quite a surprise to the electronics industry given TI’s successful Japanese subsidiary and its manufacturing plant there, TI explained that the move was necessary to spread the mounting risks and costs involved in producing such an advanced chip.

In 1977, TI boldly set itself a sales goal of $10 billion by 1989; not long after, it upped the ante to $15 billion by 1990. The TI that entered the 1990s some $9 billion short of that extraordinary goal has decided to refocus on its original chip business, putting its once-heralded consumer-products operations on the back burner. As the only U.S. chipmaker to have stayed in the DRAM business in the face of Japanese competition in the 1980s, TI is in a strong position in that industry. And TI’s defense electronics business remains strong, buoyed by a large contract in late 1989 to build 1,600 HARM missiles. While it still has quite a way to go to reach that $15 billion goal, TI, with very modern manufacturing and design facilities already located throughout the United States, Europe, Latin America, and Asia and more under construction, plans to capitalize on anticipated heavy demand for chips. With a very difficult decade behind it, TI looks ready to shine in the 1990s.

Principal Subsidiaries:

Texas Instruments Australia Limited; Texas Instrumentos Eletronicos do Brasil Limitada; Texas Instruments Canada Limited; Texas Instruments Limited; Texas Instruments Deutschland G.m.b.H.; Texas Instruments Holland B.V.; Texas Instruments (India) Private Limited; Texas Instruments Italia S.p.A.; Texas Instruments Japan Limited; Texas Instruments Korea Limited; Texas Instruments Malaysia Sdn. Bhd.; Texas Instruments de Mexico, S.A. de C.V.; Texas Instruments France S.A.; Texas Instruments (Philippines) Incorporated; Texas Instruments Equipamento Electronico (Portugal) Lta.; Texas Instruments Singapore (Pte) Limited; Texas Instruments Taiwan Limited.

International Directory of Company Histories

Texas Instruments Inc.

views updated Jun 27 2018

Texas Instruments Inc.

P.O. Box 655474
13500 North Central Expressway
Dallas, Texas 75243-1108
U.S.A.
(214) 995-2011
Fax: (214) 995-4360

Public Company
Incorporated: 1930 as Geophysical Service, Inc.
Employees: 59,400
Sales: $8.52 billion
Stock Exchanges: New York London Switzerland Boston
Cincinnati NASDAQ Philadelphia Pacific
SICs: 3674 Semiconductors and Related Devices; 3812
Search and Navigation Equipment; 3625 Relays and
Industrial Controls; 7372 Prepackaged Software; 7371
Computer Programming Services; 3577 Computer
Peripheral Equipment, Not Elsewhere Classified

The history of Texas Instruments Inc. (TI) was intimately related to the history of the American electronics industry. TI was one of the first companies to manufacture transistors, and it introduced the first commercial silicon transistors. It was a TI engineer who developed the first semiconductor integrated circuit in 1958, and TI’s semiconductor chips helped fuel the modern electronics revolution. After a disappointing performance in the 1980s, the corporation abandoned its long-held, but unfulfilled dream of becoming a consumer electronics powerhouse in favor of specialization in high-tech computer components.

Texas Instruments’s roots can be traced to Geophysical Service, a petroleum-exploration firm founded in 1930 by Dr. J. Clarence Karcher and Eugene McDermott. Headquartered in Dallas, Geophysical Service used a technique for oil exploration developed by Karcher. The technique, reflection seismology, used underground sound waves to find and map those areas most likely to yield oil. When Karcher and McDermott opened a research and equipment manufacturing office in Newark, New Jersey—to keep their research and their seismography equipment operations out of view of competitors—they hired J. Erik Jonsson, a mechanical engineer, to head it.

Toward the end of the 1930s, Geophysical Service began to change its business focus because of the erratic nature of the oil exploration business. The company was reorganized: an oil company, Coronado Corporation, was established as the parent company; and a geophysical company, Geophysical Service, Inc. (GSI), was formed as a subsidiary. McDermott and Jonsson, along with two other GSI employees, purchased GSI from Coronado in 1941. During World War II, oil exploration continued, and the company also looked for other business opportunities. The skills GSI acquired producing seismic devices were put to use in the development and manufacture of electronic equipment for the armed services. This experience revealed marked similarities in design and performance requirements for the two kinds of equipment. Jonsson, encouraged by GSI’s expansion during the war, helped make military manufacturing a major company focus. By 1942 GSI was working on military contracts for the U.S. Navy and the Army Signal Corps. This marked the beginning of the company’s diversification into electronics unrelated to petroleum exploration.

After the war, Jonsson coaxed a young naval officer named Patrick E. Haggerty—a man of exceptional vision—to join GSI. At a time when many defense contractors had shifted their focus from military manufacturing to civilian markets, Haggerty and Jonsson firmly believed that defense contracts would help them establish GSI as a leading-edge electronics company. They won contracts to produce such military equipment as airborne magnometers and complete radar systems. Haggerty, who was general manager of the Laboratory and Manufacturing (L & M) division, also set about turning GSI into a major electronics manufacturer. He and Jonsson soon won approval from the board of directors to build a new plant to consolidate scattered operations into one unit. The new building opened in 1947.

By 1951 the L & M division was growing faster than GSI’s Geophysical division. The company was reorganized again and renamed General Instruments Inc. Because its new name was already in use by another company, however, General Instruments became Texas Instruments that same year. Geophysical Service Inc. became a subsidiary of Texas Instruments in the reorganization, which it remained until early 1988, when most of the company was sold to the Halliburton Company.

The next major change came late in 1953 when Texas Instruments went public by merging with the almost-dormant Intercontinental Rubber Company. The merger brought TI new working capital and a listing on the New York Stock Exchange, and helped fuel the company’s subsequent growth. Indeed, the postwar era was a heady time for Texas Instruments. In 1953 alone, TI acquired seven new companies. Sales skyrocketed from $6.4 million in 1949 to $20 million in 1952 to $92 million in 1958, establishing TI as a major electronics manufacturer.

A major factor in TI’s astronomical growth in the 1950s was the transistor. In 1952, TI paid $25,000 to Western Electric for a license to manufacture its newly patented germanium transistor. Within two years, TI was mass-producing high-frequency germanium transistors and had introduced the first commercial silicon transistor. The silicon transistor was based on research conducted by Gordon Teal, who had been hired from Bell Laboratories to head TI’s research laboratories. Teal and his research team had developed a way to make transistors out of silicon rather than germanium in 1954. Silicon had many advantages over germanium, not least of which was its resistance to high temperatures. The silicon transistor was a critical breakthrough.

It was Patrick Haggerty who was convinced that there was a huge market for consumer products that used inexpensive transistors. In 1954 TI, together with the Regency division of Industrial Engineering Associates, Inc., developed the world’s first small, inexpensive, portable radio using the germanium transistors TI had developed. The new Regency Radio was introduced in late 1954 and became the hot gift item of the 1954 Christmas season. The transistor soon usurped the place of vacuum tubes forever.

During all this, Haggerty and Mark Shepherd Jr.—then manager of TI’s Semiconductor Components division and later chairman of TI—had been trying, with little success, to persuade IBM to make TI a supplier of transistors for its computers. But Thomas Watson Jr., president and founder of IBM, was impressed with the Regency Radio, and in 1957 IBM signed an agreement that made TI a major component supplier for IBM computers. In 1958, Patrick Haggerty was named to succeed Jonsson as president.

From 1956 to 1958, Texas Instruments’s annual sales doubled from $46 million to $92 million. In 1957 TI opened its first manufacturing facility outside the United States—a plant in Bedford, England, to supply semiconductors to Britain and Western Europe. And in 1959, TI’s merger with Metals and Controls Corporation—a maker of clad metals, control instruments, and nuclear fuel components and instrument cores—gave TI two American plants as well as facilities in Mexico, Argentina, Italy, Holland, and Australia.

One of Texas Instruments’s most important breakthroughs occurred in 1958 when a newly hired employee, Jack S. Kilby, came up with the idea for the first integrated circuit. The integrated circuit was a pivotal innovation. Made of a single semiconductor material, it eliminated the need to solder components together. Without wiring and soldering, components could be miniaturized, which allowed for more compact circuitry and also meant huge numbers of components could be crowded onto a single chip.

To be sure, there were manufacturing problems to be overcome. The chips had to be produced in an entirely dust-free environment; an error-free method of “printing” the circuits onto the silicon chips had to be devised; and miniaturization itself made manufacturing difficult. But Texas Instruments realized the chip’s potential and, after two years of development, the company’s first commercial integrated circuits were made available in 1960. Although the electronics industry initially greeted the chip with skepticism, integrated circuits became the foundation of modern microelectronics. Smaller, lighter, faster, more dependable, and more powerful than its predecessors, the chip had many advantages, but it was expensive—$100 for small quantities in 1962. But integrated circuits were ideally suited for use in computers, and together, chips and computers experienced explosive growth.

Semiconductors quickly became a key element in space technology, too, and early interest by the military and the U.S. space program gave TI and its competitors the impetus to improve their semiconductor chips and refine their production techniques. Under Jack Kilby, TI built the first computer to use silicon integrated circuits for the air force. Demonstrated in 1961, this ten-ounce, 600-part computer proved that integrated circuits were practical.

Chip prices fell to an average of $8 per unit by 1965, making the circuits affordable enough to use in consumer products. Another important breakthrough came in 1969, when IBM began using integrated circuits in all its computers. Soon the government was no longer TI’s main customer, although defense electronics remained an important part of its business. Within ten years of Kilby’s discovery, semiconductors had become a multi-billion-dollar industry. Early on, TI’s management anticipated a huge world demand for semiconductors, and in the 1960s the company built manufacturing plants in Europe, Latin America, and Asia. TI’s early start in these markets gave the company an edge over its competitors.

In 1966 Haggerty was elected chairman of TI’s board when Jonsson left to become mayor of Dallas. Haggerty had already challenged a team of engineers to develop a new product—the portable, pocket-sized calculator—to show that integrated circuits had a place in the consumer market. In 1967, TI engineers invented a prototype hand-held calculator that weighed 45 ounces. It was four years before the hand-held calculator hit the stores, but once it did, it made history. Within a few years, the once-ubiquitous slide rule was obsolete.

In 1970 TI invented the single-chip microprocessor, or microcomputer, which was introduced commercially the next year. It was this breakthrough chip that paved the way not only for small, inexpensive calculators but also for all sorts of computer-controlled appliances and devices. TI formally entered the consumer-electronic calculator market in 1972 with the introduction of a four-ounce portable calculator and two desktop models, which ranged in price from $85 to $120. Sales of calculators soared from about 3 million units in 1971 to 17 million in 1973, 28 million in 1974, and 45 million in 1975.

Despite this early success, TI was to learn many bitter lessons about marketing to the American consumer. Even early success was hard won. Bowmar Instruments had been selling a calculator that used TI-made chips since 1971. In 1972, when TI entered the calculator market and tried to undercut Bowmar’s price, Bowmar quickly matched TI and a price war ensured. TI subscribed to learning-curve pricing: keep prices low (and profits small) in the early stages to build market share and develop manufacturing efficiencies, and then competitors who want to enter the market later will find it difficult or impossible to compete. But after a few years, competitors did begin to make inroads into TI’s business; by 1975, as increased competition in the market led to plummeting prices, the calculator market softened, leading to a $16 million loss for TI in the second quarter.

But TI rebounded and again sent shock waves through the consumer-electronics world in 1976 when it introduced an inexpensive, reliable electronic digital watch for a mere $19.95. Almost overnight, TI’s watches grabbed a large share of the electronic watch market at the expense of long-established watch manufacturers. A little more than a year later, TI cut the price of its digital watch to $9.95.

When low-cost Asian imports flooded the market in 1978, however, Texas Instruments began to lose its dominant position. TI also failed to capitalize on liquid crystal display (LCD) technology, for which it held the basic patent. It had not anticipated strong consumer demand for LCD watches, which displayed the time continuously rather than requiring the user to push a button for a readout. When sales of LCD watches exploded, TI could not begin mass-production quickly enough. The company’s digital-watch sales dropped dramatically in 1979, by the end of 1981 TI had left the digital watch business.

Meanwhile, in TI’s mainstay business, semiconductor manufacturing, orders for chips became backlogged. Texas Instruments had spread its resources thinly in order to compete in both the consumer and industrial markets, and worldwide chip demand had soared at the same time. Despite these problems, TI grew at a rapid rate during the 1970s. Defense electronics continued to be highly profitable and semiconductor demand remained strong, buoyed by the worldwide growth in consumer-electronics manufacturing. The company reached $1 billion in sales in 1973, $2 billion in 1977, and $3 billion in 1979.

Mark Shepherd was named chairman of the board upon Patrick Haggerty’s retirement in 1976, and J. Fred Bucy, who had worked in almost all of TI’s major business areas, was named president and remained chief operating officer. Haggerty continued as general director and honorary chairman until his death in 1980.

In 1978, Texas Instruments introduced Speak & Spell, an educational device that used TI’s new speech-synthesis technology, which proved quite popular. That same year, TI was held up as Business Week’s model for American companies in the 1980s for its innovation, productivity gains, and phenomenal growth and earnings records.

In mid-1979 TI introduced a home computer, which reached the market that December. Priced at about $1,400, the machine sold more slowly at first than TI had predicted. In 1981 sales began to pick up, though, and a rebate program in 1982 kept sales—and sales predictions—very strong. In April 1983, TI shipped its one millionth home computer.

But suddenly, sales of the TI-99/4A fell off dramatically. By October, TI’s overconfident projections and failure to predict the price competitiveness of the market had driven the company out of the home computer business altogether. By the time the 99/4A was withdrawn from the market, TI’s usual competitive-pricing strategy had reduced the computer’s retail price below the company’s production cost, causing TI’s first-ever loss, $145 million, in 1983.

TI’s consumer electronics never managed to become a consistent money-maker. The company was often accused of arrogance—of trying to find mass markets for new TI inventions rather than adapting its product lines to accommodate customers’ needs—and TI’s aggressive price-cutting was often insensitive to dealers and customers alike. In addition, TI’s pursuit of both consumer and industrial markets often caused shortages of components resulting in backlogged or reduced shipments.

After experiencing its first loss, TI found regaining its former footing difficult. A slump in semiconductor demand during the recession of the early 1980s made TI’s heavy losses in home computers particularly painful. Cost-cutting became a high priority, and TI trimmed its work force by 10,000 employees between 1980 and 1982. In addition, management decided that its matrix management structure was strangling the company and so began to modify the system to revive innovation. Although the company’s engineers continued to lead the semiconductor field in innovations, increased competition both in the United States and overseas meant that technological superiority was no longer a guarantee of success. The company recorded yet another $100 million-plus loss in 1985.

TI President Fred Bucy was roundly criticized for being abrasive and autocratic, and the disappointments of the early 1980s hastened his departure. In May 1985 Bucy abruptly retired and Jerry Junkins was elected president and CEO. Junkins, a lifetime TI employee with a much cooler and more conciliatory management style, proved a popular chief executive.

TI’s aggressive defense of its intellectual property rights—the exclusive use of the patented technological developments of its employees—highlighted activities in the late 1980s. In 1986 TI filed suit with the International Trade Commission against eight Japanese and one Korean semiconductor manufacturers who were selling dynamic random-access memories (DRAMs) in the United States without obtaining licenses to use technology that belonged to TI. TI reached out-of-court settlements with most of the companies but, more importantly, demonstrated that infringements on its patents would not be tolerated. Royalties from these decisions proved an important source of revenue (over $250 million annually) for TI.

In late 1988 Texas Instruments announced plans to join Japan’s Hitachi, Ltd. in developing 16-megabit DRAM technology. Although this decision came as quite a surprise to the electronics industry given TI’s successful Japanese subsidiary and its manufacturing plant there, TI explained that the move was necessary to spread the mounting risks and costs involved in producing such an advanced chip.

In 1977, TI had boldly set itself a sales goal of $10 billion by 1989; not long after, it upped the ante to $15 billion by 1990. The company actually entered the 1990s some $9 billion short of that extraordinary goal. After watching its share of the semiconductor market slide from 30 percent to a meager 5 percent over the course of the decade, Junkins took a decisive step. In 1989, the CEO inaugurated a strategic plan to radically reshape Texas Instruments, dubbed “TI 2000.” A key aspect of the plan was to loosen the corporation’s traditionally tight corporate culture and encourage innovation. This fundamental change was intimately linked to a shift in manufacturing focus from cheap, commodity-based computer chips to high-margin, custom-designed microprocessors and digital signal processors. For example, in 1989 TI embarked on a partnership with Sun Microsystems Inc. to design and manufacture microprocessors, sharing engineering personnel and proprietary technology in the process. TI garnered vital contracts with Sony Corporation, General Motors Corporation, and Swedish telecommunications powerhouse L.M. Ericsson. The company promoted its repositioning with new business-to-business advertising. From 1988 to 1993, the specialty components segment increased from 25 percent of annual sales to nearly 50 percent. In 1993, Junkins told Business Week that TI was “looking for shared dependence” in these partnerships. He also hoped to parlay technological gains into mass sales.

Under Junkins, TI also increased its global manufacturing capacity through a number of joint ventures in Europe and Asia. A 1990 partnership with the Italian government allowed the shared construction expenses of a $1.2 billion plant. By 1992, TI had forged alliances with Taiwanese manufacturer Acer, Kobe Steel in Japan, and a coterie of companies in Singapore. Texas Instruments planned to invest $1 billion in Asian plants by the turn of the century. Joint ventures with Samsung Electronics Co., Ltd. and Hitachi, Ltd. in 1994 split the costs of building semiconductor plants in Portugal and the United States, respectively. TI 2000 also set a goal of increasing the company’s high-margin software sales five times, to $1 billion, by the mid-1990s.

Although Texas Instruments recorded net losses in 1990 and 1991, the company’s sales and profits rebounded in 1992 and 1993. Profitability, in terms of sales per employee, increased dramatically from $88,300 in 1989 to $143,240 in 1993. In 1992, the firm won the coveted Malcolm Baldrige National Quality Award in manufacturing and adopted the Baldrige criteria as its quality standards. Wall Street noticed the improved performance: TI’s stock price more than doubled from 1991 to early 1993.

Principal Subsidiaries

JMA Information Engineering Ltd.; Texas Instruments Deutschland GmbH (Germany); Texas Instruments Equipamento Electronicl Lda. (Portugal); Texas Instruments France S.A.; Texas Instruments Holland B.V.; Texas Instruments Italia SpA; Texas Instruments Japan Ltd.; Texas Instruments Ltd.; Texas Instruments Malaysia Sdn. Bhd.; Texas Instruments Inc. (Philippines); Texas Instruments Singapore (Pte) Ltd.; Texas Instruments Taiwan Ltd.

Texas Instruments Inc.

views updated Jun 11 2018

Texas Instruments Inc.

12500 TI Boulevard
Dallas, Texas 75243-4136
U.S.A.
Telephone: (972) 995-2011
Toll Free: (800) 995-4360
Fax: (972) 995-4360
Web site: http://www.ti.com

Public Company
Incorporated: 1930 as Geophysical Service, Inc.
Employees: 42,400
Sales: $11.8 billion (2000)
Stock Exchanges: New York Swiss
Ticker Symbol: TXN
NAIC: 334413 Semiconductor and Related Device Manufacturing; 335314 Relay and Industrial Control Manufacturing

Texas Instruments Inc. (TI) operates as one of the largest semiconductor manufacturers in the world. By 2001, it had a leading market share in the analog chip and digital signal processor (DSP) industries. In fact, over half of the world’s wireless phones have TFs DSPs. The company’s main businesses include semiconductors, which accounted for 87 percent of revenues in 2000; educational and productivity solutions; sensors and controls; and digital light processing (DLP) products. While TI experienced record financial results in 2000, the company’s profits were significantly impacted during 2001, when the semiconductor industry experienced one of worst downturns in its history.

Origins

The history of Texas Instruments is intimately related to the history of the American electronics industry. TI was one of the first companies to manufacture transistors, and it introduced the first commercial silicon transistors. It was a TI engineer—Jack Kilby—who developed the first semiconductor integrated circuit in 1958, and TFs semiconductor chips helped fuel the modern electronics revolution. (Kilby won a Nobel Prize in 2000 for his contributions.) After a disappointing performance in the 1980s, the corporation abandoned its long-held, but unfulfilled dream of becoming a consumer electronics powerhouse in favor of specialization in high-tech computer components.

Texas Instruments’ roots can be traced to Geophysical Service, a petroleum-exploration firm founded in 1930 by Dr. J. Clarence Karcher and Eugene McDermott. Headquartered in Dallas, Texas, Geophysical Service used a technique for oil exploration developed by Karcher. The technique, reflection seismology, used underground sound waves to find and map those areas most likely to yield oil. When Karcher and McDermott opened a research and equipment manufacturing office in Newark, New Jersey—to keep their research and their seismography equipment operations out of view of competitors—they hired J. Erik Jons-son, a mechanical engineer, to head it.

Focus on Defense Contracts, Electronics: 1940s–50s

Toward the end of the 1930s, Geophysical Service began to change its business focus because of the erratic nature of the oil exploration business. The company was reorganized: an oil company, Coronado Corporation, was established as the parent company, and a geophysical company, Geophysical Service, Inc. (GSI), was formed as a subsidiary. McDermott and Jons-son, along with two other GSI employees, purchased GSI from Coronado in 1941. During World War II, oil exploration continued, and the company also looked for other business opportunities. The skills GSI acquired producing seismic devices were put to use in the development and manufacture of electronic equipment for the armed services. This experience revealed marked similarities in design and performance requirements for the two kinds of equipment. Jonsson, encouraged by GSFs expansion during the war, helped make military manufacturing a major company focus. By 1942, GSI was working on military contracts for the U.S. Navy and the Army Signal Corps. This marked the beginning of the company’s diversification into electronics unrelated to petroleum exploration.

After the war, Jonsson coaxed a young naval officer named Patrick E. Haggerty—a man of exceptional vision—to join GSI. At a time when many defense contractors had shifted their focus from military manufacturing to civilian markets, Haggerty and Jonsson firmly believed that defense contracts would help them establish GSI as a leading-edge electronics company. They won contracts to produce such military equipment as airborne magnometers and complete radar systems. Haggerty, who was general manager of the Laboratory and Manufacturing (L&M) division, also set about turning GSI into a major electronics manufacturer. He and Jonsson soon won approval from the board of directors to build a new plant to consolidate scattered operations into one unit. The new building opened in 1947.

By 1951, the L&M division was growing faster than GSFs Geophysical division. The company was reorganized again and renamed General Instruments Inc. Because its new name was already in use by another company, however, General Instruments became Texas Instruments that same year. Geophysical Service Inc. became a subsidiary of Texas Instruments in the reorganization, which it remained until early 1988, when most of the company was sold to the Halliburton Company.

The next major change came late in 1953, when Texas Instruments went public by merging with the almost-dormant Intercontinental Rubber Company. The merger brought TI new working capital and a listing on the New York Stock Exchange and helped fuel the company’s subsequent growth. Indeed, the postwar era was a heady time for Texas Instruments. In 1953 alone, TI acquired seven new companies. Sales skyrocketed from $6.4 million in 1949 to $20 million in 1952 to $92 million in 1958, establishing TI as a major electronics manufacturer.

An important factor in TFs astronomical growth in the 1950s was the transistor. In 1952, TI paid $25,000 to Western Electric for a license to manufacture its newly patented germanium transistor. Within two years, TI was mass-producing high-frequency germanium transistors and had introduced the first commercial silicon transistor. The silicon transistor was based on research conducted by Gordon Teal, who had been hired from Bell Laboratories to head TFs research laboratories. Teal and his research team had developed a way to make transistors out of silicon rather than germanium in 1954. Silicon had many advantages over germanium, not least of which was its resistance to high temperatures. The silicon transistor was a critical breakthrough.

It was Patrick Haggerty who was convinced that there was a huge market for consumer products that used inexpensive transistors. In 1954, TI, together with the Regency division of Industrial Engineering Associates, Inc., developed the world’s first small, inexpensive, portable radio using the germanium transistors TI had developed. The new Regency Radio was introduced in late 1954 and became the hot gift item of the 1954 Christmas season. The transistor soon usurped the place of vacuum tubes forever.

During all this, Haggerty and Mark Shepherd Jr.—then manager of TI’s Semiconductor Components division and later chairman of TI—had been trying, with little success, to persuade IBM to make TI a supplier of transistors for its computers. But Thomas Watson Jr., president and founder of IBM, was impressed with the Regency Radio, and in 1957 IBM signed an agreement that made TI a major component supplier for IBM computers. In 1958, Patrick Haggerty was named to succeed Jonsson as president.

From 1956 to 1958, Texas Instruments’ annual sales doubled from $46 million to $92 million. In 1957, TI opened its first manufacturing facility outside the United States—a plant in Bedford, England, to supply semiconductors to Britain and Western Europe. In 1959, TFs merger with Metals and Controls Corporation—a maker of clad metals, control instruments, and nuclear fuel components and instrument cores—gave TI two U.S. plants as well as facilities in Mexico, Argentina, Italy, Holland, and Australia.

The Integrated Circuit: 1958

One of Texas Instruments’ most important breakthroughs occurred in 1958 when a newly hired employee, Jack S. Kilby, came up with the idea for the first integrated circuit. The integrated circuit was a pivotal innovation. Made of a single semiconductor material, it eliminated the need to solder components together. Without wiring and soldering, components could be miniaturized, which allowed for more compact circuitry and also meant huge numbers of components could be crowded onto a single chip.

To be sure, there were manufacturing problems to be overcome. The chips had to be produced in an entirely dust-free environment; an error-free method of “printing” the circuits onto the silicon chips had to be devised; and miniaturization itself made manufacturing difficult. But Texas Instruments realized the chip’s potential and, after two years of development, the company’s first commercial integrated circuits were made available in 1960. Although the electronics industry initially greeted the chip with skepticism, integrated circuits became the foundation of modern microelectronics. Smaller, lighter, faster, more dependable, and more powerful than its predecessors, the chip had many advantages; however, it was expensive—$100 for small quantities in 1962. But integrated circuits were ideally suited for use in computers. Together, chips and computers experienced explosive growth.

Semiconductors quickly became a key element in space technology, too, and early interest by the military and the U.S. space program gave TI and its competitors the impetus to improve their semiconductor chips and refine their production techniques. Under Jack Kilby, TI built the first computer to use silicon integrated circuits for the air force. Demonstrated in 1961, this ten-ounce, 600-part computer proved that integrated circuits were practical.

Company Perspectives:

TI has set a vision to become a premier electronics company providing world class leadership in digital solutions for the networked society—a society transformed by personalized electronics, all speaking the same digital language, all able to communicate anytime, anywhere.

Chip prices fell to an average of $8 per unit by 1965, making the circuits affordable enough to use in consumer products. Another important breakthrough came in 1969, when IBM began using integrated circuits in all its computers. Soon the government was no longer TFs main customer, although defense electronics remained an important part of its business. Within ten years of Kilby’s discovery, semiconductors had become a multi-billion-dollar industry. Early on, TFs management anticipated a huge world demand for semiconductors, and in the 1960s the company built manufacturing plants in Europe, Latin America, and Asia. TFs early start in these markets gave the company an edge over its competitors.

In 1966, Haggerty was elected chairman of TFs board when Jonsson left to become mayor of Dallas. Haggerty had already challenged a team of engineers to develop a new product—the portable, pocket-sized calculator—to show that integrated circuits had a place in the consumer market. In 1967, TI engineers invented a prototype hand-held calculator that weighed 45 ounces. It was four years before the hand-held calculator hit the stores, but once it did, it made history. Within a few years, the once-ubiquitous slide rule was obsolete.

Entering the Consumer Electronics Industry: 1970s

In 1970, TI invented the single-chip microprocessor, or microcomputer, which was introduced commercially the next year. It was this breakthrough chip that paved the way not only for small, inexpensive calculators but also for all sorts of computer-controlled appliances and devices. TI formally entered the consumer-electronic calculator market in 1972 with the introduction of a four-ounce portable calculator and two desktop models, which ranged in price from $85 to $120. Sales of calculators soared from about 3 million units in 1971 to 17 million in 1973, 28 million in 1974, and 45 million in 1975.

Despite this early success, TI was to learn many bitter lessons about marketing to the American consumer. Even early success was hard won. Bowmar Instruments had been selling a calculator that used Tl-made chips since 1971. In 1972, when TI entered the calculator market and tried to undercut Bowmar’s price, Bowmar quickly matched TI and a price war ensured. TI subscribed to learning-curve pricing: keep prices low (and profits small) in the early stages to build market share and develop manufacturing efficiencies, and then competitors who want to enter the market later will find it difficult or impossible to compete. But after a few years, competitors did begin to make inroads into TFs business; by 1975, as increased competition in the market led to plummeting prices; the calculator market softened, leading to a $16 million loss for TI in the second quarter.

However, TI rebounded and again sent shock waves through the consumer-electronics world in 1976 when it introduced an inexpensive, reliable electronic digital watch for a mere $19.95. Almost overnight, TI’s watches grabbed a large share of the electronic watch market at the expense of long-established watch manufacturers. A little more than a year later, TI cut the price of its digital watch to $9.95.

When low-cost Asian imports flooded the market in 1978, however, Texas Instruments began to lose its dominant position. TI also failed to capitalize on liquid crystal display (LCD) technology, for which it held the basic patent. It had not anticipated strong consumer demand for LCD watches, which displayed the time continuously rather than requiring the user to push a button for a readout. When sales of LCD watches exploded, TI could not begin mass-production quickly enough. The company’s digital watch sales dropped dramatically in 1979, by the end of 1981 TI had left the digital watch business.

Meanwhile, in TFs mainstay business, semiconductor manufacturing, orders for chips became backlogged. Texas Instruments had spread its resources thinly in order to compete in both the consumer and industrial markets, and worldwide chip demand had soared at the same time. Despite these problems, TI grew at a rapid rate during the 1970s. Defense electronics continued to be highly profitable and semiconductor demand remained strong, buoyed by the worldwide growth in consumer-electronics manufacturing. The company reached $1 billion in sales in 1973, $2 billion in 1977, and $3 billion in 1979.

Key Dates:

1930:: Geophysical Service Inc. (GSI) is founded by Karcher and McDermott.
1939:: Coronado Corp. is formed as a parent company for GSI.
1941:: McDermott, Jonsson, and two GSI employees purchase the GSI from Coronado.
1942:: GSI secures military contracts for the U.S. Navy and Army Signal Corps.
1946:: Patrick E. Haggerty joins the company; the Laboratory and Manufacturing (L&M) division is created.
1951:: The L&M is renamed Texas Instruments Inc. (TI).
1953:: TI goes public by merging with the Intercontinental Rubber Company.
1954:: Industrial Engineering Associates and TI develop the world’s first small portable radio.
1958:: Kilby creates the first integrated circuit.
1961:: TI builds the first computer to use silicon integrated circuits for the Air Force.
1967:: Company engineers invent a hand-held calculator.
1969:: IBM begins using integrated circuits in all of its computers.
1970:: The single-chip microprocessor is developed.
1976:: TI introduces an electronic digital watch that retails for $19.95.
1978:: Speak & Spell, an educational device using TFs new speech-synthesis technology, is launched.
1979:: The firm begins selling home computers.
1983:: TI posts its first-ever loss of $145 million.
1988:: The company forms a partnership with Hitachi Ltd. to develop 16-megabit DRAM technology.
1991:: The firm joins with Canon, Hewlett-Packard, and the Singapore government to construct a semiconductor facility in Singapore.
1999:: Butterfly VLSI Ltd. is acquired.
2001:: Sales and profits drop dramatically due to a fallout in the semiconductor industry.

Mark Shepherd was named chairman of the board upon Patrick Haggerty’s retirement in 1976, and J. Fred Bucy, who had worked in almost all of TFs major business areas, was named president and remained chief operating officer. Haggerty continued as general director and honorary chairman until his death in 1980.

In 1978, Texas Instruments introduced Speak & Spell, an educational device that used TT’s new speech-synthesis technology, which proved quite popular. That same year, TI was held up as Business Week’s model for American companies in the 1980s for its innovation, productivity gains, and phenomenal growth and earnings records.

In mid-1979, TI introduced a home computer that reached the market in December. Priced at about $1,400, the machine sold more slowly at first than TI had predicted. In 1981, sales began to pick up, though, and a rebate program in 1982 kept sales—and sales predictions—very strong. In April 1983, TI shipped its one millionth home computer.

Challenges in the 1980s

Suddenly, however, sales of the TI-99/4A fell off dramatically. By October, TFs overconfident projections and failure to predict the price competitiveness of the market had driven the company out of the home computer business altogether. By the time the 99/4A was withdrawn from the market, TFs usual competitive-pricing strategy had reduced the computer’s retail price below the company’s production cost, causing TFs first-ever loss, $145 million, in 1983.

TI’s consumer electronics never managed to become a consistent money-maker. The company was often accused of arrogance—of trying to find mass markets for new TI inventions rather than adapting its product lines to accommodate customers’ needs—and TFs aggressive price-cutting was often insensitive to dealers and customers alike. In addition, TFs pursuit of both consumer and industrial markets often caused shortages of components resulting in backlogged or reduced shipments.

After experiencing its first loss, TI found regaining its former footing difficult. A slump in semiconductor demand during the recession of the early 1980s made TFs heavy losses in home computers particularly painful. Cost-cutting became a high priority, and TI trimmed its work force by 10,000 employees between 1980 and 1982. In addition, management decided that its matrix management structure was strangling the company and so began to modify the system to revive innovation. Although the company’s engineers continued to lead the semiconductor field in innovations, increased competition both in the United States and overseas meant that technological superiority was no longer a guarantee of success. The company recorded yet another $100 million-plus loss in 1985.

TI President Fred Buey was roundly criticized for being abrasive and autocratic, and the disappointments of the early 1980s hastened his departure. In May 1985, Buey abruptly retired and Jerry Junkins was elected president and CEO. Junkins, a lifetime TI employee with a much cooler and more conciliatory management style, proved a popular chief executive.

TI’s aggressive defense of its intellectual property rights—the exclusive use of the patented technological developments of its employees—highlighted activities in the late 1980s. In 1986, TI filed suit with the International Trade Commission against eight Japanese and one Korean semiconductor manufacturers who were selling dynamic random-access memories (DRAMs) in the United States without obtaining licenses to use technology that belonged to TI. TI reached out-of-court settlements with most of the companies but, more importantly, demonstrated that infringements on its patents would not be tolerated. Royalties from these decisions proved an important source of revenue (over $250 million annually) for TI.

In late 1988, Texas Instruments announced plans to join Japan’s Hitachi, Ltd. in developing 16-megabit DRAM technology. Although this decision came as quite a surprise to the electronics industry, given TI’s successful Japanese subsidiary and its manufacturing plant there, TI explained that the move was necessary to spread the mounting risks and costs involved in producing such an advanced chip.

Back in 1977, TI had boldly set itself a sales goal of $10 billion by 1989; not long after, it upped the ante to $15 billion by 1990. The company actually entered the 1990s some $9 billion short of that extraordinary goal. After watching its share of the semiconductor market slide from 30 percent to a meager 5 percent over the course of the decade, Junkins took a decisive step. In 1989, the CEO inaugurated a strategic plan to radically reshape Texas Instruments, dubbed “TI 2000.” A key aspect of the plan was to loosen the corporation’s traditionally tight corporate culture and encourage innovation. This fundamental change was intimately linked to a shift in manufacturing focus from cheap, commodity-based computer chips to high-margin, custom-designed microprocessors and digital signal processors. For example, in 1989 TI embarked on a partnership with Sun Microsystems Inc. to design and manufacture microprocessors, sharing engineering personnel and proprietary technology in the process. TI garnered vital contracts with Sony Corporation, General Motors Corporation, and Swedish telecommunications powerhouse L.M. Ericsson. The company promoted its repositioning with new business-to-business advertising. From 1988 to 1993, the specialty components segment increased from 25 percent of annual sales to nearly 50 percent. In 1993, Junkins told Business Week that TI was “looking for shared dependence” in these partnerships. He also hoped to parlay technological gains into mass sales.

Rebounding Under the TI 2000 Plan: 1990s

Under Junkins, TI also increased its global manufacturing capacity through a number of joint ventures in Europe and Asia. A 1990 partnership with the Italian government allowed the shared construction expenses of a $1.2 billion plant. In 1991, the firm joined with Canon, Hewlett-Packard, and the Singapore government to construct a semiconductor facility in Singapore. By 1992, TI had forged alliances with Taiwanese manufacturer Acer, Kobe Steel in Japan, and a coterie of companies in Singapore. Texas Instruments planned to invest $1 billion in Asian plants by the turn of the century. Joint ventures with Samsung Electronics Co., Ltd. and Hitachi, Ltd. in 1994 split the costs of building semiconductor plants in Portugal and the United States, respectively. TI 2000 also set a goal of increasing the company’s high-margin software sales five times, to $1 billion, by the mid-1990s.

Although Texas Instruments recorded net losses in 1990 and 1991, the company’s sales and profits rebounded in 1992 and 1993. Profitability, in terms of sales per employee, increased dramatically from $88,300 in 1989 to $143,240 in 1993. In 1992, the firm won the coveted Malcolm Baldrige National Quality Award in manufacturing and adopted the Baldrige criteria as its quality standards. Wall Street noticed the improved performance: TT’s stock price more than doubled from 1991 to early 1993.

The firm continued to develop new products, invest in strategic alliances, and divest non-core, slow-growth businesses. In 1994, it launched the multimedia video processor, the first single chip processor to become available commercially that combined multiple parallel DSP and RISC chips. The following year, it won both the prestigious Singapore Quality Award and the European Quality Award. It was during this time period that the company began to focus on DSP chips, which could convert analog signals into digital form in real time. Eyeballing the market as a lucrative growth avenue, TI invested heavily in this area. During the 1990s, DSP chips began to be used in such as products as modems, cellular phones, PC peripherals, and television sets. By 1997, TI controlled 45 percent of the market.

Reshaping TI: Late 1990s and Beyond

While TI worked hard to get itself back on track in the 1990s, it continued to face hardships. During 1996, the price of its memory chips dropped by nearly 80 percent. Then, during an overseas business meeting in May, Junkins died suddenly of heart failure. Long-time TI employee Tom Engibous took over as president and CEO and stepped up the company’s acquisition and divestiture plan. In 1997, several of the firm’s business units were sold including Defense Systems & Electronics, Mobile Computing, Software, MulTIpoint Systems, Inspection Equipment, the Mold Manufacturing businesses, the Chemical Operations department, the Telecommunications Systems division, and the Power semiconductor unit. The company also made several key acquisitions including Intersect Technologies, Amati Communications Corp., and GO DSP Corp.

When questioned about the company’s rapid movements in a 1997 Electronic Business article, Engibous commented “a tragedy like that—referring to Junkins’ death—causes you to spend time reflecting. We concluded that what we were doing was in the right direction, but we thought we needed to do it at a much more rapid pace.” As such, the company continued to acquire firms related to its DSP focus including Spectron Microsystems, Adaptec Inc., Oasix Corp., and Arisix Corp. TI also sold its memory chip business to Micron Technologies Inc. for $880 million.

The acquisitions continued into the following year. TI added Butterfly VLSI Ltd., Integrated Sensor Solutions, Telogy Networks, ATL Research A/S, Libit Signal Processing Ltd., Unitrode Corp., and Power Trends to its arsenal. The firm continued to develop new products as well, including a DSP chip that facilitated high-speed Internet access. Along with leading the DSP market with a 48 percent share, TI held the top position in the analog semiconductor market for the second year in a row. All in all, TI launched 191 analog products in 1999, nearly seven times more than it developed in 1996.

TI entered the new millennium on solid ground. The company’s financial performance appeared to be back on track with revenues of $11.8 billion and profits of $2.7 billion. During 2000, the firm purchased Toccata Technology ApS, Burr-Brown Corp., Alantro Communications, and Dot Wireless Inc. It also formed a partnership with Qualcomm Inc. in which both companies were allowed to supply integrated circuits for all wireless standards without infringing on patent rights. TI partnered with four China-based manufacturers to develop and distribute wireless handsets and consumer electronics. The company also teamed up with Imax Corp. to develop digital projectors for movie theaters as well as IMAX theaters. Under the terms of the deal, Imax became the exclusive licensee of TFs DLP Cinema technology.

The tide quickly changed, however, when in the latter half of 2000 and into 2001 the semiconductor industry became embroiled in its worst downturn to date due to high customer inventories and weakening demand. Heavily dependent on that segment, TFs profits began to drop off dramatically and were not expected to return until sometime in 2003. Sales also fell throughout the year, down by as much as 40 percent.

“Despite the challenges,” claimed a 2001 Business Week article, “few doubt that TI will remain one of the chip industry’s leading players in 2003. TI also has a reputation for excellent service, something that impresses long-term customers looking for more participation and input from suppliers.” The company’s history of overcoming challenges left Engibous confident that TI would emerge from this downturn successfully. With a strong focus on developing technologies, TI appeared to be well positioned to withstand these hardships.

Principal Subsidiaries

Amati Communications Corporation; Auto Circuits, Inc.; Automotive Sensors & Controls Dresden GmbH (Germany); Benchmarq Microelectronics Corporation of South Korea; Burr-Brown AG (Switzerland); Burr-Brown Europe Limited (England); Burr-Brown Pte Ltd. (Singapore); Butterfly Communications Inc.; European Engineering and Technologies S.p.A. (Italy); Fast Forward Technologies Limited (England and Wales); GO DSP Corporation (Canada); ICOT International Limited (UK); Intelligent Instrumentation GmbH (Germany); Intelligent Instrumentation, Inc.; JMA Information Engineering Ltd.;Power Trends, Inc.; Silicon Systems (Singapore) Pte Ltd.; Telogy Networks, Inc.; Texas Instrumentos Eletronicos do Brasil Limitada; Texas Instruments A/S (Denmark); Texas Instruments Asia Limited; Texas Instruments Automotive Sensors and Controls; Texas Instruments Business Expansion GmbH (Germany); Texas Instruments Canada Limited; Texas Instruments (China) Company Limited; Texas Instruments de Mexico, S.A. de C.V.; Texas Instruments Deutschland GmbH (Germany); Texas Instruments Equipamento Electronicl Lda. (Portugal); Texas Instruments France S.A.; Texas Instruments Holland B.V.; Texas Instruments Hong Kong Limited; Texas Instruments (India) Limited; Texas Instruments Italia S.p.A.; Texas Instruments Japan Limited; Texas Instruments Korea Limited; Texas Instruments Ltd.; Texas Instruments Malaysia Sdn. Bhd.; Texas Instruments Inc. (Philippines); Texas Instruments Singapore (Pte) Ltd.; Texas Instruments Taiwan Ltd. Texas Instruments Limited (United Kingdom); Unitrode Corporation.

Principal Competitors

Analog Devices Inc.; Motorola Inc.; STMicorelectronics N.V.

Texas Instruments Inc.

views updated May 23 2018

Texas Instruments Inc.

founded: 1930 as geophysical service, inc.

Contact Information:

headquarters: 13500 north central expy.
dallas, tx 76243 phone: (214)995-2011 fax: (214)995-4360 url: http://www.ti.com

OVERVIEW

Texas Instruments is a leading maker of electronics and electrical equipment for both industrial and consumer markets. The company is best known as a world leader in the manufacture of semiconductors. In the late 1990s, Texas Instruments was putting less weight on its traditional DRAM (dynamic random access memory) business. Instead it was emphasizing digital signal processors (DSPs), which are very fast, single-purpose microprocessors. For example, in cell phones DSPs reduce the distortion of the audio signal. The company is also going forward with a new technology that will put clearer, sharper images on televisions and computer monitors. Like many other companies, Texas Instruments is getting rid of noncore businesses, preferring to concentrate on semiconductors and its latest technologies.

COMPANY FINANCES

Revenues were $9.75 billion in 1997, compared with $9.27 billion in 1996. Profits from operations were $1.21 billion in 1997 against $374 million in 1996. Operating margins (operating income as a percentage of revenue) rose to 12.4 from 8.7 percent in 1996. Between May of 1997 and May 1998, the company's stock traded in a range of $39 to $71. The quarterly dividend was $0.08 per share.

ANALYSTS' OPINIONS

Texas Instruments has often promised Wall Street more than it has been able to deliver. As Nikhil Hutheesing wrote in Forbes in 1995, "For decades TI has dazzled journalists, investors and filmgoers with its technology (the 1982 movie E.T. featured a TI talking chip). Trust us this time, the company said: TI is finally on stable ground. For years it disappointed."

In 1997 however, both investors and the financial press, including Forbes, were excited about the company's direction. Many analysts believed the company's position of leadership in the DSP chip market would translate into strong results in the late 1990s. They were pleased that Texas Instruments was selling off other, slow-moving businesses to finance expansion in the DSP market. While the crisis in the Asian economies hurt the stock price in early 1998, some analysts thought that Texas Instruments was a better investment than other semiconductor stocks for the rest of the year and 1999. They were impressed that the company had reduced its reliance on DRAM chips and was emphasizing DSPs, which are fast, specialized semiconductors. Indeed, it appeared investors were confident that CEO Engibous was taking the company in the right direction: Texas Instrument's stock price rose 129 percent between June 1996, when Engibous assumed the top spot, and May 1998.

HISTORY

Texas Instruments has long been a key player in the American electronics industry. It began its corporate life in 1930 as Geophysical Service, a petroleum-exploration firm founded by Dr. J. Clarence ("Doc") Karcher and Eugene McDermott. During the 1940s it entered the defense electronics business and performed contracts for the Navy and Army Signal Corps. In 1952 Texas Instruments purchased the rights to manufacture the germanium transistor from Western Electric for $25,000. The transistor made possible the portable transistor radio and set the stage for the modern age of electronics.

Another milestone was reached in 1960, when the company introduced its first commercially available integrated circuits (also generally known as semiconductors, or chips). During the early 1970s, the company developed a single-chip microprocessor, and introduced a four-ounce portable calculator. Later in the decade the company began marketing an electronic digital watch for about $20.00 and a home computer. The early 1980s were generally disappointing, as the company lost share in both semiconductor and consumer electronics markets. But restructuring and a re-emphasis on its semiconductor business brightened the company's prospects by the beginning of the 1990s.

STRATEGY

In late 1995 and 1996 prices for DRAM semiconductors (or, more simply, memory chips) fell a startling 80 percent. The company also lost its chief executive, Jerry Junkins, who died of a heart attack. In the wake of these two traumatic events, new management took a hard look at the company's business strategy. Thomas Engibous, the new CEO, stuck with Junkins's game plan of focusing on the semiconductor business. But he emphasized specialty chip products where Texas Instruments had a leading position.

So-called digital signal processors (DSPs) played a key role in Engibous's strategy. Texas Instruments had 45 percent of the market for these programmable chips that have a specific application, like keeping the picture steady on a camcorder. DSPs were also being used to produce "surround-sound" in stereos and headphones, to make computer drives quicker, and to improve Internet communications. But the range of uses was expected to grow much wider, including such diverse needs as reducing noise in vacuum cleaners and controlling power steering in cars.

To focus more sharply on its semiconductor businesses, Texas Instruments sold several divisions. In January 1997 it agreed to sell its defense electronics business to Raytheon and its notebook-computer business to Acer. The sales were supposed to bring the capital the company needed to invest heavily in DSPs. In March 1998 Texas Instruments pulled out of a joint venture with The Acer Group to produce DRAM chips. This move and similar actions had some observers questioning whether the company intended to remain a player in the DRAM segment of the semiconductor business. Clearly, Texas Instruments's emphasis was on DSPs.

INFLUENCES

In 1949 Texas Instruments was still a relatively small company with $6 million in sales. In an epoch-making event, in 1952 it paid Western Electric $25,000 for the right to manufacture Western's newly patented germanium transistor. Within two years the company was producing large volumes of germanium transistors. It also introduced the first commercial transistors made of silicon, which had many advantages over germanium, including resistance to high temperatures. In 1954 together with the Regency division of Industrial Engineering Associates, Texas Instruments introduced the first small, inexpensive, portable radio. The Regency Radio became the hot item of the 1954 Christmas selling season. Impressed with the Regency Radio, IBM made the company a major components supplier for IBM computers. By 1958 Texas Instruments had sales of $92 million, more than 15 times the 1949 level.

Texas Instruments first started to develop an integrated circuit in 1958. After two years of development, it introduced the first commercial integrated circuits in 1960. Originally greeted with skepticism, integrated circuits (or chips) became central to modern electronics and, most notably, to the computer. Initially the US government was the company's major customer for chips, but by 1969 IBM, which at that time essentially was the computer industry, decided to use them in all its computers.

In the early 1970s Texas Instruments once again introduced a product that was to revolutionize the electronics industry. It invented the first single-chip microprocessor in 1970 and made it commercially available in 1971. The microprocessor would eventually be used in all kinds of appliances and devices, but initially its most important application was the pocket electronic calculator. Up to that time, high school and college students, not to mention scientists and engineers, did most of their calculations on plastic slide rules. The pocket calculator, reasonably priced at $85 to $120, was an immediate success. Sales of calculators rose from 3 million in 1971 to 17 million in 1973, 28 million in 1974, and 45 million in 1995.

By 1975 however, numerous competitors had entered the market and calculator prices softened. Texas Instruments even lost money in the year's second quarter. But a few months later it would once again surprise the electronics world with the introduction of a reliable electronic digital watch for just $19.95. As with calculators, Texas Instruments would eventually lose its initially dominant position as low-cost watches from Asia flooded the market. Still, the 1970s were good years for the company, as sales grew from $1 billion in 1973, to $3 billion in 1979.

The early 1980s, however, were tough times. The company had introduced a home computer in 1979, which by 1982 was selling very well. But by October 1983 the company was out of the home computer business altogether because of competition and poor planning. Once again, the company had been the technological innovator, but it couldn't translate its early lead into long-term business success. A slump in semiconductor demand also hurt the company's chip business, and Texas Instruments cut its work force by 10,000 employees between 1980 and 1982.

In the late 1980s and early 1990s, the company regained its footing, although sales and profits continued to gyrate up and down. In 1986 Texas Instruments was threatened by the tremendous worldwide expansion in memory chip capacity. The company filed a complaint with the International Trade Commission that said Japanese semiconductor manufacturers had violated its patents. Under a settlement with Japanese makers, Texas Instruments began to receive hundreds of millions of dollars in royalties each year. Additionally, the company managed to shift production to specialty semiconductors from commodity-type memory chips. Between 1988 and 1993, the share of specialty chips in the company's mix of semiconductor products rose to 50 percent from 25 percent. While this change didn't protect Texas Instruments completely from declines in memory chip prices, it did soften the impact of the sharp downturns in the mid-1990s.

CURRENT TRENDS

In the mid-1990s Texas Instruments had been following the trend of many other American companies that were concentrating on their "core competencies." In other words, the firm was focusing on its semiconductor business and selling off other operations. In 1997 Raytheon agreed to buy its defense electronics business, which accounted for 14 percent of sales in 1995. Texas Instruments also sold its mobile computing (i.e., laptop) business to Acer Group. All in all, in 1996-1997 Texas Instruments withdrew from nine businesses, leaving 85 percent of its operations in semiconductors. Within the semiconductor business, Texas Instruments was emphasizing specialty chips rather than commodity-type memory chips. In 1996 Texas Instruments devoted 90 percent of its semiconductor capital spending to DSP chips, where it was the market leader. It ranked second to Motorola in providing chips for digital cellular phones. It also ranked second, behind Rockwell International, in personal computer modem chips.

Nevertheless, the stunning price decline in the memory chip market hurt the company's results in 1996. With DRAM prices down about 80 percent, revenues fell from $11.4 to $9.9 billion. But in 1997 Texas Instruments engineered a strong recovery, as profits from operations were more than $1.2 billion. The much improved performance reflected higher semiconductor profits in the non-memory portion of the business and the absence of losses in sold businesses, primarily mobile computing.

FAST FACTS: About Texas Instruments Inc.

Ownership: Texas Instruments is a publicly owned company traded on the New York Stock Exchange and other stock exchanges in the United States and Great Britain.

Ticker symbol: TXN

Officers: Thomas J. Engibous, Chmn., Pres., & CEO, 43, 1997 pay $2,146,000; William A. Aylesworth, Sr. VP, CFO, & Treasurer, 55, 1997 pay $963,950; Richard J. Agnich, Sr. VP, Secretary, & Gen. Counsel, 54, 1997 pay $963,950

Employees: 44,000

Chief Competitors: Texas Instrument's major competitors in the semiconductor and electronic fields include: AMD; Intel; Cypress Semiconductor; Motorola; and Rockwell International.

PRODUCTS

Texas Instruments manufacturers semiconductor discrete devices, integrated circuits, and subassemblies, which accounts for 83 percent of sales. The company also makes components, electrical and electronic control devices, and electronic calculators. In addition to putting the spotlight on the DSPs, Texas Instruments will also highlight their DLP technology. Digital light processor technology creates an ultra sharp display in televisions and computer monitors by combining over 500,000 mirrors on a surface the size of a dime.

CORPORATE CITIZENSHIP

Texas Instruments believes that making the communities where they are located better places to work and live. The charitable causes the company supports are programs in education, minority- and women-owned businesses, ethics, and the environment. In 1964 the Texas Instruments Foundation was started as a separate, nonprofit organization. The Foundation, through grants, supports educational and research projects devoted to advancing knowledge. The Foundation also tries to choose projects that will have the most influence on the greatest number of people.

GLOBAL PRESENCE

Texas Instruments is truly an international organization that depends heavily on international operations for its revenues and profits. Sales in 1997 broke down this way: United States, 33 percent; Japan, 20 percent; Singapore, 11 percent; all other countries, 36 percent. Two-thirds of Texas Instrument's staff and half of its 44,000 employees come from outside the United States. Japan and Singapore are among the company's biggest markets.

CHRONOLOGY: Key Dates for Texas Instruments

1930:: Geophysical Service is founded, using seismology to find oil
1938:: Geophysical incorporates
1941:: Receives first U.S. Navy contract for submarine detection equipment
1942:: Begins working in electronics in contracts from the U.S. Army and Navy
1951:: Name changed to Texas Instruments Inc. with Geophysical a subsidiary
1952:: Purchases license to manufacture transistors and enters the semiconductor industry
1961:: Delivers first integrated circuit computer to the U.S. Air Force
1969:: Texas Instruments equipment and semiconductors are used aboard the Apollo 11 mission to the moon
1971:: Invents the single-chip microcomputer
1972:: Enters the consumer electronics market by marketing a hand-held calculator
1978:: Introduces the first single-chip speech synthesizer with the Speak & Spell
1988:: Introduces the world's first quantum effect transistor
1989:: Forms joint venture with Acer Inc. to manufacture advanced semiconductors in Japan
1993:: Texas Instruments and Hitachi form joint venture to create 256 megabyte dynamic random access memory
1997:: Introduces the world's fastest digital signal processor operating at 1 billion floating operations per second

EMPLOYMENT

The training department of Texas Instruments emphasizes "policy deployment," which means helping employees understand how their priorities relate to those of their department and the organization as a whole. Every information technology employee at TI has an individual development plan that requires a minimum of 40 hours of training each year. This level of training placed Texas Instruments at the top of Computerworld's list of the leading corporate information systems training programs.

SOURCES OF INFORMATION

Bibliography

blodgett, mindy. "mobile merger mania." computerworld, 3 february 1997.

brown, peter. "ti inks $1.28b italy flash fab pact." electronic news, 23 december 1996.

cohen, sarah. "ti taps president/ceo." electronic news, 24 june 1996.

fitter, fawn. "annual training survey," computerworld, 30 march 1998.

gibson, marcus. "chipping at europe." the european, 11 april 1996.

goldstein, allen. "texas instruments focuses business on digital processing." knight-ridder/tribune business news, 18 may 1998.

haber, carol. "ti defense sell-off would suit street." electronic news, 11 november 1996.

haber, carol, and richard bruner. "raytheon nabs ti unit; hughes next?" electronic news, 13 january 1997.

hutheesing, nikhil. "this time it's for real (texas instruments turnaround)." forbes, 31 july 1995.

"make-over moves impact ti's fourth quarter, full year." electronic news, 26 january 1998.

myerson, allen. "after taking some recent lumps, texas instruments may be poised for an upturn." the new york times, 9 march 1998.

palmeri, christopher. "chips ahoy." forbes, 7 april 1997.

ramstad, evan. "texas instruments bets an old chip will find new markets." wall street journal, 26 march 1997.

the texas instruments home page, 23 july 1998. available at http://www.ti.com.

"texas instruments incorporated." hoover's online, 22 july 1998. available at http://www.hoovers.com.

"ti moves deeper into dsp market." electronic news, 11 march 1996.

For an annual report:

on the internet at: http://www.ti.com/corp/docs/investor/ar96/ar96home.htmor write: texas instruments, 13500 north central expy., dallas, tx 76243

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. texas instruments's primary sics are:

3577 computer peripheral equipment, nec

3625 relays and industrial controls

3764 semiconductors and related devices

7372 prepackaged software

Company Profiles for Students

Texas Instruments Incorporated

Texas Instruments Incorporated

Principal Subsidiaries:

Texas Instruments Inc.

Texas Instruments Inc.

Principal Subsidiaries

Further Reading

Texas Instruments Inc.

Texas Instruments Inc.

Origins

Focus on Defense Contracts, Electronics: 1940s–50s

The Integrated Circuit: 1958

Company Perspectives:

Entering the Consumer Electronics Industry: 1970s

Key Dates:

Challenges in the 1980s

Rebounding Under the TI 2000 Plan: 1990s

Reshaping TI: Late 1990s and Beyond

Principal Subsidiaries

Principal Competitors

Further Reading

Texas Instruments Inc.

Texas Instruments Inc.

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

STRATEGY

INFLUENCES

CURRENT TRENDS

FAST FACTS: About Texas Instruments Inc.

PRODUCTS

CORPORATE CITIZENSHIP

GLOBAL PRESENCE

CHRONOLOGY: Key Dates for Texas Instruments

EMPLOYMENT

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

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Texas Instruments Inc

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