TI acquires National Semi for $6.5 billion, creates analog chip behemoth

Texas Instruments acquired National Semiconductor for $6.5 billion in a move that creates an analog chip juggernaut.
Written by Larry Dignan, Contributor on

Texas Instruments on Monday acquired National Semiconductor for $6.5 billion in a move that creates an analog chip juggernaut.

Analog chips feature passive elements that are used for mixed signal processing in electronics systems. Key players in the market include Freescale, TI and STMicroelectronics. With National Semi, TI said it will be able to do the following:

  • Give National Semi products more sales throughput;
  • Bolster its manufacturing capacity with three fabs in Maine, Scotland and Malaysia;
  • Grab more market share.

In a statement, TI CEO Rich Templeton said the acquisition is about growth and rounding out its chip portfolio. The product lineups on the surface look largely complementary.

On a conference call, Templeton said National Semi will add to TI's earnings. Templeton said:

Our analog revenue is weighted towards communications and computing applications. Even within the various categories of analog, there is minimal product overlap. For example, National has a rich line up of high voltage power management products that are well suited to industrial power applications, while our power management product offerings are more oriented towards portable devices. National has low speed, high resolution data converters while ours are high speed and high resolution. There are plenty of examples like this but the bottom line is that the combination of TI and National means we can engage with customers and an application segment where we have no or minimal engagement today.

Indeed, TI has 30,000 analog processors and National Semi has 12,000. Analog processors will account for 50 percent of TI's revenue once the deal closes. Going into the National Semi purchase, TI got 43 percent of its revenue from analog processors.

Here's the tale of the tape:

  • For 2010, TI reported net income of $3.06 billion on revenue of $13.97 billion. Gross margins were 53.64 percent.
  • For the fiscal year ending May 30, 2011, National Semiconductor is expected to deliver net income of $300 million on revenue of $1.51 billion. Gross margins were 68.27 percent.

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