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Texas Instruments sheds 3,400 jobs

The job cuts follow a 95 percent year-on-year drop in quarterly profits, largely attributable to declining sales of chips for mobile phones
Written by David Meyer, Contributor

Semiconductor company Texas Instruments is laying off 1,800 workers, following a 95 percent quarterly drop in profits year-on-year and reduced business from major clients such as Nokia and Ericsson.

In a statement on Monday, TI also announced 1,600 additional "voluntary retirements and departures", taking the total number of job cuts to 3,400 — roughly 12 percent of TI's workforce. The company is not saying which regions are affected.

TI's UK activities are based mainly at its Northampton site, which incorporates a semiconductor design centre, an RFID products unit and a sales office, as well as a unit devoted to TI's graphing calculator products.

"We are realigning our expenses with a global economy that continues to weaken," said TI chairman, president and chief executive, Rich Templeton, in the statement. "By reducing expenses now, we keep TI financially strong and able to invest for future growth."

Templeton said the layoffs would occur mostly in TI's internal support functions and "non-core" product lines, leaving a greater focus on the company's analogue products — such as power-management units, data converters, amplifiers and interface products — and embedded processing products.

"We are not counting on a near-term economic rebound for improvement," Templeton said. "The actions we are taking to reduce expenses and inventory will position TI to deliver solid financial results, even in a period of prolonged economic weakness. When the economy strengthens, we'll be pleased that we focused aggressively on our core product lines."

Although revenues and profits were down across all of TI's divisions, its wireless unit suffered the worst drops — quarterly revenues were down year-on-year by 42 percent, while operating profits were down 134 percent, leaving an operating loss of $87m (£62m) for the quarter. TI's wireless division mainly produces digital signal processors (DSPs), Open Multimedia Application Platform (OMAP) application processors and connectivity products for handsets.

According to TI, lower DSP revenue was the chief culprit for the quarterly decline in wireless revenue, with worsening OMAP application processor sales also responsible for a drop in revenues over the whole year.

Jon Erensen, a principal research analyst at Gartner, told ZDNet UK on Tuesday that TI was in the middle of "a pretty big shift" in its wireless business.

"You've really seen a major shakeout in the baseband market over the last couple of years," Erensen said. "It started in 2007, when Nokia said they were going to a multi-supplier strategy — Nokia had been TI's biggest customer. TI also worked for Ericsson Mobile Platforms, who made basebands for Sony Ericsson — but TI was acting as the foundry. Then Ericsson Mobile Platforms announced it was joining ST-NXP in a joint venture, so TI's business there started to transition over to ST."

According to Erensen, TI will now focus on its OMAP application-processor business rather than its baseband-processor business. Pointing out that low-cost phones integrate the baseband and application processors, he said TI was "betting that the growth in the smartphone market will require continuing use of application processors that are separate from the baseband processor".

Erensen predicted 10 percent shrinkage in the handset production market during 2009. "We feel there's a significant amount of inventory, and it's going to take a while to get through that," he said. "That's accelerating the impact on the wireless semiconductor companies."

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