Texas Instruments Signals Smartphone Retreat With 1700 Job Cuts

Texas Instruments has found the intense competition in the mobile chip sector to be very tough indeed as the Austin, Texas-based company announced 1,700 job cuts from its global workforce.

“Consistent with previously stated strategic plans, Texas Instruments announced today it will reduce costs and focus investments in its wireless business on embedded markets with greater potential for sustainable growth,” the company announced.

“Cost reductions include the elimination of about 1,700 jobs worldwide,” it said.

Mobile Retreat

The job cuts at Texas Instruments signal a retreat for the company producing chips for the smartphone and tablet market, where it faces intense competition from the likes of Qualcomm, Samsung, Intel, Apple etc.

The mobile operation at Texas Instruments is centred around its OMAP processor range, however the company said in September it would shift the focus of its chip investments away from smartphones and tablets, where it has struggled to compete, toward more rewarding industrial sectors such as the car and home appliance markets.

That statement led some analysts to speculate that TI appeared to be looking to shed its smartphone and tablet chip business, although the company said it would continue to support existing customers.

“TI previously outlined intentions to focus its OMAP processors and wireless connectivity solutions on a broader set of embedded applications with long life cycles, instead of its historical focus on the mobile market where large customers are increasingly developing their own custom chips,” TI said in a statement. “These changes require fewer resources and less investment.”

“We have a great opportunity to reshape our OMAP processor and wireless connectivity product lines to concentrate on embedded markets. Momentum is already building with new embedded applications and a broad set of customers, and we are accelerating our efforts in these areas,” said Greg Delagi, senior vice president of Embedded Processing.

“These job reductions are something we do with a heavy heart because they impact people we care deeply about,” said Delagi. “We will work closely with all employees affected by these changes to provide a range of assistance related to compensation, benefits and job search.”

The company said that it expects the cost-cutting to achieve annualised savings of about $450m (£284m) by the end of 2013.

The 1,700 job cuts equate to roughly 5 percent of the company global workforce worldwide, which currently stands at 35,000 people.

Division Sell-Off?

The job cuts come amid reports last month that e-commerce giant Amazon was in advanced negotiations to purchase Texas Instruments’ mobile processor division.

However it remains uncertain at this time whether any sale of the OMAP division will go ahead.

“A sale would have been better than a restructuring but a restructuring is certainly better than nothing,” Sanford Bernstein analyst Stacy Rasgon was quoted as saying by Reuters.

A deal with Amazon would make some sense on the surface, as Amazon’s Kindle tablets use the OMAP 4 chips, and the next generation of devices are also expected to use TI’s offerings.

TI for its part is expected to continue selling existing OMAP processors for tablets as long as there is demand, however it has stopped developing new chips, meaning Amazon will have to make a decision soon about where to source its next generation components.

“This year, the Kindle runs on the OMAP 4 and next year’s Kindle is slated, we believe, for OMAP 5. We believe that program is well along to completion and do not expect that the termination of OMAP will disrupt those plans,” Longbow Research analyst JoAnne Feeney was quoted as saying by Reuters.

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