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Sweet analog dreams
This is the concluding segment of our interview with Art George, senior vice president of the High Performance Analog business unit at Texas Instruments Inc. In the March 2006 issue, George spoke with ESM's Crista Souza about the state of the analog IC market. ESM: There was some concern in the industry that analog engineers were a dying breed. How is TI advancing the cause to promote analog? George: One of the things that will define the future for all companies going forward is the ability to source analog talent as the companies grow. And again, our approach is to be proactive about that. If you look at the [electrical engineering] programs in the U.S. over the last 20 years, you've heard much more about digital than you've heard about analog. Over time, there were fewer and fewer universities in the United States that were focusing on or had very large programs in analog. So we have actively partnered with universities to help them invigorate their analog programs. We work closely with those schools by helping them understand where the industry is going, what the needs are and what is a relevant curriculum. ESM: What customer demands have had the biggest impact on the way you do business? George: Customers certainly want a lower price, just like consumers do. But our value to our customers is about system-defining and system-enabling performance. When we provide that enabling performance--be it longer battery life, better audio, features and functionality--then customers do recognize that value, and they are willing to give us a fair [price] for our product. But that comes back to us, providing a value to our customers that they can see in terms of the performance they are getting in their system, and winning in the marketplace. ESM: We always hear about the so-called solution sell. Do customers see more value in that than in being able to buy piece-parts? George: I think customers do value a solution sell if you add value. The one thing you can't do in this industry is package together a bunch of inferior products and sell it as a solution. That's why when I talk about our journey to build a great portfolio of products that's strong in all the categories of high-performance analog--data converters, interface, amplifiers, power management--you have to have a strong portfolio of products across all of those. They are not going to allow you to bundle a solution that has three really good things and one inferior one. The second thing, in order to put a solution on the table you have to have system expertise. You have to understand the system from the customer's perspective, in [terms of] what would constitute a value-added solution, where they see value in coming to one company and being able to get all of their needs met. Not only does it simplify the supply chain, but the way we architect our products and put the solution together can also help them from the standpoint of the performance they get, as well as the total cost. So our way to help customers with the price pressure they face is not just to drop the price of our products, but to find innovative ways to lower the solution cost. And again, you can only do that if you have system-level expertise, and that comes back to our talent: our application engineers backed up by our systems engineers who actually go out and visit customers and define our products, and our salespeople who are calling on those customers and meeting with them every day to understand what it is they're trying to do to differentiate their product. Having the largest sales force in the industry gives us an inherent advantage because we call on customers [ranging] from the huge companies to the very small, innovative customers, where it's two or three people in a garage thinking about some new great idea. Our competitors can't do that, because they don't have the portfolio to make that worth their while, and they don't have the footprint to be able to reach that many customers directly. ESM: How do you find those people in the garage? George: It's a mutual thing. It's amazing the number of those folks that will come to you and inquire about products. Even though we will define products for an industry or an end application or solution, there are very smart people out there who will take one of our products and call one of our applications engineers and say, "I'm thinking about using your product for X, but I'm not sure it was intended for this application. Can you give me some more technical data so I'll know whether it can be used or not?" So our design centers and the design tools we have on the Web allow customers to get information on how to use our products in very innovative ways. Sometimes they surprise us--and that's occasionally the spark we need [to discover that] if we make a few changes to one of our products, it's now ideal for this new end application or emerging market opportunity. ESM: So it sounds like it's not always the Nokias of the world, the large OEMs, that drive innovation at the chip level. George: That's true; we see great innovation across the spectrum of customers. Certainly there are very smart, innovative people at some of the largest customers in the world, but there's always going to be somebody sitting around thinking about the next iPod or the next piece of equipment that no one else has thought about. At the end of the day, we want to be a company that can service that entire spectrum of customers. ESM: Can you talk about the current business environment? Toward the end of 2006, semiconductor inventory levels rose quite a bit. What's the supply-and-demand picture like in analog right now? George: The analog market is one of the more stable segments of the overall semiconductor market over time, with steady double-digit growth, and more of the same through the end of this decade is what I would expect. If you look at 2006, in the overall analog market and at TI in particular, we had extremely healthy growth in total for our high-performance analog business and for TI analog. We definitely believe [we'll find], when all the numbers are in, that we gained share vs. our competitors and that overall the market was very strong. Your point that there was a bit of a slowdown at the end of the year is absolutely correct. I think that's not totally unexpected. Customers and our distribution partners toward the end of the year are very cautious, and they want to make sure they are managing their inventories well. And there is, in some of the end-equipment markets, a bit of seasonality. With things like consumer products, in which there is a big buildup at the end of the year, you'll see that very strongly in the third quarter, leading into the fourth, and it will be a little softer at the end of the year and into the first quarter. So I think you add some of those trends together, and it was a little bit softer toward the end of the year. ESM: Any reason to worry? George: I'm not worried. I'm very optimistic about our potential in 2007. I think we're going to grow again in 2007, maybe not quite at the pace we saw in 2006, but I think we're well positioned to grow faster than the market again this year. The results we get in any given year are really due to work that was done by our sales force and the applications engineers designing in products a year or even two years ago. We have good visibility into things that we expect to ramp to volume this year, in terms of new programs. ESM: What was behind the big jump TI had in market share in 2006? George: It's the work that we've done over the last six to seven years toward having a better portfolio, more people calling on customers, going from having maybe two or three products in the system to having 10 to 12 products in the system, and just the fact that we have the most complete portfolio of any of our competitors. I have great respect for our competitors in the high-performance analog world, but none of them have as complete a portfolio as we do, so we have the opportunity to a better job, solution-wise, with each and every customer. And again, I think we have--because of our size and scale and the synergy we get with our DSP business--the strongest customer list in the industry. If you add all of those things up, with them all moving in the right direction, I think that gives us the opportunity to grow faster than all of our competitors in what was a very good market. And we grew much faster than a very healthy market in 2006. ESM: What new applications or drivers do you see coming along to either boost sales or spur the next technological advance in the analog realm? George: We'll see continued trends in some familiar applications. Wireless communications is a trend that I think is going to continue to grow--and not just cellular handsets or basestations, but wireless communications in things like home and factory automation. Our most recent acquisition of Chipcon was squarely targeted at what we believe is a coming trend: that more and more things that are wired today are going to be wireless--in your home, and certainly in factories, where the cost of running wire is just incredible. When you can do that in a wireless manner, you have the power savings, the feature set you can get from being able to control lighting, heating, basic plant control systems--that's the promise of the product portfolio we have from acquiring Chipcon. It's strong in things like ZigBee and other wireless technology. Also, more and more things will be portable and battery-powered. The trend for more and better power management products will be very strong, but where things are tethered today, I can foresee a future where they will become more portable. We're pushing forward in the medical market and have just formed a medical business unit inside of the high-performance analog group, and we see that as an extremely important trend. If you look across the demographics of the world, there are going to be more and more people who need medical services. And if you look at the products doctors use to service that, they're going to contain more and more analog and mixed-signal devices. Crista Souza can be reached at csouza@cmp.com.
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