At Texas Instruments Inc.’s sprawling facility southwest of Houston, some top engineers and marketers these days are repeating the mantra of Intel Corp. chairman Andy Grove: “Only the paranoid survive.”
Listen to Michael J. Hames, manager of TI’s digital signal processor business. “We have to be tougher on ourselves and assume everyone’s a threat,” he says.
The reason for such uneasiness is that rival companies in recent weeks have taken direct aim at TI’s flagship products, the so-called DSPs, for digital signal processors, one of the few segments of the vast semiconductor–or electronic chip–industry not in a slump.
Right now, Dallas-based TI is king of the $3.2 billion market for the tiny devices that turn sound, images and other sensory information into a form new electronic products can use. TI has 45 percent of the business, with its chips in more than half the 86 million digital cell phones made last year and about 90 percent of high-performance hard-disk computer drives.
And TI has been investing billions to develop ever-faster versions.
But that’s no longer good enough. The long-term prize will go to those who can consistently find new uses for DSPs, say executives at TI’s Stafford DSP headquarters.
“We’re interested in opportunities where DSPs can revolutionize a market or create one that didn’t exist,” says Gene A. Frantz, a TI senior fellow and the firm’s chief DSP visionary.
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DSPs are blossoming at a time when the broad chip industry is suffering from falling prices and actually may be shrinking. DSP demand may grow more than fourfold to $14 billion by 2002, according to Forward Concepts Co., a market research firm in Tempe, Ariz.
Such projections have brought TI’s competitors running to the scene. Last month, International Business Machines Corp. said it wants to clone a TI digital cell-phone DSP. A week earlier, Motorola Inc. and Lucent Technologies Inc. pooled their forces to design DSPs.
Publicly, TI pooh-poohs those announcements.
The company says the IBM move only proves that imitation is the sincerest form of flattery. It calls the Motorola-Lucent alliance an act of desperation by two players who are losing in the marketplace.
TI executives also note that the programmable nature of DSPs tightly binds customers to suppliers. That means engineers at a customer such as Nokia use TI software to design new features for their chips. Picking a new supplier may require taking on unfamiliar programming.
In the last two years, TI has jettisoned a series of divisions–including defense electronics, notebook computer and software units–each time raising its bet on DSPs.
Digital cellular phones, hard-disk drives and modems account for 60 percent to 70 percent of DSP revenue industrywide, but as DSP chips become faster and cheaper, Frantz sees them ending up in almost everything.
In cars, they could sense the location of objects to help avoid collisions. At home, appliances could sense when dishes are clean or clothes are dry. And the medical applications are potentially enormous, Frantz said.
Internet-based telephone service, high-definition television sets and digital still cameras are also promising markets for DSPs in the next few years, says Will Strauss, president of Forward Concepts, the Arizona research firm.