TI Carries On CEO's Legacy

Texas Instruments has come a long way since the days when most of its revenues were generated by defense contracts -- and the late Jerry Junkins, the company's CEO, was one who led the transformation to the commercial world

Junkins, who died in late May from a heart attack while traveling through Germany, strode to the lectern last spring at TI's annual shareholders meeting and told the crowd, accustomed to talk of splitting stock, that splitting electromagnetic signals was actually the key to the company's future. Junkins, usually a reserved man, was buoyant as he talked about a certain silicon descendant of Jack Kilby's integrated circuit -- the digital signal processor. The question now is whether the company's metamorphosis can continue without Junkins.

The digital signal processor can compress, decompress and process digital data at speeds up to 50 times faster than a conventional microprocessor found in PCs. The chips can provide boundless bandwidth. Increasingly found in PCs, cell phones, fax modems and voice mail systems, these digital signal processors are central to the emergence of the digital economy and the convergence of computing and telephony.

TI has forged pacts with cell phone makers Ericsson, Oki and Motorola to provide custom digital signal processors for this burgeoning business. The company even assigned a special section of its semiconductor manufacturing unit to work on solutions for the digital signal processor market, where telephones will someday be replaced by an array of chips and antennas.

The power of the technology -- marketed by TI and several other leaders in the industry -- is one reason why the semiconductor content of everyday appliances and autos is also increasing, from 4.1 percent in the 1970s to 13 percent today. "All forms of data are becoming digital," Junkins observed.

Though TI's Kilby invented the integrated circuit in 1958, the semiconductor company was never a player in the market of x86 series microprocessors pioneered by Intel. Today, digital signal processors are a $1 billion industry. Analysts expect it will grow to $10 billion in the coming years. That would place it at about the size of the microprocessor industry -- and it could be a huge opportunity for TI.

The $10.4 billion Richardson, Texas-based company estimates it must build a semiconductor plant every year, and double the capacity of its joint ventures, to keep up with demand.

Across the globe, demand for digital signal processors and all other kinds of semiconductor products, microprocessors, memories and proprietary chips has grown by 30 percent per year for the last two years, according to the Semiconductor Industry Association, San Jose, Calif.

Additional growth for Texas Instruments will likely come from an emerging technology -- digital light processing. TI is working with Sony Corp. and others on this new display, which could challenge the cathode ray tube monitor, or provide a viewing display for high-definition television in the coming years.

There are threats as well. Analyst Rajiv Chandri at Goldman Sachs said one of the biggest challenges to the company is the lack of patent protection overseas. TI officials acknowledge that they have a historic knack for developing products, but were not historically able to market them outside of the original equipment manufacturers channel. A corporate re-engineering has addressed this issue.

Junkins, in an interview before his death, pledged to continue with the re-engineering.