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TI braces for lengthy downturn

Posted: 29 Jan 2009     Print Version  Bookmark and Share

Keywords:analogue  capacity utilisation  DSP  semiconductor industry 

Rich Templeton isn't doing press interviews. In his first full year of holding the three titles of chairman, president and CEO at Texas Instruments Inc., the analogue and DSP company is setting records Templeton would rather not have to explain to reporters.

This quarter, TI's factory capacity utilisation is expected to tumble to a record 33 per cent from 48 per cent and almost 70 per cent in the fourth and third quarters of 2008, respectively. The last time TI's plant utilisation levels fell to even the mid-40s was in the second half of 2001, during the height of what was then said to be the semiconductor industry's worst downturn.

At least one other unpleasant milestone looms for TI. The company's revenue is forecast to slump to a seven-year low in 2009, falling 28 per cent to approximately Rs.45,033 crore from Rs.62,545 crore ($9 billion from $12.5 billion) in 2008 and the record high of Rs.71,051.67 crore ($14.2 billion) in 2006. With sales tanking and margins under pressure, TI expects to post a net loss for the current quarter, which would be another unusual event for the Dallas-based company.

TI is not standing still. The company is cutting 12 per cent of its workforce, about 3,400 jobs, and clamping down on expenses while redirecting resources away from support functions. This is designed to ensure enough funds are available for critical operational activities in product design, engineering and sales operations, according to an internal memo sent by Templeton to employees.

"We are choosing to do fewer things internally, such as live with lower levels of IT support and facilities upgrade so that a greater percentage of our dollars can go directly towards developing and delivering what our customers need," Templeton said. "Likewise, we are moving R&D and marketing investments into products, applications and regions that hold the greatest promise for future growth."

Banking on analogue
Beyond the cost-cutting actions, TI is renewing its commitment to the analogue and DSP market, which executives said they expect would power the company's future growth. As part of its current reorganisation efforts, TI is likely to direct scarce resources to these two business units, according to executives.

"Where do we see revenue growth coming?" asked Ron Slaymaker, TI's VP and head of investor relations. "Certainly analogue. It's going to be impacted by economic weakness given its diversity. But at the same time that growth engine is well proven and not only in terms of top line but also the contribution it can provide to our bottom line."

Analysts said TI is being more aggressive in paring down operating costs than other semiconductor companies caught in the vortex of a weakening global economy. The company's capacity utilisation is seen falling to about 33 per cent, not just because of dwindling demand but also because TI plans to idle plants for several weeks during the quarter.

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