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TI plans for economic slowdown, rebound

The leading maker of digital signal processors (DSPs) plans to ride out the economic downturn by slowing down, somewhat.

Texas Instruments is assuming the role of sleeping giant--for now.

The leading maker of digital signal processors (DSPs) plans to ride out the economic downturn by slowing down, somewhat. For example, the company implemented a hiring freeze after a tough fourth quarter and is now adjusting its manufacturing to reflect the slowdown, executives said Wednesday during a meeting with analysts in Dallas.

Because an economic rebound could be several months away, the chipmaker is working to further control costs by reining in "under-performing" areas, Chief Operating Officer Rich Templeton said at the meeting. "We intend to take control instead of being a victim in terms of the current economic situation."

But the company is not pulling in its horns entirely. While it re-evaluates some product lines, TI has budgeted for $1.7 billion in capital expenditures in 2001--about $100 million more than the previous year.

Some of the funds are earmarked for the construction of three new 200-millimeter-wafer manufacturing plants for analog chips and the development of 300-millimeter-wafer manufacturing technology, said Bill Aylesworth, TI's chief financial officer. New 300-millimeter wafers increase production capacity and lower costs.

"You have to continue to make the investments in new products to drive this market," said Mike Hames, vice president for DSPs.

TI is investing in developing higher performance DSP chips, with the aim of increasing performance and decreasing power consumption. It's also investing in new applications for its DSP products, ranging from broadband and home networking to so-called catalog DSPs. The catalog business alone is worth some $1.5 billion to TI, Templeton said.

TI also expects its cellular handset business to remain strong. However, company executives warned that short-term growth rates are slowing along with the economy and because of slower-than-expected deployment of so-called 2.5G services, such as GPRS. GPRS offers data rates of up to 115K per second and is currently being used in Europe and tested by a few North American carriers.

TI also is betting heavily on its Open Multimedia Applications Protocol (OMAP) products. TI's OMAP strategy includes integrated processor and DSP offerings as well as a $100 million software development fund.

The company began sampling its first OMAP chip for a new generation of cellular phones this month. TI is also sampling a number of other new chips, including base band and RF chips that are aimed at increasing the performance of next-generation cellular phones.

"Aside from the short term, we believe the future of wireless is great," said Gilles Delfassy, vice president and manager of TI's worldwide wireless communications business.

TI is also working to tap new markets for its DSP chips, including DSL (digital subscriber line) applications, cable Internet access services and home networking products, said Joe Crupi, vice president of TI's Broadband Communications Group.