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TI drops Intel-compatible chips

After years of struggling to compete with Intel, Texas Instruments decides to pull out of the market for x86 processors.

After years of struggling to compete against Intel (INTC) in the market for 486 and Pentium processors, Texas Instruments (TXN) told CNET today that it has decided to pull out of the Intel-compatible chip business.

This is a blow to the huge chip manufacturer, but it also will provide more breathing room for competitors such as Cyrix and Advanced Micro Devices, who are themselves squeezed up against the ever-growing bulk of Intel.

Even without making microprocessors--the most visible segment of a large chip industry--TI will still remain a semiconductor powerhouse. The company is one of the world's leading suppliers of DSPs (digital signal processors) and manufactures a variety of other semiconductor products, including microcontrollers and memory chips.

"We will intensify development of DSPs and redeploy people into this area. Basically, all of the [Intel-compatible processor ] people will be absorbed by the redeployment," the company said.

TI has been stuck in the increasingly irrelevant market for 486 processors for the past two years. While the United States went the way of the Pentium, 486 processors found only a limited market in foreign markets such as South America and Asia.

The company desperately needed to come up with a Pentium-class processor--or better--if it was to continue trying to compete with Intel and the other Intel-compatible chip suppliers. Cyrix and AMD already have Pentium-class processors, leaving TI hopelessly outclassed.

In the last couple of years, the company is widely believed to have been doggedly working on a Pentium-compatible processor that would compete with Intel's MMX-enabled Pentium, according to sources familiar with the processor project. The chip was slated to appear sometime this year.

Sources said the project was killed, which caused an exodus of engineers working on the processor.

The company would not comment on the project.