Freescale and Texas Instruments have been hit by cellphone woes, with TI facing a 3.4 per cent decline in revenues and said to be laying off 400 people in Dallas, and Freescale said to be facing a 10.7 per cent decline in 2007 chip sales primarily because of the weakness in the cellphone business of its main customer, Motorola.
TI’s problems partly stemmed from the opening up of Nokia’s chip procurement process, allowing more competition from the likes of Infineon and STMicroelectronics. Nokia is such a huge buyer of chips that its buying decisions radically affect the structure of the semiconductor industry, while wireless chips make up about 40 per cent of TI’s chip business.
Infineon, primarily on wireless strength, saw its revenues rise 14.6 per cent in 2007, according to iSuppli, and ST had a 1.4 per cent rise, while NXP which supplies its Nexperia wireless platform to about a tenth of the world’s hand-sets, had a 2.8 per cent rise. Another big wireless supplier, Broadcom, had a 1.7 per cent rise to $3.7 billion.
However one statistic uninfluenced by Nokia is the 23 per cent rise to over $6 billion revenues of wireless chip supplier Qualcomm which, locked in legal disputes with Nokia, is not a preferred supplier.
The good news for TI is that its analogue business, which also supplies 40 per cent of the company’s revenues, is highly profitable and growing. That means TI's profits are up 6 per cent on the year with gross margin at 54 per cent and its share price on an upwards trend.
For Freescale, bought last year by the Blackstone private equity group in a deal which valued the company at a$17.6 billion, the 10.7 per cent revenue decline must be tough. Freescale had been through extensive re-structuring before the Blackstone deal. and must now be finding it hard to make savings in line with the decreasing revenues.
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