10-KPeriod: FY2002

TEXAS INSTRUMENTS INC Annual Report, Year Ended Dec 31, 2002

Filed March 3, 2003For Securities:TXN

Summary

Texas Instruments Incorporated (TI) in its 2002 10-K filing highlights its position as a leading semiconductor company, with the semiconductor business accounting for 83% of its revenue. The company focuses on digital signal processors (DSPs) and analog integrated circuits, serving diverse markets including cellular phones, personal computers, and automotive. While the semiconductor market saw slight growth in 2002 after a downturn, TI acknowledges its cyclical nature and intense competition, emphasizing the need for continuous innovation and investment in research and development ($1.6 billion in 2002). Beyond semiconductors, TI also operates in Sensors & Controls (11% of revenue) and Educational & Productivity Solutions (E&PS) (6% of revenue), offering products like sensors, controls, and educational calculators. The company operates globally, with over 76% of its 2002 revenue generated outside the United States, exposing it to currency fluctuations and geopolitical risks. TI's strategy involves strategic acquisitions, such as Condat AG, to strengthen its portfolio. The filing also details significant R&D investments, a robust patent portfolio contributing to revenue, and ongoing efforts to manage market risks including demand fluctuations, pricing pressures, and technological obsolescence. TI's outlook is framed by cautionary statements regarding the semiconductor industry's volatility and the company's ability to adapt to rapid technological change and competitive pressures.

Key Highlights

  • 1Semiconductor business is the core, representing 83% of 2002 revenue, with a focus on DSPs and analog integrated circuits.
  • 2Significant investment in Research and Development, with $1.6 billion spent in 2002.
  • 3Operates in diverse segments: Semiconductors (83%), Sensors & Controls (11%), and Educational & Productivity Solutions (6%).
  • 4Global operations with over 76% of revenue from outside the U.S., leading to exposure to foreign currency fluctuations and economic conditions.
  • 5Intense competition and rapid technological change are identified as key risks in the semiconductor market.
  • 6The company acknowledges the cyclical nature of the semiconductor industry and its impact on performance.
  • 7A robust patent portfolio and ongoing licensing agreements are a source of revenue and a competitive advantage.

Frequently Asked Questions

Texas Instruments' primary business is semiconductors, which accounted for 83% of its 2002 revenue. Within this segment, the company is a leading supplier of digital signal processors (DSPs) and analog integrated circuits. TI also has two other segments: Sensors & Controls, contributing 11% of revenue, and Educational & Productivity Solutions (E&PS), contributing 6% of revenue.

The company faces significant risks including the cyclical and competitive nature of the semiconductor market, rapid technological change requiring continuous innovation, pricing pressures, and potential declines in demand from key end-user markets like telecommunications and computers. Global operations also expose TI to currency fluctuations, geopolitical risks, and supply chain disruptions.

TI owns many patents and trademarks, considering its patent portfolio a significant asset that contributes to revenue through licensing agreements. The company actively enforces its intellectual property rights, though it acknowledges the risk of misappropriation or improper use and the potential need to rely on licensed technology from others.

TI periodically considers acquisitions and divestitures to strengthen its business portfolio. An example mentioned is the acquisition of Condat AG in 2002, a wireless communication software developer, for approximately $87 million.