Arik Hesseldahl

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Texas Instruments to Cut 1,700 Jobs, Shift Away From Phones

Time was that Texas Instruments was the manufacturer supplying chips to most of the world’s mobile phones.

Those days are over, and the business has shifted. Now it’s Qualcomm and Samsung that supply the main processing engine in most of the world’s smartphones not made by Apple. And Apple designs its own chips.

Despite having landed its chips in devices such as the Motorola Droid and Amazon’s Kindle Fire tablet, TI has now admitted something of defeat.

The company just announced that it will re-focus its OMAP chip business on a wider set of “embedded markets” — chip industry code for things that aren’t personal computers or in this case wireless phones. The move, it says, offers greater business potential over the long term. Design cycles for the smartphone business are pretty harsh and costly — and incredibly competitive.

As part of the move, it says it will cut nearly 1,700 jobs, amounting to about 5 percent of its work force, which it says will reduce annual costs by $450 million by the end of next year.

TI execs hinted at the change two months ago, saying they planned to shift the company’s R&D resources toward developing chips for the automotive, industrial and other non-consumer markets.

As part of the change, TI says it expects to take a $325 million charge that it will record this quarter.

Here’s TI’s original announcement:

TI to reduce costs in Wireless business; OMAP™ processors and wireless connectivity solutions will focus on embedded markets

DALLAS, Nov. 14, 2012 /PRNewswire/ — Consistent with previously stated strategic plans, Texas Instruments (TI) (TXN) announced today it will reduce costs and focus investments in its Wireless business on embedded markets with greater potential for sustainable growth. Cost reductions include the elimination of about 1,700 jobs worldwide.

TI previously outlined intentions to focus its OMAP processors and wireless connectivity solutions on a broader set of embedded applications with long life cycles, instead of its historical focus on the mobile market where large customers are increasingly developing their own custom chips. These changes require fewer resources and less investment.

“We have a great opportunity to reshape our OMAP processor and wireless connectivity product lines to concentrate on embedded markets. Momentum is already building with new embedded applications and a broad set of customers, and we are accelerating our efforts in these areas,” said Greg Delagi, senior vice president of Embedded Processing. “These job reductions are something we do with a heavy heart because they impact people we care deeply about. We will work closely with all employees affected by these changes to provide a range of assistance related to compensation, benefits and job search.”

As a result of these actions, the company expects annualized savings of about $450 million by the end of 2013. Total charges will be about $325 million, most of which will be accounted for in the current quarter. TI’s fourth-quarter outlook, published on October 22, did not comprehend these restructuring charges.

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