Mr. Richard Templeton, President and Chief Executive Officer of Texas Instrument (TI)

During 1930 in Texas, 12 small teams of oil exploration experts established a tiny company and invented a new instrument to improve the expertise of oil exploration. That is the birth of Texas Instrument (TI).

Today, after 75 years of continued growth, the company has developed into one of the largest and most prestigious companies in the global semi-conductor industry and the world's leading designer and supplier of real-time signal processing solutions. TI has approximately 36,000 employees worldwide with corporate, sales and manufacturing facilities in more than 25 countries across Asia, Europe and the Americas.

Why is the company so successful? Sharon Hampton, Media Relations Manager of TI answered the question without any doubt: "our innovations". She offered a long list of major innovations created in TI since its birth. Many of the innovations are the ones we are quite familiar with: the first commercial silicon transistor, the first integrated circuit, the first electronic handset calculator.

As a matter of fact, the TI innovations have dramatically changed the way of life for people all round the world. According to Gilles Delfassy, Senior Vice President of the Wireless Terminals Business Unit, 6 of the top 7 3G handset manufacturers use TI technology in their phones. Delfassy disclosed that TI has also announced a new cell phone technology that allows for the integration of multi-chip wireless systems into a single-chip. "We are providing samples to customers today and ramping into mass production next year," said Delfassy with pride.

The pride is also shared by Keith Lewis, China Retail Manager for DLP(Digital Light Processing) HDTV(High Definition) technology. Lewis said DLP is the world's only all-digital display chip and a key ingredient in the best digital projectors available in the world today. He disclosed that almost all Chinese color TV producers have signed contracts with TI to purchase this kind of unique chip.

Why are innovations in TI so widespread and sustainable? In order to get the answer, our People's Daily Online Washington-based correspondent Yong Tang recently did an exclusive interview with TI President and Chief Executive Officer Richard Templeton.

Do Something That Belongs To The Future

Yong Tang: According to the media report, the profit of TI for the second quarter of this year has increased 42%. Obviously it is a dramatic increase. Is this true? Why is the increase so big?

Templeton: If you look at the overall progress, the equally important or even more important thing is that the revenue of TI continues to grow faster in the marketplace in the past four years than any of our most significant competitors. It is simply because we are focusing on the right markets with the right products for the right customers.

Yong Tang: As far as I know, Intel is a long-term competitor for TI. How can TI compete with Intel for the leadership position in the global semi-conductor industry? Why didn't TI produce PC chips any more?

Templeton: Intel clearly has very good success in the PC area. It is very successful with microprocessors. But the world has moved on to an era when the communications of entertainment are really driving the semi-conductor industry. TI has been focusing on DSP (Digital Signal processing) and DSP analogy for well over 20 years now. We feel it is a right place to focus. We feel it is a long-term growth. Our bases of customers and products allow us to compete very successfully in that area.

Yong Tang: Everybody is talking about post PC world. Someone even said Intel belongs to the past while TI belongs to the future.

Templeton: I think it is if you look at the growth rates we are achieving. TI is very clearly focused on the future. If you look at the cell phone industry, probably 750 million to 800 million cell phones were shipped during 2005. This number is four times bigger than that of PCs. So this is a good example of what is the future.

Customers are More Important Than Publicity

Mr. Richard Templeton (L), President and Chief Executive Officer of Texas Instrument (TI) and Mr. Yong Tang, People's Daily Online Washington-based correspondent

Yong Tang: I have found there is Intel Inside everywhere, but there is almost no TI Inside. Why is there such a difference?

Templeton: Intel has put its brands and images almost in the front of its customers' PCs. But we have a very significant belief that we are here to support customers. Our customers, such as Nokia, Motorola, Samsung and TCL, want their brands on the phones. We should help them do what they want to do.

Yong Tang: Does this mean TI doesn't like standing in the limelight?

Templeton: We need to support our customers. If you look at the cell phone industry, our customers want their names on the cell phones. They don't want TI Inside message. But on the other hand, if you look at large-screen HD TV market, you will find a DLP brand on the front of DLP-based TV sets. We do that because it helps our customers sell more TVs.

Yong Tang: You are promoting DLP. You are still not promoting Texas Instrument.

Templeton: That is correct.

Yong Tang: Why?

Templeton: Because there is no Texas Instrument TV. When buyers wander through a retail store, we want them to ask for a DLP-based TV. That DLP-based TV may come from Samsung, Toshiba and RCA, but not from TI.

Yong Tang: So customers and your products are much more important than TI itself?

Templeton: I believe products position a company. Companies, when they become successful, will get visibility in the industry.

If You Want Innovation, You Need Concentration

Yong Tang: TI has undergone dramatic transformations in late 1990s. How did you manage to do that despite so much criticism and pressure from within and outside?

Templeton: TI owned many many different businesses during 1995-1996, ranging from defensive electronics to notebook PCs. The biggest decision we have made is that we are going to focus on things we did well. And things we did well were DSP analogy-based semi-conductors. We made a choice at that time to focus the company around DSP analogy based semi-conductors industry. We made a number of changes in Mid 1990s. We continued to make changes in 1997 and 1998 when we sold our memory business. We ended up very focused on DSP and analogy. The reason we did that is that we think it is the future. So far we are pleased to make that choice.

Yong Tang: Does this mean if you want to innovate you must concentrate?

Templeton: Yes, if you want to maximize your opportunity, you must focus on what you do well. In our case we felt the size of DSP market and the size of analogy opportunity were very large so we needed more resources working on those areas. That is why focus actually allows you to innovate. If you want to innovate, you must focus on what you want to be good at.

Keep R&D Spending Always High

Yong Tang: How about TI"s R& D (Research and Development) Spending?

Templeton: TI is a company where innovation is our foundation. So we consider innovation as a core value of our company. In order to promote innovation, we always keep our R&D spending high.

We spend about 17% or 18% of our revenue on research and development programs each year. During 2001 and 2002 downturn years for IT industry, our revenue came down by 40%-45%. But we still kept our R&D spending unchanged. When it is a time of great challenge from the marketplace, we still stay very committed that you have to innovate new products in order to win.

As a result of that, our single-chip cell phone technology was born. We spent 2 billion dollars on this technology. Innovations of this caliber take long-term effort and continued dollars to really come through.

Yong Tang: Is the R&D number large compared to your major competitors?

Templeton: We are spending about 2 billion dollars each year in Research and Development. You will not find many companies in the semi-conductors industry who invest so heavily on that.

Yong Tang: How is the R&D money used?

Templeton: TI primarily focuses its internal R&D on addressing the competitive issues that will affect customers in the next two to five years. For pre-competitive, early stage research, TI closely engages with a wide range of external industry consortia and universities. Also, through its DSP and Analog university programs, TI works with more than 1,100 universities worldwide for related research and education.

Set Up Career Ladders

Yong Tang: How you reward those employees who have made major contributions to innovations?

Templeton: Compensation is a very direct way. You just pay them bonus and stocks. We also have career ladders. Business managers have a management ladder while technologic people have a technological ladder along which they could be promoted.(Templeton himself was an ordinary salesman at the very beginning of his career at TI) But the biggest thing you do to reward great business people and great technological people is to give them harder problems.

Yong Tang: Harder problems?

Templeton: Yes.

Yong Tang: What do you mean?

Templeton: Harder assignment. Technological people want to work on more challenging products. Business people want to take more challenging business opportunities. So TI has a culture of reward by giving our employees greater challenges. I think TI President and CEO is the best job in the world. I could go around the world and meet with truly innovated people among our employees.

We Will Not Overprize Our Chips

Yong Tang: TI is the only global supplier of DLP HD TV Chip. In recent years TI has partnered with many big Chinese TV producers such as Changhong, Xiaxin, Kangka, Chuangwei and TCL. According to the disclosed partnership program, TI will provide Chinese TV makers with such chips. All DLP HD TV chips in China today come from TI. Is this true?

Templeton:Yes.

Yong Tang: But many Chinese industrial insiders are deeply worried about this. They claim that Chinese TV producers would be under control by TI. Once TI imposes excessively large amount of royalty on Chinese TV producers, Chinese TV making industry would suffer tremendously. Some experts even say that it is quite intriguing that a technologically advanced company like TI has allied with so many big Chinese TV makers. Can you tell me what is behind the partnership?

Templeton: Once you see the HD TV, you will never want to watch TV the old way. The pictures DLP produces are breathtaking. No burnout. Compared with the old alternative technologies such as Plasma and LCD from Japan, DLP lasts much longer but the cost is much lower. That is why we are able to promote early relationships with some of the Chinese TV companies you just mentioned. So my first statement is that HD TV is a very important long-term trend for large screen TV market.

Secondly, we are big believers in open systems, meaning that we want the TV market to be fast growing and the volumes to be very high. So we are very encouraged to have low prices and low cost because TV companies want to build the lowest cost TVs. So that is the objective we have. That is why we have been successful in the area.

Third, our interest is for the local Chinese TV companies to be successful. You can look at other consumer electronics companies from Japan. Sony is trying to promote its LCD technology in China but what is the objective of Sony? Sony wants to sell more Sony brand TVs. So Sony will not try as hard as us to help Chinese TV companies to be successful.

(Later in a separate interview with Keith Lewis, China Retail Manager for DLP HD TV technology, Lewis assured that if the chip price of TI is not competitive, Chinese TV makers would go somewhere else to get the chips. They could choose Plasma or LCD. If TI wants to become competitive, it should have a nice partnership with its Chinese partners. "If we overprize our chips, HD TV will become too expensive and consumers won't buy it. So we want TVs to be competitive in the market and want our customers to sell a lot of TVs in the market.")

Yong Tang: If Chinese TV producers decide to develop their own chips for HD TV, are you willing to give them assistance? Are you considering the possibility of technology transfer to China?

Templeton: We always want to talk with people about the things that could have commercial use. But obviously our greater focus is that we want to be a producer of chips going into TV. That is what we have been doing. That is our primary objective and focus. I think the focus of our customers in China is to sell TVs, which is their success. We want to work with them closely to do that. I think the biggest thing in Chinese TV market is that China should have more content available in HD format.

(In a separate interview with Gilles Delfassy, Senior Vice President of the Wireless Terminals Business Unit, Delfassy said that we support many companies to develop their own solutions and we can work to develop the best solutions adapted to the Chinese market through joint design. He also said Chinese TV makers could design the chips and TI can manufacture for them.)

(In a separate interview with Keith Lewis, China Retail Manager for DLP HD TV technology, Lewis said today it is much better for Chinese TV manufacturing companies just to acquire chips from TI. It is not economically feasible for them to create their own chips because the manufacturing facility is too expensive and complicated. TI owns five or six of those facilities. Each costs about 3 billion. In the future when the market grows larger, they could create their own chips.)

Hisense Chips Will Not Replace TI Chips

Yong Tang: But Hisense Group Corp, a Chinese TV producer, announced this June that it has independently developed a digital video media processing chip. The chip is believed to be the first domestically made chip for color TVs in Mainland China. The Chip is called China Chip or Hiview Chip, expressing a strong sense of national pride. Have you heard of this chip and how do you evaluate this chip?

Templeton: I don't know the specifics of the chip. I believe it is a digitally controlled chip. I guess you could use the Hisense chip together with DLP chip.

(In a separate interview with Keith Lewis, Lewis also said the Highsense chip can be used together with DLP chip. He said I don't think Chinese chip will replace our chip. It is a complement.)

We Don't Separate Roles For China

Yong Tang: In the next three years TI will invest 300 million dollars more in Philippine. Why is the market in Philippine so attractive?

Templeton: We invest 1.3 billion dollars this year in capital. We spent another 2 billion dollars on R&D this year. We spend those in many places throughout the world. It is not just a Philippine decision.

Yong Tang: How do you define the role of Chinese market in TI's global business strategy?

Templeton: I visit China probably twice a year. The cities and the people there are just wonderful. I am deeply impressed by their energy and the passion to grow.

We find Chinese market critical. China is a rapidly growing marketplace in terms of our local customers operating there as well as multinational companies operating there. As a result we believe China is one of the most important marketplaces for the next 20 years for us to be successful.

Yong Tang: Do you have a R&D center in India?

Templeton: Yes, We do have.

Yong Tang: Do you have a similar one in China?

Templeton: In Shanghai, you will find our wireless R&D centers. The things our Chinese customers want is local help to get cell phones to the market so we do some testing there in order to work on products quickly. Our R&D center in China tends to be very focused on our customers in China. We also set up DLP labs to get people very close to our Chinese customers.

Yong Tang: Does TI produce anything in China today?

Templeton: We produce quite a bit. We do this in two ways. First is sensor and control business. We've got major facilities in China for sensor control production. Second is semi-conductor industry. We actually do business with a number of contractors in China.

Yong Tang: So there are two roles for China. One is a manufacturing center while the other is a R&D center. Which role China plays is more important for TI?

Templeton: We look at Chinese customers. We don't separate roles. When I look across customers base in China, I just see very exciting companies and people with very strong ambition to be business leaders in China and then in the world. Some of our Chinese customers are more manufacture-oriented while some others more oriented in R&D and innovations. We want to work with that whole set because we think we have things to help all that. We want to work with every customer in China to help it become more successful.

Yong Tang: Is there any difference about the way you perceive Chinese market and Indian market?

Templeton: All markets are unique but all have commonality. The commonality is that today the world is more and more focused on communications and entertainment. People want to make phone calls. People want to listen to music. People want to watch movies. The content of the entertainment may vary. Some may be produced in Hollywood and some may be in Beijing. But people want to do those same things on the global basis. I think it is the opportunity we have.

Believer Of Open Standards And Open Markets

Yong Tang: China had decided to implement its own WLAN standard by June 2004. But later the implementation of this new standard was postponed without time limit. As you may know, the new standard has been strongly opposed by WI-FI Alliance. The attitude of TI on this standard is quite interesting. At the very beginning, TI agreed fully with the new standard but later TI changed its tone abruptly, turning to back WI-FI Alliance. Why TI changed its attitude that way?

Templeton: I don't recall the exact position TI had. In general we are strong believers of open standards and open markets. When the standards are open, it could attract more innovation and the market could grow faster. When the markets are open, they tend to attract more innovations.

(In a separate interview, Gilles Delfassy, Senior Vice President of the Wireless Terminals Business Unit, said we want free and open competition. According to him, TI needs a level playing field and TI values the importance of open industry standards, not proprietary standards where any single company has a monopolistic position. GSM and DVB-H were good examples of open standards.

By Yong Tang, People's Daily correspondent in Washington DC