Will Texas Instuments Low Cost Chips Chip Margins?

By Douglas A. McIntyre Published Feb 13, 10:10AM EST

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TI (TXN) and Infineon (IFX) are both chasing the super-low priced cellphone chip market. The TI versions are called LoCosto. That is actually the name. No one is putting you on.

These chips sell for $10 to $15 based on analyst estimates, and are for phones that will retail in the $30 to $50 range, especially in emerging markets. The markets have a great deal of potential. MarketWatch writes: According to market researcher iSuppli, Latin America, China, and India have the lowest penetration rates for wireless phone subscribers. Latin America stands at 48.3%, China, 24.3%, and India, 13.5%.

That means there is a lot of unit sales potential. But, is there a lot of profit? The market seems to be skeptical. Over the last year, TI’s stock is flat while the Dow is up 15%. There are concerns about both the margins and revenue growth at the big chip company as cell phone prices drop and unit sales slow going into 2007. And, as the company has debuted its new chips over the last three days, the shares have dropped from an intraday high of $31.96 to $30.20.

Looks like cheap chips sink ships.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.