Texas Instruments Inside?

Its Intel-like strategy: Get consumers to seek its chip technology in flat-screen TVs

Back in 1982, Texas Instruments Inc. (TXN ) had one of the hottest brands in techdom. Its digital watches and calculators were everywhere, as were its ads with TV icon Bill Cosby promoting its home computers. But when its PC business folded in 1984, so did TI's last attempts at mass marketing.

Now that's changing. In November, TI launched a major marketing blitz aimed at reintroducing itself to consumers while spurring sales of flat-screen TVs that use its digital light-processing chips. In TV spots that will air during peak viewing times, including the Super Bowl on Feb. 6, TI is promoting the picture quality of sets that use DLP, a proprietary technology that involves bouncing light off more than a million tiny mirrors. If the ads are a success, consumers could see TI start to position itself as a hip, innovative company behind a range of consumer products. "We're in an era where communications and consumer electronics are the most important [markets]," says Richard K. Templeton, who became CEO in May.

TI is taking a page from the famous "Intel Inside" ad campaign -- but success is not guaranteed. That campaign helped establish Intel Corp. (INTC ) as a brand consumers could trust when shopping for what was then a complicated and relatively new market for PCs. Intel also gave hundreds of millions of dollars in marketing funds to PC makers that used its chips. Many depended heavily on Intel, boosting its influence in the market. But TI isn't spreading marketing largesse; moreover, it's loath to risk alienating the manufacturers that buy its chips by doing anything that could undermine their brands.

Still, TI is eager to establish itself in consumer electronics. As home entertainment goes digital, it's looking more like PCs, where manufacturers' brands have less sway over buyers than those of Intel and Microsoft (MSFT ) Corp. "People are starting to look at what the components are," says researcher NPD Group Inc. analyst Stephen Baker.

That gives TI an opening. When the first TVs based on DLP hit the market in 2002, they quickly took hold as a viable alternative to plasma and liquid-crystal-display sets. The latest models are just seven inches thick, making them almost as slim and sexy -- yet they go for about half the price. In September, DLP sets accounted for 28.1% of the big-screen market in North America, neck and neck with plasma and LCD. Sales should reach $750 million for TI this year, says American Technology Research analyst Erach Desai, up 127%.


With the peak TV-buying season approaching, TI and its customers know their growth is vulnerable. Digital-TV sales are expected to rise 70% this year. But with prices falling rapidly, plasma sales soared 58% from August to September, compared to 28% for DLP sets, according to NPD. So in addition to its TV advertising, TI is also installing slick in-store displays with retailers such as Best Buy, hoping to promote what they claim is the superior picture quality. One factor in TI's favor: DLP sets typically come in much larger sizes than plasmas, making them a more popular choice for sports nuts and home-theater enthusiasts. The upshot: DLP should continue its strong growth even if ever-cheaper flat-panel technologies like plasma grab more share. "I think they have an opportunity," says American Technology Research analyst Erach Desai.

A harder task may be establishing TI's brand in other categories. TI is the No. 1 seller of chips for cell phones, supplying the brains of the snazziest multimedia models in the market. But cell-phone makers are unlikely to cede space on handsets for TI's logo. And it's far from clear that buyers would search out the chipmaker in a crowded consumer-electronics market even if they knew who it was. "It's an uphill battle," says Silicon Valley marketing consultant Regis McKenna.

Still, as technologies converge, chipmakers are assuming more influence over the design of electronic products. That may help them play a bigger role in marketing, analysts say. TI recently announced plans to add digital TV to cell phones by 2007. If that's not a gizmo fit for a Super Bowl ad, what is?

By Andrew Park in Dallas

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