Semiconductor manufacturing powerhouse Texas Instruments Inc. (Dallas) will take a leap into the rapidly growing market for low-power radio frequency devices with a $200 million acquisition next month of Chipcon (Oslo, Norway).
The current market leader for chips that comply with the IEEE 802.15.4 and ZigBee standards, Chipcon will operate as a subsidiary of TI, reporting through Art George, vice president of TI's High Performance Linear group. Chipcon will continue to operate out of its current Oslo headquarters, and Chipcon CEO Geir Forre will lead a team charged with integrating TI's and Chipcon's work on short-range wireless products, TI said.
The direct entry of a major player like TI marks an important turning point for the young but rapidly growing market for low power, short-range wireless devices. Such devices can be used in a variety of applications including mesh networks and the automated monitoring of industrial equipment and processes.
In 2004 -- Chipcon's latest full fiscal year -- the company reported revenue of $29.4 million, up 66% compared to 2003 revenues. Chipcon's earnings for the year, $900,000, were up 90% compared to 2003 results. Since 1999, the company has grown its revenues by an annual compounded rate of 70%.
This past January, Chipcon, which makes RF transceiver devices, acquired Figure 8 Wireless Inc., a provider of ZigBee-ready networking software. The deal created a one-stop shop of ZigBee system-on-a-chip solutions and positioned Chipcon solidly in the low-power RF market against its major competitors, which to date have been mainly smaller companies, including Ember Corp. (Boston) and Freescale Semiconductor Inc. (Austin, TX).
The $200 million price TI will pay for Chipcon represents a substantial premium on the company's current revenue. According to ARC Advisory Group analyst Harry Forbes, that reflects TI's faith in the market for low-power, short-range RF devices.
"That TI was willing to pay about eight times the 2004 revenues for Chipcon shows their confidence that this market will continue to grow rapidly," said Forbes in a published report.
TI officials said the company decided to enter the low-power RF chip market because customers are increasingly incorporating the technology into their products. "The addition of Chipcon's technical capabilities and leading RF integrated circuits will complement TI's existing low-power wireless product line and strengthen our high-performance analog portfolio," said Gregg Lowe, senior vice president for TI's High Performance Analog division, in a statement.
It is expected, Forbes said, that TI will develop new ZigBee-compliant products that combine Chipcon's RF logic with TI's low-power microcontroller chips -- already a popular combination among wireless device designers.
Chipcon was founded in 1996 as a maker of application-specific integrated circuits (ASICs) and later entered the market for RF devices. In addition to its Oslo headquarters, Chipcon maintains a software design center in San Diego, CA. Company officials were not available today to say whether layoffs are planned as a result of the acquisition by TI.