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Why the Internet of Things matters to Texas Instruments’ growth

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Company expects huge growth in IoT

Microcontrollers, or MCUs, dominate the Internet of Things (or IoT) that spans across all computing devices except PCs, tablets, and smartphones. Cloud Times estimates that the IoT will grow to reach 26 billion connected devices by 2020, up from just 0.9 billion in 2009. Given this exponential growth, it seems the strong demand for MCUs is likely to continue in the future.

As the graphic below shows, owing to the growth in connected devices, Texas Instruments Incorporated’s (TXN) core end markets— automotive and connected devices—present huge addressable opportunities for the company. According to the company’s own estimates, 50 billion devices are expected to be connected by 2020.

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Partnerships to develop operating system

Like its peer, Intel Corporation (INTC), Texas Instruments too aims to benefit from the IoT phenomenon. The company partnered with ARM Holdings plc (ARMH) and IBM Corporation (IBM) to launch an initiative that aims to develop a dominant IoT operating system. If Texas Instruments’ IoT initiative yields results, it’s expected to benefit the VanEck Vectors Semiconductor ETF (SMH) that has significant exposure to the company.

To understand the role of IoT as a growth engine, please read Market Realist’s series, Why “big data” and IoT are important to Intel’s growth.

New applications launched

In June 2014, Texas Instruments introduced two new CC3100 and CC3200 SimpleLink Wi-Fi platforms for IoT applications. These applications allow users to easily add embedded Wi-Fi and Internet to a wide range of industrial, home, and consumer electronics.

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