To investigate how asset-light operations generate competitive advantage for Texas Instrument, selections of top revenue company in semiconductor industry are needed and categorized them based on their total assets. This paper valuated these companies using light-asset and intangible assets valuation method which resulted with the following comparison between selected firms.
Table 6.1 shows the 3 year average post-asset light timeline of Texas Instruments in
comparable with other several firms. Texas Instruments resulted numbers was subtracted with other firms to show specifically how much the difference in their valuation value.
Table 6.1 Summary of Texas Instrument Valuation Source: Compiled by case writer
In terms of Asset-light valuation which shows the light-asset value and Degree of asset
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lightness. Texas Instrument asset-light value shows higher return in comparison with the rest of the firms except for Intel which have a huge asset base. Both Texas Instruments and Intel are more efficient in allocating or investing their capital to have profitable returns as a result of higher ROIC in comparison with cost of capital. Texas Instrument though cannot compete with Intel in terms of total asset that is why it shows a negative result in the table. However, the DAL or degree of asset-lightness proves that TI outperforms everyone in terms of making intangible value from its tangible assets. It’s DAL which shows more than everyone else demonstrates a rate of value creation greater than the tangible assets deployed.
The term asset-light implies a high ratio of intangible strategic resources relative to tangible assets. The Intangible assets valuation shows TI good indicator performance of its
market-to-book ratio, ROAOR and its EVA. These 3 valuations shows high level of organization in terms of $-valuations with comparison either internal (market-to-book and EVA) or within industry (ROAOR). With high value from its Market-to-book ratio, this means TI have high return on capital and its shows that TI intangible assets are more than the other firms as well as in industry.
TI have comparative advantage in comparison with the other selected firms since it’s ROAOR or return on asset method over reasonable rate measures higher intangible assets or unique resources. This also shows TI management capability in terms of asset management of sales over it fixed asset.
EVA or widely used as value enhancement which is computed as the product of the return spread (ROC – Cost of Capital) and Capital invested shows TI difference between market value and book value of capital are far more than the other 6 companies as well.
Base on indicators defined in this paper for Texas Instruments showing high results with the
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other comparable firms, showing both high degree of light-asset as well as high intangible ratio. We therefore conclude that TI execution of its light-asset strategy in the middle of 2006-2007 is a big success and it can say that strategy is sustainable at least within 5 years as this the only scope of this current study.
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Appendix
CDMA - stands for Code Division Multiple Access and is one of the main technologies currently used in digital wireless communications networks (also known as wireless networks). CDMA and TDMA (Time Division Multiple Access), of which Global System for Mobile Communications (GSM) is the primary commercial form, are the primary digital technologies currently used to transmit a wireless device user’s voice or data over radio waves using a public cellular wireless network.
IDM’s (Integrated Design Manufacture) - a company that performs every step of the chip-making process, design, manufacture, test and packaging (ex. Intel and TI)
IMFT and IMFS are variable interest entities that are designed to manufacture and sell NAND products to Intel and Micron at manufacturing cost.
Micro-electromechanical systems (MEMS) - is a technology that combines computers with tiny mechanical devices such as sensors, valves, gears, mirrors, and actuators embedded in semiconductor chips or what also called analog computing.
Moore’s law - number of transistors doubles every 18 months as observed by Gordon Moore, Intel co-founder.
PHY - means physical layer, in wireless since there is no actual physical connection.
Platforms - is a collection of technologies that are designed to work together to provide a more complete computing solution.
SBU – Strategic Business Unit