New chips for cheaper cell phones

NEW YORK (Fortune) -- Less than two years after announcing new semiconductor technology aimed at drastically reducing the cost of making very basic wireless phones, Texas Instruments says it now has developed a similar chip that will help make so-called smart phones cheaper to produce.

Texas Instruments (Charts), which has found a way to put much of the technology on a single microchip, says it now can add on a processor that supports multimedia applications such as games, videos and multipixel cameras.

TI says handset makers will begin integrating this newest single-chip solution, code-named "eCosto," into handset prototypes early next year.

Texas Instruments initially began working on single-chip solutions in order to deliver bare-bones phones - capable of making and receiving phone calls and text messages, and little else - to meet the demands of poor customers in fast-growing markets such as China.

Indeed, the first phones using TI's initial single-chip solution, dubbed "LoCosto", are expected to cost handset makers $30 or less to produce. (Carriers, in turn, can subsidize the phones and sell them to consumers for even less.)

But Texas Instruments executives said they discovered there was also strong demand for affordable phones that could take pictures, show videos and perform other rich functions. Using the eCosto chip, TI says, handset makers could develop multimedia phones for carriers.

"As the emerging markets evolve beyond voice-centric, basic multimedia applications, we must support the integration of more advanced multimedia features into our single-chip cell phone solutions," said Alain Mutricy, Texas Instruments's vice president and general manager of cellular systems solutions for its wireless terminals business unit, who announced the new product at a press conference in China.

CEO of Texas Instruments, Rich Templeton, affirmed the company's commitment to providing China with chips that support a range of devices. "The size and diversity of China's population create a consumer market that cannot be served with a 'one size fits all' approach," Templeton told wireless operators and device makers gathered in Beijing. "At TI, our goal is to provide our customers in China with products that help them meet the broad range of consumer needs."

Texas Instruments said it expects smart phones made with the eCosto chip to cost manufacturers anywhere from $60 to $120 to produce. Those phones should begin shipping to consumers by the end of 2008.

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