DALLAS (CNNMoney.com) – Texas Instruments Chief Executive Rich Templeton said that the continuing demand for consumer electronics and growth in emerging markets will be bigger drivers for the semiconductor industry than the PC market going forward.

Speaking at the company's annual financial analyst meeting in Dallas, Templeton said "communications and entertainment have replaced PCs as the driver."

"If you want to look at the future, go find your nearest teenager," he added. "You'll find [they have] a cell phone, an iPod, a portable game player," he said.

But Templeton noted that these opportunities are not lost on TI's competitors, like Qualcomm (Research) and Freescale Semiconductor (Research).

Templeton said that emerging markets including China, India and Africa boast roughly three billion potential new customers for TI, the largest maker of semiconductors for cell phones.

"The first electronic product these folks are going to purchase is a cell phone," he said. "The good news is that's not the last electronic product they will buy."

Wireless accounted for about $4 billion of TI's $13.4 billion in sales last year. Semiconductors account for about 96 percent of those revenues.

Templeton said the company's analog business, one of its two largest semiconductor units, stands to gain from the explosion in consumer electronics products. TI's analog business, which accounts for about 40 percent of semiconductor revenue, grew 24 percent in the first quarter.

Templeton said the analog market is extremely fragmented; he noted that while TI is currently the market leader in producing analog chips, its market share amounts to roughly 12 to 13 percent, representing an opportunity for TI to grow its share.

The CEO also outlined specific operating goals on Wednesday, saying that Texas Instruments (Research) aims to achieve gross profit margins of 50 percent and operating margins of 25 percent. Templeton noted that the company essentially achieved that during the first quarter of this year, when charges for stock options expensing are excluded.

Last quarter, TI posted a gross margin of 50.1 percent and an operating margin of 21.5 percent. Those numbers pleasantly surprised some analysts, but others have wondered whether TI has room to expand its margins -- a question that some believe has served as a drag on the stock price.

Shares of Texas Instruments fell nearly 2 percent in midday trade on the New York Stock Exchange.

Templeton downplayed the effect that gross margins have on how Wall Street values the stock, saying he believes earnings growth is more highly rewarded.

TI chief financial officer Kevin March said TI's gross margin is up eight percentage points since 2003, and its operating profit has expanded since then to $2.6 billion in 2005. March said the sale of the company's sensors and controls business to Bain Capital for $3 billion is one factor that will leave room for further margin expansion.

And he attributed the company's margin improvement to a better mix of products, more efficient manufacturing and a change in the company's method of calculating depreciation.

Templeton reiterated the message he gave to CNNMoney.com yesterday, saying that he thinks the company has the potential to meet its goal of growing revenue faster than the marketplace, and growing earnings faster than revenue.

He also acknowledged TI's failure in the fourth quarter of last year to anticipate demand and build an appropriate level of inventory, a move that cost the company sales.

Templeton reiterated comments he made during the company's most recent earnings call, saying that TI has made progress that will enable it to be more responsive to demand this year.

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