Analog Devices vs Texas Instruments: Competitive Positioning

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If you look at the historical component catalog business of Analog Devices in particular, do you see any trend of commoditization that takes a larger and larger share of this catalog and might cause them to more desperately move in other strategic directions?

This is a significant issue at ADI. Looking at the numbers, ADI has never been a cost-driven company like TI. TI starts everything with cost in mind, but that's not in ADI's DNA. They have a large base business with very high margins and costs. They've managed to maintain high prices because these products were designed a long time ago. The market has changed, but these projects haven't come up for redesign yet, and they lack the cost structures to win them again. If these projects go to the open market with new designs, ADI will face challenges. They don't have the efficiency in manufacturing and processes like TI does. They're not well-positioned to hold onto the commoditized catalog market. TI, on the other hand, is well-positioned to keep investing in those areas and reduce costs to sustain those businesses. ADI seems to lack the discipline for this.

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If I'm not mistaken, BYD initially bought the BMS from ADI and later developed their own. Do you expect more OEMs to design their own subsystems, such as BMS or others?

China is a whole other story. There's a lot of pressure from the government for companies to either develop themselves or buy from Chinese suppliers over the last four or five years. This drove a lot of decisions, like the one from BYD. They also have CATL in China, which took a lot of the ADI business and started doing things in-house. I think that pressure will always be there, especially on the Chinese side, because China is investing heavily in EVs now. That's going to be the golden screw in the BMS system. There's a lot of pressure to get American and European suppliers out. However, I haven't seen that pressure as much for BMS in the US, European, or Korean OEMs. They seem okay with buying those components rather than investing in BMS themselves.

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