Last week, BloggingStocks writer Eric Buscemi brought us the news that Texas Instruments (NYSE: TXN) intends to spend $1 billion to expand chip assembly and test operations in the Philippines. Analysts are almost unanimously positive on TI performance and now there's one more bit of positive news. SDA Asia Magazine has reported that Larry Tan has been named President of TI's operations in Asia. In light of Tan's 28 year history with TI, from manufacturing on through marketing, Tan is a perfect fit with the new depth of focus that TI has undertaken in its manufacturing flow.

Earlier this year, Texas Instruments adopted a new manufacturing strategy which more closely aligns the expressed needs of their customers with the R&D of TI's third party suppliers. This gives TI a deeper layer of product development and manufacturing control. This strategic shift should give greater quality assurance capabilities to TI and should also speed the processes of product design and development. Texas Instruments now looks at the R&D efforts of its supplier foundries as the first step in its own manufacturing process.

Texas Instruments forecasts that it will spend about $2.3 billion on research and development in 2007. Areas of primary focus shall include: reduced power consumption, reduced costs for digital mobile hardware, reduced size for SRAM memory requirements and analog chip technology. By working more closely with the R&D departments of its third party suppliers to accomplish projects already in process, Texas Instruments will have greater availability of its own resources to apply to new and upcoming technological developments.

The folks at ThinkEquity believe that Texas Instruments (NYSE:TXN) is in for better days. They slapped an "accumulate" on the shares after carrying them as a "sell." The reason given was that TI's analog chip business should be getting better. ThinkEquity admits that the TI cell phone chip business is going to be rough for a long time. But, the research firm's sources say that the analog chip pick-up is broad and sustained. They put a new price target of $30 on the stock. It already trades above $28.

Almost any other research firm on Wall Street with an opinion on TI is worried about the stock. Stifel Nicolaus thinks TI's gross margins are down. Cathay Financial thinks that weakness in handset chips is continuing into 2007. And, Lehman Bros. has cut its earnings estimates for the big chip firm. Part of Lehman's analysis is that the analog business at TI is still "challenging."

Someone is right here and someone is wrong.

TI has two strikes on it. One is that it competes with Qualcomm (NASDAQ:QCOM) in the handset chip market. QCOM has seen better days, but it has formidable market share in the handset market. In addition to that, almost no one thinks that handset giants Nokia (NYSE:NOK) and Motorola (NYSE:MOT) will do well in 2007. Margins are dropping because the demand for phones tends to be in emerging markets where cheap is better. Cheaper phones, cheaper chips.

Analog may do OK for TI. But, it can't beat the devil. The handset market is in for some rough quarters.

Douglas A. McIntyre is a partner at 24/7 Wall St.