Least Significant Bit (LSB)
The bottom 10 bits control transistor switches on the silicon die, each bit switching twice as many transistors as the one below it. Thus the 16th Least Significant Bit (LSB) switches one transistor, the 15th LSB two transistors, all the way up to the 10th LSB which switches 512 transistors. Provided all the transistors carry the same current when turned on, this arrangement will accurately produce a current output from the DAC proportional to the values of the 10 LSBs in the input word. Matching between the on-chip transistors cannot be maintained to an accuracy better than this, however, so the six Most Significant Bits are handled in a different manner.

Most Significant Bits (MSB)
Again, they switch transistors controlling currents, but now the sizes of currents are controlled by resistors. Matching is arranged by switching the current-controlling resistors between each transistor switch at a very high frequency. Any errors in the individual currents controlled by each transistor will therefore be averaged out between all the switches by this "Dynamic Element Matching".

Grading process
There will still be intrinsic errors in DAC linearity due to the tolerance in the alignments of the various masks during the IC production process. As further fine-tuning of the DACs is not possible, Philips has adopted a grading process to pick out those which offer the best performance. When the finished doped and etched silicon wafer emerges from the semi-conductor plant, it carries many dozens of individual DACs. A computer-controlled tester, consisting of 28 needle probes, then connects to the appropiate pads on each raw DAC die, providing power and supplying serial data from a CD player. If a DAC fails to work in this go/no-go test, the result being no analog music output, it is marked with a paint spot. Automatic machinery then slices the wafer into the individual dies and mounts those that passed the initial test in the familiar 28-pin DIL plastic package.

At this stage, the finished TDA1541 ICs are graded by a computer-controlled test station into three classes:

TDA1541A - no suffix
The standard grade is guaranteed to have a DLE of less than 1 LSB from bit 1 to 16; this is used in Philips's own reasonably priced players.

TDA1541A - R1
R1 (R for "relaxed) is guaranteed only to have a differential linearity error (DLE) of less than 2 LSBs from bit 1 to bit 16. This grade will be used in inexpensive players and supplied to some third-party manufacturers.

TDA1541A - S1
A small proportion of DACs meet a more stringent performance standard, having a DLE of less than 0.5 LSB for bits 1-7, less than 1 LSB for bits 8-15, and less then 0.75 LSB for bit 16; these are termed the "S" grade and are stamped with a small crown. This top perfoming chip will be used in Philips's best CD players.