
<PAGE>   1
                                                                EXHIBIT (c)(3)



                              [AMATI LETTERHEAD]

Texas Instruments Inc.                                             July 22, 1997
7829 Churchill Way
Mail Station 3995
Dallas, TX 75261

                           CONFIDENTIALITY AGREEMENT
                           -------------------------


Ladies and Gentlemen:

In connection with your possible interest in an acquisition or other business
combination (the "Transaction") involving Amati Communications Corporation
("Amati" or the "Company"), you have requested that we or our representatives
furnish you or your representatives with certain information relating to the
Company or the Transaction.  All such information (whether written or oral)
furnished (whether before or after the date hereof) by us or our directors,
officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants) or agents
(collectively, "our Representatives") to you or your directors, officers,
employees, affiliates, representatives (including, without limitation, financial
advisors, attorneys and accountants) or agents of your potential sources of
financing for the Transaction (collectively "your Representatives") and all
analysis, compilations, forecasts, studies or other documents prepared by you
or your Representatives in connection with your or their review of, or your
interest in, the Transaction which contain or reflect any such information is
hereinafter referred to as the "Information".  The term information will not,
however, include information which (i) is or becomes publicly available other
than as a result of a disclosure by you or your Representatives or (ii) is or
becomes available to you on a nonconfidential basis from a source (other than
us or our Representatives) which, to the best of your knowledge after due
inquiry, is not prohibited from disclosing such information to you by a legal,
contractual or fiduciary obligation to us.

Accordingly, you hereby agree that:

     1.   You and your Representatives (i) will keep the information
          confidential and will not (except as permitted by paragraph 3 below),
          without our prior written consent, disclose any information in any
          manner whatsoever, and (ii) will not use any information other than
          in connection with the Transaction; provided, however, that you may
          reveal the information to your Representatives (a) who need to know
          this information for the purpose of evaluating the Transaction, (b)
          who are informed by you of the confidential nature of the information
          and (c)


   

    
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Texas Instruments Inc.
July 22, 1997
Page 2

          who agree to act in accordance with the terms of this letter
          agreement. You will cause your Representatives to observe the terms of
          this letter agreement, and you will be responsible for any breach of
          this letter agreement by any of your Representatives.

     2.   You and your Representatives will not (except as permitted by
          paragraph 3 below), without our prior written consent, disclose to any
          person the fact that the information exists or has been made
          available, that you are considering the Transaction or any transaction
          involving the Company, or that discussions or negotiations are taking
          or have taken place concerning the Transaction or involving the
          Company or any term, condition or other fact relating to the
          Transaction or such discussions or negotiations, including, without
          limitation, the status thereof.

     3.   In the event that you or any of your Representatives are requested
          pursuant to, or required by, applicable law, regulation or legal
          process to disclose any of the information, you will notify us
          promptly so that we may seek a protective order or other appropriate
          remedy or, in our sole discretion, waive compliance with the terms of
          this letter agreement. In the event that no such protective order or
          other remedy is obtained, or that the Company waives compliance with
          the terms of the letter agreement, you will furnish only that portion
          of the information which you are advised by counsel is legally
          required and will exercise all reasonable efforts to obtain reliable
          assurance that confidential treatment will be accorded the
          information.

     4.   At any time upon the request of the Company or any of our
          Representatives, and in any event upon your decision not to proceed
          with a Transaction, you will either (i) promptly destroy all copies
          of the written information in your or your Representatives'
          possession and confirm such destruction to us in writing, or (ii)
          promptly deliver to the Company at your own expense all copies of the
          written information in you or your Representatives' possession. Any
          oral information will continue to be subject to the terms of this
          letter agreement.

     5.   You acknowledge that neither we, nor DMG or its affiliates, nor our
          other Representatives, nor any of our or their respective officers,
          directors, employees, agents or controlling persons within the
          meaning of Section 20 of the Securities Exchange Act of 1934, as
          amended, makes any express or implied representation or warranty as
          to the accuracy or completeness of the information, and you agree
          that no such person will have any liability relating to the
          information or for any errors therein or omissions therefrom. You
          further agree that you are not entitled to rely on the accuracy or
          completeness of the information and that you will be entitled to rely
          solely on such representations and warranties as may be included in
          any definitive agreement with respect to the Transaction, subject to
          such limitations and restrictions as may be contained therein.

     6.   You agree that, for a period of two years from the date of this
          letter agreement, you will not, directly or indirectly, solicit for
          employment or hire any employee of the Company or any of its
          subsidiaries with whom you have had contact or who became known to
          you in connection with your consideration of the Transaction;
          provided, however, that the foregoing provision will not prevent you
          from employing any such person who contacts you on his or her
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Texas Instruments Inc.
July 22, 1997
Page 3

    own initiative without any direct or indirect solicitation by or
    encouragement from you (excluding generalized solicitation by
    advertisement or other method).

 7. You agree that, for a period of two years from the date of this
    Confidentiality Agreement, neither you nor any of your affiliates will,
    without the prior written consent of the Company or the Company's Board of
    Directors:  (i) acquire, offer to acquire, or agree to acquire, directly or
    indirectly, by purchase or otherwise, any voting securities or direct or
    indirect rights to acquire any voting securities of the Company or any
    subsidiary thereof, or of any successor corporation; (ii) make, or in any
    way participate in, directly or indirectly, any "solicitation" of
    "proxies" (as such terms are used in the Rules of the Securities Exchange
    Commission) to vote, or seek to advise or influence any person or entity
    with respect to the voting of, any voting securities of the Company;  (iii)
    make any public announcement with respect to, or submit a proposal for, or
    offer of any extraordinary transaction involving the Company or its
    securities or assets;  (iv) form, join or in any way participate in a
    "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of
    1934, as amended) in connection with any of the foregoing; or (v) request
    the Company or any of the Company's Representatives to amend or waive any
    provision of this paragraph 7; provided that the foregoing provisions shall
    not preclude you from submitting any offer to acquire the Company or voting
    securities thereof in response to any publicly announced transaction or
    proposed acquisition of the Company by a third party.  You will promptly
    advise the Company of any inquiry or proposal made to it with respect to
    any of the foregoing.

 8. You acknowledge that remedies at law may be inadequate to protect us
    against any actual or threatened breach of this letter agreement by you or
    by your Representatives.  In the event of litigation relating to this
    letter agreement, if a court of competent jurisdiction determines in a
    final, nonappealable order that this letter agreement has been breached by
    your or by your Representatives, then you will reimburse the company for its
    legal expenses incurred in connection with all such litigation.

 9. You agree that no failure or delay by us in exercising any right, power or
    privilege hereunder will operate as a waiver thereof, nor will any single
    or partial exercise thereof preclude any other or further exercise thereof
    or the exercise of any right, power or privilege hereunder.

 10.This letter agreement will by governed by and construed in accordance with
    the laws of the State of California applicable to contracts between
    residents of that State and executed in and to be performed in that State.

 11.This letter agreement contains the entire agreement between you and us
    concerning the confidentiality of the Information, and no modifications of
    this letter agreement or waiver of the terms and conditions hereof will be
    binding upon you or us, unless approved in writing by each of you and us.

 12.This letter agreement shall terminate on the earlier of the consummation of
    the Transaction by you or your affiliates or the second anniversary of
    the date hereof.  
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Texas Instruments Inc.
July 22, 1997
Page 4



Please confirm your agreement with the foregoing by signing and returning to
the undersigned the duplicate copy of this letter enclosed herewith.



                                   Sincerely,

                                   Amati Communications Corporation



                                   By: /s/ JAMES STEENBERGEN
                                      --------------------------------
                                   Name:  James Steenbergen
                                        ------------------------------
                                   Title: President & CEO
                                         -----------------------------


Accepted and Agreed as of the date
first written above:


       Texas Instruments Inc.
----------------------------------------


By: /s/ CHARLES D. TOBIN
   -------------------------------------
Name:  Charles D. Tobin
     -----------------------------------
Title: Vice President Corporate Staff,
      ----------------------------------
      Manager, Corporate Development
                                   
