Function
In the picture above, the transistor base is labeled "IC Output". This is an internal output from the internal IC logic to the transistor. From the point of view of the transistor, this is the input which controls the transistor switching. The external output is the transistor collector, and the transistor acts as an interface between the internal IC logic and parts external to the IC.
The output essentially acts as either an open circuit (no connection to anything) or a connection to ground. The output usually has an external pull-up resistor, which raises the output voltage when the transistor is turned off. When the transistor connected to this resistor is turned on, the output is forced to nearly 0 volts. Open-collector outputs can be useful for analog weighting, summing, limiting, etc., but such applications are not discussed here.
A three-state logic device is unlike an open collector device, because it has transistors to source and sink current in both logic states, as well as a control to turn off both transistors and isolate the output.
Read more about this topic: Open Collector
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