Navigating Tariff-Driven Volatility: Assessing the Long-Term Resilience of Chipmakers like Texas Instruments

The semiconductor industry is navigating a turbulent landscape shaped by geopolitical tensions, trade policy shifts, and the urgent need to secure domestic supply chains. For investors, identifying companies with structural advantages in this environment is critical. Texas Instruments (TI), a leader in analog and embedded processing chips, stands out as a defensive play in a sector otherwise vulnerable to near-term headwinds. By leveraging CHIPS Act funding, tariff-resistant demand, and disciplined free cash flow (FCF) management, TI is positioning itself to thrive in a post-tariff world.

Strategic Positioning: CHIPS Act Funding and Domestic Manufacturing

Texas Instruments has secured up to $1.61 billion in direct funding under the CHIPS and Science Act of 2022, alongside an estimated $6–$8 billion in investment tax credits from the U.S. Department of Treasury [1]. These incentives are earmarked to support the construction of three 300mm wafer fabrication facilities (fabs) in Texas and Utah, part of a $18 billion investment through 2029 [2]. The funding is milestone-driven, tied to project completion and production targets, ensuring alignment with the CHIPS Act’s goal of revitalizing U.S. semiconductor manufacturing [3].

This strategic pivot to domestic production is not merely a regulatory compliance play. By building two new fabs in Sherman, Texas, and one in Lehi, Utah, TI is addressing critical bottlenecks in analog and embedded processing chips—components essential for industrial automation, automotive systems, and power management [4]. These chips operate in 28nm to 130nm technology nodes, a niche where TI holds a dominant market share. The CHIPS Act funding also includes $10 million for workforce development, supporting over 2,000 direct manufacturing jobs and thousands of indirect roles, further cementing TI’s role in the U.S. supply chain [1].

Tariff-Resistant Demand: Industrial and Automotive Tailwinds

While global trade policies remain unpredictable, TI’s business model is inherently resilient. Analog and embedded processing chips are foundational to industries such as automotive, industrial automation, and communications infrastructure—sectors less susceptible to trade disruptions. For example, TI’s automotive chips power electric vehicles (EVs) and advanced driver-assistance systems (ADAS), markets expected to grow as governments worldwide push for decarbonization [5].

Data from TI’s 2025 investor briefings indicates that 77% of its revenue and 83% of its profits come from analog and embedded processing chips [2]. This focus on essential components creates a stable demand profile. Unlike discrete logic chips or memory products, which are cyclical and sensitive to consumer demand, TI’s offerings are mission-critical. As Haviv Ilan, TI’s CEO, noted in a recent interview, the company’s vertically integrated manufacturing model—aiming to bring 95% of production in-house by 2030—reduces exposure to external supply chain shocks [5].

Geographic diversification further bolsters TI’s resilience. While 66% of its revenue comes from Asia, the company also serves 15% of clients in the EU and 10% in the U.S. [6]. This broad client base, spanning over 100,000 customers, insulates TI from regional economic downturns. Moreover, strategic partnerships with tech giants like Apple, NVIDIA, and SpaceX ensure a steady pipeline of demand for its analog solutions [5].

Free Cash Flow Management: Balancing Capex and Shareholder Returns

TI’s $60 billion investment in U.S. manufacturing, while temporarily compressing free cash flow, is offset by CHIPS Act incentives and operational efficiencies. Management has guided to a FCF per share range of $8–$12 by 2026, translating to aggregate FCF of $7.27 billion to $10.91 billion [2]. This projection assumes $7.5–$9.5 billion in tax credits and subsidies, which partially mitigate the $5–6 billion annual capex burden from 2023 to 2026 [6].

The company’s operational model is a key differentiator. By transitioning from 200mm to 300mm wafers, TI has reduced chip costs and improved gross margins [6]. Additionally, its disciplined capital allocation strategy—prioritizing R&D in analog and embedded processing—ensures long-term innovation. TI plans to return value to shareholders through consistent dividends and share repurchases, a practice that has historically aligned with its long-term growth objectives [6].

Conclusion: A Defensive Play in a Volatile Sector

Texas Instruments exemplifies how strategic foresight and operational discipline can create a moat in a sector prone to volatility. Its CHIPS Act funding accelerates domestic manufacturing, tariff-resistant demand in industrial and automotive markets ensures stable revenue, and FCF management balances growth with shareholder returns. While the semiconductor industry faces near-term challenges, TI’s focus on essential components and U.S. supply chain resilience positions it as a long-term winner. For investors seeking stability in a post-tariff world, TI’s combination of policy tailwinds and structural advantages is hard to ignore.

Source:
[1] Texas Instruments signs preliminary agreement to receive up to $1.6 billion in CHIPS and Science Act proposed funding for semiconductor manufacturing in Texas and Utah [https://www.ti.com/about-ti/newsroom/news-releases/2024/2024-08-16-texas-instruments-signs-preliminary-agreement-to-receive-up-to--1-6-billion-in-chips-and-science-act-proposed-funding-for-semiconductor-manufacturing-in-texas-and-utah.html]
[2] Texas Instruments (TXN): $60B Fab Build Tests Cash Flow [https://monexa.ai/blog/texas-instruments-txn-60b-u-s-fab-build-tests-cash-TXN-2025-08-27]
[3] Biden-Harris Administration Announces CHIPS Incentives Award to Texas Instruments [https://www.nist.gov/news-events/news/2024/12/biden-harris-administration-announces-chips-incentives-award-texas]
[4] Texas Instruments (TXN) Stock Forecast for 2025, 2026 [https://pandaforecast.com/stock_forecasts/forecast_txn/]
[5] Texas Instruments (TXN): Built for Tariffs, Ready for Growth [https://substack.com/home/post/p-161260918?utm_campaign=post&utm_medium=web]
[6] Texas Instruments Chip Investment Hits $60 Billion [https://www.electropages.com/blog/2025/06/texas-instruments-pledges-historic-60bn-us-chip-investment]