Texas Instruments Cautions on Slow Semiconductor Demand Recovery

Texas Instruments Inc. (TXN.US) Chief Financial Officer Rafael Lizardi has cautioned that the recovery of semiconductor demand is not progressing as rapidly as some had hoped. During the Citigroup TMT conference, Lizardi highlighted that the rebound has not been as robust as in other recovery scenarios. The company anticipates that four out of its five end markets will experience a full recovery, with the automotive sector being the notable exception due to macroeconomic uncertainties.

Despite the slower recovery in the automotive industry, Texas Instruments expects that this sector will eventually expand the total addressable market for its products in the long term. The company has maintained a relatively low delivery cycle by leveraging its design advantages, catalog-based business model, higher internal manufacturing efficiency, and reliance on distributors. The company's inventory days, approximately 21 to 25 days, align with expected revenue conditions.

Mike Beckman, Vice President and Head of Investor Relations, noted that while the industry and global shipments are recovering, the pace may differ from historical cycles. Texas Instruments continues to invest heavily in capital expenditures, with plans to spend around $50 billion by 2025. This investment is focused on multi-year phased expansions in the United States and modular expansions to meet market demands. If revenue remains at the lower end of guidance, capital expenditures are projected to be between $20 billion and $30 billion by 2026, with a minimum of $20 billion allocated to complete ongoing projects.

The company has also received support from the CHIPS Act, anticipating $6 billion to $9 billion in investment tax credits due to the current 35% investment tax credit rate. Texas Instruments has no plans to acquire government equity and will adjust pricing strategies periodically based on market conditions. Long-term benchmark assumptions suggest a price decline in the low single digits, ranging from 2% to 3%.