TI Q3 revenues fall 14 % yoy, flat sequentially

Haviv Ilan, TI's president and CEO cited weakness broadening in the industrial market. “Automotive growth continued”, said Ilan.

The semiconductor company has invested $3.7 billion in R&D and SGA, and $4.9 billion in capital expenditures.

In a conference call with analysts Dave Pahl, Vice President, Investor Relations, at TI commented, “Sequentially the industrial market was down mid-teens. Automotive was up about 20%. Personal electronics was down about 30%. Comms equipment was down about 50%. And enterprise system was down about 40%. So I think consistent with a weaker environment.”

Asked if with revenues slowing, TI would cut back on its capital expenditure in manufacturing, Pahl responded, “Given where the market is right now, it is a good time to remind everyone of our plan and areas of strategic investment. First, our confidence in the secular growth of semiconductor content per system, especially in industrial and automotive, remains high, and we are well positioned in these markets. Second, our long-term 300 millimetre manufacturing roadmap provides our customers with geopolitically dependable capacity. To support these buildouts and enable future growth, we continue to expect associated capital expenditures to be about $5 billion per year through 2026. In addition, we made good progress on our inventory replenishment, consistent with our long-term objectives to support growth and provide high levels of customer service.

He emphasised, “We're very pleased with the progress on our manufacturing expansion. They will provide geopolitically dependable capacity to support customer growth for the coming decade. And as you know, semiconductor content continues to increase. And to provide us with the ability to grow at that 10% growth rate that we have talked about, if the market requires that, we'll continue to make those investments. So we continue to expect $5 billion of CapEx per year in 2023, 2024, 2025, and 2026. So you should count on that.”

“Let me also give everyone, as a reminder, these CapEx numbers are gross, meaning they do not include benefits from the ITC or grants from the CHIPs Act,” added Pahl.

“We're actively working through the grant application process with the CHIPS program office, which we believe will be meaningful to our manufacturing operations in Texas and Utah and will help support semiconductor growth for decades to come. And funding from the CHIPS Act grants was comprehended in our decision making for these investments.”

Questioned on inventory levels as revenues slow, Rafael Lizardi (pictured), Senior Vice President and Chief Financial Officer, explained, “We have targets for where we want inventory levels to be and that goes by product and by state of finish of those products. So for example, of the 80,000 different products that we have, the vast majority of those are catalogue, meaning, they sell to many, many customers. They last for a long, long time.”

He added, “We can have so many years of inventory at the chip level or finished goods level, in many cases, at both levels, and that's based on our internal process to set those. That's added up to $4 billion to $4.5 billion, and that's what we have been kind of guiding to and we've been talking about. But what really matters is what happens at the very specific level on a part-by-part number. So as we have near those levels, and you see our inventory level, our inventory levels have increased about $500 million per quarter for two quarters, and then this last quarter, $179 million. So clearly, there is a deceleration of that growth, and that's on purpose because as we near those levels, then we have slowed down the factory starts, that goes primarily with the fab, but also with the assembly test operations."