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TI Bolstered by Car Chip Boom Even as Shortages Drag On

Oct. 29, 2021
TI said sales of analog, power management, and other automotive-grade chips were up more than 20% in the third quarter and up about 30% compared to pre-pandemic levels in the fourth quarter of 2019.

Texas Instruments reported a 22% increase in revenue for its latest quarter, driven by brisk demand for chips used in industrial, automotive, and consumer electronics such as smartphones and PCs. 

TI said revenue in the third quarter came to $4.64 billion, up from $3.82 in the same quarter a year ago. TI said its core analog semiconductor business was $3.5 billion, up 24% from the same quarter a year ago, while sales of microcontrollers and other embedded chips leaped 13%, according to CEO Rich Templeton.

TI has been taking advantage of the soaring demand over the last year for the wide range of electronic devices that use its analog and power management ICs and other chips, including microcontrollers (MCUs). But the company said it is still struggling to deliver all the components its customers are ordering. TI's management said its analog semiconductor sales increased by only 2% compared to its prior quarter.

TI is the world’s largest vendor of non-custom analog chips by revenue. It sells 80,000 products to more than 100,000 customers around the world, turning it into a bellwether for the broader electronics sector. 

TI said sales of automotive-grade chips were up more than 20% in the quarter and up about 30% compared to pre-pandemic levels. The chip-supply constraints have forced cuts to U.S. car production. They are also cascading into other sectors, including consumer devices from Sony’s PlayStation 5 to Apple’s iPhones.

Infineon, NXP, and Renesas are the largest automotive chip makers in the world. TI is the largest American manufacturer of car chips, locking in around 8.3% of the $35 billion global market, according to Statista.

TI’s industrial revenue was up by around 40% year-on-year, TI said. 

TI said lead times for the majority of its products remained “stable” during the last quarter. But the company said it continues to grapple with “hot spots” where it is taking longer than usual to ship orders for chips. The semiconductor industry has been dogged by delays in packaging and testing chips, limited supplies of raw materials such as substrates or silicon wafers, tight capacity at foundries, and a wide range of other factors.

As the global chip shortage has dragged on over the last year, TI said customers have put in “expedite requests” for virtually every product it sells. But on Monday the company said its customers have started to become “more selective” in the types of components they want in the priority lane, signaling the global chip shortage could be in the very early stages of a turnaround. AMD, Intel, and others have warned the supply crunch could last through 2022 and even into early 2023, possibly leading to a surplus of chips in 2024.

“There are supply constraints that are widely reported across different components,” CFO Rafael Lizardi said on a quarterly conference call with analysts Monday. “We have meetings with [customers], and rather than showing up with a long list of devices that they're asking us to expedite, they're [bringing] a short list. They are looking for particular parts that complete matched sets so that they can complete their builds. This is a different behavior that we are seeing this quarter versus the prior quarter."

TI said its revenue will be between $4.22 billion and $4.58 billion in the fourth quarter, up from $4.07 billion in the fourth quarter of 2020. Profits are projected to be in the range of $1.83 to $2.07, the company said.

While competitors slashed production last year, TI increased output and started building reserves of analog, power management, and other chips that its customers have been willing to pay more for in recent months due to severe supply constraints that have dogged the electronics industry. For the third quarter, TI’s overall income increased to $1.95 billion, or $2.07 per share, up from $1.35 billion, or $1.45 per share, a year ago. 

TI said inventory days—the average number of days the company holds inventory before selling it—were 112 at the end of the third quarter, up only a single day quarter-over-quarter. TI prefers to have inventory on hand for 130 to 190 days. 

TI has previously said that its in-house manufacturing has helped it to withstand the worst of the global chip shortage and given it more flexibility in responding to the soaring demand for chips over the last year. The company said its in-house fabs churn out around 80% of its wafers, including the majority of its analog semiconductors. Other firms outsource large portions of their chip production to foundries like TSMC.

TI is investing aggressively in its fabs to address the demand for chips over the long term. It is close to completing its latest "RFAB2" fab in Richardson, Texas, which should start making analog chips on 300-mm wafers by the second half of 2022. It is also expanding its internal assembly and test operations to prevent bottlenecks as other parts of the supply chain improve. TI has another 300-mm fab, “RFAB1,” in Dallas, Texas.

TI recently closed its purchase of Micron’s 300-mm semiconductor fab in Lehi, Utah, the company said. 

“We continue to believe owning and controlling our supply chain will be of growing strategic importance,” Lizardi said. 

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