Texas Instruments said its sales continued to grow last quarter, as it places more emphasis on serving its customers the automotive and industrial sectors that chip shortage has ravaged.
The company, which also forecasts strong sales in the coming quarter, is building more production capacity to plug the component supply gap that has snagged production of cars and consumer goods, such as Apple iPhones and Sony's Playstation 5. But the company said it plans to sharpen its focus on customers in the lucrative industrial and automotive markets, which account for 41% and 21% of its annual revenue.
"Customers are excited that our capacity investments are in 45-nm to 130-nm process technologies that are optimized for analog and embedded and will support their growth in the decades ahead," CFO Rafael Lizardi said.
In recent years, TI has been tapping into booming demand for analog and power management ICs and microcontrollers that are key to a wide swath of the world's electronic devices. TI is currently the world’s largest analog semiconductor maker, and the chip shortage has helped propel its market value to around $163 billion, closing in on Qualcomm among the most valuable U.S. chip firms.
TI sells to more than 100,000 customers, making it a bellwether for the broader electronics market.
Executives said sales and profits spiked in the fourth quarter, as demand in its semiconductor business stayed strong. TI reported revenues of $4.83 billion in the fourth quarter, up from $4.08 billion a year ago, buoyed by orders in all product categories and regions, specifically its automotive or industrial sectors. Net income was $2.14 billion, or $2.27 a share, compared to $1.69 billion, or $1.80 a share, a year ago.
The chip shortage has gripped the electronics sector for more than a year, caused by booming demand for electronic goods such as personal computers and game consoles. Snarled supply chains are adding to delays. The scarcity of chips has led to widespread disturbances, forcing auto makers unable to locate chips to put factories on hold and snagging production of medical devices. Prices for some chips are up.
The most acute shortages of chips are in analog and power management ICs where TI competes. These types of chips use legacy nodes such as 130-nm, where production capacity is in short supply around the world. TI also sells microcontrollers based on nodes, such as 45-nm, that are generations behind the most advanced chips made by Intel and TSMC. It is taking buyers a year or more to procure these parts.
U.S. companies do not see the chip shortage being solved in the next six months, at least, the Commerce Department said in a newly released report, citing responses from 150 chip suppliers and buyers.
TI said that it increased its inventory to 115 days in the fourth quarter, signaling improvements in its supply chain. But executives warned that its inventory levels are not where it wants them to be—at about 190 days. TI said lead times for many of its products are stable, but it continues to grapple with "hotspots" of demand where it has had trouble keeping up. TI said the situation has not changed significantly in the last 90 days.
TI said customers continue to place "expedited orders" for the components that they need urgently, but the company said the number of expedited orders being placed is leveling out. Its customers are also focusing more on chips required to complete a “matched set" instead of expediting orders across the board.
The company said it continues to add internal production capacity to stay ahead of demand in its analog chip business (which jumped 20% to $3.76 billion in the fourth quarter) and exert more control over its supply chain.
TI plans to ramp up production at two new factories within the next year, including at its RFAB2 site outside Dallas, Texas, later this year, and LFAB in Lehi, Utah, in early 2023. The Utah facility will be its fourth 300-mm production plant. TI, the largest U.S.-based manufacturer of auto-related chips, said the additional capacity from these fabs would help meet demand in the near term as the chip shortage continues to grip the world.
The company said in November that it plans to start building a new 300-mm site north of Dallas. The sprawling manufacturing site has enough room for up to four factories to meet demand over the long term.
Construction will begin on the first and second fabs this year, with production scheduled as early as 2025. Potential investment at the site could grow to approximately $30 billion and support 3,000 jobs over time.