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Texas Instruments comfortable with high chip inventory, claims it better serves broad customer base

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A previous version of this report incorrectly included FactSet’s estimates for Q4 earnings.

Texas Instruments Inc. stocks were relatively calm in Tuesday’s extended session following a low-ball beat and a subdued outlook. But the real draw was inventory management amid low demand for consumer electronics and the first study of how sales were broken down across categories.

As Texas Instruments’ TXN,
-0.63%
All markets except automotive chips were weak, but at a time when the industry is experiencing a supply chain stalemate, a natural concern is that analog chip makers are using up their inventories while focusing on building long-term capabilities. It was about how it was handled. Nvidia Corp. NVDA,
+0.38%
We spent billions in 2022 to reduce inventory ahead of major architecture launches.

In a conference call with analysts, Rafael Lizardi, chief financial officer of Texas Instruments, said in a conference call with analysts that stocks that have been turned into a famine-induced famine that has turned into a largely absent and irregular feast over the past two years. The company’s high inventory levels serve both short-term and long-term customers, as its “scorecard” has a broad and diverse customer base and reduces the risk of obsolescence.

“That’s why we’re able to hold higher levels of inventory,” Rizzardi told analysts. “I’m talking from current levels, 1 billion to 2 billion he could add additional inventory, and the timing will all depend on earnings trends.”

“There are many angles to the mix, such as chip stock and finished product,” says Lizardi. “We mix both of them. In some cases it makes sense to have more of one than the other. But both are very low risk. That’s what we think about it.” It’s a way of thinking.”

At the beginning of the call, the company said it was not answering questions about its capex budget, depreciation, etc. Capital spending is likely to grow “almost linearly” to about $2.5 billion in 2025. prize.

Unlike companies like Nvidia and Advanced Micro Devices Inc. AMD,
-2.39%,
Texas Instruments runs its own fab, as does Intel’s INTC.
-1.16%
and Micron Technology MU,
-0.91%.

Automotive chip sales rose mid-single digits, while the industrial market fell 10%, according to Texas Instruments. Personal electronics dropped mid-tens for him on broader weakness, while telecom equipment sales and corporate sales both fell 20%.

read: The PC industry has suffered its worst recession on record.

By 2022, industrial sales will account for 40% of revenue, automotive chip sales will account for about 25%, personal electronics will account for 20%, communications equipment will account for 7%, and enterprise systems will account for 6%. occupied. According to prepared remarks, Calculator’ accounted for 2%.

The company has increased its reliance on the industrial and automotive markets, where sales in 2022 were up 300 basis points from 2021 and accounted for 65% of revenues, whereas a decade ago it had moved out of those segments. Together, they accounted for only 42% of revenue.

read: Analysts agree PC market is in ‘rapidest’ decline since data began to be collected in mid-1990s

Fourth-quarter net income was $1.96 billion, or $2.13 per share, compared with $2.14 billion, or $2.27 per share, in the year-ago quarter. Revenue fell to $4.76 billion from $4.83 billion in the same period last year, according to the company.

Analysts surveyed by FactSet had estimated earnings of $1.98 per share on earnings of $4.61 billion.

In the previous quarter, sales of automotive chips were sole growth driver After the company focused on the analog chip segment, Building long-term capacity in a weak outlook Regarding fourth quarter earnings.

Stock of Texas Instruments TXN,
-0.63%
After closing at $177.04, down 0.7% in the regular session, the PHLX Semiconductor Index SOX fell 0.7% before falling 1% in after-hours trading.
-0.72%
S&P 500 Index SPX virtually flat with Tuesday,
-0.07%.

read: Future is more important than past for Intel’s earnings

The company expects first-quarter revenue of $1.64 to $1.90 and revenue of $4.17 billion to $4.53 billion. had expected earnings per share of $1.86. The company reported 2022 revenue of $4.91 billion and first-quarter earnings of $2.35 per share.

Texas Instruments still ranks as one of the best-performing chip stocks in the past 12 months, compared to a 16.3% drop for the SOX Chip Index and an 8.9% drop for the S&P 500.

Semiconductor manufacturing equipment manufacturer Lam Research LRCX,
-0.67%
It’s expected to report earnings on Wednesday after the bell, and KLA Corp. KLAC is expected on Thursday.
-0.57%
Intel Corporation INTC,
-1.16%
After the market closes.

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