As a leading analog chip manufacturer, TI has more than 100,000 customers and tens of millions of products. The top 10 customers account for 5% of the company's revenue, and the top 100 products account for 0.1% of the company's revenue. It has a large customer base and the broadest product range in the semiconductor industry. Therefore, TI's market outlook has reference value for the entire industry.

According to the latest financial report released by TI, although its operations in the last quarter were in line with expectations, it is cautious about the outlook for this quarter. Texas Instruments said that the market situation in the semiconductor industry has deteriorated, the performance outlook report reflects the weak environment, and customers are rebalancing inventories. The main reason is that customer inventory adjustments for industrial and automotive products have not yet been completed.

Weakness in industrial and automotive sectors

Texas Instruments said in a statement that sales in the first quarter of 2024 will be between US$3.45 billion and US$3.75 billion. Data show that analysts on average expected $4.09 billion. Profit per share was 96 cents to $1.16, compared with the forecast of $1.42.

Texas Instruments CEO Haviv Ilan said in a statement: "This quarter, our industrial sector has become increasingly weak, and the automotive industry has continued to decline."

Texas Instruments' revenue in the fourth quarter of 2023 fell 13% to US$4.08 billion, compared with the average estimate of US$4.13 billion; fourth-quarter operating profit was US$1.53 billion, compared with analysts' expectations of US$1.56 billion. Profit per share was $1.49, down from $2.13 in the same period in 2022. Sales also fell 13% in 2023, the company's largest decline in more than a decade.

Revenue in the automotive market, once one of TI's fastest-growing markets, fell by around single digits in the fourth quarter, while sales at industrial customers, the company's largest market by revenue share, fell by double digits. In response to analysts' questions about a slower-than-expected recovery in China's major markets, David Pahl, head of investor relations, said, "From a U.S. dollar perspective... it's happening across all regions except the rest of Asia." fall".

Texas Instruments is the largest maker of analog semiconductors, chips that perform simple but important functions such as converting button presses into electrical signals. These components typically require less advanced production technology than digital products, but the company has embarked on an ambitious factory upgrade program.

The company said the move would give it an advantage over rivals that rely on outsourced manufacturing, but would put pressure on profitability in the short term. The company is said to be spending about $5 billion annually by 2026.

Lizardi said the Dallas-based company has restored inventories to near target levels of about $4 billion and has slowed production lines to prevent excessive accumulation of inventory. But that doesn't mean Texas Instruments will give up on its factory upgrade plans, he said.

"In the long term, we are very confident about the growth of semiconductor content, especially in the automotive and industrial sectors," he said. "Now is the time to stay the course, especially when times are weak."

Market uncertainty

Headquartered in Dallas, Texas since the 1950s, Texas Instruments is the world's largest producer of analog semiconductors.

Analog Semiconductors Demand for analog chips is often correlated with overall levels of economic growth, as analog chips are the building blocks of most electronic products and devices. Unlike digital chip designers, analog chipmakers tend to produce most of their own chips because analog chip production does not require expensive leading-edge nodes. Modeled product cycles are much more dependent on key long-term growth drivers, typically 5-7 years.

Texas Instruments' revenue growth over the past three years has been modest, averaging 8.2% per year. For the quarter, its revenue fell to $4.08 billion from $4.67 billion in the same quarter last year. Semiconductors are a cyclical industry, and long-term investors should prepare for periods of high growth followed by periods of revenue contraction (which can sometimes provide good buying opportunities).

Texas Instruments (TI) had a tough quarter, with revenue falling 12.7% year over year, missing analysts' expectations of 1.4%. This could mean that the current downcycle is deepening.

Texas Instruments (TI) looks to be on the cusp of a rebound, as it expects revenue to rise 21.6% year over year in the next quarter. Analysts appear to agree with consensus expectations for economic growth of 0.5% over the next 12 months.

Product Demand and Outstanding Inventory Days of inventory outstanding (DIO) is an important metric for chipmakers because it reflects the capital intensity of the business as well as the cyclical nature of semiconductor supply and demand. Inventories have stabilized in a tight supply environment, allowing chipmakers to exert pricing power. The steady increase in DIO could be a warning sign of weak demand, and companies may have to scale back production if inventories continue to rise.

For the quarter, Texas Instruments (TI)'s DIO was 221, 71 days above its five-year average, indicating that the company's inventory has grown to higher levels than we have seen in the past.

Key takeaways from Texas Instruments' (TI) fourth-quarter results, and we struggled to find many strong positives in these results. Its revenue and free cash flow fell short of analysts' expectations due to weakness in industrial and automotive end markets. On top of that, its guidance for the next quarter was below Wall Street expectations. Overall, Texas Instruments (TI) had a lackluster quarter. The company's earnings fell 3.7% and are currently trading at $168 per share.

TI expects the company's revenue to fall by about 12% in fiscal 2023, resulting in a decline in full-year earnings per share of about 27%. The fourth-quarter numbers ultimately won't have much of an impact on overall 2023 results, as a weak year has long been expected.

What is concerning, however, is the trajectory for 2024. Analysts now expect the company's revenue to grow less than 1% in 2024, while earnings per share are expected to fall a further 7% as gross margins decline. Notably, 26 different analysts have recently lowered their estimates for the company. With automotive and other industrial markets critical to Texas Instruments' business slumping, it's no surprise that the outlook has turned negative.

Additionally, several other analog semiconductor companies have posted pessimistic earnings and guidance in recent quarters, pointing to continued downturn in the overall category. Microchip, for example, just warned that its revenue for the next quarter will fall about 22%, which will be well below its previous guidance. All signs point to Texas Instruments' recent earnings decline continuing into the current quarter. 2024.