Texas instruments forecast signals that slump is persisting
TEXAS Instruments gave a disappointing revenue forecast for the current period, indicating that demand remains sluggish for a broad range of electronic components, including industrial equipment.
Revenue in the fourth quarter will be US$3.93 billion to US$4.27 billion, the company said on Tuesday (Oct 24). That compares with an average analyst estimate of US$4.49 billion. Profit will be US$1.35 to US$1.57 a share, versus a prediction of US$1.76.
The outlook, which sent the shares down 4.1 per cent in late trading, bodes poorly for a chip industry trying to recover from a punishing slowdown. Texas Instruments has the broadest list of customers in the semiconductor industry, making its forecasts a bellwether for demand across the economy. The largest portion of its revenue comes from makers of industrial machinery and vehicles.
Car components remain a bright spot for the Dallas-based company, but other areas are not rebounding as quickly as hoped. “During the quarter, automotive growth continued and industrial weakness broadened,” chief executive officer Haviv Ilan said.
Chip investors have been looking for signs that electronics makers have worked their way through a pileup of inventory and are ready to increase orders again. They had been especially pessimistic about Texas Instruments this year.
Even as shares of other chipmakers rebounded, Texas Instruments stock has fallen 11 per cent in 2023. That’s made it one of the worst-performing members of the Philadelphia Stock Exchange Semiconductor Index.
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Revenue in the third quarter declined 14 per cent to US$4.53 billion, compared with an average estimate of US$4.55 billion. Profit was US$1.85 a share, versus a prediction of US$1.82. For the year, revenue is on course to drop 10 per cent, according to analysts’ projections. That would break a three-year run of sales growth.
As it copes with the slowdown, Texas Instruments has argued that its products have a long shelf life – up to a decade. That means an accumulation of inventory is less of a problem than for other chipmakers, and it may even help the company respond more rapidly when demand returns.
Up until this year, Texas Instruments had been a favourite of long-term investors, who applauded its commitment to returning cash to them in the form of dividends and buybacks. More recently, it’s been spending money on new factories, aiming to increase the amount of manufacturing it does in-house. That could give it an advantage in the future, but it’s expected to weigh on free cash flow in the short term.
Texas Instruments spent US$1.5 billion on capital expenditures last quarter, up from US$790 million in the same period a year earlier.
Texas Instruments is the biggest maker of analogue semiconductors – chips that perform simple but vital functions, like registering button presses and detecting changes in temperature. They also control motors in everything from space hardware to domestic appliances. Such chips generally require less advanced production techniques than digital products. BLOOMBERG
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