Recently, I have compiled some relevant information about Texas Instruments (TI) and written a report for everyone to review.

Recent Company Dynamics Report of Texas Instruments

Financial Performance Over the Last Four Quarters

• Q3 2024: Revenue of approximately $4.15 billion, a year-on-year decrease of 8% but a quarter-on-quarter increase of 9%; net profit of $1.36 billion, diluted earnings per share of $1.47. Gross profit was approximately $2.5 billion, with a gross margin of 60%.

• Q4 2024: Revenue of $4 billion, a slight decrease of 3% compared to the previous quarter and a year-on-year decrease of 2%; net profit of $1.2 billion, earnings per share of $1.30. Gross profit was approximately $2.3 billion, with a gross margin of 58%, a decrease of 1.9 percentage points quarter-on-quarter, mainly affected by reduced shipments and increased depreciation. Capital expenditure for the quarter was approximately $1.2 billion.

• Q1 2025: Revenue of $4.07 billion, a year-on-year increase of 11% and a quarter-on-quarter increase of 2%; net profit of $1.18 billion, earnings per share of $1.28. Gross profit was approximately $2.3 billion, with a gross margin of 57%, remaining stable compared to the same period last year. Capital expenditure for the quarter was approximately $1.1 billion, totaling $4.7 billion over the past 12 months.

• Q2 2025: Revenue of $4.45 billion, achieving strong growth of +16% year-on-year and +9% quarter-on-quarter. Net profit of $1.3 billion, earnings per share of $1.41, a year-on-year increase of 15%. Gross profit was $2.58 billion, with a gross margin recovering to 58%, an increase of 1.1 percentage points from the previous quarter. Capital expenditure for the quarter was approximately $1.3 billion, totaling about $4.9 billion over the past 12 months.

Financial Trend Analysis: The above data indicates that TI experienced an industry downturn in the second half of 2024, with revenue and profit declining year-on-year, and gross margin slightly weakening. However, entering 2025, with the recovery of semiconductor demand, the company’s performance has significantly improved: revenue and net profit in Q1 and Q2 of 2025 have both returned to double-digit growth, with gross margins stabilizing at **57% – 60%**. Notably, TI continues to maintain high capital expenditures, investing approximately $1 to $1.3 billion each quarter to expand capacity, with total capital expenditures nearing $5 billion over the past four quarters. Significant capacity investments, while compressing free cash flow, also lay the foundation for future growth.

Wafer Fab Capacity Situation

In-house Wafer Fab Capacity and Utilization: In recent years, TI has focused on expanding capacity at the 45nm to 130nm process nodes, primarily using 12-inch (300mm) wafers to enhance economies of scale. Existing 300mm fabs include Dallas DMOS6, Richardson RFAB1/2, and the Lehi fab (LFAB) in Utah acquired in 2021, mainly producing analog and embedded chips, covering mature nodes such as 90nm and 65nm. TI is constructing four new 300mm fabs (SM1~SM4) in Sherman, Texas, with a total investment expected to reach $30 billion, with the first fab SM1 scheduled to start production in 2025, and the others to be built successively to meet future demand. Due to the weak demand in 2023, TI proactively reduced the load rates of some fabs to control inventory— for example, part of the decline in gross margin at the end of 2024 was attributed to “lower capacity utilization leading to increased fixed cost amortization.” During this period, many mature process lines saw their capacity utilization drop to historical lows. However, with the industry recovering in 2025, TI’s factory utilization rates are gradually rebounding, and the capacity of the 12-inch production lines is being utilized more fully, leading to improved gross margins due to better capacity absorption.

Foundry Capacity Cooperation: Although TI emphasizes in-house manufacturing (aiming for 95%+ self-sufficiency by 2030), it also adopts a flexible “dual-track” model in its supply chain strategy: some products are produced by external foundry partners to enhance regional supply flexibility and avoid trade barriers. For example, some of TI’s embedded processors are designed in a “dual design” manner, with part produced domestically (in the Lehi fab) and another part manufactured by foundries in Taiwan for supply to Chinese customers, thereby mitigating the impact of U.S. tariffs on China. Major foundry partners include leading fabs such as TSMC, and reports indicate that a small portion of TI’s analog/embedded chips are outsourced to meet specific process or capacity overflow needs. Overall, TI is significantly expanding its own 300mm capacity to reduce reliance on foundries while leveraging foundry partners to provide geographical advantages, achieving a balance between supply chain flexibility and cost optimization.

Downstream Market Supply and Demand Trends and Growth Opportunities

Industrial Market: Industrial electronics is one of TI’s largest end markets (accounting for approximately 34% of revenue in 2024). Due to macroeconomic slowdowns, sales of industrial chips had declined for several consecutive quarters, but signs of a rebound emerged in 2025: in Q1 2025, the industrial market saw widespread recovery, ending seven consecutive quarters of quarter-on-quarter declines; in Q2, industrial revenue grew nearly 20% year-on-year, with a quarter-on-quarter increase of over ten percentage points. This strong rebound is partly attributed to surging demand in the Chinese market—TI’s revenue in the Chinese industrial sector grew by 32% year-on-year and 19% quarter-on-quarter in Q2. With the recovery of manufacturing investment and inventory rebuilding, the supply and demand for industrial chips have significantly improved. In the medium to long term, areas such as industrial automation, new energy, and industrial IoT present sustained growth opportunities, and TI will also focus on the industrial sector as one of its strategic core markets.

Automotive Market: Automotive electronics are also a pillar of TI’s revenue (accounting for about 35%). Over the past year, demand for automotive chips has grown relatively modestly: in the second half of 2024, the automotive market was weak, and TI’s automotive revenue experienced consecutive mid-single-digit quarter-on-quarter declines; in Q2 2025, automotive-related revenue increased by only about **mid-single-digit** percentage year-on-year, with a slight quarter-on-quarter decline. This indicates that the recovery of the automotive end market lags behind other sectors. However, industry trends show that new technologies such as electric vehicles and ADAS are significantly increasing the semiconductor content per vehicle, indicating substantial future growth potential. TI’s management expects the recovery of the automotive market to gradually manifest in the second half of 2025. Currently, demand in the European and American markets remains weak, but the Chinese automotive market shows relative strength, with continued growth in demand for automotive simulation devices. Given the long-term strategic significance of automotive electronics, TI continues to invest in automotive-grade chip products and emphasizes automotive as a key area for layout to seize future growth opportunities.

Personal Electronics and Communications: These two consumer markets have recently shown significant rebounds after previous downturns. In Q2 2025, TI’s revenue in the personal electronics (consumer electronics) sector surged by approximately 25% year-on-year, while revenue in the communications equipment sector skyrocketed by over 50% year-on-year. The main reason is that terminal manufacturers have resumed stocking after inventory depletion, coupled with new chip demand driven by 5G communication infrastructure construction and data terminal upgrades. Particularly in the communications market, Q2 also saw a quarter-on-quarter growth of about 10%, indicating that operators’ capital expenditures are driving improvements in related chip demand. However, these two markets remain highly cyclical and uncertain: personal electronics are significantly affected by seasonal consumer trends (for example, Q1 typically sees a quarter-on-quarter decline due to post-holiday demand drop), while communications equipment demand depends on operators’ investment rhythms and technology upgrade cycles. Therefore, despite the current phase of high growth, the distribution sector should remain cautiously optimistic about consumer electronics and communications products, closely monitoring the sustainability of subsequent orders.

Enterprise and Emerging Applications: Notably, emerging fields such as data centers and artificial intelligence are driving demand for analog chips. TI categorizes servers/enterprise systems under the “enterprise systems” market, which saw a year-on-year revenue surge of approximately 40% in Q2 2025, with data center-related businesses (such as power management chips) growing by over 50%. This reflects explosive growth in demand for analog devices driven by AI computing infrastructure construction, such as high-performance power management and precision analog front-end devices being in short supply. TI’s management also mentioned that besides automotive and industrial sectors, the company sees multi-market opportunities, including data centers, and is benefiting from these structural growth dynamics. Overall, among the five major downstream end markets, four are currently in a recovery uptrend, and the demand for TI products is showing a comprehensive warming trend. Industrial and automotive sectors continue to receive strategic attention as core areas for long-term growth; at the same time, the new demands brought by the AI wave and communication infrastructure upgrades also provide valuable market growth opportunities for TI and its distribution partners.

Distributor Recommendations: Supply and Demand Risk Warnings and Inventory Management

Supply and Demand Risk Warnings: Although TI’s overall demand has clearly rebounded, distributors need to be wary of market fluctuations and supply-demand mismatches. First, geopolitical and trade policies still bring uncertainties. TI has mitigated the impact of tariffs on China by outsourcing some chips to Taiwan, but if U.S.-China trade tensions escalate or tariff policies change, orders in related regions may fluctuate significantly, requiring advance planning. Second, pre-stocking and false demand risks are worth noting. TI pointed out that part of the unexpected high growth in the industrial sector in Q2 was due to customers pulling orders in advance to avoid tariffs, which may lead to demand adjustments in subsequent quarters. The company has provided relatively cautious guidance for Q3 2025, considering that the earlier “order rush” may normalize. Therefore, distributors should be alert to similar abnormal order surges in the short term and should not blindly expand inventory based on this to avoid inventory buildup after demand exhaustion. Additionally, the recovery pace of the automotive market is uncertain: TI expects automotive demand to gradually improve in the second half of the year, and before that, automotive-grade chip orders may remain moderate, with channels needing to guard against the risk of overly optimistic expectations leading to premature stockpiling. Furthermore, the macroeconomic environment (interest rates, inflation, etc.) still has a lagging effect on the end market, and if downstream demand dips again, it may bring inventory digestion pressure. In summary, caution should be maintained at this stage, closely tracking TI’s official forecasts and end customer trends, and preparing for risk warnings.

Stocking Strategies and Order Management: In the face of the new situation of simultaneous demand recovery and TI’s capacity expansion, distributors should strike a balance between “proactive and prudent” in inventory and order management. Specific recommendations are as follows:

• Focus on High-Demand Products: Prioritize ensuring the supply of products related to high-growth areas such as industrial, automotive, communications, and data centers. Recently, demand for industrial control and factory automation chips has surged, while the electrification of automobiles has brought incremental demand for power devices and analog ICs, and 5G base stations and AI servers have driven orders for high-speed interfaces and power management chips. For star products and key materials in these areas, safety stock can be moderately increased to prevent missed sales opportunities due to supply tightness. Especially for widely used products in TI’s analog devices such as power management and signal chain, stock should be prepared in advance based on market trends.

• Pay Attention to Capacity Bottlenecks: Given that TI’s new capacity is mainly concentrated in the 45~130nm node on 300mm wafers, the supply capacity for “mature process” products will gradually improve, and supply is expected to be ample in the medium term. However, some older processes (such as 180nm/130nm nodes on 8-inch wafers) may experience supply tightness again if demand surges due to the general lack of capacity expansion in the industry. Distributors should identify TI product lines still produced on 200mm lines and lacking alternatives, maintaining appropriate inventory levels for these potential bottleneck products to respond to sudden supply-demand imbalances. Conversely, for TI products that have been significantly expanded in production on 300mm, opportunities to optimize inventory turnover can be utilized, avoiding excessive stock that occupies capital.

• Short-term Strategy (next 1-2 quarters): Maintain flexibility in order strategy, closely aligning sales with procurement. Currently, both channel and end inventory levels are not high, and customers generally have low inventory, even only a few days’ worth. This means that when real end demand is released in the short term, it may translate into surges in immediate orders. To respond to such “Quick Turn” orders, distributors need to communicate with TI in advance to secure certain supply guarantees while maintaining a certain proportion of fast-turn inventory. However, they should also avoid raising subsequent order forecasts due to the high growth in Q2, and should rationally order based on TI’s conservative Q3 outlook. For seasonal markets such as consumer electronics, proper inventory digestion during off-peak seasons and stocking rhythm before peak seasons should be managed to control procurement rhythm and inventory structure.

• Mid-term Strategy (next 6-12 months): Looking towards trends from the end of 2025 to 2026, moderately increase order locking for products with long-term demand prospects. With the automotive electronics cycle recovering, industrial capital investment continuing to grow, and new applications such as AI/new energy advancing, the mid-term demand for TI-related chips is expected to steadily rise. At the same time, TI’s new plant capacity in Texas and Utah will begin to be released by the end of 2025, improving supply reliability. In this context, distributors can negotiate with TI to sign mid-to-long-term supply agreements or orders to ensure priority supply rights during market recoveries and capacity tightness. However, it is still necessary to control inventory turnover rates to avoid inventory buildup when TI’s capacity ramps up leads to oversupply. Close attention should be paid to TI’s capacity ramp-up progress and new product launch information to timely adjust procurement and inventory strategies.

Operational Coordination and Information Sharing: Finally, it is recommended that everyone communicate more to share market information and reduce supply risks. Through careful risk management and proactive opportunity capture, we can help customers navigate the supply-demand changes smoothly during the current recovery phase and achieve win-win development.