Texas Instruments' automotive analog semiconductors buck the trend

US semiconductor giant Texas Instruments (TI) has shown resistance to headwinds amid sluggish demand, Nikkei Asia reported. The current operating income has only fallen by 3% against the background of double-digit declines in the industry, which is a strong performance.

The company's forte is analog semiconductors for information processing such as light and sound. Growth in analog semiconductors for cars largely offset sluggish demand due to electrification. Its sales net profit rate has reached more than 40%, which is close to that of the semiconductor industry giant TSMC.

From October to December 2022, Texas Instruments' revenue will only decline by 3% year-over-year. Firmer compared to Intel (down 32%) and Micron Technology (down 47% from September to November).

buyer's difference

TI generates 25 percent of its operating income from automotive, 40 percent from industrial uses, and a small portion of semiconductors used in electronics for which demand has declined. Samuel Vicari, president of Texas Instruments Japan, said, "Pure electric vehicles (EV) are equipped with at least 3 to 4 times the number of semiconductors than gasoline vehicles." In the context of electrification, demand is strong. Texas Instruments (TI)'s automotive semiconductors posted revenue growth amid a decline in revenue from other businesses.

Strong company profitability

Texas Instruments' annual sales net profit margin in fiscal year 2022 (as of December 2022) reached 43.7%, which is close to that of TSMC (44.9%). One reason is that the depreciation expense is very low. The ratio of depreciation expenses to operating income in the last fiscal year was only about 5%, lower than that of TSMC (19%). Cutting-edge logic semiconductors and storage semiconductors require mass production technology, and the circuit line width is less than ten nanometers, but analog semiconductors are 45 to 130 nanometers, which are mainly mature technologies and do not require huge investment.

Market speaks highly of Texas Instruments

Compared with the end of 2021 before semiconductor stock prices began to adjust, Texas Instruments' current stock price has fallen by only about 8%, which is in contrast to other major manufacturers (3-40% drop). Japan's domestic institutional investors said, "Automotive analog semiconductors are expected to maintain a growth rate of 20% to 30%."

In the future, active investment will be indispensable to ensure stable supply and growth. Texas Instruments also proposed a plan to invest $3.5 billion a year by 2025, and is scheduled to disclose the progress of its capital policy and investment plan on February 3, including using the "Chip Act" passed by the United States in 2022 to support semiconductor investment. specific policies to promote scale growth.