TI: Q1 Below Expectations, Semiconductor Market Decline
Texas Instruments (TI) faced a decline in its stock prices following the release of disappointing quarterly forecasts, signaling a sustained reduction in demand for industrial and automotive electronic components. The semiconductor industry market, according to TI, is undergoing deterioration, with the performance outlook reflecting the challenges of a shifting landscape as customers recalibrate their inventories.
In an official statement, Texas Instruments disclosed that the sales projection for the first quarter of 2024 ranges between $3.45 billion to $3.75 billion, falling short of the analysts' average expectation of $4.09 billion. Earnings per share are anticipated to be in the range of $0.96 to $1.16, contrasting with the forecasted $1.42.
This outlook implies a potential delay in the recovery of key industry orders, presenting a concern for the broader market. As a significant player in the chip industry with a diverse product range and a substantial customer base, Texas Instruments serves as a barometer for overall economic demand.
Haviv Ilan, CEO of Texas Instruments, conveyed in the official announcement, "This quarter, our industrial sector is progressively soft, and the automotive sector continues its downward trajectory."
The fourth quarter of 2023 saw a 13% decline in revenue for Texas Instruments, amounting to $4.08 billion, below the average expectation of $4.13 billion. Operating profit for the same period was $1.53 billion, slightly below analysts' expectations of $1.56 billion. Earnings per share stood at $1.49, a decrease from $2.13 during the same period in 2022. The sales for 2023 experienced a significant 13% decrease, marking the company's most substantial drop in over a decade.
The escalation of chip inventory in major markets, combined with early indications of weakness in the automotive industry, has intensified the persistent softness in the industrial sector. TSMC, a prominent contract chip manufacturer, has issued a cautionary note regarding potential overcapacity in analog chip manufacturing, utilizing relatively older technology compared to the equipment employed for advanced artificial intelligence (AI) chips.
As the foremost analog semiconductor manufacturer, Texas Instruments produces chips with essential functions, such as converting button presses into electronic signals. Despite these components not requiring as advanced production technology as digital products, the company has embarked on an ambitious factory upgrade plan. Texas Instruments believes that this strategic move will confer a competitive advantage over rivals relying on outsourcing, even though it may exert short-term pressure on profitability. Executives emphasize that demand fluctuations will not deter Texas Instruments from pursuing this initiative.
