TEXAS Instruments gave a disappointing earnings forecast for the current period, a sign it’s contending with still-sluggish chip demand and higher costs tied to a factory expansion.
Profit will be 94 US cents to US$1.16 a share in the first quarter, the company said on Thursday (Jan 23). The midpoint of that range, US$1.05 a share, was well below the US$1.17 that analysts projected on average. Sales will be US$3.74 billion to US$4.06 billion, compared with an estimate of US$3.86 billion.
The outlook suggests that Texas Instruments’ ambitious effort to build out its manufacturing is weighing on profits. The broader electronics industry also remains mired in a slump – contributing to nine straight quarters of sales declines at the company.
Texas Instruments gets the biggest portion of its sales from manufacturers of industrial equipment and vehicles, making its projections a bellwether for much of the global economy. Three months ago, executives said some of the company’s end markets were showing signs of emerging from an inventory glut.
The company’s shares slipped about 3 per cent in extended trading following the announcement. They had gained about 7 per cent this year through the close of regular trading.
In contrast with the disappointing forecast, Texas Instruments’ fourth-quarter results handily beat analysts’ estimates. Though sales fell 1.7 per cent to US$4.01 billion, analysts had projected US$3.86 billion. Profit was US$1.30 a share, compared with a prediction of US$1.21 per share.
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The Dallas-based company is the biggest maker of chips that perform simple but vital functions in a broad range of electronic devices. It’s also the first large US chipmaker to report numbers in the current earnings season.
Chipmakers in other parts of the world have offered a mixed picture of demand for their products. Taiwan Semiconductor Manufacturing Company, Samsung Electronics and SK Hynix have pointed to continuing strength in data centre products – helped by the artificial intelligence (AI) boom. But overall growth is still hampered by downturns in other markets, such as smartphones and personal computers.
Together, the industrial and auto markets account for about 70 per cent of Texas Instruments’ revenue. The chipmaker produces analogue and embedded processors, a huge category of semiconductors. Though the chips handle important functions, such as converting power inside electronic devices, they do not fetch the kind of high prices of chips from the AI-focused Nvidia or even Intel.
Texas Instruments chips also generally do not require state-of-the-art production. Even so, the company has embarked on an aggressive expansion and upgrade of its facilities in the US. While that spending is weighing on profitability, the company said the move will help lower costs in the long term and help it compete with Chinese rivals. BLOOMBERG
