Texas Instruments reported strong fourth quarter revenues of $4.08 billion driven by strong demand for auto, personal electronics and industrial chip markets.
The company was able to grow auto chip revenues even during a global shortage by building up inventory ahead of demand, officials told analysts on Tuesday’s earnings call.
Revenues for the quarter improved by 22% year-over-year, the company reported. For all of 2020, TI reported revenues of $14.5 billion, up slightly from the 2019 total of $14.4 billion, a total big enough for TI to remain the seventh biggest semiconductor maker global based on revenues.
TI had a “blowout quarter,” said VLSI Research analyst Dan Hutcheson.
The chipmaker’s strong showing in auto integrated circuits was significant, given the global shortage of such chips.
Auto IC sales at TI grew 25% in the quarter year-over-year, following a big increase in the third quarter, Hutcheson noted. Still, he noted that TI’s inventory for all chips is down 15% although the company is building a 300 mm wafer fabrication facility in Richardson, Texas.
A year ago, the company said it would open the new plant no earlier than 2023 but on Tuesday said it would be completed in 2022 with some chip output in the second of next year. It has the potential to generate $5 billion in revenue per year.
Automotive chips made up 20% of all revenues in 2020, while industrial comprised 37%, personal electronics 27%, communications 8% and enterprise systems 6%, according to Dave Pahl, vice president of investor relations, during the Tuesday earnings call.
In the fourth quarter, the automotive market continued its rebound following the second quarter bottom, with 19% sequential and 25% year-over-year growth, Pahl reported. Industrial was up 7% sequentially and 16% from a year ago. Communications equipment dropped 28% sequentially and 8% from a year ago, while enterprise systems were down 2% sequentially and 13% from a year ago.
“In 2020, industrial and automotive combined made up 57% of TI’s revenue, about even with last year, and up from 42% in 2013,” Pahl said. “We see good opportunities in all of our markets, but we place additional strategic emphasis on industrial and automotive. Our industrial and automotive customers are increasingly turning to analog and embedded technology to make their end products smarter, safer more connected and more efficient. These trends have resulted and will continue to result in growing chip content per application, which will drive fast growth compared to our other markets.”
In response to questions from analysts, Pahl also said that reports of supply constraints causing increases in chip prices don’t apply to TI. “One of our foundational competitive advantages if manufacturing and technology and that really provides two benefits. One…is lower cost but the second is greater control of our supply chain. So, it’s really times like this and really throughout 2020, that greater control of your supply chains really becomes a great advantage.”
CFO Rafael Lizardi said TI has been able to “build inventory ahead of demand” which served the company well in 2020 “and will continue to serve us well.”
Pahl added, “What we’re seeing in the automotive market is a just in time supply chain that’s restarting from essentially a full stop that happened in the second quarter. What we saw in the third quarter was a 75% sequential increased followed by this last quarter with a 20% sequential increase.” TI isn’t seeing any signals of any auto chip constraints reported elsewhere in the industry, he added.
TI expects first quarter 2021 revenues of $3.79 to $4.11 billion. Shares closed on Tuesday at 171.47 and dropped as low at 164.66 Friday afternoon.
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