Texas Instruments and AMD reported earnings on the same day, offering a contrast on how the chip industry is performing after more than a year of COVID-19-related shortages and supply chain disruptions.
AMD beat expectations and has seen a surge in its share price early Wednesday, while Texas Instruments matched forecasts and saw a drop in share price.
TI is seen by many analysts as a bellwether for the auto and industrial segments in the broader economy. The company reported $4.64 billion in third quarter revenue on Tuesday, up 22% year-over-year on demand for industrial, auto and personal electronics. That roughly matched what analysts had expected but shares still dropped nearly 6.6% early Wednesday to 183.77.
TI Vice President Dave Pahl said sales of auto-related chips were up more than 20% for the quarter and up almost 30% when compared to pre-pandemic levels back in fourth quarter of 2019. TI’s industrial market was up by about 40% year-over-year, with personal electronics up in the low double digits with chips for mobile phones, PCs, notebooks and tablets.
However, Pahl added on a call with analysts that sales of communications equipment were down for the quarter in the “upper teens” percentage from a year ago, while enterprise grew. TI groups actual sales under three segments, with analog chips by far the largest at $3.5 billion in revenue, up 24% and embedded processing at $738 million, up 13%. The “other” category was $357 million, up 19%.
TI is almost tied at third place globally with Renesas in supplying semiconductors used in the auto sector, with Infineon and NXP in first and second place. The total global market in 2020 for auto semiconductors was about $35 billion, with TI holding 8.3% or about $2.9 billion, according to Statista. TI is the largest U.S.-based maker of auto chips. Infineon is based in Germany, NXP in the Netherlands and Renesas in Japan.
Pahl and TI’s CFO Rafael Lizardi said their chip customers are being more selective about which chips to expedite for purchase, instead of asking to expedite across the board, a change from earlier in the pandemic. The company has 112 days of inventory on hand which “well below” desired levels of 130 to 190 days, Lizardi said.
The company is expanding production of wafers, based on a 10-to-15-year time frame with a strategic focus on products for auto and industrial, they said. About 80% of its wafers are made internally, which “gives us much better control of our destiny,” Lizardi said.
Texas Instruments closed Friday on a $900 million purchase from Micron of a 300-mm wafer fab in Lehi, Utah, first announced in June.
Lehi will be TI’s fourth 300-mm fab and another, RFAB2, will be completed in 2022 in Richardson, Texas.
Lizardi revealed that the RFAB2 will cost about $6 billion, with $5 of that for equipment and $1 billion for the building. In addition to the Lehi purchase price of $900, TI will put $3 billion of capital expense into it. More details are expected in February during a Capital Management call with investors, he said.
AMD’s record quarter
AMD CEO Lisa Su reported third quarter revenue grew 54% year-over-year to $4.3 billion, the fifth straight quarter of greater than 50% year-over-year growth.
She said the company saw significant growth in each of its businesses, with data center sales more than doubling. The enterpirse, embedded and semi-custom segment saw an increase of 69% to $1.9 billion driven by EPYC process and semi-custom said.
Su said the Xilinx acquisition remains on track to close by the end of the year and will help AMD expand products in adaptive computing and AI. AMD shares jumped 3.5% to 127.30 early Wednesday based on the earnings results, which were above analyst forecasts.
Unlike Texas Instruments, AMD is a fabless chipmaker. AMD competes heavily with Intel, which has undertaken a massive program to open its own new fabs around the globe. Last week, Intel reported earnings and saw its share price decline 11% with shares trading at 48.54 early Wednesday. Some analysts are urging investors to buy Intel while shares are down, while others are studying how much AMD is hurting Intel.
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