Now that Texas Instruments Inc.’s restructuring is complete and annual revenue has started growing again, it plans to boost chip production on larger wafers to drive future growth, two executives said this morning in a webcast with semiconductor analysts.

TI is converting part of its 13-year-old DMOS6 factory to support $3 billion of 300-millimeter analog revenue from space that had been used for wireless products the company no longer makes, chief financial officer Kevin March said on the webcast. He expects that factory to be turning out 300-millimeter products by the end of the year.

DMOS6 will be TI’s third factory that does at least some 300-millimeter production.

TI’s first and largest 300-millimeter wafer plant opened in Richardson in 2009. It became the company’s largest revenue-generating factory in 2014, supporting $2 billion in revenue in 2014, but it has the capacity to support $5 billion in revenue.

In November, TI said it would add a 300 millimeter wafer-bumping facility to its operations in Chengdu, China. Wafer bumping is a process where “bumps” made of a lead-free alloy are formed on the wafers before they’re cut into chips, improving performance and reducing the size, weight and cost of the packaging.

The plan for DMOS6 fits into TI’s target of its capital spending equaling 4 percent of revenue. Most of the equipment already is in place at that factory, vice president Dave Pahl said on the webcast.

The rest of TI’s chip production is done on smaller 200-millimeter wafers. Pahl noted that TI’s goal is not to shift existing production from smaller wafers to the larger wafers, but to support future growth.

TI can put 2.3 more chips on the larger wafer, reducing chip costs by 40 percent and increasing its gross profit margin by 8 percentage points.

The larger wafer production is one of three main drivers of free cash flow growth at TI — along with revenue growth and share buybacks, March said.

TI officials today also said they expect annual revenue growth to resume, free cash flow to grow to about 30 percent of total revenue on a sustainable basis “in good markets” and stock repurchases to continue — all contributing to higher shareholder returns.

Last year was TI’s first year of annual revenue growth — up 7 percent to $13 billion — after a decade of flat growth. This year will be the first with no left-over business from two wireless markets TI began leaving in late 2012 to focus on analog and embedded processing.

In 2014, TI expanded its free cash flow to 27 percent and returned 115 percent of free cash flow to shareholders. TI’s goal is to return to shareholders 100 percent of free cash flow (minus debt repayments) plus proceeds from stock option exercised by executives and employees to shareholders as dividends or stock repurchases.

Pahl said 2014 was no fluke, but “a preview” of what TI can return in the years ahead.

By: DocMemory
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