Despite warning of slowing demand across most of its markets, Texas Instruments Inc. says it still plans to open a new semiconductor plant in 2020 or 2021.

The world's sixth largest chipmaker will proceed with long-term investment plans, even though "we are heading into a softer market," chief financial officer Rafael Lizardi told analysts in a conference call this week. TI spent $1.55 billion on research and development in the last 12 months.

"A slowdown will have little effect on our timing to get the next 300-millimeter factory shell in place," said Lizardi, who estimated the building could require $600 million to $700 million in capital spending over several years.

Lizardi said the company will likely decide the location in the next year. One of the sites being considered is TI-owned land in Richardson.

In August, the company applied for a 10-year tax incentive agreement with Plano ISD, the school district in which the land is located. In that application, TI said the plant could amount to $3.2 billion of investment and create as many as 625 jobs. It would make wafers that later get sliced and diced into chips used in personal electronics, cars and industrial equipment.

The Dallas-based company indicated it also is considering sites ouIn August, the company applied for a 10-year tax incentive agreement with Plano ISD, the school district in which the land is located. In that application, TI said the plant could amount to $3.2 billion of investment and create as many as 625 jobs. It would make wafers that later get sliced and diced into chips used in personal electronics, cars and industrial equipment.

The Dallas-based company indicated it also is considering sites outside of Texas. TI has 15 manufacturing sites across the globe, including Germany, China and Mexico. But the company, which began in 1930 as Geophysical Service, has long emphasized domestic production, and it has long roots in Dallas.

TI's most recent manufacturing expansions have been in North Texas with a Dallas facility that began production in 2002 and a Richardson facility in 2010. The factories have advanced equipment that makes 300-millimeter wafers. The wafers, larger than those made by other TI factories, can each make more chips — which then can lead to higher revenue.

TI's forecast of a slowdown sent shudders through Wall Street this week. Investors use TI's financial outlook as a broader economic barometer because the company has the largest customer list and widest product range in the $400 billion semiconductor industry.

Lizardi carefully avoided any broad statements to analysts about what's driving the slowdown, other than TI customers' demand for semiconductors. But it raised fears among investors about the impact of an escalating trade spat between the U.S. and China.

"The direct effect of the tariffs for us in any of the trade issues is minimal," Lizardi said. "It's really not there. So all we can judge is by what we see right in front of us ... the signal [our customers] send us."

Texas Instruments' chips are widely used in the industrial and automotive sectors. One analyst tried to pin down TI executives on where they see the softest demand, suggesting that the automotive industry faces the strongest headwinds.

"On automotive, growth did slow there," said David Pahl, head of investor relations and vice president. "But as you know, we've been growing very strongly ... for five years plus. So demand slowed but it still grew double-digits."

Businesses have no incentive to stock up on components they're uncertain they will be able to use, said Tore Svanberg, an analyst at Stifel Nicolaus & Co.

"There was some slowdown related to tariffs in certain areas, and subsequently it's spread to everything," he told Bloomberg. "It's hard to keep inventory when you don't know if it's needed. Demand will be impacted somehow by these tariffs."

As electronic functions have been increasingly added to industrial equipment and cars, demand has driven a two-year expansion of TI's revenue. If the company comes in at the lower end of its predicted fourth-quarter revenue range, it would post its first year-over-year decline since early 2016.

By: DocMemory
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