US semiconductor giant Texas Instruments gave a disappointing earnings forecast for the current period, hurt by still-sluggish chip demand and higher manufacturing costs.

Profit will be 94 cents to US$1.16 a share in the first quarter, the company said in a statement on Thursday. 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.

Much of the electronics industry remains mired in a slump – contributing to nine straight quarters of sales declines at the company. Manufacturing expenses also have affected profit, Texas Instruments executives said.

The Dallas-based company 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, Texas Instruments executives said some of the firm’s end markets were showing signs of emerging from an inventory glut, but the rebound has not come as quickly as some investors anticipated.

he company’s shares slipped about 3 per cent in extended trading after the announcement. The stock had gained about 7 per cent this year through the close of regular trading.

Texas Instruments chief executive Haviv Ilan said on Thursday that industrial demand remains slow. “Industrial automation and energy infrastructure still haven’t found the bottom,” he said on a conference call with analysts.

In the automotive segment, growth in China was not as strong as it has been, meaning it cannot offset the expected weakness in other parts of the world.

“We haven’t seen the bottom yet – let me be clear,” Ilan said, though the company is seeing “points of strength”.

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.

The company is the biggest maker of chips that perform simple but vital functions in a broad range of electronic devices. It is also the first large US chipmaker to report numbers in the current earnings season.

The company is running some plants at less-than-full capacity to reduce inventory stockpiles, chief financial officer Rafael Lizardi said during the call. That is taking a toll on profit.

When semiconductor companies slow down output, they book what they refer to as underutilisation charges. The issue affects gross margin, the percentage of sales remaining after deducting the cost of production.

Chipmakers in other parts of the world have offered a mixed picture of demand for their products.

Taiwan Semiconductor Manufacturing Co, 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 AI-focused Nvidia or even Intel Corp.

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 says the move will help lower costs in the long term and help it compete with Chinese rivals.

In China, there have been allegations that US companies are dumping lower-end chips into the market – selling them at a level that unfairly undercuts competitors. Though the country has said that it is investigating the issue, Texas Instruments has not been notified of any investigation, Ilan said. It is “business as usual,” he said.

Moreover, Texas Instruments’ chips are not powerful enough to trigger US export restrictions to ChinaUS semiconductor giant Texas Instruments gave a disappointing earnings forecast for the current period, hurt by still-sluggish chip demand and higher manufacturing costs.

Profit will be 94 cents to US$1.16 a share in the first quarter, the company said in a statement on Thursday. 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.

Much of the electronics industry remains mired in a slump – contributing to nine straight quarters of sales declines at the company. Manufacturing expenses also have affected profit, Texas Instruments executives said.

The Dallas-based company 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, Texas Instruments executives said some of the firm’s end markets were showing signs of emerging from an inventory glut, but the rebound has not come as quickly as some investors anticipated.

The company’s shares slipped about 3 per cent in extended trading after the announcement. The stock had gained about 7 per cent this year through the close of regular trading.

Texas Instruments chief executive Haviv Ilan said on Thursday that industrial demand remains slow. “Industrial automation and energy infrastructure still haven’t found the bottom,” he said on a conference call with analysts.

In the automotive segment, growth in China was not as strong as it has been, meaning it cannot offset the expected weakness in other parts of the world.

“We haven’t seen the bottom yet – let me be clear,” Ilan said, though the company is seeing “points of strength”.

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.

The company is the biggest maker of chips that perform simple but vital functions in a broad range of electronic devices. It is also the first large US chipmaker to report numbers in the current earnings season.

The company is running some plants at less-than-full capacity to reduce inventory stockpiles, chief financial officer Rafael Lizardi said during the call. That is taking a toll on profit.

When semiconductor companies slow down output, they book what they refer to as underutilisation charges. The issue affects gross margin, the percentage of sales remaining after deducting the cost of production.

Chipmakers in other parts of the world have offered a mixed picture of demand for their products.

Taiwan Semiconductor Manufacturing Co, 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 AI-focused Nvidia or even Intel Corp.

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 says the move will help lower costs in the long term and help it compete with Chinese rivals.

In China, there have been allegations that US companies are dumping lower-end chips into the market – selling them at a level that unfairly undercuts competitors. Though the country has said that it is investigating the issue, Texas Instruments has not been notified of any investigation, Ilan said. It is “business as usual,” he said.

Moreover, Texas Instruments’ chips are not powerful enough to trigger US export restrictions to China.

By: DocMemory
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