Texas Instruments at Bank of America Conference: Strategic Growth Plans

On Wednesday, 04 June 2025, Texas Instruments (NASDAQ:TXN) presented at the Bank of America Global Technology Conference 2025. The company shared an optimistic outlook for its future amidst macroeconomic challenges. While highlighting its strategic investments and readiness for a semiconductor market recovery, Texas Instruments also addressed industry concerns such as over-shipping and tariff impacts.

Key Takeaways

• Texas Instruments anticipates a semiconductor cyclical upturn, supported by strategic investments in inventory and capital expenditures.
• The company plans a phased capacity expansion to meet future demand, focusing on internal manufacturing and geographic diversification.
• Revenue targets are set between $20 billion and $26 billion by 2026 or 2027, with a focus on maintaining strong gross margins.
• Capital returns, particularly through buybacks, are expected to increase as capital expenditure decreases.
• The company is cautiously optimistic about the second half of the year, with moderated expectations for the automotive market.

Financial Results

• Revenue Target: Aiming for $20 billion to $26 billion by 2026 or 2027, representing a 7% compound annual growth rate (CAGR) from 2022.
• Gross Margins: Expected to range from the high fifties to mid-sixties percentage, depending on revenue achievements.
• CapEx Intensity: Anticipated to remain above 10% due to ongoing investments, stabilizing at 1.2 times the long-term revenue growth rate.
• Capital Returns: Buybacks are projected to increase as CapEx decreases over the coming years.

Operational Updates

• Capacity Expansion: Executing a three-phase plan, including transferring external products, building infrastructure, and adding incremental capacity.
• Geographic Footprint: While primarily investing in the US, TI maintains facilities in Japan, China, and Germany to mitigate tariff impacts and ensure diversification.
• Inventory Levels: Increased to 227 days, up from 150 days at the start of the COVID cycle, to support potential demand surges.

Future Outlook

• Cyclical Recovery: TI believes the semiconductor market is entering a recovery phase.
• Revenue Growth: Targeting between $20 billion and $26 billion by 2026 or 2027, with a 7% CAGR from 2022.
• CapEx Spending: Expected to exceed $2 billion next year, driven by Phase Two investments.
• Pricing Trends: Anticipating low single-digit price declines annually.

Q&A Highlights

• Industrial Market Recovery: Broad-based recovery observed across sectors, driven by inventory replenishment.
• Automotive Market Trends: Growth in China is moderated, with continued contributions from electric vehicles and combustion engines.
• Tariff Mitigation: Strategies include leveraging international facilities and trade agreements to minimize tariff impacts.

Readers are encouraged to refer to the full transcript for a detailed account of the conference call discussions.

Full transcript - Bank of America Global Technology Conference 2025:

Vivek Arya, Analyst, BFA Semiconductor team: Good morning. Welcome back. Really happy to have the management team from Texas Instruments join us today. Rafael Lazardi, Chief Financial Officer and Dave Wall, Head of Investor Relations. I’m Vivek Arya from the BFA Semiconductor team.

Typical fireside session, I’ll have my questions, but please feel free to raise your hand if you would like to bring up anything. But really delighted to see you, Rafael and Dave. Thank you. Joining us.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Good morning. Happy to be here.

Vivek Arya, Analyst, BFA Semiconductor team: So maybe let’s start Rafael with the state of the union, how you’re seeing the demand environment shape up a lot of macro crosscurrents obviously, but how are you seeing the demand environment shape up right now versus what you thought at the start of the year?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Yeah, no, as we said at the last earnings call, we’re starting to see a broad recovery in the space is what appears to be the beginning of a semiconductor cyclical upturn. And it’s coming in at a time when we are very well prepared, bless you, very well prepared for it. We’ve been investing in inventory, but more importantly on CapEx over the last four or so years. And we have RFQ, we have SM1, SM2, we have LFAB one and LFAB two at different levels of completion and we’re ready for what the market throws at us.

Vivek Arya, Analyst, BFA Semiconductor team: Okay. When you came up with the CapEx plan, Rafael, a few years ago, at that time, the industry looked very different than what it is today. What would you have done differently, right? If you had a better sense of how this market was going to go through or maybe a better question to ask is what would you like to do differently now, right? Given where the industry is?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: No, absolutely. It’s what we are doing, which is the capacity expansion and to do that well ahead of demand and to do that in the phases that we’re doing it. So phase one, we’ve described our plan as having three phases. The first phase is transferring products externally that run externally and growing our base. The second phase is to build buildings that will be required growth and to qualify those new factories.

And then once we get to the third phase is all about incremental capacity. So the first two phases require a significant amount of CapEx. But once we get to the third phase, it’s just incremental CapEx to match that capacity to demand, to expect the demand. I see.

Vivek Arya, Analyst, BFA Semiconductor team: Now, a skeptic would say the industry, right? Not just TI specifically, if the industry was not very good at sporting Bennett was over shipping, why should we believe the industry now when it says it’s been under shipping, right? So what checks do you have in the system to make sure that, you know, this, what you are seeing as a recovery is not just pull ins and some temporary because of the macro economic issues that this is true recovery.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Yeah. Not a big picture. We look at macro trends and by the same macro trends, I mean semiconductor macro trends. Go to slide 19 of our capital management presentation and you’ll see what I’m talking about. And it’s over the long term, this industry is very cyclical and it goes up and it goes down.

And it’s pretty clear that now it hit bottom a couple of quarters ago, maybe last quarter, and now it’s on a recovery. So that’s one. But frankly, more importantly, we’re just prepared for whatever the market throws at us. If it happens to be that this recovery is going to delay some time, then it’s okay. The inventory that we build is very safe.

It’s very long lasting. We hardly ever scrap parts and we do it very little as a percent of our revenue. So our business model is such that it protects the downside in those situations. Okay.

Vivek Arya, Analyst, BFA Semiconductor team: You know, if you look at that chart, what, you know, in your capital management presentation and what I’ve seen right across with the SIA and other data, it has shown that in the last three cycles, semiconductor sales have kind of gone up, for like 10, then they come down for full quarter, right? So it’s like two and a half years up, one year down kind of situation. So if we are kind of starting on this up cycle, do you think we are kind of at the start of what is normally a two and a half year up cycle or is there, I know there’s no cycle that will be the same, but where would you describe where we are in like very early stages, middle stages, or how would you describe where we And

Rafael Lazardi, Chief Financial Officer, Texas Instruments: of course to your point, kind of alluded to it, but it’s very difficult to draw from three or four data points. It’s all we have in the last decade in terms of how many cycles we’ve had. So it’s really not enough for a distribution, right? But our sense is that we’re early in the upturn. So probably in the first or second inning.

And then we still have ways to go. History seems to, if you look at the previous peaks, 2014 was a peak, 2018 was a peak, 2022 was a peak. So it’s kind of every four years. So potentially ’26 is a peak year, but that could, I wouldn’t be surprised given the dynamics

Vivek Arya, Analyst, BFA Semiconductor team: of the

Rafael Lazardi, Chief Financial Officer, Texas Instruments: last downturn that could extend to ’27. But at the end of the day, we’ll be prepared for any scenario.

Vivek Arya, Analyst, BFA Semiconductor team: I see. And one of the interesting analysis DI has shown in that kind of peak to peak is that, you know, across peaks you have grown, what is it like 40%, right? So?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: 7% CAGR. 7%. That probably works out about 40%, right?

Vivek Arya, Analyst, BFA Semiconductor team: Exactly. So you think we should expect the same from ’22 to whether it happens to be ’20 or ’27?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Again, unclear, it depends, but we want to be prepared for that. So that’s why when we put the framework of the various revenue levels that we could get to in twenty twenty six, One of them was as low as 20,000,000,000 and as high as 26,000,000,000. And again, that could happen in 2027 instead of ’26. But the 26,000,000,000 that was a representative of a 7% CAGR over four years.

Vivek Arya, Analyst, BFA Semiconductor team: I see. What does 26,000,000,000 mean Raphael in practice? Does it mean that you will have deployed capacity that can support 26,000,000,000 in sales or you have the capability to be up to 26? I e let’s assume that, you know, in ’26 or ’27, your top line is, I don’t know, 2021, ’20 ’2, right? Some number lower than that.

How does that reflect in your financials? Right? What is the cost of getting that?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Yeah, so we are going to be prepared for that level of revenue in terms of capacity, in terms of inventory. If instead we hit and we, you know, we’re going later this year, we’re going to tell the market if we’re going to target 2,000,000,000 or 5,000,000,000 for CapEx next year. So that plays into it. So we still have some flexibility on that front. But regardless if we don’t get, I think maybe where you’re getting to, if we don’t get all the way to $2,426,000,000,000, we’ll probably have some excess capacity versus what we could have done because, but that’s the dynamic of this industry.

If you don’t have the capacity, you’re for sure not going to get the revenue. Now you’ve got to have the capacity in place. The good news is that capacity is long lived. So it’s okay to have it ahead of time. And if we don’t use it this time around, you use it in the future.

We’re about to close a factory in Texas that 60 years old. And it has equipment that some equipment is probably 60 years old, but most of it is probably twenty thirty years old. So that equipment lasts for a long time.

Vivek Arya, Analyst, BFA Semiconductor team: Got it. I guess a different way of asking the question is that even if you are at peak sales in one of those years, hypothetically, but you’re not at the installed capacity level, Does it mean that you may not be at peak gross margins or peak crash? Like how does that Delta reflect in your financials?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Well, let me answer it this way. The way we are modeling, the way we were asking you or suggesting that you model our gross margin, which then falls through to free cash flow per share, which is what we focus on is to use 75 to 85 fall through and then adjust for depreciation, which of course, depreciation is non cash, right? But you got to adjust for that in order to get to the gross margin. So that’s 75 to 85% includes most scenarios. So for example, if we are at the higher end of that revenue, you probably are at the 85%.

And that accounts for the fact that you’ll be highly utilized. And therefore you’ll get better fall through. If you’re at the lower end of those revenue scenarios, you’ll be at the lower end of that fall through. And therefore, your gross margin will be lower. But in any case, I think what we model was the 22, 20 4 and 26,000,000,000 scenario would get you will get us back to the low to mid sixties and gross margins and only the 20,000,000,000 scenario would keep us in the high fifties gross margin.

Vivek Arya, Analyst, BFA Semiconductor team: Got it. Makes sense. And then if you look at the 2 to 5,000,000,000 CapEx range for next year, right? Based on whatever consensus expectations are and doesn’t have to be the right number. It says that your CapEx intensity, even when you don’t CapEx down to what may be a more normalized level, is still quite high, right, 10 plus percent.

And as long as your top line continues to grow and you’re spending at least, if your top line is in the 20 plus billion range and your CapEx is in the two plus billion range, it stays that your CapEx intensity, right, will consistently be double digit. Is that a fair representation of CapEx intensity? Yes, no.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: It is. I think it’s factual what you’re concluding or is a good conclusion, but it’s only because ’26 still includes some CapEx that is for phase two, meaning building buildings. And you cannot, it’s hard to build half a building, right? So you just build a full building and L5-two is a pretty expensive fab. And we’re going to be spending money on L5-two in 2026, even in 2027.

So once we get to phase three, which is incremental, that’s when we’re more on a more steady state on CapEx intensity. And what we have suggested that is a good way to model is pick a long term growth rate for revenue, say 5% to make the math easy. And CapEx intensity should be 1.2 times that. So 6% CapEx as a percent of revenue. If instead it’s 7% revenue growth, over the long term, and CapEx intensity is 8.4%.

And that is before ITC incentives and anything on grants. So that’s a gross CapEx number that then comes down after we get incentives.

Vivek Arya, Analyst, BFA Semiconductor team: Got it, makes sense. But 2,000,000,000 is kind of the minimum, right? You would say to support a 20 plus billion sales.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Next year, given those phase two investments that we still have, given where we think the potential revenue ranges, yeah, 2,000,000,000 is the minimum. Whether it’s in July or October, we’ll give you a better number, but don’t expect 2,000,000,000, expect something higher than 2,000,000,000. That’ll be my teaser for today.

Vivek Arya, Analyst, BFA Semiconductor team: Understood. Yeah, I appreciate teaser. The next question is, the reason that DI has focused so much on kind of made in The US, Was the right strategy in a situation where there were more government incentives, right, with the CHIPS Act and so forth in place, right, where there wasn’t really a penalty for producing more in The US. Right now, it seems like with this whole trade and tariff situation, what if China has tariffs in place? What if EU has tariffs in place?

Does that not call for a more geographically dispersed footprint that many of your competitors have?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Well, let me first correct a statement you just made. Many of our competitors claim to have, this is like having, Baskin Robbins in every country, but you don’t get the 31 flavors in every country. Fabs are a lot more complex than that. So if you have fabs in every country, you actually only have a couple of flavors in each of those fabs. Only their biggest 300 millimeter factories in Texas have all the 31 flavors in order to ship.

But let me get to the heart of your question, which is we have a strategy where we’re deploying CapEx primarily in The United States, Three Hundred millimeter cost competitive, cost advantage. And those factories will then can ship to the world, okay? And they’re geopolitically dependable from a United States perspective and the Western world perspective. To your point, what happens if China puts tariffs as it threatened to do in April for a couple of weeks? Well, we have four factories and foundry partners outside of The United States.

Have two factories in Japan, One in China, One in Germany. And again, we have foundries outside of The United States, foundry partners that can support us in shipping products that are non US made into China as needed. We also have there’s some trade agreements between Malaysia, Philippines and China that also allow products that even though they were built in The United States, they were fab in The United States. If they’re 18 in those countries, they enter China as country of origin for The Philippines and Malaysia. So there we have plenty of flexibility to satisfy our customers with bars that they need while minimizing or even entirely avoiding tariffs.

Vivek Arya, Analyst, BFA Semiconductor team: On the competition side, Rafael, I think on the analog side, it’s pretty well understood, right? That you guys are the leaders, right? Product breadth. The embedded business is a lot more competitive. Know, I think the last count I had was like 30 or 40 companies who can make ARM based microcontrollers.

Right? And many of them are very large established players in Europe, you know, in Japan. Right? China is investing a lot in there. So you think, you know, whether it is just that natural competition, you know, everyone, you know, using ARM as the architecture or whether it is just the fact that people would want to, in some situations, avoid buying products that are made in The US.

You don’t think that changes the competitive landscape in your embedded business?

Dave Wall, Head of Investor Relations, Texas Instruments: You want me to Yeah. I can start on that. I I think we have actually more analog competitors than embedded. It’s more diverse, I would say. But both markets, we’ve faced competitors for decades.

And what we’ve done is to invest into a portfolio that’s both application specific as well as more catalog like, so that we can sell to lots of different customers and build a revenue base that’s very diverse. We’re also able to build most of those products internally in Lehi. A big part of what we’re taking from foundries and bringing it inside is is embedded products. And, you know, there may be some customers that want to buy from manufacturing outside of The US. Have foundry partners if they want that.

There’s a lot of customers that want products not made in China or Taiwan, and we’re very uniquely positioned to be able to do that. So again, we, you know, we don’t look at that market as more competitive than analog. Right. It really is about refreshing the products, having a good portfolio, having broad portfolio, and also choosing where you make application specific investments. So that it’s not just one or two customers that it’s, you know, you know, half a dozen dozen customers that we can sell that product to.

Got it. Makes sense.

Vivek Arya, Analyst, BFA Semiconductor team: Now, I just wanted to go through first industrial trends and then automotive trends. So on the industrial side, you know, when when we look at that market from outside, I think everyone gets that, yes, there is a inventory replenishment driver, and then there is an end market recovery driver. And when it comes to end market, we don’t really see global PMI like bursting above 50 or so I think there is some skepticism about that driver. So how long can just this inventory replenishment driver, right, continue to grow industrial markets like above seasonal?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Yeah, let try to give you an example. Let’s see if this works. If event demand is 200 and you have inventory of 800 and you want to deplete that inventory, you place the order to your supplier TI or 50, only 50. In fact, you could go to zero, but let me use example with 50. That way you drain 150 every month or every quarter, So that demand to us looks like it went from 200 at one point to 50, right?

It got cut by three quarters. And then we go several quarters at just fifty, fifty, 50, 50. Then all of a sudden that 800 mountain becomes a 300 or $2.50 or 200. And the customer says, you know, I have a, that’s low enough. Now I want to just maintain that.

In order to maintain that, they go from ordering 50 to 200. That’s the bullwhip effect. Now we go from 50 to 200 now demand and they might quadruple that. Now the end demand all along was 200, nothing changed. And by the way, it quadruple and now it’s gonna stay at that level.

If the customer wants to maintain inventory, if all of a sudden end demand, their true end demand is starting to go up to two twenty five, they’re going to place two twenty five a month plus a little more because now they want safety stock. Right. Because now all of a sudden they don’t want one quarter of inventory, they want a quarter and a half. That’s the bullwhip effect. And all of a sudden we’re going to see 300, right?

We think we’re in the, up until a quarter, two quarters ago, we were in the 50 level, right? If you look at industrial, industrial had been running 40% below peak, something like that, 40% below peak.

Dave Wall, Head of Investor Relations, Texas Instruments: Some sectors, 50%.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Some sectors, there’s even lower. And because there are many sectors, many customers, it’s not everybody at the same time, right? So they’re going to go this at slightly different times, but we’re getting to the point where we’re getting to parity with the end demand. And then we’ll see what with the end demand that our customers see. Then we’ll see what happens with macro and other things to see where that goes.

But that top is not a one time pop is there and it stays and potentially grows depending on what happens with end demand.

Vivek Arya, Analyst, BFA Semiconductor team: But I guess that’s, sorry, but that’s really my question that have you already closed that gap? And let’s say if we take the situation where end, so how far, what is that Delta right now? Unclear, it’s

Rafael Lazardi, Chief Financial Officer, Texas Instruments: a hundred thousand customers, the 80,000 parts, they’re all in the permutations are infinite and where each customer is in their cycle, which is a different part. So what we do is we have a very good robust engine inside of TI to decide what to build based on history, based on orders, based on how many customers buy it, based on how long the product life cycles are. And that’s why our inventory has gone. When we started the COVID cycle, we had one hundred and fifty days of inventory, I think it was. Now we have two twenty seven days of inventory.

Vivek Arya, Analyst, BFA Semiconductor team: But shouldn’t all that data Rafael theoretically give you a reasonable sense of whether you are at 10% below parity, 20% below parity, like where?

Dave Wall, Head of Investor Relations, Texas Instruments: Think go ahead. Yeah, I would I’d go back to the chart that Rafael referred to earlier. Slide 19. Yeah, slide 19. And you can see, and we’ve got red dots at the peak of each cycle.

You know, we bottomed sometime last year. That bottom, by the way, is below the previous bottoms, first time it’s ever happened in thirty years of data. World GDP has grown over the last five years. So how can semiconductor units be so far below even the last trough? It’s because we ship too much stuff on the on the upside.

Right? So the delta is inventory burn, and that data is through November. We we we presented it early February. I think we missed December by a week or so. But if you update those, you can see, you know, that hook that you see that bottoming is is continuing.

So if that long term trend line that you see there, you know, pick your percentage, but we’re below it.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: You can eyeball it. It’s trailing twelve months, you got to be careful. But

Dave Wall, Head of Investor Relations, Texas Instruments: That’s right.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: I think one of our competitors actually gave a percent. Maybe that’s why you’re asking. Did someone say 10% or something like that?

Vivek Arya, Analyst, BFA Semiconductor team: Yeah. Does that seem reasonable?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Low and high? We just don’t know. I don’t want to venture a number because we don’t know. We’re prepared if it’s 10% below, we’re prepared if it’s 30% below and we’re to have a tremendous spike. So whatever comes our way between inventory and capacity, we’ll be ready.

Vivek Arya, Analyst, BFA Semiconductor team: Right. Can we not push back and say, well, if you are looking at historical data, a lot of that was driven by, you know, of smartphones, right? Rise of China industrialization, etcetera, that, you know, maybe it was on a slope that we may not see that same slope. So to compare it to that ancestry may not be as, you know,

Dave Wall, Head of Investor Relations, Texas Instruments: as useful. Yeah, I think I think when we we look at the market and that longer term trend line kind of sits between 56%. So unit by unit trend line, when you look at the secular trends in industrial, the secular trends in automotive, the secular trends in enterprise or servers and AI, We there’s just more content going in in systems. And our belief long term longer term is is that those are the markets that will drop. Were other markets that drove it in the past, and we’re positioned well to to take advantage of that secular growth.

Right. And industrial, is it

Vivek Arya, Analyst, BFA Semiconductor team: broad based recovery as it is an is it an all industrial market and especially factory automation? And then is it China and non China? Like, just give us a sense for how broad

Dave Wall, Head of Investor Relations, Texas Instruments: based industrial And as we saw, you know, through the first quarter, that strength was very broad based. We’ve got about 10 secondtors that make up industrial. So they were all contributing growth to the total, and there wasn’t one region that was contributing. They’re all in the same at the same zip code from that. So that’s why after eight, ten quarters of sequential declines, we think the first signal kind of coming out is that cyclical recovery.

Vivek Arya, Analyst, BFA Semiconductor team: Got it. And then the last actually, before I go to that last one, automotive. Right? What are you seeing in that market? There a similar sense x percent below parity?

I know there’s a lot more direct customers, right, rather than distribution in automotive. But give us a flavor for what are

Dave Wall, Head of Investor Relations, Texas Instruments: the trends you’re seeing in automotive, China versus non China? Yeah. So, and just to give it a reference point, I’d go back, automotive was the last market to begin to weaken almost two years after we saw a weakening in in personal electronics. From peak to trough, it was only down mid teens, so fairly shallow. And it’s troughed and kind of run more sideways since then.

Inside of that, if you go back a year, we had a couple of quarters of 20% plus sequential growth in China, followed by a third quarter of high single digits. This last quarter that has moderated. I think we’re up low single digits both sequentially and year on year. So that, you know, low single digits kinda feels like it’s still running sideways. It doesn’t feel like an inflection, but that’s kind of where where it is at this point.

Vivek Arya, Analyst, BFA Semiconductor team: And you think it’s low single digit because, you know, the inventory restocking is done or is there still a lot left or is that the content argument because of the slow slowdown in EVs is not playing out the way one would think it should?

Dave Wall, Head of Investor Relations, Texas Instruments: Yeah. And, you know, I I think it’s it’s hard to tell with just so few data points. You know, EV expectations, of course, have come down. They’re still expected to grow though. Right?

So that is content increases. If you look at cars being delivered today versus three or five or ten years ago, there’s just more content. And I think one of the things that we saw is there used to be a three or four x delta between a combustion engine car and an EV. But if you look at a combustion engine car, know, everybody wants a good screen inside of it. They want a good cockpit experience.

They want LED lights, LED turn signals, ADAS, safety systems. So that that has narrowed some ins inside of those cars. So we’re positioned well in China, in in, you know, in markets in the West. We service about a thousand different automotive OEMs out of our 65 product lines, 60 ish ship products into into automotive. So very intentionally trying to be very broad based, so we’re not dependent on a region or a technology or, you know, one one sector inside of that.

Vivek Arya, Analyst, BFA Semiconductor team: Sick. Arthur, this is more kind of a broad subjective question, but how are you feeling about the second half of the year? Right? We are kind of middle of the year, you know, qualitatively versus what you might have thought, right, three zero six. So I get the, you know, cyclical recovery aspect, but there’s also been a lot of, you know, tariffs and other macro factors.

So how are you feeling about the second half versus the first half of the year?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Yeah, as we said at the earnings call in April, and it’s reflected in our guidance that we published at the time, we think we’re in the early stages of a cyclical recovery.

Vivek Arya, Analyst, BFA Semiconductor team: So it means no seasonality. Seasonality will not play a role

Rafael Lazardi, Chief Financial Officer, Texas Instruments: for just say that. So unlike some of your competitor, and just for clarification for others, we don’t update our guidance mid quarter. We don’t give a new guidance.

Vivek Arya, Analyst, BFA Semiconductor team: No body language. No.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: We don’t talk about further quarters other than the quarter. So I, you know, all I can give you is

Vivek Arya, Analyst, BFA Semiconductor team: But you are smiling, so I think that is a good sign.

Dave Wall, Head of Investor Relations, Texas Instruments: Said burrito.

Vivek Arya, Analyst, BFA Semiconductor team: Good to see you in an optimistic board. Let me ask this last question on pricing. There we have heard, we had some of your peers present earlier and they suggested that for some new designs, they are starting to see, they are kind of proactively pricing a little more aggressively. So my broad question is that first, are you seeing any of that phenomena and in general, are customers becoming more aggressive? Because they, you know, just like we see all this inventory on on their balance sheets, right?

They have to see it, they see all this capacity that you’re putting on. Are they getting to be more aggressive in asking for price concessions?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: So let me answer that last question first. And then the first question last. No. So we have the leverage in that situation. This is Oh, we have capacity, we have inventory, we’re going to ask for a price concession.

Not at all. We don’t have any pressure to drain that inventory. That inventory is long lasting. It’s not a fire sale, nothing anywhere close to that. So no, that’s not an issue.

On the first part of your question, we are the way we think about prices as we’re a price taker, we’re not a price setter. So whatever the market price is, we go and meet it. And that’s an oversimplification potentially because of course, parts are so complicated prices, but one of 10 different factors that they take into account. But at a high level, voltage regulator for this many volts and that meant that much current with this specs will sells for X amount. And then we go and price for X amount in order to win the business.

Got it. And what we’re seeing, I’m sorry, what we’re seeing from a trend standpoint is low single digit price declines on an annual basis. That’s what we’ve been saying for some times is the end of the couple of years now. Yeah, for a couple of years now. And that’s what we’re seeing and that’s what we’re expecting.

Got it.

Vivek Arya, Analyst, BFA Semiconductor team: Final question, know we are out of time. Capital returns, at what point do you think you’ll get back to kind of the prior trend line of buyback? Like as the CapEx comes down next year, does that start to help that?

Rafael Lazardi, Chief Financial Officer, Texas Instruments: Yeah, so big picture, over the last three, four years, our focus on capital allocation has been on the CapEx line to protect, to make those investments on cash to protect those investments and the dividend, right? To make sure we maintain the dividend and continue to grow the dividend. What took a second place was the buybacks, M and A and anything else on capital allocation. Another place that we protected was of course, R and D. And R and D we’ve actually continued to invest and even increase investment.

To your point, once we get to even late this year, but definitely by next year, when the 5,000,000,000 goes to something lower, the table start turning. And then we will do less CapEx. We’re in a cyclical upturn revenue will be up. And then that should translate to we won’t need as much cash on the balance sheet. All that translates into more cash to return to owners.

My expectation would be that you see buybacks to be higher than what they’ve been in the last few years.

Vivek Arya, Analyst, BFA Semiconductor team: With that, thank you for that. Thank you so much, Raphael.

Rafael Lazardi, Chief Financial Officer, Texas Instruments: All right, thank you very much.

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