Texas Instruments at Morgan Stanley Conference: Strategic Investments in Manufacturing

On Wednesday, March 5, 2025, Texas Instruments (NASDAQ: TXN) presented at the Morgan Stanley Technology, Media & Telecom Conference. The company outlined its strategic focus on domestic manufacturing and capital management, aiming for growth despite current market challenges. While emphasizing its robust capital expenditure plans, TI also addressed potential short-term impacts on margins.

Key Takeaways

• Texas Instruments is investing heavily in 300mm wafer fabs in Texas and Utah, supported by CHIPS Act funding.
• The company is maintaining a strong focus on free cash flow growth and strategic market positioning.
• TI anticipates an upturn in the semiconductor market and is preparing to capitalize on this with increased inventory and capacity.
• The company is expanding its presence in China by leveraging its manufacturing and technological advantages.

Financial Results

• Capital expenditure for 2025 is projected at $5 billion, with 2026 expected between $2 billion and $5 billion.
• Gross margins are projected to remain above 60% in most revenue scenarios, with potential short-term impacts from new factory underutilization.
• TI has been awarded $1.6 billion from the CHIPS Act and expects $6 billion to $8 billion in ITC benefits over the next decade.

Operational Updates

• Texas Instruments is expanding its manufacturing footprint with four new wafer fabs in Sherman, Texas, and additional facilities in Lehi, Utah.
• The focus is on 300mm wafer technology to enhance scale and reduce costs.
• Domestic manufacturing is prioritized, supported by ITC and CHIPS grants, to mitigate geopolitical risks.

Future Outlook

• TI is preparing for a semiconductor market upturn and aims to gain market share amid competitors’ capacity constraints.
• The company is repositioning its embedded business, with the new Utah factory expected to support growth.
• Expansion efforts in China are ongoing, with a focus on competitive pricing and advanced products.

Q&A Highlights

• While TI did not comment on specific partnerships like Nvidia, it noted the data center market’s potential.
• The company highlighted the significant benefits expected from the ITC over the next decade.
• TI does not foresee major impacts from tariffs, thanks to its diverse supply chain.

For more details, readers are encouraged to refer to the full conference call transcript.

Full transcript - Morgan Stanley Technology, Media & Telecom Conference:

Joe Moore, Analyst, Morgan Stanley: All right. Welcome back, everybody. I’m Joe Moore, Morgan Stanley semi conductor team. Very happy to have with us today from the management team of Texas Instruments, Rafael Lizardi, Senior VP and CFO and Mike Beckman, Director of IR. Thanks guys for joining us.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Good afternoon. Happy to be here.

Joe Moore, Analyst, Morgan Stanley: Thank you. So your Capital Management Day just happened a couple of weeks ago and you basically remain on message with the objectives. But can you just give us some of the few key points from that and how you guys are thinking about capital management going forward?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes. No, we are holding a steady hand, consistent messages we’ve had the last few years. We’re going to maintain levels of CapEx to make significant investment in manufacturing and technology, where we continue ramping our 300 millimeter wafer fabs in Texas and in Utah. And this year, we’re going to spend another $5,000,000,000 next year, somewhere between $2,000,000,000 and $5,000,000,000 depending on the opportunity. But in any market scenario, we envision getting back to trend line on our free cash of our share growth, which is what we think over the long term drives value for investors.

Joe Moore, Analyst, Morgan Stanley: Great. Thank you for that. Obviously, domestic internal capacity has been a big part of the strategy for the last several years. It seems like that’s probably helping you sleep at night a little bit these days given all of the uncertainty around it. Can you talk generally about the importance of having that U.

S. Footprint, the benefit that you see in kind of a geopolitically challenging world?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes, no, especially in the current environment and the geopolitical tension, our investment we think is going to become even more valuable. We are building a complex of four wafer fabs in Sherman, Texas. That’s in addition to the two wafer fabs that we have in Richards. And all of those are 300 millimeter wafer fabs. So the largest diameter on the wafer and that translates into scale, where the cost per unit drops significantly versus older generations.

In addition to that in Utah, in Lehi, Utah, we bought a factory there from Micron that we turned into an analog and embedded factory. And now we’re expanding a second factory right next to it, which is going to be a massive three level, 300 millimeter factory. So that puts us in a really great position to build there. Of course, we’re doing that with the benefit of the ITC, the investment tax credit and some chips grant funds that we were awarded last year. So that in addition to being 300 millimeter grade cost per unit scalable footprint is being helped funded by the ITC and the grants.

Joe Moore, Analyst, Morgan Stanley: Very helpful. Thank you. Some of your competitors when we’ve talked about this have sort of talked about a little bit more matching the manufacturing in the region of consumption. So trying to build China for China, Europe for Europe, things like that. Whereas you guys have much more of a domestic strategy, as you said.

Can you talk about the way you’re thinking about that and the reason that you’ve chosen to do it that way?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes. We think that to win in China is very important. We’re all in as far as selling in China. We about 20% of our revenue is based from customers that are headquartered there. And our CEO was just there last week and he came back super excited of all the wins that we’re getting there.

At the end of the day, Chinese customers are just like any other customer. They want the best product so that to be able to sell the best product to their customers. So in order to do that, they need the best parts. So we have the best parts. We have the broadest portfolio.

We have, as I talked about earlier, the manufacturing and technology footprint that gives us the best cost, which then that allows us to go and price in the even in the more sensitive end markets, price sensitive end markets. So we feel that we’re in a really good position to continue gaining share in China.

Joe Moore, Analyst, Morgan Stanley: Appreciate that. Thank you. So a lot of this is framed to me by the shortages that we saw 2021, ’20 ’20 ’2, ’20 ’20 ’3 where people realized that these geopolitical strains can put a lot of pressure on the supply chain. But we’ve now obviously gone from a shortage environment to a little bit of an oversupplied environment. Does that change customer priorities?

How aware are your customers of what you’re doing? Do your customers still ask you the question, even if they might be drawing inventory down to levels that are lean, they’re still focused on where your supply chain is and where their supply is going to be.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes. My sense is CEOs of our customers, senior leaders of our customers, they value, they appreciate what we’re doing. Okay. And that is a key motivator to design those in their parts or in their products. But the designer, the purchasing manager, they care more about the tactical things.

So we have to be good at the tactics and having the right part with the right features at the right price and also the strategic view having the manufacturing footprint that I was talking about earlier. My sense is that we’re in an environment now where many of our competitors are retrenching, are cutting inventory, cutting OpEx, cutting factories, shutting down factories. We’re doing the opposite. We’re investing, we’re building inventory and we’re getting ready for the upturn that at some point is going to happen. This we’ve been in this industry long enough that we know that the sun eventually rises again and we think that that’s going to happen.

And when that happens, we’re going to be ready.

Joe Moore, Analyst, Morgan Stanley: Yes, that makes sense. As I think about 2026, you’ve talked about on the Capital Management Day and other times CapEx of $2,000,000,000 to $6,000,000,000 2 billion dollars 5 billion dollars dollars I think some people were thinking of 2026 as a year where we start to see cash flow go above reported earnings, but it seems like at the low point of that, you’re right around your depreciation. So why couldn’t 2026 be a year where CapEx falls further than that and and you start to see that free cash flow going above reported?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes. So just to recap, this year $25,000,000,000 we’ll do about $5,000,000,000 in CapEx. For next year, as Joe alluded to, we have been saying that we’ll have a range of $2,000,000,000 to $5,000,000,000 and the $2,000,000,000 is the floor. And the reason for that is we need to that $2,000,000,000 is to put a lot of brick and mortar and qualifications in those factories that I talked about earlier that are not going to give us any revenue on day one or even on day two. But you need to have them so that once you have that, then you can go in a modular on a modular incremental capacity addition mode.

So that’s why we need that there. It would be penny wise, pound full is if we were to forego some of those investments just to get the CapEx a little lower.

Joe Moore, Analyst, Morgan Stanley: Yes. But there could come a year where your CapEx starts to fall well.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: I’m glad you brought that up. That ’26, the floor is $2,000,000,000 There’s no floor in ’27.

Joe Moore, Analyst, Morgan Stanley: Okay.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: So if there’s a persistently weak market, CapEx in 2027 can go pretty low.

Joe Moore, Analyst, Morgan Stanley: And then you mentioned we’re going to have an upturn. We’ve all been doing this. I’ve been doing this a long time too. Too. There will be an upturn.

I guess, is part of what you’re doing though sort of lessens some of that cyclicality because you’re going to have a lot more capacity. People will know that you’ll be able to deliver. You may not have shortages in the way that you did two or three years ago. And maybe that dampens a little bit some of the cyclicality

Rafael Lizardi, Senior VP and CFO, Texas Instruments: that we see. I’m hesitant to say that TI single handedly will dampen the industry cyclicality. But to your point, we’re going to have plenty of capacity, plenty of inventory, systems in place that will make that inventory more allow us to use it more efficiently where it’s most needed. So the end result of that should be serving our customers a lot better so that they don’t have to get to a position where they’re placed where supply is tight, demand and supply are tight, and then they’re having to double or triple order in order to get what they want. So potentially, we could alleviate cyclicality.

I’m more on gaining market share. When that upturn comes and our competitors are short of inventory, short of capacity and we have plenty of that, then we’ll be in a really good position to gain share.

Joe Moore, Analyst, Morgan Stanley: Yes. Okay. That makes sense. So I guess where this all comes to fruition is kind of gross margin. You said at the midyear Capital Management Day last year that under the sort of low end scenario, you would be at 60% plus gross margin.

You’re about 55 now. So obviously, right now, you’re at 55%. There’s a little bit depressed because of the lower utilization. Do you still feel like 60% is kind of the right long term?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Let me correct, I think, what I heard you say. What we said of the four scenarios, the top three, yes, would be 60 plus. Okay. The bottom scenario, which was $20,000,000,000 of revenue, would be below 60 Okay. Slightly below 60% gross margin.

So that was on the four scenarios of $20,000,000,000 20 2 billion dollars 20 4 billion dollars and $26,000,000,000 for $2,026,000,000,000 dollars Okay.

Joe Moore, Analyst, Morgan Stanley: But that’s still those are still the right numbers?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes. Those are still the right numbers. And the way you get there, you don’t have to choose our revenue. You can pick whatever revenue you believe, just follow it through at 75% to 85%. And for the next few years, use 85%.

And then subtract the increase in depreciation, which I’ve given on the last earnings calls and the last capital management calls and you can model your own gross margin. But that’s about what you should get under those revenue scenarios.

Joe Moore, Analyst, Morgan Stanley: Okay. And then Dave and Mike were helping me understand how you manage the underutilization sort of expensing in a quarter where like last quarter you saw lower somewhat lower utilization, you take that pain kind of in the quarter where the utilization is low rather than running at FIFO, right?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: So you Correct. That’s what underutilization is.

Joe Moore, Analyst, Morgan Stanley: It’s fixed costs that are not attributable to wafers that you’re running. So then you let it fall through in the quarter. And essentially charged at the quarter where the wafers are in the fab, not when

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Well, you don’t have those wafers. So you charge that cost when the wafers are not in the You have over two hundred days

Joe Moore, Analyst, Morgan Stanley: of inventory. So if you run it through FIFO, it would take you a year to see the impact of that lower utilization, right?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: And in fact, it would not be GAAP. So we couldn’t do it that way.

Joe Moore, Analyst, Morgan Stanley: Okay.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: So the way you do it by for GAAP, Yeah. Let’s say you’re what you call normal utilization is 90%. If you’re running at 90% or higher, everything that you spend, you inventory. Okay. If you’re running at 80%, you take that 10% delta of 90% to 80% and then you apply it to all your fixed costs, depreciation, some of your people costs, some of your electricity and then you take that cost and you don’t put it in inventory.

You let it fall through on the P and L that quarter.

Joe Moore, Analyst, Morgan Stanley: Okay. But last quarter you had lower utilization and your inventory still kind of went up again? We built inventory on top of having lower utilization. Yes. Okay.

So the implicit the idea that you’ll pay back at that utilization requires a revenue recovery, I guess, obviously.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: That’s right. We need revenue.

Joe Moore, Analyst, Morgan Stanley: Okay. Okay, great. Maybe we could talk about some of the markets. In industrial, one interesting point from your Capital Management Day was you talked about 700 to $1,000 of contents in industrial robots. How are you thinking about that?

Like I feel like TI kind of doesn’t talk about those speculative markets maybe as much, but you have a lot of opportunity if those markets take off. And when you make these investments into autonomous driving and things like that, if they take a long time to get into cars, they may show up other places first. Can you just talk about how you guys think about those verticals?

Mike Beckman, Director of IR, Texas Instruments: Yes. Maybe I’ll add and Rafael will jump in. But it is a great opportunity, I think the humanoid robots and just robotics in general. Yes. The content that you see in those is incredibly rich.

I mean, you’ve got for every joint, if you think of a humanoid robot, there’s a motor controller, there’s an encoder, there’s radar systems, there’s camera systems, there’s interface systems inside of those. There’s just a lot of content opportunity in those. You talked about the size of dollars. Now I’m not going to speculate on how quickly that market will grow or what that’s going to look like in five years or ten years. But the idea is we want to make sure we’ve got the best portfolio to serve it and it’s a great opportunity for TI.

So if it does well, we will benefit. But it’s not going to be the only place that we have designed it, but it’s a great opportunity. And I think robotics in general is an area that is small and growing for us. Yes. And I think in general in the industry it is and it has a good potential to be a fast grower over time.

Joe Moore, Analyst, Morgan Stanley: And how do you guys feel about the industrial market at this point? We’ve been undergoing one of the tougher corrections that I’ve ever seen in terms of the drawdown. Feels like we have to be shipping below consumption. Do you guys feel that way? And how do you see the market?

Mike Beckman, Director of IR, Texas Instruments: It is a great market. I mean, it is it’s a diverse market, as we just mentioned. It’s a very long lived market. And when you win a socket in industrial, in many cases, these are multi decade long socket wins. And so it is a good market to be in.

Obviously, we’re going through an inventory correction in this industry. And as Rafael pointed out, we want to be ready because it will recover and we want to make sure we have the right inventory position, design and momentum, make sure we have the right portfolio to have it. And I’ll tell you, having a catalog or general purpose as well as an application specific standard product or ASSP portfolio, having both of those things make it really a compelling market to be a part of because you really can get a lot of socket opportunity with those two types of products.

Joe Moore, Analyst, Morgan Stanley: And when you talk about a market like robotics or something new, do you have organizations that are framed around that? Do you have vertical exposures within? I know it’s a catalog focus, but do you use steering those catalog focuses into certain verticals?

Mike Beckman, Director of IR, Texas Instruments: We do. So we have a first of all, we have a product set of teams that are structured and do product development by product family type. Kind of you go to our website and you look at the product families, that’s very similar to how you see our product teams that are organized. We also have a team of a marketing team or systems engineering and marketing team that knows the applications really well and helps us make sure that as there’s emerging opportunities such as robotics or industrial automation or medical opportunities, they are very deeply ingrained in what those applications are going to need and are evolving to. So they help find intersection points in the products we already have, but also help inform the roadmap to make sure that as we’re developing products, we have them.

Often a good general purpose or application specific standard product can serve multiple markets, multiple end equipments. And so they really help make sure that we’re plugging those sockets in as many of those as possible and also informing the roadmaps to make sure that if it needs to have in the embedded space, for instance, if it needs to have AI accelerators built into the chips that we have those put in there. So they help inform the roadmaps.

Joe Moore, Analyst, Morgan Stanley: Great. And then also thinking about automotive in the same context. I mean, there’s such a wide spectrum of analog componentry that goes into a car. A lot of the dollars is in more commodity powered discretes, which I know you’re not participating in, but a lot of the battery management is very expensive, high capability stuff. How do you think about verticalizing that market and deciding the right way to even if it’s a catalog approach to right places to align those resources?

Mike Beckman, Director of IR, Texas Instruments: Yes. I think it’s it goes back it’s similar to industrial and making sure that you have a broad portfolio that can address multiple things in a vehicle. And as you may be aware, we look at a vehicle, there’s more than just one socket in the vehicle. As you know, there’s we split it into five sectors, ADAS, infotainment. We’ve got body electronics, lighting, powertrain and powertrain EV, the kind of five sectors that sit inside of there.

And every one of those sectors has growth opportunities within it. And in fact, there’s a lot of folks talk about the EV opportunity, the battery electric vehicle opportunity. But even in internal combustion engine vehicles, the ADAS systems are developing, the infotainment systems are developed, the body and the lighting systems are far more advanced than they were even five years ago. So what does that mean we have to do from a roadmap perspective and a product portfolio perspective? It means you do have to have those, I use the word general purpose products first because a lot of times when someone is iterating design and doing innovation, they’re going to start with using those components to put together a new development.

Over time, that sometimes evolves into application specific standard products. So having both of those becomes really important. So you have to have a portfolio that’s in a roadmap that’s structured to head in that direction and we have. I think for, gosh, more than a decade, we’ve had most of our product lines building products for automotive, but also industrial. And we try to do as much as we can to make sure they can serve more markets, not just one single end equipment.

Joe Moore, Analyst, Morgan Stanley: Great. And so one of the things that stood out from Capital Management Day was you mentioned having a cost structure to be competitive in China, and you talked about the importance of China. In automotive, in particular, it seems very clear that a lot of the center of innovation has migrated to China at this point and you said you’re growing there. So how do those two things come together? You’re going to be in that market.

Do you see it as a market that’s more price competitive? Can you dissuade local competition with pricing? Just how do you think about China as being distinct from the rest of the world?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes. We’re doing very well in China. As I think I’ve mentioned earlier, our CEO was there last week meeting with customers and came back super excited. We’re gaining share. Our manufacturing footprint 300 millimeter with the ITC benefits and everything is putting us in a good in a really good competitive position.

We price based on what the market demands. We don’t set the price. The market sets the price. And we have based on our strategy and our manufacturing footprint, we have the capability to get to the price that needs to that we need to get to. But price is only one factor that customers care about.

It’s not the top three. Yes. Right. So there’s a lot of other things where our technology comes into play and then the broad portfolio and our quality and our sales force that puts us in a those are our competitive advantages and puts us in a position to do well in China and everywhere else.

Joe Moore, Analyst, Morgan Stanley: So you’ll be price competitive where you need to be, but it’s the first thing that you’re leading with? Correct. Yes. Okay. And what is the state of Chinese competitors?

Do you expect Silerje was here the other day talking about making progress in the analog space. I don’t think they’re really automotive grade the way we would consider it at this point. But what is the status of that? And you obviously have dealt with competition in all markets at all times. But is it different in a market where maybe a tie goes to the local?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: My sense is there’s clearly some pressure, some incentives for local Chinese companies, our customers to use local competitors. But right now, just to give you the big picture, out of the entire market in China, the consumption in China of semiconductors, about 15% of that is coming from local competitors. Okay. About 15% is coming from Texas Instruments and the other 70% is coming from other Western suppliers and Japanese suppliers. Yeah.

So we’re competing with the local players, but we’re also competing with that 70%. And that 70%, they’re not all in on China is my sense. And you heard some comments from some of them even here over the last day and a half. So we compete well with the local suppliers, but we compete even better with the Western suppliers that are not putting they’re not as focused in China as we are.

Joe Moore, Analyst, Morgan Stanley: And if you see China being more successful in the export market, whether that’s in regions where there are no tariff concerns or even migrating their manufacturing footprint into areas that do, seems like that’s a good thing for TI?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: That is a good thing. I’m glad you brought that up. As much about 20% of our revenue is for customers that are headquartered in China, but a good chunk of that 20% is for export. So it’s not for consuming China, but it’s put in some car or in some product that then is exported out of China. And there, the Chinese have to be just like any customer globally competitive.

So the best product is the one that’s going to win.

Joe Moore, Analyst, Morgan Stanley: And that’s where we feel confident that we have some of the best products. Okay, great. I wanted to shift to microcontrollers and the embedded business. You guys made no secret of kind of underperforming a little bit in that business. But some of that is repurposing and reorienting around a catalog MCU.

Can you talk about the strategy there and what you see is happening? Yes.

Mike Beckman, Director of IR, Texas Instruments: I’d be happy to do that. So if you look at the embedded business today and over the last, I’d say, five years or so since Amikai joined and started leading that team and really making sure that it leverages what TI is good at. The competitive advantage that we have of manufacturing technology, broad portfolio, reach of channel diversity and longevity. If you look at where embedded was probably a decade ago, it didn’t really benefit from those things as much. A lot of it was built externally.

The portfolio was smaller, more large complex SoC type developments. The reach of channel didn’t benefit as much because we’re talking about a handful of customers versus a huge number of customers. And so what advantage do the how do those competitive advantages line up to help in that scenario? And what Omnicai has really done is build out, first of all, bring as much internal as possible and Lehigh helps with that. It runs process technologies that both embedded and analog can use, but embedded certainly benefits probably the most from that.

So you have a benefit in internal manufacturing with Lehigh. You have a broader portfolio. I’d encourage anyone here who has a moment to go to the website, look at microcontrollers or processors or DSPs or wireless connectivity or radar chips on our website, look at the product folder, look at the number of new next to product names. There’s just a tremendous amount of release that’s gone out in the last couple of years. And it’s not just one device, it’s a family of devices.

And so to be successful in embedded, you have to have families of products. And so what we’re doing is building out a portfolio that then wins many large multitude of diverse sockets versus one single large socket. And if you look at what that business starts to look like, it starts to look like a business that benefits from TI’s advantages. And that’s the restructuring that we’ve really worked on over the last several years. And I think we’re seeing really good progress in that, and it makes it a very compelling opportunity for us.

Joe Moore, Analyst, Morgan Stanley: Yes. Great. And that’s at margins that are similar to the rest of the business gross margin?

Mike Beckman, Director of IR, Texas Instruments: I’d say that in terms of gross margin, the point we really think about is, is this a business that’s going to help us grow free cash flow per share faster for TI? Okay. Embedded does that for us. It is a business that not only now benefits from those advantages, it also strengthens those advantages.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Short term embedded is taking a bit of a hit because the new factory that we have in Utah is disproportionately an embedded factory Because it’s underutilized that’s taking a hand that’s giving it a hit on gross margins and operating margins. But just like now is a headwind in the future as we load it, it will be a tailwind. So embedded will get a disproportionate benefit as we move more external load ins internally.

Joe Moore, Analyst, Morgan Stanley: Okay. Okay. Very helpful. And then I guess consumer. Consumer has gotten kind of big personal electronics, largely because everything else has been weaker.

But that tends to be a business that you guys look at a little bit more opportunistically. Can you just talk about that personal electronics business? Yes.

Mike Beckman, Director of IR, Texas Instruments: I think that’s the right way to look at it. And it’s a market where a lot of the end equipments, the handsets and laptops and gaming and headsets and peripherals like that are kind of in a saturation replacement mode. Unless you find another planet of people to sell cell phones to, you’re kind of now in refresh. And so there’s opportunities there and there’s good places for us to participate, but we want to be proportional to the opportunity. And when we look at the markets that we play in, automotive, industrial, the opportunities in data center, those are places that we want to make sure that we have R and D biased toward because of the opportunity there.

But it doesn’t mean we don’t want to ever participate. It means there are still opportunities we want to have, but we want to have them right sized to the opportunity that we see.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Got it.

Joe Moore, Analyst, Morgan Stanley: Okay. And then just last question from me. I’ll open it to the audience. But do you guys think about market share in analog? Do you because I know there’s been some fluctuations and shortages played into it and how much who had inventory and who didn’t at various points played into it.

I know there’s a view that there’s a mean reversion kind of share gain coming for you guys. Just do you think about that at all? And just or do you look at it more opportunity by opportunity and the market share will kind of fall where it falls?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: No. We look at it both ways. And we don’t rest on our laurels just expecting some regression. I think what you’re referring to on that front, some of that is fair, which is when you hear customers competitors talk about long term service agreements and CSPs and that sort of thing. And there was also pricing.

There’s a lot of distortions in the last few years that you have to wait until that kind of settles and moves out before you make a real assessment, a more accurate assessment of market share movements. But that is those are some kind of macro factors. But in addition to that, we go customer by customer, socket by socket and fight those out to make sure that we get our unfair share of those.

Joe Moore, Analyst, Morgan Stanley: But if you look at like the growth versus like, let’s say, the Semiconductor Industry Association analog segment, there’s a lot of stuff in there that we don’t want to participate, right? Low margin commodity stuff. Is high performance analog as a category still outgrowing that broader group,

Mike Beckman, Director of IR, Texas Instruments: do you think? I have the data in front of me to compare the two, but I would say that in terms of where we see the opportunity over time being the greatest

Rafael Lizardi, Senior VP and CFO, Texas Instruments: for

Mike Beckman, Director of IR, Texas Instruments: us, it’s going to be in and when I say high performance analog, that’s a very important piece. But power management, whether it’s and we like to use the term general purpose and application specific standard product because that kind of covers the range of the spectrum that we like to cover. And when I say general purpose, that’s not what you described as commodity products. It’s really these are products that are they’re everywhere, they’re pervasive. They’re not interchangeable, but over time, we can definitely design in and gain traction on the application specific side, despite what you’re thinking of more high performance.

And we have some of those really, really high performance devices too in the portfolio. We want to have both of those things. And so having the combination of those, we think, is going to help us and be able to grow faster.

Joe Moore, Analyst, Morgan Stanley: Great. Let’s open it up to the room if there’s any questions here. There’s one in the front here.

Unidentified speaker: I have two questions. So like last year, like media announced like Texas Instruments has been the strategic supplier or partnership with TI. So but like I see from your last call report for the enterprise system, which related to the data centers, actually you have a low single digit downside. So it means like also at the same time, Fini also being a downside strategic supplier of NVIDIA, but they still big business for NVIDIA. So I just say like what’s the exposure of TI business to NVIDIA’s AI systems?

The first question. The second question is like also in your last quarter report, you’re saying you have like a RMB 1,500,000,000.0 direct funding from Chips Act. But like this week is announced like this may be canceled. And also the time line you mentioned, because this RMB 1,500,000,000.0 is like 2026 next year. So that means like a will it impact your plan to get funding?

Thanks.

Mike Beckman, Director of IR, Texas Instruments: Maybe I’ll cover the first one and you can go to the second one. So I won’t comment on a specific customer or a specific socket, but what I will say about data center in general is it is a good opportunity for us. And it’s if you look at where the opportunity is, it’s in power management is a big part of that, but it’s even beyond that. If you look at the content opportunity inside the data center, there’s quite a bit there. And today, we’ve got a substantial business in data center.

If you look at the size of our enterprise business, it’s large. And as we look at where we are allocating R and D toward, we want to make sure that we are a strong player there. The new process nodes that we’re building in SM1 are going to play an important role in that. And so it is an area, you heard me mention areas where we bias R and D, industrial, automotive and with the focus as well in enterprise and data center.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: And on your last question, so last year in late December, we announced that we were awarded $1,600,000,000 of direct funding from the CHIPS Act, the so called grants. So that was an agreement we signed with the government. And we are not aware of any we have not been told, have not been informed of any changes to that. There are several milestones that we need to complete and we’re in the process of working towards those milestones in the factories in Sherman and the factory in the second factory in Lehigh. Let me stress, as we’ve always said that the bigger portion of benefit from the CHIPS Act legislation is the ITC, the investment tax credit that we expect to get benefits of $6,000,000,000 to $8,000,000,000 over the course of the next ten years or so.

And we’ve already received cash benefits of about $600,000,000 and expect $700,000,000 to about $1,000,000,000 this year.

Joe Moore, Analyst, Morgan Stanley: I guess on the topic of kind of all the geopolitical questions that are happening right now, it’s got to be very difficult to run some of these businesses when there’s tariffs that are maybe coming, going. We don’t know if they’re going to be there. Do you see any different behavior? Do you think people are pulling things in to deal with tariffs? Or just anything that’s different because of all of this?

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Yes. It is difficult and uncertain. But fortunately for us at least, we don’t expect any meaningful significant direct impact on tariffs. Of course, indirect, if the world’s GDP is affected, then we’re going to be affected. But direct tariffs, because we have such a diverse footprint and supply chain, particularly with the assembly test operations, we can reroute supply chains so that not to minimize the impact on tariffs on ourselves and our customers.

So for example, while we have an assembly test operation in China, what we can do is the products built in China just not ship those to The United States. And instead we have plenty of AT capacity in Malaysia, in The Philippines, in Mexico and other places where we can then reroute those to customers in The United States to minimize the tariffs there.

Joe Moore, Analyst, Morgan Stanley: Great. Thank you for that. The question? Mic is coming.

Mike Beckman, Director of IR, Texas Instruments: I was wondering if you could help us understand or size the amount of application specific revenues compared to catalog either industrial, automotive or both? It’s a and there’s not a clear cut line to say, okay, this is ASSP and this is a general purpose product. They are roughly proportional in size. So it’s not like one is 90%, the other one is 10% of the business, I’d say. And again, it’s a spectrum.

Very clear, it’s not like it’s there’s devices in the middle where you probably one person would say it’s an ASSP and someone else would call it a general purpose. That’s why I’m very careful. It’s not like there’s a clear way you can always say whether one is or not. But they’re similar in size, best way to describe it, inside of our total revenue.

Joe Moore, Analyst, Morgan Stanley: Other questions? Okay, we’ll wrap it up there, Rafael. All right. Thanks so much.

Rafael Lizardi, Senior VP and CFO, Texas Instruments: Thank you so much.

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