Texas Instruments Maintains Its Leadership In Industrial Electronics
Despite declining revenues, Texas Instruments (NASDAQ:TXN) retained its position as the leading global supplier of semiconductors for industrial electronics in 2012, as per a research by iSuppli. After showing robust growth in 2010 and 2011, the industrial electronics market declined by 5.4% in 2012, on account of a slowdown in global markets where the chips are used – security, test and measurement, motor drives, metering, medical electronics, renewable energies, etc. Though TI’s revenue from the segment declined by 6.6% annually ($2.1 billion), it accounted for majority of the industrial electronics market last year. [1]
Having exited the smartphone and tablet markets in September 2012, TI is now focused on expanding its footprint in embedded applications such as industrial equipment, automotive, enterprise communications, etc. The company feels that the embedded markets offer greater potential for sustainable growth compared to mobile devices. TI derives 17% of its product revenue from the industrial sector, up from 14% in 2011. It showed increasing strength in industrial electronics in Q1 2013 and relies on the same to sell high volume and high margin chips. (Read: Texas Instruments Results Are Encouraging Amid Wireless Exit)
We believe that declining revenues from the industrial sector is more on account of macro factors. The sector tracks growth in the overall semiconductor market which had a challenging 2012 on account of soft consumer end demand. However, we believe that with improving macro conditions the semiconductor market and the industrial demand will pick up this year.
- How Will New iPads And Higher iPhone Pricing Help Apple Suppliers?
- With New iPhones Around The Corner, Are Apple Supplier Stocks A Buy?
- What’s The Outlook Like For Apple Vendors’ Stocks?
- What Has Driven Texas Instruments Stock Higher In Recent Years?
- Strong Sales Growth Has Helped Texas Instruments Stock Outperform The S&P
- What’s Behind Texas Instruments Stock’s Consistent Outperformance Of The Markets?
See our complete analysis of Texas Instruments here
|
(In USD Billion) |
2009 |
2010 |
2011 |
2012 |
|
Global Semiconductor Market |
230 |
304 |
310 |
303 |
|
Growth(%) |
– |
32.2% |
2.01% |
-2.32% |
|
Industrial Electronics Market |
21.1 |
28.9 |
32.2 |
30.5 |
|
Growth(%) |
– |
36.6% |
11.6% |
-5.4% |
Source: iSuppli
As per research firm iSuppli, the semiconductor supply chain has reduced channel and finished goods inventory which implies that the market demand has started improving. [2] Gartner predicts the semiconductor market will grow at a CAGR of 4.1% through 2016, and we forecast the rate to slow after that. We estimate the market for industrial electronics to grow at similar pace during the same period.
With $2.1 billion in revenue earned from the industrial segment, TI is considerably ahead of its closest competitors – STMicroelectronics ($1.47 billion), Infineon ($1.46 billion) and Intel ($1.34 billion). Though TI was negatively impacted by low demand for motor drives and automation equipment, it scored well in medical electronics and in the building and home control market last year. We believe that TI is well equipped to leverage future growth in the industrial electronics market and will retain its leadership for years to come.
Our price estimate of $36.31 for TI is in line with the current market price. We are yet to update our model to incorporate the reporting structure change.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- Texas Instruments, Intel and Infineon see lower revenues from anemic industrial electronics market, The Inquirer, May 10, 2013 [↩]
- Semiconductor Industry Enjoy Modest Climb in 2013 as Demand for Silicon Rises, iSuppli, March 18, 2013 [↩]