Can Automotive Segment Provide The Future Growth For Texas Instruments?

June 15th, 2016 by Trefis Team
-3.91%
Downside
173
Market
166
Trefis
TXN: Texas Instruments logo
TXN
Texas Instruments

While Texas Instruments‘(NYSE:TXN) overall revenues declined in 2015, its revenues from automotive segment saw an uptick. Further, iHS placed the company among the top 10 automotive semiconductor suppliers for the year 2014. For automotive applications, TI supplies a wide range of semiconductors for ADAS (advanced driver assistance systems), passive safety systems, electronics and lighting, as well as infotainment, drive-train control and other systems. Each of these sub-segments is expected to see strong growth going forward. According to a research report, the automotive electronics market is expected to grow at a CAGR of 8.4% to reach $353 billion by 2023. Given below are the key factors which justify TI’s increased focus on this segment:

1) Shift to HEVs (Hybrid and electric vehicles): Automakers have started overcoming challenges related to cost, battery-charging and market acceptance of electric vehicles, due to which HEVs will likely experience strong demand in the future. Further, the pollution control policies are likely to support the sales of HEVs. The demand for electronic components in these hybrid/electric vehicles is directly related to the sales these vehicles.

2) Growth of electronic components in the interior of cars: With growing connectivity and increasing need for comfort and safety, electronic components such as ADAS, passive safety and infotainment are likely to see strong demand from automotive companies. Although ADAS applications are in their nascent stage, these applications are expected to be an important source of revenue stream for semiconductor companies such as TI. According to reports, ADAS market is likely to experience a CAGR of more than 20% to reach $60 billion by 2020.

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3) Reduce the dependence upon smartphone sales of customers:  Apple accounted for approximately 11% of TI’s revenues in the year 2015. TI’s revenue declined by 5% YoY in Q1’16 as Apple’s iPhone sales slumped in this quarter for the first time since their introduction. Going ahead, as TI’s revenue from automotive electronics increases, its sales would be less affected from the stagnating smartphone sales.

Given below is a table showing how TI’s revenue from automotive electronics increased in 2015:

TI_Q&A_Automotive

Notes:

1) If you like or have any questions about our analysis, please write us back at content@trefis.com. We hope such lean communication sparks thinking, and encourages you to ask questions. The purpose of these analyses is to help you focus only on a few important things. 
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Texas Instruments

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