Texas Instruments: Growth From Industrial and Automotive Set To Boost Revenues

by Trefis Team
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Texas Instruments (NYSE:TXN) is set to report its Q3 2017 earnings on October 24. The company reported strong numbers for Q2 as both revenue and EPS beat expectations driven by strong demand in the automotive and industrial segments. Additionally, its gross margin touched an all-time high of 64.3% in Q2 2017 on the back of an increasing proportion of analog production on 300mm fabrication facilities. We expect the growth momentum to sustain in Q3 2017 as well, as the industrial and automotive markets should boost the top line yet again.

As automation continues to gain traction in the industrial and automotive markets, the company’s management believes that these will be the fastest growing semiconductor markets in the near future. Currently, these two segments account for a majority of TI’s revenue and will be key growth drivers for the company going forward. Additionally, there is a possibility of a further increase in margins as TI shifts an increasing proportion of analog production to the 300mm production facilities.

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Margins Set To Improve Again

The company has shifted its production to 300mm analog capacity, as manufacturing analog ICs in 300mm fabs is 40% cheaper for the company as compared to production on 200mm wafers. TI can continue to benefit from this strategy for the next couple of years as the utilization for 300 mm fab units improves and economies of scale impact margins positively. Additionally, to increase its 300mm production, TI is likely to ramp up its production from its RFAB and DMOS6 facilities, which have 300mm production equipment. Thus, there is still room for margins to increase in the next couple of years.

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