How Much Will Embedded Processing Segment Contribute To Texas Instruments’ Top Line Growth?
Texas Instruments (NYSE: TXN) has performed strongly over the past couple of years. The company saw its revenue grow by just over 7%, while its stock increased by 17% between 2015-2017. The Embedded Processing segment contributes nearly 23% of the company’s overall revenue and was the fastest growing segment, at over 12% annually between 2015-2017. The strong growth was largely due to robust performance in the automotive & industrials market.
Based on recent market trends and the near-term outlook provided by the company’s management, we forecast TI to report 4-5% revenue growth in the next two years, from $16 billion in FY 2018 to about $17.5 billion in FY 2020. Of the estimated $1.5 billion added to net revenues, we estimate that the Embedded Processing segment will contribute over $300 million, or about 21% of the incremental revenues. We have summarized our expectations on our interactive dashboard platform. If you disagree with our forecasts, you can change the key drivers for the segment to gauge how changes will impact its expected revenue.
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Estimates for Key Growth Drivers
The Embedded Processing segment contributes nearly 23% of the company’s overall revenue and has been the fastest growing segment, at over 12% annually between 2015-2017. This was largely driven by robust performance in the automotive & industrials market. Texas Instruments, with about 18% market share, is amongst the leaders in the Embedded Processing market and is well positioned to increase its share over time.
Embedded Processors are the “digital brains” of electronic equipment. They gather input from analog chips and are optimized to handle specific tasks and functions depending on the application. In the automotive industry, some applications for embedded processors would be infotainment systems and advanced driver assistance systems (ADAS), whereas industrials use cases can vary from robotic assembly lines that utilize sensing technology to run autonomously and accurately, to sensors in tanks that assess fluid levels. Accordingly, we believe that the Embedded Processing segment holds considerable growth potential for TI, as a result of the increasing demand for Microcontrollers and Processors from automakers, driven by autonomous and semi-autonomous vehicles and other technological advancements, coupled with strong demand in the industrial segment.
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