After Dropping In 2019, Can Texas Instruments’ Revenue Cross $15 Billion By 2021?

Texas Instruments’ (NASDAQ: TXN) total revenue has dropped from $14.96 billion in 2017 to $14.38 billion in 2019, but it is expected to rise to $15.4 billion by 2021. Total revenue has dropped from $14.96 billion to $14.38 billion, largely driven by a $560 million drop in embedded processor revenue.
We expect total revenue to remain roughly the same in 2020, owing to a drop in both embedded processor and other revenue, due to the ongoing trade war between the US and China and cooling demand for TI’s products in many end markets. However, things should get better going into 2021, driving revenue to $15.4 billion, owing to stronger demand from the communications space, with the advent of 5G networks.
Total revenue is expected to rise by around $1.02 billion over the next 2 years, on the back of steady demand growth.

Takeaway:

• Texas Instruments’ Analog Semiconductors division, which sells analog semiconductors to different industries such as Automotive and Industrials, is expected to contribute $10.27 billion to total revenue in 2020, making up 72% of Texas Instruments’ $14.34 billion revenue estimate.
• The Analog division, is more than 3.5x larger than the Embedded Processors division, which is expected to bring in $2.91 billion in 2020, making up 20% of the total revenue estimate.
• TI’s Analog division will bring in an additional $1.2 billion, which is 272% of the $440 million in total revenue that the company is expected to add between 2017 and 2021.
• This strong expected revenue growth has been key to TI’s ~75% price appreciation since January 2017, further helped by growing margins and a steady drop in shares outstanding.
• In our interactive dashboard Texas Instruments Revenue: How Does TXN Make Money?, we discuss TI’s business model, followed by sections that review past performance and 2021 expectations for TI’s revenue.

A look at Texas Instruments’ segments and their contribution to total revenue

Additional details about how Texas Instruments’ Revenues and Key Operating Metrics compare with that of Qualcomm’s are available in our interactive dashboard.

(A) Revenue from analog semiconductors to rise by $880 million over the next 2 years, to make up around 72% of total revenue in 2021

• Analog revenue first grew from $9.9 billion in 2017 to $10.8 billion in 2018, on the back of Texas Instruments’ increased focus on catering to the fast-growing automotive and industrial markets, which are witnessing an increase in semiconductor content.
• However, with the ongoing semiconductor downcycle, and trade tensions between the US and China, revenue dropped to $10.22 billion in 2019.
• However, with demand set to improve, we expect this metric to rise to $11.1 billion by 2021.

(B) Revenue from embedded processors to grow by $260 million by 2021, to make up 21% of the total revenue estimate

• Revenue from the embedded processors segment has dropped from $3.5 billion in 2016 to $2.94 billion in 2018, on the back of slowing demand and lower selling prices due to the semiconductor supply glut and US-China trade tensions.
• However, we expect things to get better, driving revenue from this segment to $3.2 billion by 2021.

(C) Other Revenue to drop $120 million over the next 2 years, and make up around 7% of the total revenue estimate in 2021

• This segment includes revenue from TI’s smaller semiconductor product lines and from sales of TI’s handheld graphing and scientific calculators.
• Revenue from this segment has declined steadily from $1.56 billion in 2017 to $1.22 billion in 2019.
• This segment sees relatively low R&D expenses, as calculators is mostly a legacy business, and hence has no additional assets or costs associated.
• We expect revenue from this segment to decline to around $1.1 billion by 2021.

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