TI sees Covid-19 bounce back

TI sees Covid-19 bounce back

Business news |
By Nick Flaherty

Texas Instruments is seeing the recovery from the Covid-19 pandemic in the coming quarters, although the automotive market is holding the market back.   

The company’s second quarter revenue was $3.24bn, down 12 percent, with an income of $1.38bn. The company predicts higher revenues in the coming quarter as it reduces its dependence on distribution.

“Revenue decreased 12 percent from the same quarter a year ago, driven primarily by weakness in the automotive market,” said Rich Templeton, chairman, president and CEO of TI. “In our core businesses, Analog revenue declined 4 percent and Embedded Processing declined 31 percent from the same quarter a year ago. Analog and Embedded Processing both had positive sequential growth in the second quarter excluding the automotive market.”

“TI’s third quarter outlook is for revenue in the range of $3.26 billion to $3.54 billion,” he added.

The impact has not been as great as the financial crisis in 2008 as some areas such as IT and communications have remained strong as a result of home working as well as the medical market remaining strong.

“While second quarter did not experience the depth of the decline we saw in the 2008 financial crisis, nonetheless we remain cautious on how the economy might behave over the next few years,” said a spokesman.

“Overall the weakness was primarily from the automotive market. Automotive was down about 40 percent sequentially and down over 40 percent compared to a year ago. To help appreciate this impact, excluding automotive, TI was up 8 percent sequentially and down 3 percent versus a year ago. The automotive market appears to have bottomed in May as North American and European assembly plants resumed operations,” he said.

“The industrial market was up about 2 percent sequentially and also up 2 percent from a year ago. There are end-markets that are weak and others that are understandably strong, like medical. We do believe that some customers are trying to maintain strong inventory positions to limit exposure to any supply chain disruptions.”

Personal electronics was up over 20 percent sequentially and up about 10 percent compared to a year ago. This can best be explained by work from home trends and TI being in a position to support unforecasted demand in the second quarter.

Similarly the communications equipment was up 20 percent sequentially, but down 15 percent compared to a year ago. “Within this market, it’s important to note that analog achieved sequential and year-over-year growth, while embedded was down in both comparisons following our planned decline in this portion of the business. Enterprise systems was up sequentially and year-over-year. This strength, similar to personal electronics, is best explained by work from home trend and TI being positioned to support unforecasted demand,” he added.

The company is continuing to reduce its role in distribution to have greater control over inventory.

“Distribution-owned inventory declined again in second quarter by about $150 million, the seventh consecutive quarter of planned reductions as we continued the transition to have fewer distributors and bring more customers direct,” said Rafael Lizardi, CFO of Texas Instruments. “out of our 100,000 or so customers, I will guess 70,000 to 80,000 of those are in industrial.”

“Tactically and strategically, we are pleased. We have held total inventory dollars steady, while increasing the percent of inventory held inside TI and therefore in fewer places. This enables us to continue to maintain short lead times and high availability to meet unforecasted customer demand,” he said.

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