Texas Instruments Incorporated (TXN) Credit Suisse 26th Annual Technology Conference (Transcript)

Texas Instruments Incorporated Conference Call Summary Company Overview - Company: Texas Instruments Incorporated (NASDAQ: TXN) - Event: Credit Suisse 26th Annual Technology Conference - Date: November 29, 2022 Key Industry Insights - Market Cycles: Texas Instruments (TI) emphasizes a long-term perspective, focusing on preparing for future opportunities rather than solely reacting to current market cycles. The company acknowledges the cyclical nature of the semiconductor industry but prioritizes strategic planning for the next decade [2][20]. - Sector Performance: The company has observed varying performance across sectors, with personal electronics and notebooks showing weakness, while automotive remains stable. TI anticipates corrections in these markets but does not predict exact timing [3][4]. - Industrial Growth: TI is optimistic about the industrial sector's growth potential, citing a strong position in industrial and automotive markets, with a market share above 60% as of 2021. The company is preparing for significant growth in the next 10 years [6][14]. Strategic Initiatives - Capital Expenditure (CapEx): TI is investing in capacity ahead of demand, with a focus on maintaining a competitive edge through its own manufacturing capabilities. The company believes it is better to invest early rather than late in the cycle [7][9][20]. - Geopolitical Dependability: TI is focusing on creating a reliable supply chain that reassures customers about the origin and availability of parts, which is crucial for long-term relationships [10][11]. - R&D Focus: TI maintains a steady investment in R&D, particularly in analog and embedded systems, ensuring that products are competitive in terms of cost and performance. The company has reallocated R&D resources to align with its competitive advantages [23][24][27]. Competitive Landscape - Market Position: TI's strategy differs from competitors like Analog Devices, as TI does not rely on long-term supply agreements due to its ownership of manufacturing plants. This allows for greater flexibility and responsiveness to market changes [15][16][18]. - China Market: TI acknowledges the competitive nature of the Chinese market, where local companies pose challenges. However, TI believes its breadth of product offerings and manufacturing control provide a competitive advantage [30][31]. Financial Outlook - Pricing Strategy: TI adopts a steady pricing approach, focusing on long-term market share rather than short-term price competition. The company aims to ensure that pricing does not hinder customer adoption [33][39]. - Cash Flow Projections: TI anticipates that investments in new manufacturing capacity will lead to improved free cash flow starting in 2023-2024, contingent on market conditions and revenue growth [40][41]. Additional Considerations - Supply Chain Management: TI emphasizes the importance of controlling input costs and manufacturing capacity to mitigate risks associated with inflation and supply chain disruptions [36][37]. - Long-term Investments: The company is committed to making substantial investments in capacity and technology, viewing these as essential for future growth despite potential short-term downturns [39][41].