Introduction
Texas Instruments Inc., commonly abbreviated as TI or TXN, refers to a leading technological firm that deals with manufacturing semiconductors and integrated circuits (ICs). It was established with the name of Geophysical Service Inc. (GSI) as an oil and natural gas exploration service in 1938 and now operates in over 35 nations. It is best known for its analog semiconductors, microcontrollers, digital signal processors, and integrated circuits, and operates in the automotive, industrial, communications, and consumer electronics industries.
Recent Performance And Market Position

Graph representing TXN’s revenue from the years 2019 to 2023
Source: Stock Analysis- Texas Instruments Revenue
Texas Instruments earned a revenue of USD 17.5 billion in 2024. While Q3, its revenue was USD 4.14 billion, and both revenue and EPS beat consensus by 1% and 7% respectively, in Q4 2024, its revenue guidance was 3.7-4 billion USD, which was significantly below street estimates.
Over the last 5 years, the company has demonstrated a compounded annual growth rate of 6%. TI’s profitability margins are considerably higher than many peers in the semiconductor industry. In 2023 the company posted a gross margin of 66% indicating strong operational efficiency.
The TXN stock has carved a niche among investors because of the high returns which are typically higher than industry standard and broad market averages. This stock has been considered as a steady stock and has been delivering an increased dividend payment for 18 years continuously. The TXN stock closed at an all-time high at USD 212.91 on August 30, 2024.
The company focuses on returning capital to shareholders through dividends and repurchasing.

Graph representing the rise in TXN’s stock price over the years
Source: MacroTrends- TXN stock price history
The company showed spectacular performance in the automotive sector, with a 7.5% quarter-over-quarter growth. These numbers were largely driven by the 20% quarter-over-quarter growth in China for 2 consecutive quarters.
Growth Drivers
TXN’s innovative technology and effective implementation of strategies have maintained its long-term cash flow. It deployed a 3-prong plan to realize its growth strategy: A clearly defined business model focused on Analog and Embedded Processing products, disciplined capital allocation, and continuous improvement. Here is an overview of the various factors that have driven the company’s growth:
1. Innovation and Recruitment strategies
In view of the close ties that the company has with the semiconductor industry in China and that a significant portion of its business and market share comes from China, TI Inc. has established relationships with Chinese universities and research institutions, thus making a notable contribution to the semiconductor market in China.
Since it was established, the company ensured that it has the best human resources in the market. This contributed to the development of a culture of innovation and the researcher had to strive to embrace the new technologies and engineering solutions. Retirement and benefit plans that are well designed and reasonable, allow TXN to attract the best professionals in the field. Employee satisfaction plays a crucial in the company’s human resources management, employee financial well-being, and corporate image.
However, the globalization process of the company is also ongoing, which has improved its supply chain diversification, advanced its technology, and protection of intellectual property.
2. Rich product portfolio and multiple applications of products
TXN has a rich history of innovating products with diversified use cases, creating ripples in the domestic and military spheres.
For example, the first ICs created by the company in 1958 were used by the US Air Force in 1962 in its first intercontinental ballistic missile. The same chip found application in 1964 in hearing aids that were created by TXN in collaboration with Zenith Radio Corporation, as well as in 1967 to create handheld calculators that were only 45 ounces. The first single-chip speech synthesizer also invented by Texas Instrument made great contributions to the development of the auxiliary learning tool market.
This rich product portfolio established TXN’s credibility in manufacturing and technology leadership. Its product line is extensive and supports the main product architecture of the company through analog products, embedded processing products, and other businesses such as calculators and DLP products. They have a total of more than 80000 products over most of the electronics industry.
In addition, products like the embedded processing products increase intimacy and continuity of cooperation with customers long term.
3. Strategic Corporate Social Responsibility
TI Inc. in 2022 implemented 2 factories in Richardson, Texas, and Lehi, Utah for 300-millimeter wafer manufacturing. Moreover, the facility for 300- 300-millimetre wafer production in Sherman, Texas is also put on the agenda and planned to start. There are several similarities between the factories that have started construction-
- Both of them are attached to existing buildings and have Leed environmental ratings. The facility in Lehi is connected to the existing building in the new LFAB2 ensuring an efficient and environmentally friendly synthesis.
- The planned factory in Sherman will bring more jobs than the Lehi factory, however, both will focus on environmental production and investment in education to foster a diverse technology community.
- The Sherman and Lehi facilities will cost 30 billion dollars and 11 billion dollars separately and it shows their emphasis on the core of supply chain and sustainability.
These efforts show their commitment to the development of social responsibility in terms of environmental sustainability and employee satisfaction. In addition, it was seen that in 2022 the company’s growth from automotive and industrial markets offset the downturn in mobiles and computers. Hence, its CSR-inclusive long-term strategy on 300- 300-millimeter wafer production has already cut costs by 40% and will likely decrease even more. It also received tax incentives and subsidies as a result of the passage of the CHIPS Act, improving its growth prospects.
Risks To Growth
The first risk to the growth of Texas Instruments was the impact and aftermath of the COVID-19 pandemic which affected the entire industry of semiconductors, making it a big challenge for decision-makers to be aware of current demand and trends and appropriately allocate resources. However, there is a bright side. The semiconductor industry is now influenced by new innovations such as artificial intelligence (AI) and electric vehicles (EVs) which have been a bright spot for the industry amidst other challenges. Texas Instruments has particularly capitalized on China’s EV growing EV market.
The second risk is related to supply chains and manufacturing. The supply chain of the semiconductor industry relies heavily on third-party providers for key materials, natural resources, new technology, and timely services. Any failure on the supplier side leads to unprecedented and expensive damages. For example, in 2011 an Earthquake off the Pacific Coast of Tohoku led to extensive damage of hydrogen peroxide and the supply distribution of automotive microcontroller units that are used in the manufacturing of semiconductors. This came as a huge shock to the semiconductor industry.
The industrial segment has been a primary concern for TXN as peak-to-trough declines were massive, exceeding 30%. A persistent downfall will impact its overall revenue. In addition, the industrial sector has a higher margin than consumer electronics. A prolonged downturn could gravely impact TXN’s operating income and long-term strategy, forcing reconsideration of long-term strategy and affecting market position
Texas Instruments has also been investing heavily in capital expansion, hence a prolonged downturn in the semiconductor cycle can lead to underutilization of facilities, raising cost per unit and resulting in lower efficiency. An exaggerated downturn in the semiconductor industry will also lead to missed analyst expectations and impact investor confidence, risk projected cashflow, and exacerbate inventory management issues.
Accounting Analysis
The following accounting analysis has been written in comparison with four other competing companies namely: Integrated Electronics, Advanced Micro Devices, Broadcom Inc., and Qualcomm Incorporated. These companies are strong competitors in terms of product overlap, global presence, loyalty programs, market share, etc.
1. Revenue Recognition:
This is a simple and fast accounting standard which is clear in the immediate recognition of revenue and is conducive in reflecting the overall economic condition of the enterprise. Since direct sales and payments to distributors do not usually depend on subsequent sales, revenue recognition could reduce risks. In the revenue recognition of Qualcomm Inc., it explains how customer incentive arrangements are handled with a complete set of accounting methods and audit provisions for the implementation of this policy. However, in the statements of TI Inc. concepts such as the rebate part of the cooperative advertising program that will lead to a reduction in revenue and in certain special circumstances will be considered as expenses are only briefly mentioned. In such cases, more detailed explanations to investors can reduce misunderstandings.
2. Restructuring Charges
: USD 257 million of restructuring charges was incurred in the financial year ending 2022 by TXN. However, the justification for such high charges was restricted to the cost of the facility at Lehi and the pre-production cost. On the other hand, competitors like Intel’s restructuring charges were specified and had conviction describing the cost, the financial effect, and when the restructuring was expected to be complete, and Broadcom which mentioned restructuring charges, which included lease-related impairment and other expenses that were relevant to discontinued operations. The absence of such communication from TXN can lead to many adverse effects in terms of investors, and stock prices and raises accusations about distorted financial reports.
3. Retirement Plans:
TI Inc. has diversified and clear retirement plans. It offers defined contributions, retiree healthcare benefits, and deferred compensation for different qualifications. In this case, only Intel’s description of retirement plans is comparable to Texas Instruments Inc. The company’s comprehensive and clear retirement plan is conducive to better management and evaluation by stakeholders and investors. As mentioned before, a well-designed retirement plan and reasonable benefits are a competitive advantage in recruiting top-tier professionals.
Performance Evaluation
1. Liquidity performance:
The liquidity ratio of TXN is the highest among all companies. Its current and quick ratio are abnormally high showcasing capability to pay off short-term obligations. The exaggeratedly high liquidity ratios are due to many short-term investments which account for nearly half of its current assets. TXN’s short-term investments include $ 1535 million of corporation obligations, $ 4234 million of U.S. government and agency securities, and $ 248 million of non-U.S. government and agency securities. To make short-term investments for high liquidity is reasonable, however, the company should focus on investing more in operating costs to boost profits in the long run.
2. Solvency Performance:
TXN has good solvency since its total debt ratio and long-term debt are within normal ranges and it has the highest Time-interest-earned ratio. Its total debt ratio showcases that it has managed debt well to build and expand business and its long-term debt ratio can be interpreted as an impressive extent of leverage. Its time-earned ratio means TXN poses fewer risks to investors. It will be outstanding for TXN to maintain its total debt and long-term debt ratio while increasing the times-interest-earned ratio for optimum utilization of debt for product development and business expansion.
3. Profitability Performance:
TXN has strong profitability in the semiconductor industry based on its ratio. TXN’s profit margin ratio means that it is able to effectively control its costs and provide goods at a price significantly higher than costs. The high operating margin ratio suggests that TXN is potentially less of a risk as it shows the sufficiency of funds to cover non-operating costs. Considering TXN’s asset turnover ratio, it needs to improve asset utilization to make profits. The company can choose to increase revenue, improve inventory management, or lease instead of buying assets to augment its asset turnover ratio.
4. Investment Performance:
High ROE implies that TXN is efficient at managing capital invested by shareholders and high ROA suggests that the company is profitable in relation to its total assets. TXN’s market-to-book ratio is over 1, which suggests that its market value is slightly overvalued and is very popular among investors. TXN will become more welcomed if they maintain high ROE and ROA ratios while decreasing their market-to-book ratio meantime.
Financial Projections
Analysts currently anticipate that TXN will return to annual growth by Q1 of 2025, with a broader semiconductor industry recovery. The success that has already been witnessed in China contributes to TXN’s reputation as a technological giant which in the long run will lead to tremendous growth of its revenue and market share. Its strategic location in the Chinese automobile market will enable new growth and diversity in the world markets. In addition, the company’s strong performance in the Chinese EV sector will increase with a shift in consumer preferences for EVs.There are a number of opportunities within the EV market, which are available for firms such as TXN since they need several products including ICs, sensors, and microcontrollers.
Conclusion
The present analysis proves that TXN is a company with a favorable future outlook because of its product diversification, high profitability, and investments in the 300-millimeter wafer production line. We could therefore state that it has a strong base to stand in a volatile market through its leadership in analog as well as embedded processing products, position in the China market as well as the EV sector. However, the implications of industrial cyclicality and supply chain risks for the company remain potent sources of potential near-term revenue shortfalls and possible long-term capital investment cuts.
Reference
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- Broadcom Inc. (2022). Form 10-K for the fiscal year ended October 30, 2022. . Available at: https://www.sec.gov/ix?doc=/Archives/edgar/data/1730168/000173016822000118/avgo-20221030.htm .
- Texas Instruments Incorporated (2022). Form 10-K for the fiscal year ended December 31, 2022. .
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- Strategy study: The Texas Instruments Growth Study (no date) Strategy Study: The Texas Instruments Growth Study. Available at: https://www.cascade.app/studies/texas-instruments-strategy-study#Innovation-Keeps-Texas-Instruments-At-the-Forefront (Accessed: 09 November 2024).
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