Texas Instruments' third-quarter outlook is bleak, and customers in various industries are cutting orders

On Tuesday local time, Texas Instruments, the world's largest analog semiconductor device manufacturer, released its latest financial report. The company's third-quarter performance outlook is relatively weak, indicating that the sluggish market demand for some key semiconductor devices is still ongoing.

Financial report data showed that in the second quarter, Texas Instruments revenue was US$4.53 billion (currently approximately 32.344 billion yuan), a year-on-year decrease of 13%, but exceeding analyst expectations of US$4.35 billion. Profit per share was $1.87 in the second quarter, significantly lower than the $2.45 per share in the second quarter last year.

Texas Instruments predicts that third-quarter revenue will be between $4.36 billion and $4.74 billion. The midpoint of this forecast range is already lower than the average forecast of $4.59 billion by Wall Street analysts. This bad news caused Texas Instruments' stock price to drop 4% in after-hours trading.

Texas Instruments is considered a "barometer company" in the semiconductor market. The company's third-quarter performance outlook also indicates that life for the entire semiconductor industry is still relatively difficult.

Among its semiconductor peers, Texas Instruments has the longest customer list and the richest product catalog. The company's earnings results and performance outlook can reflect the health of many areas of the macroeconomics. Among them, Texas Instruments' largest revenue segment comes from the sales of electronic devices to industrial machinery and vehicle manufacturers.

Although the company's analog chips have simple functions, they are very important in the industrial field, such as chips that measure button pressure or chips that detect temperature changes. The company's chips are also used to control electric motors in various scenarios, from space equipment to home appliances. Compared with chips for other digital products, these analog chips do not require the most advanced manufacturing processes.

Haviv Ilan, CEO of Texas Instruments, said that in the second quarter, chips in the automotive industry became a bright spot, but sales of other products were sluggish. “As in previous quarters, except for the automotive industry, we experienced sluggish demand in all end markets. "

In a conference call with analysts, Texas Instruments executives said that in addition to the automotive industry, customers in other industries continue to cut chip orders and they want to consume existing inventory first.

Rafael Lizard, chief financial officer of Texas Instruments, said that customers have cut orders, causing Texas Instruments' own chip inventory to increase. The current inventory has climbed to a level of 207 days, and the value of inventory goods will continue to rise in the third quarter.

Lizard also said that unlike other chip manufacturers, Texas Instruments' analog chips have a long storage period (even up to 10 years). Therefore, the current high inventory can solve the sudden increase in market demand in the future.

In an interview, Lizard said: "Our inventory of chips can be stored for a long time. These chips can be stored for 10 years and they will still look brand new when taken out."

Texas Instruments said that currently, the number of customer order cancellations is still at a high level, which also shows that customers are more cautious about future business prospects.

For the third quarter, Texas Instruments expects profit per share to be between $1.68 and $1.92. For reference, analysts expected earnings of $1.9 per share.

During the intraday trading session that day, Texas Instruments' stock price rose 1.2%, and its year-to-date increase is 13%. This increase is significantly lower than that of other semiconductor giants. It is reported that the stock prices of major semiconductor manufacturers have risen sharply as the market expects computer sales to rebound this year.

Similar to other semiconductor manufacturers, Texas Instruments is currently building new factories to increase production capacity. In the long term, the entire semiconductor industry is still optimistic about future demand and believes that chips will play a more important role in the economy.

Capital spending will weigh on Texas Instruments' profits. Texas Instruments executives said on Tuesday that a new factory is currently under construction near the company's Dallas headquarters, and that increasing expenses will affect profit figures before the factory is completed and put into production.