Texas Instruments Faces Challenges
Texas Instruments, a prominent analog chipmaker, presented a first-quarter revenue and profit forecast on Tuesday that fell below market expectations. The disappointing outlook is linked to early signs of weakness in the automotive sector, exacerbating concerns about an enduring supply glut in industrial markets.
Following the less-than-optimistic projections, Texas Instruments’ shares experienced a decline of more than 4% in extended trading. This reaction underscores investors’ apprehensions and raises concerns about the automotive chip industry, which had managed to remain relatively immune to the supply glut crisis faced by other markets.
In a parallel development, Mobileye (MBLY.O), a peer in the industry, also provided a preliminary 2024 revenue forecast below estimates. The rationale cited was a reduction in orders from customers, driven by the necessity to clear excess inventory.
Summit Insights analyst Kinngai Chan attributes the supply chain corrections in the automotive segment to weaker demand for electric vehicles and recent United Auto Workers strikes at major automakers. Chan anticipates that inventory corrections will persist into the first quarter, with a potential recovery in the second half of the year.
Despite being one of Texas Instruments’ fastest-growing sectors, revenue from the automotive market experienced a mid-single-digit decline in the fourth quarter. Simultaneously, sales to industrial customers, representing the company’s largest revenue share, declined in the mid-teens during the same period.
Addressing concerns about a slower-than-expected recovery in the crucial Chinese market, David Pahl, head of Investor Relations, noted that “from a dollar standpoint… sequentially, all the regions were down with the exception of the rest of Asia.”
In response to market challenges, Texas Instruments continued to reduce factory loadings in the fourth quarter. This strategic move aimed to ship below the already weak end-market demand, with the goal of normalizing inventory levels.
As the company looks ahead, Texas Instruments forecasts first-quarter revenue in the range of $3.45 billion to $3.75 billion. This projection falls short of analysts’ average estimate of $4.06 billion, according to LSEG data. Additionally, the company’s forecast for earnings per share in the current quarter is also below analysts’ estimates.
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