Texas Instruments reports declining sales

This past Wednesday, the semiconductor design and manufacturing company Texas Instruments reported a quarter-on-quarter growth decline for the first time in over two years.

This comes shortly after the company reported back in October it was witnessing a shrinking demand across most markets it supplies.

In 2018, Texas Instruments reported revenue of $3.79 billion in their first quarter, whereas this year their first quarter revenue is projected to fall somewhere between $3.34 billion and $3.62 billion.

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This slowdown is the first the company has experienced in 10 quarters, and it could have some significant implications regarding the entire semiconductor industry. As Texas Instruments supplies more products to customers in the industry than any other, trouble for them likely means trouble for the entire sector.

The Semiconductor Slowdown

As one can infer from Texas Instrument’s October report, this weakening of the revenue stream hasn’t come as a surprise. The question for the company was never whether their profits would slow, but rather how dramatically they would.

In a recent statement by Texas Instrument’s chief financial officer, Rafael Lizardi, the company expressed this slowdown is partly due to a combination of normal phases within the semiconductor industry’s lifecycle, and partly due to the ongoing tensions surrounding the U.S.-China trade war that may prolong the phase further.

Texas Instruments applies their semiconductors in chips which become the basic components for most electronic devices, including smartphones. These chips are also responsible for the majority of the company’s earnings. With the world of tech manufacturing getting tied-up over the uncertainty surrounding international trade, this stagnation is to be expected.

However, it’s also worth mentioning that last year Texas Instruments’ chip sales performed notably well in the automobile and industrial control markets, which has helped mitigate the severity of their slowdown.

Where Texas Instrument Goes from Here

Right now, Texas Instruments is standing on a growing stack of unsold inventory, a sign that the company is producing semiconductor empowered chips faster than they are selling.

Comparing their inventory value from the fourth quarter of 2018 to the same quarter in 2017, this stockpile has grown from $1.96 billion to $2.22 billion. But Texas Instruments is well established, and the company doesn’t seem to be shaken by this setback.

Even if the industry slump doesn’t pick up soon, Texas Instruments will be able to tread water much longer than their semiconductor competitors. Their chips are made to be long-lasting and are often sold years after production, meaning their inventory isn’t in danger of going to waste any time soon.

If anything, after weathering this period of industry stagnation, Texas Instruments may be perfectly positioned to hit the ground running and grow much stronger.

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