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Could Personal Electronics’ Slowdown Affect Texas Instruments?

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Nov. 20 2020, Updated 5:04 p.m. ET

Personal electronics 

In addition to being involved in the industrial and enterprise markets, Texas Instruments (TXN) caters to companies that make consumer electronics such as PCs, handsets, TVs, and home appliances. In 2017, the company earned 25% of its revenue from the personal electronics market. In the second quarter, the company’s personal electronics revenue grew by low-single digits as strength in some sectors was offset by weakness in others. While smartphone growth slowed, the PC market recovered.

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PCs

Gartner’s estimates show that PC shipments rose 1.4% YoY (year-over-year) for the first time in six years in Q2 2018. Gartner expects PC shipments to be flat YoY in the third quarter and then decline in the fourth quarter, as Intel (INTC) may not be able to attend to the PC market’s unexpected growth. Whereas IDC expects the computing market to shrink 0.7% (compounded annually) between 2017 and 2022, it expects the client computing and enterprise solid-state drive sectors to grow 9.8%.

Mobile

Texas Instruments supplies processing, power management, and battery charging chips for Apple’s (AAPL) iPhone XS and XS Max, which were launched in September. Apple doesn’t disclose its suppliers’ names, nor do suppliers list Apple as a client. The only way to know Apple’s suppliers is through iPhone teardowns. According to the Dallas Business Journal, a teardown by iFixit indicated that Texas Instruments supplied more content for Apple’s new iPhones than for the iPhone 8.

Enterprise systems

Texas Instruments earned only 6% of its revenue from enterprise systems in 2017. This segment grew as data centers and enterprises increased their capital spending on IT infrastructure. However, this growth could slow as US tariffs on Chinese imports impact server chips, which are made mostly in China. Next, we’ll look at Texas Instruments’ profitability.

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