Industrial and Automotive, Texas Instruments’ Growth Drivers



Texas Instruments’ end-markets

Texas Instruments (TXN) caters to a broad range of markets, diversifying its earnings. The company has been reducing its investments in the slowing personal electronics market to focus on the fast-growing industrial and automotive markets. However, it has maintained a presence in the personal electronics market, as it believes mobile technology and PCs are here to stay.

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Industrial and automotive

Texas Instruments earned 35% of its revenue from the industrial market and 19% of its revenue from automotive in 2017. The company caters to 14 industrial sectors, including factory automation. In automotive, it caters to five sectors, including advanced driver assistance systems and car infotainment. Of those 19 industrial and automotive sectors, it witnessed growth in 18 sectors, boosting revenue.

According to IDC, automotive and industrial could grow the fastest among semiconductor markets, at a compound annual rate of 9.6% and 6.8%, respectively, between 2017 and 2022. Texas Instruments, NVIDIA (NVDA), and Intel (INTC) are investing heavily in these markets. NVIDIA and Intel are leading the autonomous vehicle space.

Texas Instruments’ exposure to these 19 sectors could bring stability, with some sectors’ decline being offset by others’ growth. However, the company’s broad customer base doesn’t protect it from cyclical headwinds that impact the entire industry. As we’ve discussed, CNBC reported that Raymond James analyst Chris Caso warned of a cyclical downturn in the semiconductor sector in 2019. In its upcoming earnings release, Texas Instruments could discuss the downturn and its strategy to tackle the situation.

Communication equipment

Texas Instruments earned 12% of its revenue from communication equipment in 2017. The company’s revenue from this sector has been declining due to lower investments in 4G (fourth-generation) infrastructure. The sector could recover in 2019 as telecom companies increase their spending on 5G (fifth-generation) infrastructure.

IDC expects communication infrastructure semiconductors to grow 1.7% compounded annually between 2017 and 2022, driven by strong growth from consumer networks. Qualcomm (QCOM), Intel, and Huawei are leading in the 5G space. Next, we’ll look at Texas Instruments’ other end markets.

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