Texas Instruments Disappoints with Weak Outlook Amidst Sluggish Chip Market

Dallas, Texas - Texas Instruments Inc. (TXN) has issued a disappointing earnings forecast for the current quarter, citing continued weakness in chip demand and rising manufacturing costs.

Underwhelming Outlook

The company expects earnings per share (EPS) to range from $0.94 to $1.16 in the first quarter. The midpoint of this range, $1.05, falls short of analysts' average estimate of $1.17. Similarly, sales are projected to be between $3.74 billion and $4.06 billion, below the consensus estimate of $3.86 billion.

Persistent Industry Slump

The electronics industry continues to grapple with a protracted slump, resulting in nine consecutive quarters of declining sales for Texas Instruments. Chief Executive Officer Haviv Ilan attributes this downturn to weak industrial automation and energy infrastructure markets, with no signs of recovery in the automotive segment.

Manufacturing Costs Dent Margins

Manufacturing expenses have further eroded profitability, despite Texas Instruments' efforts to reduce inventory stockpiles by operating some plants at reduced capacity. This has led to underutilization charges that have weighed on gross margins.

Fourth-Quarter Results Beat Estimates

In contrast to the disappointing forecast, Texas Instruments' fourth-quarter results exceeded analysts' expectations. Sales declined modestly to $4.01 billion, but EPS reached $1.30, higher than the predicted $1.21.

Aggressive Expansion and Competition

Texas Instruments is investing heavily in expanding and upgrading its facilities in the United States, a move it believes will reduce costs and enhance competitiveness with Chinese rivals. The company is also competing with other chipmakers in the stagnant smartphone and personal computer markets.

China Allegations

Ilan dismissed allegations that Texas Instruments is dumping low-end chips into the Chinese market, stating that the company has not been notified of any investigation and that its operations are proceeding as usual. The company's chips do not fall under US export restrictions to China.