Image courtesy of Getty Images
Image courtesy of Getty Images
Image courtesy of Getty Images
Image courtesy of Getty Images
Image courtesy of Getty Images

Texas Instruments Plans 300 mm Fab Investment for Analog ICs

Sept. 7, 2018
The company’s actions are in anticipation of a growth surge in 2022.

While Texas Instruments (TI) has yet to make any official announcement, its filing for special tax considerations for a new production facility in Richardson, Tex. revealed its intent to invest $3.2 billion in a new 300 mm analog IC manufacturing facility.

The investment would be split into two main areas: $500 million would go for new buildings or other non-removable improvements to the property. The remaining $2.7 billion would be earmarked for items such as computers, production equipment, and other movable goods.  If TI moves forward with plans in Richardson, the construction on the property is expected to begin in 2019, with commercial operations slated to begin in the first quarter of 2022.

The announcement of TI’s request for special tax considerations has prompted local debate about the benefits of new job creation compared to lost tax revenues. The implications for school funding and state revenues has attracted many interested parties to debate the choice to provide tax breaks for TI’s potential local investment. In the midst of the debate, it is worth noting that TI could choose to locate its new facility in another area, even though there are advantages to expansion in an area where the company already has a strong presence.

Texas Instruments has more than 9,000 employees in the state. However, based on its website, TI has 15 manufacturing sites in nine countries. In its planning process TI could consider other locations that offer compelling benefits. The state of Texas has been highly successful in promoting a pro-business climate and attracting large businesses from other regions. Given the current aggressive business outreach in Texas, it is likely TI will find willing partners to support its tax break requests and will locate this new facility in Richardson.

Strong Market Growth Drives Investment Plans

While much of the focus in the semiconductor market has been on the red-hot memory markets, the analog IC market has also delivered a very strong performance. According to World Semiconductor Trade Statistics (WSTS) data, the overall semiconductor market grew by 21.6% in 2017 with Memory ICs skyrocketing by 61.5%. Non-memory ICs grew by 9.9% in 2017 and analog ICs grew by double digits at 10.9%. The latest annualized WSTS data through July 2018 shows analog ICs growing at an even stronger rate of 11.8%. The unit shipment growth rate of analog ICs is even stronger, at around 16% over the past year.

The timing of planned operations for TI’s new fab lines up well with the anticipated boost the semiconductor market will receive from the combination of 5G, IoT and Cloud technologies coming together to drive a significant new wave of electronics demand. Len Jelinek, chief analyst at IHS Markit Technology, notes that TI has consistently pursued internal production for its analog products while outsourcing production for logic/embedded processor ICs to Asian foundries. He notes that TI gains significant cost reduction benefits from its investments in 300 mm manufacturing.

Rich Templeton, TI CEO, also emphasizes this point. “Our cash flow from operations of $6.6 billion for the trailing 12 months again underscored the strength of our business model,” Templeton proudly stated in the Q2 2018 earnings release from TI. “Free cash flow for the trailing 12 months was $5.7 billion, or 36.6% of revenue. This reflects the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter Analog production.”

Pursuing Organic Growth Over M&A

The last 10 years have seen dramatic consolidation in many semiconductor segments, as well as the overall industry, as companies have pursued the benefits of cost reduction and market positioning through M&A.  On the other hand, TI disengaged from the M&A path about the same time things were heating up. 

TI acquired 18 companies between 2000 and 2011, with its final acquisition of National Semiconductor finalizing in September 2011. Since then, TI has directed its investments to manufacturing and organic growth. TI has differentiated itself with its manufacturing prowess in analog ICs.

Jelinek notes that TI’s strength in manufacturing will serve it well as power management products increasingly shift to heterogeneous packages that incorporate analog, control, and memory in a single package. As a forward-looking company, TI is planning investments that will place it in a strong position to build on future market growth.

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About the Author

Dale Ford

Dale Ford is a highly respected industry analyst with extensive experience producing award-winning market research. He brings expertise in technology trends, competitive analysis, forecasting ,and supply/demand research of the electronics, semiconductor and electronics components industries. His focused research delivers enhanced visibility on the products, technologies, and players shaping the electronics value chain.