TI's automotive chip revenue plummeted by 40%

American semiconductor giant Texas Instruments (Texas Instruments) released its 2020 second-quarter earnings report after US stocks on Tuesday (21st), and its overall performance was better than Wall Street expected. The company predicts that it will continue to benefit from the demand for remote offices driven by the epidemic in the future, and is optimistic that the third quarter operating performance will once again be better than expected. Motivated by bright earnings reports and financial estimates, Texas Instruments' stock price jumped 2.6% after the market.
 
According to the financial report data released by Texas Instruments, in the second quarter of 2020 (as of June 30), due to weak demand for automotive chips, revenue decreased by 12% to 3.24 billion U.S. dollars, but far higher than the market's average expectation of 2.94 billion US dollars; net profit increased by 6% to 1.38 billion US dollars; earnings per share increased from 1.36 US dollars in the same period last year to 1.48 US dollars, better than analysts expected 0.87 US dollars.
 
Dave Pahl, Head of Investor Relations at Texas Instruments, said on the earnings call that as the epidemic has driven the global boom in home and office work, the demand for chips for tablets, personal computers, and servers has increased. The company used personal electronic devices in the second quarter. Sales in the field increased by 20% compared with the same period last year.
 
Dave Pahl further pointed out in the conference call that the decline in the second quarter was not as severe as during the 2008 financial crisis, but TI remains cautious about the economic performance in the next few quarters. He said the company will retain its R&D investments because they have a period of 5 to 10 years. In addition, the long-term manufacturing capacity from 2022 to 2025 will remain unchanged.
 
Yahoo Finance's quotation showed that Texas Instruments' stock price fell 0.81% in normal trading on Tuesday to close at 135.48 US dollars. After the market benefited from earnings reports and financial estimates, the stock price rose 1.68% to 137.76 US dollars. As of Tuesday’s close this year, Texas Instruments’ stock price has risen 5.60%, better than the broader market. The S&P 500 Index rose 0.82% over the same period.

 
Texas Instruments originally predicted that revenue for the second quarter was US$2.61 billion to US$3.19 billion, and earnings per share were US$0.64 to US$1.04. Among them, the main reason that dragged down the 12% year-on-year revenue decline in the second quarter was the plummeting sales of automotive chips. The data shows that TI's automotive chip market has dropped by 40% compared with the first quarter, and by more than 40% compared with the same period last year. But the company's chief financial officer Rafael Lizardi said the long-term prospects of the car are good. He said: "Our confidence in the growth of automotive content will remain high in three to five years."
 
Dave Pahl added that medical chips are very powerful, and sales of personal computers and servers are also driven by work from home. The data shows that TI's personal computing business increased by 20% month-on-month and 10% year-on-year. The communications business increased by 20% over the previous quarter, but fell by 15% over the same period last year.
 
Excluding the part of automotive chips, revenue in the second quarter fell only 3% from the same period last year. Looking forward to the third quarter, Texas Instruments expects earnings per share to reach US$1.14 to US$1.34, and revenues range from US$3.26 billion to US$3.54 billion. And Wall Street analysts previously estimated that Texas Instruments' third-quarter earnings per share was $1 and revenue was $3.1 billion. The data compiled by Bloomberg shows that analysts' average expectation of profit for the quarter was 98 cents and sales of US$3.07 billion.
 
Statistics show that TI manufactures about 100,000 parts and has about 100,000 customers. As many as 80% of industrial companies use their various chips.
 
Overall, Lizardi said TI remains cautious about the economy in the next few years. In an interview, Rafael Lizardi said: “The world economy seems to be shaken. But my job is not to figure out the direction of the world economy, but to put TI in the best position no matter what happens.”
 
"We will maximize the options and be able to meet the forecasted needs of customers as in the second quarter." He added. "The parts we sell are catalog parts. These parts are sold to many customers and last for a long time. If we build inventory, the inventory will not deteriorate, which is beneficial to us." Rafael Lizardi further pointed out.
 
Edward Jones analyst Logan Purk said: “The business must have fallen into a trough and is beginning to show signs of recovery again.” But she also went on to say that even so, the pandemic and ongoing trade conflict between China and the United States may be Damage demand in the near future.