Q4 2024 Summary
Published Feb 14, 2025, 8:13 PM UTC- TI's Analog revenue grew 2% year-over-year in Q4 2024 after eight consecutive quarters of decline, signaling a recovery in demand for their analog products. ,
- TI expects to receive $7.5 billion to $9.5 billion in total CHIPS Act funding over the life of the program, which will support their investments in 300-millimeter manufacturing capacity and reduce future depreciation expenses, improving free cash flow.
- TI's business in China grew mid-teens year-over-year in Q4 2024, driven by strength in the automotive and personal electronics markets, indicating strong demand in a major market. ,
- Gross profit margin is expected to decrease by a few hundred basis points in Q1 due to lower revenue, higher depreciation, and reduced factory loadings.
- Inventory levels have increased to $4.5 billion, with days increasing to 241; management expects inventories to rise by an additional $100 million or more in Q1, indicating potential oversupply and demand uncertainty.
- The Embedded Processing segment is experiencing sharp revenue and margin declines, disproportionately affected by underutilization at the Lehi factory.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | –1.7% | Total Revenue fell slightly from $4,077 million in Q4 2023 to $4,007 million in Q4 2024. This modest decline reflects the mixed performance across segments, notably the significant drops in both Embedded Processing and Other revenue that offset stability in the Analog segment. |
Analog Revenue | ~+1.7% (minor change) | Analog revenue remained robust, rising slightly from approximately $3,120 million to $3,174 million, indicating stable demand and a steady product mix in this segment despite broader market challenges. |
Embedded Processing Revenue | –18.5% | Embedded Processing revenue declined from $752 million to $613 million, a drop attributed to lower demand and shifts in product mix, which suggests that this segment was adversely affected by external market conditions and pricing pressures. |
Other Revenue | –89% | Other revenue experienced a dramatic decline from $205 million to $22 million, which likely indicates a significant reduction in sales or potential discontinuation of certain product lines, altering the revenue mix considerably. |
United States Revenue | –58.6% | United States revenue plunged from $3,914 million to $1,622 million. This stark decline suggests a major shift in geographic revenue composition, potentially due to reduced domestic demand or a rebalancing of sales efforts across regions. |
China Revenue | Rebounded dramatically | China revenue rebounded to $821 million from –$2,238 million, representing a dramatic recovery. This turnaround implies a rebound in demand in the region, reversing prior negatives that likely reflected market disruptions or strategic shifts from the previous period. |
Rest of Asia Revenue | +544% | Rest of Asia revenue surged from $67 million to $432 million, reflecting substantial growth possibly driven by emerging market recovery, regional economic improvements, or targeted strategic initiatives in these markets. |
EMEA Revenue | –55% (approximate) | EMEA revenue declined sharply from $1,748 million to $786 million, likely due to weakening regional demand and economic headwinds in those markets, which contrasts with gains seen in some other geographies. |
Japan Revenue | –65% (approximate) | Japan revenue dropped significantly from $806 million to $277 million, indicating severe cyclical or market-specific challenges that reduced demand in the region, possibly linked to broader global demand shifts. |
Operating Income (EBIT) | –10% | Operating income declined from $1,533 million to $1,377 million, reflecting margin compression driven by higher manufacturing costs and other operational expenses despite relatively steady overall revenue. |
Net Income | –12% | Net Income fell from $1,371 million to $1,205 million. The decrease mirrors overall revenue and margin pressures, compounded by increased costs and shifts in the mix of higher and lower performing segments. |
Earnings Per Share (Basic) | –12% | Basic EPS dropped from $1.50 to $1.32, a decline that directly reflects the lower net income and operational challenges, impacting per-share profitability. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | no prior guidance | $3.74B to $4.06B | no prior guidance |
EPS | Q1 2025 | no prior guidance | $0.94 to $1.16 | no prior guidance |
Effective Tax Rate | FY 2025 | no prior guidance | 12% | no prior guidance |
CapEx | FY 2025 | no prior guidance | $5B | no prior guidance |
Depreciation | FY 2025 | no prior guidance | $1.8B to $2.0B | no prior guidance |
CapEx | FY 2026 | no prior guidance | $2B to $5B | no prior guidance |
Depreciation | FY 2026 | no prior guidance | $2.3B to $2.7B | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q4 2024 | $3.7B to $4.0B | $4,007 million | Beat |
Earnings per Share (EPS) | Q4 2024 | $1.07 to $1.29 | 1.30 | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Recovery and decline patterns in Analog revenue | Q3: -4% y/y ; Q2: -11% y/y ; Q1: -14% y/y. | Analog revenue grew 2% year-over-year after 8 consecutive quarters of decline. | Sentiment improved from persistent declines to a slight upturn, indicating a possible cyclical recovery. |
CHIPS Act funding and its impact on manufacturing expansions and cash flow | Q3 mentioned a $220M ITC benefit in Q3 and $532M TTM ; Q2 and Q1 highlighted ongoing ITC cash flow and grant applications. | Awarded up to $1.6B with a total of $7.5B–$9.5B expected including ITC; lowers future depreciation expense. | Continues to be a major driver of capacity expansion and positive cash flow impacts. |
China’s market performance balancing strong growth potential with rising local competition | Q3 focused on strong automotive in China but lagging industrial ; Q2 showed ~20% sequential rebound ; Q1 emphasized local competition. | Accounts for ~20% of TI’s 2024 revenue; saw growth in automotive and personal electronics. | Steady emphasis on China’s importance despite tough local competitors; automotive leads current growth. |
Automotive sector swings from decline to strong growth | Q3: strong 20% sequential growth in China, weaker outside ; Q2: -13% from peak ; Q1: down single digits year-over-year. | Down mid-single digits sequentially in Q4 overall, although China grew. | Mixed sentiment with China’s EV adoption offsetting declines in other regions. |
Industrial market softness persisting over multiple quarters | Q3: eight consecutive quarters of decline, ~30% below peak ; Q2: asynchronous declines ; Q1: sequential declines ongoing. | Q4 commentary highlighted continued weakness; some industrial sub-sectors have not found a bottom. | Prolonged downturn with no clear timeline for recovery. |
High inventory levels and the risk of oversupply | Q3: $4.3B inventory, building for 2025 cyclical recovery ; Q2: strategic inventory approach ; Q1: $4.1B, 235 days of inventory. | Comfortable keeping ~$4.5B in inventory; no plans to reduce below that. | Maintaining high inventory to ensure service levels and mitigate lead times. |
Embedded Processing challenges and potential future growth opportunities | Q3: -27% y/y ; Q2: -31% y/y, transition to in-house wafers ; Q1: cyclical correction but seen as a growth driver. | -18% y/y; underutilized LFAB weighs on margins, but management remains optimistic for future. | Still under pressure, yet long-term bullish as internal production scales. |
Increased depreciation expenses and underutilized factories affecting margins | Q3: new depreciation from SM1 building ; Q2: projected rise to $1.5–$1.6B in 2024, up to $2–$2.3B in 2025 ; Q1: cited margin pressure but less directly. | Contributed to a ~190 bps sequential margin drop; further pressure expected in Q1 2025. | Substantial headwinds on gross margin due to expansion and lower factory loadings. |
Geopolitically dependable capacity driving market share gains | Not explicitly cited in Q3; Q2 stressed value of capacity outside China/Taiwan ; Q1 focused on automotive customers seeking non-China/Taiwan sources. | Highlighted CHIPS Act funding for three 300-mm fabs to ensure stable supply. | Competitive advantage as customers prioritize resilient supply chains. |
Shifts in capital deployment, including reduced share repurchases and increased debt | Q3: no explicit shift ; Q2: no mention of a change ; Q1: issued $3B debt, slowed buybacks. | No major change in Q4; repurchased $537M, total debt at $13.7B. | No new pivot beyond earlier debt issuance and moderated repurchases. |
Changing sentiment in key markets, notably automotive and China | Q3: robust auto in China, ~20% sequential growth, industrial still soft ; Q2: ~20% China rebound after long decline ; Q1: reevaluations of supply chain and local competition. | Automotive weaker in US/EU/Japan, while China auto and personal electronics gained momentum. | China remains a bright spot, but global automotive outside China is less positive. |
Potential long-term impact from government incentives, expanding capacity, and global supply chain shifts | Q3: largely around ITC benefits ; Q2: emphasized expansions aided by ITC ; Q1: aligned with CHIPS Act applications and “geopolitically dependable capacity”. | Not extensively discussed in Q4; updates mainly on depreciation guidance. | Continuing driver of long-term growth, but less explicitly highlighted this quarter. |
-
CHIPS Act Funding Impact
Q: Have you mapped out the $1.6B CHIPS Act grants over 2025-26 and updated free cash flow per share?
A: The Department of Commerce awarded us up to $1.6 billion in CHIPS Act funding. Along with the ITC, we expect to receive $7.5 to $9.5 billion in total over the life of the program. While we don't have specific details on cash payments yet, this funding decreases our expected depreciation. For 2025, depreciation is now expected to be $1.8 to $2 billion, slightly down from previous expectations. In 2026, we expect depreciation to be in the lower half of the $2.3 to $2.7 billion range. -
Gross Margin Outlook
Q: How should we think about gross margins beyond the March quarter?
A: Revenue remains the primary driver of gross margin. We recommend modeling revenue and applying a 75% to 85% fall-through rate. Depreciation increases, which we've updated, should be adjusted in your calculations. Factory loadings will impact margins; we expect a hit in Q1 due to underutilization but anticipate improvement as revenues grow. -
China Sales and Market Dynamics
Q: Can you address the sustainability of China longer term and any changes in dynamics there?
A: China is a crucial market, representing 20% of world GDP and accounting for 20% of our revenue in 2024. Our business in China is healthy, particularly in automotive and personal electronics. We have not been notified of any investigations regarding product dumping. We continue to compete effectively due to our broad portfolio and strong manufacturing capabilities. -
Embedded Business Margins
Q: What needs to be done to improve embedded margins?
A: Embedded is a business in transition. Margins are under pressure due to revenue declines and underutilization of our LFAB facility, which disproportionately affects Embedded. As we ramp up LFAB and move production internally, we expect margins to improve and contribute significantly to free cash flow per share. -
Inventory Levels and Factory Loadings
Q: Is there a near-term inventory target, and how are you managing factory loadings?
A: Our goal is to maintain high customer service levels while minimizing obsolescence. We expect inventory levels to increase by $100 million plus in the first quarter. To manage inventory, we are reducing factory loadings in Q1, which will impact gross margins by a few hundred basis points. -
Pricing Environment
Q: Has the pricing environment changed meaningfully?
A: We haven't seen any significant change; pricing behaved as expected in 2024, declining low single digits per part per year. The mix has shifted due to changes in revenue between industrial and personal electronics markets. We anticipate similar pricing behavior across all geographies in 2025. -
Market Outlook for End Markets
Q: How do you expect end markets to play out this year?
A: Certain markets like personal electronics, enterprise, and communications are on a cyclical upturn. However, industrial and automotive, which comprised 70% of our business in 2024, haven't found the bottom yet. We see points of strength, especially in China, but we'll have to wait and see how the year unfolds. -
Capital Expenditure Plans
Q: Is the depreciation guidance due to tax credits and grants, or lower CapEx?
A: The lower depreciation is a result of CHIPS Act funding and ITC benefits, not reduced CapEx. We continue to expect $5 billion in CapEx for 2025. Our capacity expansion plans remain on track, and we're executing them as previously outlined. -
Competition and Market Share
Q: Are there any changes in the competitive backdrop or market share gains?
A: We haven't observed significant changes; competition feels stable and remains intense during this down cycle. We continue to compete effectively across all markets and geographies due to our strong portfolio and cost structure. -
Customer Behavior and Demand Indicators
Q: Have pushouts, cancellations, or changes in customer forecasts changed?
A: Cancellations remain at very low levels. Turn orders are high as customers place orders at the last moment, and we fulfill them promptly due to our short lead times and product availability. This trend contributed to our strong performance in the fourth quarter.