Texas Instruments Forecast Shows Rising Auto-Industry Demand

  • Carmakers need more chips as vehicles become mobile computers
  • `One large customer' hurt demand for personal electronics

Texas Instruments Inc., the biggest maker of analog chips, forecast second-quarter sales that may exceed some analysts’ estimates, indicating greater demand from carmakers for parts needed to add automation and entertainment systems to new vehicles.

Second-quarter sales will be $3.07 billion to $3.33 billion, generating a profit of 67 cents to 77 cents a share, the company said Wednesday in a statement. That compares with average analysts’ estimates for revenue of $3.17 billion and net income of 71 cents, according to data compiled by Bloomberg.

Chipmakers are benefiting as cars increasingly become mobile computers packed with sensors, cameras and networking systems that require more electronic components per vehicle. The automotive industry is being influenced by consumer-technology trends at a time when economic concerns are weighing down demand for new smartphones, laptops and other personal gadgets.

“Automotive, industrial and communications are improving,” said Betsy Van Hees, an analyst at Wedbush Securities. “There’s a lot more content going in cars.”

For the first quarter, Texas Instruments’ net income rose to $668 million, or 65 cents a share, from $656 million, or 61 cents, a year earlier. Revenue slipped 4.5 percent to $3.01 billion, the chipmaker said. Analysts on average had projected net income of 62 cents on $2.98 billion in sales.

Texas Instruments shares, which hit their highest in a year on Wednesday, have gained 9.3 percent in 2016, compared with a 2.7 percent rise in the Philadelphia Stock Exchange Semiconductor Index. The company’s stock rose 1.8 percent in extended trading after earlier closing up 52 cents at $59.92 in New York.

Autos, Communications

The company saw more demand in the first quarter from automakers, producers of industrial equipment and sellers of communications gear, Chief Financial Officer Kevin March said. The company is expecting auto and industrial demand to continue to be robust in the current period, he said.

“Probably automotive is going to be the strongest,” he said. “There’s a lot more content going in cars.”

One large customer is hurting demand for chips used in personal electronics, March said, without naming the company. Apple Inc., which yesterday reported a 16 percent drop in iPhone shipments, is Texas Instruments’ largest customer, according to Bloomberg supply chain analysis.

Texas Instruments’ analog chips act as an interface between the real world and the digital, converting things like touch, pressure and sound into electronic signals. Under Chief Executive Officer Rich Templeton, the company has spread out its bets even further, easing its former dependence on digital parts for smartphones. While that has helped profits and generated cash for share repurchases and dividend payments, the company’s sales have shrunk in three of the past five years.

Texas Instruments gets about a third of its sales from industrial customers and 15 percent from carmakers. While communications equipment makes up an additional 13 percent of revenue, the company still depends on consumer electronics for about 30 percent of sales, and on the shrinking PC market for 6 percent.

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