Understanding Texas Instruments (TXN) as a “quietly strong semiconductor” company: Analog and embedded, supply-side investment, dividends, and power infrastructure in the AI era

* This report is based on data as of 2026-01-07.

1. TXN in plain English: What it does and how it makes money

Texas Instruments (TI, TXN) can be summed up in one line: it manufactures and sells high volumes of essential components (chips) that let real-world machines and electronic products use electricity safely and precisely. Instead of building the “headline brain” inside a smartphone (a leading-edge CPU/GPU), TI’s core battleground is the behind-the-scenes semiconductors embedded across cars, factories, power equipment, medical devices, home appliances, and more.

The key point is that TI is fundamentally a B2B business. It doesn’t sell to consumers; it earns money by supplying “the parts you need to build products” to electronics OEMs and component manufacturers. End users ultimately buy the cars and industrial systems that contain these chips, but TI’s direct customers are businesses.

Who it creates value for (customer profile)

• Electronics manufacturers (automotive components, industrial machinery, home appliances, etc.)
• Data-center equipment manufacturers (power supplies and server-adjacent hardware)
• Design firms and contract manufacturers, etc. (B2B supply chain)

What it sells (revenue pillars)

TI’s business is built on three primary pillars.

• Analog semiconductors (the largest pillar): Components that translate real-world electrical signals (voltage, current, temperature, sound, light, etc.) into “usable” forms so equipment can run safely and accurately. These show up in automotive electronics, factory motor control, low-signal medical instrumentation, chargers and power supplies, and more.
• Embedded processors (a core pillar): A “small brain” inside appliances, vehicles, and industrial equipment that reliably executes defined tasks over long periods. A notable feature is that embedded is often adopted alongside analog.
• Other (supporting): Peripheral logic and related products. Not the headline segment, but it can still help drive adoption by reducing design effort and lowering overall component count.

How it makes money (core of the business model)

Rather than relying on a single “hit product,” TI compounds revenue by offering a massive number of SKUs and winning designs across a wide range of applications. In B2B electronics, once a part is designed into a product, it often keeps shipping for as long as that end product remains in production (design-in inertia).

Another foundational element is TI’s commitment to meaningful in-house manufacturing. The company is pushing a transition and expansion toward large-scale 300mm wafer fabs, with the goal of improving long-run costs and supply stability. With support tied to the U.S. CHIPS Act, TI is expanding capacity in Texas and Utah. There are also reports of shutting older fabs and consolidating into newer facilities. Even if this weighs on near-term profitability, it can become a durable “cost-of-goods advantage” over time.

Why it is chosen (value proposition)

• Durable and easy to design in: In automotive and industrial systems, downtime is expensive. Stable operation, long-term availability, and strong documentation/tools matter.
• Strong where content per unit is high: The more power-conversion and control points a system has, the more naturally TI’s components tend to get designed in.
• Supply confidence supported by owned fabs: The strategy is to give customers confidence that TI can supply at scale.

Forward direction (growth drivers and “candidates for future pillars”)

TI’s tailwinds are less about flashy themes and more about a simple reality: “the world’s equipment is becoming electrically more complex.”

• Vehicle electrification and electronification: As power control, sensing, and control “brains” proliferate, analog and embedded typically see more design opportunities.
• Factory automation and energy efficiency: More motor control, better power efficiency, and more signal processing. The more mission-critical the site, the more valuable long-term supply tends to be.
• The “power problem” in data centers and AI compute: As AI scales, power supply, conversion, and protection can become bottlenecks even more than compute itself, and TI is expanding its power-management push for data centers.

In addition, as potential future pillars, TI is positioning products for next-generation power architectures shifting to 48V and even higher voltages, high-efficiency power devices such as GaN, and device families that simplify design and reduce component count (such as PLDs). These are less the core of today’s revenue and more potential add-on engines that can broaden adoption by increasing the “reasons to choose TI.”

Analogy (just one)

TI’s chips aren’t the sports car’s engine (the attention-grabbing CPU). They’re more like the control modules for brakes, power, safety systems, and sensors—installed by the dozens throughout a vehicle. You don’t notice them, but without them the car can’t operate safely.

2. Long-term fundamentals: Putting numbers around TXN’s “corporate archetype”

The starting point for viewing TI as a long-term holding is that it’s not a company that “wins through pure high growth.” It’s better understood as a mature, demand-diversified semiconductor franchise. The long-term data makes that profile clear.

Long-term trends in revenue, EPS, and FCF (5-year, 10-year)

• Revenue CAGR: Approximately +1.8%/year over the past 10 years and approximately +1.7%/year over the past 5 years. Long-run revenue growth has been modest.
• EPS CAGR: Approximately +7.2%/year over the past 10 years, but approximately -0.2%/year over the past 5 years (roughly flat to slightly down). The difference across periods reflects the familiar “period effect” in cyclical, macro-sensitive industries.
• Free cash flow (FCF) CAGR: Approximately -8.2%/year over the past 10 years and approximately -23.7%/year over the past 5 years. Over the last several years, cash generation looks weak (for now, treat this as a “fact on the page,” and revisit the drivers later).

Profitability: Long-term profile of ROE and margins

• ROE (latest FY): Approximately 28.4%. Over the past 5 years, ROE has trended down from very high levels (e.g., the 50% range) (the past 5-year median is approximately 58%).
• Operating margin (FY): Approximately 50.6% in 2022 versus approximately 34.9% in 2024. The “peak → slowdown” pattern of the semiconductor cycle shows up clearly.

The key takeaway is that TI isn’t “permanently locked” into ultra-high ROE and margins. Instead, there was a stretch of exceptionally high profitability, and today the numbers are skewed toward the lower end.

Source of EPS growth: Contribution from share count reduction

TI’s share count has steadily declined (e.g., approximately 1.08 billion shares in 2014 → approximately 919 million shares in 2024). That means EPS growth has, at times, reflected a meaningful contribution from share reduction (buybacks, etc.), not just revenue expansion.

3. Lynch-style “type”: TXN isn’t a Fast Grower—so what is it?

Using Lynch’s six categories, TI is best framed as a hybrid of “Cyclicals × Slow Grower”.

Rationale as a Cyclical

• Over the last 2 years (roughly 8 quarters), EPS has been trending down (2-year CAGR is negative, and the trend is downward).
• FY operating margin fell from the 2022 high through 2024 (peak → slowdown).
• Inventory turnover shows meaningful variability, with data suggesting the impact of supply-demand rebalancing.

Annual revenue and profits were near a peak in 2022, with 2023–2024 representing the slowdown phase. Meanwhile, on a TTM basis, revenue and profit have returned to modest YoY growth, and there are signs consistent with a bottoming-to-early-recovery phase (however, this cannot be confirmed; we limit the statement to “there is such data”).

Rationale as a Slow Grower

• 5-year revenue growth (CAGR) is low at approximately +1.7%/year.
• 5-year EPS growth (CAGR) is near zero (slightly negative).
• Payout ratio (TTM, earnings-based) is high at approximately 98%.

This is the classic mature-company setup: low growth, but shareholder returns tend to stand out. That said, because cash generation has looked weak recently, the durability of those returns needs to be evaluated separately.

4. Recent performance momentum: Recovery signals, but still “decelerating” overall

Many trailing-twelve-month (TTM) metrics have turned positive again, but relative to the 5-year average and the last 2-year trend, it’s hard to argue momentum is strong. Overall, it’s reasonable to classify near-term momentum as Decelerating.

Last year (TTM) YoY: What is growing?

• Revenue (TTM YoY): +9.897%
• EPS (TTM YoY): +2.238%
• FCF (TTM YoY): +41.689%

Revenue is rising in a way that fits a recovery phase, but EPS is only modestly higher—suggesting profits haven’t snapped back in line with sales. FCF has rebounded sharply, though the absolute level is a separate question.

Last 2 years (roughly 8 quarters): Is the “type” intact?

• EPS: 2-year CAGR is negative, with a strongly downward trend
• Revenue: 2-year CAGR is slightly negative, with a roughly flat trend
• FCF: 2-year CAGR is positive, with an upward trend

Put simply: revenue is starting to return, profits (EPS) are recovering only modestly, and cash (FCF) is improving first—often what an early-cycle recovery can look like for a cyclical business.

Margin guideposts (FY): A key determinant of recovery “quality”

On an FY basis, operating margin fell from approximately 50.6% in 2022 to approximately 34.9% in 2024. Even if TTM revenue improves, where margins ultimately settle can materially change how investors should read EPS momentum.

Also, FY and TTM views can diverge simply because they cover different time windows (annual vs. trailing 12 months). It’s not a contradiction; it’s a reminder to stay consistent about which period you’re analyzing.

5. Financial soundness (how to view bankruptcy risk): Strong liquidity, but leverage is higher than it used to be

TI doesn’t look like a company that’s “about to run out of cash.” At the same time, compared with prior years, debt-related metrics are tilted more heavily.

• Debt-to-equity ratio (latest FY): Approximately 0.80
• Net Debt / EBITDA (latest FY): Approximately 0.80
• Interest coverage (latest FY): Approximately 11.7x
• Cash ratio (latest FY): Approximately 2.08

Interest coverage of approximately 11.7x suggests ample ability to service interest. Meanwhile, Net Debt / EBITDA is an inverse indicator where “smaller (more negative) means more cash and lighter net debt,” and a level of approximately 0.80 implies leverage is higher than in the past. A cash ratio of approximately 2.08 is relatively strong as a near-term liquidity buffer.

From a bankruptcy-risk standpoint, “interest-paying capacity and liquidity” are supportive. Still, in periods when investment intensity and return-of-capital intensity overlap, it’s reasonable to treat this as a watch item for a business where flexibility can tighten.

6. Dividends and capital allocation: Attractive, but potentially constraining

It’s hard to underwrite TI without addressing the dividend. The dividend yield (TTM) is approximately 2.97% (share price $177.17). TI has a 36-year dividend history and 21 consecutive years of dividend increases (a dividend cut occurred in 2003)—a long record.

Where the dividend stands today (yield context)

• Dividend yield (TTM): Approximately 2.97%
• Dividend per share (TTM): Approximately $5.41
• 5-year average yield: Approximately 2.84% (recently slightly above the 5-year average)
• 10-year average yield: Approximately 2.95% (recently roughly in line)

On yield alone, today’s level sits close to the recent average range.

Dividend growth pace: Historically strong, but slowing lately

• 5-year CAGR of dividend per share: Approximately +10.6%/year
• 10-year CAGR of dividend per share: Approximately +15.6%/year
• Most recent 1-year (TTM) dividend growth rate: Approximately +5.18%

The most recent 1-year dividend growth rate has slowed versus the 5-year and 10-year pace.

Dividend safety: Looking at both earnings and cash (important)

• Payout ratio (earnings-based, TTM): Approximately 98.1% (higher than the 5-year average of approximately 66.1% and the 10-year average of approximately 58.7%)
• Dividends/FCF (TTM): Approximately 238% (dividends exceed FCF)
• Dividend coverage by FCF (TTM): Approximately 0.42x
• FCF (TTM): Approximately $2.08 billion
• Capex intensity reference: Capex-to-operating cash flow ratio is approximately 0.55

On the latest TTM numbers, dividends are not covered by free cash flow on their own. So even with a strong dividend history, the current snapshot suggests dividend sustainability deserves “some caution” if you rely strictly on present metrics. The point isn’t to label the policy good or bad; it’s to recognize the reality that running heavy investment (fab expansion) alongside shareholder returns (dividends) can make cash look tight.

For income investors, the yield and track record can be compelling. For total-return investors, the key question is whether TI can keep the dividend intact while balancing investment needs and other forms of capital return.

7. Cash flow tendencies: How to read the gap between EPS and FCF

In TI’s long-term record, one gap stands out: EPS has had periods of growth, while FCF has looked weak over the last several years. Even in the latest TTM—where revenue and EPS are back to modest YoY gains—FCF has rebounded sharply YoY. Still, the FCF margin is approximately 12.05% on a TTM basis, below its historical center of gravity.

That gap alone isn’t proof that “the business has deteriorated.” The first lens is structural: high capex intensity (and timing differences in investment) can depress cash flow. TI is in the middle of a transition and expansion to new 300mm fabs, and when investment leads, there can be stretches where FCF looks thin.

From an investor’s standpoint, the practical question is simple: the path to reconnecting EPS and FCF runs through where operating margin and FCF margin normalize while investment continues.

8. Current valuation positioning (where it sits within its own history)

Here, instead of benchmarking against the market or peers, we focus on where TI sits versus its own history. We limit the view to six indicators: PEG / PER / free cash flow yield / ROE / free cash flow margin / Net Debt / EBITDA.

PEG: Well above the normal range over the past 5 and 10 years

• PEG (current): 14.35
• Positioned far above the normal range over the past 5 and 10 years (breakout above)
• Direction over the last 2 years: rising

Historically, this positioning can make valuation look stretched relative to the growth rate (TTM YoY).

PER: Upper end over 5 years; above the range over 10 years

• PER (TTM, share price $177.17): 32.11x
• Within the normal range over the past 5 years but near the upper bound; above the normal range over the past 10 years
• Direction over the last 2 years: rising

The longer the lookback window (10 years), the more elevated today’s positioning appears.

Free cash flow yield: Low end over 5 years; below the range over 10 years

• FCF yield (TTM): 1.29%
• Near the lower bound of the normal range over the past 5 years; below the normal range over the past 10 years
• Direction over the last 2 years: declining

Within its own history, the yield is skewed low—either because the share price is high (or because FCF is temporarily depressed).

ROE: Below the normal range over the past 5 and 10 years

• ROE (latest FY): 28.39%
• Below the normal range over both the past 5 years and 10 years (breakdown below)
• Direction over the last 2 years: declining

Versus prior highs, capital efficiency is running on the lower side.

FCF margin: Low range over 5 years; below the range over 10 years (though improving over the last 2 years)

• FCF margin (TTM): 12.05%
• Within the lower range over the past 5 years; below the normal range over the past 10 years
• Direction over the last 2 years: rising

There’s improvement, but it’s hard to say the business has returned to its long-term cash-generation baseline.

Net Debt / EBITDA: Above the normal range over the past 5 and 10 years (inverse indicator)

• Net Debt / EBITDA (latest FY): 0.80
• Above the normal range over both the past 5 years and 10 years (= higher leverage than in the past)
• Direction over the last 2 years: rising

Net Debt / EBITDA is an inverse indicator: the smaller (more negative) the value, the more cash the company has; the larger the value, the higher the leverage pressure. On that basis, today’s positioning is “heavier than in the past.”

9. Why TI has won (success story): Built through accumulation, not flash

TI’s success is less about “one breakthrough technology” and more about steadily compounding a value proposition that B2B customers consistently reward. The structural core is its ability to deliver components that handle real-world electricity safely, accurately, and efficiently—across an enormous catalog, with long-term availability.

What customers value (Top 3)

• Deep breadth of lineup: Engineers can find the exact part number they need and consolidate vendors, reducing friction in both design and procurement.
• Confidence in long-term supply: In automotive and industrial markets, being able to buy the same part for years reduces redesign and qualification costs.
• Strong design documentation and tools: Datasheets and reference designs increase development speed and reduce uncertainty.

Product story: Not “one-point performance,” but “making standard parts easy to use”

TI’s competitive game is typically not about winning on a single peak spec. It’s about offering a vast portfolio of easy-to-use standard parts, backed by long-term supply and design support. That shifts competition beyond unit price toward total cost—engineering time, evaluation effort, procurement stability, and the rework required to substitute parts.

10. Is the story still intact? Consistency with recent strategy and news (current narrative positioning)

TI’s recent actions largely reinforce its traditional playbook—breadth of lineup, long-term supply, design support, and supply reliability—while new sources of friction are also becoming part of the story.

(1) A stronger push to be a “company that can create supply”

The shift and expansion to 300mm fabs has been a long-standing strategy, but TI has now officially announced the start of production at its new 300mm fab in Sherman (SM1). That signals a move into a phase where “capacity is actually coming online.” This can strengthen customer value through supply confidence, while also making the trade-off more visible: during ramp and heavy investment periods, cash can look thinner.

(2) “Pricing and trade” have become part of the internal narrative

Analog at mature nodes can be exposed to geopolitics and trade dynamics. Public agencies have indicated that in September 2025 China initiated an anti-dumping investigation into analog ICs from the U.S. Because this can influence sales and supply assumptions (tariffs, procedures, and customer sourcing decisions), it’s a structural factor that’s hard to dismiss. A published schedule indicates a final determination is expected in September 2026.

(3) The numbers narrative: “Revenue is back, but headroom hasn’t fully returned”

On the latest TTM basis, revenue, profit, and FCF are back to positive YoY growth. But “headroom” metrics haven’t fully normalized—ROE remains below its historical range, dividends aren’t covered by FCF, and Net Debt / EBITDA is higher than in the past. It’s reasonable to view the current narrative as “recovering, but not fully recovered.”

11. Quiet Structural Risks: Where strengths can subtly become vulnerabilities

This section is not claiming there is “already fatal damage.” Instead, it lays out eight dimensions where weaknesses could develop in ways that aren’t immediately obvious.

• ① Concentration in customer dependence (in less visible forms): End markets are broad, but trade risk can become explicit at the intersection of region × specific category. China’s anti-dumping investigation could be a concrete example.
• ② Rapid shifts in the competitive environment (renewed price competition): The more commoditized the product, the more price dominates; periods where price revisions become a focal point can signal that equilibrium is shifting toward price.
• ③ Quiet commoditization: Where “it must be this part number” is less true, second sourcing can gradually expand—often hitting pricing power and mix more than headline revenue, and potentially delaying margin recovery.
• ④ The other side of internal manufacturing (impact of utilization and yields): Owning fabs is a weapon, but new fab ramps are hard to match perfectly to demand, and utilization and fixed-cost absorption losses can show up quietly.
• ⑤ Deterioration in organizational culture (hard to see except through text): Within the search scope, primary information is insufficient to conclude. Still, large investments and ramp phases are structurally periods when frontline burden can rise, leaving room for additional diligence.
• ⑥ Deterioration in ROE/margins: Capital efficiency and margins are below prior levels; if that gap persists, the story risks drifting toward “investment happened, but profitability didn’t follow.”
• ⑦ Worsening financial burden (reduced flexibility): Interest-paying capacity remains, but leverage is higher than in the past and dividends aren’t covered by FCF—potential pressure points if the cyclical recovery takes longer.
• ⑧ Geopolitics × structural change in mature nodes: If trade events accelerate dual sourcing and domestic substitution, supply-chain reconfiguration tends to have inertia and may not easily reverse.

12. Competitive landscape: Who it faces, where it wins, and where it could lose

Analog and embedded are categories where outcomes are less likely to hinge on “one-point performance” the way leading-edge CPU/GPU markets do. Competition is typically multi-factor: breadth of lineup, quality and reliability, design support, supply stability, and total cost. That creates a dual reality: “there are many competitors, but switching isn’t always easy.”

Key competitors (varies by application)

• Analog Devices (ADI): often directly comparable in high value-added analog/mixed-signal
• Infineon: overlaps in automotive and power conversion
• STMicroelectronics: broad overlap in automotive and industrial
• NXP: competes in automotive and industrial embedded, often in a bundle-adoption context
• Renesas: competes in automotive MCUs and industrial control
• Microchip: competes in industrial and embedded; inventory phases and supply operations often draw attention
• onsemi: competes in automotive, power, and certain categories, and could also be pulled into trade dynamics

Competitive debate: Switching costs and barriers to entry

• Conditions where switching is less likely: Long-life automotive and industrial designs (heavy evaluation, certification, and reliability testing), and situations where adopting a multi-component set creates spillover benefits to surrounding parts.
• Conditions where switching is more likely: Commoditized categories with standardized specs and multiple equivalent suppliers, and periods when procurement KPIs tilt heavily toward unit price.

When trade and policy mix into competition

China’s anti-dumping investigation suggests competition is entering a phase where it’s not just “technology × supply,” but also “trade/policy × procurement policy.” If specific categories (e.g., interfaces, gate drivers, etc.) are included, the competitive map could be partially reshaped.

13. What is the Moat, and how durable is it likely to be?

TI’s moat isn’t a single barrier like exclusive access to leading-edge process technology. It’s better described as an accumulated wall built over time.

• Breadth of lineup: More options for design engineers and easier vendor consolidation.
• Reliability and long-term supply: Fits automotive and industrial product lifecycles and reduces redesign costs.
• Design support (reference designs, documentation, tools): Lowers adoption friction and increases the odds of being selected in the next design cycle.
• Supply foundation (in-house manufacturing mix, 300mm investment): Often translates into long-term supply confidence and a stronger cost structure.

At the same time, substitution is feasible in specific product categories. The typical pattern is “hard to replace in aggregate, but partial replacement happens,” and durability can vary meaningfully by category and region.

14. Structural positioning in the AI era: TXN isn’t “AI compute,” it’s the “power and control foundation”

TI isn’t selling AI itself (models or GPUs). Instead, it captures AI-driven demand on the foundational layer of power, conversion, protection, and sensing that makes AI compute possible. The core idea is that as AI scales, data-center power constraints intensify and power becomes increasingly central (electricity becomes the bottleneck).

Where AI could be a tailwind

• Transition in power architecture: As the industry moves from 12V to 48V and toward higher-voltage DC distribution, the value of power management, protection, conversion components, and design resources tends to rise.
• Mission-criticality: The higher the cost of downtime, the more valuable reliability and continuity of supply become.
• Barriers to entry: Building the combination of breadth, long-term supply, design support, and cost advantage takes time and can be durable.

Where AI could be a headwind (indirect pressure)

• Automation of design and efficiency in component selection: As AI-enabled procurement optimization spreads, comparisons in commoditized areas may become more rigorous, potentially translating into pricing pressure.
• Timing gap in investment payback: Even with an AI tailwind, the lag between supply investment and margin/cash benefits can influence how quickly the upside shows up.

15. Leadership and corporate culture: Is the manufacturing-and-supply strategy consistent?

In recent years, TI’s external messaging has consistently emphasized “delivering foundational semiconductors—analog and embedded—in a way that can be supplied reliably over the long term.” The flagship narrative is scaling 300mm production capacity in the U.S.

CEO vision and structure: Continuity context

• In June 2025, TI clearly laid out a plan to materially expand U.S. production capacity for foundational semiconductors (including seven fabs, totaling more than $60 billion).
• In December 2025, TI announced the start of production at Sherman (SM1), moving the supply foundation into real output under the premise of “ramping in line with demand.”
• It has been disclosed that long-time leader Rich Templeton will retire at the end of 2025, and from January 2026 Haviv Ilan will move into a structure where he also serves as Chairman.

Overall, this reads as a continuation of the core playbook—supply, manufacturing, and breadth of lineup—rather than a pivot toward “flashy new businesses.”

Person → culture → decision-making → strategy (organizing causality)

• Operations emphasis: A management bias toward “being able to make / being able to deliver,” not just R&D.
• Treating long-term supply and reliability as corporate value: Bringing that necessity to the forefront through the framing of “foundational semiconductors.”
• Phased ramp aligned with demand: Suggests an intent to manage utilization and fixed-cost absorption risk in a cyclical industry.

Fit with long-term investors and watch items (governance and capital allocation)

• Potential areas of alignment: A long-term supply and manufacturing investment story that reinforces an accumulated moat can fit well with long-duration investing.
• Watch item: A CEO who also serves as Chairman can tighten decision-making, but it also becomes a point to monitor regarding the balance between oversight and execution.
• Capital allocation tension: With ongoing investment and a period of heavy dividend burden, scrutiny increases around investment payback (margin recovery and cash generation).

It has also been reported that the fab transition phase includes workforce reductions tied to closing older fabs. That can be discussed as a potential source of frontline strain and organizational uncertainty during ramp periods (no judgment is made on whether this is good or bad).

16. TXN through a KPI tree: The “causal skeleton” investors should track

TI’s enterprise value isn’t driven only by “near-term revenue swings.” It’s shaped by how investment, supply, mix, inventory, and shareholder returns fit together. Laying this out as a KPI tree helps clarify what matters most.

Outcomes

• Sustainable profit generation across the business cycle
• Free cash flow generation that remains after investment
• Maintenance and recovery of capital efficiency (ROE, etc.)
• Headroom to sustain shareholder returns (dividend-centric)

Intermediate KPIs (Value Drivers)

• Revenue scale and growth (accumulation of design wins)
• Product mix and pricing/terms (including pricing power)
• Margins (gross margin, operating margin)
• Manufacturing cost structure (utilization, fixed-cost absorption)
• Capex burden and payback (magnitude and timing)
• Working capital efficiency (especially inventory)
• Financial leverage and liquidity (debt and cash on hand)
• Dividend coverage (dividend burden relative to earnings and cash)

Bottleneck hypotheses (Monitoring Points)

• How much margins follow the revenue recovery (quality of recovery)
• Whether cash generation returns to normal levels above the investment burden (investment payback)
• How new capacity ramps affect utilization, yields, and costs (operations)
• How inventory turns evolve through the cycle (cash tie-up)
• How price/terms competition in commoditized categories affects mix and margins (pricing power)
• How much dual sourcing and domestic substitution progress after trade/policy events (quality of demand)
• Within simultaneous dividends and investment, how well dividends are covered by earnings and cash (capital allocation)
• How the combination of debt weight and liquidity changes during cyclical recovery phases (durability)

17. Two-minute Drill: The “investment thesis skeleton” long-term investors should hold

For a long-term view of TI, the core isn’t “whether this year’s EPS is up or down.” It can be distilled into three questions.

• How far margins, ROE, and FCF can recover when the cycle turns: On an FY basis, operating margin fell from approximately 50.6% in 2022 to approximately 34.9% in 2024, making the recovery path central.
• Whether supply investment (300mm transition and new fabs) translates into cost and supply reliability: When investment leads, FCF can look thin, but the structure can improve as payback comes through.
• Whether a strong dividend commitment can coexist with investment and the balance sheet: The latest TTM shows a payout ratio of approximately 98% and FCF dividend coverage of approximately 0.42x, creating a gap between a strong history and current metrics.

In the AI era, TI’s role isn’t “AI compute,” but “power and control infrastructure that enables AI,” which can be a tailwind. At the same time, pricing pressure in commoditized categories and trade/policy-driven regional fragmentation can persist as quietly compounding frictions.