Texas Instruments

Components and weights: Switching costs 35% (score 85). TI’s parts are designed into systems for many years and often tied to customer software on TI microcontrollers; redesign costs, requalification, and field risk make swapping difficult. Product lifecycles typically run 10 to 15 years, reinforcing stickiness. Cost advantage 35% (score 90).

TI leads 300mm analog wafer manufacturing, with cost per chip about 40% lower than 200mm. Internal sourcing is expanding toward ~95% by 2030 and GaN internal manufacturing capacity has been scaled, further strengthening structural cost economics. Efficient scale 20% (score 80).

Analog is fragmented and characterized by many niches with limited addressable capacity per product, where a broad, low-cost incumbent benefits from scale and long duration assets. Intangibles 7% (score 80).

Strong brand, deep field application support, and TI.com direct channel serving 100,000-plus customers with fast fulfillment add soft power to retention. Network effects 3% (score 20). Minimal classic network effects. Weighted moat score results in the low-to-mid 80s and is durable given captive 300mm fabs, U.S. siting, and long product lives.

Risks: analog commoditization in select categories, overbuild or underutilization pressure on margins during downturns, and geopolitical or tariff frictions given 19% revenue exposure to China.

Evidence: gross margins remain structurally high through cycles relative to peers, supported by 300mm cost per die advantages and a catalog of differentiated power and signal chain parts where bill-of-material cost is small relative to system value.

In tight cycles TI has historically realized better pricing; in slack cycles, structural costs preserve margins. Recent margin compression is primarily from planned depreciation and reduced factory loadings rather than broad price erosion. TI’s direct channel and broad portfolio enhance mix management.

Latent power remains as industrial and automotive content per unit rises, and TI’s growing presence in data center power and sensing adds higher-value sockets. Risks: price competition in commoditizing categories, customer dual-sourcing, and auto OEM pricing pressure.

Positives: the business is predominantly catalog analog and embedded with long lifecycles, multi-year design-ins, and diversified customers. Industrial and automotive together were roughly 69% of 2024 revenue, providing secular tailwinds from electrification, automation, and content growth.

TI reported broad-based sequential growth in 2025 as the cycle turned, with Q3 2025 revenue up 14% year over year. Negatives: analog is cyclical with inventory corrections and factory loading swings, and geopolitical or tariff changes introduce forecasting uncertainty.

TI cited reduced loadings and recorded restructuring charges while closing remaining 150mm sites, which can temporarily cloud near-term gross margin predictability. Geographic mix includes about 19% of revenue from China, adding macro policy risk. Overall, medium-high predictability over multi-year horizons, medium in any single year.

Balance sheet and cash generation: as of Q3 2025 TI had approximately 14.05 billion dollars of total debt and about 5.19 billion dollars of cash and short-term investments, implying net debt near 8.9 billion dollars.

TTM cash from operations was 6.9 billion dollars against about 4.8 billion dollars of capex and 2.4 billion dollars of free cash flow including CHIPS proceeds. 2024 EBIT covered interest by over 10 times, and the credit profile is investment-grade. Liquidity is strong with an undrawn revolver.

The main near-term financial risk is capex intensity during ramp years, which depresses free cash flow and elevates depreciation. However, the CHIPS ITC and proposed direct funding offset a portion of the burden, and capex is modular. Inventory days normalized to 215 in Q3 2025. Overall resilience through cycles remains high.

Philosophy and record: management focuses on long-term free cash flow per share growth, with three pillars of a great business model, disciplined capital allocation, and efficiency. Over the last 12 months TI returned 6.6 billion dollars to owners and invested 4.8 billion dollars in capex.

The dividend has been raised for 21-plus consecutive years, and 2024 saw a 5% increase to 1.36 dollars per quarter, with 2025 dividends continuing and share repurchases resuming as capacity investments progressed. SBC dilution is managed with an explicit target of under 2% net annual dilution.

Constructive critique: the current capex cycle is unusually heavy; activist engagement in 2024 pressed for more dynamic capacity management and a path to higher FCF per share by 2026. We view the spend as moat-accretive and U.S.-sited, but we monitor utilization discipline and the cadence of buybacks while FCF is temporarily suppressed.

Leadership: CEO Haviv Ilan, a 26-year TI veteran and former COO, succeeded Rich Templeton in 2023 and will become chairman effective January 2026 following Templeton’s retirement as chair. CFO Rafael Lizardi is a long-tenured insider with consistent IR transparency.

Governance and alignment appear solid, though insider equity ownership is modest given TI’s scale. Operational execution through a large U.S. capacity build, including the Sherman and Lehi fabs, has been steady with clear communication on loadings, depreciation, and CHIPS accounting. Cultural continuity and internal promotions support consistency.

We score management as strong, with conservative communication and long-term orientation.