Texas Instruments is flexing its chip-making muscles, boasting of impressive foresight in avoiding the worst of the component shortages and its progress in bringing two new fabs online – but admits it could be years before either begin producing in volume.
"We are investing for the long-term," Dave Pahl, head of investor relations, claimed during the company's earnings call. "Some of the obvious things that you can see are the new manufacturing investments in RFAB2. If you're down here in Texas, you will see cranes up over the building. I think I counted six or seven at the max that were up over that."
Pahl confirmed the company is investing in all its fabrication facilities to bring supply closer to meeting demand, increasing its output at the RFAB1 facility and continuing work to bring RFAB2, its third 300mm wafer facility, online.
"RFAB2 will become operational sometime in the middle of next year," Rafael Lizardi, chief financial officer, added. "That's when the shell will be completed, and then we will be deploying equipment there by the second half of 2022."
The company isn't just building its own fabs, though. It recently took a shortcut to increased production by splashing $900m (£657m) on Micron's Lehi facility in Utah – surplus to requirements since its split from Intel and their joint 3D XPoint project.
"The Lehi fab will be our fourth 300mm fab," Lizardi confirmed, "joining DMOS6, RFAB1 and soon-to-be completed RFAB2 in our wafer fab manufacturing operations. We continue to believe that our competitive advantage of manufacturing and technology will be of growing importance in owning and controlling our supply chain."
While the company is clearly pushing to bring new manufacturing capacity online – and isn't afraid to splash the cash to do so, as its acquisition of the Lehi fab proved – it also had words for its competitors who are deeper into the shortage pit than itself: you guessed wrong.
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"When the pandemic was starting, in fact, March of last year, everybody, all our competitors, were decreasing their inventory levels, slowing down factories," Lizardi smugly pronounced. "We went the other way. We maintained and in fact increased our production levels.
"We increased our inventory levels. They went from about 140 days to 160, some 170 days, almost. And that, along with our business strategy, our business model, helped to put us in a great position to take advantage of the situation, and has helped us do significantly better than our competitors over the last three or four quarters."
That level of foresight in being able to "take advantage" of supply constraints driven by global pandemic only bought the company a head start, however, and now it's beginning to feel the bite.
"We have gotten to a point where, yes, inventory is now below desired levels," Lizardi admitted. "We are running about 111 days and our target is 130 to 190 days."
"I know there's lots of speculation on how long the strong demand will last, and certainly we've read the ranges that it's going to end soon and others that say it is going to continue for quite some time," Pahl added. "We are not going to forecast the fourth quarter or even comment on how long the cycle last, because honestly, as you know, we don't know. I don't think anyone knows."
It could be a while before the company's fab investments pay off, too.
"[Lehi] is ready for production once we qualify it," Lizardi admitted, "but at relatively low volumes. We still have to add CapEx [Capital Expenditure] at factory to take it to the volumes that we want and that will happen over time. That CapEx is probably going to run about half of what RFAB2 CapEx will run. And I'm talking over years, right, as we deploy equipment there."
Texas Instruments' results for calendar Q2 showed $4.58bn in revenue and $1.93bn in net income – a hefty 41 and 40 per cent above the same period last year respectively. Its outlook of $4.4bn to $4.76bn in revenue for the coming quarter, however, appeared to rattle investor confidence, with the company's share price dropping 5 per cent in pre-market trading after closing up 3.45 per cent.
Texas Instruments did not respond to a request for additional comment in time for publication. ®