5nm? Pah. Texas Instruments focuses on 45nm+ analog, embedded electronics – and makes bank

Most electronics in the things you use are on old-school-gen process nodes, after all

Texas Instruments is focusing its fabrication efforts on analog chips and embedded processors – and seeing growing revenue from the components – amid an insatiable demand for the electronics by automakers, industrial system manufacturers, and others.

"Our industrial and automotive customers are increasingly turning to analog and embedded technology to make their end products smarter, safer, more connected and more efficient," said Dave Pahl, company veep and head of investor relations in a fourth-quarter earnings call with analysts this week.

Analog chips were identified by the US Department of Commerce in a report this week as a weak link in semiconductor supply chain. The department said manufacturers hit hardest by the ongoing component supply crunch included buyers of analog chips made using process nodes from 40nm to 800nm.

Bear in mind the majority of chips in the things you use are not state-of-the-art 10, 7, or 5nm parts – they're using larger, older nodes. Fabs turning out 14 and 5nm chips aren't helping products that just need 130nm microcontrollers, 45nm embedded processors, and so on.

It's fortunate, then, that TI is investing in its capacity to churn out analog and embedded electronics using 45nm to 130nm process nodes.

"Customers are excited that our capacity investments are in 45nm to 130nm process technologies that are optimized for analog and embedded and will support their growth in the decades ahead," TI CFO Rafael Lizardi said.

As part of that capacity investment, the US giant is plowing $30bn in a new 300-millimetre wafer fab in Sherman, Texas, which is expected to go online in 2025. And it acquired a fab in Lehi, Utah, from Micron, which will reopen early next year.

"We have a 300-millimeter roadmap to support growth from 2025 to 2035," Pahl said.

Texas Instruments' revenue for the fourth quarter of 2021 reached $4.8bn, growing by 19 per cent compared to the same quarter a year ago. Of that, TI's analog revenue was $3.76bn, growing 20 per cent year-over-year. Embedded processors grew six per cent to $764m.

Net income for the quarter was $2.1bn, growing 24 per cent from $1.69bn in the year-ago quarter.

For the full 2021 [PDF], TI reported revenue of $18.34bn, growing 27 per cent from $14.46bn in the prior year. Net profit was $7.79bn, growing 39 per cent from the year-ago profit of $5.6bn.

TI is projecting first quarter 2022 revenue to be in the range of $4.5bn to $4.9bn, with earnings per share between $2.01 and $2.29.

With the heavy financial commitment, Texas Instruments is continuing its long-term plan to deemphasize digital signal processors and pivot to analog chips, said Jim McGregor, principal analyst at Tirias Research.

The advantages of analog

Analog circuitry, which is used for handling things like power management, sensor readings, and communications, typically uses older-generation processes and materials such as silicon-germanium, which don't mix well with digital chip manufacturing processes.

Analog circuits also rely on older processes for considerations that include cost, variations in voltage, and device sizes. By comparison, the fabs built by the likes of Intel and TSMC that make cutting-edge digital chips are expensive to establish and run, and need upgrades every few years.

"TI has a lot of capacity around analog. The manufacturing doesn't scale the same as digital, which reduces the size of transistors every few years," McGregor said.

During the call, Pahl said Texas Instruments is seeing orders for "matched sets," or a coherent set of components to build a complete computing device, versus expedited orders for specific components.

Typically a matched set will include materials and components tuned to a particular end product, which could include oscillator clocks, diodes and capacitors. For TI, the ability to make those also depends on the availability of material, McGregor said.

A scarcity of chips has shut down manufacturing or cars and short-circuited PC shipments.

The chip crunch has been especially severe for power management ICs in autonomous cars, PCs and other electronics. Cars can't be built without PMICs, and car makers want to ensure a steady supply of corresponding parts to produce a vehicle.

"Customers continue to be selective in their expedite requests, increasingly focusing on products that complete a matched set rather than expediting products across the board. This behavior is not specific to any product family, end market or geography," TI's Pahl said. ®