Texas Instruments Reports Demand Slowdown Following Tariff Spike

Texas Instruments (TI) has reported a notable slowdown in demand following a surge in April, which was largely driven by customers accelerating orders ahead of the “Liberation Day” tariff announcement. The company’s shares dropped nearly 4 percent on Thursday, reflecting investor concerns over future performance.

Speaking at the Citi Global TMT Conference, TI’s Chief Financial Officer, Rafael Lizardi, explained that the strength observed from January to April was partially attributed to market dynamics influenced by tariffs ahead of President Donald Trump‘s tariff announcement on April 2, 2023. “But then things did slow down after April, or at least didn’t grow as they normally would have,” Lizardi noted.

Government Equity Stake Discussions Unconfirmed

Lizardi further clarified that Texas Instruments has neither been approached regarding nor discussed any potential U.S. government equity stake as a condition for receiving incentives under the CHIPS Act. This statement comes in light of the Trump administration’s controversial decision to acquire a 9.9 percent equity stake in Intel, which has raised concerns about government involvement in the private sector. “Nothing along those lines has been discussed or proposed. We have not been approached on any of that,” Lizardi affirmed.

The agreement with the U.S. government, initially established under the Biden administration and subsequently revised over the past six months, has resulted in only minor adjustments according to Lizardi. “There were little things they wanted to change, but nothing along the lines of what you’re hearing from companies like Intel,” he added.

Funding and Financial Outlook

The U.S. Commerce Department has allocated up to $1.6 billion in funding for TI under the CHIPS and Science Act. Despite this financial backing, Lizardi indicated that the company’s free cash flow has been affected by increased capital expenditures in recent years. Although share repurchases have continued, the pace has slowed due to prioritizing capital expenditure.

In July, TI’s quarterly profit forecast failed to meet investor expectations, as it indicated weaker-than-anticipated demand for its analog chips from various customers. Nonetheless, the company remains optimistic, stating that four of its five end markets are on the path to recovery. The automotive sector, however, continues to face challenges due to a sluggish rebound in demand and ongoing economic uncertainty.