Financial report outlook | Texas Instruments Incorporated (TXN.US) opens the curtain of chip stock financial report season, expected to release signals of analog chip recovery

Focus on analog chips and embedded processing solutions, American chip giant Texas Instruments Incorporated (TXN.US) will announce its fourth-quarter 2024 performance report after the US stock market closes on January 23, Eastern Time. Investors are expecting the chip company to announce better-than-expected performance, setting a good start for the chip company's earnings season, and also hoping the giant will release optimistic signals about the recovery cycle of analog chip demand. Prior to this, analog chip giants Analog Devices, Inc. (ADI.US) and United Microelectronics Corp. Sponsored ADR (UMC.US), which focus on mature processes such as 14nm and 28nm, have released optimistic signals about the recovery of demand for analog chips in two core application areas - automotive chips and industrial chips. Wall Street analysts generally expect Texas Instruments Incorporated to announce earnings per share of $1.19 for the fourth quarter, a 20.1% year-on-year decrease. Total revenue for the fourth quarter is expected to be around $3.86 billion, down 5.4% from the same period last year, indicating a significantly narrower decline compared to the past few quarters. Most analysts believe that Texas Instruments Incorporated's customers are significantly digesting excess inventory. In addition, as generative artificial intelligence gradually integrates with consumer electronics and industrial applications, after several quarters of continuous revenue decline, the timing for the recovery of orders and the revival of demand for analog chips is expected to come in the middle or second half of this year. Texas Instruments Incorporated is one of the world's largest analog chip manufacturers, and most of its chip products perform simple but crucial functions, such as converting power to different voltages in electronic devices. More importantly, analog chips have played an indispensable role in various key modules and systems of electric vehicles in recent years, including power management, battery management, sensor interfaces, audio and video processing, and motor control. With one of the largest customer bases and product ranges among chip manufacturers, Texas Instruments Incorporated's performance and outlook data can serve as a forecast indicator for various industry demands. Most of its chip products are used in industrial and electric vehicle applications. If one of the world's largest analog chip manufacturers, Texas Instruments Incorporated, announces better-than-expected optimistic earnings and outlook, it will also mark the start of the earnings season for US chip giants, or continue to boost the bull market trend of the Philadelphia Semiconductor Index, which has been dubbed the "global chip stock benchmark." Chip giants such as ON Semiconductor Corporation (ON.US), Intel Corporation (INTC.US), ASML Holding NV ADR (ASML.US), KLA Corporation (KLAC.US), Qualcomm (QCOM.US), AMD (AMD.US), and NVIDIA Corporation (NVDA.US) will gradually disclose their latest earnings reports and outlook data from late January to late February. The performance of these chip giants is crucial for the outlook of global chip industry demand and is also critical for the direction of the Nasdaq 100 index in financial markets. Analysts' outlook on Texas Instruments Incorporated's various business segments: In the past 30 days, Wall Street financial institutions have maintained general expectations for Texas Instruments Incorporated's earnings per share this quarter. Before the company announces its earnings, any changes in earnings per share forecasts are crucial. If there are no significant upward revisions or downward revisions, it means analysts have a consistent outlook for the performance, and the stock price tends to fluctuate less after the earnings are announced. These revisions play a key role in predicting potential investor reactions to the company's financial results. Several empirical studies have consistently shown a close relationship between earnings per share forecast trends and short-term stock price changes. Although investors often rely on general earnings per share and revenue estimates to evaluate quarterly business performance, in-depth analysis of analysts' predictions on certain key performance indicators can often provide a more comprehensive understanding of performance. With this perspective in mind, it is time to comprehensively examine the average forecast values of certain key performance indicators that Wall Street analysts routinely monitor and predict for Texas Instruments Incorporated. According to collective analyst judgment, "Other revenue" is estimated to be approximately $213.67 million. This estimate indicates a year-on-year change of +4.2%. Analysts generally expect that "Embedded Processing revenue" will reach $588.98 million. This estimate indicates that the revenue for this business will decrease by 21.7% compared to the same period last year. Analyst evaluations indicate that "Analog Business Revenue" will reach around $3.05 billion, with a forecast indicating a change of -2.2% compared to the same period last year. In terms of core business operating profits for Texas Instruments Incorporated, Wall Street analysts generally predict that "Analog Business fourth-quarter operating profit" will reach approximately $1.15 billion; compared to the current forecast, the company's performance report for the same quarter last year showed $1.28 billion. Collective analyst evaluations show that the estimated "overall operating profit for other businesses" is $3.72 million; compared to the current estimate, the company's operating profit for the same period last year was.Quarterly profit is approximately 58 million US dollars.Analysts expect that the operating profit related to the "embedded processing business" will reach approximately $1.0378 billion; compared to the current forecast data, the profit for the same quarter of the previous year was around $1.95 billion. AI may help Texas Instruments Incorporated enter the long-awaited "analog chip demand recovery cycle" in the market. Many analog chip manufacturers focusing on the industrial and electric vehicle markets, including Texas Instruments Incorporated, have experienced continued poor performance since 2023. Their revenue has been severely affected by customer excess inventory, slowing customer orders, and a sharp shortage of analog chips after the COVID-19 pandemic, leading industrial customers to accelerate inventory hoarding, and more importantly, the sluggish demand for electric vehicles and industrial manufacturing. Under the long-term excess inventory and the macroeconomic environment of high interest rates maintained by the Federal Reserve, demand for the industrial manufacturing sector and global electric vehicles has significantly cooled since 2023, exacerbated by the gradual withdrawal of government subsidies related to global electric vehicles, further weakening demand for electric vehicles. Artificial intelligence (AI) is gradually being integrated into Texas Instruments Incorporated's business focus on the automotive and industrial sectors, driving technological innovation in production and hardware deployment in these two major fields. Since the second half of 2024, it has led to continued demand recovery, while downstream accelerating destocking has constantly helped demand to overcome the "sluggish period." In the electric vehicle sector, AI is not only used for autonomous driving and advanced driver assistance systems (ADAS), but also to optimize production manufacturing and in-vehicle entertainment experiences. In the industrial manufacturing sector, AI is widely used in smart manufacturing, predictive maintenance, and automation control. By integrating AI-related architectures into the hardware system, analog chips can support real-time inference of deep learning models, ensuring that AI systems can respond quickly to changes in the environment. The TDA4VM processing platform, a high-performance chip platform newly designed by Texas Instruments Incorporated for autonomous driving and industrial applications, integrates various processors (including CPUs, DSPs, AI accelerators, etc.), supports various deep learning inference tasks, and can provide real-time data processing through edge computing. This platform can process data from vehicle perception systems, vision systems, radar, and LiDAR. Since 2024, Texas Instruments Incorporated's upgraded DSP chips have begun to be widely used in many electric vehicles and industrial applications, especially in scenarios that require efficient signal processing and low power consumption. By combining deep learning and edge computing, Texas Instruments Incorporated's DSP chips can accelerate the AI inference process, helping to achieve faster responses and decisions. Analog Devices, Inc., the global leader in analog chips, released its financial report at the end of November last year, showing that the demand for analog chips in electric vehicles and industrial end markets, which has been sluggish since the rate hike cycle by the Federal Reserve in 2022, is expected to enter the road to demand recovery. Analog Devices, Inc.'s financial report as of November 2 showed that all terminal application markets, including industrial, automotive, communications, and consumer electronics, showed a month-on-month growth, indicating a major turning point in the demand for analog chips that has been sluggish for several quarters. Among them, Analog Devices, Inc.'s Q4 consumer electronics analog chip revenue unexpectedly increased year-on-year, with an increase of over 30%, reinforcing the logic of the recovery of demand in consumer electronics such as PCs and smartphones. Analog Devices, Inc.'s financial report and relatively optimistic growth expectations for 2025 indicate that the demand for analog chips, especially for electric vehicles, which has been continually sluggish since 2022 and has been hovering at the "bottom," may be about to enter the long-awaited demand recovery phase in the market. Since the second half of 2023, driven by the AI frenzy, global enterprises and government agencies have seen a surge in demand for the NVIDIA Corporation (NVDA.US) AI GPU series products, the dominant AI chip in data center, leading to a sharp increase in demand for server CPUs, enterprise storage chips, and high-performance Ethernet chips, and even a recovery trend in demand for PC and smartphone chips due to the rise of AI large models at the terminal. However, the analog chip industry has consistently shown signals of sluggish demand, and Analog Devices, Inc.'s better-than-expected financial report and performance outlook may indicate a turning point in the fundamentals of analog chips. In addition, United Microelectronics Corp., focusing on mature chip processes such as 14nm and 28nm, announced its operating data in January, achieving revenue of 18.97 billion New Taiwan dollars, an 11.7% year-on-year increase. More importantly, after a significant decline of 20% in total revenue in 2023, United Microelectronics Corp. has resumed its growth trend in 2024. Data shows that from January to December, the total revenue of United Microelectronics Corp. increased by 4.39%, reaching approximately 232.3 billion New Taiwan dollars. Unlike the "chip foundry king" Taiwan Semiconductor Manufacturing Co., Ltd. (TSM. US) focusing on the most advanced chip fabrication processes (such as 5nm, 4nm, and 3nm), United Microelectronics Corp. focuses on mature chip processes.Electronics Corp. Sponsored ADR provides mature process technology ranging from 14nm to 28nm and larger values, focusing on mature process nodes. These chip products based on United Microelectronics Corp. Sponsored ADR's mature nodes are widely used in the communication, consumer electronics, automotive electronics, and industrial sectors, focusing on stable and cost-effective mature nodes to meet the overall demand of traditional industrial sectors and mid-range consumer electronics markets. United Microelectronics Corp. Sponsored ADR's total revenue for 2024 rebounded in the fourth quarter driven by strong orders, indicating a recovery process for mature process chips such as analog chips at 14nm and above.The analyst team of Wall Street financial giant Bank of America Corp (Bank of America) recently stated in a report that by 2025, chip stocks are still likely to be one of the most eye-catching sectors in the US stock market. The contribution to the increase in value is expected to expand from benefiting overall from the "AI chip three giants" and other chip companies that benefit from the AI boom to include analog chips and electric vehicle chip stocks, which have long lagged behind the US stock market and the Philadelphia Semiconductor Index. "Non-AI" chip stocks as targets.