Texas Instruments Incorporated

Welcome to the Texas Instruments Q3 2021 earnings release conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dave Paul.

Please go ahead.

Good afternoon and thank you for joining our third quarter 2021 earnings conference call. For any of you who missed the release, you can find it on our website at ti.com slash IR. This call is being broadcast live over the web and can be accessed through our website. A replay will be available through the web. This call will include forward-looking statements that involve risk and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings for a more complete description. Our Chief Financial Officer, Rafael Lazzardi, is with me today and will provide the following updates. First, I'll start with a quick overview of the quarter. Next, I'll provide insight into third quarter revenue results with some details of what we're seeing in respect to the customers and markets, and I'll also provide details by end market, including some sequential performance as we have the last few quarters. As sequential data begins to be less insightful, we'll move back to reporting only year over year per our normal practice. And lastly, Rafael will cover the financial results, an update of our capacity expansion plans, and our guidance for fourth quarter 2021. Starting with a quick overview of the quarter. Revenue in the quarter was $4.6 billion, an increase of 1% sequentially and 22% year-over-year, driven by demand in industrial, automotive, and personal electronics. On a sequential basis, analog grew 2% and embedded processing declined 5%. On a year-over-year basis, analog revenue grew 24% and embedded processing grew 13%. Our other segment grew 19% from the year-ago quarter. Now let me comment on the current environment to provide some context of what we're seeing with our customers and markets. Overall, the quarter came in generally as we expected across product segments and markets and geographies. Lead times for the majority of our products remain stable, but hotspots continue to exist. However, customers are becoming more selective in their expedite requests, focusing on products that complete a matched set rather than expediting products across the board. This behavior is not specific to any product family and market or geography. Discussions with customers confirm a high-level interest in our commitment to expanding our internal manufacturing capacity roadmap, including 300-millimeter wafer fabs RFAB II and Lehigh, or what we call L-FAB, and the associated assembly test expansions. These investments to strengthen our manufacturing and technology competitive advantage will provide lower costs and greater control of our supply chain. And while there is a growing recognition that the near-term supply-demand imbalance will end at some point, the secular growth of semiconductor content per system will continue to grow, and this requires a robust manufacturing capacity roadmap for 2025 and beyond. Moving on, I'll provide some insight into our third quarter revenue by end market. First, the industrial market was down mid-single digits sequentially, and up about 40% from the year ago. The changes both sequentially and from the year ago were generally consistent across the diverse set of sectors. The automotive market again grew sequentially and was up more than 20% from the year ago. When comparing to pre-pandemic levels of Q4 2019, revenue is up almost 30%. Personal electronics grew low double digits sequentially and was up low double digits compared to a year ago. The strength sequentially in the year ago was due to mobile phones, PC notebooks, and tablets. Next, communications equipment was down mid-single digits sequentially and was down upper teens from a year ago. Enterprise systems grew sequentially and from the year-ago quarter. Rafael will now review profitability