(Bloomberg) — Haviv Ilan, CEO of Texas Instruments Inc., said customers are working through excess inventory and the timing is right for a rebound in orders after eight consecutive quarters of sales declines.
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During a conference call after announcing third-quarter results, Ilan said three of TI’s key markets have already started to recover, but its biggest sources of sales – industrial chips and automotive chips – are still suffering from a glut of inventory .
“We really need the broad industrial market and the automotive market to come on board,” he said. When asked to predict a rebound, he replied: “It’s about time, but we haven’t seen it yet.”
Investors seized on the bullish tone, sending shares up about 3% in late trading. The stock had fallen after Texas Instruments released its results, which included a tepid fourth-quarter forecast.
Sales during that period will be between $3.7 billion and $4 billion, the company said. Analysts estimate an average of $4.08 billion, according to data compiled by Bloomberg. Earnings will be $1.07 to $1.29 per share, compared to an average projection of $1.35.
The Dallas-based company is the largest maker of chips that perform simple but vital functions in a wide range of electronic devices. While chipmaker executives are typically reluctant to provide long-term projections for the entire industry, investors use their forecasts as indicators of industry-wide demand.
Shares of Texas Instruments, up 14% this year, closed Tuesday at $193.97.
In the third quarter, sales fell 8.4% to $4.15 billion, marking the eighth consecutive contraction. Analysts had forecast $4.12 billion. Earnings were $1.47 per share, compared with an estimate of $1.37 per share.
Heading into Texas Instruments’ earnings, chip companies gave conflicting signals about the sector. Equipment maker ASML Holding NV reported weak orders for its equipment and said customers are becoming more cautious. Taiwan Semiconductor Manufacturing Co. meanwhile came up with strong forecasts. For both companies, the demand for advanced chips used in artificial intelligence is a bright spot.
The majority of Texas Instruments’ revenue comes from manufacturers of industrial equipment and vehicles, which together account for more than 70% of sales. The products offer a variety of functions, some as simple as registering button presses and converting power.
Although those types of components require less sophisticated manufacturing than the processors that power computers and telephones, the addition of new electronic features to everyday devices has made Texas Instruments products more valuable.
The company is spending heavily on new factories – part of an effort to bring most production back in-house – and that’s weighing on profits in the meantime. Texas Instruments has said the effort, when completed, will give it a cost advantage over the competition.
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