Good day, and welcome to the Texas Instruments fourth quarter 2021 earnings release conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Dave Pahl. Please go ahead, sir. Good afternoon, and thank you for joining our fourth quarter in 2021 earnings conference call. Rafael Lizardi, TI's Chief Financial Officer, is with me today. For any of you who missed the release, you can find it on our website at ti.com/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 risks 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. First, let me provide some information that's important for your calendars. We plan to hold a call for our Capital Management Update on February 3rd at 10:00 A.M. Central Time. Similar to what we've done in the past, Rafael and I will summarize our progress and provide some insight into our business and our approach to capital allocation. For today's call, let me summarize what Rafael and I will be reviewing. I'll start with fourth quarter revenue results, including some details of what we're seeing with respect to our customers and markets. I'll then provide the annual summary of revenue breakout by end markets. Lastly, Rafael will cover the financial results, some insights into one-time items, and our guidance for first quarter 2022. Starting with fourth quarter results in the market environment. The company's revenue grew 19% year-over-year, driven by strong demand in the industrial and automotive markets. Analog revenue grew 20% year-over-year, and Embedded Processing grew 6%. Our other segment grew 35% from the year-ago quarter. Let me now comment on the current environment to provide some context of what we're seeing with our customers and markets. Overall, the quarter came in stronger than we expected. The strength was across most product families, end markets, and geographies. The market environment is similar to what we reported 90 days ago. Lead times for the majority of our products remain stable, but hotspots continue to exist. However, 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. Discussions with customers confirm a high level of interest in our commitment to expanding our internal manufacturing capacity roadmap, including 300 mm wafer fabs, our RFAB2 and LFAB, our recently announced plans for a multi-fab site in Sherman, Texas, 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. While there's 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 increase, and this requires a robust manufacturing capacity roadmap for 2025 and beyond. Moving on, I'll now provide some insight into our fourth quarter revenue by end market for the year-ago quarter. First, the industrial market was up about 40%, driven by broad-based strength across all sectors. The automotive market was up high single digits with strength in most sectors. Personal electronics was down upper single digits off a strong compare from a year ago. Next, communications equipment was up about 25%. Finally, enterprise systems was up about 50% off a weak compare from a year ago, driven primarily by data center and enterprise computing. Lastly, as we do at the end of each calendar year, I'll describe our revenue by end market for 2021. We break our end markets into six categories that are grouped by their life cycles and market characteristics. The six end markets are industrial, automotive, personal electronics, which includes products such as mobile phones, PCs, tablets, and TVs, communications equipment, enterprise systems, and other, which is primarily calculators. As a percentage of revenue for the year, industrial was 41%, automotive 21%, personal electronics 24%, communications equipment 6%, enterprise systems 6%, and other was 2%. In 2021, industrial and automotive combined made up 62% of TI's revenue, up about 5 percentage points from 2020 and up from 42% from 2013. We see good opportunities in all of our markets, but we place additional strategic emphasis on Industrial and Automotive. 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. These trends have resulted and will continue to result in growing chip content for application, which will drive faster growth compared to the other markets. Rafael will now review profitability, capital management, and our outlook. Rafael. Thanks, Dave, and good afternoon, everyone. Gross profit in the quarter was $3.4 billion or 69% of revenue. From a year ago, gross profit increased primarily due to higher revenue. Gross profit margin increased 440 basis points. Operating expenses in the quarter were $793 million, up 1% from a year ago and about as expected. On a trailing 12-month basis, operating expenses were 18% of revenue. For the year, we have invested $1.6 billion in R&D, an important element of our capital allocation. We are pleased with our disciplined process of allocating capital to R&D, which we believe will allow us to continue to grow our top line over the long term. Restructuring charges were $54 million in the quarter. This expense is driven by the Lehi wafer fab purchase we closed in October. Operating profit was $2.5 billion or 52% of revenue. Operating profit was up 38% from the year-ago quarter. Net income in the fourth quarter was $2.1 billion or $2.27 per share, which included a $0.04 cost that was not in our prior outlook, primarily due to the purchase I discussed earlier. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $2.4 billion in the quarter. Capital expenditures were $1.3 billion in the quarter, which included about $900 million for the L FAB purchase. Free cash flow on a trailing 12 month basis was $6.3 billion, up 15% from a year ago. In the quarter, we paid $1.1 billion in dividends. We have increased our dividend per share by 13%, marking our 18th year of dividend increases. For the year, our dividend represented 62% of free cash flow, underscoring its sustainability. Our balance sheet remains strong with $9.7 billion of cash and short-term investments at the end of the fourth quarter. Total debt outstanding was $7.8 billion, with a weighted average coupon of 2.6%. Inventory days were 116, up four days sequentially and remained below desired levels. Now let's look at some of these results for the year. In 2021, cash flow from operations was $8.8 billion. Capital expenditures were $2.5 billion or 13% of revenue. Free cash flow for 2021 was $6.3 billion or 34% of revenue. Our cash flow reflects the strength of our business model. As we have said, we believe that growth of free cash flow per share is the primary driver of long-term value. Turning to our outlook for the first quarter, we expect TI revenue in the range of $4.5 billion-$4.9 billion and earnings per share in the range of $2.01-$2.29. We expect our 2022 annual operating tax rate to continue to be about 14% and our effective tax rate about a percentage point lower than that. This is based on current tax law and would be about the same as we sold in 2021. Next, let me help you model our expectation for the expenses for the LFAB purchase. As we have said, we expect to have about $75 million of cost per quarter until we start production, which is still expected in early 2023. This cost continued to be mostly reflected in the restructuring line on the P&L, so will be visible each quarter to you and therefore part of our operating profit results. Once the facility begins production, this cost will move and be primarily reflected in cost of revenue. As I close, let me explain why we're so excited about this capacity investments as they strengthen our manufacturing and technology competitive advantage. First, we have significant 300 mm capacity coming online with RFAB2 and LFAB in 2022 and 2023. Second, with the announcement of the Sherman complex, we have a 300 mm roadmap to support growth from 2025 to 2035. Third, customers are excited that our capacity investments are in 45 nm to 130 nm process technologies that are optimized for Analog and Embedded and will support their growth in the decades ahead. It is clear that owning and controlling our manufacturing and technology will give us both lower costs, and greater control of our supply chain. It is with this confidence we look forward to sharing with you more details of our plans in our capital management call next week. With that, let me turn it back to Dave. Thanks, Rafael. Operator, you can now open the lines up for questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response, we'll provide you an opportunity for additional follow-up. Operator? Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. As mentioned, in order to accommodate as many questions as possible, please limit yourself to one question and one follow-up before reentering the queue. Once again, that is star one if you'd like to ask a question. We will take our first question from John Pitzer with Credit Suisse. Please go ahead. Yeah, good afternoon, guys. Congratulations on the solid results. Dave and Rafael, last quarter was the first quarter you talked about customers being a little bit more selective about their ordering patterns, and that was somewhat reflected in upside in September, which was a little bit muted. You characterized Q4 as being the same, but the upside was a little bit stronger. I'm wondering if you could help me just square that circle as to what drove the magnitude of upside in the December quarter above that of September. Yeah, John, I'll take that. The upside that we saw in the fourth quarter was very, very broad-based. You know, as we described it was across the product families, across our end markets and geography. You know, really wasn't one thing that was driving it, and was very broad-based. That was the difference that we saw between last quarter and this quarter. You have a follow-up? Yeah, just as a follow-up. You know, notwithstanding the impressive growth you put up in your Analog business in calendar year 2021, if I comp that against the SIA, it's gonna end up having been, you know, an unusual year for you guys because you would have undergrown the industry by a fairly wide margin, at least versus history. I'm wondering if you can help me understand, is that a function of peers being a bit more aggressive on pricing than you? Is it something that we shouldn't take as a trend? Or how do you explain the difference there? Yeah, I think whenever we look at the SIA data and, you know, regardless of which direction that it's trending, and you'll know that I'll always be consistent, that I say, you know, never look at one, you know, one quarter or sometimes even one year on specifics. It really needs to be something that is looked at over time, especially as we go through a period, you know, the last four or six quarters, you know, through COVID and the choppiness that's been going on. Just be real careful to get too precise on measuring things in this type of time period. I think, you know, with our competitive advantages, with the investments that we're making, we're very confident that we're making progress in the markets that we're making those investments. We really believe that we've made progress, you know, over this time period. Thank you, John. We'll go to the next caller, please. Thank you. We'll hear next from Vivek Arya with Bank of America Securities. Please go ahead. Thanks for taking my question. I'm curious how would you characterize the demand environment? Would you call it, you know, early, mid, or late cycle? Or if I ask the question differently, do you think any of your end markets is overheated right now in any way? Yeah, Vivek, I would say that the demand environment is similar to what we saw 90 days ago. You know, we had seen strength in orders and our backlog continued to be strong, those types of things. You know, the upside that we saw, of course, this quarter was very broad-based. You know, that was different here in the fourth quarter. I'd say that, you know, we did see the match set behavior last quarter. Again, we did see it again this quarter. You know, that's where customers are really looking to complete that, you know, instead of expediting across the board. You know, you could describe that behavior as being symptomatic of growing customer inventory that's out of mix. You know, as we've talked about previously, you know, we don't have direct visibility into customer inventory, so that's not something that we could measure over time. You have a follow-on, Vivek? Yeah. Thank you, Dave. The other question is now on the supply side. You know, there is investor concern that the semiconductor industry is overinvesting at a time when demand might be peaking. I know you guys have made it clear that you invest for the longer term, but how are you thinking about your current acceleration on the investment side? When does that translate into actual useful capacity? What are you doing to make sure that you don't overinvest right, at least in the next couple of quarters? Yeah, Vivek, I'll go ahead and take that. You know, as you alluded to at the beginning of that question, we think of the long term when we make these decisions. This is not about 2021, 2022, or even 2023. This is over the long term and the secular trends in our industry. We're confident of where those are pointing. And specifically in our products, analog and embedded, and the end markets where we put a strategic priority, industrial, automotive. On the manufacturing investments that you alluded to, we're very excited about those. As I mentioned during the prepared remarks, they're gonna strengthen our competitive advantage on manufacturing technology. You know, first, we're gonna have significant 300 mm capacity coming online with RFAB2 and Lehi. That's gonna happen actually this year and then going to next year with Lehi. Second, with the announcement of the Sherman Complex, we're gonna have a roadmap that's gonna support us out to 2035. Finally, customers are very excited about our investment, specifically in 45 nm to 130 nm process technologies that are optimized for Analog and Embedded, and will support the customers' growth for decades ahead. Great. Thank you, Vivek. We'll go to the next caller, please. I think you'll hear next from Toshiya Hari with Goldman Sachs. Hi, guys. Thanks so much for taking the question. Your days of inventory came in at 116, and as you pointed out, you're still below where you'd like to be. To the extent you have visibility into customer inventory, how would you characterize where they are today, and where do you see them going forward? Well, I'll start out, I'll comment on our own inventories, and Dave, you wanna add to that. Yes, as you pointed out, our inventory days are 116. That is higher by about four days from last quarter, but still well below where we want to be, and our goal is to be significantly higher than that. Our guidance on that is 130-190 days. Just know that that's a very tactical metric because it's just based on one quarter. The bottom line is that we want to have more inventory, and in that measure, you know, I would not be uncomfortable at the very high end or even above the high end of that measure at some point, 190 days of inventory. Yeah. I think I'll just follow up with that, as I commented before, you know, we just don't have direct visibility into customer inventory, so it's not something that we can measure directly. Do you have a follow on, Toshiya? Yeah, I do. Thank you. I wanted to ask about OpEx, a fairly mundane item, but you've done an incredible job in leveraging OpEx over the past couple of years, during which revenue has gone up, you know, significantly, you know, particularly considering kind of the inflationary environment and the competition for talent. What's driving the flattish OpEx and how should we think about, you know, potential upside to OpEx going forward, given the current backdrop? Thank you. Yeah, no, so I'll take that. First, we've been running OpEx at about $3.2 billion per year, a little lower, a little higher than that. You know, for the last five years, essentially that number has rounded to that. You know, OpEx, most of OpEx is an investment. That's how we think about it. Obviously, R&D continues to strengthen the broadest portfolio in the industry that we have, both Analog and Embedded. But even inside of SG&A, there are several key pieces there that are key investments. ti.com is one that comes to mind, and we'll talk more about ti.com specifically at the capital management call next week. You know, OpEx fuels our future growth. We don't really think about it from a percent of revenue standpoint, but you know, to help you with that, we have guided that over the long term should trend between 20% and 25%. Of course, we're right now about 18% or so. So that $3.2 billion, I wouldn't expect it to change significantly in the short term, but over time, over many years, it should, you know, 20%-25% is probably the right way to look at it. Okay, great. Thank you, Toshiya. Thank you. We'll go to the next caller, please. Thank you. We'll hear next from Ross Seymore with Deutsche Bank. Hi, guys. Congrats on the strong result and guide. I wanted to ask about the gross margin side of things. I know one quarter doesn't make a trend, but the incremental gross margin was way bigger in the fourth quarter than expected, and it seems like the first quarter is also guided for the gross margin to perhaps rise again sequentially. Whether it's the short term or kind of a longer term description or answer, what are the big drivers of the upside that you're seeing in the near term, and how much of that do we expect to continue going into 2022 and beyond? Yeah. A couple angles on that question on gross margin. First, as you know, you've followed for a long time, we do not manage to gross margin. We manage to the growth of free cash flow per share. We think that's the key driver of value for the long-term owners of the company. You can do that with higher gross margins. You can do that with lower gross margins. That's our focus. But specifically on gross margins, you know, our guidance has been and continues to be, think about it, you know, on a fall-through basis over the long term, 70%-75%. We have been doing pretty well on that front. The key driver, of course, is revenue growth. Beyond that 300 mm capacity, that continues to be a great tailwind as we have more and more of our capacity on 300 mm. It has a structural cost advantage, and we'll be continuing to add to that with RFAB2, Lehi, and the Sherman Complex. The last comment I'll make is we'll give you more details on that next week on capital management, but CapEx has been going up and will continue to go up over a number of years with those investments that I mentioned. Those are long-term investments. Those are gonna set us up great for the next 15+ years, so I'm very happy about those. I'm pleased with that. We're confident about those. You know, that does flow through the P&L as higher depreciation, so expect CapEx to go up and depreciation will follow, and that will have an impact on gross margins. Frankly, at the end of the day, that's accounting. You know, the investment is happening now, and it will happen over the next few years with that additional CapEx, and that will just put us in a great position to grow the top line and have really great fall-throughs over a long time to come. Follow on, Ross? Yeah, just want to pivot back to the revenue side and whether it's industrial or automotive, your two focus markets, they look like they both grew kind of, you know, 30%-35% year-over-year in 2021 as a whole. That's significantly faster than the secular growth rate that you guys have delivered, but not terribly different than the peer group for the year. I just wondered, how do you guys explain that level of growth? You don't seem to see any inventory anywhere. The end markets don't seem to be growing that fast. But whether it's for TI specifically or the group as a whole, the sector as a whole, I wonder how you would explain that growth and the sustainability of it. I you know I think that it's clear you know as we look at those markets over time we believe that there's going to be content growth. Let me just talk about the long-term prospects of that both of those markets. It's very easily seen in the automotive market that there's content growth. We can see the cars today just have more semi content in them per vehicle than what we drove five years ago and 10 years ago and it's very clear that that's going to continue. That same phenomenon it's just a lot harder to see is going on in the industrial market and that's what we love about it. It's not one thing, w e've got you know 13 sectors that make up that market. We have hundreds of end equipments that we're working on and tens of thousands of customers that we're working for, and our product portfolio is just positioned perfectly for that. It's really a strategic focus that's on it. Now, is there gonna be noise around growth rates in any one given year. You know, John pointed out with SIA data, the stuff bouncing around, that's gonna happen. We're gonna put in place growth and capacity to support that growth for the long term. You know, it's cause we've got the confidence that those markets are gonna grow and those secular trends are going to continue. Thank you, Ross, and we'll go to the next caller, please. Thank you. We'll now move on to our next question from Tore Svanberg with Stifel. Yes, thank you, and congratulations on the solid execution here. First question is on customer behavior, perhaps on the ordering front. I think there's a lot of investors that are worried that inflation is kind of stalling the economies globally. Are you not seeing any change at all in your customers' behavior from higher prices? Cause obviously, you know, there is inflation in the semiconductor industry too. Have you not seen any change in order behavior at all sequentially? Well, yeah, Tore, I'll start, and Rafael, if you wanna add anything. I'd say that the environment that, as we mentioned before, is very similar to 90 days ago, the customer behavior that we talked about with the match set continued. Really not, you know, in a 90 day period, has there been a change? Nothing that we could measure on that front. Rafael, anything to add? No. No. Yeah. You have a follow on? Yes. No, thank you for that. When we think about your capacity expansion, you talk a lot about the front end. Rafael, you mentioned you're also doing some assembly and test expansions. Could you elaborate a little bit on that, especially how it would impact the CapEx numbers going forward? Yeah, no, thanks for that question. We, as you alluded to, a lot of the conversations on CapEx do tend to be on the fab side. That's because that's where a disproportionate amount of the money goes to, because it's very capital intensive. It's also because the lead times to build those are much longer, the type of structure that you have to build, et cetera. We're also spending a lot of time internally on the back end and what we need to do on that front. We're gonna give you more details on that next week, but essentially, we do have plans going on at various countries where we already have operations to continue to expand capacity to match that front-end capacity and always be ahead of demand. Great. We'll go to the next caller, please. Thank you. We'll take our next question from Harlan Sur with JP Morgan. Good afternoon. Thanks for taking my question, and congrats on the solid results and execution. You know, as you guys mentioned, relative to your view 90 days ago, it looks like things didn't change all that much from a fundamental perspective, right? Selective hotspots, lead time stable, broad-based demand. How much of the upside was actually driven by an increase in supply availability, both from your internal manufacturing and outsource partners? Because it looks like you guys were capacity constrained starting from about the middle of last year. Just wondering if you're able to bring on some additional supply in Q4, which drove some of the upside. Yeah. I'll start, and Dave, you wanna chime in, but you know, I would tell you first, as Dave mentioned during the call, prepared remarks and then during a couple of questions, the strength was broad-based across geographies and end markets, et cetera. On your specific comment on capacity, as we have said, probably for the last four quarters or so, maybe longer, we have been and will continue to bring capacity incrementally. Incrementally meaning, relatively small steps. But nevertheless, those make a difference, especially on a cumulative basis, right? We have been doing that for some time, and that's obviously helping. I mean, you could see not only our revenue has improved during this cycle, but we went from draining inventory to now the last two quarters, we've actually increased inventory, albeit at a relatively low level, but still much better than draining inventory. That gives you an appreciation for what that incremental additions to capacity have done. We expect to continue to increase incrementally, again, you know, relatively small steps, for another two quarters, and then RFAB2 comes online sometime in third quarter of this year, of 2022, and that will give us more leg room on those tailwinds. About six months later, first Q of 2023, we'll have Lehi LFAB come online once it's qualified, and that will give us also more leg room on that front. A follow-on, Harlan? Yeah. Thanks for letting me ask the follow-up. When the team announced the purchase of the Lehi 300 mm fab, you noted that Lehi would start off with 65 nm and 45 nm Analog and Embedded Processing products, which is somewhat of a strategic change, right? Because you guys have always been focused on 300 mm Analog products. Is TI bringing embedded in-house because you have some sort of competitive differentiators on the manufacturing side for your next generation Embedded portfolio or is it just a focus on lower cost versus outsourcing and moving the manufacturing mix towards more insourced over time? Yeah. I'll start, and Rafael, if you wanna add, please do. If you look, we do manufacture Embedded today in DMOS 6. So part of our you know manufacturing footprint today includes Embedded. You know, with the Lehi factory, we will be able to build you know additional product there. I would say, you know, over time, you know, foundry will continue to be a portion of our footprint. You know, as our revenue grows as a percentage of revenue, you know, could that move some? It could. We will continue to build you know products both internally and externally. I'll just say that, as we invest in 300 mm both for Analog and Embedded, that brings the same cost advantages to us. It allows better control of our supply chain. Certainly in periods like this, it shows why that's an important advantage for us. Okay. Thank you, Harlan. I think we've got time for one more caller. Thank you. We'll take our next question from Ambrish Srivastava with BMO. Hi. Thanks for squeezing me in, Dave and Rafael. I had a question on end markets, and specifically in auto. There is a lot of concern, has been for you know, more than a couple of quarters about semi components going into the industry and the auto units and the big gap. If I look at your automotive, the year-over-year change, at least the [rapid], I think it was up 2x couple of quarters ago, that seems to be decelerating. Can you just help us kind of understand, it seems to be some parts are forward, but the concern is that the supply chain collectively is holding up on a lot of inventory. Just would love to get your perspective. Dave, I think last quarter you had given us a pre-pandemic level, and you had kind of contrasted what you shipped last quarter versus that number. Yeah. Ambrish, maybe I'll start, and Rafael, if you want to add to it. You know, first I'll just make a comment that you know, our team has done a good job supporting customers really across all of our end markets. You know, when we look at that pre-pandemic level of fourth quarter 2019, and just picking that to fourth quarter 2021, you know, revenue overall is up 40%. We grew shipments in all of our end markets. You know, I think that's important to point out. You know, we believe inside of that we've made strategic progress you know, in industrial, in automotive that will pay dividends for us for years ahead. Our teams really have done a great job supporting customers across the board. Some of those year-on-year transitions, Ambrish, as you know, you know, some of those really big numbers, I think one quarter we had close to 100%, maybe even above that was more of a function of how low shipments had gotten, you know, the quarter before. That's where I talk about when things get really noisy, you really have to begin to look at it over these longer periods of time. I think that's a really good number to look at for our overall shipments. Do you have a follow-up to that? Ambrish? I had a separate follow-up, Dave. I have never seen such a broad mention of a TI chip being short as PMIC. It started with PCs. Now we hear from pretty much every end market. Oh, everybody's pointing the finger at TI. The question I get from investors, and I have it myself as well, so I don't wanna just say from investors, is, you know, how did TI. You guys are, at least I hold you on a pedestal in terms of ops planning, supply chain management. How did you guys get to that point where one part, and I know it's a small piece of the overall business, but more importantly, how do you convince us that this does not translate into potential share losses when people start to design you out potentially because this time, you know, several quarters you couldn't supply the part? Yeah, that's a fair question, Ambrish. You know, I'd point to maybe a couple of things. First, I'd point out that we've got you know the broadest portfolio in the industry. When we engage with customers, it's not unusual for us to have a dozen, two dozen, sometimes three, four dozen different components shipped or on any particular design in any particular system. You know, it only takes one of those products for our teams to have to work closely with that customer on. As I talked about before, you know, our teams have really done a great job supporting customers across the board, across those products. That's what we'll continue to focus on. I think as we look to this year, you know, we've got capacity coming online, you know, later this year with RFAB2 and those investments Rafael talked about. You know, we're putting in capacity every quarter this year. We've put in capacity every quarter last year incrementally, so you see that showing up in our results. Then we followed that up with the Lehi Fab in early 2023. I think we're in a really good position to continue to support our customers overall. We'll continue to work really hard at that and deliver the results that follow with that. With that, I'd like to remind everyone of our upcoming capital management call, and it is on February 3rd at 10:00 A.M. Central Time, and a replay of this call will be available shortly on our website. Good evening. Thank you. That does conclude today's conference. We do thank you all for your participation, and you may now disconnect.