Good. Awesome. Thank you. Good morning, everyone. Thank you for coming. I'm Stacy Rasgon. I'm Bernstein's senior analyst. I cover the U.S. semiconductor and semiconductor capital equipment space. It is my great pleasure to have our guest today, Haviv Ilan, the President and CEO of Texas Instruments. Before I start, I wanna mention, if you have questions you'd like to ask during the presentation, on the inner cover of your program, there's a QR code to our Q&A form. It's called Pigeonhole, and you can submit questions there, and we'll have leave time at the end to ask those. You know, TI, Texas Instruments, quite often, they sorta like to joke that they're boring and they kind a like it that way, although I think it's not easy to look boring. If you dig in, I think you'll find they're anything but. More recently, I'd say things have gotten a bit more exciting, as they're embarking on a new CapEx and investment plan. It's stirred things up a little bit versus the prior years. I think the long-term implications of that move might be very different from the near-term implications, and as always, they'll continue to run things like they do, like they always say, "We run the company like owners," and they mean it. Tell us all about that as well as many other things. My great pleasure to welcome Haviv. Thank you so much. Thanks, Stacy. joining us today. Thanks. Thanks for having us. You bet. Look, you've been in the top job now two months. You're not clearly not new to TI. You've been there 20 years, more? Twenty-four. 24 years, okay. Multiple decades at TI. Still, things are a little different once you're finally looking around from the top of the pyramid. I mean, what surprised you at this point, if anything? I guess I get questions from investors who wanna know if anything is going to change, given the leadership. My gut says probably not, but I'd love to get your view. Yeah, maybe on that, the internal joke in TI, that the biggest change would be the accent versus Rich. More seriously, I think, as you said, when you look at stuff from the top, it looks like a lot of change, but for us, the change has been continuous in TI, and that's part of our culture, always changing and getting better. We have done, we have gone through a lot of change in the last 10, 15 years, I participated in a big part of it, we are finding ourselves in a new phase of the evolution of TI, we are very excited about it, that's part of the reason we are making this CapEx investment that you've mentioned. We can go deeper into it, but just being in TI. Sure for so many years and looking at the amount of change we had to go through I can't be more excited. Yeah of where we are right now Yeah looking at our future. It's really funny, people do talk, Oh, it's boring, but it hasn't been boring, right? I mean, I remember when I first started, it was 15 years ago, and the big thing was the mobile exit, and it was kind of a gutsy move. It was like, we have this business, it's a third of our revenues, it's $4 billion. We're the biggest base. It wasn't Qualcomm back then, it was TI, it was the biggest base vendor, and we're gonna run it for cash into the ground, right? Gutsy move, and it worked. Then the whole three hundred millimeter. I still remember where I was when you first announced the RFAB investment in, like, what, September of 2009 or whenever it was, and people thought you guys were insane. I remember you had aspirational targets to get to 55% gross and 30% operating margins, like, someday, and that's come through. Then the whole auto and industrial focus and 100% free cash, which I think a lot of folks are focusing on those same things now. You were probably the first to clearly articulate that story. Like, under the surface, like I said, if you dig a little bit, I'm boring is the wrong word. It's been exciting. Didn't feel boring inside. I can tell you that, yeah. I do wanna focus a little just to start a little on some of the near term. All right. This form, I don't really like it, but it's hard to avoid it in this environment. I think just one of the big questions people have had is, at least until maybe recently, your near-term results have been somewhat at odds with many peers. Again, maybe not quite as much anymore, given what we've seen this earnings cycle, but even in magnitude, it's been more in. Obviously, I always have a hard time believing that you guys would be seeing something going on in the market that's not actually happening. I mean, you sell kind a everything to everybody, everywhere. Why do you think you were seeing maybe some of these terms in industrial and some of these other markets earlier than others? Yeah, maybe start a little bit with what we have seen. I think we talked about it. Even last year, I remember Rich mentioning this amazing prediction that the market will go up, then it go down, then it will go up again. So far it went up and then down. That happened, for us, it happened in a way that was kind of asynchronous in terms of the markets. It started with PE. Yeah consumer personal electronics, as we call it internally, and we've seen weakness already kind of a year ago. Yeah. Typically, Q3 is a big quarter for us, and it did the opposite last year, and we've seen it, you know, continuous decline in Q3, in Q4, in Q1 again. Mm. It kind of guided flat into Q2, but it's already almost a year of weakness in PE. We have seen industrial, comms, enterprise following up, maybe a couple of quarters after. So far, automotive is holding. Yeah. It's a little bit different than the previous, you know, cycles, in the sense of it, the markets are a little asynchronous to each other. They don't behave the same time. In terms of the real way it comes into our results versus the competition, I do believe that our approach to market, the way we have supported our customers, the way we've done or not done special deals with them, I believe or our belief is that we see the results more real time. Mm. That's our estimation, especially in the markets we operate in, industrial and automotive, they don't move. Mm-hmm -share, very quickly. Mm-hmm. The belief is that we have to go and wait and look at market share over the long term. Yeah. You started to even hint that lately we are... Yeah Hearing more voices, that maybe it wants to correct itself. I do believe that we've seen things a little bit earlier based on the way we supported our customers. Is this just the fact, I mean, you guys, you don't run as much of a backlog model, and you're more direct, and there's, you know, clearly less of a distribution buffer in between you and your customers? Is that what... Your lead times have been pretty normal also for most of your products, right? Lead times are improving. Still, of course, there are always some, you know, hot spots, and we always have them, but, they are diminishing in a growing rate. I would say that, the way we go to the market, not only the direct business, but also the terms of the way we do business, it's very, I think, customer-friendly in terms of the convenience and support to our customers. We don't try to force them to take parts. We won't write NCNRs with them, non-cancelable, non-orderable type of agreements, because to be fair, customers don't really know what they need. Yeah What they want, and our job is to support them, you know, in a convenient way. Yeah. I don't think there's any such thing as a non-cancelable order, personally, but, We believe the same. Well- If you insist, it just makes the tension too high. I mean. We prefer not to have them. It is interesting, as you're talking about market share, and it's a fact for me, if I take your analog revenues, I look at sort of industry analog revenues. On that rough metric, you have been losing share, quote, unquote, over the last, like, year or two. Is that just more? I mean, you can make the argument that your competitors do run backlog models, and, I mean, maybe they're stuffing the channel and you're not. I mean, is that the kind of dynamic that we ought to be thinking about here? I'm talking the analog side right now. No. Yeah. No. Yeah. For us, and it's the way we think about it internally, we would spend time on market share over really a long-term period. Mm. Again, that's the way we like to measure stuff. I think it's messy right now. How long? To us, at least five years, you know, through cycles. Right. I think, if you look at TI and look at the rest of the I look at it, of course, every quarter. I don't have long, you know, a lot of concerns on our analog performance. It's always better to be ahead of the competition- Yeah On the short term, but I think when you let the cycle run its course, we see where we are, I think we'll be in a good position. Got it. Do you have any worries about, like, double ordering anything, or would you even care? It's like, you know, we ship it today, we ship it tomorrow, like, doesn't matter? You know, less care about it and the way we also, as you talked about backlog, the way we prepare, and that's part of our execution areas right now. We need to prepare for the next opportunity. For us, the way to look at how much, for example, inventory to have and how to have it across parts, at what level, is it in die bank or is it in finished goods? Yeah. We have to go deeper into the real demand of the parts. You look historically at what the parts did, you look at the trend line, and I think Dave showed in our last capital management, kind of the way the market is and the cycles, and our mind is on, where could be the next upcycle be? Yeah. How noisy could it become? That derives together with some other parameters, like, you know, cycle time of parts... Mm. How much inventory we wanna have for each and every part. Yeah. We have tens of thousands of them. That's where the focus is right now. We don't put a lot of attention on backlog. Okay. Let's talk about inventories then. Yeah ... because this is something I, and maybe I'll ask you, though, to articulate your current inventory strategy, 'cause you just took the targets up, and you're running well above the high end, and you've even talked about, we actually wanna run even higher than that. It is scaring investors somewhat, although, again, I think the makeup of your portfolio and your inventory itself is probably safer from that standpoint than others. Maybe talk a little bit about what you are doing with inventories and why. Yeah. First, that is kind of a lessons we took from the last cycle. Mm. As you remember, in the beginning of the cycle, when we ran our factories open, and I think you guys talked about it last year, even it was counterintuitive to many-. Yeah in the Street, but it served us very well, and we only wish we had more. Mm. We now look at the next opportunity and say, Hey, these parts have a certain behavior. They run through a lot of customers. They've run for many, many years. We have a signal that we can analyze. Mm What can these parts do in the next two, three years or even next cycle? That derives our decisions of how much we wanna have. It's also a more sophisticated in a granular way of where do you wanna have the inventory? Do you want to have it in die banks? Do you want to have it in finished goods? Mm. It all relates to how long it takes. Mm-hmm to build the parts when you see a surge in demand. That's how we approach a problem. This is why we don't have a definite days number or even an inventory dollar amount in mind. The target was $130-$190, right? We upped it in the last February to. Little bit up. above 200. Above 200. It's endless, right? It's not endless. To make everyone feel better about it, we have a very granular plan for each and every part. Right. How do we bring it to the right level so it can serve us very well in the next upcycle? We wanna take market share when we- Mm -when the market, surges. To your point, the composition of our, portfolio is very different compared to 10 years ago. We have now a very diverse portfolio, and more than 75% of it can be built with almost zero risk of obsolescence. Mm. I see us taking advantage of that opportunity and preparing, not only getting capacity ahead of demand, but also have inventory. Mm to serve the short-term, demand from customers. We want to be the best supplier in terms of convenience and availability at the next opportunity. I'm gonna ask you, like, during the pandemic, when the shortages were happening, but you guys had inventories. Even then, though, at least anecdotally, TI was called out as part of the issue, there was PMIC and other things that were... Was it just you didn't have, like, the specific things that were needed? Or like, why was TI called out, given where the inventory levels were? I think statistically, you know, we serve many times tens of sockets. Mm you know, on a board, so just in terms of presence. Mm especially on industrial and automotive, you would find our name from time to time. Mm. We have heard these escalations. We have learned that the devil is in the details. That's part of the way we wanna prepare for the next opportunity. How do we make sure that each and every technology, part, package, process technology- Yeah. is, first, we have sufficient supply ahead of that demand, and second, we have enough inventory. I think, you know, when I talk to customers, just came back from Europe, in the last couple of weeks, I had zero discussions on even on escalations. Meaning, I think the situation is much more healthy now, and that's very good for us because we can talk about 25 and 26, and how do our long-term investments serve our customers. Mm. -as they think about what, the market can do for them and who are the potential suppliers, and how TI could be even a bigger or larger supplier for them moving forward. I'm excited about that because, you know, instead of just solving short-term problems, we can kind of focus on the future. Let's talk about some of those long-term things. again, going back to the original 300mm strategy, you know, 2009? It was a long time ago, right? Yeah, it was. Effectively, you bought 10 or 15 years worth of capacity through a number of transactions back then at $0.10 on the dollar, give or take, whatever it was. Because of that, you were running capital intensity at, you know, the low single digits for the better part of last decade or even beyond. That's changing now. There's not a lot of. I guess during that cycle, we had bankruptcies, right? Lots of, like, freely available capacity. We just don't really have that. I guess that's good. We don't really have that this time. You did buy the Micron fab. We'll talk about that. Correct. That was an asset. Yeah, correct. It wasn't a bankruptcy, but that was an asset. Yeah. I'm assuming it wasn't at $0.10 on the dollar either, although it should have been attractive, presumably. It was attractive. Okay. In general, you've got to build fabs, and I'll get to the mechanics of the fabs and the model. One thing that's really got people wondering is the growth targets, and as far as I understand, they're not specifically growth targets. You're not committing to any specific target for growth, but what you have said is that we want to put capacity in place that is sufficient to support growth. Originally, it was 7%, and now it's 7%-10% over- It's 10. It is 10? Yeah. Okay. It's not 7-10, it is 10. It's 10, yeah. Okay, over the long-. Correct. Period. What gives you the confidence to start on a strategy like that? I guess, what drives that kind of growth? Like, how, especially at this point, everybody's freaking out because you're adding a ton of capacity in what looks like a cycle peak. Like, how do we parse all of that, and where do those targets come from? Yeah, we can go through that, I'll say the way we talk about it internally, and of course, you can go and we can go deeper as needed. You know, let's start with industrial and automotive. You know, when we started, I remember the days when Rich said, Hey, we are not gonna be a wireless player. It's gonna be industrial and automotive. I said, What? That was kind of before the end of that decade. Then we went on into a very tough execution period of winding down wireless and then shifting some of the IP into the industrial and automotive. Rich Templeton did that. Absolutely. Ten years, right? Yeah. Which, by the way, helps you also on capacity, because when you get away from revenue, some of the capacity, let's take DMOS6, our first 300 millimeter wafer fab, it was a Nokia fab, supports your analog growth, right? That also happened in between. We just look at industrial and automotive and what it did for us, and it's actually on our website. We talked with some folks earlier today. You go back to 2013, and I think that's the earliest we put it on our website, and you look at our industrial and automotive business, it was 42% of our revenue. It was 65% last year in 2022. If you just look at the dollar amount, because you can do the math, you will see between, for the company, industrial and automotive grew at 11%, almost 11%. From 2013? Yes. That's where, you know, embedded did not have its best days. Yeah. When I think about what we have done, before we put all the R&D effort. Mm. Acceleration into these markets, before we got to learn these markets in granularity, we have, I think, overperformed. I think we took some market share over the years. We've done okay. Mm-hmm. You look at the opportunity in the next decade, the exciting part is the market is also changing. We are seeing an acceleration of really secular growth in industrial and automotive. We saw it also on the ICE or the combustion engine areas- Mm. of automotive, but it's accelerating with EVs. There is more content- Mm. per vehicles with EVs have not completed the adoption. Mm S-curve into the market. Also, you see acceleration in industrial, in areas like factory automation, medical, aerospace and defense, and electrification, which is really accelerating immensely in the last 10 years. When we look at what the market wants to do, we look at how we did in the last 10 years. Mm. Before, we had some fixes ongoing in our portfolio, in our business. Mm-hmm. The time we spent with the teams in industrial and automotive, learning it, going deeper into it, I give ourselves a good chance to continue that trajectory, at least. Mm. It's just math, Stacy. If you just take the same growth rate. Mm-hmm from 2022 for industrial and automotive, run it at 11%, just hold all the other markets flat, you'll get to about 8% growth for. Mm ... for the TI. 10 doesn't sound crazy- Okay when you do that math. Of course, it looks weird because we have not done it before, but this is why you have to look under the hood- Mm See where the opportunity is. The second part of it, how are you going to support that growth? This is where the tougher- Mm. because we can all put, you know, trajectory growth out there, but how are you willing to support it? Yeah, we know everybody wants growth. We decided to support it internally. Everybody wants growth for free, right? No one wants the investment. Yeah. I think the bold decision, and that's where Rich, again, carried us through it, and we spent years discussing it until you saw the plan coming first in 2022 and then updated in 2023. The best way to do that is internally. Mm-hmm. Because of cost advantages and because of control of our destiny. Mm-hmm. of our supply. That control part was kind of always... Yeah kind of, no one paid a lot of attention on it. Yeah. I can tell you in the last, 12-18 months, our customers. Yeah are paying a lot of attention of where is that supply coming from? We'll get to that. Absolutely. For sure. I guess just to, maybe if you want to just remind people in the audience who aren't, maybe not as familiar with the current plan, what is the current plan for these builds? Yes. Again, the, as you said, rightfully so, we said, Okay, we want to be prepared to support growth of about 10% for the company. The reason we feel confident is the growth of the industrial and automotive markets. Our position in these markets at 65% end of last year, Dave, right? I think higher now, because they are holding better than the rest of the markets. Yeah. Please, yeah. The feedback of the customers, which is a big parameter for us, because when he came out there with the 7% growth plan and showed the investments, the feedback for customers was: We think we need more. Mm. When you look and talk with customers about 25 and 2030, and what they are willing to do with TI, if we are willing to be a little bit more ambitious and bold about our investment, gave us the confidence that we want to take that plan to 10%, which we don't talk about it as a 10% plan. Mm-hmm. By the way, we want to support $45 billion of revenue by the end of the decade. To do that, we have to start to invest now. We can't wait for the cycle to decide what it wants to do, to be able to support it. We knew that if we don't start now, we have no chance to get there. That's what we are embarking upon. You're seeing our Fab 2 right now in production, and that's something that has happened in the end of the third quarter of last year, but it's now producing wafers in a higher rate. That takes a few years to ramp to full volume, though? Correct. About two, three years- Okay ... to ramp a fab, but it is now, you know, every day the wafer start is giving us a big chunk of delta. Where are the wafer starts now? Have you given that number, or? We don't provide that. Okay. I would say we are half a year or maybe three quarters in, maybe another couple of years to go. Okay. The slope of the ramp is behaving nicely. It's like everything is like an S-curve, right? Mm. Lehi, which is the investment we've made with Micron, the acquisition of $1 billion, but we had to put in more equipment, and new equipment, to make that factory serve our... Mm ... technologies. It ramped ahead of schedule with a great team in Lehi in December of last year. The beauty of Lehi, that every wafer I can build over there for MCUs, for real-time control systems with embedded flash, every wafer we can build, sold, is sold into customers. That's an area where that is still a hotspot in the industry and for TI, and we are very pleased with that execution. That's gonna be, give us the first wave through 25 of that capacity addition. The next phase of addition is gonna be first in Sherman, Texas. This is where we announced the four sites. Four, yeah. Yeah, the four wafer fab. We haven't given a time frame of, how we are going to ramp them, but it depends on what the market wants to do. Mm-hmm. We are going to build the first 2 shells in parallel. Yeah. That's, again, we wanna be ready with the brick and mortar ahead of the equipment. We'll equip by. You'll equip as you see need, as they're ready to go, or? I mean, right now, the plan of record, and that's what we run, with, is that our Fab Two will ramp somewhere to full production somewhere in 2025, we will want to have Sherman One continuing that growth. Mm-hmm ... in the middle of 25. Sherman 2, it depends. Yeah. The last announcement was Lehi. We expanded Lehi, and this is actually a big expansion. Yeah, I believe. It's from, call it X wafers per day or wafers per month, the way you wanna measure it, to almost 4X. That's an $11 billion investment... Mm. which also gives you the confidence, that we have. Mm. TI, by the way, we don't like to spend money, okay? When we do it, we look very carefully on what's the risk versus reward, and to us, it was almost like an asymmetrical bet of there is more opportunity than risk- Mm We are going to go build it internally. Mm-hmm. I always joke internally, when we did Lehi, and we did the make versus buy analysis, we had a certain wafer fab from the foundries. Guess what they have done in the last couple of years? They actually went up tremendously. Yeah. That return on investment of Lehi one was very, very favorable versus our original plan. Mm-hmm. I think Lehi 2 will be also, again, a great team and a continuation of Lehi 1. Wafers will run in between the factories, so it's going to be an expansion. Okay. That gives you in a nutshell, the decade of investment. Dave did show in the slide that somewhere in 2025, 2026, when I would say that's where we have to see through the next cycle, we can have a checkpoint and see: Hey, are we ahead of ourselves? Mm. Should we slow down the investment plan? We gave kind of two options. Yeah ... or a funnel of how we want to invest, but we want to see it through the cycle. Let's see what the cycle wants to do. Let's see it recovering. Let's see what the market wants to do. Our assumptions, are they correct or not? Is the world still the same, in terms of what's going on? Yeah. We can make a decision, should we slow down or not? We always joke that we wanna have two years. It's not a joke, actually, it's an important thing. We wanna have two years, we prefer to have two years, ahead of supply rather than Q2 later. Mm-hmm ... because it's very painful, and we felt it, during the COVID cycle. Yeah when you don't have enough supply to support your customers. Yeah. Yeah, I think you guys ran into that in 2008 as well, right? That's kind of where you learned some of these initial lessons. Absolutely. Yeah. Again, even in 2019, when we decided to continue with our fab two, the same: "Oh, you guys crazy." Boy, if we had that factory already a couple of years earlier, that would have been a great moment for TI, but I think the opportunity will. Yeah will come in the future. Yeah. Yeah. I do wanna talk about the financial impact of this, 'cause there is an impact, and so the CapEx is going up pretty considerably. Correct ... over the next several years, and I think it was $5 billion on average through 2026? 23 to 26, about $5 billion ramping. 23 is lower than that because it takes time. Yeah ... you know, it will be higher. It's, every quarter will probably go higher, because equipment also is coming in-. Yeah ...and lead times are becoming, you know, more-. Yeah ... you know, reasonable. Yeah, it will ramp. I know you guys don't guide the gross margins, but you've been fairly transparent on how to model the impact of this. It seems clear to me that gross margins, all else being equal, probably need to come down? I assume you guys don't care. You don't run the company to a gross margin target anyways. We don't think that way because it doesn't drive the right decisions. Again, the decisions are driven by, hey, we need to have that capacity ready for the demand so we can serve our customers and grow market share, right? Mm-hmm. That's why we make the investment. Yeah. If you start to dwell on what... Mm margins are going to do, you know, that can yield the wrong decisions. Yeah. Having said that, you know, when we build these factories, we wanna do it very efficiently, and, these are great variable cost factories. Yeah. When we have wafers coming out in our fab two, every wafer we can move from 200 to 300... Yeah goes there, right? These are tactical decisions that I monitor on a weekly basis. Yeah. That are we utilizing that capacity at entitlement? So far, so good. Yeah. How much of your capacity will be on... You've given these numbers, I think, but how much will be on 300mm in internal by the end of the decade if this plays out? I think in 2022, it was 40% on 300, going to above 80% in 2030. I will also say that the internal versus external is, I think, 80% in 2022. Mm. Almost 95%, we said above nineteen- Yeah 2030. The big mover is that Lehi embedded processing. Yeah. This is where our confidence in that business is higher. It's a no-brainer to take that technology and move it internally. That will be the biggest mover, because analog is. Yeah already internal. I wanna talk about embedded in a minute. Absolutely. First, what I'd like to be one of the drivers of this clearly is also the CHIPS Act. There's two pieces of this. There's the tax credit, and then there's the subsidies. My impression of the increase in your, in your outlook for these investments was effectively that you were taking the tax credit and reinvesting it, the entirety of the tax credit, into more CapEx. Is that too simplistic? Like, would you have upped it even if the tax credit wasn't there? You know, it's hypothetical, so I would never- Right ... be able to answer because we took the plane higher once- Right The CHIPS Act was in motion, right? We never... Again, the driver of the investment is our excitement about the opportunity of the 10%. Mm. We do like to say that it helps, right? Mm. It makes us more competitive, this is something that our competition around the world is getting help, you know, if U.S. companies are going to be competing for market share. Yeah worldwide, globally, I mean, that government. Mm Help is blessed. We like it not only because of the capacity help that we can get or the support, but also the R&D. Mm the CHIPS Act. We think it's historic. We are excited about it, and it's definitely gonna help us implement our plan. Yes. Got it. I guess there's another, like, maybe longer-term implication, where people are worried about China decoupling, I suppose if China or Asia are no longer attractive places to have semiconductors, maybe you guys will be sitting here in the U.S. with a, with a good amount of, shall we say, geographically attractively located capacity. That had to have been a driver of what you're doing and maybe even a driver of the increase. I would say that gave us the higher level of confidence, but again, we've done it through our customers. Uh-huh. We've learned the importance of that point, through the discussion with customers. Mm. Usually, when, you know, when I think about automotive or even industrial, our parts are, you know, our AUP is less than $0.40. Usually, we decided at a very low level, but now with semiconductors becoming a bigger part and bigger importance. Mm ...of these customer end systems or end equipments, us, building our capacity in the U.S. and the diversity of the back end and the fact that we control it is a big important to this... Mm important for these customers. We are meeting with CEOs, CPOs that we would never meet before to talk about 2025, 2026, and they like our plan. You know, there are all kind of scenarios of what the world wants to do, but when we look at it and we analyze it internally... Mm kind of like our chances in if the world wants to stay, and I hope it actually does that, and stays open, and everybody can compete everywhere, or the worlds want to, worst case, decouple or whatever, I think we can do well on both cases, and also all the in-between. Mm-hmm you know, options, and there are many of them that you can envision. That is part of this dependability. Mm The geopolitical, geopolitically dependable capacity. Mm We are putting together for our customers. Got it. Got it. When will we know about, like, the more direct subsidies? I presume, like, I think the initial plans are due in February. Yeah, it's very early in the phases. Yeah. We are starting discussions right now, and again- Okay We are learning, you know, as we go. I have not even have the latest on that. I think it's early phases. Probably by the end of the year, we'll have more. Okay more information on that, yeah. To be clear, what you're doing doesn't depend on any of that, correct? I mean, we cannot wait, right? We have to move forward because, again, we have to get prepared, as we talked at the beginning. To say that we are not counting on that, it's gonna be a mistake. Of course, we think it's important. Okay. We think it's part of what we hope to do together with the government, and we think it's gonna put U.S. companies on a level playing field. Mm With the rest of the world. I think it's super important. Got it. I guess if there was ever a time, if you had plans to build a lot of capacity in the U.S., now is the time. Sometimes you get lucky. Yeah. Got it. I wanna talk about embedded more broadly, then I wanna talk about some specific opportunities within your various end markets. You know, embedded has been Clearly, it's, I wouldn't call it a subscale business, but versus analog, it's much smaller. The margins are lower, and I always have a question, is that simply because, like, if embedded was as big as analog, would the margins be the same? There are broader questions that people... Because I think it's maybe it's gotten a little better recently, but embedded over the last several years, and you kind of alluded to it a little bit, it has underperformed. You're making this massive investment in Lehi, which clearly suggests that you believe that that business is on the mend and the opportunity is strong. maybe you could talk a little bit about embedded relative to analog and some of those points. No, we can, and we can go as deep as you want here, Stacy. I'll start with the last point you've made. You know, again, TI, and I've been in the company for 24 years, I know how we look at, efficiency and capital allocation very seriously. Yeah. We don't just wake up one day and say, Let's put a $15 billion investment in an embedded, mainly embedded factory, right? To say that we are excited about the business is one thing, but to go and put our dollars where our mouth is different, or actually, it shows, I think, the evidence of our confidence. I think we've done a lot of work in the last four years. First, analyzing what could have been done better before, and it's really what are the competitive advantages of the company? Mm-hmm. You know, can we build it internally? Can we have a broad portfolio? Can we reach many, many customers? Maybe just like, what is embedded, for the people in the audience that may not know? Okay. What does that mean? For us, embedded, would include microcontrollers, real-time control, which is another way to say DSPs. Mm-hmm ... specialized MCUs for specific tasks, mainly motor drives, power conversion, which is an exploding area, and our old IP of DSPs is being put together with MCUs of a processor to solve a more specific problem. It includes my old business, wireless connectivity- Yeah. ... that we took away from phones into the embedded or the, analog and the You sold the wireless. industrial market. You sold the wireless IP piece, right? Yeah. You kept the- Some people call it IoT. We don't like to use that term. For us, it's really wireless connectivity in many, many standards, proprietary, non into the broad market. There is, you know, our radar business, which is, again, a real-time control business with some DSP, is part of embedded, and the other two are processors, usually low power. You won't find us doing big computes. Yeah processors that can run on processors, we run in, even in Lehi, and some of them that are more advanced, that will still use Foundry. That's more or less the six businesses in embedded. Mm-hmm. We have started to. When we took the decision to restructure in 2019, we said, "Hey, let's not stop anything, but let's bias the investment towards where our strength is. Mm-hmm. Can we build it internally? Can it serve multiple markets, multiple customers, multiple end equipment, so it has that diversity and longevity type of characteristics, and also taking advantage of our channel, that we can touch many, many customers? Typically, these are the lower AUP type of parts, because they're less specialized, they can be adapted by a large set of customers, of R&D teams, and that's what we have been doing in the last several years, to the point that we said, Hey, now we have such a big confidence, let's move them. Mm TSMC, UMC into Lehi. That's part of the execution that we are embarking upon now, with already more than, I think, 15 parts have moved in, and we have a long plan moving forward. At the end of the execution phase, all of these type of parts, think about radar system, real-time control, connectivity, MCUs, they're all gonna be run in Lehi. Yes, so far, so good. We're starting to see the business stabilizing. You know, we are not pleased yet. Our ambitions- Mm are higher, and I don't think it can, it needs to perform very differently than analog. Once you get the cost structure advantage- Yeah ... in moving it internally, once you focus on, I like to call it, lesser concentration of revenue per socket, that way you can get the margins. I mean. Right we've learned. The higher the AUP and the higher the volume per- Yeah ... per socket, times AUP, the more competitive the market is. It's how to maintain you know, margins. Mm. I will say that, when you serve a $0.25, $0.30 socket, price is not the biggest thing. Yeah. It's a performance of the part, it's the power of the part... Yeah ... it's the features that. That's an interesting- Take care. Are you- I think embedded is the same. Yeah. Are your $0.25-$0.30 parts higher margin on a percentage basis than like your, you know, $10 parts? We probably don't share, but we are as excited about the lowest size, and even at five, when you sell a part at $0.05. Yeah ... but you can build it for one. Yeah ... it adds up nicely. Yeah. They get less attacked, because who cares about a 5 cent part? They have these characteristics of, they're more defendable. Got it. Just an interesting, like, the gamut of the stuff that you guys sell, I mean, what's the range in like ASPs and things? I mean, it must go from like $0.05 to hundreds of dollars. It's actually, but goes below $0.03, I can tell you. We make good margin on this. It goes all the way to tens of dollars, I would say. Wow! Oh, yeah, you know, in the aerospace and defense, it can go to $50K, but that's very nichey. Yeah, yeah. type of high-speed ADCs and stuff like that. What's your average ASP? $0.35 or $0.40? Right. Somewhere in between. Closer. Yeah. So kind of- Right now, the mix has a little changed, less personal electronics. Yeah ... so it went more to the 40, but, you know, 35. I mean, the entire industry is like $0.40, give or take, if I include screens. Yeah, we are not very different. Okay. Yeah. Interesting. I like that. I wanna ask you about some specific, areas within the market. Like, within automotive, particularly EVs. Mm-hmm. What's the EV play for TI? People don't look at TI specifically, and I always say, like, you're as happy to sell, like, the headlight controller typically as you are anything else, but like- Yeah ... what is the EV exposure within your auto? Auto is about, what, 20% or 25% of total revenues right now? 25% and growing, actually, the fastest growing business for us in the last 10 years. We have good, you know, view on what it can do in the future, as we said before. EVs for us, it's a big, it's a large opportunity, hundreds of sockets. This is why you won't hear us talking about end equipment even- Yeah. you know, whether it's battery or DC-to-DC or onboard chargers or traction inverters. We play in all of them, and in a material way. Mm-hmm. When you look at the boards and you open up a box, in the automotive market, you see the breadth of the parts, and actually, the dollar amount that we can sell into a vehicle is very large, and even on ICE, it's hundreds of dollars. On EVs, it's probably 2 to two and a half x higher. Mm-hmm. We do pretty well. We like our position, we like the breadth of the opportunity, and we are also internally teaching the team to stop talking about specific sockets. Mm. Because that means that your discipline is lacking on the broad opportunity. Okay. They add up, and you don't wanna just put all the efforts on the one, two- Yeah big sockets other than the entire board. Do you guys still use the term look left, look right? I've not heard that, but, we call it out, but the way we've heard it- That's the thing, wasn't it? You know it? The way we look at it, don't be blinded by the sparkling objects- Ah People like to have the big sockets, big AUP, and... Yeah forget about the rest. Yeah. We don't like that. Got it. That makes sense. The other areas, you know, you talk about, like, five segments in auto. I can't remember, safety and lighting. ADAS. Okay -infotainment, um, you know, powertrain- Mm-hmm which is where a lot of the EV content is. Body. again, body is a great area for us as well. Mm. I mean, think about. You can see, actually, body. You can think about the lights you can see. Think about the ambient lighting, think about the seats and the massages and the this 18 motors in a seat. It's the record I've seen, and each motor has to be driven, has to be sensed, has to be controlled. Mm has to be powered. The breadth of the opportunity in a vehicle is immense. Mm-hmm. Just on lighting, for example, Tens of dollars per vehicle opportunity. Mm-hmm ... this is why you see TI, and this is what we've taught in the last 10 years. Yeah. You know, automotive has to be broad for us. Yeah. It has the characteristics of actually industrial, and it needs a lot of granularity work, and that's what we have done in the past 10 years. Go deeper. I think, like, last year or the year before, you were talking about everything in auto doing really well, except for maybe safety was a little- Yeah, because safety, if you think about the history- Yeah It's mainly was like airbags. Yeah That's not where you see a lot of content growth. Uh-huh. It used to be a lot of custom business, but there is a future also in braking systems. Yeah. They are now, you know, if you heard about brake, like, wires and stuff like that. Yeah. These are opportunities for the future investment. Safety could also be a growing business for us in the future. This is where traditionally our custom ASIC business was, and we are going away from that type of business. Mm. We wouldn't like to have catalog parts. Mm-hmm. Could be very simple one, kind of general purpose ones, could be very sophisticated ASSPs. Mm-hmm. We do the breadth of them. Got it. not only specific ones. Within industrial, you have, I can't remember, 15 different end markets at least that you put on the slide in the capital market? Oh, maybe $550. Yeah or end equipments or higher in industrial. Yeah. 13 sectors. 13 sectors. 13 sectors, okay. Each sector has end equipments. Okay. Again, by the way, that's the way industrial customers, they don't think about themselves even in a sector perspective. Mm-hmm. They think about the end equipment that they make. That's still vertical, and you have hundreds of them. Mm. The breadth over there is much higher, and the granularity you have to adapt into. Mm machine is much higher, but as we said, we are kind of 15 years into it, so. Mm-hmm We've learned a lot. Got it. Is there any way for investors to get a handle on, quote, unquote, industrial? I can give some, and we can go endlessly here, but I can give some. Yeah things. let's just talk about factory automation, because it's an area that is close to my heart. Two months ago, we had the chance to go visit our assembly and test factories in Malaysia and the Philippines, and you start to see these AGVs moving around. These are these Yeah Automated Guided Vehicles, small robots that kind of carry racks and move inventory from one place to another. In our case, in our factories, the return on these is immediate. Like, in one year, sometimes 18 months, you already return the investment. Mm-hmm of the robotic arm or the AGV and just save it on labor. Mm-hmm. That is something that is accelerating. You see, labor is hard to get. There is also inflation. You replace it with machines, so that's an area where we see a great opportunity. Mm. It's becoming a very sizable business for the company, and I think it's only the beginning of it. Our investment, I just take the AGV, for example, the investments in automotive are very applicable. Mm to that type of end equipment. Electrification is a big part of industrial. It's now, probably our fastest growing sector. Even now, when industrial is slowed down in the last couple of quarters, that sector did not. It stayed very strong, simply because energy and renewables, if you just look at the solar energy from the panels to the inverters to the storage system. Mm-hmm -to the distribution, these are thousands of dollars of opportunity per system, when you look for- Mm for the company, and it's very early in the adoption curve, but growing very, very fast. Yeah. These are a couple of sectors that are showing the example of. Mm of industrial, but you have to go really into hundreds of them to see. Yeah. Each and every one of them is being redesigned into more electrical, electromechanical system. Mm other than mechanical or gas-based or whatever. We are excited about that. Got it. There's a question from the audience. I was gonna ask it anyway. I'm gonna ask it now. Look, every company these days needs to have an AI story. Like, what's the, what's the TI AI story? We have an allergy in TI for big words like AI, IoT and 5G and all that, we usually don't talk about it. Look, you know, the biggest opportunity in terms of the market, and it's not new, we've been spending effort on it, and we are expanding our presence there, is all these compute they require a lot of amps, you start to talk about kilowatts, right? The power opportunity is high, it's growing. It's actually in two areas. First, on the to power the server, you have a high voltage, you know, power delivery box, that's more in our industrial business, we call it power delivery sector. You take energy, you take AC, you make it into DC for the right, you know, consumption nodes. Then you have the processors themselves, more and more phases, more inputs of power, and it has to be controlled, it has to be very efficient. This is where our Alpha two investment, the new process technologies we put there for power, the Sherman factory in, also this dependable capacity, because these servers are gonna serve some critical mission-critical tasks. That's our story on. Do you have those designs? capacity. We do have a growing roadmap over there. Mm-hmm. It's a small part of our business. Enterprise, it's a small part, but it's growing fast, and most of that enterprise business is going into this cloud and enterprise compute, and most of it in power. There's also some signal chain stuff on monitoring, sensing, measuring, and all that, and some embedded, but the main opportunity is power. I think power will grow with data, it will grow exponentially. So that's gonna be important, and controlling it cost and of our analog processes is gonna be important. Got it. I wanna ask you about competition. This is a market where, as you said, market share doesn't tend to move around all that much. Like, how do you differentiate against a player like I guess, like, a major at scale player like ADI, for example? I also wanna ask about China, and I'm gonna maybe ask that question separately, but maybe just broad strokes, like, what is it about- If you don't mind, I would like to start with China, because I think it's relevant. Let's start with China. I think it's relevant also to the rest of the market. I get a lot of concerns from investors about Chinese competition in particular, especially now. No, but, and. TI has Texas right in the name, and. Yeah. I think rightfully so, Stacy, in the sense of. I've spent many years in China. Sure ... supporting customers and, you know, some of them very large, some of them up and coming. You cannot. I'm coming from a culture of moving fast with urgency and aggressively, and that's kind of the way I think I'm wired. You go to China, you see that. These are fast-moving, bold, not fearing to fail, customers, and also competition. So what we teach internally, and I spend time on it myself, it's part of our culture also. When you talk about competitiveness, you don't downplay these guys, as you know, they just do simple stuff, quote, unquote, commodity copying. You actually go and adopt them as a competitor, and we run a list of more than 50 competitors in China. Local? Local. That some of them run at a very low single-digit $ million per quarter, some of them run at hundreds of $ million. We watch them for the last three, four years. You can respect them- Only the last three, four years? Three, four years. Most of them were actually not public before, it was hard to get data. Of course, there are some known ones, but we look at the span of the customer base, of the competitor base, it's grown tremendously, there is more visibility. What we do there is teach our businesses to compete, to me, that's our conditioning room, that's where we get stronger as a competitor. I say to my team, If you go to Shenzhen, and you win a socket on an air conditioner versus a local competitor, is it an op amp or an LDO or a DC-to-DC converter, and you have the cost, the features, the power level that customer wants, you can win everywhere." I think it strengthens your muscle. I think the mistake is, and that was sometimes the mistake we've done in the past, was, we are big, we have the scale, they could not compete. Mm-hmm. That's a very dangerous assumption to make. Now, having said that, we do have some competitive advantages versus them in terms of, just think about cost. All these guys are working with foundries, with offsets. Mm. They have margin stacking, we don't. We have a breadth of technology and portfolio that they don't. Mm. You don't wanna underestimate them, and that's what we are doing. What we have learned is that when we do that well over there. Mm ... reapply that against our... Mm-hmm ... competition. That's our plan moving forward. I believe the level of competitiveness, it has to be higher. We talk about it internally to the team. You know, China is an opportunity, but it's gonna be tougher, and you better not run a tie with a local competitor because you'll lose the socket. Yeah. That's where the focus is. I think it's moving well, I think it strengthens the company. It allows us to compete versus each and every competitor out there, including our traditional ones. Got it. A lot of your competitors have been trying to grow. I'd make the argument, in general, growth for this industry is more important than it was in the past. I think the opportunities for margin expansion that we've seen in the past are probably not there to the same degree that we've seen, which means growth has to be a bigger imperative. You've had competitors that have actually been taking the inorganic route, you guys have not. Correct. Do you think that's been a mistake not to be-? The short answer is no. No. To be fair is, you know, the National acquisition helped us a great deal because it really helped us get to this broad automotive reach that we did not have before. I remember, I mean, getting some of these product lines into my signal chain business at the time, and learning how you can sell automotive in many more end equipments than we originally envisioned, and also the change in automotive to more catalog business. That helped a lot. Once we have done that, and once we've put our efforts in organic growth for industrial and automotive, I don't see us lacking. Mm-hmm ... a big ingredient, in that sense. We like our portfolio, we like where we are. We worked very hard to get there. Yeah ... and position ourselves there. Right now, yes, top line is gonna be the largest contributor. Mm to free cash flow per share growth. That's where the focus is. Got it. We've got about 1 minute left. Got a room full of folks here. I will give you your soapbox. What's the pitch? Why should investors buy your stock? Yeah, I mean, nothing new here, so you can answer it yourself. I think TI focus on a good and important part of the market in analog and embedded. That's where the focus is. We worked many, many years to get to that point, and we are now well-positioned, including, early signs of embedded starting to perform. We are in the right markets. Again, people think, TI likes industrial and automotive because they are safe or they have longevity. No, we like them because they will be the fastest growing markets, and I think there is more and more evidence that indeed they will. The position we have built there is strong. You know, 65% going higher, of our revenue. If you just run the math, the math of mechanically growing these markets in the same rate, the results or the top line, future of TI could be very appealing. You couple that with an efficient manufacturing plan, which is dependable, and customers appreciating that could be a decade that when we execute our plan. I've seen the, our internal model numbers, they are exciting. There is a lot of execution between us and them, between us now and then. Mm-hmm. I think we control our destiny. That's the exciting part, and, I'm excited about the future.