All right. Welcome back, everybody. I'm Joe Moore, Morgan Stanley Semiconductor team. Very happy to have with us today from the management team of Texas Instruments, Rafael Lizardi, Senior VP and CFO, and Mike Beckman, Director of IR. Thanks, guys, for joining us. Good afternoon. Happy to be here. Yeah. Thank you. So your Capital Management Day just happened a couple of weeks ago, and you basically remained on message with the objectives. But can you just give us some of the few key points from that and how you guys are thinking about capital management going forward? Yeah. No, we are holding a steady hand, consistent messages we've had the last few years. We're going to maintain levels of CapEx to make a significant investment in manufacturing and technology, where we continue ramping our 300-millimeter wafer fabs in Texas and in Utah. And this year we're going to spend another $5 billion. Next year, it's somewhere between $2 billion and $5 billion, depending on the opportunity. But in any market scenario, we envision getting back to trend line on our free cash flow and our share growth, which is what we think over the long term drives value for investors. Great. Thank you for that. Obviously, domestic internal capacity has been a big part of the strategy for the last several years. It seems like that's probably helping you sleep at night a little bit these days, given all of the uncertainty around it. Can you talk generally about the importance of having that U.S. footprint, the benefit that you see in kind of a geopolitically challenging world? Yeah. No, especially in the current environment and the geopolitical tension, our investment, we think, is going to become even more valuable. We are building a complex of four wafer fabs in Sherman, Texas. That's in addition to the two wafer fabs that we have in Richardson. All of those are 300-millimeter wafer fabs, so the largest diameter on the wafer. And that translates into scale, where the cost per unit drops significantly versus older generations. In addition to that, in Utah, in Lehi, Utah, we bought a factory there from Micron that we turned into an Analog and Embedded factory. And now we're expanding a second factory right next to it, which is going to be a massive three-level 300-millimeter factory. So that puts us in a really great position to build there. Of course, we're doing that with the benefit of the ITC, the Investment Tax Credit, and some CHIPS grant funds that we were awarded last year. So that, in addition to being 300-millimeter grade cost per unit scalable footprint, is being helped funded by the ITC and the grants. Very helpful. Thank you. Some of your competitors, when we've talked about this, have sort of talked about a little bit more matching the manufacturing in the region of consumption, so trying to build China for China, Europe for Europe, things like that, whereas you guys have much more of a domestic strategy, as you said. Can you talk about the way you're thinking about that and the reason that you've chosen to do it that way? Yeah. We think that winning in China is very important. We're all in as far as selling in China. About 20% of our revenue is based from customers that are headquartered there. And our CEO was just there last week, and he came back super excited of all the wins that we're getting there. At the end of the day, Chinese customers are just like any other customer. They want the best product to be able to sell the best product to their customers. So in order to do that, they need the best parts. So we have the best parts. We have the broadest portfolio. We have, as I talked about earlier, the manufacturing and technology footprint that gives us the best cost, which then allows us to go and price in even in the more sensitive end markets, price-sensitive end markets. We feel that we're in a really good position to continue gaining share in China. Appreciate that. Thank you. So a lot of this is framed to me by the shortages that we saw 2021, 2022, 2023, where people realized that these geopolitical strains can put a lot of pressure on the supply chain. But we've now obviously gone from a shortage environment to a little bit of an oversupplied environment. Does that change customer priorities? How aware are your customers of what you're doing? Do your customers still ask you the question? Even if they might be drawing inventory down to levels that are lean, they're still focused on where your supply chain is and where their supply is going to go? Yeah. My sense is CEOs of our customers, senior leaders of our customers, they value, they appreciate what we're doing. And that is a key motivator to design us in their parts, in their products. But the designer, the purchasing manager, they care more about the tactical thing. So we have to be good at the tactics, at having the right part with the right features, at the right price, and also at the strategic view, having that manufacturing footprint that I was talking about earlier. My sense is that we're in an environment now where many of our competitors are retrenching, are cutting inventory, cutting OpEx, cutting factories, shutting down factories. We're doing the opposite. We're investing, we're building inventory, and we're getting ready for the upturn that at some point is going to happen. We've been in this industry long enough that we know that the sun eventually rises again, and we think that that's going to happen, and when that happens, we're going to be ready. Yeah. That makes sense. As I think about 2026, you've talked about on the Capital Management Day and other times CapEx of $2 billion-$6 billion, $2 billion-$5 billion, I think. I think some people were thinking of 2026 as a year where we start to see cash flow go above reported earnings. But it seems like at the low point of that, you're right around your depreciation. So why couldn't 2026 be a year where CapEx falls further than that and you start to see that free cash flow going above reported earnings? Yeah. So just to recap, this year, 2025, we'll do about $5 billion in CapEx. For next year, as Joe alluded to, we have been saying that we'll have a range of $2 billion-$5 billion. And the $2 is a floor. And the reason for that is we need that $2 billion is to put a lot of brick and mortar and qualifications in those factories that I talked about earlier that are not going to give us any revenue on day one or even on day two. But you need to have them so that once you have that, then you can go on a modular incremental capacity addition mode. So that's why we need that there. It would be penny-wise, pound-foolish. If we were to forego some of those investments just to get the CapEx a little lower. Yeah. But there could come a year where your CapEx starts to fall well below. I'm glad you brought that up. That 2026, the floor is $2 billion. There's no floor in 2027. So if there's a persistently weak market, CapEx in 2027 can go pretty low. And then you mentioned we're going to have an upturn. We've all been doing this. I've been doing this a long time, too. There will be an upturn. I guess is part of what you're doing, though, sort of lessen some of that cyclicality because you're going to have a lot more capacity. People will know that you'll be able to deliver. You may not have shortages in the way that you did two or three years ago. And maybe that dampens a little bit some of the cyclicality that we see. I'm hesitant to say that TI single-handedly will dampen the industry cyclicality. But to your point, we're going to have plenty of capacity, plenty of inventory, systems in place that will make that inventory allow us to use it more efficiently where it's most needed. So the end result of that should be serving our customers a lot better so that they don't have to get to a position where supply is tight, demand and supply are tight, and then they're having to double or triple order in order to get what they want. So potentially, we could alleviate our cyclicality and more on gaining market share. When that upturn comes and our competitors are short of inventory, short of capacity, and we have plenty of that, then we'll be in a really good position to gain share. Yeah. OK. That makes sense. So I guess where this all comes to fruition is kind of gross margin. You said at the mid-year Capital Management Day last year that under the sort of low-end scenario, you would be at 60%+ gross margin. You're about 55% now. So obviously, right now, you're at 55%. There's a little bit depressed because of the lower utilization. Do you still feel like 60% is kind of the right long-term? Let me correct. I think what I heard you say, what we said of the four scenarios, the top three would be 60+. The bottom scenario, which was $20 billion in revenue, would be below 60, slightly below 60% gross margin. So that was on the four scenarios of $20 billion, $22, $24, and $26 billion for 2026. OK. But those are still the right numbers. Yeah. Those are still the right numbers. And the way you get there, you don't have to choose our revenue. You can pick whatever revenue you believe. Just flow it through at 75%-85%. And for the next few years, use 85%. And then subtract the increase in depreciation, which I've given on the last earnings calls and the last capital management calls. And you can model your own gross margin. But that's about what you should get under those revenue scenarios. OK. And then Dave and Mike were helping me understand how you manage the underutilization sort of expensing in a quarter where, like last quarter, you saw somewhat lower utilization. You take that pain kind of in the quarter where the utilization is low rather than running it FIFO, right? Correct. That's what underutilization is. It's fixed costs that are not attributable to wafers that you're running. So then you let it fall through in the quarter. Essentially charge at the quarter where the wafers are in the fab, not when. You don't have those wafers. So you charge that cost when the wafers are not in the. But you have over 200 days of inventory. So if you run it through FIFO, it would take you a year to see the impact of that lower utilization, right? In fact, it would not be GAAP. We couldn't do it that way. The way you do it for GAAP, let's say what you call normal utilization is 90%. If you're running at 90% or higher, everything that you spend, you inventory. If you're running at 80%, you take that 10% delta of 90% to 80%, and then you apply it to all your fixed costs, depreciation, some of your people costs, some of your electricity. Then you take that cost and you don't put it in inventory. You let it fall through on the P&L that quarter. OK, but last quarter, you had lower utilization and your inventory still kind of went up. We built inventory on top of having lower utilization. Yeah. OK. So the idea that you'll pay back at that utilization requires a revenue recovery, I guess, obviously. That's right. We need revenue. OK. OK, great. Maybe we could talk about some of the markets. In Industrial, one interesting point from your capital markets day was you talked about $700-$1,000 of content in Industrial robots. How are you thinking about that? I feel like TI kind of doesn't talk about those speculative markets maybe as much. But you have a lot of opportunity if those markets take off. And when you make these investments into autonomous driving and things like that, if they take a long time to get into cars, they may show up other places first. Can you just talk about how you guys think about those verticals? Yeah. Maybe I'll add, and Rafael will jump in. But it is a great opportunity. I think the humanoid robots and just robotics in general, the content that you see in those is incredibly rich. I mean, you've got for every joint, if you think of a humanoid robot, there's a motor controller, there's an encoder, there's radar systems, there's camera systems, there's interface systems inside of those. There's just a lot of content opportunity in those. You talked about the size in dollars. Now, I'm not going to speculate on how quickly that market will grow or what that's going to look like in five years or 10 years. But the idea is we want to make sure we've got the best portfolio to serve it. And it's a great opportunity for TI. So if it does well, we will benefit. But it's not going to be the only place that we have design in. But it is a great opportunity. And I think robotics in general is an area that is small and growing for us. I think in general, in the industry, it is. And it has a good potential to be a fast grower over time. And how do you guys feel about the Industrial market at this point? We've been undergoing one of the tougher corrections that I've ever seen in terms of the drawdown. It feels like we have to be shipping below consumption. Do you guys feel that way? And how do you see the market? It is a great market. I mean, it's a diverse market, as we just mentioned. It's a very long-lived market. When you win a socket in Industrial, in many cases, these are multi-decade-long socket wins. And so it is a good market to be in. Obviously, we're going through an inventory correction in this industry. And as Rafael pointed out, we want to be ready because it will recover. And we want to make sure we have the right inventory position, design and momentum, make sure we have the right portfolio to have it. And I'll tell you, having a catalog or general purpose as well as an application-specific standard product or ASSP portfolio, having both of those things makes it really a compelling market to be a part of because you really can get a lot of socket opportunity with those two types of products. When you talk about a market like robotics or something new, do you have organizations that are framed around that? Do you have vertical exposures within? I know it's a catalog focus. But do you use steering those catalog focuses into certain verticals? We do. So first of all, we have a product set of teams that are structured and do product development by product family type. Kind of if you go to our website and you look at the product families, that's very similar to how you'll see our product teams that are organized. We also have a marketing team or a systems engineering and marketing team that knows the applications really well and helps us make sure that as there's emerging opportunities such as robotics or Industrial automation or medical opportunities, they are very deeply ingrained in what those applications are going to need and are evolving to. So they help find intersection points in the products we already have but also help inform the roadmap to make sure that as we're developing products, we have them. Often, a good general purpose or application-specific standard product can serve multiple markets, multiple end equipments. And so they really help make sure that we're plugging those sockets in as many of those as possible and also informing the roadmaps to make sure that if it needs to have in the Embedded space, for instance, if it needs to have AI accelerators built into the chips, that we have those put in there. So they help inform the roadmaps. Great, and then also thinking about Automotive in the same context, I mean, there's such a wide spectrum of Analog componentry that goes into a car. A lot of the dollars is in more commodity power discretes, which I know you're not participating in. But a lot of the battery management is very expensive, high-capability stuff. How do you think about verticalizing that market and deciding the right way to, even if it's a catalog approach, the right places to align those resources? Yeah. I think it's similar to Industrial, making sure that you have a broad portfolio that can address multiple things in a vehicle. And as you may be aware, we look at a vehicle, there's more than just one socket in a vehicle. As you know, we split it into five sectors, ADAS, infotainment. We've got body electronics, lighting, powertrain, and powertrain EV are the kind of five sectors that sit inside of there. And every one of those sectors has growth opportunities within it. And in fact, there's a lot of folks talk about the EV opportunity, the battery electric vehicle opportunity. But even in internal combustion engine vehicles, the ADAS systems are developing, the infotainment systems are developed, the lighting systems are far more advanced than they were even five years ago. So what does that mean we have to do from a roadmap perspective and a product portfolio perspective? It means you do have to have those, I use the word general purpose products first because a lot of times when someone is iterating design and doing innovation, they're going to start with using those components to put together a new development. Over time, that sometimes evolves into application-specific standard products. So having both of those becomes really important. So you have to have a portfolio that's in a roadmap that's structured to head in that direction. And we have. I think for, gosh, more than a decade, we've had most of our product lines building products for Automotive, but also Industrial. And we try to do as much as we can to make sure they can serve more markets, not just one single end equipment. Great. And so one of the things that stood out from the capital markets day was you mentioned having a cost structure to be competitive in China. And you talked about the importance of China. In Automotive in particular, it seems very clear that a lot of the center of innovation has migrated to China at this point. And you said you're growing there. So how do those two things come together? You're going to be in that market. Do you see it as a market that's more price competitive? Can you dissuade local competition with pricing? Just how do you think about China as being distinct from the rest of the world? Yeah. We're doing very well in China. As I think I mentioned earlier, our CEO was there last week meeting with customers and came back super excited. We're gaining share. Our manufacturing footprint, 300 millimeter, with the ITC benefits and everything is putting us in a really good competitive position. We price based on what the market demands. We don't set the price. The market sets the price. And based on our strategy and our manufacturing footprint, we have the capability to get to the price that we need to get to. But price is only one factor that customers care about. It's not the top three. So there's a lot of other things where our technology comes into play and then the broad portfolio and our quality and our sales force that puts us in a, those are our competitive advantages and puts us in a position to do well in China and everywhere else. So you'll be price competitive where you need to be, but it's not the first thing that you're leading with. Correct. Yeah. OK. And what is the state of Chinese competitors? Do you expect Silergy was here the other day talking about making progress in the Analog space. I don't think they're really Automotive grade the way we would consider it at this point. But what is the status of that? And you obviously have dealt with competition in all markets at all times. But is it different in a market where maybe a tie goes to the local? My sense is there's clearly some pressure, some incentives for local Chinese companies, our customers, to use local competitors, but right now, just to give you the big picture, out of the entire market in China, the consumption in China of semiconductors, about 15% of that is coming from local competitors. About 15% is coming from Texas Instruments, and the other 70% is coming from other Western suppliers and Japanese suppliers. Yeah, so we're competing with the local players, but we're also competing with that 70%, and that 70%, they're not all in on China, is my sense, and you heard some comments from some of them even here over the last day and a half, so we compete well with the local suppliers, but we compete even better with the Western suppliers that are not focused in China as we are. If you see China being more successful in the export market, whether that's in regions where there are no tariff concerns or even migrating their manufacturing footprint into areas that do, it seems like that's a good thing for TI? That is a good thing. I'm glad you brought that up. About 20% of our revenue is for customers that are headquartered in China. But a good chunk of that 20% is for export. So it's not for consumption in China, but it's put in some car or in some product that then is exported out of China. And there, the Chinese have to be, just like any customer, globally competitive. So the best product is the one that's going to win. And that's where we feel confident that we have some of the best products. OK, great. I wanted to shift to microcontrollers and the Embedded business. You guys have made no secret of kind of underperforming a little bit in that business. But some of that is repurposing and reorienting around a catalog MCU. Can you talk about the strategy there and what you see is happening? Yeah. I'd be happy to do that. So if you look at the Embedded business today and over the last, I'd say, five years or so since Amichai joined and started leading that team and really making sure that it leverages what TI is good at, the competitive advantages that we have of manufacturing technology, broad portfolio, reach of channel, diversity, longevity. If you look at where Embedded was probably a decade ago, it didn't really benefit from those things as much. A lot of it was built externally. The portfolio was smaller, more large complex SoC type developments. The reach of channel didn't benefit as much because we're talking about a handful of customers versus a huge number of customers. And so what advantage do those competitive advantages line up to help it in that scenario? What Amichai has really done is build out, first of all, bring as much internal as possible. And Lehi helps with that. It runs process technologies that both Embedded and Analog can use. But Embedded certainly benefits probably the most from that. So you have a benefit in internal manufacturing with Lehi. You have a broader portfolio. I encourage anyone here who has a moment to go to the website, look at microcontrollers or processors or DSPs or wireless connectivity or radar chips on our website. Look at the product folder. Look at the number of new next to product names. There's just a tremendous amount of release that's gone out in the last couple of years. And it's not just one device. It's a family of devices. And so to be successful in Embedded, you have to have families of products. And so what we're doing is building out a portfolio that then wins a large multitude of diverse sockets versus one single large socket. And if you look at what that business starts to look like, it starts to look like a business that benefits from TI's advantages. And that's the restructuring that we've really worked on over the last several years. And I think we're seeing really good progress in that. And it makes it a very compelling opportunity for us. Yeah. Great. And that's at margins that are similar to the rest of the business, gross margin? I'd say that in terms of gross margin, the point we really think about is this a business that's going to help us grow free cash flow per share faster for TI? Embedded does that for us. It is a business that not only now benefits from those advantages, it also strengthens those advantages. Short term, Embedded is taking a bit of a hit because the new factory that we have in Utah is disproportionately an Embedded factory because it's underutilized. That's giving it a hit on gross margins and operating margins. But just like now, it's a headwind. In the future, as we load it, it'll be a tailwind. So Embedded will get a disproportionate benefit as we move more external loadings internally. OK. OK, very helpful, and then I guess Consumer. Consumer has gotten kind of big Personal Electronics, largely because everything else has been weaker. But that tends to be a business that you guys look at a little bit more opportunistically. Can you just talk about that, the Personal Electronics business? Yeah. I think that's the right way to look at it. And it's a market where a lot of the end equipment, the handsets and laptops and gaming and headsets and peripherals like that are kind of in a saturation replacement mode. Unless you find another planet of people to sell cell phones to, you're kind of now in refresh. And so there's opportunities there. And there's good places for us to participate. But we want to be proportional to the opportunity. And when we look at the markets that we play in, Automotive, Industrial, the opportunities in data center, those are places that we want to make sure that we have R&D bias toward because of the opportunity there. But it doesn't mean we don't want to ever participate. It means there are still opportunities we want to have. But we want to have them right sized to the opportunity that we see. Got it. it. OK, and then just last question from me. I'll open it to the audience, but do you guys think about market share in Analog? Because I know there's been some fluctuations and shortages played into it, and how much who had inventory and who didn't at various points played into it. I know there's a view that there's a mean reversion kind of share gain coming for you guys. Just do you think about that at all? Or do you look at it more opportunity by opportunity, and the market share will kind of fall where it falls? No. We look at it both ways, and we don't rest on our laurels just expecting some regression. I think what you're referring to on that front, some of that is fair, which is when you hear customers, competitors talk about long-term service agreements and CSPs and that sort of thing, and there was also pricing. There's a lot of distortions in the last few years that you have to wait until that kind of settles and moves out before you make a real assessment, a more accurate assessment of market share movements, but those are some kind of macro factors, but in addition to that, we go customer by customer, socket by socket, and fight those out to make sure that we get our unfair share of those. But if you look at the growth versus, let's say, the Semiconductor Industry Association Analog segment, there's a lot of stuff in there where you don't want to participate, right? Low margin commodity stuff. Is High Performance Analog as a category still outgrowing that broader group, do you think? I don't have the data in front of me to compare the two. But I would say that in terms of where we see the opportunity over time being regressed for us, it's going to be in, and when I say High Performance Analog, that's a very important piece. But power management, whether it's, and we like to use the term general purpose and application -specific standard product because that kind of covers the range of a spectrum that we like to cover. And when I say general purpose, that's not what you described as commodity products. It's really these are products that are everywhere. They're pervasive. They're not interchangeable. But over time, we can definitely design in and gain traction on the application -specific side, despite what you're thinking of more the high performance. And we have some of those really, really high performance devices too in the portfolio. We want to have both of those things, and so having the combination of those, we think, is going to help us be able to grow faster. Great. Let's open it up to the room. If there's any questions here. There's one in the front here. Hello. I have two questions. So last year, NVIDIA announced Texas Instruments has been the strategic supplier or partnership with TI. But I see from your last quarter report for the Enterprise Systems, which related to the data centers, actually you have low single digit downside. So it means also at the same time, Infineon also being a long-term strategic supplier of NVIDIA, but they sell a big business from NVIDIA. So I just say, what's the exposure of TI business to NVIDIA's AI systems? The first question. The second question is, also in your last quarter report, you say you have $1.5 billion direct funding from CHIPS Act. But this week, it's announced this may be canceled. And also the timeline you mentioned got this $1.5 billion is 2026, next year. So it means it impacts your plan to get funding. Thanks. Maybe I'll cover the first one and you cover the second one. So I won't comment on a specific customer or a specific socket. But what we'll say about data center in general is it is a good opportunity for us. And if you look at where the opportunity is, it's in power management as a big part of that. But it's even beyond that. If you look at the content opportunity inside the data center, there's quite a bit there. And today, we've got a substantial business in data center. If you look at the size of our Enterprise business, it's large. And as we look at where we are allocating R&D toward, we want to make sure that we are a strong player there. The new process nodes that we're building in SM1 are going to play an important role in that. It is this area, as you heard me mention, areas where we bias R&D, Industrial, Automotive, and with the focus as well on Enterprise and data center. And on your last question, so last year in late December, we announced that we were awarded $1.6 billion of direct funding from the CHIPS Act, the so-called grants. So that was an agreement we signed with the government. And we are not aware of any. We have not been told, have not been informed of any changes to that. There are several milestones that we need to complete. And we're in the process of working towards those milestones in the factories in Sherman and the second factory in Lehi. Let me stress, as we've always said, that the bigger portion of benefit from the CHIPS Act legislation is the ITC, the Investment Tax Credit. That we expect to get benefits of $6 billion-$8 billion over the course of the next 10 years or so. We've already received cash benefits of about $600 million and expect $700 to about $1 billion this year. I guess on the topic of kind of all the geopolitical questions that are happening right now, it's got to be very difficult to run some of these businesses when there's tariffs that are maybe coming, going. We don't know if they're going to be there. Do you see any different behavior? Do you think people are pulling things in to deal with tariffs? Just anything that's different because of all of this? Yeah. It is difficult and uncertain. But fortunately for us, at least, we don't expect any meaningful, significant direct impact on tariffs. Of course, indirect, if the world's GDP is affected, then we're going to be affected. But direct tariffs, because we have such a diverse footprint and supply chain, particularly with the assembly test operations, we can reroute supply chains so that not to minimize the impact on tariffs on ourselves and our customers. So for example, what we have as assembly test operation in China, what we can do is the products built in China just not ship those to the United States. And instead, we have plenty of AT capacity in Malaysia, in the Philippines, in Mexico, in other places where we can then reroute those to customers in the United States to minimize the tariffs there. Great. Thank you for that. Another question. Mike is coming. I was wondering if you could help us understand or size the amount of application specific revenues compared to catalog, either Industrial, Automotive, or both? Sure. And there's not a clear cut line to say, OK, this is ASSP and this is a general purpose product. They're roughly proportional in size. So it's not like one is 90%, the other one's 10% of the business, I'd say. And again, it's a spectrum. It's very clear. It's not like there's devices in the middle where you probably one person would say it's an ASSP and someone else would call it a general purpose. That's why I'm very careful. It's not like there's a clear way you can always say whether one is or not. But they're similar in size, the best way to describe it, inside of our total revenue. Other questions? OK. We'll wrap it up there. Rafael, thanks so much. Thank you so much.