Last week, Texas Instruments (TXN) announced the opening of its 300mm (12-inch) analog fab at Richardson, Texas, which is the first of its kind. The fab was completed in 2006, but the demand situation caused management to defer production. 

Management expects to start equipping the fab this month and hire around 250 employees, including engineering, manufacturing and administrative personnel. If all goes well, the first chips from the fab should ship by late 2010. 

We have been positive about several changes in the market that are driving demand for smart phones, net books and other mobile Internet devices. Since Texas Instruments’ power management analog chips are largely used in these devices, the company is no doubt seeing significant opportunities. Another factor driving demand for its chips is the growing need for energy efficiency and protection. 

Management has been refocusing the business for some time now and has increased investment in analog production. The company’s digital needs are gradually being outsourced, enabling it to use older equipment, which continues to be suitable for analog production. 

Digital manufacturing requires expensive, state-of-the-art equipment, necessitating significant volumes to generate profit. Analog production, on the other hand, is focused on more differentiated products, which remain viable for longer periods of time. This results in relatively slower transition to newer technologies, enabling manufacturers to get more value from existing equipment. 

The decision to equip the new fab with older equipment will save the company a significant amount of money. 

On Sep 9, Texas Instruments raised its third quarter guidance. Revenue is now expected to come in at $2.73−$2.87 billion (or up 9.7%−16.7% sequentially) compared to previous guidance of $2.50−$2.80 billion (or up 1.6%−13.8%). The earnings per share (EPS) are expected to come in at 37 to 41 cents, compared to the previously guided range of 29 to 39 cents. 

On Sep 17, Texas Instruments also raised the quarterly dividend from 11 to 12 cents per share.
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