Texas Instruments (TXN), or "TI”, recently acquired a building in the Chengdu Hi-Tech Zone from UTAC Chengdu Ltd. to open an assembly and test (A/T) operation plant in Chengdu, China.
Earlier in June, TI announced the expansion of its existing wafer fabrication factory in the same complex. The company stated that it will invest $1.69 billion over the next 15 years, which will include funds for facilities, manufacturing equipment and land.
The new 358,000 square-foot building will become TI's seventh A/T operation. As both TI's existing wafer fab and the new building for A/T operation plant are located on the same property, the Chengdu site will become the only integrated wafer production, A/T center.
TI has started hiring people to refurbish the building and will simultaneously run a small production line in the new building. Management expects the site to be fully equipped and start production by the fourth quarter of 2014.
Texas Instruments has been investing in the Chengdu site since it started its fab in 2010. Overall, the company employs about 14,500 people in Asia which is about 43% of its worldwide workforce.
TI’s growing investments in China make sense as it has been operating in the market for close to three decades now. The company has 18 offices for sales and applications support in the country, including a product distribution center in Shanghai and the wafer fab facility in Chengdu. TI’s long association with the Chinese government may provide it with cost benefits and cheap labor, among other things.
TI’s capital spending forecast remains unchanged for 2013. The company expects its capital spending levels to remain about 4% of revenues until the latter exceeds $18 billion and over the long run should range between 4%–7%.
In the third quarter of fiscal 2013, TI’s earnings were up both sequentially and year over year, beating the Zacks Consensus Estimate by 8 cents. Results were helped by an improving mix of business, good cost control and a lower tax rate. Also, revenues of $3.24 billion were up 6.5% sequentially butdown 4.3% year over year (at the higher end of the recently narrowed guidance range of $3.15 billion to $3.25 billion).
Texas Instruments has a Zacks Rank #3 (Hold). Other stocks that are performing well at current levels include Intersil Corp. (ISIL), Syntel Inc. (SYNT) and Silicom Ltd. (SILC). All these stocks carry a Zacks Rank #2 (Buy).