The Distributors TI FiredThin moat
Texas Instruments (TXN) — moat facet
The channel TI walked away from is still calling on the customers TI reaches least well, for a fuller margin.
TI spent a decade moving its business away from distributors, and the distributors are still there, carrying somebody else's catalogue to the same customers.
More than 80% of TI's revenue was direct in 2025, including TI.com, after years of deliberate investment in building the customer relationship itself.1 What that took was volume out of Arrow, Avnet and the rest — in the long tail, which is where distribution earns its keep and where TI's own coverage is thinnest.
Those distributors did not go away. They carry Analog Devices, Infineon, STMicroelectronics, Microchip and the Chinese suppliers, they still hold the inventory and the relationships, and they have a direct commercial reason to steer a small customer toward a line on which they earn a full margin.
That is a genuinely unusual competitive dynamic: TI created a motivated adversary out of its own channel, in the segment where it has the least direct presence.
The bet has largely worked so far. TI serves more than 100,000 customers with about half of revenue from outside its largest fifty, which is evidence the long tail is being reached rather than merely counted.
It is also the least defensible of TI's advantages, because every distributor now runs a web storefront with the same datasheets and the same shipping.
Watch TI's revenue growth against the broader analog market's. Long-tail share loss appears there first.
Every distributor now runs an e-commerce storefront carrying rival catalogues with the same datasheets and shipping, aimed at the customers TI serves through a website rather than a salesperson.
Without a distributor's margin in between, more of each sale reaches TI's gross profit.
- ReportedMore than 80% of TI's revenue was direct in 2025, including TI.com, after years of deliberate investment in building the customer relationship itself.Texas Instruments Incorporated, Form 10-K for the year ended 31 December 2025 (SEC, CIK 97476) — Item 1, Business. TI's two reportable segments are Analog and Embedded Processing, with remaining activities in Other; operations began in 1930 and it has design, manufacturing or sales operations in more than 30 countries. The product portfolio includes more than 80,000 products. TI states four sustainable competitive advantages: a strong foundation of manufacturing and technology, a broad portfolio of analog and embedded processing products, the reach of its market channels, and the diversity and longevity of its products, markets and customer positions, which in combination it describes as difficult to replicate. An unpackaged chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer; TI continued qualifying and ramping production at its newest 300mm fabs in Richardson and Sherman, Texas, and Lehi, Utah, supporting external foundry transfers and internal transfers from its legacy 150mm facilities, and expects to maintain sufficient internal capacity to meet the majority of its production needs, offering customers geopolitically dependable capacity. TI sells to over 100,000 customers, with about half of revenue derived from customers outside its largest 50; more than 80% of revenue was direct in 2025, including TI.com. End markets as a percentage of 2025 revenue: industrial 33%, automotive 33%, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%. About 60% of revenue comes from customers headquartered outside the United States; revenue from end customers headquartered in China represented about 20% of revenue in 2025, while revenue from products shipped into China represented about 50%. The analog and embedded processing markets remain highly fragmented, with significant global competition from dozens of large and small companies including emerging companies, particularly in Asia. The company's stated objective is the growth of free cash flow per share over the long term. — FY2025 · publ. 2026-02-06 · source ↗