Selling DirectNarrow moat
Texas Instruments (TXN) — moat facet
TI spent a decade taking its business away from its own distributors, and now sells more than 80% of it directly.
Texas Instruments spent a decade taking its own business away from its distributors, and it now sells more than 80% of its output directly.
The old model in analog was that a broad-line supplier reached its long tail through distribution — Arrow, Avnet and the rest carrying the catalogue, holding the inventory, finding the small customers and taking a cut. TI decided to do it itself. More than 80% of revenue was direct in 2025, including TI.com, and the company describes investing in new capabilities to build closer direct customer relationships.1
What that buys is three things. The margin the distributor took. The inventory position, which in a shortage is the difference between supplying a customer and losing them. And the data: who is designing what, at which stage, with which parts — which a distributor previously held and TI did not.
It also reaches a customer base that would otherwise be uneconomic to serve. TI sells to more than 100,000 customers, and about half of revenue comes from outside its largest fifty. A salesperson cannot call on a hundred thousand accounts. A website with 80,000 parts, datasheets, samples and next-day shipping can.
This is the weakest of the four advantages TI claims, and it is worth saying so. Direct selling is a good decision that any competitor can also make; Analog Devices and the European suppliers all sell direct to their largest accounts, and every distributor now has a web storefront. What TI has is a lead in execution rather than a structural position.
It also created a competitor. The distributors TI moved away from still carry rival catalogues to the same long tail, and they have every reason to promote them.
The number to watch is revenue per customer outside the top fifty, which TI does not disclose — so in practice, the direct share itself.
More than 80% of revenue was direct in 2025 after a decade of deliberate shift, and TI continues to invest in the capability. The share has risen every year; the informative moment will be when it stops.
Selling direct is meant to be cheap to run at scale; the ratio rising would mean the channel costs more than it saves.
- ReportedMore than 80% of revenue was direct in 2025, including TI.com, and the company describes investing in new capabilities to build closer direct customer relationships.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 ↗