Owning the Factories, on PurposeNarrow moat
Texas Instruments (TXN) — moat facet
For two decades the smart answer was not to own factories. TI kept building, and now sells that as the product.
Owning the factories used to be a disadvantage in semiconductors. TI now sells it as a feature, and customers have started agreeing.
The fabless model — design here, manufacture at TSMC — produced better returns on capital for two decades, and most of TI's peers moved that way. TI kept building. Its own framing is that internal manufacturing gives lower costs, greater control of the supply chain, and geopolitically dependable capacity for customers.1 The company expects to maintain sufficient internal capacity to meet the majority of its production needs.
The shift that made this valuable was not technological. It was the 2020-22 shortage, which taught automotive and industrial customers that a chip they cannot buy has no price, followed by an era in which where a fab sits became a policy question. TI's new 300mm capacity is in Texas and Utah.
The evidence is in the mix rather than the marketing: industrial and automotive are 33% of revenue each, and those are precisely the customers who design a part in for a decade and cannot tolerate an allocation failure.2
The cost is visible in the same filing. Capital expenditure was $4.55 billion in 2025, and free cash flow only 16.6% of revenue.3 Fabless peers do not have that line.
The comparison is TI's ROIC against Qualcomm's — 18.6% against 22.2% — two ways of running a chip company, both above the hurdle.
Owning capacity was a liability for two decades and became an asset in 2021. Trade policy, customer preference for supply security and the industrial and automotive mix have all moved in favour of the decision since, and TI's new capacity is in Texas and Utah.
TI builds most of its own chips on purpose, and the heavy spending on new fabs is now winding down. Capex falling while revenue grows is the payoff; a new spending wave would restart the wait for free cash flow.
Source: Texas Instruments Form 10-Q, Q2 2026 ↗- ReportedIts own framing is that internal manufacturing gives lower costs, greater control of the supply chain, and geopolitically dependable capacity for customers.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 ↗
- ReportedThe evidence is in the mix rather than the marketing: industrial and automotive are 33% of revenue each, and those are precisely the customers who design a part in for a decade and cannot tolerate an allocation failure.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 ↗
- Moat Explorer calcCapital expenditure was $4.55 billion in 2025, and free cash flow only 16.6% of revenue.Texas Instruments Incorporated, Form 10-K FY2025 — Management's Discussion and Analysis, cash flow statement and the free-cash-flow reconciliation. Cash flow from operations $7,153M (2024 $6,318M), 40.5% of revenue; capital expenditures $4,550M (2024 $4,820M); proceeds from CHIPS Act incentives $335M; free cash flow $2,938M (2024 $1,498M), 16.6% of revenue. In 2025 TI invested $3.94bn in R&D and SG&A, invested $4.55bn in capital expenditures and returned $6.48bn to shareholders. Dividends paid were $4,999M against $4,795M in 2024 and $4,557M in 2023, reflecting an increased dividend rate; $1,477M was used to repurchase 8.5 million shares against $929M for 4.7 million shares in 2024. Net proceeds of $1,199M were received from the issuance of fixed-rate long-term debt and $750M of maturing debt retired. Over the ten-year period from 2016 to 2025 TI allocated $109 billion, of which about $24 billion went to capital expenditures, and states it is near completion of its six-year elevated capital expenditure cycle. The dividend was raised 4% to $1.42 per share per quarter, marking 22 consecutive years of increases, since extended to 23. The One Big Beautiful Bill Act, enacted 4 July 2025, provided for expensing of US research and eligible capital expenditure and increased the CHIPS Act investment tax credit; TI expects the effective tax rate and tax-related cash payments to be lower than under prior law from 2026. — FY2025 · publ. 2026-02-06 · source ↗