What changed in this filing

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Item 1. Business

2023-02-03 compared with 2022-02-04 · 46 added, 37 removed, 178 unchanged (32% of the section changed)

We design and make semiconductors that we sell to electronics designers and manufacturers all over the world.

We design and manufacture semiconductors that we sell to electronics designers and manufacturers all over the world.

Our operations began in 1930, and we are incorporated in Delaware.

13 unchanged sentences

As engineers, we are fortunate to work on exciting technology which helps our customers innovate to create a better world.

Technology is the foundation of our company, but ultimately, our objective and the best metric to measure progress and generate long-term value for owners is the growth of free cash flow per share.

Our strategy to maximize free cash flow per share growth has three elements:

Technology is the foundation of our company, but ultimately, our objective and the best metric for owners to measure our progress is through the growth of free cash flow per share over the long term.

Our strategy to maximize long-term free cash flow per share growth has three elements:

The first element of our strategy is a business model that is focused on analog and embedded processing products and built around four competitive advantages.

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The largest allocation over this period was to drive organic growth, which includes investments in R&D, sales and marketing, capital expenditures and working capital for inventory.

In this period we allocated just over $8 billion to capital expenditures, and in the years ahead this amount will increase, as we expect it to be the largest driver of long-term free cash flow growth.

In this period, we allocated just over $10 billion to capital expenditures.

Going forward, we expect increased capital expenditures to be the largest driver of free cash flow growth over the next 10 to 15 years.

Beyond that, we also allocated capital to dividends and share repurchases.

49 unchanged sentences

Industrial Factory automation & control

(41% of TI revenue) Building automation

Grid infrastructure

Aerospace & defense

(40% of TI revenue) Grid infrastructure

Building automation

Test & measurement

Pro audio, video & signage

Aerospace & defense

Power delivery

Retail automation & payment

Pro audio, video & signage

Industrial transport

Retail automation & payment

Automotive Infotainment & cluster

(21% of TI revenue) Advanced driver assistance systems (ADAS)

Passive safety

Hybrid, electric & powertrain systems

(25% of TI revenue) Hybrid, electric & powertrain systems

Advanced driver assistance systems (ADAS)

Body electronics & lighting

Personal electronics Mobile phones

(24% of TI revenue) Portable electronics

PC & notebooks

Passive safety

Personal electronics PC & notebooks

(20% of TI revenue) Mobile phones

Portable electronics

Connected peripherals & printers

12 unchanged sentences

Competitive landscape

Despite recent consolidation, the analog and embedded processing markets remain highly fragmented.

Despite consolidation, the analog and embedded processing markets remain highly fragmented.

As a result, we face significant global competition from dozens of large and small companies, including both broad-based suppliers and niche suppliers.

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Our customer base is diverse, with more than 40% of our revenue derived from customers outside our largest 100.

We market and sell our products through direct sales channels, including our website and broad sales and applications team, and, to a lesser extent, through distributors.

We market and sell our products through direct sales channels, including our website and broad sales and marketing team, and, to a lesser extent, through distributors.

Over the past several years, we have been investing in new capabilities to build closer direct customer relationships.

For example, in 2021 about two-thirds of our revenue was direct, and transactions on TI.com grew to about 10% of our revenue, as customers valued the convenience of purchasing online.

As a result, in 2022 about 70% of our revenue was direct, which includes TI.com, as customers valued the convenience of purchasing online.

Closer direct relationships with our customers help to strengthen our reach of market channel advantage and give us access to more customers and more of their design projects, leading to opportunities to sell more of our products into each design.

1 unchanged sentence

Our investments in new and improved capabilities to directly support our customers include website and e-commerce enhancements as well as inventory consignment programs and order fulfillment services.

We expanded the reach of our TI.com e-commerce channel by offering a localized online experience in many countries, with convenience features such as immediate availability, local currency, payment methods, invoicing and importer of record.

Our TI.com e-commerce channel offers a localized online experience in many countries, with convenience features such as immediate availability, local currency, payment methods, invoicing and importer of record.

Our new application programming interfaces (APIs) give customers the ability to directly access real-time inventory information about TI products from their own systems, enabling them to purchase available chips immediately to better support their supply needs, reducing cost and delays.

In addition to doing business directly with TI, we offer customers the option of using a single worldwide distributor and a few region-specific distributors for order fulfillment.

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We invest in manufacturing technologies and do most of our manufacturing in-house.

This strategic decision to make manufacturing and technology a core competitive advantage provides us with tangible benefits of lower manufacturing costs and greater control of our supply chain.

We have focused on creating a competitive manufacturing structural cost advantage by investing in our advanced 300-millimeter capacity.

An unpackaged chip built on a 300-millimeter wafer costs about 40% less than an unpackaged chip built on a 200-millimeter wafer.

This strategic decision to make manufacturing and technology a core competitive advantage provides us with tangible benefits of lower manufacturing costs and greater control of our supply chain, offering our customers geopolitically dependable capacity.

We have focused on creating a competitive manufacturing structural cost advantage by investing in our advanced 300-mm capacity.

An unpackaged chip built on a 300-mm wafer costs about 40% less than an unpackaged chip built on a 200-mm wafer.

We continue to invest to strengthen our competitive advantage in manufacturing and technology as part of our long-term capacity planning.

Progress and investments include:

• continuing construction of RFAB2 (Richardson, Texas), our next 300-millimeter wafer fabrication facility, to begin production in the second half of 2022;

• purchasing a 300-millimeter wafer fabrication facility in Lehi, Utah, to support analog and embedded processing manufacturing, which is expected to begin production in early 2023;

• planning construction on our next two 300-millimeter wafer fabrication facilities in Sherman, Texas, to begin in 2022.

This North Texas site has the potential for up to four fabrication facilities to meet demand over time, as semiconductor growth in electronics, particularly in industrial and automotive markets, is expected to continue well into the future.

Production is expected to begin in 2025.

• starting production in 300-mm wafer fabrication facility RFAB2 (Richardson, Texas);

• starting production in 300-mm wafer fabrication facility LFAB (Lehi, Utah);

• starting construction on our next two 300-mm wafer fabrication facilities in Sherman, Texas, SM1 and SM2.

This North Texas site has the potential for four fabrication facilities to meet demand over time, as semiconductor growth in electronics, particularly in industrial and automotive markets, is expected to continue well into the future.

SM1 production is expected to begin in 2025.

Together, these investments are designed to strengthen our manufacturing and technology competitive advantage, provide us with lower costs and greater control of our supply chain, and support growth over the next 10 to 15 years.

We assess and are careful to address potential health, safety, and environmental risks presented by our operations, including our manufacturing operations.

We care for our environment and work to prevent pollution and the potential risks related to climate change by implementing practices such as recycling and reusing materials, controlling harmful emissions, and properly handling hazardous and restricted substances.

We care for our environment and work to prevent pollution and the potential risks related to climate change.

We invest to reduce emissions long-term by installing abatement devices, using alternative gases and expanding renewable energy, in addition to implementing practices such as recycling and reusing materials and properly handling hazardous and restricted substances.

We expect to continue to maintain sufficient internal manufacturing capacity to meet the majority of our production needs and to obtain manufacturing equipment to support new technology developments and revenue growth.

To supplement our manufacturing capacity and maximize our responsiveness to customer demand, we selectively use the capacity of outside suppliers, commonly known as foundries, and subcontractors.

In 2021, we sourced about 20% of our total wafers from external foundries and about 40% of our assembly/test services from subcontractors.

In 2022, we sourced about 80% of our total wafers and about 60% of our assembly/test production internally.

With our planned capacity expansions, we expect these percentages to increase.

To supplement our internal manufacturing capacity, we selectively use the capacity of outside suppliers, commonly known as foundries and subcontractors.

Our objectives for inventory are to maintain high levels of customer service, maintain stable and competitive lead times, minimize inventory obsolescence and improve manufacturing asset utilization.

1 unchanged sentence

Inventory levels will vary based on market conditions and seasonality.

As a result, we expect to increase our inventory levels over time.

Raw materials

We purchase materials, parts and supplies from a number of suppliers.

In some cases we purchase such items from sole-source suppliers.

The materials, parts and supplies essential to our business are generally available at present, and we believe that such materials, parts and supplies will be available in the foreseeable future.

We source materials, parts and supplies from a diverse set of suppliers globally.

The materials, parts and supplies essential to our business are generally available, and we believe that such materials, parts and supplies will be available in the foreseeable future.

Intellectual property

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Kozanian 40 Senior Vice President

Leonard 47 Senior Vice President

Lizardi 50 Senior Vice President and Chief Financial Officer

3 unchanged sentences

Cynthia Hoff Trochu 59 Senior Vice President, Secretary and General Counsel

Whitaker 56 Senior Vice President

Witzsche 38 Senior Vice President

* On January 19, 2023, Mr.

Ilan was elected by the board of directors to succeed Mr.

Templeton as president and chief executive officer, effective April 1, 2023.

Templeton will continue as chairman of the board.

The term of office of these officers is from the date of their election until their successor shall have been elected and qualified.

All have been employees of the company for more than five years.

Templeton, Ilan and Lizardi and Mses.

Trochu and Whitaker have served as executive officers of the company for more than five years.

Templeton, Ilan and Lizardi and Ms.

Trochu have served as executive officers of the company for more than five years.

Bahai, Flessner and Kozanian became executive officers of the company in 2018.

3 unchanged sentences

Witzsche became executive officers in 2021.

Leonard became an executive officer in 2022.

Human capital management

At December 31, 2022, we had about 33,000 employees worldwide.

Of those, about 87% were in Sales, R&D or manufacturing.

Of those, about 90% were in R&D, sales or manufacturing.

Our objective for human capital management is to recruit, develop and retain the best talent possible.

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business