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TXN to Expand in China

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Texas Instruments (TXN - Free Report) , or "TI,” recently announced the expansion of its existing wafer fabrication factory in Chengdu, China. This apart, the company will also open an assembly or test operation plant in the complex.

TI will invest $1.69 billion over the next 15 years, which will include funds for facilities, manufacturing equipment and land. It will receive comprehensive support from the government of Chengdu.

Texas Instruments has been investing in the site since it started its fab in 2010. It is constructing a new classroom building at the TI Project Hope School in rural Nanbu County and has donated 30 TI Project Hope libraries as part of the China Youth Development Foundation, which rebuilds and modernizes schools in rural regions. Further, TI donated 50 multimedia classrooms to schools in the Sichuan region in China and $0.6 million for earthquake relief to Wenchuan and Ya'an in Sichuan.

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 a product distribution centerin Shanghai apart from 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.  

In the first quarter of fiscal 2013, TI generated total revenue of $2.89 billion, which was down 3.2% sequentially and 7.6% year over year (slightly better than the mid-point of the recently narrowed guidance range of $2.80 billion to $2.91 billion). The Analog business fell 1.3% sequentially and 2.3% year over year. TI attributed the year-over-year decline primarily to SVA, which continues to shift to a consignment model. HVAL and HPA also declined but were offset by an increase in the power management product line.

Texas Instruments has a Zacks Rank #3 (Hold). Other semiconductor stocks that are worth considering include Linear Technology Corp. , ON Semiconductor Corp. and Intersil Corp. , all carrying a Zacks Rank #2 (Buy).

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