Texas Instruments CFO lays out expected benefits from CHIPS Act

On Texas Instruments’ capital management update call, CFO Rafael Lizardi stated: "For 2023, we have 2 updates that you will see highlighted. As we mentioned previously, we’re ensuring our capacity is prepared to support higher growth rates. As a result, we expect CapEx to average $5 billion per year from 2023 to 2026, and about 10% to 15% of revenue per year in 2027 and beyond… In summary, this plan to support higher growth reflects the combination of higher confidence in semiconductor content growth, particularly in industrial and automotive, our position in these markets and continued strong customer response to our geopolitically dependable capacity. As a result, we will continue to increase our allocation toward capital expenditures, as we believe top line revenue growth will be a greater component of free cash flow per share growth over the next 10 to 15 years. Last year, the U.S. government passed the CHIPS Act from which we will benefit. For the purpose of today, there are 2 main provisions in the Act we will mention: the first [provision relates to] $10 billion of grants, of which $10 billion is allocated to mature technologies. Any potential benefit is uncertain and not reflected in our estimates, but we are actively seeking funding for any programs that we qualify for as we submit our grant applications in February. The second provision provides a 25% investment tax credit, or ITC, for U.S. semiconductor manufacturing investments, and we expect a cash benefit of about $4 billion. With the ITC largely offsetting the higher CapEx levels, our depreciation expectations are consistent with what we have shared with you previously. Therefore, we continue to expect that depreciation will increase from about $1 billion in 2022 by about $500 million per year, to $2.5 billion in 2025."