Texas Instruments Receives $1.6 Billion in Federal Grants for Chip Factories

Texas Instruments (TXN) has reached a preliminary agreement with the U.S. Department of Commerce to receive up to $1.6 billion in federal grants for three semiconductor factories currently under construction. This news, however, was overshadowed by concerns raised by analysts about the company’s future spending, causing a decline in the company’s shares during intraday trading on Friday.

The funds from the CHIPS and Science Act of 2022 will be utilized by Texas Instruments to support the development of three 300mm semiconductor wafer fabs in Texas and Utah. In addition to the federal grants, the company expects to receive $6 billion to $8 billion from the Treasury Department’s Investment Tax Credit for qualified U.S. manufacturing investments. Furthermore, Texas Instruments will also receive an additional $10 million for creating over 2,000 jobs.

CEO Haviv Ilan expressed his confidence in these investments, stating that they will “further strengthen our competitive advantage in manufacturing and technology.”

Potential Reduction in Capital Investment Plan

Despite the positive news, Citi Research analysts have suggested that Texas Instruments is likely to reduce its current $5 billion-per-year capital investment plan through 2026. The company is expected to make an announcement regarding this during a capital management call scheduled for Tuesday. Investors have been anticipating a reduction in capital expenditures, which could potentially drive the company’s shares higher. However, today’s announcement may alter this dynamic.

As a result of these developments, shares of Texas Instruments experienced a 1.5% decline, reaching $198.99 as of 12:10 p.m. ET on Friday. Nevertheless, the company’s shares have seen a year-to-date increase of almost 17%.

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