Latest news! TI is rumored to be raising prices again!

01

TI is raising prices again? What's going on?

Yesterday, our friends in the TI business reported that TI is raising prices again, affecting approximately several thousand related models. The changes to the Distributor Buy Price (DBP) will take effect

 from September 1! Including the price hike rumors in June and July, this marks the third increase already!

We reached out to some relevant contacts for confirmation. A distributor specializing in chip imports and exports stated that the latest information confirms the price increase will officially take effect on September 1. Additionally, a screenshot of a related email shows that the parts listed in the attachment will undergo changes starting September 1, and this adjustment will impact all open orders.

We contacted a TI distributor, who stated that TI had raised prices in recent months and was now selling only spot stock, so orders were being placed.

Let's review two previous TI price increase rumors.

In early June of this year, news of TI's upcoming price increase began to circulate widely in the chip market. However, due to the lack of an official price increase letter from the manufacturer, the specific extent of the increase and the specific product categories were widely speculated.

At the time, we also sought confirmation from relevant sources, and a TI distributor stated that prices on TI's official website had already increased, and that TI would subsequently adjust contract prices with customers. There would not be a general price increase, so there was no need to worry. However, the distributor did not know the specific models experiencing price increases, so customers could check for themselves.

Some distributors specializing in TI have stated that prices have indeed increased, even for goods already in transit. Furthermore, some suggest that TI began raising prices around

 mid-June, primarily due to a price war that has persisted since 2022, leaving them with no room for maneuver, and the manufacturer has responded with appropriate price

 adjustments.

On August 1st of this year, rumors first circulated, allegedly from financial institutions, that TI was about to raise prices again. Around August 12th, more information about price

 increases was revealed.

According to industry insiders, Texas Instruments (TI), a global leader in analog ICs and a major automotive chip manufacturer, recently issued price increase notices to customers.

 These increases cover over 60,000 models, making them TI's largest price increases in recent years. While most increases range from 10-25%, there are also reports that over 40% of

 its products will see increases exceeding 30%.

In addition, a screenshot of an email allegedly related to a TI price increase has been leaked. The email states that TI will raise DBP costs in August, affecting over 60,000 parts. The

 new DBP will take effect on August 4th.

We have also contacted relevant sources for confirmation, and several chip distributors have stated that the price increase news is likely true. One person stated that after inquiring

 with several major manufacturers, the price increase will primarily target industrial and automotive applications. We contacted a TI distributor, who confirmed that the price

 increase is real and will take effect on August 4th.

02

What's the situation behind the price increase from the original manufacturer?

We have analyzed the reasons for the previous two price increases, （https://mp.weixin.qq.com/s?__biz=MzU1MzQ1NDk3MQ==&mid=2247576318&idx=1&sn=3a374b220288deced31c523c9e29e0f9&scene=21#wechat_redirect ）
which were mainly related to recovering profits and pushing up gross profit margins, followed by TI's high capital expenditure in building factories.

Analog chip giants TI and ADI have both shown signs of recovery in their recent performance. However, TI's growth has been less robust than ADI's. TI's revenue increased by 11%

 and 16% year-on-year in the first and second quarters, respectively, while ADI has achieved year-on-year growth exceeding 20% for two consecutive quarters.

Among TI's five end markets, only the automotive business has yet to fully recover. In the second quarter, automotive revenue grew by a mid-single digit year-on-year, but declined

 by a low-single digit quarter-on-quarter. Currently, automotive orders are mostly urgent, and it remains to be seen whether the automotive market can recover in the fourth

 quarter. Furthermore, TI's business is more heavily weighted towards the consumer sector, making it more susceptible to fluctuations in the consumer market. Overall, this puts TI

 under greater pressure. TI's gross profit margin has been around 60% in recent years, reaching 57.89% in the second quarter, still below ADI's long-term gross profit margin of

 around 70%.

TI projects that overall semiconductor market demand in 2025 will remain in a moderate recovery phase, making it difficult to fill existing production capacity. Its current inventory

 level exceeds 200 days, remaining elevated.

In recent years, TI has been expanding its 12-inch wafer production capacity, focusing on high capital expenditures and self-owned production capacity to ensure long-term gross

 profit margins and supply security. However, this may put some financial pressure in the short term.

For a long-established US-listed company renowned for its actuarial expertise, price increases are a natural consequence.

Overall demand for TI chips in the spot market will be weak in 2024, and flat in early 2025, but PPV demand will still provide some support. After entering the second quarter,

 tariff concerns led to a brief increase in market quotes, but the market gradually returned to normal.

For chip distributors facing heavy inventory pressure, price increases may not necessarily be a bad thing. TI inventory held back during the previous round of chip shortages may

 gradually begin to flow due to the new pricing structure. At the same time, rising order prices may force some customers to seek spot stock or other alternatives. 

As for when this will be reflected in the market, consistent with previous estimates, it will take three to six months for the impact to become apparent.