The Channel TI Walked Away FromThin moat
Texas Instruments (TXN) — moat facet
TI created a motivated adversary out of its own channel, in the segment where its own coverage is thinnest.
The distributors TI moved away from are still in business, carrying somebody else's catalogue to the same customers.
The direct shift captured margin, inventory control and design data — and it took volume out of a channel that had spent decades building relationships with exactly the long-tail customers TI now wants to reach itself.1 Those distributors did not disappear. They carry Analog Devices, Infineon, STMicroelectronics, Microchip and the Chinese suppliers, and they have a commercial reason to steer a customer toward a line they still earn a full margin on.
That is an unusual competitive dynamic: TI created a motivated adversary out of its own former channel, in the segment of the market where relationships matter most and where TI's own coverage is thinnest.
The bet is that TI.com and the breadth of the catalogue are worth more than the distributor's salesforce. More than 80% of revenue direct says the bet has largely worked so far.
Where it is least tested is the smallest customers, who are the ones a distributor serves best and a website serves adequately.
Watch revenue growth against the analog market's, because share loss in the long tail would show up there before it showed up anywhere else.
The distributors TI moved away from now carry rival catalogues to precisely the long-tail customers TI reaches least well, and every one of them has built an e-commerce front end. The competitive intensity in the tail rises each year.
Without distributors, TI carries the stock itself; inventory falling while revenue grows is the channel working.
Source: Texas Instruments Form 10-Q, quarter ended 30 June 2026 ↗- ReportedThe direct shift captured margin, inventory control and design data — and it took volume out of a channel that had spent decades building relationships with exactly the long-tail customers TI now wants to reach itself.Texas Instruments Incorporated, Form 10-K for the year ended 31 December 2025 (SEC, CIK 97476) — Item 1, Business. TI's two reportable segments are Analog and Embedded Processing, with remaining activities in Other; operations began in 1930 and it has design, manufacturing or sales operations in more than 30 countries. The product portfolio includes more than 80,000 products. TI states four sustainable competitive advantages: a strong foundation of manufacturing and technology, a broad portfolio of analog and embedded processing products, the reach of its market channels, and the diversity and longevity of its products, markets and customer positions, which in combination it describes as difficult to replicate. An unpackaged chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer; TI continued qualifying and ramping production at its newest 300mm fabs in Richardson and Sherman, Texas, and Lehi, Utah, supporting external foundry transfers and internal transfers from its legacy 150mm facilities, and expects to maintain sufficient internal capacity to meet the majority of its production needs, offering customers geopolitically dependable capacity. TI sells to over 100,000 customers, with about half of revenue derived from customers outside its largest 50; more than 80% of revenue was direct in 2025, including TI.com. End markets as a percentage of 2025 revenue: industrial 33%, automotive 33%, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%. About 60% of revenue comes from customers headquartered outside the United States; revenue from end customers headquartered in China represented about 20% of revenue in 2025, while revenue from products shipped into China represented about 50%. The analog and embedded processing markets remain highly fragmented, with significant global competition from dozens of large and small companies including emerging companies, particularly in Asia. The company's stated objective is the growth of free cash flow per share over the long term. — FY2025 · publ. 2026-02-06 · source ↗