The 300-Millimetre Cost AdvantageWide moat

Texas Instruments (TXN) — moat facet

Six years and $24 billion to make each chip 40% cheaper — a permanent advantage bought with a temporary collapse in returns.

A chip on a 300mm wafer costs about 40% less than the same chip on a 200mm wafer, and that number is the whole manufacturing argument.1

Cost per unpackaged chip, by wafer sizebaselineOn a 200mm waferabout 40% lessOn a 300mm waferA 300mm wafer has 2.25x the area and costs nowhere near 2.25x as much to process.
In a business selling fifty-cent parts, cost per chip is the competition.

The physics is simple: a 300mm wafer has 2.25 times the area of a 200mm wafer and costs nowhere near 2.25 times as much to process, so the cost per die falls. What is not simple is doing it in analog, where processes are older, products are long-lived, and volumes per part are small. Most of the industry runs analog on 200mm and 150mm because the conversion is expensive and the payback is measured in decades. TI decided to pay for it anyway.

The scale of the commitment: roughly $24 billion of capital expenditure over the decade to 2025, most of it in a six-year elevated cycle now ending, with new 300mm fabs qualifying and ramping at Richardson and Sherman in Texas and Lehi in Utah.2 Capital spending was $4.55 billion in 2025 alone, against $17.68 billion of revenue.3

TI is explicit about the second benefit, which is not cost. Owning the fabs gives it control of its own supply chain and, in its own phrase, offers customers geopolitically dependable capacity — a selling point that did not exist in 2015 and is now on the first page of the argument.

The cost of the strategy is the return. Return on invested capital fell from 49.8% in 2021 to 17.6% in 2024 as the capital landed.4

The measure is capacity utilisation, which shows up as gross margin. It was 57.0% in 2025 and 61.4% in the June 2026 quarter.

Moat trajectory: Widening

The 300mm conversion is largely complete, capital spending is guided down from $4.55bn to $2-3bn, and gross margin has already moved from 57.0% to 61.4% as utilisation recovers. Every quarter from here the cost advantage is more fully realised and less expensively financed.

The number that tests this moat
Reported
Depreciation, first half
$1,088M in H1 2026, from $884M

The cost of the new 300mm fabs arrives as depreciation; the advantage shows only if gross margin rises faster than this line.

Source: Texas Instruments Form 10-Q, quarter ended 30 June 2026 ↗
Aspects of the moat
DIG DEEPER 01
Forty Percent Cheaper per Chip
Forty percent less per chip is not an efficiency in a business selling fifty-cent parts. It is the competitive position.
DIG DEEPER 02
Owning the Factories, on Purpose
For two decades the smart answer was not to own factories. TI kept building, and now sells that as the product.
DIG DEEPER 03
What Washington Contributes
$335 million of CHIPS money against $4.55 billion of capex is a rounding error dressed as industrial policy.
DIG DEEPER 04
The Cliff on the Other Side
From $4.55 billion to $2-3 billion — the single line on which the entire valuation rests.
⚠ Threats to the moat
⚠ THREAT 01
Six Years of Building Halved the Return on Capital
Return on capital fell from 49.8% to 17.6% while nothing at all went wrong, which is what deploying $24 billion looks like.
⚠ THREAT 02
The Advantage Only Exists at High Utilisation
Revenue fell 22% and operating profit fell 46%. A company that rented its fabs would not have done that.
References
  1. ReportedA chip on a 300mm wafer costs about 40% less than the same chip on a 200mm wafer, and that number is the whole manufacturing argument.
    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 ↗
  2. ReportedThe scale of the commitment: roughly $24 billion of capital expenditure over the decade to 2025, most of it in a six-year elevated cycle now ending, with new 300mm fabs qualifying and ramping at Richardson and Sherman in Texas and Lehi in Utah.
    Texas Instruments Incorporated, Form 10-K FY2025 — Management's Discussion and Analysis, cash flow statement and the free-cash-flow reconciliation. Cash flow from operations $7,153M (2024 $6,318M), 40.5% of revenue; capital expenditures $4,550M (2024 $4,820M); proceeds from CHIPS Act incentives $335M; free cash flow $2,938M (2024 $1,498M), 16.6% of revenue. In 2025 TI invested $3.94bn in R&D and SG&A, invested $4.55bn in capital expenditures and returned $6.48bn to shareholders. Dividends paid were $4,999M against $4,795M in 2024 and $4,557M in 2023, reflecting an increased dividend rate; $1,477M was used to repurchase 8.5 million shares against $929M for 4.7 million shares in 2024. Net proceeds of $1,199M were received from the issuance of fixed-rate long-term debt and $750M of maturing debt retired. Over the ten-year period from 2016 to 2025 TI allocated $109 billion, of which about $24 billion went to capital expenditures, and states it is near completion of its six-year elevated capital expenditure cycle. The dividend was raised 4% to $1.42 per share per quarter, marking 22 consecutive years of increases, since extended to 23. The One Big Beautiful Bill Act, enacted 4 July 2025, provided for expensing of US research and eligible capital expenditure and increased the CHIPS Act investment tax credit; TI expects the effective tax rate and tax-related cash payments to be lower than under prior law from 2026. — FY2025 · publ. 2026-02-06 · source ↗
  3. ReportedThe scale of the commitment: roughly $24 billion of capital expenditure over the decade to 2025, most of it in a six-year elevated cycle now ending, with new 300mm fabs qualifying and ramping at Richardson and Sherman in Texas and Lehi in Utah. Capital spending was $4.55 billion in 2025 alone, against $17.68 billion of revenue.
    Texas Instruments Incorporated, Form 10-K FY2025 — Management's Discussion and Analysis, cash flow statement and the free-cash-flow reconciliation. Cash flow from operations $7,153M (2024 $6,318M), 40.5% of revenue; capital expenditures $4,550M (2024 $4,820M); proceeds from CHIPS Act incentives $335M; free cash flow $2,938M (2024 $1,498M), 16.6% of revenue. In 2025 TI invested $3.94bn in R&D and SG&A, invested $4.55bn in capital expenditures and returned $6.48bn to shareholders. Dividends paid were $4,999M against $4,795M in 2024 and $4,557M in 2023, reflecting an increased dividend rate; $1,477M was used to repurchase 8.5 million shares against $929M for 4.7 million shares in 2024. Net proceeds of $1,199M were received from the issuance of fixed-rate long-term debt and $750M of maturing debt retired. Over the ten-year period from 2016 to 2025 TI allocated $109 billion, of which about $24 billion went to capital expenditures, and states it is near completion of its six-year elevated capital expenditure cycle. The dividend was raised 4% to $1.42 per share per quarter, marking 22 consecutive years of increases, since extended to 23. The One Big Beautiful Bill Act, enacted 4 July 2025, provided for expensing of US research and eligible capital expenditure and increased the CHIPS Act investment tax credit; TI expects the effective tax rate and tax-related cash payments to be lower than under prior law from 2026. — FY2025 · publ. 2026-02-06 · source ↗
  4. Moat Explorer calcReturn on invested capital fell from 49.8% in 2021 to 17.6% in 2024 as the capital landed.
    Return on invested capital for Texas Instruments computed from SEC EDGAR XBRL filings — NOPAT divided by average operating invested capital, where NOPAT is operating income after the effective tax rate and invested capital is total assets less current liabilities less cash. The series for 2015 to 2025 is 23.4%, 27.6%, 29.6%, 43.2%, 39.0%, 40.1%, 49.8%, 45.8%, 27.2%, 17.6% and 18.6%. The decline from the 2021 peak coincides with roughly $24 billion of capital expenditure over the decade to 2025 and a fall in revenue from $20,028M in 2022 to $15,641M in 2024. — 2015-2025 · publ. 2026-02-06 · source ↗
Sources
Generated September 23, 2026