Forty Percent Cheaper per ChipWide moat
Texas Instruments (TXN) — moat facet
Forty percent less per chip is not an efficiency in a business selling fifty-cent parts. It is the competitive position.
Forty percent is the number, and it is the reason TI accepted six years of depressed returns to get it.
An unpackaged chip built on a 300mm wafer costs about 40% less than the same chip built on a 200mm wafer, according to TI's own disclosure.1 In a business where an individual part often sells for well under a dollar, a 40% structural reduction in unit cost is not an efficiency — it is the competitive position.
What makes it a moat rather than a technique is that it is expensive and slow to copy. Converting analog production to 300mm requires building fabs, qualifying processes and migrating tens of thousands of long-lived products, and the payback runs over decades rather than product cycles. Most analog competitors run substantially on 200mm and 150mm and will continue to, because the arithmetic only works at TI's volume and TI's product count.
The evidence it is working is in the margin at the bottom of a cycle. Gross margin was 57.0% in 2025 on revenue still 12% below the 2022 peak, and reached 61.4% in the June 2026 quarter as utilisation recovered.23
The catch is that a cost advantage in manufacturing is only realised when the factories run full. Empty capacity has the same 40% advantage per chip and a great deal more depreciation per chip.
Forty percent less per chip on 300mm than 200mm is a property of wafer geometry, not of execution. It does not improve and it does not erode.
Cheaper wafers should show up as a higher Analog gross margin once the fabs are full.
- ReportedAn unpackaged chip built on a 300mm wafer costs about 40% less than the same chip built on a 200mm wafer, according to TI's own disclosure.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 ↗
- ReportedGross margin was 57.0% in 2025 on revenue still 12% below the 2022 peak, and reached 61.4% in the June 2026 quarter as utilisation recovered.Texas Instruments Incorporated, Form 10-Q for the quarter ended 30 June 2026 (SEC, CIK 97476). Revenue $5,463M against $4,448M a year earlier, and $10,288M for the six months against $8,517M; cost of revenue $2,111M; gross profit $3,352M against $2,575M — a 61.4% gross margin against 57.9%; research and development $535M against $527M; selling, general and administrative $490M against $485M; acquisition charges $17M; operating profit $2,310M against $1,563M. Income before income taxes $2,238M; provision for income taxes $258M; net income $1,980M against $1,295M. Basic EPS $2.16 and diluted EPS $2.14, against $1.42 and $1.41, on 920 million diluted shares. — Q2 2026 · publ. 2026-07-24 · source ↗
- ReportedGross margin was 57.0% in 2025 on revenue still 12% below the 2022 peak, and reached 61.4% in the June 2026 quarter as utilisation recovered.Texas Instruments Incorporated, Form 10-Q for the quarter ended 30 June 2026 (SEC, CIK 97476). Revenue $5,463M against $4,448M a year earlier, and $10,288M for the six months against $8,517M; cost of revenue $2,111M; gross profit $3,352M against $2,575M — a 61.4% gross margin against 57.9%; research and development $535M against $527M; selling, general and administrative $490M against $485M; acquisition charges $17M; operating profit $2,310M against $1,563M. Income before income taxes $2,238M; provision for income taxes $258M; net income $1,980M against $1,295M. Basic EPS $2.16 and diluted EPS $2.14, against $1.42 and $1.41, on 920 million diluted shares. — Q2 2026 · publ. 2026-07-24 · source ↗