Texas Instruments TXN
TI's rigid $5bn/year capex ramp is building ~50% excess capacity and has collapsed FCF per share 75%; flex capex to demand and commit to $9.00+ per share by 2026.
Thesis
Elliott, holding over $2.5 billion in Texas Instruments, argues that since TI announced a $5bn/year capex program in 2022, free cash flow per share has collapsed by more than 75% and the stock has trailed every relevant benchmark over 2-, 4-, 6-, and 10-year windows. The root cause is a rigid plan to build capacity for $30bn of 2026 revenue — roughly 50% above consensus expectations — without tying buildout pace to demand. Elliott asks the Board to adopt a 'dynamic capacity-management' approach (equipping fab shells only as demand materializes, mirroring TI's own RFAB 1 playbook from 2003-2010) and commit to a $9.00+ FCF-per-share target in 2026, ~40% above current expectations. The argument leans on former CEO Rich Templeton's 'best measure' mantra to frame capital discipline as a return to TI's own roots.
SCQA
Texas Instruments is the #1 analog semiconductor company with industry-leading margins, a geopolitically prized U.S. manufacturing footprint, and a decade-long legacy of growing free cash flow per share at a 17% CAGR through 2019.
The 2022 capex ramp to $5bn/year is building toward $30bn of 2026 revenue — roughly 50% above consensus — which has collapsed FCF per share by 75%+ and driven shareholder returns to the bottom 40% of the semi index.
Adopt a dynamic capacity-management approach: modulate the pace of equipping fab shells to actual customer demand, as TI did with RFAB 1 from 2003 to 2010, and publicly commit to a $9.00+ FCF per share target for 2026.
FCF per share of $9.00+ in 2026 (~40% above consensus) with a path to $11.00+ in 2027, restoring TI's historical 'best measure' trend line and closing the multi-year TSR gap versus analog peers.
The three reasons
- 1
TI's 2022 capex ramp has collapsed free cash flow per share by more than 75% since announcement
- 2
Planned 2026 revenue capacity of $30bn is 50% above consensus — equivalent of two dormant $5bn fabs
- 3
TI's own RFAB 1 playbook — build shells, equip on demand — delivered 17% FCF/share CAGR from 2006-2019
Primary demands
- Adopt a dynamic capacity-management approach that flexes capex to customer demand rather than adhering to a fixed $5bn/year plan
- Commit publicly to a $9.00+ free cash flow per share target for 2026 (~40% above current investor expectations)
- Modulate the pace of equipping fab shells (SM 1, SM 2, LFAB 2) based on demand, consistent with TI's own RFAB 1 historical playbook
- Re-establish free cash flow per share as the 'best measure' of performance with CEO-communicated multi-year targets
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- TI's own RFAB 1 construction (2003-2010): shell built first, equipment added gradually as demand materialized
- TI's 2012 Investor Meeting framework distinguishing cleanroom capacity vs. equipped capacity
- National Semiconductor acquisition (2011) as value-accretive share gain
- Former CEO Rich Templeton's 'best measure' (FCF per share) mantra (2015-2019 quotes)
Notable slides (6)
Notes
Formal letter to TI's Board signed by Jesse Cohn (Managing Partner) and Jason Genrich (Partner & Senior PM). Hybrid letter/deck format: Word-processed body text with embedded institutional charts. Rhetorical spine is former CEO Rich Templeton's 'best measure' (FCF/share) mantra — Elliott uses TI's own historical commitments and the 2003 RFAB 1 'modulate to demand' precedent as a non-adversarial frame, asking TI to return to its own playbook rather than attacking management personally. Stake is $2.5bn+ but no percentage disclosed (market cap ~$160bn implies ~1.6%). No villain named; tone is collaborative-analytical. Notable analyst quote collage on p7 (Citi/BofA/Wells/Cowen) reinforces sell-side consensus. Capex scenarios table on p12 quantifies the ask ($9.01 FCF/share in both Consensus and Share Gain cases). Campaign later resulted in Elliott accepting CFO Haviv Ilan's retention and TI reporting improved FCF discipline.