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Texas Instruments is not expecting a recovery in demand for its range of semiconductors in 2009 and has started to take aggressive actions to reduce cost and lower inventory levels to better match customer demand, which it expects to deteriorate further in the coming year. TI expects to cut its workforce by 12% through direct layoffs of approximately 1,800 workers and approximately 1,600 through voluntary retirements and departures. Average fab utilizations are expected to fall to approximately 33% in the first quarter of 2009, down from 67% in the third quarter of 2008. According to TI, fab utilization rates are below those recorded in the last major downturn in 2001, when rates fell to the low 40% range.

Certain fabs had also been idled at the beginning of the year to reduce inventory levels as demand drastically weakened in the fourth quarter of 2008. However, TI now plans to idle many of its fabs again in March, for several weeks.

“We are not anticipating that we're at a bottom,” commented Kevin March, Chief Financial Officer, Texas Instruments, during a conference call with financial analysts. “We think that the economy is shaping up to be, as we've heard many economists talk about recently, probably the worst one that most of us have experienced in our working lives. With the contraction of credit going on in the economy, we expect that will probably cause a smaller global economy as well as a U.S. economy in 2009 and so we're taking actions to get ready for that. We are not anticipating an upturn any time on the horizon.”

Ron Slaymaker, Vice President, Investor Relations at Texas Instruments noted in the conference call opening remarks that consumer consumption had dramatically weakened and that it would likely weaken further. He also said that TI couldn’t forecast demand for its products in the second-half of the year or into 2010.

The job cuts have already begun and the company expects to have completed the major part of the redundancies by the end of the first quarter but would continue through to the third quarter. TI expects the cost cutting measures to produce savings in the range of US$500 million per annum.

Capital spending will also be reduced significantly. Although adopting a fab-lite strategy in recent years, TI still spent US$763 million on CapEx in 2008. For 2009, TI expects to only spend US$300 million as the fall in demand and low utilization rates do not justify fab spending, TI executives said.