Semis Feel R&D Squeeze

Rick Merritt, EETimes
3/21/2014 12:30 PM EDT

SAN JOSE, Calif. -- Investors are increasingly rewarding semiconductor companies for short-term returns to shareholders, rather than long term R&D investments, one Wall Street analyst said. If that's true, it marks a significant and unfortunate industry milestone.

"In the past not investing in R&D was a sign of no growth and poor ability to compete in the future," said the analyst who asked to remain anonymous so he could speak freely. The new view is the chip sector is not growing significantly, so "why keep throwing good money after bad?" he said.

Texas Instruments is the poster child of the new way of thinking. It bought back nearly $3 billion of its stock recently, pumping its share price up 40%. In a May 13 call with financial analysts TI's CFO laid out a new model that's already well in place of freeing up cash so it can pay greater dividends to shareholders. In the last five years, TI returned to shareholders 113% of its previous target, a cumulative $14 billion in profits.

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