Texas Instruments (TXN) 10-K risk factor changes: FY2018 vs FY2017

[removed: You] [added: ~You] should read the following risk factors in conjunction with the factors discussed elsewhere in this and other of our filings with the Securities and Exchange Commission (SEC) and in materials incorporated by reference into these filings.

[removed: These risk] [added: These~ ~risk] factors are intended to highlight certain factors that may affect our financial condition and results of operations and are not meant to be an exhaustive discussion of risks that apply to TI, a company with broad international operations.

[removed: Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad that may] [added: These ~may] affect the general economic climate and our performance and the performance of our customers.

Similarly, the price of our securities is subject to volatility due to fluctuations in general market conditions, actual financial results that do [removed: not] [added: n~~ot] meet our and/or the investment community’s expectations, changes in our and/or the investment community’s expectations for our future [removed: results] [added: results, dividends or share repurchases,] and other factors, many of which are beyond our [removed: control.][added: control.~]

For example, we may face increased [removed: competition] [added: ~competition~] as a result of China actively promoting and reshaping its domestic semiconductor industry through policy changes and investment.

We are exposed to political, social and economic conditions, security risks, terrorism or other hostile acts, health conditions, labor conditions, and possible disruptions in transportation, communications and information technology networks of the various countries in which we [removed: operate, including the United States.][added: operate.]

Additionally, certain countries where we operate have experienced, and other countries may experience, increasing protectionism that may impact global [removed: trade.][added: trade, including tariffs, import or export restrictions, trade embargoes and sanctions, restrictions on cross-border investment and other trade barriers.]

These events could, among other things, compromise our information technology networks; result in corrupt or lost data or the unauthorized release of our, our customers’ or our suppliers’ confidential or proprietary information; cause a disruption to our manufacturing and other operations; result in the release of personal data; or cause us to incur costs associated with increased protection, [removed: remediation] [added: remediation, regulatory inquiries] or penalties, any of which could adversely affect our operating results and our reputation.

We make significant investments in research and development to improve existing technology and [removed: products and] [added: products,] develop new [removed: ones] [added: products] to meet changing customer [removed: demands.][added: demands, and improve our production processes.]

In some cases, we might not realize a return [added: or the expected return] on our investments because they are generally made before commercial viability can be assured.

Further, projects that are commercially viable may not contribute [removed: significant revenue] [added: to our operating results] until at least a few years after they are completed.

[removed: We could be subject to claims] [added: Claims] based on warranty, product liability, epidemic or delivery failures, or other grounds relating to our products, manufacturing, services, designs, communications or cybersecurity [removed: that] could lead to significant expenses as we defend [removed: such] [added: the] claims or pay damage awards or settlements.

In addition, it is possible for [removed: one of our customers] [added: a customer] to recall a product containing a TI part, for example, with respect to products used in automotive applications or handheld electronics, which may cause us to incur costs and expenses relating to the recall.

Any of these events could adversely affect our results of operations, financial condition and [removed: our] reputation.

A number of factors could cause our tax rate to increase, including a change in the jurisdictions in which our profits are earned and taxed; a change in the mix of profits from those jurisdictions; changes in available tax [removed: credits;] [added: credits or deductions, including for amounts relating to stock compensation;] changes in applicable tax rates; changes in tariff regulations or surcharges; changes in accounting principles; or adverse resolution of audits by taxing authorities.

Each quarter we forecast our tax [removed: liability] [added: expense] based on our forecast of our performance for the year.

If that performance forecast changes, our forecasted tax [removed: liability] [added: expense] will change.

If in the future we repatriate any of [removed: the] [added: our] earnings represented by non-cash, operating assets such as inventory and fixed assets, we might incur incremental non-U.S. taxes, which could affect our results of operations.

In [removed: 2017,] [added: 2018,] about 65 percent of our revenue was generated from sales of our products through distributors.

Disputes with or the loss of [removed: a] significant [removed: number of] distributors could be disruptive or harmful to our current business.

Our continued success depends in part on the retention and recruitment of skilled personnel, [removed: including engineering, management, marketing, technical and staff personnel.][added: as well as the effective management of succession for key employees.]

Skilled and experienced personnel in our [removed: industry] [added: industry, including engineering, management, marketing, technical and staff personnel,] are in high [removed: demand,] [added: demand] and competition for their talents is intense.

Like other~ ~companies, we are susceptible to~ ~any potential downturn associated with~ ~increasing protectionism, trade tensions and~ ~macroeconomic~ ~weakness~~, including any potential downturn associated with~ the pending withdrawal of the United Kingdom from the European Union.

Any such claims may also cause us to write off the value of related inventory.

These laws and regulations can be complex and subject to interpretation.

Our initial estimates of the financial impact of the U.S. Tax Cuts and Jobs Act, enacted in December 2017, may change as we refine our analysis and as additional guidance becomes available.

Our business model is designed around the following four sustainable competitive [removed: advantages,] [added: advantages] that we believe, in combination, put us in a unique class of companies:

| | • | A strong foundation of manufacturing and technology. We invest in manufacturing technologies and do most of our manufacturing in-house. This strategic decision to directly control our manufacturing helps ensure a consistent supply of products for our customers and also allows us to invest in technology that differentiates the features of our products. We have focused on creating a competitive manufacturing cost advantage by [removed: increasing factory loadings of] [added: investing in] our advanced analog 300-millimeter [removed: wafers,] [added: capacity,] which [removed: have] [added: has] about a 40 percent cost advantage per unpackaged chip over [removed: 200-millimeter wafers.] [added: 200-millimeter. To strengthen this advantage, we are planning our next phase of] 300-millimeter [added: capacity expansion as 300-millimeter] wafers will [added: continue to] support the majority of our Analog [removed: growth going forward. Additionally, we keep our manufacturing costs low by using mature assets acquired ahead of demand when their prices are most attractive.] [added: growth.] |

| | • | Broad portfolio of differentiated analog and embedded processing semiconductors. Our customers need multiple chips for their systems. The breadth of our portfolio means we can [removed: solve] [added: meet] more of these needs than our [removed: competitors,] [added: competitors can,] which gives us access to more customers and the opportunity to sell more products and generate more revenue per customer system. We invest more than $1 billion each year to develop new products for our portfolio, which includes tens of thousands of products. |

| | • | Broadest reach of market channels. Customers often begin their initial product selection process and design-in journey on our website, and the breadth of our portfolio attracts more customers to our website than any of our [removed: competitors.] [added: competitors’ websites.] Our web presence, combined with our global sales force that is also greater in size than those of our competitors, are advantages that give us unique access to about 100,000 customers designing TI semiconductors into their end products. |

| | • | Diversity and longevity of our products, markets and customer positions. Together, the attributes above result in diverse and long-lived positions that deliver high terminal value to our shareholders. Because of the breadth of our portfolio, we are not dependent on any single product, [removed: and because of the breadth of our markets we are not dependent on any single application] [added: customer, technology] or [removed: customer.] [added: market.] Some of our products generate revenue for decades, which strengthens the return on our investments. |

Analog and embedded processing products sold into industrial and automotive markets provide long product life cycles, intrinsic [removed: diversity,] [added: diversity] and less capital-intensive manufacturing, which we believe offer stability, profitability and strong cash generation.

This business model is the foundation of our capital management strategy, which is based on our belief that free cash flow growth, especially on a [removed: per share] [added: per-share] basis, is important for maximizing shareholder value over the long term.

Our business model puts us in a unique class of companies with the ability to grow, generate [removed: cash,] [added: cash] and return that cash to shareholders.

| | • | The [removed: recently enacted] [added: 2017 enactment of the] U.S. Tax Cuts and Jobs Act (the Tax Act) [removed: will reduce] [added: reduces] our annual operating tax rate, which does not include discrete tax items, from 31 percent in 2017 to an ongoing rate of about [removed: 18] [added: 16] percent starting in [removed: 2019, comprehending the benefits of exports and having manufacturing, R&D and intellectual property in the United States.] [added: 2019.] In 2018, our annual operating tax rate [removed: is expected to be about 23] [added: was 20] percent, [removed: 5] [added: 4] percentage points higher, primarily due to a transitional non-cash expense. For an explanation of the term “annual operating tax rate,” see the Non-GAAP financial information [removed: section after the Liquidity and capital resources] section. |

[removed: These] [added: We focus on Analog and Embedded Processing, with an emphasis on the industrial and automotive markets, because these] products serve highly diverse markets with thousands of applications and have long-term growth opportunities.

Gross margin of [removed: 64.3] [added: 65.1] percent reflected the quality of our product portfolio, as well as the efficiency of our manufacturing [removed: strategy.][added: strategy, including the benefit of 300-millimeter Analog production.]

Our cash flow from operations of [removed: $5.36] [added: $7.19] billion underscored the strength of our business model.

Free cash flow was [removed: $4.67] [added: $6.06] billion and represented [removed: 31.2] [added: 38.4] percent of revenue, up from [removed: 30.5] [added: 31.2] percent a year ago.

Our dividends represented [removed: 45] [added: 42] percent of free cash flow, underscoring their sustainability.

Revenue of $14.96 billion was up $1.59 billion, or 12 percent, [added: from 2016] due to higher revenue from Analog and Embedded Processing.

Operating expenses [removed: (R&D and SG&A)] were $3.20 billion compared with $3.10 billion, as we [removed: continued our ongoing allocation of] [added: allocated] resources [removed: to] [added: from manufacturing support and SG&A into] R&D activities.

See Note [removed: 13] [added: 8] to the financial statements.

See Note [removed: 3] [added: 12] to the financial statements.

OI&E was $75 million of income compared with $155 million [added: of income] in 2016.

Our effective tax rate, which includes discrete tax items, was 39 percent in 2017 [removed: and] [added: compared with] 27 percent in 2016.

See Note [removed: 6] [added: 5] to the financial statements for a reconciliation of the U.S. statutory income tax rate to [removed: the] [added: our] effective tax rate.

Operating profit increased [removed: primarily] due to higher revenue and associated gross profit.

Other revenue [removed: declined] [added: decreased by] $248 million primarily due to custom ASIC products and the [removed: move] [added: recognition] of royalties [removed: from revenue to OI&E,] [added: in OI&E instead of revenue,] which began in the first quarter of 2017.

Operating profit decreased [added: by] $150 million.

Details of financial results – [removed: 2016] [added: 2018] compared with [removed: 2015][added: 2017]

Revenue of [removed: $13.37] [added: $15.78] billion [removed: was up $370] [added: increased $823] million, or [removed: 3] [added: 6] percent, [removed: from 2015] [added: primarily] due to higher revenue from [removed: Embedded Processing and] Analog.

Gross profit [removed: was $8.26 billion, an increase] of [removed: $682] [added: $10.28 billion was up $663] million, or [removed: 9] [added: 7] percent, due to [added: higher revenue and] lower manufacturing [removed: costs and, to a lesser extent, higher revenue.][added: costs.]

Operating profit was [removed: $4.86] [added: $6.71] billion, or [removed: 36.3] [added: 42.5] percent of revenue, compared with [removed: $4.32] [added: $6.08] billion, or [removed: 33.2] [added: 40.7] percent of revenue.

[removed: Our] [added: Net] income [removed: tax provision] was [removed: $1.34] [added: $5.58] billion compared with [removed: $1.23] [added: $3.68] billion.

EPS was [removed: $3.48] [added: $5.59] compared with [removed: $2.82.][added: $3.61.]

Segment results – [removed: 2016] [added: 2018] compared with [removed: 2015][added: 2017]

| Operating profit % of revenue | | | | [removed: 40.0] [added: 47.3] | % | | | | [removed: 36.9] [added: 45.1] | % | | | | | |

Analog revenue increased due to Power [removed: and] [added: and, to a lesser extent,] Signal Chain, [removed: while] [added: partially offset by a decline in] High [removed: Volume declined.][added: Volume.]

Operating profit increased [added: primarily] due to higher gross [removed: profit, which benefited from lower manufacturing costs.][added: profit.]

| Operating profit % of revenue | | | | [removed: 27.0] [added: 33.9] | % | | | | [removed: 21.9] [added: 32.7] | % | | | | | |

Embedded Processing revenue increased due to [removed: Processors and, to a lesser extent,] Connected Microcontrollers.

| Operating profit % of revenue | | | | [removed: 34.3] [added: 27.9] | % | | | | [removed: 33.8] [added: 30.2] | % | | | | | |

At the end of [removed: 2017,] [added: 2018,] total cash [removed: (Cash] [added: (cash] and cash equivalents plus [removed: Short-term] [added: short-term] investments) was [removed: $4.47] [added: $4.23] billion, [removed: an increase] [added: a decrease] of [removed: $979] [added: $236] million from the end of [removed: 2016.][added: 2017.]

Accounts receivable were [removed: $1.28 billion at the end of 2017, an increase] [added: $1.21 billion, a decrease] of [removed: $11] [added: $71] million compared with the end of [removed: 2016.][added: 2017.]

Days sales outstanding at the end of [removed: 2017] [added: 2018] were [removed: 31] [added: 29] compared with [removed: 33] [added: 31] at the end of [removed: 2016.][added: 2017.]

| | • | After a sustained period of growth, in late 2018 the semiconductor market entered a downturn. As a result, demand for our products weakened, and we expect this weakness to continue in 2019. During this time, we will continue to be disciplined with our operating plan and expenses, while focusing on long-term investments to strengthen our competitive advantages. |

We continued to perform well in 2018, even as the year ended with a semiconductor market slowdown.

During 2018, we returned $7.66 billion to shareholders through a combination of stock repurchases and dividends.

Our strategy is to return all free cash flow to shareholders.

Embedded Processing also grew.

As a percentage of revenue, gross profit increased to 65.1 percent from 64.3 percent.

Operating expenses (R&D and SG&A) were $3.24 billion compared with $3.20 billion.

Other income and expense (OI&E) was $98 million of income compared with $75 million of income.

Interest and debt expense of $125 million increased $47 million due to the issuance of additional long-term debt.

Our provision for income taxes was $1.11 billion compared with $2.40 billion, which includes a discrete tax benefit of $198 million in 2018 and a discrete tax expense of $540 million in 2017.

The decrease in our tax provision was due to the enactment of the Tax Act in 2017, which included a reduction in the statutory tax rate in 2018 and the tax on indefinitely reinvested earnings recorded in 2017.

The benefits of the Tax Act in 2018 were partially offset by higher income before income taxes.

Our effective tax rate, which includes discrete tax items, was 17 percent in 2018 compared with 39 percent in 2017.

| | | 2018 | | | | | 2017 | | | | | Change | | | |

| Revenue | | $ | | 10,801 | | | $ | | 9,900 | | | | | 9 | % |

| Operating profit | | | | 5,109 | | | | | 4,468 | | | | | 14 | % |

| | | 2018 | | | | | 2017 | | | | | Change | | | |

| Revenue | | $ | | 3,554 | | | $ | | 3,498 | | | | | 2 | % |

| Operating profit | | | | 1,205 | | | | | 1,143 | | | | | 5 | % |

Processors revenue was about even.

| | | 2018 | | | | | 2017 | | | | | Change | | | |

| Revenue | | $ | | 1,429 | | | $ | | 1,563 | | | | | (9 | )% |

| Operating profit * | | | | 399 | | | | | 472 | | | | | (15 | )% |

Other revenue decreased by $134 million, and operating profit decreased by $73 million.

Acquisition charges of $318 million were non-cash.

Cash flows from operating activities for 2018 were $7.19 billion, an increase of $1.83 billion from 2017.

This increase was due to higher net income, which benefited from a lower effective tax rate.

Dividends paid in 2018 were $2.56 billion compared with $2.10 billion in 2017, reflecting an increase in the dividend rate, partially offset by fewer shares outstanding.

We had $2.44 billion of cash and cash equivalents and $1.80 billion of short-term investments as of December 31, 2018.

| Long-term debt (a) | | $ | | 886 | | | $ | | 1,281 | | | $ | | 1,188 | | | $ | | 3,876 | | | $ | | 7,231 | |

| Purchase commitments (b) | | | | 389 | | | | | 469 | | | | | 37 | | | | | 15 | | | | | 910 | |

| Total (f) | | $ | | 1,348 | | | $ | | 1,924 | | | $ | | 1,476 | | | $ | | 4,345 | | | $ | | 9,093 | |

| --- | --- | --- |

| | o | Over time, we have been allocating resources from areas like manufacturing support and SG&A into R&D activities. |

| | • | In the first quarter of 2017, we adopted ASU 2017-07 related to certain pension and other retiree benefit costs. We applied the new standard on a full retrospective basis for all periods presented in the Consolidated Statements of Income, which have been recast as a result. See Note 2 to the financial statements for more details. |

| | • | As of January 1, 2017, we no longer recognize royalties as revenue; instead, they are recorded as OI&E. We continue to receive royalties from arrangements involving license rights to our patent portfolio. Although we expect royalties to continue for many years, they are of decreasing significance to our core operations. |

We continued to perform well in 2017, reflecting our focus on Analog and Embedded Processing, with a particular emphasis on the industrial and automotive markets.

In 2017, Analog and Embedded Processing represented 90 percent of revenue.

During 2017, we returned $4.66 billion to shareholders through a combination of stock repurchases and dividends, consistent with our strategy to return all of our free cash flow to shareholders.

These amounts are included in Other for segment reporting purposes.

This change was due to tax adjustments made in 2017 as a result of the Tax Act.

Gross profit margin was 61.8 percent compared with 58.3 percent.

Operating expenses were $1.36 billion for R&D and $1.74 billion for SG&A.

R&D expense increased $89 million, or 7 percent, due to a combination of our allocation of resources into R&D activities and higher compensation-related costs.

SG&A expense increased $14 million, primarily due to higher compensation-related costs.

Acquisition charges associated with our 2011 acquisition of National Semiconductor were $319 million compared with $329 million.

These non-cash charges resulted from the amortization of intangible assets.

Restructuring charges/other was a credit of $15 million, which included a gain on the sale of intellectual property of $40 million that was partially offset by $25 million related to restructuring charges.

This compared with a credit of $71 million in 2015, which included gains on sales of assets of $83 million that were partially offset by $12 million related to restructuring charges and other credits.

OI&E was $155 million of income compared with $16 million of expense.

The increase is due to income of $188 million from settlements related to intellectual property infringement.

The increase was primarily due to higher income before income taxes, partially offset by a tax benefit for stock compensation.

Our annual operating tax rates, which do not include discrete tax items, were 30 percent in 2016 and 29 percent in 2015.

Our effective tax rates were 27 percent in 2016 and 29 percent in 2015.

Net income was $3.60 billion, an increase of $609 million, or 20 percent.

EPS benefited $0.13 in 2016 due to the adoption of a stock compensation accounting standard.

| | | 2016 | | | | | 2015 | | | | | Change | | | |

| Revenue | | $ | | 8,536 | | | $ | | 8,339 | | | | | 2 | % |

| Operating profit | | | | 3,416 | | | | | 3,077 | | | | | 11 | % |

| Revenue | | $ | | 3,023 | | | $ | | 2,787 | | | | | 8 | % |

| Operating profit | | | | 817 | | | | | 611 | | | | | 34 | % |

Processors revenue increased due to the mix of products shipped.

| Revenue | | $ | | 1,811 | | | $ | | 1,874 | | | | | (3 | )% |

| Operating profit * | | | | 622 | | | | | 634 | | | | | (2 | )% |

Other revenue decreased due to, in declining order, royalties, custom ASIC products and calculators.

This decrease was partially offset by growth in DLP products.

Operating profit decreased $12 million.

Cash flows from operating activities for 2017 was $5.36 billion, an increase of $749 million from 2016 that was driven by an increase in Income before income taxes.

Capital expenditures in both periods were primarily for semiconductor manufacturing equipment.

Dividends paid in 2017 were $2.10 billion compared with $1.65 billion in 2016.

During 2017, the quarterly dividend increased to $0.62 from $0.50 per share, resulting in an annualized dividend payment of $2.48 per share.

During 2016, we increased our quarterly dividend to $0.50 from $0.38 per share.

The U.S. dollar is [removed: the] [added: our] functional currency for financial reporting.

Exchange rate fluctuations [removed: can have a significant] impact [removed: on] taxable income in those jurisdictions, and consequently [removed: on] [added: impact] our effective tax rate.

Because most of the aggregate non-U.S. dollar balance sheet exposure is hedged by forward currency exchange contracts, based on year-end [removed: 2017] [added: 2018] balances and currency exchange rates, a hypothetical 10 percent plus or minus fluctuation in non-U.S. currency exchange rates relative to the U.S. dollar would result in a pre-tax currency exchange gain or loss of about [removed: $6] [added: $3] million.

We use these forward currency exchange contracts to reduce the earnings impact [added: that] exchange rate fluctuations may have on our non-U.S. dollar net balance sheet exposures.

For example, at year-end [removed: 2017,] [added: 2018,] we had forward currency exchange contracts outstanding with a notional value of [removed: $365] [added: $525] million to hedge net balance sheet exposures (including [removed: $140] [added: $160] million to sell Japanese yen, [removed: $59] [added: $99] million to sell [removed: British pound sterling] [added: euros] and [removed: $49] [added: $94] million to sell [removed: euros).][added: Indian rupees).]

Similar hedging activities existed at year-end [removed: 2016.][added: 2017.]

As of December 31, [removed: 2017,] [added: 2018,] a hypothetical 100 basis point increase in interest rates would decrease the fair value of our investments in cash equivalents and short-term investments by [removed: $8] [added: about $4] million and decrease the fair value of our long-term debt by [removed: $141] [added: $330] million.

Long-term investments at year-end [removed: 2017] [added: 2018] include the following:

| | • | Investments in venture capital funds – includes investments in limited partnerships (accounted for under either the equity [added: method] or [added: at] cost [removed: method).] [added: as non-marketable equity securities).] |

Non-marketable equity securities and [removed: some] [added: certain] venture capital funds are stated at [removed: cost.][added: cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.]

See Note [removed: 8] [added: 7] to the financial statements for details of equity and other long-term investments.

Impairments deemed to be other-than-temporary are expensed in Net income.

In [removed: 2017,] [added: 2018,] we generated [removed: $14.96] [added: $15.78] billion of revenue.

Our business model is designed around four sustainable competitive [removed: advantages,] [added: advantages] that we believe, in combination, put us in a unique class of companies.

Analog and embedded processing products sold into industrial and automotive markets provide long product life cycles, intrinsic [removed: diversity,] [added: diversity] and less capital-intensive manufacturing, which we believe offer stability, profitability and strong cash generation.

TI’s business model puts us in a unique class of companies with the ability to grow, generate [removed: cash,] [added: cash] and return that cash to shareholders.

Our Analog segment generated [removed: $9.90] [added: $10.80] billion of revenue in [removed: 2017.][added: 2018.]

Sales of our Analog products generated about [removed: 66] [added: 68] percent of our revenue in [removed: 2017.][added: 2018.]

According to external sources, the market for analog semiconductors was about [removed: $53] [added: $59] billion in [removed: 2017.][added: 2018.]

Our Analog segment’s revenue in [removed: 2017] [added: 2018] was about [removed: 19] [added: 18] percent of this fragmented market, the leading position.

These products support applications like [removed: touch screens] [added: displays] and automotive safety systems.

Our Embedded Processing segment generated [removed: $3.50] [added: $3.55] billion of revenue in [removed: 2017.][added: 2018.]

Our devices vary from simple, low-cost microcontrollers used in [added: applications such as] electric toothbrushes to highly specialized, complex devices used in automotive applications such as infotainment systems and advanced driver assistance systems (ADAS).

Sales of Embedded Processing products generated about 23 percent of our revenue in [removed: 2017.][added: 2018.]

According to external sources, the market for embedded processors was about [removed: $20] [added: $21] billion in [removed: 2017.][added: 2018.]

Our Embedded Processing segment’s revenue in [removed: 2017] [added: 2018] was about 18 percent of this fragmented market, among the leaders.

Other generated [removed: $1.56] [added: $1.43] billion of revenue in [removed: 2017] [added: 2018] and includes revenue from DLP® products (primarily used in projectors to create high-definition images), calculators and certain custom semiconductors known as application-specific integrated circuits (ASICs).

The table below lists the major markets for our products in [removed: 2017] [added: 2018] and the estimated percentage of our [removed: 2017] [added: 2018] revenue that the market represented.

| Communications equipment [removed: (12% of TI revenue)] | | Wireless infrastructure [removed: Telecom infrastructure Enterprise switching Residential] |

| Other (calculators and other) [removed: (3% of TI revenue)] | | |

In addition, manufacturing process [added: and package] technologies that provide differentiated levels of performance are a competitive factor for our Analog products and customers’ prior investments in software development is a competitive factor for our Embedded Processing products.

We market and sell our [removed: semiconductor] products through direct sales [added: channels, including our broad sales force] and [removed: distributors,] [added: our website,] and [removed: online.][added: through distributors.]

About 65 percent of our sales are fulfilled through [removed: distribution channels.][added: our distributors, and they maintain inventory of our products.]

The entire process takes place in highly specialized [removed: facilities and requires an average of 12 weeks,] [added: facilities,] with most products [removed: being completed within] [added: requiring] 6 to 14 [removed: weeks.][added: weeks for completion.]

We [added: invest in manufacturing technologies and] do most of our manufacturing in-house.

We have focused on creating a competitive manufacturing cost advantage by [removed: increasing factory loadings of] [added: investing in] our advanced analog 300-millimeter [removed: wafers,] [added: capacity,] which [removed: have] [added: has] about a 40 percent cost advantage per unpackaged chip over [removed: 200-millimeter wafers.][added: 200-millimeter.]

In [removed: 2017,] [added: 2018,] we sourced about 20 percent of our total wafers from external foundries and about 40 percent of our assembly/test services from subcontractors.

About [removed: 60] [added: 65] percent of TI revenue is fulfilled from consignment programs.

Our backlog of orders was [removed: $1.32] [added: $1.45] billion at December 31, [removed: 2017,] [added: 2018,] and [removed: $1.09] [added: $1.32] billion at December 31, [removed: 2016.][added: 2017.]

In some cases we purchase such items from [removed: sole source] [added: sole-source] suppliers.

| Name | [added: |] Age | [added: |] Position |

| Niels Anderskouv | [removed: 48] | [added: 49 | |] Senior Vice President |

| [removed: Stephen A. Anderson] [added: Ahmad S. Bahai] | [added: |] 56 | [added: |] Senior Vice President |

| Ellen L. Barker | [removed: 55] | [added: 56 | |] Senior Vice President and Chief Information Officer |

| [removed: Brian T. Crutcher*] [added: Richard K. Templeton] | [removed: 45] | [added: 60 | |] Director, [removed: Executive Vice] [added: Chairman of the Board,] President and Chief [removed: Operating] [added: Executive] Officer |

| R. Gregory Delagi | [removed: 55] | [added: 56 | |] Senior Vice President |

| Haviv Ilan | [removed: 49] | [added: 50 | |] Senior Vice President |

| Rafael R. Lizardi | [removed: 45] | [added: 46 | |] Senior Vice President, Chief Financial Officer and Chief Accounting Officer |

| [removed: Kevin J. Ritchie] [added: Kyle M. Flessner] | [removed: 61] | [added: 48 | |] Senior Vice President |

| Cynthia Hoff Trochu | [removed: 54] | [added: 55 | |] Senior Vice President, Secretary and General Counsel |

| Julie M. Van Haren | [removed: 49] | [added: 50 | |] Senior Vice President |

| Darla H. Whitaker | [removed: 52] | [added: 53 | |] Senior Vice President |

| Industrial | | Factory automation & control |

| (36% of TI revenue) | | Building automation |

| | | Grid infrastructure |

| | | Medical |

| | | Test & measurement |

| | | Aerospace & defense |

| | | Appliances |

| | | Motor drives |

| | | Pro audio, video & signage |

| | | Power delivery |

| | | Electronic point of sale (EPOS) |

| | | Industrial transport |

| | | Lighting |

| Automotive | | Infotainment & cluster |

| (20% of TI revenue) | | Advanced driver assistance systems (ADAS) |

| | | Passive safety |

| | | Hybrid, electric & powertrain systems |

| | | Body electronics & lighting |

| Personal electronics | | Mobile phones |

| (23% of TI revenue) | | PC & notebooks |

| | | Portable electronics |

| | | Connected peripherals & printers |

| | | Tablets |

| | | Data storage |

| | | Home theatre & entertainment |

| | | TV |

| | | Wearables (non-medical) |

| | | Gaming |

| (11% of TI revenue) | | Wired networking |

| | | Broadband fixed line access |

| | | Datacom module |

| Enterprise systems | | Enterprise projectors |

| (7% of TI revenue) | | Data center & enterprise computing |

| | | Enterprise machine |

| | | |

| (3% of TI revenue) | | |

| | | |

We plan manufacturing facility and equipment expansion ahead of demand.

In order to provide high service levels for our customers, over the last several years we have been investing to have a closer direct relationship with a large, diverse customer base.

Our investments in new and improved capabilities include website and e-commerce enhancements for demand creation as well as inventory consignment programs and order fulfillment services.

In 2017, we reorganized the product lines within our segments to align our business structure with the way our customers select and buy products.

Financial information with respect to our segments and our operations outside the United States is contained in Note 1 to the financial statements, which is included in Item 8, “Financial Statements and Supplementary Data.” Risks attendant to our foreign operations are described in Item 1A, “Risk Factors.”

| --- | --- | --- |

| Industrial (35% of TI revenue) | | Factory automation and control Building automation Medical/healthcare/fitness Grid infrastructure Test and measurement Motor drives Space/avionics/defense Appliances Power delivery Electronic point of sale Display Industrial transportation Lighting Industrial other |

| Automotive (19% of TI revenue) | | Infotainment and cluster Passive safety Advanced driver assistance systems (ADAS) Hybrid/electric vehicle and powertrain Body electronics and lighting |

| Personal electronics (25% of TI revenue) | | Mobile phones Personal and notebook computers Portable electronics Storage Tablets Printers and other peripherals Home theater and entertainment Wearables (non-medical) TV Gaming |

| Enterprise systems (6% of TI revenue) | | Projectors Servers Multi-function printers High-performance computing Thin client |

We acquire our manufacturing facilities and equipment ahead of demand, which usually allows us to acquire this capacity at lower costs.

We have sales or marketing offices in more than 30 countries, and we continue to expand and enhance our online presence.

Our distributors maintain an inventory of our products and sell directly to a wide range of customers.

They also sell products from our competitors.

300-millimeter wafers will support the majority of our Analog growth going forward.

Additionally, we keep our manufacturing costs low by using mature assets acquired ahead of demand when their prices are most attractive.

Research and Development

Our R&D expense was $1.51 billion in 2017, compared with $1.36 billion in 2016 and $1.27 billion in 2015.

We continually grow and strengthen our broad Analog and Embedded Processing portfolios through disciplined allocation of R&D resources.

We invest in R&D to develop differentiated products, with a particular emphasis on designing for the industrial and automotive markets.

We conduct most of our R&D internally.

We also closely engage with a wide range of third parties, including software suppliers, universities and select industry consortia, and we collaborate with our foundry suppliers on semiconductor manufacturing technology.

Acquisitions and divestitures

From time to time we consider acquisitions and divestitures.

We focus on transactions that are a strategic fit and strengthen our portfolio, and that also meet our financial objectives.

| Richard K. Templeton* | 59 | Director, Chairman of the Board, President and Chief Executive Officer |

* On January 18, 2018, Mr. Crutcher was appointed to succeed Mr. Templeton as president and chief executive officer, effective June 1, 2018.

Mr. Templeton will continue as chairman of the board.

10-K 1 [removed: txn-10k_20171231.htm] [added: txn-10k_20181231.htm] 10-K

for the fiscal year ended December 31, [removed: 2017][added: 2018]

Indicate by check mark whether the Registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit [removed: and post] such files).

The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately [removed: $76,179,967,734] [added: $107,359,133,537] as of June 30, [removed: 2017.][added: 2018.]

[removed: 983,787,502] [added: 938,484,603] (Number of shares of common stock outstanding as of February [removed: 20, 2018)][added: 18, 2019)]

Part III hereof incorporates information by reference to the Registrant’s proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders.

| | [removed: |] Analog | | [removed: Embedded] Processing |

| Dallas, Texas | [removed: |] X | | X |

| Houston, Texas | | | [removed: |] X |

| Sherman, Texas | [removed: |] X | | |

| Tucson, [removed: Arizona* |] [added: Arizona *] | X | | |

| Santa Clara, California | [removed: |] X | | |

| South Portland, Maine | [removed: |] X | | |

| Chengdu, [removed: China† |] [added: China †] | X | | X |

| Shanghai, [removed: China* |] [added: China *] | X | | X |

| Freising, Germany | [removed: |] X | | X |

| Bangalore, [removed: India† |] [added: India †] | X | | X |

| Aizu, Japan | [removed: |] X | | X |

| Miho, Japan | [removed: |] X | | X |

| Kuala Lumpur, [removed: Malaysia† |] [added: Malaysia †] | X | | X |

| Melaka, [removed: Malaysia† |] [added: Malaysia †] | X | | |

| Aguascalientes, [removed: Mexico* |] [added: Mexico *] | X | | |

| Baguio, [removed: Philippines† |] [added: Philippines †] | X | | X |

| Pampanga (Clark), [removed: Philippines† |] [added: Philippines †] | X | | X |

| Greenock, Scotland [removed: |] [added: #] | X | | |

| Taipei, [removed: Taiwan† |] [added: Taiwan †] | X | | X |

Our facilities in the United States contained approximately [removed: 13.1] [added: 13.0] million square feet at December 31, [removed: 2017,] [added: 2018,] of which approximately [removed: 0.7] [added: 0.6] million square feet were leased.

Our facilities outside the United States contained approximately 10.0 million square feet at December 31, [removed: 2017,] [added: 2018,] of which approximately 1.5 million square feet were leased.

At the end of [removed: 2017,] [added: 2018,] we occupied substantially all of the space in our facilities.

| | | | Embedded |

| --- | --- | --- | --- |

| # | In February 2019, we entered into an agreement to sell our manufacturing facility in Greenock, Scotland. The sale is expected to close during the first quarter of 2019. |

| --- | --- |

| --- | --- | --- | --- | --- |

The information concerning the number of stockholders of record at December 31, [removed: 2017,] [added: 2018,] is contained in Item 6, “Summary of Selected Financial Data.”

TI common stock is [removed: listed] [added: quoted] on The [removed: NASDAQ] [added: Nasdaq] Global Select [removed: Market.][added: Market under the ticker symbol TXN.]

The following table contains information regarding our purchases of our common stock during the fourth quarter of [removed: 2017.][added: 2018.]

| [removed: (1)] [added: (a)] | All open-market purchases during the quarter were made under the [removed: authorization] [added: authorizations] from our board of directors to purchase up to $7.5 billion [added: and $6.0 billion] of additional shares of TI common stock announced September 17, [removed: 2015. On] [added: 2015 and] September 21, 2017, [added: respectively. On September 20, 2018,] our board of directors authorized the purchase of an additional [removed: $6.0] [added: $12.0] billion of our common stock. |

| [removed: (2)] [added: (b)] | In addition to open-market purchases, [removed: 14,201] [added: 46,401] shares of common stock were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units. |

| [removed: (3)] [added: (c)] | As of December 31, [removed: 2017,] [added: 2018,] this amount consisted of the remaining portion of the [removed: $7.5] [added: $6.0] billion authorized in September [removed: 2015] [added: 2017] and the [removed: $6.0] [added: $12.0] billion authorized in September [removed: 2017.] [added: 2018.] No expiration date has been specified for these authorizations. |

| Period | | Total Number of Shares Purchased | | | | | Average Price Paid per Share | | | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) | | | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a) | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October 1, 2018 through October 31, 2018 | | | 10,869,754 | | | | $ | | 97.50 | | | | | 10,823,353 | | | | $ | | 17.10 | | billion |

| November 1, 2018 through November 30, 2018 | | | 5,992,830 | | | | | | 95.44 | | | | | 5,992,830 | | | | | | 16.53 | | billion |

| December 1, 2018 through December 31, 2018 | | | 4,062,116 | | | | | | 93.96 | | | | | 4,062,116 | | | | | | 16.14 | | billion |

| Total | | | 20,924,700 | | (b) | | $ | | 96.22 | | (b) | | | 20,878,299 | | | | $ | | 16.14 | | billion (c) |

Common stock prices and dividends

The table below shows the high and low closing prices of TI common stock as reported by Bloomberg L.P. and the dividends paid per common share in each quarter during the past two years.

| | | | | Quarter | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | 1st | | | | 2nd | | | | 3rd | | | | 4th | | |

| Stock prices: | | | | | | | | | | | | | | | | | | |

| 2017 | | High | | $ | 82.20 | | | $ | 84.34 | | | $ | 89.65 | | | $ | 104.82 | |

| | | Low | | | 72.92 | | | | 76.90 | | | | 76.41 | | | | 89.65 | |

| 2016 | | High | | | 58.37 | | | | 63.30 | | | | 71.42 | | | | 74.87 | |

| | | Low | | | 48.03 | | | | 56.43 | | | | 61.06 | | | | 67.60 | |

| Dividends paid: | | | | | | | | | | | | | | | | | | |

| 2017 | | | | $ | 0.50 | | | $ | 0.50 | | | $ | 0.50 | | | $ | 0.62 | |

| 2016 | | | | | 0.38 | | | | 0.38 | | | | 0.38 | | | | 0.50 | |

Issuer purchases of equity securities

| | | | | | | | | | | | Total Number | | | | | Approximate | | |

| | | | | | | | | | | | of Shares | | | | | Dollar Value | | |

| | | | | | | | | | | | Purchased as | | | | | of Shares that | | |

| | | | | | | | | | | | Part of | | | | | May Yet Be | | |

| | | Total | | | | | | | | | Publicly | | | | | Purchased | | |

| | | Number of | | | | | Average | | | | Announced | | | | | Under the | | |

| | | Shares | | | | | Price Paid | | | | Plans or | | | | | Plans or | | |

| Period | | Purchased | | | | | per Share | | | | Programs (1) | | | | | Programs (1) | | |

| October 1, 2017 through October 31, 2017 | | | 2,575,154 | | | | $ | 93.49 | | | | 2,560,953 | | | | $ | 9.71 billion | |

| November 1, 2017 through November 30, 2017 | | | 3,324,228 | | | | | 97.71 | | | | 3,324,228 | | | | | 9.39 billion | |

| December 1, 2017 through December 31, 2017 | | | 1,456,816 | | | | | 97.63 | | | | 1,456,816 | | | | | 9.24 billion | |

| Total | | | 7,356,198 | (2) | | | $ | 96.22 | (2) | | | 7,341,997 | | | | $ | 9.24 billion | (3) |

| (Millions of dollars, except share and per-share amounts) | | [removed: 2017] [added: 2018] | | | | | [removed: 2016] [added: 2017] | | | | | [removed: 2015] [added: 2016] | | | | | [removed: 2014] [added: 2015] | | | | | [removed: 2013] [added: 2014] | | | |

| Cash flows from operating activities | | $ | | [removed: 5,363] [added: 7,189] | | | $ | | [removed: 4,614] [added: 5,363] | | | $ | | [removed: 4,397] [added: 4,614] | | | $ | | [removed: 4,054] [added: 4,397] | | | $ | | [removed: 3,514] [added: 4,054] | |

| Capital expenditures | | | | [removed: 695] [added: 1,131] | | | | | [removed: 531] [added: 695] | | | | | [removed: 551] [added: 531] | | | | | [removed: 385] [added: 551] | | | | | [removed: 412] [added: 385] | |

| Free cash flow (a) | | | | [removed: 4,668] [added: 6,058] | | | | | [removed: 4,083] [added: 4,668] | | | | | [removed: 3,846] [added: 4,083] | | | | | [removed: 3,669] [added: 3,846] | | | | | [removed: 3,102] [added: 3,669] | |

| Dividends paid | | | | [removed: 2,104] [added: 2,555] | | | | | [removed: 1,646] [added: 2,104] | | | | | [removed: 1,444] [added: 1,646] | | | | | [removed: 1,323] [added: 1,444] | | | | | [removed: 1,175] [added: 1,323] | |

| Stock repurchases | | | | [removed: 2,556] [added: 5,100] | | | | | [removed: 2,132] [added: 2,556] | | | | | [removed: 2,741] [added: 2,132] | | | | | [removed: 2,831] [added: 2,741] | | | | | [removed: 2,868] [added: 2,831] | |

| Analog | | | | [removed: 9,900] [added: 10,801] | | | | | [removed: 8,536] [added: 9,900] | | | | | [removed: 8,339] [added: 8,536] | | | | | [removed: 8,104] [added: 8,339] | | | | | [removed: 7,194] [added: 8,104] | |

| Embedded Processing | | | | [removed: 3,498] [added: 3,554] | | | | | [removed: 3,023] [added: 3,498] | | | | | [removed: 2,787] [added: 3,023] | | | | | [removed: 2,740] [added: 2,787] | | | | | [removed: 2,450] [added: 2,740] | |

| Other | | | | [removed: 1,563] [added: 1,429] | | | | | [removed: 1,811] [added: 1,563] | | | | | [removed: 1,874] [added: 1,811] | | | | | [removed: 2,201] [added: 1,874] | | | | | [removed: 2,561] [added: 2,201] | |

| Revenue | | | | [removed: 14,961] [added: 15,784] | | | | | [removed: 13,370] [added: 14,961] | | | | | [removed: 13,000] [added: 13,370] | | | | | [removed: 13,045] [added: 13,000] | | | | | [removed: 12,205] [added: 13,045] | |

| Gross profit [removed: (b)] | | | | [removed: 9,614] [added: 10,277] | | | | | [removed: 8,257] [added: 9,614] | | | | | [removed: 7,575] [added: 8,257] | | | | | [removed: 7,447] [added: 7,575] | | | | | [removed: 6,400] [added: 7,447] | |

| Operating expenses (R&D and SG&A) [removed: (b)] | | | | [removed: 3,202] [added: 3,243] | | | | | [removed: 3,098] [added: 3,202] | | | | | [removed: 2,995] [added: 3,098] | | | | | [removed: 3,164] [added: 2,995] | | | | | [removed: 3,329] [added: 3,164] | |

| Acquisition charges | | | | 318 | | | | | [removed: 319] [added: 318] | | | | | [removed: 329] [added: 319] | | | | | [removed: 330] [added: 329] | | | | | [removed: 341] [added: 330] | |

| Restructuring charges/other [removed: (b)] | | | | [removed: 11] [added: 3] | | | | | [removed: (15] [added: 11] | [removed: )] | | | | [removed: (71] [added: (15] | ) | | | | [removed: (50] [added: (71] | ) | | | | [removed: (192] [added: (50] | ) |

| Operating profit [removed: (b)] | | | | [removed: 6,083] [added: 6,713] | | | | | [removed: 4,855] [added: 6,083] | | | | | [removed: 4,322] [added: 4,855] | | | | | [removed: 4,003] [added: 4,322] | | | | | [removed: 2,922] [added: 4,003] | |

| Net income | | $ | | [removed: 3,682] [added: 5,580] | | | $ | | [removed: 3,595] [added: 3,682] | | | $ | | [removed: 2,986] [added: 3,595] | | | $ | | [removed: 2,821] [added: 2,986] | | | $ | | [removed: 2,162] [added: 2,821] | |

| [removed: As a result of accounting rule ASC 260, which requires a] [added: A] portion of [removed: Net] [added: net] income [removed: to be] [added: is] allocated to unvested restricted stock units (RSUs) on which we pay dividend [removed: equivalents, diluted] [added: equivalents. Diluted] earnings per share (EPS) is calculated using the following: | | | | | | | | | | | | | | | | | | | | | | | | | |

| Income allocated to RSUs | | | | [removed: (33] [added: (42] | ) | | | | [removed: (44] [added: (33] | ) | | | | [removed: (42] [added: (44] | ) | | | | [removed: (43] [added: (42] | ) | | | | [removed: (36] [added: (43] | ) |

| Income allocated to common shares for diluted EPS | | $ | | [removed: 3,649] [added: 5,538] | | | $ | | [removed: 3,551] [added: 3,649] | | | $ | | [removed: 2,944] [added: 3,551] | | | $ | | [removed: 2,778] [added: 2,944] | | | $ | | [removed: 2,126] [added: 2,778] | |

| Average diluted shares [removed: outstanding, in millions] [added: outstanding (millions)] | | | | [removed: 1,012] [added: 990] | | | | | [removed: 1,021] [added: 1,012] | | | | | [removed: 1,043] [added: 1,021] | | | | | [removed: 1,080] [added: 1,043] | | | | | [removed: 1,113] [added: 1,080] | |

| Diluted EPS | | $ | | [removed: 3.61] [added: 5.59] | | | $ | | [removed: 3.48] [added: 3.61] | | | $ | | [removed: 2.82] [added: 3.48] | | | $ | | [removed: 2.57] [added: 2.82] | | | $ | | [removed: 1.91] [added: 2.57] | |

| Cash dividends declared per common share | | $ | | [removed: 2.12] [added: 2.63] | | | $ | | [removed: 1.64] [added: 2.12] | | | $ | | [removed: 1.40] [added: 1.64] | | | $ | | [removed: 1.24] [added: 1.40] | | | $ | | [removed: 1.07] [added: 1.24] | |

| (Millions of dollars, except [removed: Other] [added: other] data items) | | [removed: 2017] [added: 2018] | | | | | [removed: 2016] [added: 2017] | | | | | [removed: 2015] [added: 2016] | | | | | [removed: 2014] [added: 2015] | | | | | [removed: 2013] [added: 2014] | | | |

| Cash, cash equivalents and short-term investments | | $ | | [removed: 4,469] [added: 4,233] | | | $ | | [removed: 3,490] [added: 4,469] | | | $ | | [removed: 3,218] [added: 3,490] | | | $ | | [removed: 3,541] [added: 3,218] | | | $ | | [removed: 3,829] [added: 3,541] | |

| Total assets | | | | [removed: 17,642] [added: 17,137] | | | | | [removed: 16,431] [added: 17,642] | | | | | [removed: 16,230] [added: 16,431] | | | | | [removed: 17,372] [added: 16,230] | | | | | [removed: 18,554] [added: 17,372] | |

| Current portion of long-term debt | | | | [removed: 500] [added: 749] | | | | | [removed: 631] [added: 500] | | | | | [removed: 1,000] [added: 631] | | | | | [removed: 1,001] [added: 1,000] | | | | | [removed: 1,000] [added: 1,001] | |

| Long-term debt | | | | [removed: 3,577] [added: 4,319] | | | | | [removed: 2,978] [added: 3,577] | | | | | [removed: 3,120] [added: 2,978] | | | | | [removed: 3,630] [added: 3,120] | | | | | [removed: 4,145] [added: 3,630] | |

| Employees | | | | [removed: 29,714] [added: 29,888] | | | | | [removed: 29,865] [added: 29,714] | | | | | [removed: 29,977] [added: 29,865] | | | | | [removed: 31,003] [added: 29,977] | | | | | [removed: 32,209] [added: 31,003] | |

| Stockholders of record | | | | [removed: 14,260] [added: 13,825] | | | | | [removed: 14,910] [added: 14,260] | | | | | [removed: 15,563] [added: 14,910] | | | | | [removed: 16,361] [added: 15,563] | | | | | [removed: 17,213] [added: 16,361] | |

| Net income | | $ | | 5,580 | | | $ | | 3,682 | | | $ | | 3,595 | | | $ | | 2,986 | | | $ | | 2,821 | |

| --- | --- |

| (b) | Prior periods reclassified to conform to the 2017 presentation, having adopted ASU 2017-07. See Note 2 to the financial statements. |

Income for each of the three years in the period ended December 31, [removed: 2017][added: 2018]

Comprehensive income for each of the three years in the period ended December 31, [removed: 2017][added: 2018]

Balance sheets [removed: at] [added: as of] December 31, [removed: 2017] [added: 2018] and [removed: 2016][added: 2017]

Cash flows for each of the three years in the period ended December 31, [removed: 2017][added: 2018]

Stockholders’ equity for each of the three years in the period ended December 31, [removed: 2017][added: 2018]

| (Millions of dollars, except share and per-share amounts) | | [removed: 2017] [added: 2018] | | | | | [removed: 2016] [added: 2017] | | | | | [removed: 2015] [added: 2016] | | | |

| Revenue | | $ | | [removed: 14,961] [added: 15,784] | | | $ | | [removed: 13,370] [added: 14,961] | | | $ | | [removed: 13,000] [added: 13,370] | |

| Cost of revenue (COR) | | | | [removed: 5,347] [added: 5,507] | | | | | [removed: 5,113] [added: 5,347] | | | | | [removed: 5,425] [added: 5,113] | |

| Gross profit | | | | [removed: 9,614] [added: 10,277] | | | | | [removed: 8,257] [added: 9,614] | | | | | [removed: 7,575] [added: 8,257] | |

| Research and development (R&D) | | | | [removed: 1,508] [added: 1,559] | | | | | [removed: 1,356] [added: 1,508] | | | | | [removed: 1,267] [added: 1,356] | |

| Selling, general and administrative (SG&A) | | | | [removed: 1,694] [added: 1,684] | | | | | [removed: 1,742] [added: 1,694] | | | | | [removed: 1,728] [added: 1,742] | |

| Acquisition charges | | | | 318 | | | | | [removed: 319] [added: 318] | | | | | [removed: 329] [added: 319] | |

| Restructuring charges/other | | | | [removed: 11] [added: 3] | | | | | [removed: (15] [added: 11] | [removed: )] | | | | [removed: (71] [added: (15] | ) |

| Operating profit | | | | [removed: 6,083] [added: 6,713] | | | | | [removed: 4,855] [added: 6,083] | | | | | [removed: 4,322] [added: 4,855] | |

| Other income (expense), net (OI&E) | | | | [removed: 75] [added: 98] | | | | | [removed: 155] [added: 75] | | | | | [removed: (16] [added: 155] | [removed: )] |

| Interest and debt expense | | | | [removed: 78] [added: 125] | | | | | [removed: 80] [added: 78] | | | | | [removed: 90] [added: 80] | |

| Income before income taxes | | | | [removed: 6,080] [added: 6,686] | | | | | [removed: 4,930] [added: 6,080] | | | | | [removed: 4,216] [added: 4,930] | |

| Provision for income taxes | | | | [removed: 2,398] [added: 1,106] | | | | | [removed: 1,335] [added: 2,398] | | | | | [removed: 1,230] [added: 1,335] | |

| Net income | | $ | | [removed: 3,682] [added: 5,580] | | | $ | | [removed: 3,595] [added: 3,682] | | | $ | | [removed: 2,986] [added: 3,595] | |

| Basic | | $ | | [removed: 3.68] [added: 5.71] | | | $ | | [removed: 3.54] [added: 3.68] | | | $ | | [removed: 2.86] [added: 3.54] | |

| Diluted | | $ | | [removed: 3.61] [added: 5.59] | | | $ | | [removed: 3.48] [added: 3.61] | | | $ | | [removed: 2.82] [added: 3.48] | |

| Basic | | | | [removed: 991] [added: 970] | | | | | [removed: 1,003] [added: 991] | | | | | [removed: 1,030] [added: 1,003] | |

| Diluted | | | | [removed: 1,012] [added: 990] | | | | | [removed: 1,021] [added: 1,012] | | | | | [removed: 1,043] [added: 1,021] | |

| [removed: As a result of accounting rule ASC 260, which requires a] [added: A] portion of [removed: Net] [added: net] income [removed: to be] [added: is] allocated to unvested restricted stock units (RSUs) on which we pay dividend [removed: equivalents, diluted] [added: equivalents. Diluted] EPS is calculated using the following: | | | | | | | | | | | | | | | |

| Income allocated to RSUs | | | | [removed: (33] [added: (42] | ) | | | | [removed: (44] [added: (33] | ) | | | | [removed: (42] [added: (44] | ) |

| Income allocated to common stock for diluted EPS | | $ | | [removed: 3,649] [added: 5,538] | | | $ | | [removed: 3,551] [added: 3,649] | | | $ | | [removed: 2,944] [added: 3,551] | |

| (Millions of dollars) | | [removed: 2017] [added: 2018] | | | | | [removed: 2016] [added: 2017] | | | | | [removed: 2015] [added: 2016] | | | |

| Adjustment, net of tax effect of [removed: ($26), $6] [added: $35, ($26)] and [removed: $36] [added: $6] | | | | [removed: 92] [added: (98] | [added: )] | | | | [removed: (43] [added: 92] | [removed: )] | | | | [removed: (74] [added: (43] | ) |

| Recognized within [removed: Net] [added: net] income, net of tax effect of [removed: ($27), ($25)] [added: ($15), ($27)] and ($25) | | | | [removed: 56] [added: 50] | | | | | [removed: 51] [added: 56] | | | | | [removed: 53] [added: 51] | |

| Adjustment, net of tax effect of $1, [removed: $0] [added: $1] and [removed: ($11)] [added: $0] | | | | [removed: (2] [added: (6] | ) | | | | [removed: —] [added: (2] | [added: )] | | | | [removed: 20] [added: —] | |

| Recognized within [removed: Net] [added: net] income, net of tax effect of $1, [removed: $2] [added: $1] and [removed: $0] [added: $2] | | | | [removed: (5] [added: (3] | ) | | | | [removed: (3] [added: (5] | ) | | | | [removed: —] [added: (3] | [added: )] |

| Recognized within [removed: Net] [added: net] income, net of tax effect of $0, $0 and [removed: ($1)] [added: $0] | | | | [removed: 1] [added: —] | | | | | 1 | | | | | 1 | |

| Other comprehensive income (loss), net of taxes | | | | [removed: 142] [added: (59] | [added: )] | | | | [removed: 6] [added: 142] | | | | | [removed: —] [added: 6] | |

| Total comprehensive income | | $ | | [removed: 3,824] [added: 5,521] | | | $ | | [removed: 3,601] [added: 3,824] | | | $ | | [removed: 2,986] [added: 3,601] | |

| (Millions of dollars, except share amounts) | | [removed: 2017] [added: 2018] | | | | | [removed: 2016] [added: 2017] | | | |

| Cash and cash equivalents | | $ | | [removed: 1,656] [added: 2,438] | | | $ | | [removed: 1,154] [added: 1,656] | |

| Short-term investments | | | | [removed: 2,813] [added: 1,795] | | | | | [removed: 2,336] [added: 2,813] | |

| Accounts receivable, net of allowances of [removed: ($8)] [added: ($19)] and [removed: ($17)] [added: ($8)] | | | | [removed: 1,278] [added: 1,207] | | | | | [removed: 1,267] [added: 1,278] | |

| Raw materials | | | | [removed: 126] [added: 181] | | | | | [removed: 102] [added: 126] | |

| Work in process | | | | [removed: 1,089] [added: 1,070] | | | | | [removed: 954] [added: 1,089] | |

| Net income | | $ | | 5,580 | | | $ | | 3,682 | | | $ | | 3,595 | |

| Change in fair value, net of tax effect of $1, $0 and $0 | | | | (2 | ) | | | | — | | | | | — | |

| Shares: 2018 – 795,665,646; 2017 – 757,657,217 | | | | (32,130 | ) | | | | (27,458 | ) |

| (Millions of dollars) | | 2018 | | | | | 2017 | | | | | 2016 | | | |

| Net income | | $ | | 5,580 | | | $ | | 3,682 | | | $ | | 3,595 | |

| Cumulative effect of accounting changes | | | | — | | | | | — | | | | | 236 | | | | | — | | | | | (30 | ) |

| Balance, December 31, 2018 | | $ | | 1,741 | | | $ | | 1,950 | | | $ | | 37,906 | | | $ | | (32,130 | ) | | $ | | (473 | ) |

| Total revenue | $ | | 15,784 | | | $ | | 14,961 | | | $ | | 13,370 | |

| | 2018 | | | | | 2017 | | | |

We have reclassified certain amounts in the prior periods’ financial statements to conform to the 2018 presentation.

We generate revenue primarily from the sale of semiconductor products, either directly to a customer or to a distributor, or at the conclusion of a consignment process.

We have a variety of types of contracts with our customers and distributors.

In determining whether a contract exists, we evaluate the terms of the arrangement, the relationship with the customer or distributor and their ability to pay.

We recognize revenue from sales of our products, including sales to our distributors, when control is transferred.

Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where required, when the customer has accepted the products.

This transfer generally occurs at a point in time upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order.

Payment for sales to customers and distributors is generally due on our standard commercial terms.

Transfer of control occurs at that point, when title and risk of loss transfers and the customer or distributor becomes obligated to pay for the products pulled from inventory.

Until the products are pulled for use or sale by the customer or distributor, we retain control over the products’ disposition, including the right to pull back or relocate the products.

The revenue recognized is adjusted based on allowances, which are prepared on a portfolio basis using a most likely amount methodology based on analysis of historical data and contractual terms.

The length of time between invoicing and payment is not significant under any of our payment terms.

In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component.

| Net income | $ | | 5,580 | | | | | | | | | | | | $ | | 3,682 | | | | | | | | | | | | $ | | 3,595 | | | | | | | | | | |

| Net income | $ | | 5,580 | | | | | | | | | | | | $ | | 3,682 | | | | | | | | | | | | $ | | 3,595 | | | | | | | | | | |

Goodwill

We adopted Accounting Standards Codification Topic 606 (ASC 606) as of January 1, 2018, using the modified retrospective transition method applied only to contracts that were not completed as of the adoption date.

The reported results for 2018 reflect the application of the new accounting guidance, while the reported results for prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605, Revenue Recognition.

Although royalty income is recorded within OI&E, the new revenue guidance applies to these agreements by analogy, and therefore, such agreements have been evaluated for ASC 606 transition considerations.

Under ASC 606, royalty income for our fixed-rate royalty agreements is bifurcated between two performance obligations: providing a right to use our initial patent portfolio and the right to access our future patents when those patents are developed.

We have determined that the value of these agreements is allocated more heavily to the initial performance obligation.

As a result, income from these agreements is recognized predominately at the time of contract execution rather than ratably over the life of the agreements, accelerating the timing of when we recognize royalty income in OI&E.

The timing of revenue recognition, billings and cash collections may result in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities).

These items are included in other current and non-current assets and liabilities on the Consolidated Balance Sheets.

Generally, we invoice customers for payment upon shipment or when goods are pulled from consignment inventory, which results in an unconditional right to consideration.

The time frame between when the customer places an order for products and when it is shipped is less than 12 months.

Occasionally, as of the end of a reporting period, some performance obligations associated with contracts are unsatisfied or only partially satisfied.

In accordance with the practical expedients available in the guidance, we do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

Additionally, sales commissions are expensed when incurred because the amortization period would have been one year or less.

We recognized an increase to opening retained earnings of $206 million, net of taxes, as of January 1, 2018, due to the cumulative impact of adopting ASC 606.

A contract asset of $283 million and deferred tax liabilities of $55 million were recorded as of January 1, 2018, related to the transition period adjustments.

| | | | | | | | | | | | | | | | |

| Cash dividends declared per common share | | $ | | 2.12 | | | $ | | 1.64 | | | $ | | 1.40 | |

| Shares: 2017 – 757,657,217; 2016 – 744,831,978 | | | | (27,458 | ) | | | | (25,523 | ) |

| Balance, December 31, 2014 | | $ | | 1,741 | | | $ | | 1,368 | | | $ | | 29,653 | | | $ | | (21,840 | ) | | $ | | (532 | ) |

| 2015 | | | | | | | | | | | | | | | | | | | | | | | | | |

Beginning January 2017, we reorganized the product lines within our reportable segments – Analog and Embedded Processing – to align our business structure with the way our customers select and buy products.

These changes had no effect on either our previously reported consolidated financial statements or our reportable segment amounts.

| --- | --- | --- |

As of January 1, 2017, we no longer recognize royalties as revenue; instead, they are now recorded as OI&E.

Prior period amounts were not material.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Operating profit in the prior periods has been recast as a result of our early adoption of a new accounting standard related to pension and other retiree benefit costs.

We have reclassified certain amounts in the prior periods’ financial statements to conform to the 2017 presentation, retrospectively applying the new accounting standard related to pension and other retiree benefit costs.

See Changes in accounting standards – adopted standards for current period for further information.

We recognize revenue from sales of our products, including sales to our distributors, when title and risk of loss pass, which usually occurs upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order; when persuasive evidence of an arrangement exists; when sales amounts are fixed or determinable; and when collectability is reasonably assured.

Delivery occurs when the customer or distributor pulls product from consignment inventory that we store at designated locations.

We recognize revenue net of allowances, which are management’s estimates of future credits to be granted to customers or distributors under programs common in the semiconductor industry.

Allowances are based on analysis of historical data and contractual terms and are recorded when revenue is recognized.

We believe we can reasonably and reliably estimate allowances for credits to distributors in a timely manner.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Adjustment for dilutive shares: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | • | Classification of investments – Depending on our reasons for holding the investment and our ownership percentage, we classify our investments as either available for sale, trading, equity method or cost method, which are more fully described in Note 8. We determine cost or amortized cost, as appropriate, on a specific identification basis. |

Goodwill and indefinite-lived intangibles

Accounting Standards Update (ASU) No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

This standard requires current and deferred taxes resulting from the intra-entity transfer of any assets other than inventory to be recognized for financial reporting purposes when the transfer occurs rather than postpone recognition until the asset has been sold to an outside party, as currently allowed.

We elected to adopt this standard in the first quarter of 2017.

The effect on our financial position and results of operations was not material.

ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

This standard amends the income statement presentation of the components of net periodic benefit cost for defined benefit pension and other postretirement plans.

This standard requires us to: (1) disaggregate the current service cost component from the other components of net periodic benefit cost (the “other components”) and present it in the same line items on the statement of income as other current compensation costs for related employees and (2) present the other components outside of operating profit (i.e., in OI&E).

We elected to adopt this standard as of January 1, 2017.

Adoption of this standard did not impact Revenue, Net income, Earnings per common share or Cash flows from operating activities.

The following components on the Consolidated Statements of Income were affected:

| | For The Years Ended December 31, | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | 2016 | | | | | | | | | | 2015 | | | | | | | | |

| | Reported | | | | | Recast | | | | | Reported | | | | | Recast | | | |

| COR | $ | | 5,130 | | | $ | | 5,113 | | | $ | | 5,440 | | | $ | | 5,425 | |

| Gross profit | | | 8,240 | | | | | 8,257 | | | | | 7,560 | | | | | 7,575 | |

| R&D | | | 1,370 | | | | | 1,356 | | | | | 1,280 | | | | | 1,267 | |

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the fourth quarter of [removed: 2017] [added: 2018] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

TI management assessed the effectiveness of internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

Based on our assessment, we believe that, as of December 31, [removed: 2017,] [added: 2018,] our internal control over financial reporting is effective based on the COSO criteria.

We have audited Texas Instruments Incorporated’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Texas Instruments Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Texas Instruments Incorporated as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of income, comprehensive income, [removed: shareholders'] [added: shareholders’] equity and cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] and the related notes, and our report dated February 22, [removed: 2018] [added: 2019] expressed an unqualified opinion thereon.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may [removed: deteriorate][added: deteriorate.]

[removed: ][added: ]

February 22, 2019

February 22, 2018

The information with respect to directors’ names, ages, positions, term of [removed: office and] [added: office,] periods of [removed: service,] [added: service and business experience,] which is contained under the caption “Election of directors” in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders, is incorporated herein by reference to such proxy statement.

The information [removed: with respect to directors’ business experience, which is] contained under the caption [removed: “Diversity] [added: “Committees of the board” with respect to the audit committee] and [removed: qualifications”] [added: the audit committee financial expert] in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of [removed: stockholders,] [added: stockholders] is incorporated herein by reference to such proxy statement.

The information with respect to Section 16(a) beneficial ownership reporting compliance contained under the caption of the same name in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders is incorporated herein by reference to such proxy statement.

The information contained under the caption “Committees of the board” with respect to the audit committee and the audit committee financial expert in our proxy statement for the 2018 annual meeting of stockholders is incorporated herein by reference to such proxy statement.

The information contained under the captions “Director compensation” and “Executive compensation” in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders is incorporated herein by reference to such proxy statement, provided that the Compensation Committee report shall not be deemed filed with this Form 10-K.

The information contained under the caption “Compensation committee interlocks and insider participation” in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders is incorporated herein by reference to such proxy statement.

The information [added: that is] contained under the [removed: caption “Equity compensation plan information”] [added: captions “Security ownership of certain beneficial owners” and “Security ownership of directors and management”] in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders is incorporated herein by reference to such proxy statement.

The following table sets forth information about the company’s equity compensation plans as of December 31, 2018.

| Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) | | | | | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (2) | | | | | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (1)) (3) | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Equity compensation plans approved by security holders | | | 47,037,697 | | (a) | | $ | | 56.24 | | (b) | | | 84,722,515 | | (c) |

| Equity compensation plans not approved by security holders | | | 558,052 | | (d) | | $ | | 56.10 | | (b) | | | — | | |

| Total | | | 47,595,749 | | (e) | | $ | | 56.24 | | | | | 84,722,515 | | |

| (a) | Includes shares of TI common stock to be issued under the Texas Instruments 2003 Director Compensation Plan (the “2003 Director Plan”), the Texas Instruments 2009 Long-Term Incentive Plan (the “2009 LTIP”) and predecessor stockholder-approved plans, the Texas Instruments 2009 Director Compensation Plan (the “2009 Director Plan”), the TI Employees 2014 Stock Purchase Plan (the “2014 ESPP”) and the Texas Instruments 2018 Director Compensation Plan (the “2018 Director Plan”). |

| --- | --- |

| (b) | Restricted stock units and stock units credited to directors’ deferred compensation accounts are settled in shares of TI common stock on a one-for-one basis. Accordingly, such units have been excluded for purposes of computing the weighted- average exercise price. |

| --- | --- |

| (c) | Shares of TI common stock available for future issuance under the 2009 LTIP, the 2014 ESPP and the 2018 Director Plan. 48,175,749 shares remain available for future issuance under the 2009 LTIP and 1,991,665 shares remain available for future issuance under the 2018 Director Plan. Under the 2009 LTIP and the 2018 Director Plan, awards may be granted in the form of restricted stock units, options or other stock-based awards such as restricted stock. |

| --- | --- |

| (d) | Includes shares to be issued under the Texas Instruments 2003 Long-Term Incentive Plan (the “2003 LTIP”). The 2003 LTIP was replaced by the 2009 LTIP, which was approved by stockholders. No further grants may be made under the 2003 LTIP. Only non-management employees were eligible to receive awards under the 2003 LTIP. The 2003 LTIP authorized the grant of shares in the form of restricted stock units, options or other stock-based awards such as restricted stock. The plan is administered by a committee of independent directors (the Committee). The Committee had the sole discretion to grant to eligible participants one or more equity awards and to determine the number or amount of any award. Except in the case of awards made through assumption of, or in substitution for, outstanding awards previously granted by an acquired company, and except as a result of an adjustment event such as a stock split, the exercise price under any stock option, the grant price of any stock appreciation right, and the purchase price of any security that could be purchased under any other stock-based award under the 2003 LTIP could not be less than 100 percent of the fair market value of the stock or other security on the effective date of the grant of the option, right or award. |

| --- | --- |

Also includes shares to be issued under the Texas Instruments Directors Deferred Compensation Plan and the Texas Instruments Restricted Stock Unit Plan for Directors.

These plans were replaced by the stockholder-approved 2003 Director Plan (which was replaced by the 2009 Director Plan), and no further grants may be made under them.

| (e) | Includes 39,905,454 shares for issuance upon exercise of outstanding grants of options, 7,305,543 shares for issuance upon vesting of outstanding grants of restricted stock units, 229,836 shares for issuance under the 2014 ESPP and 154,916 shares for issuance in settlement of directors’ deferred compensation accounts. |

| --- | --- |

The information that is contained under the captions “Security ownership of certain beneficial owners” and “Security ownership of directors and management” in our proxy statement for the 2018 annual meeting of stockholders is incorporated herein by reference to such proxy statement.

The information contained under the captions “Related person transactions” and “Director independence” in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders is incorporated herein by reference to such proxy statement.

The information with respect to principal accountant fees and services contained under the caption “Proposal to ratify appointment of independent registered public accounting firm” in our proxy statement for the [removed: 2018] [added: 2019] annual meeting of stockholders is incorporated herein by reference to such proxy statement.

| Designation of Exhibit | Description of Exhibit | [removed: Incorporated by Reference] | [added: Form] | [added: File Number] | [added: Date of Filing] | [added: Exhibit Number] | Filed or Furnished Herewith |

| [added: Designation of Exhibit | Description of Exhibit | |] Form | File Number | [removed: |] Date of Filing | Exhibit Number | [removed: | |] [added: Filed or Furnished Herewith] |

| 3(a) | [Restated Certificate of Incorporation of the Registrant, dated April 18, 1985, as amended](http://www.sec.gov/Archives/edgar/data/97476/000009747615000003/txn-12312014xexhibit3a.htm) | [added: |] 10-K | 001-3761 | [removed: |] February 24, 2015 | 3(a) | |

| 3(b) | [By-Laws of the Registrant](http://www.sec.gov/Archives/edgar/data/97476/000156459016030135/txn-ex3_6.htm) | [added: |] 8-K | 001-3761 | [removed: |] December 12, 2016 | 3 | |

| 4(a) | [Indenture](http://www.sec.gov/Archives/edgar/data/97476/000119312511147104/dex42.htm) | [added: |] 8-K | 001-3761 | [removed: |] May 23, 2011 | 4.2 | |

| 4(b) | [Officer’s [removed: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312511147104/dex43.htm)] [added: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312513206195/d533359dex42.htm)] | [added: |] 8-K | 001-3761 | [removed: |] May [removed: 23, 2011] [added: 8, 2013] | [removed: 4.3] [added: 4.2] | |

| 4(c) | [Officer’s [removed: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312513206195/d533359dex42.htm)] [added: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312514094885/d691140dex42.htm)] | [added: |] 8-K | 001-3761 | [removed: | May 8, 2013] [added: March 12, 2014] | 4.2 | |

| 4(d) | [Officer’s [removed: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312514094885/d691140dex42.htm)] [added: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312515173382/d920775dex41.htm)] | [added: |] 8-K | 001-3761 | [removed: | March 12, 2014] [added: May 6, 2015] | [removed: 4.2] [added: 4.1] | |

| 4(e) | [Officer’s [removed: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312515173382/d920775dex41.htm)] [added: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312516581435/d194090dex41.htm)] | [added: |] 8-K | 001-3761 | [removed: |] May 6, [removed: 2015] [added: 2016] | 4.1 | |

| 4(f) | [Officer’s [removed: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312516581435/d194090dex41.htm)] [added: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312517158011/d582525dex41.htm)] | [added: |] 8-K | 001-3761 | [removed: |] May [removed: 6, 2016] [added: 4, 2017] | 4.1 | |

| 4(g) | [Officer’s [removed: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312517158011/d582525dex41.htm)] [added: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312517332507/d482992dex41.htm)] | [added: |] 8-K | 001-3761 | [removed: | May 4,] [added: November 3,] 2017 | 4.1 | |

| 4(h) | [Officer’s [removed: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312517332507/d482992dex41.htm)] [added: Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312518154669/d579571dex41.htm)] | [added: |] 8-K | 001-3761 | [removed: | November 3, 2017] [added: May 7, 2018] | 4.1 | |

| 10(a) | [TI Deferred Compensation Plan, as amended*](http://www.sec.gov/Archives/edgar/data/97476/000156459016013126/txn-ex10a_325.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2016 | 10(a) | |

| 10(b) | [TI Employees Non-Qualified Pension Plan, effective January 1, 2009, as amended*](http://www.sec.gov/Archives/edgar/data/97476/000156459016013126/txn-ex10b_263.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2016 | 10(b) | |

| 10(c) | [TI Employees Non-Qualified Pension Plan II*](http://www.sec.gov/Archives/edgar/data/97476/000156459016013126/txn-ex10c_264.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2016 | 10(c) | |

| 10(d) | [Texas Instruments Long-Term Incentive Plan, adopted April 15, 1993*](http://www.sec.gov/Archives/edgar/data/97476/000009747612000010/txn-12312011xexhibit10c.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2012 | 10(c) | |

| 10(e) | [Texas Instruments 2000 Long-Term Incentive Plan as amended October 16, 2008*](http://www.sec.gov/Archives/edgar/data/97476/000009747615000003/txn-12312014xexhibit10e.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2015 | 10(e) | |

| 10(f) | [Texas Instruments 2003 Long-Term Incentive Plan as amended October 16, 2008](http://www.sec.gov/Archives/edgar/data/97476/000009747615000003/txn-12312014xexhibit10f.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2015 | 10(f) | |

| [removed: 10(g)] [added: 10(i)] | [Texas Instruments [removed: Executive Officer Performance] [added: 2003 Director Compensation] Plan as amended [removed: September 17, 2009*](http://www.sec.gov/Archives/edgar/data/97476/000009747615000003/txn-12312014xexhibit10g.htm)] [added: January 19, 2012](http://www.sec.gov/Archives/edgar/data/97476/000009747615000003/txn-12312014xexhibit10j.htm)] | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2015 | [removed: 10(g)] [added: 10(j)] | |

| [removed: 10(h)] [added: 10(g)] | [Texas Instruments Restricted Stock Unit Plan for Directors, as amended, dated April 16, 1998](http://www.sec.gov/Archives/edgar/data/97476/000009747612000010/txn-12312011xexhibit10h.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2012 | 10(h) | |

| [removed: 10(i)] [added: 10(h)] | [Texas Instruments Directors Deferred Compensation Plan, as amended, dated April 16, 1998](http://www.sec.gov/Archives/edgar/data/97476/000009747612000010/txn-12312011xexhibit10i.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 24, 2012 | 10(i) | |

| [removed: 10(j)] [added: 10(m)] | [Texas Instruments [removed: 2003] [added: 2009] Director Compensation Plan as amended January 19, [removed: 2012](http://www.sec.gov/Archives/edgar/data/97476/000009747615000003/txn-12312014xexhibit10j.htm)] [added: 2012](http://www.sec.gov/Archives/edgar/data/97476/000156459017002142/txn-ex10n_1020.htm)] | [removed: 10-K] | [added: 10-K] | 001-3761 | February [removed: 24, 2015] [added: 23, 2017] | [removed: 10(j)] [added: 10(n)] | |

| [removed: 10(k)] [added: 10(j)] | [Form of Non-Qualified Stock Option Agreement for Executive Officers under the Texas Instruments 2009 Long-Term Incentive Plan*](http://www.sec.gov/Archives/edgar/data/97476/000156459017002142/txn-ex10k_1019.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 23, 2017 | 10(k) | |

| [removed: 10(l)] [added: 10(k)] | [Form of Restricted Stock Unit Award Agreement for Executive Officers under the Texas Instruments 2009 Long-Term Incentive Plan*](http://www.sec.gov/Archives/edgar/data/97476/000156459017002142/txn-ex10l_1018.htm) | [removed: 10-K] | [added: 10-K] | 001-3761 | February 23, 2017 | 10(l) | |

| [removed: 10(m)] [added: 10(l)] | [Texas Instruments 2009 Long-Term Incentive Plan as amended April 21, 2016*](http://www.sec.gov/Archives/edgar/data/97476/000119312516497866/d117862ddef14a.htm) | [added: |] DEF 14A | [removed: |] 001-3761 | March 9, 2016 | Appendix B | |

| 10(n) | [Texas Instruments [removed: 2009] [added: 2018] Director Compensation [removed: Plan as amended January 19, 2012](http://www.sec.gov/Archives/edgar/data/97476/000156459017002142/txn-ex10n_1020.htm)] [added: Plan](http://www.sec.gov/Archives/edgar/data/97476/000156459018018753/txn-ex10a_108.htm)] | [removed: 10-K] | [added: 10-Q] | 001-3761 | [removed: February 23, 2017] [added: August 2, 2018] | [removed: 10(n)] [added: 10(a)] | |

| 21 | [List of Subsidiaries of the [removed: Registrant](https://www.sec.gov/Archives/edgar/data/97476/000156459018002832/txn-ex21_10.htm)] [added: Registrant](https://www.sec.gov/Archives/edgar/data/97476/000156459019003839/txn-ex21_598.htm)] | | | | | | X |

| 23 | [Consent of Independent Registered Public Accounting [removed: Firm](https://www.sec.gov/Archives/edgar/data/97476/000156459018002832/txn-ex23_11.htm)] [added: Firm](https://www.sec.gov/Archives/edgar/data/97476/000156459019003839/txn-ex23_597.htm)] | | | | | | X |

| 31(a) | [Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive [removed: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459018002832/txn-ex31a_14.htm)] [added: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459019003839/txn-ex31a_596.htm)] | | | | | | X |

| 31(b) | [Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial [removed: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459018002832/txn-ex31b_9.htm)] [added: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459019003839/txn-ex31b_595.htm)] | | | | | | X |

| 32(a) | [Section 1350 Certification of Chief Executive [removed: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459018002832/txn-ex32a_6.htm)] [added: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459019003839/txn-ex32a_594.htm)] | | | | | | X |

| 32(b) | [Section 1350 Certification of Chief Financial [removed: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459018002832/txn-ex32b_7.htm)] [added: Officer](https://www.sec.gov/Archives/edgar/data/97476/000156459019003839/txn-ex32b_593.htm)] | | | | | | X |

[removed: *Management] [added: * Management] compensation plans and arrangements

| | • | Financial difficulties of our distributors or their promotion of competing product lines to our detriment, or the loss of [removed: a] significant [removed: number of] distributors; |

| | • | Our ability to recruit and retain skilled engineering, management and technical [removed: personnel;] [added: personnel, and effectively manage key employee succession;] |

| [added: |] TEXAS INSTRUMENTS INCORPORATED | | [removed: |]

| [removed: By:] | [added: By:] | /s/ Rafael R. Lizardi |

| | | [removed: Rafael R. Lizardi Senior Vice President, Chief Financial Officer] and Chief Accounting Officer |

Date: February 22, [removed: 2018][added: 2019]

Lizardi, and Cynthia Hoff Trochu, or any of them, each acting alone, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities in connection with the annual report on Form 10-K of Texas Instruments Incorporated for the year ended December 31, [removed: 2017,] [added: 2018,] to sign any and all amendments to the Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

| | | Incorporated by Reference | | | | | |

| 4(i) | [Officer’s Certificate](http://www.sec.gov/Archives/edgar/data/97476/000119312518187735/d603255dex41.htm) | | 8-K | 001-3761 | June 8, 2018 | 4.1 | |

| | | Incorporated by Reference | | | | | |

| | | Rafael R. Lizardi |

| | | Senior Vice President, |

| | | Chief Financial Officer |

| /s/ Martin S. Craighead | | |

| Martin S. Craighead | | Director |

| 4(i) | The Registrant has omitted certain instruments defining the rights of holders of long-term debt of the Registrant and its subsidiaries pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). The Registrant undertakes to furnish a copy of such instruments to the Securities and Exchange Commission upon request. | | | | | | |

| 12 | [Ratio of Earnings to Fixed Charges](https://www.sec.gov/Archives/edgar/data/97476/000156459018002832/txn-ex12_12.htm) | | | | | | X |

| | | |

| /s/ Brian T. Crutcher | | |

| Brian T. Crutcher | | Director, Executive Vice President and Chief Operating Officer |

| /s/ Wayne R. Sanders | | |

| Wayne R. Sanders | | Director |