Texas Instruments (TXN) 10-K risk factor changes: FY2019 vs FY2018

[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.

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

These [removed: actions] [added: actions, in conjunction with trade tensions,] may restrict us from participating in the China market or may prevent us from competing [removed: effectively with Chinese companies.][added: effectively.]

The cyclical nature of the semiconductor market [removed: may lead] [added: occasionally leads] to significant and rapid increases and decreases in product demand.

Additionally, the loss or significant curtailment of purchases by one or more of our large customers, including curtailments due to a change in the design or manufacturing sourcing policies or practices of these customers, [removed: or] the timing of customer or distributor inventory adjustments, [added: or trade restrictions,] may adversely affect our results of operations and financial condition.

About [removed: 85 percent] [added: 85%] of our revenue comes from shipments to locations outside the United States; [removed: in particular,] shipments of products into China [removed: typically] represent a large portion of our revenue.

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

Our operating results and our reputation could be adversely affected by [removed: breaches or] [added: breaches,] disruptions [removed: of] [added: or other incidents relating to our] information technology systems.

[removed: Breaches or] [added: Breaches,] disruptions [removed: of] [added: or other incidents relating to] our information technology systems or the systems of our customers, vendors and other third parties could be caused by factors such as computer viruses, system failures, restricted network access, unauthorized access, terrorism, employee malfeasance, or human error.

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, remediation, regulatory inquiries or penalties, [added: or claims for damages,] any of which could adversely affect our operating results and our reputation.

Cybersecurity [added: or other] threats [added: to our information technology systems or the systems of our customers, vendors and other third parties] are frequent and constantly evolving, thereby increasing the difficulty of defending against them.

[removed: A natural disaster that results in a prolonged disruption to our operations] [added: Properties,] may adversely affect our results and financial condition.

Our access to needed goods and services may be adversely affected by potential disputes with suppliers or disruptions in our suppliers’ operations as a result of, for example: quality excursions; uncertainty regarding the stability of global credit and financial markets; domestic or international political, social, economic and other conditions; natural events [added: or health epidemics] in the locations in which our suppliers operate; or limited or delayed access to key raw materials, natural resources and utilities.

Additionally, a breach [removed: of] [added: or other incident relating to] our suppliers’ information technology systems could result in a release of [removed: our] confidential or proprietary information.

Reliance on these suppliers involves risks, including possible shortages of capacity in periods of high demand, suppliers’ inability to develop and deliver advanced logic manufacturing process technology in a timely, cost effective, and appropriate [removed: manner and] [added: manner,] the possibility of suppliers’ imposition of increased costs on [removed: us.][added: us and the unauthorized disclosure or use of our intellectual property.]

In the event of a claim, we [removed: may] [added: would] also incur costs if we decide to compensate the affected customer or end consumer.

We are subject to complex laws, rules and regulations affecting our domestic and international operations relating to, for example, the environment, safety and health; [removed: exports and imports;] [added: trade;] bribery and corruption; [added: financial reporting;] tax; data privacy and protection; labor and employment; competition; market access; intellectual property ownership and infringement; and the movement of currency.

If a customer or distributor were to experience a loss with respect to TI-consigned inventory, our results of operations and financial condition [removed: may] [added: would] be adversely affected if we do not recover the full value of the lost inventory from the customer, distributor or insurer, or if our recovery is delayed.

In [removed: 2018,] [added: 2019,] about [removed: 65 percent] [added: 65%] of our revenue was generated from sales of our products through distributors.

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

Our profit margins [removed: may be adversely affected by] [added: vary due to] a number of factors, [removed: including decreases in] [added: which may include] customer demand and shipment volume; [removed: obsolescence of] our [removed: inventory; shifts in our] [added: manufacturing processes;] product mix; [removed: changes in] [added: inventory levels;] tariffs; [removed: changes in our manufacturing processes;] and new accounting pronouncements or changes in existing accounting practices or standards.

[removed: We may,] [added: We,] directly or indirectly, face infringement claims from third parties, including non-practicing entities that have acquired patents to pursue enforcement actions against other companies.

We [removed: may] also face infringement claims where we or our customers make, use or sell products and where the intellectual property laws may be less established or less predictable.

These assertions, whether or not of any merit, [removed: could] expose us to claims for damages and/or injunctions from third parties, as well as claims for indemnification by our customers in instances where we have a contractual or other legal obligation to indemnify them against damages resulting from infringement claims.

We maintain bank accounts, one or more [removed: multi-year] [added: multiyear] revolving credit agreements, and a portfolio of investments to support the financing needs of the company.

Our ability to successfully implement [added: strategic,] business and organizational changes could affect our business plans and results of operations.

From time to time, we undertake [added: strategic,] business and organizational changes, including acquisitions, divestitures and restructuring actions, to support or carry out our [removed: strategic] objectives.

[removed: Further, we] [added: We] may not achieve or sustain the expected [removed: growth or] [added: growth,] cost savings [added: or other] benefits of [added: strategic,] business and organizational changes, and restructuring charges could differ materially in amount and timing from our expectations.

Like many companies, we are susceptible to a potential downturn associated with macroeconomic weakness, which may affect our performance and the performance of our customers.

This protectionism impacts our ability to deliver products and product support into China, could cause Chinese customers to seek alternate suppliers and could otherwise adversely affect our operations and financial results.

A natural disaster that results in a prolonged disruption, particularly where we have principal manufacturing and design operations, as listed in Item 2.

Our margins vary.

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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.

These ~may affect the general economic climate and our performance and the performance of our customers.

Additionally, traditional intellectual property licensors are increasingly providing functionality, designs and complete hardware or software solutions that compete with our products.

This could result in an adverse effect on our operations and our financial results.

If in the future we repatriate any of 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.

Our margins may vary over time.

For example, we may not realize the expected benefits of an acquisition if we are unable to timely and successfully integrate acquired operations, product lines and technology, and our pre-acquisition due diligence may not identify all possible issues and risks that might arise with respect to an acquisition.

[removed: Overview][added: Overview]

[removed: | | • | 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 meet more of these needs than our competitors can, which gives us access to more customers and the opportunity to sell more products and generate more revenue per customer system. [removed: We invest more than $1 billion each year to develop new products for our portfolio, which includes tens of thousands of products. |]

[removed: | | • | Broadest reach] [added: - *Reach] of market [removed: channels.] [added: 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 competitors’ websites. [removed: 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. |]

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

Our strategic focus, and where we invest the majority of our resources, is on Analog and Embedded Processing, with a particular emphasis on designing and selling those products into the industrial and automotive [removed: markets, which we believe represent the best growth opportunities.][added: markets.]

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

[removed: The combined effect of these sustainable competitive advantages is that over time] [added: Over time,] we have gained market share in Analog and Embedded Processing and [removed: have] grown [added: and returned all] free cash [removed: flow.][added: flow to our owners.]

[removed: | | • |] [added: -] Our segments represent groups of similar products that are combined on the basis of similar design and development requirements, product characteristics, manufacturing processes and distribution channels, and how management allocates resources and measures results. [removed: See Note 1 to the financial statements for more information regarding our segments. |]

[removed: | | • |] [added: -] When we discuss our results: [removed: |]

[removed: | | o | Unless] [added: ◦Unless] otherwise noted, changes in our revenue are attributable to changes in customer demand, which are evidenced by fluctuations in shipment volumes. [removed: |]

[removed: | | o | New] [added: ◦New] products [removed: tend] [added: do] not [added: tend] to have a significant impact on our revenue in any given period because we sell such a large number of products. [removed: |]

[removed: | | o | From] [added: ◦From] time to time, our revenue and gross profit are affected by changes in demand for higher-priced or lower-priced products, which we refer to as changes in the “mix” of products shipped. [removed: |]

[removed: | | o | Because we own much of our manufacturing capacity, a significant portion of our operating cost is fixed.] When factory loadings decrease, our fixed costs are spread over reduced output and, absent other circumstances, our profit margins decrease. [removed: Conversely, as factory loadings increase, our fixed costs are spread over increased output and, absent other circumstances, our profit margins increase. Increases and decreases in factory loadings tend to correspond to increases and decreases in demand. |]

[removed: | | • |] [added: -] All dollar amounts in the tables are stated in millions of U.S. dollars. [removed: |]

[removed: Results] [added: Results] of [removed: operations][added: operations]

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

Gross margin of [removed: 65.1 percent] [added: 63.7%] reflected the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter Analog production.

Our cash flow from operations of [removed: $7.19] [added: $6.65] billion underscored the strength of our business model.

Free cash flow was [removed: $6.06] [added: $5.80] billion and represented [removed: 38.4 percent] [added: 40.3%] of revenue, up from [removed: 31.2 percent] [added: 38.4%] a year ago.

During [removed: 2018,] [added: 2019,] we returned [removed: $7.66] [added: $5.97] billion to shareholders through a combination of stock repurchases and dividends.

Our dividends represented [removed: 42 percent] [added: 52%] of free cash flow, underscoring their sustainability.

[added: |] Free cash flow [removed: is a non-GAAP financial measure.][added: (non-GAAP) | | | $ | 5,802 | | | | | $ | 6,058 | | | | | | | |]

[removed: See] [added: For an explanation of free cash flow, see] the Non-GAAP financial information section.

Details of financial results – [removed: 2018] [added: 2019] compared with [removed: 2017][added: 2018]

Operating expenses (R&D and SG&A) were [removed: $3.24] [added: $3.19] billion compared with [removed: $3.20] [added: $3.24] billion.

Acquisition charges of [removed: $318] [added: $288] million were non-cash.

See Note [removed: 8] [added: 7] to the financial statements.

Operating profit was [removed: $6.71] [added: $5.72] billion, or [removed: 42.5 percent] [added: 39.8%] of revenue, compared with [removed: $6.08] [added: $6.71] billion, or [removed: 40.7 percent] [added: 42.5%] of revenue.

Other income and expense (OI&E) was [removed: $98] [added: $175] million of income compared with [removed: $75] [added: $98] million of income.

See Note [removed: 13] [added: 11] to the financial statements.

Interest and debt expense of [removed: $125] [added: $170] million increased [removed: $47] [added: $45] million due to the issuance of additional long-term debt.

Our provision for income taxes was [removed: $1.11 billion] [added: $711 million] compared with [removed: $2.40 billion, which includes a discrete tax benefit of $198 million in 2018 and a discrete tax expense of $540 million in 2017.][added: $1.11 billion.]

Our effective tax rate, which includes discrete tax items, was [removed: 17 percent] [added: 12%] in [removed: 2018] [added: 2019] compared with [removed: 39 percent] [added: 17%] in [removed: 2017.][added: 2018.]

See Note [removed: 5] [added: 4] to the financial statements for a reconciliation of the U.S. statutory income tax rate to our effective tax rate.

Net income was [removed: $5.58] [added: $5.02] billion compared with [removed: $3.68] [added: $5.58] billion.

EPS was [removed: $5.59] [added: $5.24] compared with [removed: $3.61.][added: $5.59.]

Segment results – [removed: 2018] [added: 2019] compared with [removed: 2017][added: 2018]

[removed: Analog] [added: *Analog] (includes Power, Signal Chain and High Volume product [removed: lines)][added: lines)*]

| | | [removed: 2018] | [added: 2019] | | | | [removed: 2017] | | [added: 2018] | | | [removed: Change] | | | [added: Change] | [added: | |]

| Revenue | | [removed: $] | [added: $] | [removed: 10,801] [added: 10,223] | | | [added: | |] $ | [added: 10,801] | [removed: 9,900] | | | | [added: (5)] | [removed: 9] | % |

For many years, we have run our business with three overarching ambitions in mind.

First, we will act like owners who will own the company for decades.

Second, we will adapt and succeed in a world that is ever changing.

And third, we will be a company that we are personally proud to be a part of and that we would want as our neighbor.

When we are successful in achieving these ambitions, our employees, customers, communities and shareholders all win.

- *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 investing in our advanced analog 300-millimeter capacity, which has about a 40% cost advantage per unpackaged chip over 200-millimeter.

To strengthen this advantage, we are moving forward with our plan to build our new 300-millimeter wafer fabrication facility in Richardson, Texas, as 300-millimeter wafers will continue to support the majority of our Analog growth.

- *Broad portfolio* *of differentiated analog and embedded processing products.* Our customers need multiple chips for their systems.

We invest more than $1 billion each year to develop new products for our portfolio, which includes tens of thousands of products.

Our web presence and global sales and applications team are advantages that give us unique access and insight to about 100,000 customers designing TI semiconductors into their end products.

Because of the breadth of our portfolio, we are not dependent on any single product, customer, technology or market.

Some of our products generate revenue for decades, which strengthens the return on our investments.

We believe these markets represent the best growth opportunities over the next decade or longer, due to increasing semiconductor content.

The combined effect of our ambitions, business model and sustainable competitive advantages is that we have continued to build a stronger company.

See Note 1 to the financial statements for more information regarding our segments.

◦Because we own much of our manufacturing capacity, a significant portion of our operating cost is fixed.

Conversely, as factory loadings increase, our fixed costs are spread over increased output and, absent other circumstances, our profit margins increase.

Increases and decreases in factory loadings tend to correspond to increases and decreases in demand.

Our results of operations discussed below provides details of our financial results for 2019 and 2018 and year-to-year comparisons between 2019 and 2018.

Discussion of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s discussion and analysis of financial condition and results of operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

In 2019, we continued our focus on analog and embedded processing products and the industrial and automotive markets.

Revenue of $14.38 billion decreased $1.40 billion, or 9%, primarily due to lower revenue from Embedded Processing and Analog.

As a percentage of revenue, gross profit decreased to 63.7% from 65.1%.

Restructuring charges/other was a credit of $36 million due to the sale of our manufacturing facility in Greenock, Scotland.

The decrease was due to lower income before income taxes and a lower annual operating tax rate.

We use “annual operating tax rate” to describe the estimated annual effective tax rate, as explained further in the Non-GAAP financial information section.

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| | | | 2019 | | | | | | 2018 | | | | | | Change | | |

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| | | | 2019 | | | | | | 2018 | | | | | | Change | | |

Cash flows from operating activities for 2019 were $6.65 billion, a decrease of $540 million primarily due to lower net income.

Short-term investments used cash of $1.14 billion in 2019 and provided cash proceeds of $1.07 billion in 2018.

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| | • | 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 investing in our advanced analog 300-millimeter capacity, which has about a 40 percent cost advantage per unpackaged chip over 200-millimeter. To strengthen this advantage, we are planning our next phase of 300-millimeter capacity expansion as 300-millimeter wafers will continue to support the majority of our Analog growth. |

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

| | • | The 2017 enactment of the U.S. Tax Cuts and Jobs Act (the Tax Act) reduces our annual operating tax rate, which does not include discrete tax items, from 31 percent in 2017 to an ongoing rate of about 16 percent starting in 2019. In 2018, our annual operating tax rate was 20 percent, 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 section. |

| | • | 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.

Revenue of $15.78 billion increased $823 million, or 6 percent, primarily due to higher revenue from Analog.

Embedded Processing also grew.

Gross profit of $10.28 billion was up $663 million, or 7 percent, due to higher revenue and lower manufacturing costs.

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

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.

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Embedded Processing revenue increased due to Connected Microcontrollers.

Processors revenue was about even.

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Details of financial results – 2017 compared with 2016

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

As a percentage of revenue, gross profit increased to 64.3 percent from 61.8 percent.

Operating expenses were $3.20 billion compared with $3.10 billion, as we allocated resources from manufacturing support and SG&A into R&D activities.

Restructuring charges/other was a charge of $11 million compared with a credit of $15 million in 2016.

These amounts are included in Other for segment reporting purposes.

Operating profit was $6.08 billion, or 40.7 percent of revenue, compared with $4.86 billion, or 36.3 percent of revenue.

OI&E was $75 million of income compared with $155 million of income in 2016.

Our provision for income taxes was $2.40 billion compared with $1.34 billion.

The increase was due to the enactment of the Tax Act and, to a lesser extent, higher income before income taxes.

Net income was $3.68 billion compared with $3.60 billion.

EPS was $3.61 compared with $3.48.

Segment results – 2017 compared with 2016

Analog

| | | 2017 | | | | | 2016 | | | | | Change | | | |

| Revenue | | $ | | 9,900 | | | $ | | 8,536 | | | | | 16 | % |

| Operating profit | | | | 4,468 | | | | | 3,416 | | | | | 31 | % |

| Operating profit % of revenue | | | | 45.1 | % | | | | 40.0 | % | | | | | |

Analog revenue increased due to Power and Signal Chain.

High Volume also grew, but to a lesser extent.

Operating profit increased primarily due to higher revenue and associated gross profit.

Embedded Processing

| Revenue | | $ | | 3,498 | | | $ | | 3,023 | | | | | 16 | % |

[removed: Foreign] [added: Foreign] exchange [removed: risk][added: risk]

Exchange rate fluctuations impact taxable income in those [removed: jurisdictions,] [added: jurisdictions] and consequently 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: 2018] [added: 2019] balances and currency exchange rates, a hypothetical [removed: 10 percent] [added: 10%] plus or minus fluctuation in non-U.S. currency exchange rates relative to the U.S. dollar would result in a [removed: pre-tax] [added: pretax] currency exchange gain or loss of [removed: about $3] [added: less than $1] million.

[removed: For example, at year-end 2018,] [added: As of December 31, 2019,] we had forward currency exchange contracts outstanding with a notional value of [removed: $525] [added: $458] million to hedge net balance sheet exposures (including [removed: $160] [added: $136] million to sell Japanese yen, [removed: $99] [added: $106] million to sell [removed: euros] [added: Indian rupees] and [removed: $94] [added: $74] million to sell [removed: Indian rupees).][added: British pounds).]

Similar hedging activities existed at year-end [removed: 2017.][added: 2018.]

[removed: Interest] [added: Interest] rate [removed: risk][added: risk]

We have the following potential exposure to changes in interest rates: [removed: (1)] [added: (i)] the effect of changes in interest rates on the fair value of our investments in cash equivalents and short-term investments, which could produce a gain or a loss; and [removed: (2)] [added: (ii)] the effect of changes in interest rates on the fair value of our debt.

As of December 31, [removed: 2018,] [added: 2019,] 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 about [removed: $4] [added: $8] million and decrease the fair value of our long-term debt by [removed: $330] [added: $532] million.

[removed: Equity risk][added: Equity risk]

Long-term investments at year-end [removed: 2018] [added: 2019] include the following:

[removed: | | • | Investments] [added: - *Investments] in mutual [removed: funds] [added: funds*] – includes mutual funds that were selected to generate returns that offset changes in certain liabilities related to deferred compensation arrangements. [removed: The mutual funds hold a variety of debt and equity investments. |]

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

[removed: | | • | Equity investments] [added: - *Equity investments*] – includes non-marketable (non-publicly traded) equity securities. [removed: |]

Changes in prices of the mutual fund investments are expected to offset related changes in deferred compensation liabilities such that a [removed: 10 percent] [added: 10%] increase or decrease in the investments’ fair values would not materially affect operating results.

See Note [removed: 7] [added: 6] to the financial statements for details of equity and other long-term investments.

The mutual funds hold a variety of debt and equity investments.

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[removed: We are incorporated in Delaware, headquartered] [added: With headquarters] in Dallas, Texas, [removed: and] [added: we] have design, manufacturing or sales operations in more than 30 countries.

[removed: We] [added: Our two reportable segments are Analog and Embedded Processing, and we] report the results of our remaining business activities in Other.

In [removed: 2018,] [added: 2019,] we generated [removed: $15.78] [added: $14.38] billion of revenue.

These advantages include [removed: (1)] [added: (i)] a strong foundation of manufacturing and technology, [removed: (2)] [added: (ii)] a broad portfolio of differentiated analog and embedded processing products, [removed: (3) the broadest] [added: (iii)] reach of market channels [added: including our sales force] and [removed: (4)] [added: TI.com and (iv)] diversity and longevity of our products, markets and customer positions.

Our strategic focus, and where we invest the majority of our resources, is on Analog and Embedded Processing, with a particular emphasis on designing and selling those products into the industrial and automotive [removed: markets, which we believe represent the best growth opportunities.][added: markets.]

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

We also believe that free cash flow [added: (cash flow from operations less capital expenditures)] will be valued only if it is productively invested in the business or returned to shareholders.

[removed: The combined effect of these sustainable competitive advantages is that over time] [added: Over time,] we have gained market share in Analog and Embedded Processing and [removed: have] grown and returned [added: all] free cash [removed: flow.][added: flow to our owners.]

[removed: Product information][added: Product information]

Our Analog segment generated [removed: $10.80] [added: $10.22] billion of revenue in [removed: 2018.][added: 2019.]

Analog semiconductors [removed: also] are [added: also] used to manage power in all electronic equipment by converting, distributing, storing, discharging, isolating and measuring electrical energy, whether the equipment is plugged into a wall or [removed: running off] [added: using] a battery.

Sales of our Analog products generated about [removed: 68 percent] [added: 71%] of our revenue in [removed: 2018.][added: 2019.]

According to external sources, the market for analog semiconductors was about [removed: $59] [added: $54] billion in [removed: 2018.][added: 2019.]

Our Analog segment’s revenue in [removed: 2018] [added: 2019] was about [removed: 18 percent] [added: 19%] of this fragmented market, [added: which is] the leading position.

[removed: Power][added: *Power*]

Our broad portfolio is designed to manage power requirements across different voltage levels using battery management solutions, portable components, power supply controls, point-of-load products, switches and interfaces, integrated protection devices, high-voltage [removed: products,] [added: products] and mobile lighting and display products.

[removed: Signal Chain][added: *Signal Chain*]

[removed: High Volume][added: *High Volume*]

Our Embedded Processing segment generated [removed: $3.55] [added: $2.94] billion of revenue in [removed: 2018.][added: 2019.]

Sales of Embedded Processing products generated about [removed: 23 percent] [added: 20%] of our revenue in [removed: 2018.][added: 2019.]

According to external sources, the market for embedded processors was about [removed: $21] [added: $18] billion in [removed: 2018.][added: 2019.]

Our Embedded Processing segment’s revenue in [removed: 2018] [added: 2019] was about [removed: 18 percent] [added: 16%] of this fragmented market, [added: which is] among the leaders.

[removed: Connected Microcontrollers][added: *Connected Microcontrollers*]

[removed: Processors][added: *Processors*]

Other generated [removed: $1.43] [added: $1.22] billion of revenue in [removed: 2018] [added: 2019] 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).

Examples of these items include acquisition [removed: charges;] [added: charges,] restructuring [removed: charges;] [added: charges,] and certain corporate-level items, such as litigation expenses, environmental costs, insurance [removed: settlements,] [added: settlements] and gains and losses from other activities, including asset dispositions.

The table below lists the major markets for our products in [removed: 2018] [added: 2019] and the estimated percentage of our [removed: 2018] [added: 2019] revenue that the market represented.

| [removed: Market] [added: Market] | | [removed: Sector] | [added: | | | Sector | | |]

| [removed: Industrial] [added: Industrial] | | [added: | | | |] Factory automation & control | [added: | |]

| (36% of TI revenue) | | [added: | | | |] Building automation | [added: | |]

| | | [added: | | | |] Grid infrastructure | [added: | |]

| | | [added: | | | |] Medical | [added: | |]

| | | [added: | | | |] Test & measurement | [added: | |]

| | | [added: | | | |] Aerospace & defense | [added: | |]

| | | [added: | | | |] Appliances | [added: | |]

| | | [added: | | | |] Motor drives | [added: | |]

| | | [added: | | | |] Pro audio, video & signage | [added: | |]

| | | [added: | | | |] Power delivery | [added: | |]

| | | [added: | | | |] Industrial transport | [added: | |]

| | | [added: | | | |] Lighting | [added: | |]

Our operations began in 1930, and we are incorporated in Delaware.

For many years, we have run our business with three overarching ambitions in mind.

First, we will act like owners who will own the company for decades.

Second, we will adapt and succeed in a world that is ever changing.

And third, we will be a company that we are personally proud to be a part of and that we would want as our neighbor.

When we are successful in achieving these ambitions, our employees, customers, communities and shareholders all win.

We believe these markets represent the best growth opportunities over the next decade or longer, due to increasing semiconductor content.

The combined effect of our ambitions, business model and sustainable competitive advantages is that we have continued to build a stronger company.

| | | | | | | | | |

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

| | | | | | | Retail automation & payments | | |

| | | | | | | PC & notebooks | | |

| | | | | | | TV | | |

Industrial and automotive markets also benefit from long product life cycles, which help to smooth the impact of cyclicality.

In addition, we plan manufacturing facility and equipment expansion ahead of demand, as well as utilize consignment inventory programs to give us improved insight into customer demand and more accurately manage factory loadings.

Over the past several years, we have been investing in new capabilities and evolving our distribution network to better align with our strategy to establish closer, more direct relationships with our customers.

Closer direct customer relationships give us better insight into customer needs and allow us to provide better service and greater assurance of supply, among other benefits.

As we expand these direct customer relationships over the next several years, we will have less business flowing through the distribution channel and therefore will require fewer distributors.

To meet these objectives and to allow greater flexibility in periods of high demand, we build ahead of demand long-lived, low-volume products and maintain inventory of other products that have a broad customer base and low risk of obsolescence.

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Mr. Ron became an executive officer in 2019.

| --- | --- |

We began operations in 1930.

We have two reportable segments: Analog and Embedded Processing.

Free cash flow is cash flow from operations less capital expenditures.

Microcontrollers tend to have minimal requirements for memory, program length and software complexity.

Our products are used in a wide range of applications and incorporate both wired and wireless communication with integrated analog functions to enable electronic equipment to sense, connect, log and transfer data.

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

| | | Electronic point of sale (EPOS) |

| | | |

| | | Portable electronics |

| | | TV |

We plan manufacturing facility and equipment expansion ahead of demand.

Additionally, we utilize consignment inventory programs with our customers and distributors that give us improved insight into customer 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.

To capitalize on manufacturing efficiencies, we build in advance of demand low-volume, long-lived devices with a broad customer base and a low risk of obsolescence.

Additionally, we sometimes maintain product inventory in unfinished wafer form to allow greater flexibility in periods of high demand.

Longer term, we expect to carry more inventory than we have in the past as we move towards higher consignment levels and more long-lived, low-volume devices to serve industrial customers, a growing portion of our business.

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[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| ☒ | [removed: ANNUAL] [added: | | ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: | |]

[removed: for] [added: For] the fiscal year ended December 31, [removed: 2018][added: 2019]

| ☐ | [removed: TRANSITION] [added: | | TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: | |]

[removed: for] [added: For] the transition period from [added: ___________] to [added: ___________]

[removed: Commission] [added: Commission] File Number [removed: 1-3761][added: 001-03761]

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

[removed: (Exact name] [added: | | | | (Exact Name] of Registrant as [removed: specified] [added: Specified] in [removed: its charter)][added: Its Charter) | | | | | | | | | | | | | | | | | |]

| [removed: Delaware] | [removed: 75-0289970] | [added: | Delaware | | | | | | 75-0289970 | | | | | | | | | | | |]

| [removed: (State] [added: | | | (State] of [removed: Incorporation)] [added: Incorporation)] | [removed: (I.R.S.] [added: | | | | | (I.R.S.] Employer Identification [removed: No.)] [added: No.)] | [added: | | | | | | | | | | |]

| [removed: 12500] [added: | | | 12500] TI Boulevard, Dallas, [removed: Texas] [added: Texas] | [removed: 75243] | [added: | | | | 75243 | | | | | | | | | | | |]

| [removed: (Address] [added: | | | (Address] of [removed: Principal Executive Offices)] [added: principal executive offices)] | [removed: (Zip Code)] | [added: | | | | (Zip Code) | | | | | | | | | | | |]

[removed: Registrant’s Telephone Number, Including Area Code: 214-479-3773][added: | | | | Registrant’s telephone number, including area code 214-479-3773 | | | | | | | | | | | | | | | | | |]

[added: |] Securities registered pursuant to Section 12(b) of the Act: [added: | | | | | | | | | | | | | | |]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | | [removed: Name] [added: | Trading Symbol(s) | | | Name] of each exchange on which [removed: registered] [added: registered] | [added: | | | | | | | |]

| Common Stock, par value $1.00 | | [added: | TXN | | |] The Nasdaq Global Select Market | [added: | | | | | | | |]

[added: |] Securities registered pursuant to Section 12(g) of the Act: None [added: | | | | | | | | | | | | | | |]

| [removed: Large accelerated] [added: Non-accelerated] filer | [removed: ☒] | | [removed: Accelerated filer |] ☐ | | [removed: Non-accelerated filer] | [removed: ☐] | | [added: |] Smaller reporting company | [added: | |] ☐ | [added: | | | | | | | | | | |]

[added: |] Emerging growth company [added: | | |] ☐ [added: | | | | | | | | | | | | | | | | | | | | |]

[added: |] If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange [removed: Act.☐][added: Act | | | | | | | | | | | | | | | | | | | | | ☐ | | |]

The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately [removed: $107,359,133,537] [added: $107,187,939,993] as of June 30, [removed: 2018.][added: 2019.]

[removed: 938,484,603] [added: 933,975,619] (Number of shares of common stock outstanding as of February [removed: 18, 2019)][added: 14, 2020)]

Part III hereof incorporates information by reference to the Registrant’s proxy statement for the [removed: 2019] [added: 2020] annual meeting of stockholders.

[removed: PART I][added: PART I]

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| Large accelerated filer | | | ☒ | | | | | | Accelerated filer | | | ☐ | | | | | | | | | | | |

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10-K 1 txn-10k_20181231.htm 10-K

| --- | --- |

OR

| | |

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

| --- | --- |

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[removed: |] * [removed: |] Leased. [removed: |]

[removed: |] † [removed: |] Portions of the facilities are leased and owned. [removed: This may include land leases. |]

Our facilities in the United States contained approximately [removed: 13.0] [added: 12.9] million square feet at December 31, [removed: 2018,] [added: 2019,] of which approximately [removed: 0.6] [added: 0.5] million square feet were leased.

Our facilities outside the United States contained approximately [removed: 10.0] [added: 9.7] million square feet at December 31, [removed: 2018,] [added: 2019,] of which approximately [removed: 1.5] [added: 1.4] million square feet were leased.

At the end of [removed: 2018,] [added: 2019,] we occupied substantially all of the space in our facilities.

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

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

| North Texas (Dallas, Richardson and Sherman) | | | X | | | | | | X | | |

This may include land leases.

| --- | --- |

| | | | Embedded |

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

| Dallas, Texas | X | | X |

| Sherman, Texas | X | | |

| Greenock, Scotland # | X | | |

| # | 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. |

[removed: PART II][added: PART II]

| --- | --- |

The following table contains information regarding our purchases of our common stock during the fourth quarter of [removed: 2018.][added: 2019.]

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

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

[removed: | (b) | In] [added: (b)In] addition to open-market purchases, [removed: 46,401] [added: 6,651] shares of common stock were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units. [removed: |]

[removed: | (c) | As] [added: (c)As] of December 31, [removed: 2018,] [added: 2019,] this amount consisted of the remaining portion of the $6.0 billion authorized in September 2017 and the $12.0 billion authorized in September 2018. [removed: No expiration date has been specified for these authorizations. |]

At December 31, 2019, we had 13,098 stockholders of record.

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

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| October 1, 2019 through October 31, 2019 | | | | | | 1,420,035 | | | | | | | | | $ | 124.15 | | | | | | | | 1,413,384 | | | | | | $ | 13.50 | | billion | | | | | | | | | | | |

| November 1, 2019 through November 30, 2019 | | | | | | 2,013,945 | | | | | | | | | 118.57 | | | | | | | | | 2,013,945 | | | | | | 13.26 | | | billion | | | | | | | | | | | |

| December 1, 2019 through December 31, 2019 | | | | | | 618,048 | | | | | | | | | 120.37 | | | | | | | | | 618,048 | | | | | | 13.18 | | | billion | | | | | | | | | | | |

| Total | | | | | | 4,052,028 | | | (b) | | | | | | $ | 120.80 | | (b) | | | | | | 4,045,377 | | | | | | $ | 13.18 | | billion (c) | | | | | | | | | | | |

On September 20, 2018, our board of directors authorized the purchase of an additional $12.0 billion of our common stock.

No expiration date has been specified for these authorizations.

| --- | --- |

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

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

| 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) |

| | | [removed: For] [added: | For] Years Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: (Millions] [added: (Millions] of dollars, except share and per-share [removed: amounts)] [added: amounts)] | | [removed: 2018] | [added: 2019] | | | | [removed: 2017] | | [added: 2018] | | | [removed: 2016] | | | [added: 2017] | | [removed: 2015] | | | | [added: 2016] | [removed: 2014] | | | | [added: | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Cash] [added: Cash] flow [removed: data:] [added: data:] | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Cash flows from operating activities | | [removed: $] | [added: $] | [removed: 7,189] [added: 6,649] | | | [added: | |] $ | [added: 7,189] | [removed: 5,363] | | | [added: |] $ | [added: 5,363] | [removed: 4,614] | | | [added: |] $ | [added: 4,614] | [removed: 4,397] | | | [added: |] $ | [added: 4,397] | [removed: 4,054] | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Capital expenditures | | | [added: 847] | [added: | | | | |] 1,131 | | | | | [added: |] 695 | | | | | [added: |] 531 | | | | | [added: |] 551 | | | | | [removed: 385] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Free cash flow (a) | | | [added: 5,802] | [added: | | | | |] 6,058 | | | | | [added: |] 4,668 | | | | | [added: |] 4,083 | | | | | [added: |] 3,846 | | | | | [removed: 3,669] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Dividends paid | | | [added: 3,008] | [added: | | | | |] 2,555 | | | | | [added: |] 2,104 | | | | | [added: |] 1,646 | | | | | [added: |] 1,444 | | | | | [removed: 1,323] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Stock repurchases | | | [added: 2,960] | [added: | | | | |] 5,100 | | | | | [added: |] 2,556 | | | | | [added: |] 2,132 | | | | | [added: |] 2,741 | | | | | [removed: 2,831] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Income] [added: Income] statement [removed: data:] [added: data:] | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Revenue by segment: | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Analog | | | [added: 10,223] | [added: | | | | |] 10,801 | | | | | [added: |] 9,900 | | | | | [added: |] 8,536 | | | | | [added: |] 8,339 | | | | | [removed: 8,104] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Embedded Processing | | | [added: 2,943] | [added: | | | | |] 3,554 | | | | | [added: |] 3,498 | | | | | [added: |] 3,023 | | | | | [added: |] 2,787 | | | | | [removed: 2,740] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Other | | | [added: 1,217] | [added: | | | | |] 1,429 | | | | | [added: |] 1,563 | | | | | [added: |] 1,811 | | | | | [added: |] 1,874 | | | | | [removed: 2,201] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Revenue | | | [added: 14,383] | [added: | | | | |] 15,784 | | | | | [added: |] 14,961 | | | | | [added: |] 13,370 | | | | | [added: |] 13,000 | | | | | [removed: 13,045] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Gross profit | | | [added: 9,164] | [added: | | | | |] 10,277 | | | | | [added: |] 9,614 | | | | | [added: |] 8,257 | | | | | [added: |] 7,575 | | | | | [removed: 7,447] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Operating expenses (R&D and SG&A) | | | [added: 3,189] | [added: | | | | |] 3,243 | | | | | [added: |] 3,202 | | | | | [added: |] 3,098 | | | | | [added: |] 2,995 | | | | | [removed: 3,164] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Acquisition charges | | | [added: 288] | [added: | | | | |] 318 | | | | | [added: |] 318 | | | | | [added: |] 319 | | | | | [added: |] 329 | | | | | [removed: 330] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Restructuring charges/other | | | [added: (36)] | [added: | | | | |] 3 | | | | | [added: |] 11 | | | | | [removed: (15] | [removed: )] [added: (15)] | | | | [removed: (71] | [removed: )] | [added: (71)] | | | [removed: (50] | [removed: )] | [added: | | | | | | | | | | | | | | | | | | | | | | | | |]

| Operating profit | | | [added: 5,723] | [added: | | | | |] 6,713 | | | | | [added: |] 6,083 | | | | | [added: |] 4,855 | | | | | [added: |] 4,322 | | | | | [removed: 4,003] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Net income | | [removed: $] | [added: $] | [removed: 5,580] [added: 5,017] | | | [added: | |] $ | [added: 5,580] | [removed: 3,682] | | | [added: |] $ | [added: 3,682] | [removed: 3,595] | | | [added: |] $ | [added: 3,595] | [removed: 2,986] | | | [added: |] $ | [added: 2,986] | [removed: 2,821] | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | |]

| A portion of net income is allocated to unvested restricted stock units (RSUs) on which we pay dividend equivalents. Diluted earnings per share (EPS) is calculated using the following: | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Income allocated to RSUs | | | [added: (31)] | [removed: (42] | [removed: )] | | | | [removed: (33] [added: (42)] | [removed: )] | | | | [removed: (44] | [removed: )] [added: (33)] | | | | [removed: (42] | [removed: )] | [added: (44)] | | | [removed: (43] | [removed: )] | [added: | (42) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Income allocated to common shares for diluted EPS | | [removed: $] | [added: $] | [removed: 5,538] [added: 4,986] | | | [added: | |] $ | [added: 5,538] | [removed: 3,649] | | | [added: |] $ | [added: 3,649] | [removed: 3,551] | | | [added: |] $ | [added: 3,551] | [removed: 2,944] | | | [added: |] $ | [added: 2,944] | [removed: 2,778] | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Average diluted shares outstanding (millions) | | | [added: 952] | [added: | | | | |] 990 | | | | | [added: |] 1,012 | | | | | [added: |] 1,021 | | | | | [added: |] 1,043 | | | | | [removed: 1,080] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Diluted EPS | | [removed: $] | [added: $] | [removed: 5.59] [added: 5.24] | | | [added: | |] $ | [added: 5.59] | [removed: 3.61] | | | [added: |] $ | [added: 3.61] | [removed: 3.48] | | | [added: |] $ | [added: 3.48] | [removed: 2.82] | | | [added: |] $ | [added: 2.82] | [removed: 2.57] | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Cash dividends declared per common share | | [removed: $] | [added: $] | [removed: 2.63] [added: 3.21] | | | [added: | |] $ | [added: 2.63] | [removed: 2.12] | | | [added: |] $ | [added: 2.12] | [removed: 1.64] | | | [added: |] $ | [added: 1.64] | [removed: 1.40] | | | [added: |] $ | [added: 1.40] | [removed: 1.24] | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | |]

[removed: | (a) | Free] [added: (a)Free] cash flow is a non-GAAP measure derived by subtracting capital expenditures from cash flows from operating activities. [removed: |]

| | | [removed: December 31,] | [added: December 31,] | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: (Millions] [added: (Millions] of [removed: dollars, except other data items)] [added: dollars)] | | [removed: 2018] | [added: 2019] | | | | [removed: 2017] | | [added: 2018] | | | [removed: 2016] | | | [added: 2017] | | [removed: 2015] | | | | [added: 2016] | [removed: 2014] | | | | [added: | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Balance] [added: Balance] sheet [removed: data:] [added: data:] | | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Cash, cash equivalents and short-term investments | | [removed: $] | [added: $] | [removed: 4,233] [added: 5,387] | | | [added: | |] $ | [added: 4,233] | [removed: 4,469] | | | [added: |] $ | [added: 4,469] | [removed: 3,490] | | | [added: |] $ | [added: 3,490] | [removed: 3,218] | | | [added: |] $ | [added: 3,218] | [removed: 3,541] | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Total assets | | | [added: 18,018] | [added: | | | | |] 17,137 | | | | | [added: |] 17,642 | | | | | [added: |] 16,431 | | | | | [added: |] 16,230 | | | | | [removed: 17,372] | | [added: | | | | | | | | | | | | | | | | | | | |]

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

| Long-term debt | | | [added: 5,303] | [added: | | | | |] 4,319 | | | | | [added: |] 3,577 | | | | | [added: |] 2,978 | | | | | [added: |] 3,120 | | | | | [removed: 3,630] | | [added: | | | | | | | | | | | | | | | | | | | |]

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

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

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

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

| Net income | | | $ | 5,017 | | | | | $ | 5,580 | | | | | $ | 3,682 | | | | | $ | 3,595 | | | | | $ | 2,986 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

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

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

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

| Other data - Number of: | | | | | | | | | | | | | | | | | | | | | | | | | |

| Employees | | | | 29,888 | | | | | 29,714 | | | | | 29,865 | | | | | 29,977 | | | | | 31,003 | |

| Stockholders of record | | | | 13,825 | | | | | 14,260 | | | | | 14,910 | | | | | 15,563 | | | | | 16,361 | |

[removed: List] [added: List] of [removed: Financial Statements (Item 15(a))][added: financial statements]

Income for each of the three years in the period ended December 31, [removed: 2018][added: 2019]

Comprehensive income for each of the three years in the period ended December 31, [removed: 2018][added: 2019]

Balance sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017][added: 2018]

Cash flows for each of the three years in the period ended December 31, [removed: 2018][added: 2019]

Stockholders’ equity for each of the three years in the period ended December 31, [removed: 2018][added: 2019]

Schedules have been omitted because the required information is not present or not present in amounts sufficient to require submission of the [removed: schedule,] [added: schedule] or because the information required is included in the consolidated financial statements or the notes thereto.

| [removed: Consolidated] [added: Consolidated] Statements of [removed: Income] [added: Income] | | [removed: For] [added: | | | | For] Years Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | |]

| [removed: (Millions] [added: (Millions] of dollars, except share and per-share [removed: amounts)] [added: amounts)] | | [removed: 2018] | | | | [added: 2019] | [removed: 2017] | | | | | [removed: 2016] [added: 2018] | | | | [added: | | 2017 | | | | | | | | | | | | | | | | | | | | |]

| Revenue | | [removed: $] | | [removed: 15,784] | | [added: $] | [added: 14,383 | | | | |] $ | [added: 15,784] | [removed: 14,961] | | | [added: |] $ | [added: 14,961] | [removed: 13,370] | | [added: | | | | | | | | | | | | | | | | |]

| Cost of revenue (COR) | | | | [added: | | 5,219 | | | | | |] 5,507 | | | | | [added: |] 5,347 | | | | | [removed: 5,113] | | [added: | | | | | | | | | | | | | |]

| Gross profit | | | | [added: | | 9,164 | | | | | |] 10,277 | | | | | [added: |] 9,614 | | | | | [removed: 8,257] | | [added: | | | | | | | | | | | | | |]

| Research and development (R&D) | | | | [added: | | 1,544 | | | | | |] 1,559 | | | | | [added: |] 1,508 | | | | | [removed: 1,356] | | [added: | | | | | | | | | | | | | |]

| Selling, general and administrative (SG&A) | | | | [added: | | 1,645 | | | | | |] 1,684 | | | | | [added: |] 1,694 | | | | | [removed: 1,742] | | [added: | | | | | | | | | | | | | |]

| Acquisition charges | | | | [added: | | 288 | | | | | |] 318 | | | | | [added: |] 318 | | | | | [removed: 319] | | [added: | | | | | | | | | | | | | |]

| Restructuring charges/other | | | | [added: | | (36) | | | | | |] 3 | | | | | [added: |] 11 | | | | | [removed: (15] | [removed: )] | [added: | | | | | | | | | | | | | |]

| Operating profit | | | | [added: | | 5,723 | | | | | |] 6,713 | | | | | [added: |] 6,083 | | | | | [removed: 4,855] | | [added: | | | | | | | | | | | | | |]

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

| Interest and debt expense | | | | [added: | | 170 | | | | | |] 125 | | | | | [added: |] 78 | | | | | [removed: 80] | | [added: | | | | | | | | | | | | | |]

| Income before income taxes | | | | [added: | | 5,728 | | | | | |] 6,686 | | | | | [added: |] 6,080 | | | | | [removed: 4,930] | | [added: | | | | | | | | | | | | | |]

| Provision for income taxes | | | | [added: | | 711 | | | | | |] 1,106 | | | | | [added: |] 2,398 | | | | | [removed: 1,335] | | [added: | | | | | | | | | | | | | |]

| Net income | | [removed: $] | | [removed: 5,580] | | [added: $] | [added: 5,017 | | | | |] $ | [added: 5,580] | [removed: 3,682] | | | [added: |] $ | [added: 3,682] | [removed: 3,595] | | [added: | | | | | | | | | | | | | | | | |]

| Earnings per common share (EPS): | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Basic | | [removed: $] | | [removed: 5.71] | | [added: $] | [added: 5.33 | | | | |] $ | [added: 5.71] | [removed: 3.68] | | | [added: |] $ | [added: 3.68] | [removed: 3.54] | | [added: | | | | | | | | | | | | | | | | |]

| Diluted | | [removed: $] | | [removed: 5.59] | | [added: $] | [added: 5.24 | | | | |] $ | [added: 5.59] | [removed: 3.61] | | | [added: |] $ | [added: 3.61] | [removed: 3.48] | | [added: | | | | | | | | | | | | | | | | |]

| Average shares outstanding (millions): | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Basic | | | | [added: | | 936 | | | | | |] 970 | | | | | [added: |] 991 | | | | | [removed: 1,003] | | [added: | | | | | | | | | | | | | |]

| Diluted | | | | [added: | | 952 | | | | | |] 990 | | | | | [added: |] 1,012 | | | | | [removed: 1,021] | | [added: | | | | | | | | | | | | | |]

| A portion of net income is allocated to unvested restricted stock units (RSUs) on which we pay dividend equivalents. Diluted EPS is calculated using the following: | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | |]

| Income allocated to RSUs | | | | [removed: (42] | [removed: )] | [added: (31)] | | | [removed: (33] | [removed: )] | | [added: (42)] | | [removed: (44] | [removed: )] | [added: | | (33) | | | | | | | | | | | | | | | | | | | | |]

| Income allocated to common stock for diluted EPS | | [removed: $] | | [removed: 5,538] | | [added: $] | [added: 4,986 | | | | |] $ | [added: 5,538] | [removed: 3,649] | | | [added: |] $ | [added: 3,649] | [removed: 3,551] | | [added: | | | | | | | | | | | | | | | | |]

[removed: |] See accompanying notes. [removed: | | | | | | | | | | | | | | | |]

| [removed: Consolidated] [added: Consolidated] Statements of Comprehensive [removed: Income] [added: Income] | | [removed: For] [added: | | | | For] Years Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

| [removed: (Millions] [added: (Millions] of [removed: dollars)] [added: dollars)] | | [removed: 2018] | | | | [added: 2019] | [removed: 2017] | | | | | [removed: 2016] [added: 2018] | | | | [added: | | 2017 | | | | | | | | | | | | | | |]

| Other comprehensive income (loss) | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | |]

| Net actuarial losses of defined benefit plans: | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | |]

| [removed: Adjustment,] [added: Adjustments,] net of tax effect of [removed: $35, ($26)] [added: ($37), $35] and [removed: $6] [added: ($26)] | | | | [removed: (98] | [removed: )] | [added: 88] | | | [added: | | | (98) | | | | | |] 92 | | | | | [removed: (43] | [removed: )] | [added: | | | | | | | |]

| Recognized within net income, net of tax effect of [removed: ($15), ($27)] [added: ($13), ($15)] and [removed: ($25)] [added: ($27)] | | | | [added: | | 38 | | | | | |] 50 | | | | | [added: |] 56 | | | | | [removed: 51] | | [added: | | | | | | | |]

| Prior service credit of defined benefit plans: | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | |]

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

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

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

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

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

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

| Shares: 2019 – 808,784,381; 2018 – 795,665,646 | | | | | | (34,495) | | | | | | (32,130) | | | | | | | | |

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

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

| (Millions of dollars) | | | | | | 2019 | | | | | | 2018 | | | | | | 2017 | | | | | | | | | | | | | | |

| Net income | | | | | | $ | 5,017 | | | | | $ | 5,580 | | | | | $ | 3,682 | | | | | | | | | | | | | |

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

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See accompanying notes.

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

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

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

| Dividend equivalents on RSUs | | | | | | — | | | | | | — | | | | | | (17) | | | | | | — | | | | | | — | | |

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

| Dividend equivalents on RSUs | | | | | | — | | | | | | — | | | | | | (17) | | | | | | — | | | | | | — | | |

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

| Net income | | | | | | — | | | | | | — | | | | | | 5,017 | | | | | | — | | | | | | — | | |

| Dividend equivalents on RSUs | | | | | | — | | | | | | — | | | | | | (17) | | | | | | — | | | | | | — | | |

| Balance, December 31, 2019 | | | | | | $ | 1,741 | | | | | $ | 2,110 | | | | | $ | 39,898 | | | | | $ | (34,495) | | | | | $ | (347) | |

See accompanying notes.

| Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total revenue | | | $ | 14,383 | | | | | $ | 15,784 | | | | | $ | 14,961 | | | | | | | | | | | | | |

(a)Revenue from products shipped into China was $7.2 billion, $7.0 billion and $6.6 billion in 2019, 2018 and 2017, respectively, which includes shipments to customers that manufacture in China and then export end products to their customers around the world, as well as distributors that transship inventory through China to service other countries.

Property, plant and equipment at our sites in China was $304 million and $313 million as of December 31, 2019 and 2018, respectively.

We determine if an arrangement is a lease at inception.

Lease assets represent our right to use underlying assets for the lease term, and lease liabilities represent our obligations to make lease payments over the lease term.

On the commencement date, leases are evaluated for classification, and assets and liabilities are recognized based on the present value of lease payments over the lease term.

We use our incremental borrowing rate based on the information available at commencement in determining the present value of lease payments.

Operating lease expense is generally recognized on a straight-line basis over the lease term.

| --- | --- |

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

| | | | | | | | | | | | | | | | | | Treasury | | | | | | | | |

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| | | Common | | | | | Paid-in | | | | | Retained | | | | | Common | | | | | | | | |

| Balance, December 31, 2015 | | $ | | 1,741 | | | $ | | 1,629 | | | $ | | 31,176 | | | $ | | (24,068 | ) | | $ | | (532 | ) |

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

| 2016 | | | | | | | | | | | | | | | | | | | | | | | | | |

| Dividend equivalents paid on restricted stock units | | | | — | | | | | — | | | | | (18 | ) | | | | — | | | | | — | |

| Dividend equivalents paid on restricted stock units | | | | — | | | | | — | | | | | (17 | ) | | | | — | | | | | — | |

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Specifically, many of our products are shipped to our customers in China who may include these parts in the manufacture of their own end products, which they may in turn export to their customers around the world.

| (a) | Revenue from products shipped into China was $7.0 billion, $6.6 billion and $6.0 billion in 2018, 2017 and 2016, respectively. |

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| | Net | | | | | | | | | | | | | | Net | | | | | | | | | | | | | | Net | | | | | | | | | | | | |

No potentially dilutive securities were excluded from the computation of diluted earnings per common share during 2016.

Consigned inventory was $314 million and $303 million as of December 31, 2018 and 2017, respectively.

Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606)

This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures.

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 most significant impact from adopting the standard relates to our accounting for royalty income on licenses of intellectual property; however, the effect of such change during any individual reporting period will not materially impact our results of operations and financial position.

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).

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.

ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

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[removed: Disclosure] [added: Disclosure] controls and [removed: procedures][added: procedures]

An evaluation as of the end of the period covered by this report was carried out under the supervision and with the participation of [removed: TI’s] management, including [removed: its chief executive officer] [added: our Chief Executive Officer] and [removed: chief financial officer,] [added: Chief Financial Officer,] of the effectiveness of the design and operation of [removed: TI’s] [added: our] disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).

[removed: Internal] [added: Opinion on internal] control over financial [removed: reporting][added: reporting]

[removed: Report] [added: *Report] by management on internal control over financial [removed: reporting][added: reporting*]

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: 2018] [added: 2019] 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: 2018.][added: 2019.]

Based on our assessment, we believe that, as of December 31, [removed: 2018,] [added: 2019,] our internal control over financial reporting is effective based on the COSO criteria.

[removed: Report] [added: *Report] of independent registered public accounting firm on internal control over financial [removed: reporting][added: reporting*]

[removed: Opinion on Internal Control] [added: Internal control] over [removed: Financial Reporting][added: financial reporting]

We have audited Texas Instruments Incorporated’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] 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: 2018,] [added: 2019,] 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 [removed: Texas Instruments Incorporated] [added: the Company] as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes, and our report dated February [removed: 22, 2019] [added: 20, 2020] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: opinion]

[removed: Definition] [added: Definition] and [removed: Limitations] [added: limitations] of [removed: Internal Control Over Financial Reporting][added: internal control over financial reporting]

[removed: ][added: ]

Report of independent registered public accounting firm

February 20, 2020

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February 22, 2019

[removed: PART III][added: PART III]

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The information with respect to directors’ names, ages, positions, term of office, periods of service and business experience, which is contained under the caption “Election of directors” in our proxy statement for the [removed: 2019] [added: 2020] annual meeting of stockholders, is incorporated herein by reference to such proxy statement.

The information [removed: with respect to Section 16(a) beneficial ownership reporting compliance] contained under the caption [added: “Committees] of the [removed: same name] [added: board” with respect to the audit committee and the audit committee financial expert] in our proxy statement for the [removed: 2019] [added: 2020] annual meeting of stockholders is incorporated herein by reference to such proxy statement.

[removed: Code] [added: Code] of [removed: Ethics][added: ethics]

[removed: Audit Committee][added: Audit committee]

| --- | --- |

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 2019 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: 2019] [added: 2020] 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: 2019] [added: 2020] annual meeting of stockholders is incorporated herein by reference to such proxy statement.