Texas Instruments 2014 Annual Report Download - page 16

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

FORM 10-K

or suppliers operate.
We฀have฀manufacturing,฀data฀and฀design฀facilities฀and฀other฀operations฀in฀locations฀subject฀to฀natural฀occurrences฀such฀as฀health฀
epidemics, severe weather and geological events that could disrupt operations. In addition, our suppliers and customers have similar
facilities and operations in such locations. A natural disaster that results in a prolonged disruption to our operations, or the operations of
our customers or suppliers, may adversely affect our results and financial condition.
The loss of or significant curtailment of purchases by any of our largest customers could adversely affect
our results of operations.
We฀generate฀revenue฀from฀thousands฀of฀customers฀worldwide.฀The฀loss฀of฀or฀significant฀curtailment฀of฀purchases฀by฀one฀or฀more฀of฀our฀
top customers (including curtailments due to a change in the design or manufacturing sourcing policies or practices of these customers,
or฀the฀timing฀of฀customer฀or฀distributor฀inventory฀adjustments)฀may฀adversely฀affect฀our฀results฀of฀operations฀and฀financial฀condition.


In฀2014,฀about฀60฀percent฀of฀our฀revenue฀was฀generated฀from฀sales฀of฀our฀products฀฀through฀distributors.฀Our฀distributors฀carry฀
competing฀product฀lines,฀and฀our฀sales฀could฀be฀affected฀if฀our฀distributors฀promote฀competing฀products฀over฀our฀products.฀Moreover,฀
our฀results฀of฀operations฀could฀be฀affected฀if฀our฀distributors฀suffer฀financial฀difficulties฀that฀result฀in฀their฀inability฀to฀pay฀amounts฀owed฀
to us.

suffers a loss with respect to our inventory.
We฀have฀consignment฀inventory฀programs฀in฀place฀for฀some฀of฀our฀largest฀customers฀and฀distributors.฀If฀a฀customer฀or฀distributor฀were฀
to฀experience฀a฀loss฀with฀respect฀to฀TI-consigned฀inventory,฀our฀results฀of฀operations฀and฀financial฀condition฀may฀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.
Incorrect forecasts of customer demand could adversely affect our results of operations.
Our฀ability฀to฀match฀inventory฀and฀production฀with฀the฀product฀mix฀needed฀to฀fill฀orders฀may฀affect฀our฀ability฀to฀meet฀a฀quarter’s฀
revenue forecast. In addition, when responding to customers’ requests for shorter shipment lead times, we manufacture products
based฀on฀forecasts฀of฀customers’฀demands.฀These฀forecasts฀are฀based฀on฀multiple฀assumptions.฀If฀we฀inaccurately฀forecast฀customer฀
demand,฀we฀may฀hold฀inadequate,฀excess฀or฀obsolete฀inventory฀that฀would฀reduce฀our฀profit฀margins฀and฀adversely฀affect฀our฀results฀of฀
operations and financial condition.


Our manufacturing processes and critical manufacturing equipment, and those of some of our customers and suppliers, require that
certain฀key฀raw฀materials,฀natural฀resources฀and฀utilities฀be฀available.฀Limited฀or฀delayed฀access฀to฀and฀high฀costs฀of฀these฀items฀could฀
adversely฀affect฀our฀results฀of฀operations.฀Our฀products฀contain฀materials฀that฀are฀subject฀to฀conflict฀minerals฀reporting฀requirements.฀
Our฀relationships฀with฀customers฀and฀suppliers฀may฀be฀adversely฀affected฀if฀we฀are฀unable฀to฀describe฀our฀products฀as฀conflict-free.฀
Additionally, our costs may increase if customers demand that we change the sourcing of materials we cannot identify as conflict-free.
Our฀inability฀to฀timely฀implement฀new฀manufacturing฀technologies฀or฀install฀manufacturing฀equipment฀could฀adversely฀affect฀our฀results฀
of฀operations.฀We฀subcontract฀a฀portion฀of฀our฀wafer฀fabrication฀and฀assembly฀and฀testing฀of฀our฀products.฀We฀also฀depend฀on฀third฀
parties฀to฀provide฀advanced฀logic฀manufacturing฀process฀technology฀development.฀A฀limited฀number฀of฀third฀parties฀perform฀these฀
functions,฀and฀we฀do฀not฀have฀long-term฀contracts฀with฀all฀of฀them.฀Reliance฀on฀these฀third฀parties฀involves฀risks,฀including฀possible฀
shortages฀of฀capacity฀in฀periods฀of฀high฀demand,฀the฀third฀parties’฀inability฀to฀develop฀and฀deliver฀advanced฀logic฀manufacturing฀process฀
technology฀in฀a฀timely,฀cost฀effective,฀and฀appropriate฀manner฀and฀the฀possibility฀of฀third฀parties฀imposing฀increased฀costs฀on฀us.