David Pahl - Vice President and Head of Investor Relations Kevin March - Senior Vice President, Chief Financial Officer, Finance and Operations.

Stacy Rasgon - Sanford C. Bernstein & Co. LLC C.J. Muse - Evercore ISI Toshiya Hari - Goldman Sachs Christopher Danely - Citigroup Global Markets, Inc.

Joseph Moore - Morgan Stanley Christopher Caso - CLSA Americas LLC Ambrish Srivastava - BMO Capital Markets David Wong - Wells Fargo Securities Vivek Arya - Bank of America Merrill Lynch Amit Daryanani - RBC Capital Markets LLC Ian Ing - MKM Partners John Pitzer - Credit Suisse Securities.

Good day and welcome to the Texas Instruments’ Third Quarter 2016 Earnings Release Conference Call. At this time, I’d like to turn the conference over to Dave Pahl. Please go ahead, sir..

Thank you and good afternoon. And thank you for joining our third quarter 2016 earnings conference call. As usual, Kevin March, TI’s Chief Financial Officer, is with me today. For any of you who missed the release, you can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through our website.

A replay will be available through the web. This call will include forward-looking statements that involve risks and uncertainties that could cause TI’s results to differ materially from management’s current expectations.

We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today as well as TI’s most recent SEC filings for a more complete description. I’ll start with a quick summary. Revenue and earnings per share for the quarter were slightly above our expected range.

Compared with a year ago, demand for our products continued to be strong in the automotive market and strengthened in the industrial market. Demand in the personal electronics market was about even from a year ago. In our core businesses, Embedded Processing revenue grew 10% and Analog revenue grew 6% compared with the same quarter a year ago.

Operating margin increased in both businesses. Earnings per share were $0.94. With that backdrop, Kevin and I will move on to the details of our performance, which we believe continues to be representative of the ongoing strength of our business model. In the third quarter, our cash flow from operations was $1.4 billion.

We believe that free cash flow growth, especially on a per share basis, is most important to maximizing shareholder value in the long-term. Free cash flow for the trailing 12-month period was $3.9 billion, up 8% from a year ago. Free cash flow margin was 29.5% of revenue, up from 27.5% a year ago.

We continue to benefit from our improved product portfolio and the efficiency of our manufacturing strategy, the latter of which includes our growing 300 millimeter Analog output and the opportunistic purchase of assets ahead of demand.

We believe that free cash flow will be valued only if it is productively invested in the business or returned to shareholders. For the trailing 12-month period, we returned $3.8 billion of cash to investors through a combination of dividends and stock repurchases.

Also today, we announced a 32% dividend increase that Kevin will provide more detail on in a moment. From a year ago, Analog revenue grew 6% due to High Performance Analog, Silicon Valley Analog and Power Management. High Volume Analog & Logic was about even.

Embedded Processing revenue increased by 10% from a year ago due to growth in all three product lines, led by Processors. In our Other segment, revenue grew 7% from a year ago primarily due to calculators and DLP products, and was partially offset by a decrease in royalties and custom ASIC products.

Now I’ll provide some insight into this quarter’s revenue performance by end markets versus a year-ago. Automotive demand remained strong, with most sectors growing double digits. Industrial demand improved and had broad-based growth, with most sectors growing.

Personal electronics was about even despite continued year-over-year decline in demand from one customer. This decline was offset by growth elsewhere. Communications equipment grew from a year ago and was even sequentially. And lastly, enterprise systems grew.

We continue to focus on making our Company stronger through manufacturing and technology, the breadth of our product portfolio, the reach of our market channels, and our diverse and long-lived positions. These four attributes, taken together, are at the core of what puts TI in a unique class of companies capable of long-term free cash flow growth.

Kevin will now review profitability, capital management and our outlook..

Thanks, Dave, and good afternoon, everyone. Gross profit in the quarter of $2.28 billion was 62.0% of revenue. From a year ago, gross profit margin increased 380 basis points, primarily due to lower manufacturing costs. Operating expenses were $804 million, or 21.9% of revenue.

Over the last 12 months, we’ve invested $1.33 billion in R&D, an important element of our capital allocation. Acquisition charges were $80 million, all of which were the ongoing amortization of intangibles, which is a non-cash expense. Operating profit was $1.40 billion, or 38.0% of revenue.

Operating profit was up 20% percent from the year-ago quarter. Operating margin for Analog was 40.9% and for Embedded Processing was 27.7%. Our focused investments on the best sustainable growth opportunities with differentiated positions enable both businesses to continue to contribute nicely to free cash flow growth.

Net income in the third quarter was $968 million, or $0.94 per share. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $1.41 billion in the quarter. Inventory days were 117, consistent with our long-term model of 105 to 135 days. Capital expenditures were $139 million in the quarter.

On a trailing 12-month basis, cash flow from operations was $4.46 billion, up 8% from the same period a year ago. Trailing 12-month capital expenditures were $585 million, or 4% of revenue. As a reminder, our long-term expectation is for capital expenditures, including the expansion of our 300 millimeter Analog capacity, to be about 4% of revenue.

Free cash flow for the past 12 months was $3.87 billion, or 29.5% of revenue. Free cash flow was 8% higher than a year ago. Our cash flow reflects the strength of our business model.

As we’ve said, we believe free cash flow growth, especially on a per share basis, is most important to maximizing shareholder value in the long-term and will be valued only if it is productively invested in the business or returned to shareholders.

Our intent, over time, remains to return all of our free cash flow plus any proceeds we receive from exercises of equity compensation minus net debt retirement. Consistent with this intent, we’ve announced a 32% or $0.12 increase in our quarterly dividend. This brings our quarterly dividend to $0.50 per share, or $2.00 annualized.

I also will note we have updated our long-term dividend model from our prior target of about 50% of trailing four-year average free cash flow to a range of 50% to 80%. This new range provides a more robust framework to adjust the allocation of our shareholder returns between dividend growth and share repurchases.

Today’s announcement extends our string of dividend increases to 13 consecutive years, which we believe are an important element of shareholder returns. In the third quarter, we paid $382 million in dividends and repurchased $500 million of our stock for a total return of $882 million.

Total cash returned to shareholders in the past 12 months was $3.82 billion. Outstanding share count was reduced by 2% over the past 12 months and by 42% since the end of 2004 when we initiated a program designed to reduce our share count.

These combined returns demonstrate our confidence in our business model and our commitment to return excess cash to our shareholders. Fundamental to our commitment to return cash are our cash management and tax practices. We ended the third quarter with $3.14 billion of cash and short-term investments, with our U.S.

entities owning about 80% of our cash. This on-shore cash is readily available for a variety of uses. Our orders in the quarter were $3.64 billion, up 6% from a year ago. Turning to our outlook, for the fourth quarter, we expect revenue in the range of $3.17 billion to $3.43 billion and earnings per share to be in the range of $0.76 to $0.86.

Our expectation for our annual effective tax rate in 2016 is unchanged at about 30% and this is the tax rate you should use for the fourth quarter and for the year. So in summary, we believe our third quarter results continue to demonstrate the strength of our business model. With that, let me turn it back to Dave..

Thanks, Kevin. Operator, you can now open the lines up for questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response, we will provide you an opportunity for an additional follow-up. Operator..

Thank you. [Operator Instructions] And we do have our first question from Stacy Rasgon with Bernstein Research..

Hi, guys. Thanks for taking my questions. First, I wanted to ask about OpEx is roughly flat quarter-over-quarter R&D up and you talked about increasing R& D investment.

Given that what are your expectations for R&D in total OpEx as we go into Q4 I know seasonally they would be down, but given the increases that we’re seeing in R&D how should we think it OpEx next quarter..

So Stacy I think as we’ve talked about R&D what we continue to reallocate and we will continue to reallocate through the first half of next year resources from other areas of the company into R&D.

But overall, you should think about OpEx in 4Q pretty much being the same as you’ve seen in each of the last several years that is down, because we have seasonal benefit there just from the fact that there’s going to be Thanksgiving and Christmas holidays going on. So total OpEx, the shift continued to be seasonally down..

Do you have a follow-up?.

Yes, thank you. From a follow-up, I wanted to ask about the change in strategy between or apparent change in strategy between dividends and buybacks.

Does that imply and I mean what does that imply in terms of how you see the current return on your own stock versus the potential for at least how you view the stability and strength of your business going forward, seems like you’re allocating more into dividends now?.

Well. And that is correct. We are planning to allocate more towards the dividends at this point in time. We’ve always said the buybacks will vary as a function of the stock price and a dividend model that can vary from 50% to 80%, we believe there is more thorough comprehensive or capital allocation.

This new model provides a more robust framework to adjust the allocation of our shareholder returns between dividend growth and share repurchases and that’s really what we’re talking about here..

Okay, great. Thank you, Stacy. Next caller please..

Our next question comes from C.J. Muse with Evercore..

Yes. Good afternoon. Thank you for taking my question. I guess first question on the analog margin side. I believe record levels for you 40 plus here. I think the highest I’ve seen out there is high 40s at linear.

Curious do you think that you could achieve that over time and as part of that thought process what percentage of your mix would have to be on 300 millimeter to get to that kind of level..

C.J. the possibility for improving margins in analog are not anything that we would hold back your expectation on, because you’ve actually hit the essence of the formula there and that is we have more and more revenue being generated on 300 millimeter where we enjoy a significant cost benefit versus any of our competitors.

We’ll see that just falling straight through not just the margin, but all the way through the free cash flow which is most important in our mind. So clearly, as you pointed out, this has been a new height for our analog segment and that business still has plenty of runway underneath as we go forward..

And than I just add C.J. that when you look at our practice of buying capacity well ahead of demand, that puts us in a places. At the end of last year, we had about $6 billion of open 300 millimeter capacity.

So as revenue grows that was 200 millimeter capacity that will help to grow free cash flow margin as well as operating margins in the businesses that you’ve been. So the fact that it’s 300 millimeter, of course and the fact that it’s 40% lower cost will certainly help us as well.

Do you have follow-up C.J.?.

I do. A shorter term question, as you look to your implied guide of down 10% and I know typical seasonality is kind of throwing out the door here, but I guess in the last five years your average is roughly down 7%.

So is there any one-time issues here, customer concentration, conservatism how should we think about that?.

Yes. I think if you look at the midpoint of the guidance C.J., it would suggest a year-on-year growth of about 3%. So I think in general, we just believe that’s just very consistent with the modest overall macro environment. And that’s really kind of been the case for the last few years.

So our view really remains that we’re in the slow growth economic environment. We don’t really see any catalyst that’s really going to change that one direction or the other any time soon. So thank you. We’ll go to the next caller please..

Our next caller is Toshiya Hari with Goldman Sachs..

Hi, thank you for taking my question. My first question is on the demand environment.

I was hoping you could provide a little bit more detail on the different buckets within TI industrial personal electronics, comms equipment in automotive and specifically what sort of trends you saw in the quarter and more importantly what your internal expectations are heading into Q4..

Okay. So let me just talk about what drove the quarter. As I mentioned before, the automotive market remained strong. We’ve got five sectors inside of that market and most of them had grown double-digit. Industrial demand improved and encouraging part of that was it was very, very broad-based and we had most of the sectors growing.

Inside the personal electronics that was even and that was despite continued year-over-year declines in demand from one customer, but I think that speaking to the diversity of our product portfolio and our customer base, we were able to offset that with growth elsewhere inside of personal electronics.

And then communications equipment grew from a year ago was even sequentially. And lastly, we did see growth in enterprise systems as well.

So when we look into the fourth quarter, we’ll call out anything that is moving around significantly, you’ve seen us do that in the past when we’ve had some type of discontinuity to help explain the results and that’s not the case as we move into fourth quarter.

So do you have a follow-up Tosh?.

Yes, I do. Thanks for that. So my second question is on M&A, clearly TI has been very disciplined especially with regards to valuation over the past couple of years maybe even several years. Obviously, you’ve seen a lot of activity elsewhere in the industry, I was just hoping you could provide an update on as to how you approach M&A detail? Thank you..

Tosh our first M&A is really no different than we’ve talked about in the past. There are really four attributes that we think that we have put us in a pretty unique position versus our competitors and actually quite difficult for others to duplicate.

Those include our approach to manufacturing technology, the breadth of our product portfolio, our reach to our market channels and the diversity and all that positions that our products enjoy in the marketplace.

So when we look at the acquisitions, it’s both trying to see if we can strengthen those four attributes and really if not so by looking at companies and standpoint of the strategic match. That means, we’ll have strategic match delivered to the strength of the competitive advantage we’ve been building on these last number of years.

So from a strategic standpoint that would probably include a company that’s likely engaged in Analog and probably has pretty good exposure to Industrial and Automotive which is where we believe most of the growth for some if that is going to happen for a quite a few years to come.

If a potential target passes the strategy test and we’ve got to get past the numbers test. And that really means the price that we pay for it. For the return on that price for the return on that investment capital exceed our weighted average cost of capital in about a four-year timeframe.

If we can get all that to work then we will remain disciplined and just stay on the sidelines.

As we look at what’s been going on in the M&A landscape these last couple of years and strike us that there are probably really two things underway for most participants in that space they’re either trying to increase their scale or broaden their market opportunities because they have fairly narrow markets.

In our case, we already enjoy advantages in both of those, so we don’t feel compelled to have to move unless we can pass that strategy and match test I just talked about a moment ago..

Okay. Thank you, Toshiya. And we’ll go to the next caller please..

We have Chris Danely with Citi..

Thanks guys. I guess one more question on the Q4 revenue guidance. I am just looking at the results of the last 10 or so years and it’s only been down double-digits I think once in eight years or something like that. I remember last year you guys got it down 7% sequentially.

Has anything changed recently? Have you seen any change in order rates, any change in the end markets, change in linearity, change in anything I’m just wondering why the downtime?.

Yes, again Chris, no big changes on that. I think it’s just consistency with the overall macro and if you look over the last five years, we’ve had a range from as high as down 1.3% and back in 2012 I think we’re down 12.1%. So certainly our range that we’ve given is certainly inside of those things from a sequential standpoint.

So that’s kind of how we are looking at them.

Do you have a follow-on?.

Yes.

Can you just talk about utilization rates? How much sort of below capacity you guys are? And where we should expect utilization rates to trend in Q4 and how you feel about inventory as a result of that?.

So Chris on utilization, it really hasn’t changed much from probably last three or four quarters and I don’t expect it to change anytime in the near-term. We load the factories on accordance with our expectation of demand and because of our inventory strategy sometimes that demands goes beyond just next quarter may include the following quarter.

From an inventory standpoint to recall that our model is to have 105 to 135 days. We had quite a bit more inventory last quarter and we from a day standpoint and we had – David mentioned that we have built that anticipation of growing revenues in the third quarter. We have had those growing revenues and our inventory days dropdown to 117.

So I expect that will continue to operate within the model days that we talk about and our utilizations will continue to be relatively stable as we’ve seen in the last three four quarters..

Great, thank you Chris. Next caller please..

Joe Moore with Morgan Stanley..

Great, thank you. I have one short-term question and one long-term question.

In the shorter-term you said Personal Electronics kind of flat year-over-year despite declines that one customer can give us a sense for which areas are growing year-over-year as other smartphones, PCs, where that growth components of that business right now?.

Yes, at that level we’ve had PCs come in year-over-year about even which is an improvement from what we saw. I think that outside of that one customer we’ve actually seen really broad based growth. And so I think that all the classical areas inside a Personal Electronics are doing well.

So you have a follow-on?.

Sure, thank you. And then longer-term side as you look at your automotive business. Obviously that’s a focus for you guys.

Can you talk a little bit about how do you plan for that business and how much of your effort is sort of aimed at sort of traditional building block catalog type products, and when you think about markets like autonomous driving where there might be sort of systems level solutions how much are you thinking about the sort of need to do something, that’s a little bit more revolutionary rather than evolutionary in that part market?.

Sure yes, so we have - we’ve got five sectors that make up the automotive market for us that we look at their infotainment, safety, Advanced Driver Assistance Systems or ADAS, Body Electronics and Lighting and then power train systems, which include hybrid and electric systems.

And we have a very intentional focus to invest across all of those five sectors.

We’re seeing that in the results with revenues and most of those sectors growing double digits and we have an approach inside of Automotive that is similar really across their other markets where we look to leverage our four competitive advantages and I think that that’s helping to turn in those results.

So we are favoring what I would say a catalog and application specific solutions. I wouldn’t put that into the category of full turnkey system level solutions where we’re doing what we would consider to be the work that our customers do. So we are providing them.

Building blocks that have different levels of integration but we’re not looking to provide a full ADAS system as an example. So will enable those systems and I think that that’s pretty consistent with what you see across all the markets and sectors that that we serve, so. Okay. Thanks Joe and we’ll go to next caller please..

And we have Chris Caso with CLSA..

Yes, thank you. Good evening. I guess first question would be regarding your comments on the industrial segment you talked about some broad improvement.

I guess could you talk about your level of visibility there and the likelihood of that sustaining into the end of the year and moving into next year?.

Can you just ask that once again make sure I got the question right, Chris..

Sorry, it was regarding the Industrial segment and your comments on that you talked about broad improvement.

If you can give some more color on that and your view on the potential for that to sustain into year end and into next year?.

Yes. I think as we talked about last quarter we did see an improvement in industrial demand it actually had been flat for several quarters year-on-year, so we were encouraged by that. This quarter we’ve built on that a little bit and like last quarter it was very, very broad-based.

I won’t try to go in and try to predict how long that will last or carryforward, but I definitely would say that we were encouraged as we saw most of those sectors growing. Yes, follow-on Chris..

I do kind follow-on is regarding inventory in both the channel at your customers and given the stronger growth in Q3 was any part of that growth perhaps contributed to some increase in inventory, understand that most of your inventory in the distribution channel on consignment now, but what’s your view of customer inventory levels right now?.

Yes. So if we look into the distribution channel inventory is actually decreased by about a half a week and it’s currently very, very low levels at about four weeks and that’s pretty similar to what we saw a year-ago.

So again, we just we believe that that inventory level just reflects an environment of really good product availability and we’ve got you know good inventories on our books available to be able to ship. We continue to have very stable lead times and those things kind of taken together just drive very high customer service metrics.

So customers in general are getting products when they want to have them. So and I’ll just make the reminder too that four weeks of inventory is just structurally lower because of the consignment programs that we have at our major distributors. So thank you Chris and we’ll go to the next caller please..

We have Ambrish Srivastava with BMO..

Hi, thank you. My first question is on the embedded side. This segment has been growing really well for the last third quarter in the year posting pretty good year-over-year growth.

What’s driving that Dave, I know it has three major segments? Could you just help us understand the drivers behind the growth?.

Yes I think when you look at the embedded market. We’ve seen good growth there for a number of quarters and if you look at the end markets they have a very good exposure to automotives, to industrial, and to that the comps markets. So as we talked about the communications market or really all three of those markets contributed to the growth.

And the great thing about the growth is it’s very broad-based its not in. One market it’s not in, one sector it’s not driven by one technology. So we feel really good about the sustainability of that growth and the great thing with that is it’s fallen through to the operating profit, which you can see inside of that business.

And most importantly is following through to free cash flow growth.

So you have a follow on Ambrish?.

Yes, I did.

Could you talk a little bit your – that this seems to be a change in the relationship with how you work with your major distribution partners and our sense is this is nothing new, but could you just help us understand how you thought through the pros and cons of this change and whether it’s just a matter of you having more in consignment or it’s trade-off between confidence of sourcing your own wins versus potential loss in future sales? Thank you..

Yes. So our relationship with distributors have been evolving and always evolving like any healthy business relationships of all, but especially as the reach of our channel advantages continues to strengthen. So you know you’ve heard Kevin and I both mention our four competitive advantages and certainly the reach of our channel is one of them.

And so that includes both the size and the skill of our direct sales and applications teams, but it also includes the growing capabilities of the web and TI.com.

So as an example three years ago we discontinued our incentive programs for demand creation on accounts that represented about 80% of the TAM where we had resources calling on those accounts directly.

We made that that change because our team is just more effective and efficient at and demand creation and this is played out as we’ve continued to gain share every year since then. And more recently, we’ve discontinue the incentives for remain balance of the accounts.

So we expect as with all relationships that will continue to evolve but we do believe distributors will continue to play an important role in order fulfillment for our customers. Okay, thank you Ambrish. And we will go to the next caller please..

We have David Wong with Wells Fargo..

Thanks very much. TI and several other chip companies had really impressive September year-over-year growth. That was many percent about guidance and you’re also giving December guidance which is solid even then the year-over-year growth in December looks like it’s going to be below September.

Can you give us some feel as to what’s happening here that things weaken and September progressed or is December particularly tough comparison?.

Yes. David if you look at our normal seasonality the one thing that we can conclude for sure is that the second and third quarter are seasonally strongest quarters fourth and first are seasonally weakest and so certainly that that will play in effect as we go into fourth quarter.

So it’s not unusual for us to see fourth quarter that’s down and in fact why we point to the year-over-year guidance and how that is consistent with just our belief is that things in the macro really haven’t changed too dramatically. So that has gone into the guidance. Do you have a follow-on..

No. I am good. Thank you..

Okay. Thank you David. .

The next question is from Vivek Arya with Bank of America Merrill Lynch..

Thanks for taking my question and congratulations on the strong results and dividend boost. Maybe I’ll also try my hand on this Q4 outlook question. Because I still don’t know whether this is a top down forecast or it’s a bottoms up forecast because with specific end market is going down sequentially so much for your overall sales to go down 10%.

And I don’t know whether it’s actually the other segment which had very strong growth in Q3 and I know Dave you mentioned on an year-on-year basis but last year I believe your sales were down in Q4.

So the comps should have been easier versus the last year, so that’s really my first question that is this top down forecast or is this a bottoms up forecast..

I think Dave has probably answered that same question about three or four times now and the answer still going to be the same. It is our best outlook right now based up on a continuing weak macro economy. We had a book-to-bill in 3Q of 0.99 compared that to 1.0 a year ago.

So the visibility into the quarter is a little bit reduce versus it was a year ago. There is no one market, no one customer, no one product, it is our best estimate at this point in time. And I’ll remind you it does include a range and that range probably comprehends to high probability where will land fourth quarters..

And I just add the fact that whenever we’ve had a big discontinuity that you’re searching around for, we’ve been clear at following those things out. So we want to be able to provide that transparency when it’s necessary. So do you have a follow-on..

Yes. Thank you. Now given the focus on free cash flow, why isn’t TI better utilizing an asset like your balance sheet because you’re operating, if my numbers are right at about 0.15 net debt to trailing EBITDA and most of your peers are comfortable operating at three to four times.

So given this low growth environment and sort of negative returns for holding cash, why is TI holding so much cash and why not buyback more of your stock if you think M&A looks expensive or not attractive right now. Thank you..

I think its now you consider our stock quite undervalued at the moment in times. I appreciate that observation. We have been buying back shares every quarter since the fourth quarter of 2004 our method for buying back shares is to be disciplined and consistent in how we go about doing it.

More importantly what we’ve talked about is that we will buyback more shares when the price is lower and probably fewer shares when the price is higher.

And so to that end we recently as with today’s announcement have updated our allocation budget if you will for what we allocate in free cash flow to dividends from 50% of our trailing four years average free cash flow to 50% to 80%.

We think this new range provides a more robust framework that allows us to adjust the allocation of our shareholder return between dividend growth and share repurchases.

To as far as leveraging the balance sheet any further right now that balance sheet has been leveraged higher in the past, we have been slowly paying that debt back down over time which means the debt is available today and important strategic opportunities present some at the right moment in time.

We believe that leveraging now just for the sake of leveraging would actually block the balance sheet and being available should an opportunity present ourselves out there from a strategic standpoint..

Okay, great. Thank you, Vivek. And we’ll go to the next caller please..

The next caller is Amit Daryanani with RBC Capital Markets..

Thanks a lot. I’ve a question and a follow-up as well. I guess just starting on the dividend increase that you guys announced.

Could you just talk about as I think about the future dividend payout strategies you guys have? Is it going to be more reflection of your free cash flow growth on an annualized basis or with the desire be to increase dividends along with free cash flow growth plus increasing the payout as you get to the midpoint of this 50% to 80% range.

So how do I think about this on an annual basis?.

Well, I think if you think about that what you have been seeing is probably what you will see and that is our free cash flow has been growing consistently for quite a few years now. And our formula design means that by definition are dividends are increasing consistent with that.

What this new range does is just give us more framework to adjust the allocation between dividends and stock buybacks. We call it that we take all the free cash flow and we use it either for dividend or buyback. And this allows us to allocate more towards dividend growth as opposed to buyback going forward.

If we reach a point where share price tends to be relatively lower at a point in time then this allows us to slow down the dividend growth rate and adjust that back towards dividend repurchases. So that’s what this new range is designed to do is to give us more flexibility to be responsive to the changing market valuations that we see out there.

Do you have follow-on Amit?.

Got it. If I can just follow-up, your R&D is sort of increased doubled-digit the few quarters. It sounds like, it will do so again.

Does that suggest that you kind of shifting a little bit from harvesting towards investing more in your business? And if that’s the case, should we recalibrate expectations maybe in calendar 2017 and 2018 that the share again that you guys are typically out 30, 40, 50 basis points could be somewhat higher given all the investments you’re making?.

Well, certainly we’re investing more in the R&D with the intent of continuing our share gains and ideally accelerating them. And really what we’re doing on the stuff, we are being very disciplined on R&D as well.

We’re not spending just for the sake of spending, but we’re spending because we have a higher degree of confidence and the ideas are coming to us that we can actually turn that into profitable revenue growth and ideally market share.

And we’re doing that by just reallocating our internal resources as we mentioned, meaning we’re not taking our total spending up, but we’re taking people who may have been working in the manufacturing lines or people who may have been working in sales or general administrative areas and putting them into working on R&D projects as well.

So it’s an overall reallocation internally and I would expect that that will continue to support our market share gains as we go forward..

Yes. I would add that we’ve gained on average 30 to 40 basis points of market share and I think we’ve gained share each of the last six years. I think we’re on track to be able to put a seven figure up and we’ll wait for the numbers to get posted before we declare that.

But again, market share just doesn’t move quickly in the markets that we’ve got and I think that just speaks to the quality of the market. So I think these opportunities that Kevin just talking about just gives us confidence that we can continue to have share gains into the future. Thanks, Amit and we will go to the next caller please..

Our next question is from Ian Ing with MKM Partners. .

Yes, thank you. In your prepared comments, you talked about being opportunistic in terms of purchasing assets ahead of demand, so do you anticipate any greater opportunities or fire sales as the industry I would say rapidly consolidates.

I mean, you probably got enough wafer fabrication equipment, but maybe there’s other areas like test and packaging? Thanks..

Yes. Ian, I would say that we are continuously on the lookout for buying assets that we don’t need now, but we believe we will need at some point in time, it could be a strategic cost advantage to us at some point in time and we have been in pretty much every quarter, picking up some piece of equipment here or there.

But again, we look at the total opportunity, meaning, can we get the right price and can it be something that will contribute to our free cash flow as we go forward and so we look at it in that context when we consider these sorts of things. So I would expect that we will continue to be out there, making opportunistic acquisitions.

Some may rise to the level of an announced, but most of them are probably just remain as they have been just spot purchases that we do from time to time as we look around the world..

Yes, and I’ll also point out we’re making those purchases while keeping our CapEx at about 4% of revenues, so continuing to strengthen that competitive advantage.

Do you have follow-up Ian?.

Yes, over to embedded processing. Questions on expectations for DSP applications, should we think of it is largely communication infrastructure 4G and 5G. I noticed there is DSP, IT companies out there, they are talking about using these chips as accelerators for things like Deep learning, artificial intelligence accelerating some applications..

Yes, I think when you look at our portfolio that the lines between what the DSP and what’s not a DSP blur to some degree so like you said in the comm’s equipment space you’ve got processors that have multicourse of both arms and DSP’s but also have a heavy component of hardware accleators.

Our OMAP products that are gaining traction and automotive and other applications inside of industrial have DSPs inside of them. If you look at our communication products where we support over a dozen different standards that help machines be connected and be smarter, they will have now DSP inside of them.

So we kind of just look at that as an enabling technology, the good news is that that business complements our analog product portfolio, very well it isn’t one type of product or technology that’s building that business. We’ve got a very good diversity of customers that we’re building over time.

So we’re encouraged by the confidence in the sustainability of that revenue and the wires underneath and the technology underneath are important on how we deliver it. But the business model is what’s really encouraging for us. So okay, we can go to - have time for one more caller please..

Our next question is from John Pitzer with Credit Suisse..

Yes, guys thanks for squeezing me in here. Kevin I guess my first question is you talked about OpEx being down sequentially in December quarter.

Depending upon how much down sequentially it is, you could still have gross margins kind of flat to up in the December quarter and notwithstanding the revenue decline, you’ve had in prior quarters were down revenue doesn’t necessarily mean down gross margins.

So kind of curious how you think about gross margins going into the calendar fourth quarter and what leverage you can still pull other than just volume to keep moving gross margins up into the right..

John, I think you know that we normally don’t try to give that precise of forecast other than just topline and bottom line and earnings. But I would just remind you that, just like 3Q benefited from lower costs we increased production in the 300-millimeter and depreciation rolling off.

Depreciation will continue to roll off and 300-millimeter will continue to become a bigger portion of wafers that we start. So you’ve got a number of underlying cost things that will continue to give us good results on the overall gross margin for those who are interested in that number..

That’s helpful. I appreciate it. And then Dave I guess is my follow-up. You talked about your largest customer in Personal Electronics being down year-over-year in the September quarter.

Do you think that’s an accurate reflection of kind of their unit demand or is there something going on with your content or your pricing? Would you expect that customer to be down again year-over-year in the December quarter?.

Well I will say that I’m not going to make any comments on their command. And with most of our large customers if I’ll just generalize the comment, most of our large customers will be on some type of consignment or hub based systems. So there is usually not a large delay and the demand when it actually gets pulled and when it’s used.

There’s always an exception to that overall. From a content standpoint, I think we’ve mentioned before that we sell hundreds of products into our largest customers including our largest one and we continue to see win new products. So we’re confident in the design wins that we’ve got and the revenue that will drive overall.

Okay, well thank you John for your call. End of Q&A.

Thanks everyone for listening tonight. A replay of this call will be available on our website. Good evening..

That does conclude today’s call. We appreciate your participation..