By Arsheeya Bajwa

(Reuters) - Texas Instruments ( TXN ) forecast first-quarter profit below analysts' estimates on Thursday, as the analog chipmaker grapples with an inventory buildup in its key automotive and industrial markets. 

Shares of the over 90-year-old company fell about 4% in extended trading after TI also forecast first-quarter revenue largely in line with estimates, disappointing investors waiting for a rebound in the analog chip market.

The automotive market has struggled to clear existing chip inventory in the face of tepid end-market demand, hurting orders for TI's chips amid a prolonged analog slump stemming from stock-piling during the pandemic. This is mirrored in the industrial market, which utilizes chips for tasks such as automating factories.

"A real recovery in analog market growth is still not happening," said Stifel analyst Tore Svanberg.

Fourth-quarter revenue from the industrial and automotive markets was down by single-digit percentage points sequentially.

The China automotive market, which has been a bright spot for TI, could not buoy the company past wider weakness. The market in "China did grow, but not enough to offset the declines in Europe, the U.S. and Japan," CEO Haviv Ilan said in a post-earnings call.

While revenue in the analog segment grew 2% in the fourth quarter, ending eight consecutive quarters of declines, the industrial and automotive markets - which make up a majority of revenue - have still not "seen the bottom," Ilan said.

Additionally, TI hasn't been notified about any investigations by China's commerce ministry into the company, CEO Ilan said in response to an analyst's questions about Beijing launching an investigation into U.S. government subsidies to its semiconductor sector over alleged harm caused to Chinese mature node chipmakers.

ELEVATED INVENTORY HITS PROFIT

The company forecast earnings in the range of 94 cents to $1.16 per share for the first quarter, compared to analysts' average estimate of $1.17 per share, according to data compiled by LSEG. 

Elevated inventory levels across these markets drove TI to reduce factory loadings - the quantity of products being manufactured - spreading fixed costs out over lesser output.

The high inventory levels will "lead to factory under utilization and will lead to some near-term gross margin impact," said Summit Insights analyst Kinngai Chan.

Inventory at the end of the fourth quarter was $4.5 billion, up $231 million from the previous quarter.

The company reported revenue of $4.01 billion for the fourth quarter, beating estimates of $3.88 billion.