| Metric [Unit: $ Million] | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 |
|--------------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Americas                 | **567.4**  **[0000827054-23-000020_mchp-20221231.htm:32]**  | **2,169.0**  **[0000827054-23-000080_mchp-20230331.htm:68]**  | **642.8**  **[0000827054-23-000132_mchp-20230630.htm:28]**  | **655.2**  **[0000827054-23-000185_mchp-20230930.htm:31]**  | **510.2**  **[0000827054-24-000024_mchp-20231231.htm:34]**  | N/A | N/A | N/A |
| Europe                   | **428.6**  **[0000827054-23-000020_mchp-20221231.htm:32]**  | **1,774.8**  **[0000827054-23-000080_mchp-20230331.htm:68]**  | **558.5**  **[0000827054-23-000132_mchp-20230630.htm:28]**  | **558.0**  **[0000827054-23-000185_mchp-20230930.htm:31]**  | **414.5**  **[0000827054-24-000024_mchp-20231231.htm:34]**  | N/A | N/A | N/A |
| Asia                     | **1,173.2**  **[0000827054-23-000020_mchp-20221231.htm:32]**  | **4,494.9**  **[0000827054-23-000080_mchp-20230331.htm:68]**  | **1,087.3**  **[0000827054-23-000132_mchp-20230630.htm:28]**  | **1,041.1**  **[0000827054-23-000185_mchp-20230930.htm:31]**  | **841.0**  **[0000827054-24-000024_mchp-20231231.htm:34]**  | N/A | N/A | N/A |
| Total Net Sales          | **2,169.2**  **[0000827054-23-000020_mchp-20221231.htm:32]**  | **8,438.7**  **[0000827054-23-000080_mchp-20230331.htm:68]**  | **2,288.6**  **[0000827054-23-000132_mchp-20230630.htm:28]**  | **2,254.3**  **[0000827054-23-000185_mchp-20230930.htm:31]**  | **1,765.7**  **[0000827054-24-000024_mchp-20231231.htm:34]**  | N/A | N/A | N/A |

bee9519e4b26e26244436a9f7687475c7e395a7c97096db8cd549d76385073c1

Microchip Technology Inc. (MCHP) develops, manufactures, and sells smart, connected, and secure embedded control solutions used in a wide variety of applications **[0000827054-24-000098_mchp-20240331.htm:5]** **[0000827054-24-000139_mchp-20240630.htm:25]** **[0000827054-24-000206_mchp-20240930.htm:26]** **[0000827054-24-000024_mchp-20231231.htm:28]**. The company's strategic focus includes general-purpose and specialized 8-bit, 16-bit, and 32-bit mixed-signal microcontrollers, microprocessors, analog, FPGA, and memory products **[0000827054-24-000098_mchp-20240331.htm:5]** **[0000827054-24-000139_mchp-20240630.htm:25]** **[0000827054-24-000206_mchp-20240930.htm:26]** **[0000827054-24-000024_mchp-20231231.htm:28]**. These products are part of their Total System Solution (TSS), which combines hardware, software, and services to help customers increase revenue, reduce costs, and manage risks **[0000827054-24-000098_mchp-20240331.htm:5]** **[0000827054-24-000139_mchp-20240630.htm:25]** **[0000827054-24-000206_mchp-20240930.htm:26]** **[0000827054-24-000024_mchp-20231231.htm:28]**.

1. **Mixed-Signal Microcontrollers** - Develops and sells 8-bit, 16-bit, and 32-bit microcontrollers, forming the largest component of the company's semiconductor products segment.
2. **Analog Products** - Offers a range of analog solutions that are integral to the company's semiconductor offerings.
3. **Other Products and Services** - Includes FPGA products, memory products, and manufacturing services, contributing to the semiconductor products segment.
4. **Technology Licensing** - Provides technology licensing services as a separate business segment.

2cc9b58a9323d349926aae9e69a8941f3936f080ef643d09bd37c4cf9589449b

| Metric (Unit: USD Million) | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 |
|----------------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| **Total Net Sales**        | **2,169**  **[MCHP_3395780_0]**  | **2,233**  **[0000827054-23-000060_exhibit991q4fy23.htm:0]**  | **2,288.6**  **[0000827054-23-000132_mchp-20230630.htm:6]**  | **2,254.3**  **[0000827054-24-000098_mchp-20240331.htm:80]**  | **1,765.7**  **[MCHP_3405900_0]**  | **7,634.4** (FY)  **[8_8]**  | **1,241**  **[0000827054-24-000138_exhibit991q1fy25.htm:1]**  | **1,164**  **[0000827054-24-000205_exhibit991q2fy25.htm:1]**  |
| **Semiconductor Products** | N/A     | N/A     | **2,254.8**  **[0000827054-23-000132_mchp-20230630.htm:6]**  | **2,227.7**  **[0000827054-24-000098_mchp-20240331.htm:80]**  | **1,741.5**  **[MCHP_3405900_0]**  | N/A     | N/A     | N/A     |
| **Technology Licensing**   | N/A     | N/A     | **33.8**  **[0000827054-23-000132_mchp-20230630.htm:6]**  | **26.6**  **[0000827054-24-000098_mchp-20240331.htm:80]**  | **24.2**  **[MCHP_3405900_0]**  | N/A     | N/A     | N/A     |
| **Mixed-signal Microcontrollers** | **56.3%** of total  **[MCHP_3405900_0]**  | **56.3%** of total (FY)  **[13_13]**  | **1,301.7**  **[0000827054-23-000132_mchp-20230630.htm:6]**  | N/A     | N/A     | **56.0%** of total (FY)  **[8_8]**  | N/A     | N/A     |
| **Analog**                 | **28%** of total  **[MCHP_3405900_0]**  | **28.2%** of total (FY)  **[13_13]**  | **633.6**  **[0000827054-23-000132_mchp-20230630.htm:6]**  | N/A     | N/A     | **26.4%** of total (FY)  **[8_8]**  | N/A     | N/A     |
| **Other**                  | N/A     | **15.5%** of total (FY)  **[13_13]**  | **353.3**  **[0000827054-23-000132_mchp-20230630.htm:6]**  | N/A     | N/A     | **17.6%** of total (FY)  **[8_8]**  | N/A     | N/A     |

7b5be64d24636398fb93b4290906e400c210b5131f91dee69f5d11f5e11b329f

1. Given the prolonged reliance on high turns business due to customer uncertainty and short lead times, what specific actions is Microchip taking to encourage customers to place longer-term orders to improve visibility into future demand?
2. With the downturn being deeper and longer than anticipated, how is Microchip managing the risks of significant inventory write-downs or the need for restructuring, and can you assure investors that the dividend will be maintained without impacting the company's long-term financial health?
3. As competitors report low to mid-single-digit pricing declines for 2025, how does Microchip plan to adjust its pricing strategy to stay competitive without eroding profit margins, particularly amidst aggressive pricing in new design wins?
4. Underutilization charges and elevated inventory reserves are significantly impacting gross margins; what are your plans to mitigate these pressures, and at what revenue levels do you anticipate gross margins returning to historical norms?
5. You mentioned challenges in quantifying the success of your Total System Solutions strategy across your extensive customer base; how can investors evaluate the tangible impact of TSS on revenue growth and increased customer content going forward?

2557c7af5fa4c4c136bdd000af61a763fd8a99d141e275f017b827ceea07b60d

### Q2 2025 Earnings Call
- **Issued Period**: Q2 2025
- **Guided Period**: Q3 2025
- **Guidance**:
  - **Net Sales**: $1.025 billion to $1.095 billion  **[MCHP_3405900_4]** .
  - **Non-GAAP Gross Margin**: 57% to 59% of sales  **[MCHP_3405900_4]** .
  - **Non-GAAP Operating Expenses**: 33.2% to 34.8% of sales  **[MCHP_3405900_4]** .
  - **Non-GAAP Operating Profit**: 22.2% to 25.8% of sales  **[MCHP_3405900_4]** .
  - **Non-GAAP Diluted Earnings Per Share**: $0.25 to $0.35  **[MCHP_3405900_4]** .

### Q1 2025 Earnings Call
- **Issued Period**: Q1 2025
- **Guided Period**: Q2 2025
- **Guidance**:
  - **Net Sales**: $1.12 billion to $1.18 billion  **[MCHP_3395780_5]** .
  - **Non-GAAP Gross Margin**: 58.5% to 59.5% of sales  **[MCHP_3395780_5]** .
  - **Non-GAAP Operating Expenses**: 30% to 31% of sales  **[MCHP_3395780_5]** .
  - **Non-GAAP Operating Profit**: 27.5% to 29.5% of sales  **[MCHP_3395780_5]** .
  - **Non-GAAP Diluted Earnings Per Share**: $0.40 to $0.46  **[MCHP_3395780_5]** .

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: June 2024 quarter
- **Guidance**:
  - **Net Sales**: $1.22 billion to $1.26 billion  **[MCHP_3386630_5]** .
  - **Non-GAAP Gross Margin**: 59% to 61% of sales  **[MCHP_3386630_5]** .
  - **Non-GAAP Operating Expenses**: 28.25% to 28.75% of sales  **[MCHP_3386630_5]** .
  - **Non-GAAP Operating Profit**: 30.25% to 32.75% of sales  **[MCHP_3386630_5]** .
  - **Non-GAAP Diluted Earnings Per Share**: $0.48 to $0.56  **[MCHP_3386630_5]** .

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: Q4 2024
- **Guidance**:
  - **Net Sales**: $1.225 billion to $1.425 billion  **[MCHP_3371646_4]** .
  - **Non-GAAP Gross Margin**: 59% to 61.6% of sales  **[MCHP_3371646_4]** .
  - **Non-GAAP Operating Expenses**: 26.9% to 30.7% of sales  **[MCHP_3371646_4]** .
  - **Non-GAAP Operating Profit**: 28.3% to 34.7% of sales  **[MCHP_3371646_4]** .
  - **Non-GAAP Diluted Earnings Per Share**: $0.46 to $0.68  **[MCHP_3371646_4]** .
  - **Non-GAAP Operating Margin for Full Fiscal Year '24**: 43.6% at the midpoint of the March quarter guidance  **[MCHP_3371646_4]** .
  - **Inventory Days**: 225 to 230 days  **[MCHP_3371646_1]** .
  - **Capital Return to Shareholders**: 82.5% of the December quarter adjusted free cash flow  **[MCHP_3371646_2]** .

d4932483c94544a3e97fd00800fa214ec262f317cefcc1ecf6dbc58a46644345

Total Revenue [USD, Millions]

Cost of Goods Sold (COGS) [USD, Millions]

SG&A [USD, Millions]

R&D [USD, Millions]

D&A [USD, Millions]

Interest Expense [USD, Millions]

Operating Income (EBIT) [USD, Millions]

Net Income [USD, Millions]

EPS - Basic [USD, Per Share]

EPS - Diluted [USD, Per Share]

940a73ccf594ed11c60bddada27caa5a0e5acec53b9f94a7bffc1d7f6dd648c8

9c3eab2ddd5a1fc80a96190595f408e1340778c41773a9ea3280d2a62db57682

Semiconductor Products

- Mixed-signal Microcontrollers

- Analog

- Other

- Analog, Interface, Mixed Signal, and Timing

- Field-Programmable Gate Array Products

- Memory Products

- Multi-market and Other

Technology Licensing

Total Revenue

bbfbd2eb22079c26179f191c93b7789bede0be41239665fc6e70513cdecde2cd

**Quarterly guidance for Q3 2025:**
- **Net Sales**: $1.025B to $1.095B  **[MCHP_3405900_4]**  (lowered from $1.12B to $1.18B  **[MCHP_3395780_5]** )  
- **Non-GAAP Gross Margin**: 57% to 59%  **[MCHP_3405900_4]**  (lowered from 58.5% to 59.5%  **[MCHP_3395780_5]** )  
- **Non-GAAP Operating Expenses**: 33.2% to 34.8%  **[MCHP_3405900_4]**  (raised from 30% to 31%  **[MCHP_3395780_5]** )  
- **Non-GAAP Operating Profit**: 22.2% to 25.8%  **[MCHP_3405900_4]**  (lowered from 27.5% to 29.5%  **[MCHP_3395780_5]** )  
- **Non-GAAP Diluted Earnings Per Share**: $0.25 to $0.35  **[MCHP_3405900_4]**  (lowered from $0.40 to $0.46  **[MCHP_3395780_5]** )  

bd2eed9da38b007232281e74daaf452cae245f2604d6bc7f438188bab7e1f5fc

Americas

Europe

Asia

- Germany

- China

- Taiwan

b1102c2a4e7e32d486f9a579b6aa2ea673fd9a354b42a0bce9ad761970fe7366

| Name                  | Position                                                                 | Start Date       | Short Bio                                                                                                                                                                                                 |
|-----------------------|--------------------------------------------------------------------------|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Ganesh Moorthy        | President, Chief Executive Officer, and Director                         | March 2021       | Ganesh Moorthy has been serving as the President and CEO of Microchip Technology Inc. since March 2021 and has been a member of the Board of Directors since January 2021. He joined Microchip in 2001  **[0000827054-24-000098_mchp-20240331.htm:15]** **[0000827054-24-000128_mchp-20240708.htm:29]** . |
| Steve Sanghi          | Executive Chair                                                          | March 2021       | Steve Sanghi has been with Microchip since August 1990, serving in various leadership roles. He was CEO from October 1991 to March 2021 and has been Chair of the Board since October 1993  **[0000827054-24-000098_mchp-20240331.htm:15]** **[0000827054-24-000128_mchp-20240708.htm:28]** **[0000827054-23-000104_mchp-20230707.htm:29]** .          |
| Richard J. Simoncic   | Chief Operating Officer                                                  | April 1, 2024    | Richard J. Simoncic is the COO at Microchip Technology Incorporated. He was promoted to this position on April 1, 2024. He has been with Microchip since 1990  **[0000827054-24-000098_mchp-20240331.htm:15]** **[0000827054-24-000128_mchp-20240708.htm:60]** .                                       |
| J. Eric Bjornholt     | Senior Vice President and Chief Financial Officer                        | January 2009     | J. Eric Bjornholt has been serving as the Senior Vice President and CFO of Microchip since January 2009. He joined Microchip in 1995 and has served in various financial management capacities  **[0000827054-24-000098_mchp-20240331.htm:15]** **[0000827054-23-000080_mchp-20230331.htm:14]** .         |
| Stephen V. Drehobl    | Senior Vice President, MCU8 and MCU16 Business Units                     | August 1989      | Stephen V. Drehobl has been employed by Microchip since August 1989. He was promoted to Senior Vice President in 2019. He retired from his executive officer role on June 7, 2024  **[0000827054-24-000098_mchp-20240331.htm:15]** **[0000827054-24-000098_mchp-20240331.htm:16]** **[0000827054-24-000128_mchp-20240708.htm:60]** .                   |
| Steve Sanghi          | Interim Chief Executive Officer and President, Chair of the Board        | November 18, 2024| Steve Sanghi is currently serving as the Interim CEO and President and continues as Chair of the Board. He was reappointed as interim CEO and President on November 18, 2024  **[0000827054-24-000221_mchp-20241118.htm:1]** .                             |

8fdcdcf7f731792088b2c980e22d7ae75af9967dbb30ef7ba54070e004a19c11

| Program Details           | Program 1                |
|---------------------------|--------------------------|
| Approval Date             | November 2021  **[0000827054-24-000206_mchp-20240930.htm:22]** **[0000827054-24-000206_mchp-20240930.htm:41]** **[0000827054-24-000206_mchp-20240930.htm:100]**   |
| End Date/Duration         | No expiration date  **[0000827054-24-000206_mchp-20240930.htm:22]** **[0000827054-24-000206_mchp-20240930.htm:41]** **[0000827054-24-000206_mchp-20240930.htm:100]**  |
| Total additional amount   | **$4.00 billion**  **[0000827054-24-000206_mchp-20240930.htm:22]** **[0000827054-24-000206_mchp-20240930.htm:41]** **[0000827054-24-000206_mchp-20240930.htm:100]**  |
| Remaining authorization   | **$1.56 billion**  **[0000827054-24-000206_mchp-20240930.htm:22]** **[0000827054-24-000206_mchp-20240930.htm:41]** **[0000827054-24-000206_mchp-20240930.htm:100]**  |
| Details                   | Used to fund share issuance requirements under the Company's equity incentive plans  **[0000827054-23-000080_mchp-20230331.htm:146]** **[0000827054-23-000185_mchp-20230930.htm:22]** **[0000827054-23-000132_mchp-20230630.htm:19]** **[0000827054-23-000020_mchp-20221231.htm:22]** **[0000827054-22-000193_mchp-20220930.htm:19]** **[0000827054-24-000206_mchp-20240930.htm:22]** **[0000827054-24-000024_mchp-20231231.htm:24]** **[0000827054-24-000139_mchp-20240630.htm:21]**  |

b090c6ae404aed824a7387085a11ee1fd25c9564f661394b1efeb9ddb987e51c

Adjustments for Non-Cash Items [USD, Millions]

Stock-Based Compensation [USD, Millions]

Changes in Working Capital [USD, Millions]

Capital Expenditures (CapEx) [USD, Millions]

Proceeds from / Repayments of Debt [USD, Millions]

Share Repurchases [USD, Millions]

Dividend Payments [USD, Millions]

Net Change in Cash [USD, Millions]

708a8690df91967212bc90fa17d7ef55e02c729ea65d80c3c942c003a04c07d5

- **Microchip believes they are in the later stages of an industry-wide inventory correction and anticipate a market recovery, positioning them to benefit from the turnaround.**  **[MCHP_3405900_8]**
- **Their Total System Solution (TSS) strategy is increasing content per customer application, creating multiplier effects and driving future growth opportunities.**  **[MCHP_3405900_18]**
- **Microchip is well-positioned in the data center and AI markets, with strong product offerings like PCIe switches, SSD controllers, and CXL solutions, expecting growth in these areas.**  **[MCHP_3405900_16]**

1ecee0a741f1bcac83fc8804779696bd96c55bcc3ba57ebcfa70e5171f6e7d41

| Name               | Start Date | End Date | Reason for Change |
|--------------------|------------|----------|-------------------|
| Ernst & Young LLP | 2001  **[0000827054-24-000098_mchp-20240331.htm:114]**    | Present  | Current auditor   |

744fbc221b7db85ae2890dabbf1a4e8b2bd9e05e6987ff8f1815b5747b5f9165

c6ec90ebc2c9e9946ab5c4260a0dc4d86874de9b52cf26d9049ade6e2963b165

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

- Total Revenue: $1,163.8 million (**-48%** YoY)  **[0000827054-23-000185_mchp-20230930.htm:6]** **[0000827054-24-000206_mchp-20240930.htm:29]** **[0000827054-24-000206_mchp-20240930.htm:7]**   
- Semiconductor Products: $1,125.0 million (-49% YoY)  **[0000827054-23-000185_mchp-20230930.htm:6]** **[0000827054-24-000206_mchp-20240930.htm:29]** **[0000827054-24-000206_mchp-20240930.htm:7]**   
  • Mixed-Signal Microcontrollers: $594.6 million (-53% YoY)  **[0000827054-23-000185_mchp-20230930.htm:6]** **[0000827054-24-000206_mchp-20240930.htm:29]** **[0000827054-24-000206_mchp-20240930.htm:7]**   
  • Analog: $292.1 million (-53% YoY)  **[0000827054-23-000185_mchp-20230930.htm:6]** **[0000827054-24-000206_mchp-20240930.htm:29]** **[0000827054-24-000206_mchp-20240930.htm:7]**   
- Technology Licensing: $38.8 million (**+46%** YoY)  **[0000827054-23-000185_mchp-20230930.htm:6]** **[0000827054-24-000206_mchp-20240930.htm:29]** **[0000827054-24-000206_mchp-20240930.htm:7]**   
- Americas: $370.2 million (-44% YoY)  **[0000827054-23-000185_mchp-20230930.htm:31]** **[0000827054-24-000206_mchp-20240930.htm:31]**   
- Europe: $212.8 million (**-62%** YoY)  **[0000827054-23-000185_mchp-20230930.htm:31]** **[0000827054-24-000206_mchp-20240930.htm:31]**   
- Asia: $580.8 million (-44% YoY)  **[0000827054-23-000185_mchp-20230930.htm:31]** **[0000827054-24-000206_mchp-20240930.htm:31]**   
- Net Income: $78.4 million (**-88%** YoY)  **[0000827054-23-000185_mchp-20230930.htm:3]** **[0000827054-24-000206_mchp-20240930.htm:3]**   
- EPS (Basic): $0.15 (-88% YoY)  **[0000827054-23-000185_mchp-20230930.htm:3]** **[0000827054-24-000206_mchp-20240930.htm:3]**   

68a76a5dce81df8eef6b104948a2ebb781eb5408a4fb3ec7fb9ab8fdba3fbf1d

- **New bookings are growing** and **cancellations are decreasing**, signaling improving demand trends.  **[MCHP_3395780_16]** **[MCHP_3395780_8]**
- **Strong early interest in new 64-bit microprocessor products** from customers, potentially driving future growth.  **[MCHP_3395780_25]** **[MCHP_3395780_26]**
- **Stable pricing environment with no significant pricing pressure**, helping maintain gross margins.  **[MCHP_3395780_14]**

ae120bc84743dddf8cb58cf92b7c67728d3652cc089cac53b777a55dedce0078

5eba6c7ff10d122e3916de5ee99d29127b73b99d1083e8fde83d8752b7984129

a1e2739783388c40e3b83acaf964adc48bd0be2b9083dd719353681bc1ee0d14

Days of inventory (days)

Days of inventory for distributors (days)

Percentage of assembly requirements performed internally (percent)

Percentage of test requirements performed internally (percent)

Percentage of net sales from products produced at outside wafer foundries (percent)

c2cb08a1c2695e550b6ea14d22ce06685a747b8426ff39918615afa6f9bdf77c

| Year | Amount Due (in millions) | Debt Type                  | Interest Rate (%) | % of Total Debt                                                                 |
|----------|------------------------------|---------------------------------|-----------------------|------------------------------------------------------------------------------------|
| 2024     | $665.5                       | 2020 Senior Convertible Debt   | 0.125                 | 10.3% = (665.5 / 6,454.2) * 100 **[0000827054-24-000206_mchp-20240930.htm:12]** **[0000827054-24-000206_mchp-20240930.htm:11]**                                   |
| 2024     | $1,544.0                     | Commercial Paper               | 5.32                  | 23.9% = (1,544.0 / 6,454.2) * 100 **[0000827054-24-000206_mchp-20240930.htm:11]** **[0000827054-24-000206_mchp-20240930.htm:15]**                                 |
| 2025     | $750.0                       | 2025 Term Loan Facility        | Variable              | 11.6% = (750.0 / 6,454.2) * 100 **[0000827054-24-000206_mchp-20240930.htm:11]**                                           |
| 2025     | $1,200.0                     | 4.250% 2025 Notes              | 4.250                 | 18.6% = (1,200.0 / 6,454.2) * 100 **[0000827054-24-000206_mchp-20240930.htm:12]** **[0000827054-24-000206_mchp-20240930.htm:11]**                                 |
| 2027     | $38.0                        | 2017 Senior Convertible Debt   | 1.625                 | 0.6% = (38.0 / 6,454.2) * 100 **[0000827054-24-000206_mchp-20240930.htm:11]** **[0000827054-24-000206_mchp-20240930.htm:2]**                                     |
| 2029     | $1,000.0                     | 5.050% 2029 Notes              | 5.050                 | 15.5% = (1,000.0 / 6,454.2) * 100 **[0000827054-24-000206_mchp-20240930.htm:11]** **[0000827054-24-000206_mchp-20240930.htm:2]**                                 |
| 2030     | $1,250.0                     | 2024 Senior Convertible Debt   | 0.750                 | 19.4% = (1,250.0 / 6,454.2) * 100 **[0000827054-24-000206_mchp-20240930.htm:11]** **[0000827054-24-000206_mchp-20240930.htm:2]**                                 |

fb6ff3fa02ea6636afe2c4c04b4e09c9f5fa75809cfdbdb9d87a4de0bf48fd8c

8da8b7bf3832a6e9cf4774d5ae8c73e492092c73bc4832bbcf0b4a9b3577319b

1. **June Quarter Bottoming and Growth Outlook**  
   **Q:** Is June the bottom? Will September see growth?  
   **A:** Management expects the **June quarter to be the bottom**  **[MCHP_3386630_7]** , with growth resuming in September based on increasing bookings and customer demand across various end markets.  **[MCHP_3386630_7]** **[MCHP_3386630_34]** 

2. **Gross Margin Trajectory**  
   **Q:** Will gross margins bottom in June and then improve?  
   **A:** They believe gross margins will bottom in the June quarter along with revenue  **[MCHP_3386630_7]** **[MCHP_3386630_9]** , and expect improvement as revenue grows and factory utilization increases, though it depends on product mix and operational factors.  **[MCHP_3386630_9]** 

3. **Inventory Levels and Management**  
   **Q:** How are internal and channel inventories being managed?  
   **A:** Internal inventories remain high at **224 days**  **[MCHP_3386630_15]** , but are being managed without significant factory cuts  **[MCHP_3386630_15]** ; channel sell-through is exceeding sell-in, indicating customer inventories are reducing  **[MCHP_3386630_10]** , supporting future demand.

4. **Pricing Trends and Sustainability**  
   **Q:** Are pricing trends holding up, and what about future expectations?  
   **A:** Pricing remains stable with **average selling prices holding up**  **[MCHP_3386630_9]** , and while new designs are competitive, management expects to maintain strong gross margins due to product differentiation and customer relationships.  **[MCHP_3386630_18]** **[MCHP_3386630_19]** 

5. **Operating Expenses and Salary Sacrifice Program**  
   **Q:** How long can OpEx be held down through salary cuts?  
   **A:** The company has implemented a **shared sacrifice program** with voluntary salary reductions to manage OpEx  **[MCHP_3386630_12]** ; employees won't receive retroactive pay but will share in future rewards as conditions improve.  **[MCHP_3386630_12]** 

6. **Acquisitions and AI at the Edge**  
   **Q:** How will acquisitions, like Neuronex Labs, impact AI opportunities in MCUs?  
   **A:** Acquisitions like Neuronex Labs accelerate AI capabilities in the MCU portfolio, targeting industrial, automotive, and medical applications; meaningful contributions from AI are expected in **24 to 30 months**.  **[MCHP_3386630_16]** **[MCHP_3386630_27]** 

7. **Competitive Landscape and China Supply**  
   **Q:** Is increased competition from China affecting the business?  
   **A:** While acknowledging Chinese competitors, management focuses on differentiating products and winning new designs; competitive dynamics are consistent with historical trends.  **[MCHP_3386630_22]** 

8. **CapEx Guidance and Capacity Utilization**  
   **Q:** Can you meet future demand with lower CapEx and current capacity?  
   **A:** Management is confident that existing internal and partner capacity will meet future demand  **[MCHP_3386630_20]** ; CapEx has been significantly reduced, with previous investments deemed sufficient.  **[MCHP_3386630_20]** 

9. **FPGA Business Performance**  
   **Q:** How is the FPGA business performing relative to peers?  
   **A:** The FPGA business is outperforming other segments due to strength in aerospace and defense  **[MCHP_3386630_30]** ; management is optimistic about growth as competitors shift focus away from mid-tier markets.  **[MCHP_3386630_30]** 

10. **Design Win Pipeline**  
    **Q:** Can you discuss design win metrics for the fiscal year?  
    **A:** The design win pipeline is strong, with increased activity as customers resume innovation after supply chain disruptions, positioning the company well for future growth.  **[MCHP_3386630_13]** 

11. **Book-to-Bill Ratios and Order Trends**  
    **Q:** How are book-to-bill ratios and bookings trending?  
    **A:** Book-to-bill ratios are below one due to shorter lead times  **[MCHP_3386630_14]** , but bookings are rising month by month, indicating improving demand; book-to-bill is not a key growth indicator.  **[MCHP_3386630_14]** 

12. **Inventory Correction Duration**  
    **Q:** When will inventory corrections be completed?  
    **A:** Inventory corrections are expected to extend beyond the June quarter, varying by customer; some have completed corrections, others are still adjusting.  **[MCHP_3386630_25]** **[MCHP_3386630_32]** 

13. **Geographical Trends in Recovery**  
    **Q:** Are green shoots concentrated in specific regions?  
    **A:** Improvements are seen across all geographies and end markets, with no specific region leading; customer recovery varies widely.  **[MCHP_3386630_26]** 

14. **Impact of Employee Attrition on Factory Utilization**  
    **Q:** How is employee attrition affecting factory utilization?  
    **A:** Employee attrition has modestly reduced capacity utilization; fewer employees limit wafer starts, leading to slightly lower utilization in the June quarter.  **[MCHP_3386630_15]** **[MCHP_3386630_23]** 

15. **Expected Level of Turns**  
    **Q:** What is the required level of turns for the June quarter?  
    **A:** The company needs to achieve certain turns to meet guidance, but exact figures aren't disclosed  **[MCHP_3386630_33]** ; short lead times and customer uncertainties make turns unpredictable, but risks are accounted for in guidance.  **[MCHP_3386630_33]** 

16. **Returning to Seasonal Trends**  
    **Q:** Will September return to seasonal trends post-inventory correction?  
    **A:** While growth is expected, not all customers will have completed inventory correction by September; returning to seasonal trends may take more time.  **[MCHP_3386630_32]** 

17. **Customers Relearning Inventory Lessons**  
    **Q:** Have customers learned from past cycles to avoid overcorrection?  
    **A:** Management notes that customers quickly revert to old behaviors, treating semiconductors as readily available; similar cyclical patterns are expected to continue.  **[MCHP_3386630_28]** **[MCHP_3386630_29]** 

18. **Future Inventory Management Goals**  
    **Q:** What are long-term inventory management targets?  
    **A:** The company aims to reduce inventory days to **130-103 days** over time, maintaining short lead times and effective customer support.  **[MCHP_3386630_18]** 

79494752760f65b6a6679d47e9529854829833bf57fd757d3333c23f59ed6f9e

- **Microchip maintained strong margins and cash flow despite revenue declines**, with non-GAAP gross margin at **63.8%** and operating margin at **41.2%** in the December quarter.  **[MCHP_3371646_2]**  Adjusted EBITDA was **45.1% of net sales**, demonstrating resilience.  **[MCHP_3371646_2]**
- **The company is increasing capital return to shareholders**, announcing a **25.7% increase** in dividend to **$0.45 per share** and planning a record **$386.8 million** in share buybacks in the March quarter.  **[MCHP_3371646_5]**  Microchip plans to return **82.5%** of adjusted free cash flow to shareholders.  **[MCHP_3371646_5]**
- **Strength in Aerospace, Defense, and AI markets is a positive**, with **Aerospace and Defense remaining strong**, and their portion of the **AI data center platforms doing extremely well**, representing pockets of strength.  **[MCHP_3371646_19]**

bef0d71fb26b1da5ff13d680672ebbf81c6fb03ed4c20e47ca8696ebe9be215b

- **Significant Revenue Decline and Weak Demand Across All Markets**: Net sales in the December quarter were **down 21.7% sequentially** and **down 18.6% year-over-year**, reflecting weakness in **all regions and most end markets** due to customers pushing out or canceling backlog amid increased uncertainty.  **[MCHP_3371646_20]**
- **High Inventory Levels Leading to Under-utilization and Margin Pressure**: Inventory days increased to **185 days** and are expected to rise to **225-230 days**, causing the company to implement **factory shutdowns** and reduce utilization rates. This under-utilization is **negatively impacting gross margins** and profitability.  **[MCHP_3371646_23]** **[MCHP_3371646_7]** **[MCHP_3371646_13]**
- **Limited Visibility and Uncertainty About Future Demand**: The company has **very limited visibility** into future market conditions and is unable to provide forecasts beyond the current quarter, increasing risk for investors due to the unpredictability of demand recovery.  **[MCHP_3371646_11]** **[MCHP_3371646_20]**

09d9405e7418966c35b7d5b8afa944dad9d5acc3585af7bcc77a4cf1ab472ead

1. **Revenue Decline and Recovery Outlook**  
   **Q:** How steep is the revenue decline, and what's the recovery outlook?  
   **A:** Our revenue from peak to trough is declining by over **40% within the same fiscal year**  **[MCHP_3371646_14]** , an extreme rate comparable to the **36% decline** during the global financial crisis.  **[MCHP_3371646_11]**  We have limited visibility into market conditions and cannot predict the slope of the recovery.  **[MCHP_3371646_11]** **[MCHP_3371646_14]**  We are significantly under-shipping to end demand but can't provide guidance beyond this quarter.  **[MCHP_3371646_11]** 

2. **Gross Margin Impact and Utilization**  
   **Q:** What's affecting gross margins, and how will utilization impact them?  
   **A:** The biggest factor impacting gross margins is **lower factory utilization** due to continued attrition, reduced production rates, and **two-week shutdowns** in our large factories.  **[MCHP_3371646_13]** **[MCHP_3371646_7]**  Under-utilization is absolutely impacting our business and gross margins this quarter.  **[MCHP_3371646_7]**  We're also taking **large charges for inventory reserves**, but the main impact is from utilization.  **[MCHP_3371646_7]** **[MCHP_3371646_13]**  It will be difficult for capacity utilization to increase in the June quarter.  **[MCHP_3371646_24]** 

3. **Inventory Levels and Reduction Plans**  
   **Q:** What's the status of inventory levels, and when will they realign?  
   **A:** Inventory levels are high and somewhat obscure to us; we're under-shipping consumption to help reduce them but can't quantify how much inventory will be drained.  **[MCHP_3371646_10]**  We're taking actions we can control, like lowering utilization and shutdowns, to reduce our inventory.  **[MCHP_3371646_23]** **[MCHP_3371646_27]**  However, without clearer demand visibility, we can't predict when inventory levels will realign.  **[MCHP_3371646_23]** 

4. **Demand Visibility and Cancellation Rates**  
   **Q:** Are cancellation rates stabilizing, and what's the demand visibility?  
   **A:** Cancellation rates are still at a **relatively high rate**; customers and distributors feel they have excess inventory and are pushing out or not placing backlog.  **[MCHP_3371646_8]**  We have limited backlog visibility beyond this quarter, making it hard to predict future demand.  **[MCHP_3371646_14]** 

5. **PSP Program Discontinuation**  
   **Q:** Why didn't the PSP program buffer volatility, and what's its status?  
   **A:** The PSP program aimed to discourage speculative demand by making orders non-cancelable, but strong OEM demand and long lead times led customers to over-order.  **[MCHP_3371646_18]**  Customers couldn't accurately predict demand **12–18 months out**, leading to more backlog than necessary.  **[MCHP_3371646_18]**  We're ending the PSP program as the reasons for it no longer exist; no new PSP orders are being accepted, and existing backlog is naturally winding down.  **[MCHP_3371646_30]** 

6. **CapEx Plans and Capacity Management**  
   **Q:** What are your CapEx plans and capacity additions for 2024?  
   **A:** Our capital expenditures for fiscal '24 are **$300–$310 million**.  **[MCHP_3371646_22]**  We expect CapEx to be quite low in fiscal 2025.  **[MCHP_3371646_22]**  We have equipment on hand not yet in production, which we can deploy as the market normalizes.  **[MCHP_3371646_22]**  Our responses include utilizing built inventory, increasing factory utilization, deploying existing equipment, and adding more if needed.  **[MCHP_3371646_22]** 

7. **Pricing Stability**  
   **Q:** Is pricing erosion contributing to revenue decline?  
   **A:** **Pricing is stable** and not contributing to revenue declines.  **[MCHP_3371646_9]** **[MCHP_3371646_13]**  The revenue decline is due to **volume decreases**, not pricing.  **[MCHP_3371646_9]** 

8. **End Market Strength**  
   **Q:** Which end markets are holding up better than others?  
   **A:** Our **Aerospace and Defense** markets are strong; commercial aviation and defense remain robust.  **[MCHP_3371646_19]** **[MCHP_3371646_20]**  Our portion of the data center market around **AI platforms** is doing extremely well, though not significant enough to impact overall results.  **[MCHP_3371646_19]** **[MCHP_3371646_20]** 

9. **Manufacturing Strategy**  
   **Q:** Will you change your manufacturing strategy amid current challenges?  
   **A:** We're committed to our strategy of producing products cost-effectively within our manufacturing footprint, maintaining a balance of roughly **40% internal** and **60% external** production.  **[MCHP_3371646_17]**  Over time, this strategy has led to higher gross margins and better performance across cycles, and we see no need to change it.  **[MCHP_3371646_17]** 

10. **Employee Pay Reductions**  
    **Q:** What's the plan regarding the 10% employee pay reduction?  
    **A:** We have informed employees of the pay reduction but haven't shared all details yet.  **[MCHP_3371646_15]**  This is not new to us; we've done this multiple times, emphasizing **shared sacrifice and rewards**.  **[MCHP_3371646_15]**  We believe our team understands and will support this measure.  **[MCHP_3371646_15]** 

5fb9c583a9649912076bba9cad2b3e5c623d2f55c35406510dacdb7c217c85af

- **Anticipated Sharp Recovery Post-Inventory Correction**: Microchip's management expects the **June 2024 quarter to mark the bottom of the cycle**, with sequential revenue growth returning in the **September 2024 quarter**. They anticipate a **sharper recovery** as customers burn through inventory and begin buying to consumption, potentially leading to stronger revenue growth over the next 12 months.  **[MCHP_3386630_34]** ,  **[MCHP_3386630_11]**
- **Expansion into High-Growth Markets with 64-bit Microprocessors and AI Edge Solutions**: Microchip is entering the **64-bit embedded microprocessor market**, extending its product portfolio to higher performance applications, including **AI-enabled edge solutions**. The acquisition of **Neuronix AI Labs** enhances their neural network capabilities, positioning them to capitalize on high-growth opportunities in industrial, automotive, and medical markets over the next **24 to 30 months**.  **[MCHP_3386630_4]** ,  **[MCHP_3386630_16]**
- **Strong Competitive Position and Improving Demand Indicators**: Despite competition, particularly from China, Microchip continues to **win new designs** through competitive solutions and providing better value to customers. Early signs of improving demand include **bookings increasing month over month**, with **April bookings higher than March**, and customers placing backlog into the **September and December quarters**, indicating a potential upswing in demand.  **[MCHP_3386630_22]** ,  **[MCHP_3386630_19]** ,  **[MCHP_3386630_11]** ,  **[MCHP_3386630_26]**

15b68f16dc23a6fb2a6c90ce77c53efd7cd6bf02902c6d93857c359a12ce9bb1

- **Book-to-bill ratio is below 1**, indicating **continued weak demand** and potential revenue decline. Despite bookings being up nearly **50% sequentially**, they are still not at desired levels.  **[MCHP_3395780_8]**
- **Industrial sector "feels worse"** compared to automotive, and besides aerospace and defense, **no other end market is acting better**, suggesting widespread market weakness.  **[MCHP_3395780_18]** **[MCHP_3395780_20]**
- **Significant declines in the Americas and Europe**, which are major markets for Microchip, indicate geographic weaknesses impacting overall performance.  **[MCHP_3395780_11]**

f2d6101b25a7c566be2090ea0afba762d015d61aa5b31f6321b3bf2ba0f2dd27

1. **Underutilization Impact on Margins**  
   **Q:** How does underutilization affect gross margin recovery?  
   **A:** Underutilization is significantly impacting our **gross margins** and **operating results**, and this will continue as we remain **significantly underutilized** ( **[MCHP_3405900_7]** ). We cannot specify a revenue level to eliminate underutilization charges; it depends on the revenue curve's slope and our forecast ( **[MCHP_3405900_7]** ). Additionally, high **inventory reserve charges** are affecting margins, but these will provide a tailwind as the environment improves ( **[MCHP_3405900_7]** ).

2. **Inventory Destocking and Recovery**  
   **Q:** What's the outlook on inventory destocking and demand recovery?  
   **A:** We are in the **later innings of the correction** and expect a turnaround as inventory levels normalize ( **[MCHP_3405900_8]** ). Customers overbuilt inventory due to optimism and are now destocking, but our confidence comes from our strong customer connections and long product cycles ( **[MCHP_3405900_8]** ). We are shipping considerably below consumption levels, indicating that as customers correct inventories, they will return to consumption levels significantly higher than our current shipping levels ( **[MCHP_3405900_10]** ).

3. **Sell-In vs. Sell-Through Gap**  
   **Q:** How big is the gap between what you're selling and actual consumption?  
   **A:** We are shipping **well below** consumption levels, and our customers' businesses are not down to the degree that our revenues suggest ( **[MCHP_3405900_10]** ). This reverse **bullwhip effect** means that as customers adjust inventories, they will need to increase orders, leading to higher shipping volumes in the future ( **[MCHP_3405900_10]** ).

4. **Pricing Environment**  
   **Q:** What's your outlook on pricing into 2025?  
   **A:** Our pricing remains **consistent year-over-year**, although the environment for new designs is more competitive, and some competitors are more aggressive ( **[MCHP_3405900_11]** ). We will match competitors where necessary but maintain discipline in our processes. Pricing pressure will be primarily on new designs, while existing designs will continue with current pricing and terms ( **[MCHP_3405900_11]** ).

5. **Capital Allocation and Debt**  
   **Q:** Why are you borrowing to pay dividends?  
   **A:** In quarters where **adjusted free cash flow** is less than the dividend, we may increase debt temporarily to maintain the dividend payment ( **[MCHP_3405900_13]** ). In subsequent quarters, we plan to generate excess free cash flow to reduce debt, ensuring we maintain **100% capital return** without raising aggregate debt levels ( **[MCHP_3405900_13]** ).

6. **CapEx and CHIPS Act Benefits**  
   **Q:** How will CapEx and CHIPS Act impact you?  
   **A:** For the current fiscal year ending in March, **CapEx is expected to be about $150 million**, and we expect even lower CapEx in fiscal 2026 due to existing capacity ( **[MCHP_3405900_17]** ). We are working on agreements related to the **CHIPS Act**, but don't anticipate short-term benefits in the next **1–2 quarters**. Over the next **3–5 years**, as demand returns, the CHIPS Act will be beneficial as we expand and deploy capital ( **[MCHP_3405900_17]** ).

7. **Demand Outlook and Green Shoots**  
   **Q:** Are you seeing signs of demand recovery?  
   **A:** We continue to see strength in **aerospace and defense** and the AI subset of data centers ( **[MCHP_3405900_14]** ). We are observing increasing **expedites and pull-ins**, which indicates some early signs of recovery, but customers remain cautious and lack sufficient confidence to place more backlog orders ( **[MCHP_3405900_28]** ). The **green shoots** are there but less prominent than two quarters ago ( **[MCHP_3405900_28]** ).

8. **Comparison with Competitors**  
   **Q:** Why are your sales declining more than competitors?  
   **A:** Our larger decline reflects our steeper increase in previous years; we grew **25% annually** for two consecutive years during the upcycle ( **[MCHP_3405900_24]** ). Different companies navigated the cycle differently, and our customers, especially in industrial and automotive, built higher inventories that they're now reducing ( **[MCHP_3405900_24]** ). Over time, we expect to capitalize on the opportunity to **grow significantly** as the market recovers ( **[MCHP_3405900_24]** ).

9. **Data Center Segment Growth**  
   **Q:** What's the outlook for your data center business?  
   **A:** Long-term, we are confident that data centers are a **huge opportunity** with multiple growth areas, including the AI subset, which represents about **30%** of our data center revenue and is **continuing to grow** ( **[MCHP_3405900_16]** ). In the short run, overall data center budgets are constrained on the non-AI portion, but as investments return, we expect increased growth ( **[MCHP_3405900_16]** ).

10. **Geographical Performance**  
    **Q:** How is Europe affecting your results, and what about China?  
    **A:** Europe is experiencing larger declines due to its high exposure to **industrial and automotive** markets, and it typically lags cycles by **1–2 quarters** ( **[MCHP_3405900_12]** ). In contrast, **Greater China** shows less weakness; while not experiencing great strength, it doesn't have the same level of decline as Europe and the Americas ( **[MCHP_3405900_12]** ).

11. **Turns Business and Lead Times**  
    **Q:** Could high turns business persist due to inventory levels?  
    **A:** It's hard to predict, but as customers gain confidence and their inventories drain, they will need to place backlog orders, reducing the proportion of turns business ( **[MCHP_3405900_19]** ). Current short lead times mean customers can defer ordering, but external factors like improving interest rates and inventory depletion will eventually encourage backlog placement ( **[MCHP_3405900_19]** ).

12. **Operating Expenses**  
    **Q:** How will OpEx trend in the coming quarters?  
    **A:** We are reinstating **salary cuts**, returning most employees to **100% salary** this quarter, resulting in an OpEx increase of over **$8 million** quarter-over-quarter ( **[MCHP_3405900_15]** ). OpEx is expected to rise again in the March quarter as the full effect of reinstating salaries takes place ( **[MCHP_3405900_15]** ).

13. **Channel Strategy**  
    **Q:** Are you changing your approach to channel partners post-cycle?  
    **A:** Our **channel partners** remain an important part of our sales strategy, representing around **50%** of our business ( **[MCHP_3405900_26]** ). We have no plans to deemphasize them and will continue to evolve how we work together, incentivizing and compensating based on performance ( **[MCHP_3405900_26]** ).

14. **Long-Term Growth Rates**  
    **Q:** What's your expectation for long-term growth?  
    **A:** The recent cycle has been unusual, and it's challenging to provide a precise long-term growth rate. While we previously grew at **25% annually**, we know cycles fluctuate. Our focus remains on innovation and participating in faster-growing areas through our products and **Total System Solutions** strategy, aiming to consistently gain **market share** over time ( **[MCHP_3405900_22]** ).

15. **Pricing Pressure**  
    **Q:** Are you seeing pricing pressure in negotiations?  
    **A:** There's always pricing pressure as purchasing managers push for better terms, but we focus on creating **win-win** outcomes that make the pie bigger for both us and our customers ( **[MCHP_3405900_27]** ). Our products have **long design-in cycles**, and we maintain stable and disciplined pricing in the long term. Current gross margin movements are more impacted by underutilization and other operational issues rather than pricing ( **[MCHP_3405900_27]** ).

16. **CHIPS Act Progress**  
    **Q:** What's the status of your CHIPS Act funding?  
    **A:** We are still negotiating agreements related to the **CHIPS Act** and have worked through many details with the Commerce Department ( **[MCHP_3405900_29]** ). The process has involved significant learning on both sides due to the complexity of semiconductor manufacturing. We anticipate reaching an agreement and benefiting over the next **3–5 years**, but it's not affecting our short-term business operations or capital deployment plans ( **[MCHP_3405900_29]** ).

59bdf2d9fe06552acb892ddf993b21f03bd949a9c8268a5cd8a4907ddae8390c

1. **Demand Trends and Orders**  
   **Q:** Why is revenue declining despite signs of recovery?  
   **A:** Despite some positive signs, revenue is declining due to weak demand in the **industrial and automotive sectors**, where more inventory cleanup is needed. Prolonged weak PMI reports in the **U.S. (21 months)** and **Europe (24 months)** reflect a lack of confidence, leading customers to place orders cautiously and with shorter lead times.  **[MCHP_3395780_17]** 

2. **China and Asia Sales**  
   **Q:** How did China and Asia perform this quarter?  
   **A:** **Asia sales were flat**, with China showing relative stability. The declines were mainly in the **Americas and Europe**. China and Asia are currently more constructive, possibly due to earlier downturns allowing for earlier recovery.  **[MCHP_3395780_11]** ,  **[MCHP_3395780_15]** 

3. **Customer Ordering Patterns**  
   **Q:** Are customers holding too little inventory?  
   **A:** Yes, many customers are ordering **hand-to-mouth** due to working capital constraints and low visibility into their own businesses. With ample capacity and short lead times, they see little reason to build backlog. This cautious approach might lead to urgent orders later as inventories run low.  **[MCHP_3395780_12]** 

4. **Utilization and Production**  
   **Q:** Will there be further production shutdowns?  
   **A:** **No further two-week shutdowns** are planned for wafer fabs in the September quarter. Production output is expected to be similar quarter-on-quarter. The company continues to manage assembly and test activities to align with demand.  **[MCHP_3395780_10]** 

5. **Data Center Market Strength**  
   **Q:** What is the outlook for the data center market?  
   **A:** There is strength in the **data center market**, not only in the **AI subset** but across broader data center applications. Expectations are positive for the **September and December quarters**, with increased investments in data center infrastructure.  **[MCHP_3395780_9]** ,  **[MCHP_3395780_21]** 

6. **Inventory Levels**  
   **Q:** Can you provide insight on inventory levels?  
   **A:** Distribution inventory has been decreasing for **three consecutive quarters**. Customers' businesses are down **5–15%** year-over-year, while Microchip's business is down **mid-40%** due to inventory adjustments. The discrepancy is expected to close as inventory drains, even if the macro environment remains weak.  **[MCHP_3395780_13]** 

7. **Pricing Environment**  
   **Q:** Are you seeing any pricing pressure?  
   **A:** There's **no significant pricing pressure** on current products shipped. While competition is natural in new design wins, the company focuses on providing overall value beyond just price.  **[MCHP_3395780_14]** 

8. **Launch of 64-bit Microcontrollers**  
   **Q:** What can you tell us about the new 64-bit microcontroller?  
   **A:** The 64-bit microcontroller expands opportunities into higher-performance applications like **factory automation**, **machine vision**, and **AI at the edge**. It effectively doubles the total available market from around **$3–4 billion** to about **$6 billion**. Early customer engagement is positive, with interest in evaluating samples and tools.  **[MCHP_3395780_19]** ,  **[MCHP_3395780_25]** 

9. **End Market Performance**  
   **Q:** Which end markets are performing better or worse?  
   **A:** **Aerospace and defense** show stability, with strength in **defense** due to global issues. **Industrial** feels weaker compared to **automotive**, though both sectors are experiencing challenges.  **[MCHP_3395780_18]** ,  **[MCHP_3395780_20]** 

10. **Foundry Partnerships**  
    **Q:** How are you managing external wafer supply agreements?  
    **A:** The company is working with foundry partners to align wafer supply with changing demand. Business arrangements are in place to avoid excess wafer inventory, except for **last-time buys** from factories closing down or processes ending, which involve high-margin products worth maintaining.  **[MCHP_3395780_10]** 

429230e92700669dcb9e6c12a236d8d0797cc73e2938463f6e6e7145903dfd28

- **Significant weakness across most regions and end markets**, except aerospace and defense and AI data centers, with customers lowering inventories amidst a weak macro environment and uncertain outlook, leading to significant inventory destocking at multiple levels and reduced near-term visibility for the business.  **[MCHP_3386630_4]**
- **Factories running at lower utilization rates** due to the severity of the inventory correction, with **three major fabs scheduled for another two-week shutdown** in the June quarter to control inventory growth. Internal capacity expansion actions are paused, and **capital investments will be low in fiscal year 2025**, indicating prolonged demand weakness.  **[MCHP_3386630_4]**
- **Sharper revenue decline compared to competitors**, potentially due to higher exposure to markets like automotive and industrial that are correcting later and deeper, and possibly amplified by their Preferred Supply Program (PSP), suggesting Microchip may be more vulnerable to market downturns than peers.  **[MCHP_3386630_21]**

12a48de55e23adfde5ecab3b5afbf17c5593372b599eee52ce0c817199c931e6

- **Microchip is experiencing continued uncertainty and low visibility due to customers delaying orders and relying on short lead times, leading to higher reliance on turns orders (short-term orders) and making it difficult to predict demand.**  **[MCHP_3405900_19]** **[MCHP_3405900_21]**
- **The company is facing pricing pressure as customers negotiate for better deals, and underutilization is impacting gross margins, indicating challenges in maintaining profitability.**  **[MCHP_3405900_27]**
- **Significant corrections in the microcontroller and industrial markets have led to revenue declines for Microchip, with customers over-ordering in the past and now adjusting inventories, resulting in decreased demand.**  **[MCHP_3405900_8]**

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Microchip Technology Inc (MCHP)

Financials