Microchip 2 Presenta… · ©August 2017 2 Business Update Net sales for Q2FY18 expected to be up 3% sequentially which would drive Microchip’s first one billion dollar net sales

Steve Sanghi, CEO Ganesh Moorthy, COO

Eric Bjornholt, CFO ©August 2017

Microchip 2.0

2 ©August 2017

Business Update Net sales for Q2FY18 expected to be up 3% sequentially which

would drive Microchip’s first one billion dollar net sales quarter. Operating profit for Q2FY18 expected to be between 37.5% and

38.25% Non GAAP EPS for Q2FY18 expected to be between $1.33 to $1.37

per share. Business conditions and backlog continue to be strong. Lead

times are long but have stabilized at 4 to 20 weeks. We expect significant capacity challenges to persist until the

middle of calendar year 2018 until lead times return to normal. Long-term non-GAAP financial model is now 62.5% gross margin,

22.5% operating expenses and 40% operating profit. Introducing Microchip 2.0- Total system solutions- Smart,

connected and Secure.

3 ©August 2017

MICROCHIP 1.0

1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Shareholder friendly with consistently increasing

dividends and free cash flow 5. Successful M&A strategy

4 ©August 2017

0100200300400500600700800900

1000110012001300140015001600170018001900200021002200230024002500260027002800290030003100320033003400350036003700380039004000

FY93FY95

FY97FY99

FY01FY03

FY05FY07

FY09FY11

FY13FY15

FY17

MCU Analog Memory Licensing MMO

Annual Net Sales Growth $

Mill

ion

107 consecutive quarters of profitability!

5 ©August 2017

Total MCU (8/16/32) Market Share %

%

6 ©August 2017

Worldwide Microcontroller Market Share

Based on dollar shipment volume 2003-2016, Source: Gartner and Microchip

2003 2008 2009 2010 2012 2014 2015 2016 No. Rank Rank Rank Rank Rank Rank Rank Rank 1 Renesas Renesas Renesas Renesas Renesas Renesas Renesas Renesas 2 Motorola NEC NEC Freescale Freescale Freescale NXP NXP 3 NEC Freescale Freescale Samsung Infineon ST-Micro ST-Micro Microchip 4 Matsushita Infineon Samsung Microchip Microchip Microchip Microchip ST-Micro 5 Infineon Samsung Microchip Atmel ST-Micro NXP Infineon TI 6 Fujitsu Microchip TI TI TI TI TI Infineon 7 Toshiba ST-Micro Infineon Infineon Atmel Infineon Atmel Cypress 8 Microchip TI ST-Micro ST-Micro NXP Atmel Cypress Samsung 9 Samsung Fujitsu Fujitsu Fujitsu Fujitsu Spansion Samsung CEC Huada 10 ST-Micro NXP NXP NXP Samsung Samsung CEC Huada Toshiba 11 Atmel Toshina Atmel Toshiba Toshiba Cypress Datang Si Labs 12 TI Atmel Toshiba Denso Cypress Toshiba Toshiba Denso 13 Sanyo Panasonic Panasonic Cypress Denso Denso Denso Datang 14 Philips Denso Denso Panasonic Panasonic Datang Si Labs SH Fudan 15 Intel Sony Cypress Sony Sony Si Labs SHIC Panasonic 16 Sony Cypress Sony Datang Si Labs CEU-Huada Tongfang Holtek 17 Micronas Intel Datang JSC Sitronics CEC Huada Panasonic Panasonic Nuvoton 18 Oki Micronas Intel Si-Labs Melfas SHIC Holtek Unigroup 19 Sunplus Winbond Si-Labs Intel JSC Tongfang Winbond Maxim 20 Winbond Si-Labs Rohm INSIDE Holtek Nationz

7 ©August 2017

Analog Yearly Revenue (k$)

$0$50,000

$100,000$150,000$200,000$250,000$300,000$350,000$400,000$450,000$500,000$550,000$600,000$650,000$700,000$750,000$800,000$850,000$900,000$950,000

$1,000,000

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

8 ©August 2017

30

35

40

45

50

55

60

65

Q1F

Y02

Q2F

Y02

Q3F

Y02

Q4F

Y02

Q1F

Y03

Q2F

Y03

Q3F

Y03

Q4F

Y03

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Y04

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Y04

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Y04

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Y05

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Y05

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Y06

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Y07

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Y07

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Y08

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Y08

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Y08

Q1F

Y09

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Y09

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Y09

Q4F

Y09

Q1F

Y10

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Y10

Q3F

Y10

Q4F

Y10

Q1F

Y11

Q2F

Y11

Q3F

Y11

Q4F

Y11

Q1F

Y12

Q2F

Y12

Q3F

Y12

Q4F

Y12

Q1F

Y12

Q2F

Y13

Q3F

Y13

Q4F

Y13

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

Q1F

Y15

Q2F

Y15

Q3F

Y15

Q4F

Y15

Q1F

Y16

Q2F

Y16

Q3F

Y16

Q4F

Y16

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Gross Margin % (Non-GAAP*)

(%)

Fab 4 Production start

Higher Utilization Richer Product Mix

Worldwide Financial

Crisis

Record

*Excludes share-based compensation and acquisition-related expenses. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.

SST Acquisition

Business Downturn

62.5% Long-term GM goal

Atmel Acquisition

9 ©August 2017

2008 2009 2010 2011 2012 2013 2014

Expanding Our Solutions Through Acquisitions

Hampshire Touch Screen

Controllers

Security & Life Safety ASICs

Low-Power Embedded

Wi-Fi®

High-Density Flash & IP

Motor Drive Products

Development Tools Compiler

Assembly & Test Capacity

Expansion

LSS High-Speed

ADCs

3D Gesture Capture & Proximity Detect

Bluetooth® & Embedded Wi-Fi®

MOST®, USB, Ethernet, Wireless Audio

& PC Controllers

Non-volatile Memory IP

Equalizer & Coaxial

Transceiver Products

High-Voltage Analog & Mixed-Signal Products

Bluetooth® Low Energy

2015

Analog, mixed-signal, timing & power management

HI-TECH

ZeroG

Advanced Silicon Roving Networks

Novocell

Supertex

Micrel

R&E International

SST

MMT

Ident

SMSC

EqcoLogic

ISSC

2016

Microcontrollers, Wireless, Touch,

Automotive, Security

& Memory

Atmel

10 ©August 2017

Microchip 2.0

Be The Very Best Embedded Control Solutions Company Ever

11 ©August 2017

MICROCHIP 2.0

1. Total System Solution in Embedded Control 2. Leading customer preference to design with our

MCUs 3. Multiple growth drivers 4. Record gross margin target with multiple drivers 5. Record low opex target with multiple leverage

drivers 6. End market mix skewed to Industrial and

Automotive 7. New LT model with industry leading operating

profits

12 ©August 2017

MICROCHIP 2.0





profits

13 ©August 2017

Keypad

PIC24FJ1024GA610

Radio

LCD Display

EBI/PMP LCD

Driver

SQI GPIO

GPIO

GPIO

SPI SPI

KEY FIRMWARE Analog Driver

SQI

SST26VF064B SQI Flash

Font Storage

MIC2297 LED Boost Backlight

Supply

PW

M

MCP1700 Regulator

Micrel

SST

Classic Microchip

PIC12LF1552

Proximity Power Management

SPI

14 ©August 2017

Automotive PEPS System

ATA5279 LF Coil Driver Base Station

ATA5781 RF Receiver

PIC32MK1024GP100 32-BIT MCU W/ ECC

MIC5353 LDO

MIC94355 Ripple Blocker

Micrel

Classic Microchip

Atmel

MCP2025 LIN

Transceiver

MCP2025 LIN

Transceiver

ATA6570 CAN Transceiver

w/ Partial Networking

25LC640 EEPROM

VBAT

15 ©August 2017

Card Reader Micrel

Classic Microchip

Atmel

MIC4690 Sw. Reg

PIC32 Controller Graphics

PIC32MZ2048 MCU

WINC1500 WiFi

MIC5209 LDO

SMSC

SST

LAN8740A Ethernet

PHY

SST26VF032

Flash

16 ©August 2017

Laser Printer SMSC

Classic Microchip

Atmel

PIC10F220 Safety

Controller

USB2534 USB Hub

AT24C01D Serial

EEPROM

Customer ASIC

MCP39F501

Energy Meter

Heating Element

Fuser

MXT144U Capacitive

Touch Controller

Panel Touch Display

PIC16LF1503 Power Rail Controller

SST25VF040B Flash Memory

SST

17 ©August 2017

LoRa Gateway Micrel

Classic Microchip

Atmel

KSZ8061 Eth Phy

MIC45205 Power Supply

ATECC508A Crypto

PIC32MZ2048 MCU

DSC1001

MEMS Ocsillator

MRF24WN

WiFi

SST

SST26VF064 Serial Flash

LoRa Radio Gateway

PIC24

MIC5248 LDO

ISSC

BM71 Bluetooth

18 ©August 2017

MICROCHIP 2.0





profits

© 2017 Copyright by AspenCore. All rights reserved. 2017 Embedded Markets Study

19

46%

43%

18%

13%

13%

11%

10%

10%

9%

9%

9%

8%

7%

3%

2%

2%

2%

2%

39%

34%

19%

17%

10%

10%

13%

8%

12%

11%

10%

9%

4%

2%

2%

1%

3%

2%

Microchip PICAtmel AVR

STMicroelectronics ST6, ST7, ST8Freescale HC

TI TMS370, 7000Intel 80xx, '251

NXP/Philips P80x, P87x, P89xAtmel 80xxRenesas H8

CypressPSoC 1 (M8C) / PSoC 3 (8051)Xilinx PicoBlaze (soft core)

SiLabs 80xxZilog Z8, Z80, Z180, eZ80Digi / Rabbit 2000, 3000

ParallaxToshiba

Infineon XC800, C500Maxim 80xx

2017 (N = 462)

2015 (N = 695)

Which of the following 8-bit chip families would you consider for your next embedded project?


20

45%

42%

22%

15%

11%

11%

10%

9%

6%

5%

4%

4%

3%

38%

43%

21%

19%

11%

12%

12%

7%

5%

3%

5%

6%

5%

Microchip PIC24 / dsPIC

TI MSP430

STMicroelectronics ST9, ST10

Freescale HC16

Intel 8086, '186, '286

Renesas RL78

Freescale HC12

Renesas R8C

AMD 186, '188

Zilog Z180, Z380

Maxim

Infineon XE166, XC2000, XC166, C166

Other2017 (N = 412)

2015 (N = 621)

*

*



21

30%

20%

17%

17%

16%

16%

14%

14%

13%

12%

12%

11%

11%

11%

11%

10%

9%

8%

8%

7%

7%

6%

6%

STMicro STM32 (ARM)

Microchip PIC 32-bit (MIPS)

Xilinx Zynq (with dual ARM Cortex-A9)

Freescale i.MX (ARM)

NXP LPC (ARM)

FreescaleKinetis (ARM/Cortex-M4/M0)

Atmel SAMxx (ARM)

TI Sitara (ARM)

Intel Atom, Pentium, Celeron, Core 2, Core iX

Altera (Intel FPGA) SoC-FPGA (with dual ARM Cortex-A9)

Arduino

Altera (Intel FPGA) Nios II (soft core)

TI SimpleLink (ARM)*

TI TM4Cx (ARM)

Atmel (AVR32)

Atmel AT91xx/ATSAMxx (ARM)

Cypress PSOC 4 ARM Cortex-M0/PSoC 5 ARM Cortex-M3

Renesas RX

Broadcom (any)

TI C2000 MCUs

Xilinx MicroBlaze (soft-core)

NVIDIA Tegra

TI Hercules (ARM)

2017 (N = 617)


5% 5% 4% 4% 4% 4% 4% 4% 4% 4% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1%

4%

SiLABS Precision32 (ARM)Qualcomm (any)

Energy Micro EFM32Microsemi SmartFusion2 SoC FPGA (Cortex-M3)

Infineon XMC4000 (ARM)AMD Fusion, Athlon, Sempron, Turion, Opteron, Geode

Atmel AT91xxFreescalePowerQUICC

Renesas RH850Freescale PowerPC 55xx

Microsemi FPGA (Cortex-M1, softcore)Freescale PowerPC 5xx, 6xx

Intel ItaniumFreescale Vybrid (ARM)Freescale 68K, ColdFire

Microsemi SmartFusion SoC FPGA (Cortex-M3)IBM PowerPC 4xx, 7xx

Infineon XMC1000 (ARM Cortex-M0)Marvell

Infineon TricoreXilinx Virtex-5 (with PowerPC 405)

Infineon AURIX (TriCore-based)Cirrus Logic EP73xx, EP93xx (ARM)

AMD Alchemy (MIPS)SPARC (any)

Xilinx Virtex-4 (with PowerPC 405)Spansion (formerly Fujitsu) FM3 (ARM)

Infineon TriCoreInfineon TriCore-based 32-bit families AUDO MAX

AMCC PowerPC 4xxOther (please specify)


22

25%

68%

7%

26%

67%

8%

27%

65%

8%

The chip itself The ecosystem surrounding the chip(software, tools, support, etc.)

The chip's supplier/vendor

2017 (N = 719) 2015 (N = 960) 2014 (N = 1304)

What’s most important when choosing a microprocessor?


23

14%

14%

11%

11%

5%

5%

4%

4%

2%

2%

2%

2%

Microchip or Atmel (Microchip)

Texas Instruments (TI)

ST Microelectronics

NXP/Freescale/Qualcom

Xilinx

Intel, Intel Altera

ARM

Digi-Key

Cypress Semiconductor

Renesas

Arrow

Silicon Labs2017 (N = 328) Unaided

(Unaided Open End)

Which vendor has the best ecosystem for your needs?

24 ©August 2017

Multiple Growth Drivers

1. Microcontroller market growth and share gains 2. Analog growth and attach opportunity 3. Wireless and Wired Connectivity – IoT 4. Security 5. Automotive Networking, HMI, Access Control,

Lighting and Body Electronics 6. Technology licensing

25 ©August 2017

Gross Margin Drivers

1. Increasing Fab utilization 2. Savings from Micrel Fab closure 3. Increasing back end plants utilization 4. Porting Atmel products to Microchip assembly/test

technology 5. Transfer of Micrel and Atmel’s U.S. test areas to

Thailand 6. Stable to rising pricing environment 7. Richening product mix

26 ©August 2017

Operating expense leverage drivers

1. Synergy in roadmaps on MCU, analog, wireless and memory

2. Convergence of Microchip and Atmel to common process technology platforms

3. Synergy in common development of IP libraries 4. Synergy in development of tools ecosystem 5. Synergy in marketing - trade shows, technical

conferences, website, training 6. Lower incremental opex for sales growth

27 ©August 2017

~ $4.6B Returned To Shareholders

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

$0.50

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000Q

1FY0

7Q

2FY0

7Q

3FY0

7Q

4FY0

7Q

1FY0

8Q

2FY0

8Q

3FY0

8Q

4FY0

8Q

1FY0

9Q

2FY0

9Q

3FY0

9Q

4FY0

9Q

1FY1

0Q

2FY1

0Q

3FY1

0Q

4FY1

0Q

1FY1

1Q

2FY1

1Q

3FY1

1Q

4FY1

1Q

1FY1

2Q

2FY1

2Q

3FY1

2Q

4FY1

2Q

1FY1

3Q

2FY1

3Q

3FY1

3Q

4FY1

3Q

1FY1

4Q

2FY1

4Q

3FY1

4Q

4FY1

4Q

1FY1

5Q

2FY1

5Q

3FY1

5Q

4FY1

5Q

1FY1

6Q

2FY1

6Q

3FY1

6Q

4FY1

6Q

1FY1

7Q

2FY1

7Q

3FY1

7Q

4FY1

7Q

1FY1

8

Total Dividend Dividend per Share

~ $3.2B in dividends and ~$1.4B in share buy-backs!

28 ©August 2017

Revenue by End Market

Industrial35%

Automotive25%

Consumer24%

Computing9%

Communi-cation

5%

Defense & Aerospace

2%

29 ©August 2017

Industrial (35% of Sales)

30 ©August 2017

Automotive (25% of sales)

31 ©August 2017

Consumer (24% of sales)

32 ©August 2017

Computing (9% of sales)

33 ©August 2017

Communications (5% of sales)

34 ©August 2017

Defense and Aerospace (2% of sales)

35 ©August 2017

Financial Results, Guidance and Long-Term Model

Microchip does not utilize a GAAP long-term model. All figures in long-term model are non-GAAP. Excludes share-based compensation, acquisition related charges, non-recurring items. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.

Long Term ModelRevenue Growth 7% - 9%Gross Margin 62.5%Operating Expense 22.5%Operating Margin 40.0%

Q2 FY18 GuidanceNet Sales $1,001.3Gross Margin % 60.5% -60.75%Operating Expense 22.5% to 23%Operating Margin 37.5% to 38.25%Diluted EPS $1.33 - $1.37

Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18Net Sales $844.0 $873.8 $881.2 $902.7 $972.1Gross Profit $471.1 $499.9 $509.7 $534.7 $587.2Gross Margin 55.8% 57.2% 57.8% 59.2% 60.4%Operating Expense $240.0 $233.6 $220.6 $213.6 $222.9Operating Income $231.1 $266.3 $289.1 $321.2 $364.3Operating Margin 27.4% 30.5% 32.8% 35.6% 37.5%Net Income $194.0 $219.6 $246.5 $276.9 $319.1Diluted EPS $0.84 $0.94 $1.05 $1.16 $1.31EBITDA $264.1 $298.8 $321.3 $356.5 $395.6

Actual Results

http://www.microchip.com/

36 ©August 2017

Non-GAAP Net Sales

$0$250,000$500,000$750,000

$1,000,000$1,250,000$1,500,000$1,750,000$2,000,000$2,250,000$2,500,000$2,750,000$3,000,000$3,250,000$3,500,000$3,750,000$4,000,000

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

*RR

FY1

8

* Run rate for FY18 represent Q1 FY18 actual results multiplied by four

17.6% CAGR

37 ©August 2017

Non-GAAP Gross Profit

$0$250,000$500,000$750,000

$1,000,000$1,250,000$1,500,000$1,750,000$2,000,000$2,250,000$2,500,000

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

*RR

FY1

8

18.2% CAGR


38 ©August 2017

Non-GAAP Operating Income

$0

$250,000

$500,000

$750,000

$1,000,000

$1,250,000

$1,500,000

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

*RR

FY1

8


20.4% CAGR

39 ©August 2017

Non-GAAP Net Income and Diluted EPS Growth

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000

$1,000,000$1,100,000$1,200,000$1,300,000$1,400,000

FY12

FY13

FY14

FY15

FY16

FY17

*RR

FY1

8

Non-GAAP Net Income $ Non-GAAP Diluted EPS


40 ©August 2017

Free Cash Flow as a % of Revenue

0.0%3.0%6.0%9.0%12.0%15.0%18.0%21.0%24.0%27.0%30.0%33.0%36.0%39.0%42.0%

$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000

$1,000,000$1,100,000$1,200,000$1,300,000$1,400,000

FY12

FY13

FY14

FY15

FY16

FY17

* RR

FY1

8

Free Cash Flow $ Free Cash Flow as a % of Sales

* Run rate for FY18 represent Q1 FY18 actual results multiplied by four. Free cash flow = operating cash flow minus capital expenditures.

41 ©August 2017

EBITDA

$0

$250,000

$500,000

$750,000

$1,000,000

$1,250,000

$1,500,000

$1,750,000

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

*RR

FY1

8


17.6% CAGR

42 ©August 2017

EBITDA and Net Leverage

0.000.350.701.051.401.752.102.452.803.153.50

$0$50,000

$100,000$150,000$200,000$250,000$300,000$350,000$400,000$450,000$500,000

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Q2F

Y18

fcst

EBITDA $ Net Leverage* EBITDA as calculated in accordance with Microchip’s Credit Facility. Net leverage excludes 2037 convertible debt, consistent with Credit Facility

43 ©August 2017

Summary A consistent revenue grower and market share gainer with multiple

growth drivers High margin business model and shareholder friendly Currently strong business conditions with September quarter

revenue guidance expected to be up approximately 3% sequentially and 14.6% year-over-year

Significant capacity challenges to persist through the middle of calendar year 2018 before lead times are normal.

Premium long-term non-GAAP financial model to 62.5% gross margin, 22.5% operating expenses and 40% operating income.

Executing on Microchip 2.0- Total system solutions- Smart, connected and Secure.

Thank You!

Documents

Microchip 2 Presenta… · ©August 2017 2 Business Update Net sales for Q2FY18 expected to be up 3% sequentially which would drive Microchip’s first one billion dollar net sales