©June 2013
Stephens 2013 Spring Investment Conference
June 4 – 5, 2013
Eric Bjornholt,
Vice President and Chief Financial Officer
2 ©February 2013 ©June 2013
Safe Harbor Statement
This presentation contains guidance, projections and other forward-looking statements regarding the future financial performance of Microchip. These statements involve predictions and our actual results may vary materially. Please refer to Microchip’s filings with the SEC which identify some important risk factors about the company. This presentation also contains information about Microchip and Microchip’s industry as of a certain date and such data is time-sensitive and subject to change. This information is provided only as of the original date of such information and has not been updated since such date. Microchip does not undertake any obligation to update the existing published information or any forward-looking statements to reflect events, circumstances or new information occurring after the date thereof.
3 ©February 2013 ©June 2013
Today’s Agenda
Microchip’s business characteristics 1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently
increasing dividends and free cash flow Current business conditions Opportunity for significant accretion as margins
expand towards business model
4 ©February 2013 ©June 2013
Microchip Characteristics
1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently
increasing dividends and free cash flow
5 ©February 2013 ©June 2013
0100200300400500600700800900
10001100120013001400150016001700
FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Annual Net Sales Growth $
Mill
ion
• 90 consecutive quarters of profitability
6 ©February 2013 ©June 2013
16-bit Revenue
FQ1 FQ1
FQ2 FQ2
FQ3 YTD
FQ3 YTD
YTD FQ1
YTD FQ1
YTD FQ3
YTD FQ3
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
7 ©February 2013 ©June 2013
32-bit Revenue
FQ2 YTD
FQ2 YTD
YTD FQ3
YTD FQ3 YTD
FQ3 YTD FQ3
FY09 FY10 FY11 FY12 FY13
8 ©February 2013 ©June 2013
Analog Yearly Revenue (k$)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000FY
02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
9 ©February 2013 ©June 2013
Microchip Characteristics
1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently
increasing dividends and free cash flow
10 ©February 2013 ©June 2013
Total MCU (4/8/16/32) Market Share %
%
11 ©February 2013 ©June 2013
Worldwide 8-Bit Microcontroller Market Share (Dollars)
Based on dollar shipment volume 1991-2012, Source: Gartner and Microchip
1991 1996 1998 2001 2005 2006-9 2010 2012 No. Rank Rank Rank Rank Rank Rank Rank Rank 1 Motorola Motorola Motorola Motorola Motorola Microchip Renesas Renesas 2 Intel NEC NEC Hitachi Renesas NEC Microchip Microchip 3 Philips Philips ST-Micro NEC Microchip ST-Micro Atmel Atmel 4 Mitsubishi Hitachi Philips Microchip NEC Freescale ST-Micro ST-Micro 5 NEC Mitsubishi Hitachi ST-Micro ST-Micro Atmel Samsung NXP 6 Hitachi Toshiba Mitsubishi Philips Atmel Renesas Freescale Freescale 7 Toshiba Matsushita Microchip Toshiba Toshiba NXP NXP Samsung 8 Siemens SGS-Thomson Toshiba Atmel Philips Cypress Cypress Cypress 9 TI Intel Siemens Matsushita Fujitsu Sony Panasonic Si Labs 10 Matsushita Microchip TI Sanyo Infineon Fujitsu Fujitsu Panasonic 11 National Siemens Fujitsu Samsung Sanyo Panasonic Datang Fujitsu 12 SGS-Thomson Fujitsu Sanyo Mitsubishi Samsung Toshiba NEC (1Q) Sony 13 Ricoh TI Matsushita Infineon Matsushita Samsung Sony Toshiba 14 MHS Sony Atmel Sony Sony Datang Toshiba Holtek 15 IIT Zilog Zilog TI Sunplus Si Labs Si Labs MELFAS 16 Sharp Sharp Sharp Fujitsu Micronas Holtek JSC CEC Huada 17 Fujitsu Temic Sony Sunplus Novatek Infineon Holtek JSC 18 Oki Sanyo Intel Zilog Intel Elan Infineon Datang 19 Zilog National National Novatek Holtek Winbond Sonix Infineon 20 Sony Oki LG Semi Micronas Winbond Denso Elan Elan 23 Microchip
12 ©February 2013 ©June 2013
Which of the following 8-bit chip families would you consider for your next embedded project?
52%40%
17%16%
15%13%
11%10%10%10%10%
9%7%
6%5%5%
3%3%3%
2%1%1%
Microchip PIC® MCUAtmel AVR
ArduinoFreescale HCxx
STMicro ST6, ST7, ST8TI TMS370, 7000
Renesas H8, R8NXP/Philips P80x, P87x, P89x
Atmel 80xxIntel 80xx, '251
Cypress PSoCSiLabs 80xx
Xilinx PicoBlazeAltera soft core
Zilog Z8, Z80, Z180, eZ80Other
Digi/Rabbit 2000, 3000Parallax
Maxim 80xxInfineon XC800
NEC K0Toshiba
Those Clock Rate Under 100 MHz
N = 764
Source: UBM 2013 Embedded Market Study
13 ©February 2013 ©June 2013
Worldwide 16-Bit Microcontroller Market Share (Dollars)
Based on dollar shipment volume 2004-2012, Source: Gartner and Microchip
2004 2006 2008 2009 2010 2011 2102 No. Rank Rank Rank Rank Rank Rank Rank 1 Renesas Renesas Renesas Renesas Renesas Renesas Renesas 2 Infineon Infineon Infineon Infineon Infineon Infineon Infineon 3 Freescale Freescale Samsung TI TI TI TI 4 TI Fujitsu TI Samsung Samsung Freescale Freescale 5 NEC TI Freescale Fujitsu Freescale Fujitsu Fujitsu 6 Matsushita Intel Fujitsu Freescale Fujitsu Toshiba Samsung 7 Toshiba Toshiba Toshiba Toshiba Toshiba Samsung Microchip 8 Fujitsu NEC Intel NEC Microchip Microchip Toshiba 9 Intel Sunplus NEC Intel Intel Intel Intel 10 STMicro Sony Sony Microchip Sony Sony INSIDE 11 Oki NXP Panasonic Panasonic JSC Sitronics JSC Sony 12 Sony Micronas NXP Sony Sunplus I Winbond CEC Huada 13 Micronas Winbond Winbond Winbond Winbond Ixys JSC 14 Sunplus Matsushita Microchip Sunplus I NXP Micronas EM Micro 15 Winbond Microchip Micronas Micronas Micronas Seiko Epson Shanghai Fudan 16 Microchip Samsung Sunplus I NXP Sunplus MM Shenzhen St Sunplus 17 Samsung Oki Sunplus MM Sunplus MM Seiko Epson Sunplus Datang 18 Philips National Sharp Seiko Panasonic Rohm Winbond 19 Magnachip Sharp Rohm Sharp Rohm Panasonic Ixys 20 Sharp STMicro Seiko Rohm Seiko Epson
14 ©February 2013 ©June 2013
Which of the following 16-bit chip families would you consider for your next embedded project?
*
* 53%
45%
17%
14%
13%
13%
7%
5%
4%
4%
3%
3%
Microchip PIC24/dsPIC® DSC
TI MSP430
Freescale HC16
STMicro ST9, ST10
Renesas H8/300H, H8S/2000, M16C
Freescale HC12
Intel 8086, '186, '286
AMD 186, '188
Other
Infineon XE166, XC2000, XC166, C166
Maxim
Zilog Z180, Z380
Those clock rate under 100 MHz
N = 690
Source: UBM 2013 Embedded Market Study
15 ©February 2013 ©June 2013
Worldwide 32-bit Microcontroller Market Share (Dollars)
Based on dollar shipment volume 2010-2012, Source: Gartner and Microchip
2010 2011 2012 No. Rank Rank Rank 1 Renesas Renesas Renesas 2 Freescale Freescale Freescale 3 TI TI ST-Micro 4 ST-Micro ST-Micro TI 5 Denso NXP Atmel 6 Fujitsu Denso Denso 7 NXP Atmel Infineon 8 Atmel Fujitsu NXP 9 Toshiba Infineon Toshiba 10 Infineon Toshiba Fujitsu 11 Panasonic Panasonic Panasonic 12 EM Micro EM Micro Microchip 13 Rohm Rohm MELFAS 14 JSC JSC Samsung 15 Shenzhen St Microchip Rohm 16 Huahong Shenzhen St Energy Micro 17 Seiko Epson Huahong CEC Huada 18 Winbond Winbond Nationz 19 Microchip Seiko Epson Shanghai Fudan 20 Samsung Samsung Cypress
16 ©February 2013 ©June 2013
Which of the following 32-bit chip families would you consider for your next embedded project?
33%28%26%
21%19%
17%15%
13%12%
11%10%10%
9%9%
8%8%8%8%8%
7%7%7%
6%5%
4%4%4%
Microchip PIC 32-bit (MIPS)STMicro STM32 (ARM)
TI Stellaris (ARM)NXP LPC (ARM)Atmel (AVR32)
Atmel SAMxx (ARM)FreescaleKinetis (Cortex-M4/M0)
ArduinoTI OMAP
Atmel AT91xxTI C2000 MCUsTI Sitara (ARM)
Freescale i.MX (ARM)Cypress PSOC 5 (ARM)
Altera Nios II (soft core)RenesasSuperH, H8SX, M32C, M32R
Freescale 68K, ColdFireXilinx Zynq (with dual ARM Cortex-A9)
Xilinx MicroBlaze (soft-core)Intel Atom, Pentium, Celeron, Core 2, Core iXAltera SoC-FPGA (with dual ARM Cortex-A9)
TI Hercules (ARM)Energy Micro EFM32
SiLABS Precision32 (ARM)Freescale PowerPC55xx
Microsemi SmartFusion2 SoC FPGA (Cortex-M3)Freescale PowerPC 5xx, 6xx
Those clock rate are under 100 MHz
N = 810
4%4%
3%3%3%3%3%3%3%3%
2%2%2%2%2%2%2%2%
1%1%1%1%1%1%
0%0%
OtherFreescale PowerPC 7xx, 8xx
Qualcomm (any)Xilinx Virtex-5 (with PowerPC 405)
Microsemi SmartFusion SoC FPGA (Cortex-M3)AMD Fusion, Athlon, Sempron, Turion, Opteron, Geode
Freescale Vybrid (ARM)NVIDIA Tegra
Microsemi FPGA (Cortex-M1, soft)Xilinx Virtex-4 (with PowerPC 405)
Freescale PowerQUICCInfineon XMC4000 (ARM)
BroadcomNEC V850
Cirrus Logic EP73xx, EP93xx (ARM)Marvell
Intel ItaniumFujitsu FM3 (ARM)
AMD Alchemy (MIPS)IBM PowerPC 4xx, 7xx
Infineon TricoreSPARC (any)
Fujitsu FR SeriesAMCC PowerPC 4xx
IDT 32xxxAtmel AT91xx/ATSAMxx (ARM)
Source: UBM 2013 Embedded Market Study
17 ©February 2013 ©June 2013
Microchip Characteristics
1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently
increasing dividends and free cash flow
18 ©February 2013 ©June 2013
Gross Margin % (Non-GAAP*)
30
35
40
45
50
55
60
65
Q1F
Y02
Q2F
Y02
Q3F
Y02
Q4F
Y02
Q1F
Y03
Q2F
Y03
Q3F
Y03
Q4F
Y03
Q1F
Y04
Q2F
Y04
Q3F
Y04
Q4F
Y04
Q1F
Y05
Q2F
Y05
Q3F
Y05
Q4F
Y05
Q1F
Y06
Q2F
Y06
Q3F
Y06
Q4F
Y06
Q1F
Y07
Q2F
Y07
Q3F
Y07
Q4F
Y07
Q1F
Y08
Q2F
Y08
Q3F
Y08
Q4F
Y08
Q1F
Y09
Q2F
Y09
Q3F
Y09
Q4F
Y09
Q1F
Y10
Q2F
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
(%) 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
19 ©February 2013 ©June 2013
Non-GAAP Operating Margin
$0
$30,000
$60,000
$90,000
$120,000
$150,000Q
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
3
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Operating Margin $ Operating Margin %
20 ©February 2013 ©June 2013
Microchip Characteristics
1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently
increasing dividends and free cash flow
21 ©February 2013 ©June 2013
Broadening Microchip Solutions Through Acquisitions
Hampshire R&E HI-TECH ZeroG SST Adv Silicon Products
Oct ’08 Apr ‘09 Mar ’09 Jan ’10 Apr ‘10 Oct ‘10
Touch Screen Controllers
Security / Life-Safety
ASICs
Development Tools /
Compiler
Low Power Embedded
Wi-Fi
High-Density Flash / IP
Motor Drive Products
22 ©February 2013 ©June 2013
Broadening Microchip Solutions Through Acquisitions
MMT LSS Ident Roving Networks SMSC Feb ’11 Oct ‘11 Feb’12 Apr ’12 Aug ‘12
Assembly & Test Capacity
Expansion
High Speed ADC
Gesture Recognition and Proximity
Bluetooth and WiFi Solutions
MOST® USB & Ethernet Wireless Audio PC Controllers
LSS
23 ©February 2013 ©June 2013
Accretion from SMSC (Non-GAAP)
• FQ3 EPS accretion 6.5 cents/share • FQ4 EPS accretion 8.5 cents/share • FQ1 2014 accretion 9 to 10 cents/share • FY 2014 accretion 40 to 45 cents/share
24 ©February 2013 ©June 2013
SAM Expansion Focus Areas
• eXtreme Low Power • Infotainment in Cars • Touch Sense • Touch Screen • Advanced Graphics • USB Interface • Ethernet Connectivity • Wireless Connectivity • Advanced Analog
• Wireless Audio • Computing Embedded
Controllers • Motor Control • Digital Power Supplies • Energy Efficient Lighting • Energy Harvesting and
Monitoring • Made for iPod and iPhone • Medical Solutions
25 ©February 2013 ©June 2013
MCHP Applications in S-Class 26 MCUs / 6 Analog / 6 Memory
Approach Sensors PTC Heater
LED DRL
HID Ballast
Navigation
Throttle Control
HVAC Blower
Light Switch
Airbag
Car Alarm
Engine Control Timer
Parking Assist
Rear View Camera
Garage Door Opener
Door Switch Module
SEE
Analog
Analog
SEE Analog
SEE Cluster (SEE Only)
Adaptive Light (Analog Only)
COMPASS
Mirror Analog SEE
Surround View Camera Analog SEE
Telephone Touch Dialer
DewPoint Controller
26 ©February 2013 ©June 2013
MCHP Applications in S-Class 6 MOST / 5 KLEER
Head Unit High
Fond Unit
Digital AudioTuner
Head Phones
Satellite Digital Audio Tuner
Remote Control
TV Tuner
Premium Amplifier
27 ©September 2012 ©June 2013
Microchip Characteristics
1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently
increasing dividends and free cash flow
28 ©September 2012 ©June 2013
Cash and Investment Balance
$0$200,000$400,000$600,000$800,000
$1,000,000$1,200,000$1,400,000$1,600,000$1,800,000$2,000,000
Q1F
Y07
Q2F
Y07
Q3F
Y07
Q4F
Y07
Q1F
Y08
Q2F
Y08
Q3F
Y08
Q4F
Y08
Q1F
Y09
Q2F
Y09
Q3F
Y09
Q4F
Y09
Q1F
Y10
Q2F
Y10
Q3F
Y10
Q4F
Y10
Q1F
Y11
Q2F
Y11
Q3F
Y11
Q4F
Y11
Q1F
Y12
Q2F
Y12
Q3F
Y12
Q4F
Y12
Q1F
Y13
Q2F
Y13
Q3F
Y13
Q4F
Y13
29 ©September 2012 ©June 2013
$2B Dividends Paid
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000Q
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
1**
Q4F
Y11
Q1F
Y12
Q2F
Y12
Q3F
Y12
Q4F
Y12
Q1F
Y13
Q2F
Y13
Q3F
Y13
Q4F
Y13
$0.00
$0.06
$0.12
$0.18
$0.24
$0.30
$0.36
Total Dividend Dividend per Share**Q4FY11 dividend accelerated into Q3FY11
30 ©February 2013 ©June 2013
Topics to Cover
The Characteristics of Microchip’s Business 1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently increasing
dividends and free cash flow
Current business conditions Opportunity for significant accretion as margins
expand towards business model
31 ©February 2013 ©June 2013
Current Business Conditions
March quarter results were better than what we guided during our February 2013 earnings call. Net sales were above the midpoint of our guidance. Non-GAAP gross margin, operating expenses, operating profit and EPS were better than the high end of our guidance.
Continuing to experience very strong bookings activity. Inventory is within the target range at 116 days, but our internally
produced inventory is a bit high and our inventory purchased from third-party foundries is low. We expect these inventory balances to be better balanced by the end of the June quarter.
After a record low distribution inventory at the end of December, distributors built 3 days of inventory in the March quarter and it seems that distributors will build some additional inventory in June. Microchip recognizes distributor revenue on a sell-through basis worldwide.
32 ©February 2013 ©June 2013
Total Inventory (Disti/MCHP)
020406080
100120140160180200220Q
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
3
Day
s
Disti MCHP
Purchase Accounting
33 ©February 2013 ©June 2013
Topics to Cover
The Characteristics of Microchip’s Business 1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently increasing
dividends and free cash flow
Current business conditions Opportunity for significant accretion as margins
expand towards business model
34 ©February 2013 ©June 2013
MCHP Updated Financial Guidance
Previous Updated (05/02/2013) (06/04/2013) Q1FY14 Guidance Q1FY14 Guidance June 30, 2013 June 30, 2013 Net Sales ($MM Non-GAAP) $438.7 – 456.0 $447.35 - $460.25
Gross Margin* 56.5% - 57.0% 56.75% - 57.25%
Operating Expenses* (% of Sales) 27.75% - 28.25% 27.25% - 28.0%
Operating Profit 28.25% - 29.25% 28.75% - 30.0%
EPS (Non-GAAP*) $0.50 – 0.54 $0.52 – 0.56
EPS (GAAP) $0.30 – 0.34 $0.32 – 0.36 * Excludes share-based compensation, acquisition related charges, non-recurring items and adoption of ASC Subtopic 470-20. The Q4 FY13 GAAP and non-GAAP EPS includes a benefit of ~ 3 cents for the reinstatement of the R&D tax credit. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.
35 ©February 2013 ©June 2013
MCHP Financial Information Consolidated
Q1FY14 Actual Guidance Long-Term Mar. 31, 2013 June 30, 2013 Model
Net Sales ($MM Non-GAAP) $430.1 $447.35 – 460.25
Gross Margin* 56.4% 56.75% - 57.25% ~ 60% ± .5%
Operating Expenses* (% of Sales) 28.6% 27.25% - 28.0% ~ 27.5% ± .5%
Operating Profit 27.8% 28.75% - 30.00% ~ 32.5% ± .5%
EPS (Non-GAAP*) $0.52 $0.52 – 0.56
EPS (GAAP) $0.28 $0.32 – 0.36 * Excludes share-based compensation, acquisition related charges, non-recurring items and adoption of ASC Subtopic 470-20. The Q4 FY13 GAAP and non-GAAP EPS includes a benefit of ~ 3 cents for the reinstatement of the R&D tax credit. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.
Actual Guidance
36 ©February 2013 ©June 2013
Summary
Microchip is a consistent revenue grower Microchip is a perennial market share gainer Microchip has consistently maintained a high margin business
model Microchip has shown a consistent track record of accretive
acquisitions Microchip is shareholder friendly with consistently increasing
dividends and free cash flow Current business conditions are showing very strong bookings Investors have an opportunity for significant EPS accretion as
margins expand towards the long term business model
©June 2013
Thank You!