2022 Was a Year of Record Results, Some Challenges and Many Opportunities

2022 was another eventful year of opportunities and challenges for Microchip and our stakeholders, as the semiconductor industry and we continued to experience one of the strongest and longest upcycles in memory. I’d like to recognize and thank all our employees, customers, suppliers, partners and shareholders for their steadfast support and invaluable contributions to our success.

As we stand on the brink of 2023, I remain optimistic about the future, energized by the impact our solutions are making to enhance the human experience. We continue to develop and introduce innovative new solutions at a record pace, thus empowering the innovation of our customers. We have posted net sales records through the last eight consecutive quarters, expect the December quarter to be our 9th consecutive record quarter, and expect to set another record in the March 2023 quarter. We crossed the $8 billion annualized net sales mark for the first time, and we continue to benefit from our disciplined execution in carefully selected markets that have higher resiliency and lower volatility.

We believe our Total System Solution (TSS) strategy, combined with our focus on key megatrends in the markets we serve, will result in an organic compounded annual revenue growth rate of 10%-15% during the FY22 – FY26 time frame. While the general semiconductor industry supply environment is improving, the capacity corridors for many of the specialized technologies which are important to our customers are improving at a slower rate. Our internal factories, as well as our supply chain partners’ factories, are working hard to continue to bring relief to the remaining constrained capacity corridors. The passage of the CHIPS Act in August 2022, which we worked on actively, we expect will further enable us to make long term capacity investments to serve our customers.

We are extremely grateful to our customers, channel partners and supply chain partners for your patience, flexibility and ingenuity during a challenging period of supply constraints to help us help you. We particularly appreciate our customers who took advantage of the Preferred Supply Program (PSP) which enabled us to plan and allocate our resources more effectively so that we could better serve you. ?

Turning to our shareholders, we announced our Microchip 3.0 strategy a year ago focused on consistent growth, improved profitability, strong free cash generation and increased capital return. Throughout 2022 we continued to deliver strong financial results and new records every quarter. Further, in 2022 our capital return program went into high gear with our dividends increasing ~9% sequentially every quarter (>40% annualized) and the implementation of a programmatic share buy-back program every quarter. We expect to do more of the same in 2023, and further strengthen our strong business foundation which is based on our culture and our commitment to sustainability.

While our business indicators look strong well into 2023, we are also cognizant of the weakening macro conditions resulting from rising inflation and interest rates. No matter what the future holds, the Microchip leadership team is confident that we will navigate changing conditions consistent with how long-term owners of the company would. We will make the key investments in people, technology, capacity and customer service required to thrive in the long-term, while being prudent and pragmatic about whatever short-term adjustments may be required.

Onward!