QUOTE AND NEWS
Business Wire  Feb 8  Comment 
Microchip Technology Incorporated (NASDAQ:MCHP), a leading provider of microcontroller and analog semiconductors, announced today that the Company will present at the Thomas Weisel Partners 2010 Technology and Telecom Conference on Tuesday, February
Stock Blog Hub  Feb 6  Comment 
Microchip Technologies Incorporated (MCHP) reported net sales of $250.1 million in the third quarter of fiscal 2010, up approximately 10.3% sequentially and up 30.1% year-over-year. Revenues from all three product lines -- Microcontrollers,...
Market Intelligence Center  Feb 4  Comment 
Microchip Technology (NASDAQ: MCHP) opened at $26.60. So far today, the stock has hit a low of $25.54 and a high of $26.61. MCHP is now trading at $25.74, down $1.18 (-4.38%). Over the last 52 weeks the stock has ranged from a low of $17.55 to a...
EE Times  Feb 3  Comment 
Silicon Storage Technology Inc. is being snapped up at a bargain price by Microchip Technology Inc., which will buy the company partly with the storage IC vendor's cash, gain many valuable patents, critical technology applications and a steady...
EE Times  Feb 3  Comment 
Microchip Technology Inc. said it has struck an agreement to pay approximately $273 million for Silicon Storage Technology Inc., which has also terminated a previous merger deal with a private equity investment group. Silicon...
MarketWatch  Feb 3  Comment 
Silicon Storage Technology Inc. on Wednesday said it has entered into a merger agreement with Microchip Technology Inc. under which Microchip will acquire all of Silicon Storage's outstanding common stock for $2.85 a share in cash. The deal is...
StreetInsider.com  Feb 3  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Earnings/Microchip+Tech+%28MCHP%29+Posts+Q3+EPS+of+%240.37%2C+Tops+by+8c/5302431.html for the full story.
Business Wire  Feb 3  Comment 
Microchip Technology Incorporated (NASDAQ: MCHP), a leading provider of microcontroller and analog semiconductors, today announced that its Board of Directors has declared a quarterly cash dividend on its common stock of 34.1 cents per share. The
Business Wire  Feb 3  Comment 
Microchip Technology Incorporated (NASDAQ: MCHP), a leading provider of microcontroller and analog semiconductors, today reported results for the three months ended December 31, 2009 as summarized in the following table:     GAAP   % ofRevenue  



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Microchip Technology (NASDAQ: MCHP) makes analog microcontrollers, memory, and other electronic components for embedded systems, which are small, low-power computers designed to perform specific tasks. The company primarily competes in the microcontroller market, where the company generated 80% of its 2008 revenue. Since 2003, MCHP has occupied the largest market share in the microcontroller market. [1]

The weak U.S. housing market hurt sales of MCHP's products used in household electronics, from garage door openers to thermostats. Revenue fell 12.8% or $132.4 million to $903.3 million in 2009, reflecting declining demand for memory products and fluctuating exchange rates.[2] [3]

MCHP primarily competes with STMicroelectronics and Atmel.[4] In April 2009, Microchip Technology acquired R&E International, a privately-held developer of integrated circuits. [5]

Business

Year ending March 31
Year ending March 31[4]
Microchip Technology Revenue and Operating Income ($ in millions)[6] [3]
Products 2009 2008 2007 2006
Microcontrollers 731.6 832.9 834.3 736.2
Memory Products 89.3 120.3 122.7 125.3
Analog and Interface Products 82.3 82.5 82.6 66.4
Total Revenue 903.3 1035.7 1039.6 927.9
Operating Income 233.3 301.67 347.81 326.36

The struggling U.S. housing and Asian markets contributed to the decline in sales in all areas.[2]

Business Segments

Year ending March 31
Year ending March 31[7]

Microcontrollers (81.0% of 2009 sales[3])

The largest component of Microchip's revenue, this segment decreased by 0.17% from fiscal 2007 to fiscal 2008 because of a weak housing market, weak sales in Asia, and declining demand for its memory products.[7]

Microcontrollers are essentially computers condensed to a single chip, containing a processor, memory, and a input/output interface. MCHP produces microcontrollers under its PIC brand name. PIC microcontrollers are designed for high performance, low power and cost effectiveness. MCHP microcontrollers use a dual-bus architecture, which has separate pathways for data and instruction, making them faster than the majority of other microcontroller products on the market that tend to use single-bus architectures. MCHP manufactures products in the 8-bit, 16-bit, and 32-bit microcontroller markets and has the largest market share in the 8-bit market.[8] The 8-bit microcontroller is the smallest and most popular of the three, as an estimated 55% of all computers use 8-bit microcontrollers.[9] The 16-bit and 32-bit microcontrollers are more computationally powerful and physically bigger.

MCHP also makes the Development Tools that system designers use to program PIC microcontrollers. These tools are hardware products that let these designers program MCHP's microcontrollers and other electronics products. As of fiscal 2008, MCHP has shipped more than 600,000 development tools worldwide.[8]

Memory Products (9.9% of 2009 sales [3])

Memory products consist of Serial EEPROMs (Electrically Erasable Programmable Read-Only Memory), which are useful in embedded devices because they do not require power to keep data stored. MCHP is the largest manufacturer of EEPROMs. This segment was responsible for 11.8% of revenue in 2007, but this number fell to only 11.6% of total revenue in 2008 due to fluctuations in customer demand. [7]

Analog and Interface Products (9.1% of 2009 sales[3])

Analog and Interface Products consist of MCHP's power management, linear, mixed-signal, thermal management and interface products, which number over 500. Its line of mixed-signal products primarily includes data converters that convert data from analog to digital or vice versa. Linear products refer to Microchip's products that transfer either analog or digital data, without any conversions.[7]

Key Trends and Forces

The struggling U.S. housing market has negatively affected MCHP's domestic revenue

By the end of 2006, the number of vacant homes in the U.S. had increased by 34% to 2.1 million, a number that continued to increase in 2007. MCHP's microcontrollers are used in garage door openers, security systems, thermostats, irrigation equipment, and air conditioning, which are driven by the housing market. Fiscal 2008 Q2 earnings fell short of company predictions by $8.3 million, or 3.1%, which MCHP attributed to the weak housing market.[10][11]

Microchip's business has suffered from decreasing demand for its products

Products in the semiconductor industry tend to have short shelf lives, with their selling prices decreasing rapidly over the course of their existence. In the case of Microchip, the average selling prices of its microcontroller and analog and interface products remained relatively constant as of fiscal 2008, but average selling prices of its memory products and non-proprietary analog and interface products decreased. Memory sales dropped by 1.95%, the most of all segments.[12]

Weak U.S. Dollar benefits Microchip's international sales

Because MCHP reports its revenues in U.S. dollars but most of its business is international (74% in 2008), it is affected by exchange rates. When the value of the dollar depreciates, MCHP's international sales grow in dollar terms. From 2006-2008, the dollar depreciated relative to the Euro and Japanese Yen.[13][14]

Competitors

  • Atmel (ATML) competes with all three of MCHP's segments and is most notably successful for its business in the smart card market.[15][16]
  • STMicroelectronics (STM) manufactures a wide variety of products in its 3 segments: application specific product group (54% 2007 revenue), industrial and multi-segment group (32% 2007 revenue), and flash memory group (14% 2007 revenue). In the application specific product group, STM competes with Microchip in the production of mixed signal and power technologies. STM's industrial and multi-segment group, on the other hand, competes with MCHP in the production of microcontrollers and memory products.[17][18]
MCHP and Major Competitors (2008) ($ in millions)
Company 2008 Revenue ($ in millions) 2008 Net Income ($ in millions) 2008 Microcontroller Revenue ($ in millions) Net profit margin
Microchip Technology (MCHP)[3] 1035.7 297.7 832.9 27.55%
STMicroelectronics (STM)[19] 9,842 -786 936[20] -7.93%
Atmel Corporation (ATML)[21] 1567 -27.2 522.6 [22] -1.74%

STMicroelectronics microcontroller segment also includes its line of memory and smartcard products




References

  1. Global Spec "Microchip"
  2. 2.0 2.1 MCHP 2008 10-K, Item 7: Management Discussion and Analysis of Financial Condition, page 30
  3. 3.0 3.1 3.2 3.3 3.4 3.5 MCHP 2009 10-K, Item 7 "Management's Discussion," page 30
  4. 4.0 4.1 MCHP 2008 10-K, Item 1: Business, page 7
  5. MCHP Press Release, 8 Apr 2090
  6. MCHP 2009 10-K, Item 6 "Selected Financial Data," page 22
  7. 7.0 7.1 7.2 7.3 MCHP 2008 10-K, Item 7: Management Discussion and Analysis of Financial Condition, page 30-31
  8. 8.0 8.1 MCHP 2008 10-K, Item 1: Business, page 4-5
  9. Wikipedia: 8-bit
  10. SeekingAlpha: Microchip Blames Housing Weakness for FY Q2 Low Revs
  11. The Market Oracle: US Housing Market Crash to result in the Second Great Depression
  12. MCHP 2008 10-K, Section 1A: Risk Factors, page 11
  13. EUR to USD Exchange Rates
  14. USD to JPY Exchange Rates
  15. Wikinvest: Atmel
  16. Atmel: Products
  17. Wikinvest: STMicroelectronics
  18. STMicroelectronics: Company Profile
  19. Google Finance: STM
  20. FTM 10-K 2009, Item 7 "Results of Operations," page 26
  21. Google Finance: STM
  22. ATML 10-K 2008, Item 7 "Management's Discussion," page 36
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