Investor Presentation August 2017.090517.Pdf

Home , Atmel, Cypress PSoC, EFM32, Energy micro, Hercules (processors), Infineon AURIX

Microchip 2.0

Steve Sanghi, CEO Ganesh Moorthy, COO Eric Bjornholt, CFO ©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.

©August 2017 2

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

©August 2017 3 Annual Net Sales Growth

4000 3900 3800 3700 3600 107 consecutive quarters of profitability! 3500 3400 3300 3200 3100 MCU Analog Memory Licensing MMO 3000 2900 2800 2700

2600 2500 2400 2300 2200 2100 2000 1900 $ Million 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0

FY93 FY95 FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17

©August 2017 4 Total MCU (8/16/32) Market Share %

©August 2017 5 Worldwide Microcontroller Market Share

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

Based on dollar shipment volume 2003-2016, Source: Gartner and Microchip ©August 2017 6 Analog Yearly Revenue (k$)

$1,000,000 $950,000 $900,000 $850,000 $800,000 $750,000 $700,000 $650,000 $600,000 $550,000 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

©August 2017 7 Gross Margin % (Non-GAAP*)

Higher Utilization Richer Product Mix

65  62.5% Record Long-term GM goal 60

55 (%) 50 SST Atmel Acquisition Acquisition 45 Fab 4 Production start Worldwide Business 40 Financial Crisis Downturn 35

30 Q1FY02 Q2FY02 Q3FY02 Q4FY02 Q1FY03 Q2FY03 Q3FY03 Q4FY03 Q1FY04 Q2FY04 Q3FY04 Q4FY04 Q1FY05 Q2FY05 Q3FY05 Q4FY05 Q1FY06 Q2FY06 Q3FY06 Q4FY06 Q1FY07 Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY12 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18

*Excludes share-based compensation and acquisition-related expenses. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com. ©August 2017 8 Expanding Our Solutions Through Acquisitions HI-TECH Supertex Roving Networks High-Voltage Analog & Development Tools Advanced Silicon Bluetooth® & Motor Drive Mixed-Signal Products Compiler Embedded Wi-Fi® Products

ZeroG Micrel Low-Power Hampshire Embedded LSS Novocell Analog, mixed-signal, timing & power Touch Screen Wi-Fi® High-Speed Non-volatile management Controllers ADCs Memory IP

2008 2009 2010 2011 2012 2013 2014 2015 2016

EqcoLogic Atmel SST Ident Equalizer & Microcontrollers, High-Density Flash 3D Gesture Capture Coaxial Wireless, Touch, & IP & Proximity Detect Transceiver R&E Products Automotive, MMT Security International & Memory Assembly & Test SMSC Security & Life Capacity ® ISSC Safety ASICs MOST , USB, Expansion Ethernet, Wireless Audio Bluetooth® & PC Controllers Low Energy

©August 2017 9 Microchip 2.0

Be The Very Best Embedded Control Solutions Company Ever

©August 2017 10

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

©August 2017 11

MICROCHIP 2.0

©August 2017 12

Keypad

Micrel Classic

Microchip MIC2297 LED MCP1700 SST Boost Backlight Regulator Supply

PWM

LCD Analog KEY FIRMWARE EBI/PMP Driver Driver

PIC24FJ1024GA610 SPI SPI SPI GPIO

Radio SQI GPIO GPIO

SQI

LCD Display

PIC12LF1552 SST26VF064B SQI Flash Proximity Power Font Storage Management

©August 2017 13 Automotive PEPS System

Micrel Classic

MCP2025 Microchip LIN 25LC640 Atmel EEPROM Transceiver

MCP2025

LIN ATA6570 Transceiver CAN Transceiver

VBAT w/ Partial MIC5353 Networking LDO

MIC94355

Ripple Blocker

ATA5279 PIC32MK1024GP100 LF Coil Driver ATA5781 32-BIT MCU W/ ECC Base Station RF Receiver

©August 2017 14 Card Reader

Micrel Classic

Microchip

Atmel LAN8740A WINC1500 SMSC Ethernet WiFi PHY SST

MIC4690

Sw. Reg PIC32

Controller

Graphics PIC32MZ2048 MIC5209 MCU LDO

SST26VF032 Flash

©August 2017 15

Laser Printer

SMSC Classic

Microchip

Atmel

MCP39F501 SST Energy

Meter

PIC16LF1503 SST25VF040B

Power Rail Flash Memory

Controller USB2534

Customer USB Hub

PIC10F220 ASIC

Safety MXT144U Controller Capacitive Panel Touch Touch Display

Heating Controller

Element Fuser AT24C01D Serial EEPROM

©August 2017 16 LoRa Gateway

Micrel Classic

Microchip

Atmel

SST

ISSC

MIC45205 BM71

Power Bluetooth

Supply

PIC32MZ2048 ATECC508A SST26VF064 MCU Crypto Serial Flash LoRa Radio

Gateway

PIC24 DSC1001 MRF24WN MEMS WiFi Ocsillator

MIC5248 KSZ8061 LDO Eth Phy

©August 2017 17

MICROCHIP 2.0

©August 2017 18

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

46% Microchip PIC 39% 43% Atmel AVR 34% 18% STMicroelectronics ST6, ST7, ST8 19% 13% Freescale HC 17% 13% TI TMS370, 7000 10% 11% Intel 80xx, '251 10% 10% NXP/Philips P80x, P87x, P89x 13% 10% Atmel 80xx 8% 9% Renesas H8 12% 9% CypressPSoC 1 (M8C) / PSoC 3 (8051) 11% 9% Xilinx PicoBlaze (soft core) 10% 8% SiLabs 80xx 9% 7% Zilog Z8, Z80, Z180, eZ80 4% 3% Digi / Rabbit 2000, 3000 2% 2% Parallax 2% 2% Toshiba 1% 2% Infineon XC800, C500 3% 2017 (N = 462) 2% Maxim 80xx 2% 2015 (N = 695)

Which of the following 16-bit chip families would you consider for your next embedded project?

45% Microchip PIC24 / dsPIC 38% * 42% TI MSP430 43% * 22% STMicroelectronics ST9, ST10 21% 15% Freescale HC16 19% 11% Intel 8086, '186, '286 11% 11% Renesas RL78 12% 10% Freescale HC12 12% 9% Renesas R8C 7% 6% AMD 186, '188 5% 5% Zilog Z180, Z380 3% 4% Maxim 5% Infineon XE166, XC2000, XC166, C166 4% 6% 2017 (N = 412) 3% Other 5% 2015 (N = 621)

Which of the following 32-bit chip families would you consider for your next embedded project?

SiLABS Precision32 (ARM) 5% STMicro STM32 (ARM) 30% Qualcomm (any) 5% Microchip PIC 32-bit (MIPS) 20% Energy Micro EFM32 4% Microsemi SmartFusion2 SoC FPGA (Cortex-M3) 4% Xilinx Zynq (with dual ARM Cortex-A9) 17% Infineon XMC4000 (ARM) 4% Freescale i.MX (ARM) 17% AMD Fusion, Athlon, Sempron, Turion, Opteron, Geode 4% NXP LPC (ARM) 16% Atmel AT91xx 4% FreescalePowerQUICC 4% FreescaleKinetis (ARM/Cortex-M4/M0) 16% Renesas RH850 4% Atmel SAMxx (ARM) 14% Freescale PowerPC 55xx 4% TI Sitara (ARM) 14% Microsemi FPGA (Cortex-M1, softcore) 3% Freescale PowerPC 5xx, 6xx 3% Intel Atom, Pentium, Celeron, Core 2, Core iX 13% Intel Itanium 3% Altera (Intel FPGA) SoC-FPGA (with dual ARM Cortex-A9) 12% Freescale Vybrid (ARM) 3% Arduino 12% Freescale 68K, ColdFire 2% Microsemi SmartFusion SoC FPGA (Cortex-M3) 2% Altera (Intel FPGA) Nios II (soft core) 11% IBM PowerPC 4xx, 7xx 2% TI SimpleLink (ARM)* 11% Infineon XMC1000 (ARM Cortex-M0) 2% Marvell 2% TI TM4Cx (ARM) 11% Infineon Tricore 2% Atmel (AVR32) 11% Xilinx Virtex-5 (with PowerPC 405) 2% Atmel AT91xx/ATSAMxx (ARM) 10% Infineon AURIX (TriCore-based) 1% Cirrus Logic EP73xx, EP93xx (ARM) 1% Cypress PSOC 4 ARM Cortex-M0/PSoC 5 ARM Cortex-M3 9% AMD Alchemy (MIPS) 1% Renesas RX 8% SPARC (any) 1% Broadcom (any) 8% Xilinx Virtex-4 (with PowerPC 405) 1% Spansion (formerly Fujitsu) FM3 (ARM) 1% TI C2000 MCUs 7% Infineon TriCore 1% Xilinx MicroBlaze (soft-core) 7% 2017 (N = 617) Infineon TriCore-based 32-bit families AUDO MAX 1% AMCC PowerPC 4xx NVIDIA Tegra 6% 1% Other (please specify) 4% TI Hercules (ARM) 6%

68% 67% 65%

25% 26% 27%

7% 8% 8%

The chip itself The ecosystem surrounding the chip The chip's supplier/vendor (software, tools, support, etc.)

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

(Unaided Open End) Microchip or Atmel (Microchip) 14%

Texas Instruments (TI) 14%

ST Microelectronics 11%

NXP/Freescale/Qualcom 11%

Xilinx 5%

Intel, Intel Altera 5%

ARM 4%

Digi-Key 4%

Cypress Semiconductor 2%

Renesas 2%

Arrow 2% 2017 (N = 328) Unaided Silicon Labs 2%

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

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

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

©August 2017 26 ~ $4.6B Returned To Shareholders $100,000 $0.50 Total Dividend Dividend per Share $90,000 $0.45 $80,000 $0.40 $70,000 $0.35 $60,000 $0.30 $50,000 $0.25 $40,000 $0.20 $30,000 $0.15 $20,000 $0.10 $10,000 $0.05 $0 $0.00 Q1FY07 Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 ~ $3.2B in dividends and ~$1.4B in share buy-backs!

Communi- Defense & cation Aerospace 2% Computing 5% 9%

Industrial 35% Consumer 24% Automotive 25%

Actual Results Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Net Sales $844.0 $873.8 $881.2 $902.7 $972.1 Gross Profit $471.1 $499.9 $509.7 $534.7 $587.2 Gross Margin 55.8% 57.2% 57.8% 59.2% 60.4% Operating Expense $240.0 $233.6 $220.6 $213.6 $222.9 Operating Income $231.1 $266.3 $289.1 $321.2 $364.3 Operating Margin 27.4% 30.5% 32.8% 35.6% 37.5% Net Income $194.0 $219.6 $246.5 $276.9 $319.1 Diluted EPS $0.84 $0.94 $1.05 $1.16 $1.31 EBITDA $264.1 $298.8 $321.3 $356.5 $395.6 Q2 FY18 Guidance Long Term Model Net Sales $1,001.3 Revenue Growth 7% - 9% Gross Margin % 60.5% -60.75% Gross Margin 62.5% Operating Expense 22.5% to 23% Operating Expense 22.5% Operating Margin 37.5% to 38.25% Operating Margin 40.0% Diluted EPS $1.33 - $1.37 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. ©August 2017 35 Non-GAAP Net Sales

$4,000,000 $3,750,000 $3,500,000 $3,250,000 $3,000,000 $2,750,000 17.6% CAGR $2,500,000 $2,250,000 $2,000,000 $1,750,000 $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18

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

$2,500,000 $2,250,000 $2,000,000 $1,750,000 18.2% CAGR $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18

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

$1,500,000

$1,250,000

$1,000,000 20.4% CAGR $750,000

$500,000

$250,000

$0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18

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

©August 2017 38 Non-GAAP Net Income and Diluted EPS Growth $1,400,000 $7.00 $1,300,000 $1,200,000 $6.00 $1,100,000 $1,000,000 $5.00 $900,000 $800,000 $4.00 $700,000 $600,000 $3.00 $500,000 $400,000 $2.00 $300,000 $200,000 $1.00 $100,000 $0 $0.00 FY12 FY13 FY14 FY15 FY16 FY17

Non-GAAP Net Income $ Non-GAAP Diluted EPS *RR FY18

* Run rate for FY18 represent Q1 FY18 actual results multiplied by four ©August 2017 39 Free Cash Flow as a % of Revenue $1,400,000 42.0% $1,300,000 39.0% $1,200,000 36.0% $1,100,000 33.0% $1,000,000 30.0% $900,000 27.0% $800,000 24.0% $700,000 21.0% $600,000 18.0% $500,000 15.0% $400,000 12.0% $300,000 9.0% $200,000 6.0% $100,000 3.0% $0 0.0% FY12 FY13 FY14 FY15 FY16 FY17 Free Cash Flow $ Free Cash Flow as a % of Sales *RR FY18

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

$1,750,000

$1,500,000

$1,250,000 17.6% CAGR $1,000,000

$750,000

$500,000

$250,000

$0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18

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

$500,000 3.50 $450,000 3.15 $400,000 2.80 $350,000 2.45 $300,000 2.10 $250,000 1.75 $200,000 1.40 $150,000 1.05 $100,000 0.70 $50,000 0.35 $0 0.00 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18

EBITDA $ Net Leverage fcst Q2FY18 * EBITDA as calculated in accordance with Microchip’s Credit Facility. Net leverage excludes 2037 convertible debt, consistent with Credit Facility

 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.