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 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 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 Transceiver EEPROM 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 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 18 19 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) 2017 Embedded Markets Study © 2017 Copyright by AspenCore. All rights reserved. 20 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) 2017 Embedded Markets Study © 2017 Copyright by AspenCore. All rights reserved. 21 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