Microchip (MCHP) Goldman Sachs Communicopia + Technology Conference 2025 summary

Market trends and growth drivers

• July bookings reached a two-year high, with August performing better than typical seasonal trends.

• Strongest growth seen in AI, data center, infrastructure, and connectivity, with significant design-in activity for next-gen PCIe switches and Ethernet T1.

• Aerospace and defense segment accounts for 18% of revenue, benefiting from global defense spending and high-margin FPGA products.

• Automotive growth is driven by T1S connectivity and HMID products, especially in high-end dashboards and next-gen Ethernet.

• China represents 18% of revenue, with most business insulated from tariffs and ongoing growth in non-EV markets.

Operational and strategic initiatives

• Aggressively reducing inventory, manufacturing at 50% of demand, with a target of 195-200 days by September and a long-term goal of 130-150 days.

• Strategic focus on reorganizing microcontroller groups, funding connectivity, networking, and data center businesses, and creating a unified AI/ML business unit.

• Path to 25% operating expenses of revenue relies on productivity gains from AI and disciplined variable compensation.

• Early adoption of AI in operations since 2017, with 87% of orders auto-scheduled using deep learning and ongoing expansion into software and design productivity.

Technology and product innovation

• Focus on long-lived, high-margin products in security, timing, and connectivity, avoiding commoditized power segments.

• FPGA business has more than doubled since the Microsemi acquisition, expanding into industrial and medical markets with new product ranges.

• AI-powered recommender tools and coding assistants have improved internal and customer productivity by 20-40%.

• Customers benefit from integrated environments offering code generation, documentation, and targeted video support.