Microchip (MCHP) KeyBanc Capital Markets Technology Leadership Forum summary

Market cycle and demand trends

• Bookings increased from February through April, with June quarter bookings nearly 50% higher than March, but momentum stalled with flat bookings in May, June, and July.

• Green shoots in demand are present but not accelerating as expected; cancellations and push-outs have moderated, and some customers are pulling in orders.

• Europe and North America saw significant weakness in the June quarter, while China, which led the downturn, is expected to recover first.

• Recovery is expected to be asymmetric and gradual, with industrial and automotive markets remaining weak.

• Aerospace/defense and AI data center segments are outperforming, but AI is a small portion of overall business.

Inventory management and customer behavior

• Customers are tightly managing inventory due to higher interest rates and short lead times, with confidence in quick supply.

• Despite past supply chain lessons, customers are not holding higher inventory levels, risking future cycle volatility.

• Inventory on the balance sheet remains high, with short lead times for most products.

PSP program and supply chain strategy

• The PSP program, requiring 12-month non-cancelable orders for supply priority, was effective during tight supply but ended in February.

• The program enabled efficient manufacturing and reliable delivery but needed to be unwound sooner as supply normalized.