Microchip (MCHP) TD Cowen's 54th Annual Technology, Media & Telecom Conference summary

Industry cycle and inventory normalization

• Post-COVID cycle was marked by extreme artificial demand, leading to significant inventory imbalances and a prolonged downturn due to inflexible order programs.

• Shipments to customers and distributors have been below consumption for two years, but the gap is closing, with customer count rising and normalization expected within a quarter.

• Inventory days have dropped from 266 to 185 (or 170 excluding last-time buys), with a target of 130–150 days as revenue grows.

• Current inventory levels are considered healthy, with expectations to ship to consumption soon.

Pricing strategy and customer relationships

• Reluctant to raise prices opportunistically; focus is on passing through only genuine cost increases from suppliers.

• Industry-wide inflation post-COVID led to rare price hikes, but efforts are ongoing to fend off supplier increases.

• Competitors’ opportunistic price hikes are driving their customers to seek alternatives, aiding market share gains.

• Major customer relationship repair initiatives are complete, with ongoing engagement to maintain trust.

Data center and product innovation

• Data center-specific products (storage controllers, memory controllers, PCI Express) are growing, with significant ramp expected from 2025–2026.

• Broader catalog products also serve data centers, but exposure is hard to quantify due to multi-market use.

• PCIe Gen 5 misexecution led to lost share, but Gen 6 leapfrogs competition with advanced technology and multiple design wins; major production ramp expected next year.

• New PCIe retimer product developed in-house, already has a design win and is synergistic with switching business.