Microchip In Industrial

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1 September 2017 Microchip In Industrial Ganesh Moorthy President and Chief Operating Officer

2 2 Corporate Overview Leading provider of: High-performance Microcontrollers, Digital Signal Controllers and Microprocessors Mixed-Signal, Analog, Interface and Security solutions Clock and Timing solutions Wireless and Wired Connectivity solutions Non-volatile EEPROM and Flash Memory solutions Flash IP solutions ~ $3.9 Billion revenue run rate ~13,500 employees Headquartered near Phoenix in Chandler, AZ

3 3 Our Vision Be The Very Best Embedded Control Solutions Company Ever

4 Annual Net Sales Growth $ Million MCU Analog Memory Licensing MMO FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 RR September consecutive quarters of profitability! 4

5 5 Revenue by End Market Communication Microchip is a top 10 semiconductor supplier to the Industrial and Automotive Markets

6 6 Industrial Market Characteristics Products need to work in harsh and/or remote environments Suppliers need patience and persistence Design-in cycles are complex and take 2 to 3 years much longer than consumer applications Volume is slow to ramp.and then often lasts for 10 to 20 years Switching costs are high, requiring long-time (> 20 years) component supply capability Counter to most semiconductor companies practice Growing adoption of smart, connected and secure (IoT) solutions to grow revenue, save cost and mitigate risk

7 Microchip s Business Model Is Designed For Industrial Markets All our products are designed to operate robustly in harsh environments Organizational DNA is suited for long design-in cycles and long product life cycles No distraction from mobile phone market Low exposure to consumer electronics market Have practiced customer driven product obsolescence for >25 years Low risk and high value for Industrial market Strong portfolio of Smart, Connected and Secure solutions for Industrial IoT requirements Complemented by software, tools and technical support tailored for industrial market customers 7

8 8 Industrial Process Control Flow Meters Pumps Touch Panels and Buttons Pressure Gauges

9 9 Metering and Measurement Test Equipment Electric Meters Gas Meters Fuel Evaluation Water Meters

10 10 Safety and Security Surveillance Cameras Smoke Detectors Security Touchpads Motion Sensors Carbon Monoxide Detectors

11 11 Smart Cities Energy Management Grid Infrastructure Smart Street Lighting Street Signs

12 12 Communication/Networking Machine-to-Machine (M2M) Communication Video Surveillance Communication Towers Routers/Gateways

13 13 Authentication Access Control Systems Secure POS Terminal Bus Authentication Cartridge Authentication

14 14 Medical Defibrillators CPAP Machines In-Home Patient Monitors Ultrasound Machines

15 15 Industrial Computing Industrial Printers Industrial Computers Point-of-Sale Machines Bar Code Scanners Information Kiosks

16 16 Building/Factory Automation Assembly Line Automation Boilers HVAC Machine Vision Smart Lighting

17 Industrial IoT Smart 17

18 Industrial IoT Connected 18

19 Industrial IoT Smart, Connected & Secure 19

20 Confidential September 2017 Industrial OEMs Using Microchip Solutions 20

21 21 Investment Thesis Consistent and above market revenue growth, profitability, cash generation and return to shareholders

22 Confidential September Non-GAAP Net Sales $4,000,000 $3,750,000 $3,500,000 $3,250,000 $3,000,000 $2,750,000 $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 17.6% CAGR FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18 * Run rate for FY18 represent Q1 FY18 actual results multiplied by four

23 Confidential September Non-GAAP Gross Profit $2,500,000 $2,250,000 $2,000,000 $1,750,000 $1,500, % CAGR $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

24 Confidential September Non-GAAP Operating Income $1,500,000 $1,250,000 $1,000,000 $750, % CAGR $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

25 Confidential September Non-GAAP Net Income and Diluted EPS Growth $1,400,000 $1,300,000 $1,200,000 $1,100,000 $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 FY12 FY13 FY14 FY15 Non-GAAP Net Income $ FY16 FY17 Non-GAAP Diluted EPS *RR FY18 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 * Run rate for FY18 represent Q1 FY18 actual results multiplied by four

26 Confidential September Free Cash Flow as a % of Revenue $1,400,000 $1,300,000 $1,200,000 $1,100,000 $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 FY12 FY13 FY14 Free Cash Flow $ FY15 FY16 FY17 Free Cash Flow as a % of Sales * RR FY % 39.0% 36.0% 33.0% 30.0% 27.0% 24.0% 21.0% 18.0% 15.0% 12.0% 9.0% 6.0% 3.0% 0.0% * Run rate for FY18 represent Q1 FY18 actual results multiplied by four. Free cash flow = operating cash flow minus capital expenditures.

27 Confidential September EBITDA $1,750,000 $1,500,000 $1,250,000 $1,000, % 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

28 Confidential September EBITDA and Net Leverage $500, $450, $400, $350, $300, $250, $200, $150, $100, $50, $ Q1FY17 Q2FY17 EBITDA $ Q3FY17 Q4FY17 Q1FY18 Net Leverage Q2FY18 fcst * EBITDA as calculated in accordance with Microchip s Credit Facility. Net leverage excludes 2037 convertible debt, consistent with Credit Facility

29 Financial Results, Guidance and Long-Term Model 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 Net Sales $1,001.3 Gross Margin % 60.5% % Operating Expense 22.5% to 23% Operating Margin 37.5% to 38.25% Diluted EPS $ $1.37 Long Term Model Revenue Growth 7% - 9% Gross Margin 62.5% Operating Expense 22.5% Operating Margin 40.0% 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 Confidential September

30 Confidential September 2017 ~ $4.7B Returned To Shareholders 30 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Total Dividend Dividend per Share 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 Q2FY18* ~ $3.3B in dividends and ~$1.4B in share buy-backs! $0.50 $0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00

31 31 Microchip Summary Significant provider of Industrial semiconductor solutions with >25 years experience in Industrial market Dominate multiple application areas in the Industrial market Well-positioned for Industrial IoT growth with a broad range of Smart, Connected and Secure solutions Consistent and above market revenue growth, profitability, cash generation and return to shareholders

32 Thank you!