We remain steadfast in our belief that semiconductors are the engine of innovation

In a recent interview with Electronics Maker, Ganesh Moorthy, President & Chief Executive Officer of Microchip Technology Inc.  delves into the challenges faced by the semiconductor market in 2023 and offers a glimpse into what lies ahead in 2024 and beyond.

1.            Could you share Microchip’s overall developments/achievements in 2023? Which areas do you see significant growth and how do these align with the company’s strategic goals?

2023 was marked by early business momentum and subsequent macro-economic instability. Despite these contrasting dynamics, we effectively navigated the challenges through a set of strategies to further promote stability, resilience and long-term growth. Our strategic response to reduced demand visibility includes helping customers with inventory risk mitigation while identifying win-win outcomes and reducing lead times for most products from 52 weeks to less than eight weeks.

Microchip’s robust cash-generating capability underscores our strategies’ effectiveness. In November, we announced our 85th consecutive quarterly dividend payment, marking the 79th increase since our inception. During calendar year 2023, we returned approximately $1.7 billion in a combination of dividends and share buybacks to our shareholders.

Meanwhile, our strategic focus on total system solutions in key market megatrends (5G infrastructure, IoT, data center, e-Mobility, sustainability, and Advanced Driver Assistance Systems [ADAS]) continues to drive a healthy design-win pipeline, and we enter 2024 positioned for long-term growth as macro-economic conditions improve.

2.            Looking ahead to 2024, which specific market segments do you anticipate having strong growth potential? Where do you plan to invest more in R&D to ensure technological advancement as well as to secure a leading position in the market?

Despite the current macro-economic challenges, we remain steadfast in our belief that semiconductors are the engine of innovation that continually propels us toward an ever-enriching human experience. Our diverse product portfolio acts as a springboard for innovation in applications ranging from aerospace and defense solutions to data centers, automobiles, medical devices, industrial equipment and communication infrastructures. We are cultivating a strong design-win pipeline across these applications through our focus on total system solutions that solve customer challenges in key megatrend areas. We believe this pipeline positions us well in each of these markets.

3.            Microchip has consistently provided a highly reliable supply partner system. In 2024, a year with uncertain demand forecasts, what are your thoughts on the trust-based supply relationship between Microchip and its customers? How do you plan to work with your customers to ensure a win-win situation in the supply chain?

During these challenging times, we believe maintaining short lead times is the most effective strategy. It gives our customers and us greater agility and efficiency as we engage an unpredictable environment.

At the same time, we strive for an optimal balance of inventory that not only caters to customer requirements but also positions us for robust and long-term growth when the macro-economic environment improves.

4.            Amid the uncertainty of the global economic and industry environment, what are Microchip’s plans and strategies to ensure the continued growth and stability of its business?

As we have with all semiconductor industry cycles, we intend to tackle this period of uncertainty with our tried-and-true strategy that focuses on sustainable long-term growth while adjusting our speed and responsiveness to implement short-term modifications as and when necessary.

This strategy is what gives Microchip its stability and resilience. It is deeply rooted in our guiding values whose foundation is our culture, people and seasoned leadership.

Our strategic focus on total system solutions is another key contributor to Microchip’s long-term growth and success. It drives a pipeline of design wins that positions us well in the markets we serve and enables consistent investment in employee development and empowerment so we can retain our invaluable team members despite challenging business cycles.

As we step into 2024, my undiminished optimism is fueled by our proven and robust business model and the utmost confidence in our leadership team. Our diligent global team is enabling us to effectively navigate business cycles as we continue to strengthen our partnerships while adjusting our course as needed and consistently enhancing shareholder value.

5.            Large AI models have become the foundation of new intelligent computing infrastructure and the evolution of large models on cloud servers and mobile devices is underway. In light of these transformations, what urgent chip demands are arising from customers? What type of technological challenges do semiconductor manufacturers need to address in response to these changes?

Generative AI’s infrastructure requirements are estimated to be 10 to 100 times greater than that of earlier AI models. All data center infrastructure is affected by this trend. Generative AI’s success will depend on more than just advanced AI processors, including semiconductors for storing and otherwise handling all this data while making data centers cooler, more efficient and secure. These are the kinds of data center challenges we have a track record of solving so that operators can support technologies such as5G, cloud services and the current generation of AI/ML applications. Operators will face similar challenges, to an even greater extent, as they bring generative AI to the data center and on-premises servers.

Many believe that generative AI will also extend to the network edge in IoT applications like patient monitoring and automobile traffic violation detection. Today’s current AI-at-the-edge solutions may provide a roadmap for this transition, but getting there will be more difficult than with traditional AI. We are already looking at these challenges.

As an example, we are exploring how our current Wi-Fi® devices can be used to create a serial port to a bridge that enables generative AI to be accessed by an 8-bit microcontroller’s UART.  Whether an endpoint can exclusively operate generative AI at the edge without calling back to a data center remains to be seen. These are early days on the innovation curve and, as with any market we serve, our goal is to make it as easy as possible to solve some of the industry’s most fundamental system design challenges. These same basic challenges apply to generative AI and must be solved before it and other emerging technologies can deliver on their promise.

6.            What is Microchip’s approach in talent acquisition and employee development to further support its growth in the coming years?

We strive to build a global talent pipeline while ensuring our company is an ideal place to begin new careers and develop existing ones.

First, we are cultivating the best possible workplace culture for employee success, growth and stability, as well as for building a deep talent bench. This culture is based on a clear purpose to empower innovation that enhances the human experience, and a common set of guiding values for accomplishing this purpose while achieving our goals of quality, profit and technological advancement. Everyone shares in profits and ownership and especially in challenging times, we take every possible step to support our team members.

Second, we are training a new generation of manufacturing technicians in our fabs and providing educational resources for embedded design coursework to teachers, researchers and students worldwide. We also help schools integrate our products and technologies into the classroom and give seasonal and long-term interns hands-on experience to work closely with senior staff members.

Third, we believe our business environment is inherently more stable than some of the other semiconductor companies mainly due to factors ranging from long tenures among our leadership ranks, to how we structure our business. Our products cut across key growth megatrends andwe offer customer benefits that differentiate us from our competitors, including reducing costs and development risks by creating more complete solutions and providing greater supply resilience across our entire portfolio through our combination of internal and outsourced manufacturing capacity.

7.            Could you provide insights on Microchip’s developments or plans to achieve the company’s eco-friendly/sustainability goals?

We are committed to protecting the environment, conserving resources and minimizing waste within the communities in which we operate. This includes continuously working to minimize our products’ environmental impact throughout their lifecycle and make significant investments toward developing new technologies and products that ensure a sustainable future while enabling the innovations of tomorrow.

We strive for year-over-year improvement in our environmental programs while also balancing the needs of our growing company. Microchip has identified four strategic focus areas (GHG Emissions, Energy Efficiency, Water Conservation and Water Diversion) which govern the objectives of our environmental initiatives. We have committed to short-, mid-, and long-term science-based targets and are tracking our progress to drive future initiatives.

Our Sustainability Report and CDP Responses detail our annual environmental and social performance and share selected activities that highlight key workplace and community involvements. The management systems that we have implemented to support our environmental programs are aligned with international standards and are administered by a team of dedicated professionals.