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What changed in MICROCHIP TECHNOLOGY INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MICROCHIP TECHNOLOGY INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+476 added−395 removedSource: 10-K (2024-05-23) vs 10-K (2023-05-25)

Top changes in MICROCHIP TECHNOLOGY INC's 2024 10-K

476 paragraphs added · 395 removed · 336 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

50 edited+11 added−15 removed43 unchanged
Biggest changeAnalog Our analog product line consists of several families including power management, linear, mixed-signal, high voltage, thermal management, discrete diodes and MOSFETS, RF, drivers, safety, security, timing, USB, ethernet, wireless and other interface products.
Biggest changeAnalog Our analog product line consists of several families including power management, linear, mixed-signal, high voltage, thermal management, discrete diodes and MOSFETS, RF, drivers, safety, security, timing, USB, ethernet, wireless and other interface products. 5 Table of Contents We market and sell our analog product line into our mixed-signal microcontroller, microprocessor and FPGA customer base, and to customers who use mixed-signal microcontrollers and FPGA products from other suppliers and to customers who use other products that may not fit our traditional mixed-signal microcontroller, FPGA and memory products customer base.
We currently compete principally on the basis of the technical innovation and performance of our embedded control products, including the following product characteristics: • performance • analog, digital and mixed-signal functionality and level of functional integration • field programmability • memory density • low power consumption • extended voltage ranges • reliability • security and functional safety • packaging alternatives • comprehensive suite of development tools We believe that other important competitive factors in the embedded control market include: • our broad product portfolio offers a Total System Solutions through a combination of hardware, software and services • ease of use • functionality of application development systems • hardware, software and tool compatibility within product families to increase migration flexibility • dependable delivery, quality and availability • technical and innovative service and support • time to market • total solution cost 9 Table of Contents • reference design We believe that we compete favorably with other companies on all of these factors, but we may be unable to compete successfully in the future, which could harm our business.
We currently compete principally on the basis of the technical innovation and performance of our embedded control products, including the following product characteristics: • performance • analog, digital and mixed-signal functionality and level of functional integration • field programmability • memory density • low power consumption • extended voltage ranges • reliability • security and functional safety • packaging alternatives • comprehensive suite of development tools We believe that other important competitive factors in the embedded control market include: • our broad product portfolio offers a Total System Solutions through a combination of hardware, software and services • ease of use • functionality of application development systems • hardware, software and tool compatibility within product families to increase migration flexibility • dependable delivery, quality and availability • technical and innovative service and support • time to market • total solution cost • reference design We believe that we compete favorably with other companies on all of these factors, but we may be unable to compete successfully in the future, which could harm our business.
Item 1. Business Overview We develop, manufacture and sell smart, connected and secure embedded control solutions used by our customers for a wide variety of applications. With over 30 years of technology leadership, our broad product portfolio is a Total System Solution (TSS) for our customers that can provide a large portion of the silicon requirements in their applications.
Item 1. Business Overview We develop, manufacture and sell smart, connected and secure embedded control solutions used by our customers for a wide variety of applications. With over 30 years of technology leadership, our broad product portfolio offers a Total System Solution (TSS) for our customers that can provide a large portion of the silicon requirements in their applications.
We promote employee adoption of our culture through a number of methods including training, mentorship, values-based performance reviews, employee engagement surveys, company-wide quarterly meetings, town hall meetings with the President and Chief Executive Officer and other executive team members, and an open-door policy of communication where employees are encouraged to interact directly with management.
We promote employee adoption of our culture through a number of methods including training, mentorship, values-based performance reviews, company-wide quarterly meetings, town hall meetings with the President and Chief Executive Officer and other executive team members, and an open-door policy of communication where employees are encouraged to interact directly with management.
To address these requirements, manufacturers often use integrated circuit-based embedded control systems that enable them to: • differentiate their products • replace less efficient electromechanical control devices • reduce the number of components in their system • add product functionality • reduce the system level energy consumption • make systems safer to operate • add security to their products • decrease time to market for their products • significantly reduce product cost Embedded control systems have been incorporated into thousands of products and subassemblies in a wide variety of applications and markets worldwide, including: • actuators • applications requiring touch buttons, touch screens and graphical user interfaces • automotive access control • automotive comfort, safety, information and entertainment applications • avionics • communication infrastructure systems • consumer electronics • defense and military hardware • electric vehicles • handheld tools • home and building automation • industrial automation • large and small home appliances • medical devices • motor controls • portable computers and accessories • power supplies • residential and commercial security systems • robotics • routers and video surveillance systems • satellites • smart home and IoT edge devices • smart meters and energy monitoring • storage and server systems • touch control • wireless communication Embedded control systems typically incorporate a mixed-signal microcontroller, microprocessor or FPGA as the principal active, and sometimes sole, component.
To address these requirements, manufacturers often use integrated circuit-based embedded control systems that enable them to: • differentiate their products • replace less efficient electromechanical control devices • reduce the number of components in their system • add product functionality • reduce the system level energy consumption • make systems safer to operate • reduce the consumption of natural resources • add security to their products • decrease time to market for their products • significantly reduce product cost Embedded control systems have been incorporated into thousands of products and subassemblies in a wide variety of applications and markets worldwide, including: • actuators • applications requiring touch buttons, touch screens and graphical user interfaces • automotive access control • automotive comfort, safety, information and entertainment applications • avionics • communication infrastructure systems • consumer electronics • data center solutions • defense and military hardware • electric vehicles • handheld tools • home and building automation • industrial automation • large and small home appliances • medical devices 4 Table of Contents • motor controls • portable computers and accessories • power supplies • residential and commercial security systems • robotics • routers and video surveillance systems • satellites • smart home and IoT edge devices • smart meters and energy monitoring • storage and server systems • touch control • wireless communication Embedded control systems typically incorporate a mixed-signal microcontroller, microprocessor or FPGA as the principal active, and sometimes sole, component.
We also compete with a number of companies that we believe have copied, cloned, pirated or reverse engineered our proprietary product lines in such countries as China and Taiwan. We are continuing to take actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis.
We also compete with a number of companies that we believe have copied, cloned, pirated or reverse engineered our proprietary product lines in such 8 Table of Contents countries as China and Taiwan. We are continuing to take actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis.
Training and Development Microchip’s culture focuses on continuous improvement. We provide training on our culture, management skills, communication, technical skills, and personal improvement. Microchip also has a leadership program that provides for the growth and development of its future leaders. This program helps us develop leaders that serve as role models of Microchip culture, and support empowerment and open communication.
We provide training on our culture, management skills, communication, technical skills, and personal improvement. Microchip also has a leadership program that provides for the growth and development of its future leaders. This program helps us develop leaders that serve as role models of Microchip culture, and support empowerment and open communication.
The failure to obtain necessary licenses, the necessity of engaging in defensive legal proceedings, or any negative results of these proceedings could harm our business. Environmental Regulation We must comply with many different federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of certain chemicals and gases used in our manufacturing processes.
The failure to obtain necessary licenses, the necessity of engaging in defensive legal proceedings, or any negative results of these proceedings could harm our business. 9 Table of Contents Environmental Regulation We must comply with many different federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of certain chemicals and gases used in our products and manufacturing processes.
The primary mission of our ESE team is to provide technical 8 Table of Contents assistance to customers and to conduct periodic training sessions for the balance of our sales team. ESEs also frequently conduct technical seminars and workshops in major cities around the world or through online webcasts.
The primary mission of our ESE team is to provide technical assistance to customers and to conduct periodic training sessions for the balance of our sales team. ESEs also frequently conduct technical seminars and workshops in major cities around the world or through online webcasts.
Human Capital Resources Our Employees We invest in our highly-skilled global workforce of approximately 22,600 people in accordance with our Guiding Value: employees are our greatest strength.
Human Capital Resources Our Employees We invest in our highly-skilled global workforce of approximately 22,300 people in accordance with our Guiding Value: employees are our greatest strength.
Patents, Licenses and Trademarks We maintain a portfolio of U.S. and foreign patents, expiring on various dates from 2023 through 2042. We also have numerous additional U.S. and foreign patent applications pending. We do not expect that the expiration of any particular patent will have a material impact on our business.
Patents, Licenses and Trademarks We maintain a portfolio of U.S. and foreign patents, expiring on various dates from 2024 through 2043. We also have numerous additional U.S. and foreign patent applications pending. We do not expect that the expiration of any particular patent will have a material impact on our semiconductor business.
During fiscal 2023, approximately 59% of our assembly requirements were being performed in our internal facilities and approximately 67% of our test requirements were performed in internal facilities. We use third-party assembly and test contractors for the balance of our assembly and test requirements.
During fiscal 2024, approximately 59% of our assembly requirements were being performed in our internal facilities and approximately 71% of our test requirements were performed in internal facilities. We use third-party assembly and test contractors for the balance of our assembly and test requirements.
With the exception of Arrow Electronics, our largest distributor, which made up 11% of our net sales, no other distributor or direct customer accounted for more than 10% of our net sales in fiscal 2023. In fiscal 2022, no distributor or direct customer accounted for more than 10% of our net sales.
With the exception of Arrow Electronics, our largest distributor, which made up 12% and 11% of our net sales, in fiscal 2024 and in fiscal 2023, respectively, no distributor or direct customer accounted for more than 10% of our net sales.
Our culture is important to our employees, and is a key reason why we have had a strong worldwide retention rate for many years, and have a significant number of employees with long tenure with Microchip that have grown from individual contributors in the early stages of their careers into senior leadership positions today.
Our culture is important to our employees, and is a key reason why we have a significant number of employees with long tenure with Microchip that have grown from individual contributors in the early stages of their careers into senior leadership positions today.
Compensation Programs We strive to provide competitive pay and benefits, that help meet the varying needs of our employees. Our total compensation package includes base pay, broad-based stock grants and bonuses, healthcare and retirement plans, employee stock purchase plans, paid time off and family leave.
Compensation Programs We strive to provide competitive pay and benefits, that help meet the varying needs of our employees and encourage employees to be shareholders in Microchip through our various equity incentive plans. Our total compensation package includes base pay, broad-based stock grants and bonuses, healthcare and retirement plans, employee stock purchase plans, paid time off and family leave.
Drehobl 61 Senior Vice President, MCU8 and MCU16 Business Units Richard J. Simoncic 59 Executive Vice President, Analog Power and Interface Business Units Mr. Moorthy was appointed as Chief Executive Officer in March 2021 and to the Board of Directors in January 2021. Mr. Moorthy has served as President since February 2016 and Chief Operating Officer since June 2009.
Drehobl 62 Senior Vice President, MCU8 and MCU16 Business Units Mr. Moorthy was appointed as Chief Executive Officer in March 2021 and to the Board of Directors in January 2021. Mr. Moorthy has served as President since February 2016 and Chief Operating Officer since June 2009.
In fiscal 2023 and fiscal 2022, we derived 47% and 48%, respectively, of our net sales through distributors compared to 53% and 52%, respectively, of our net sales from customers serviced directly by us.
In each of fiscal 2024 and fiscal 2023, we derived 47% of our net sales through distributors compared to 53% of our net sales from customers serviced directly by us.
Executive Officers of the Registrant The following sets forth certain information regarding our executive officers as of April 30, 2023: Name Age Position Ganesh Moorthy 63 President, Chief Executive Officer, and Director Steve Sanghi 67 Executive Chair J. Eric Bjornholt 52 Senior Vice President and Chief Financial Officer Stephen V.
Executive Officers of the Registrant The following sets forth certain information regarding our executive officers as of April 30, 2024: Name Age Position Ganesh Moorthy 64 President, Chief Executive Officer, and Director Steve Sanghi 68 Executive Chair Richard J. Simoncic 60 Chief Operating Officer J. Eric Bjornholt 53 Senior Vice President and Chief Financial Officer Stephen V.
Culture and Core Values Before Microchip went public in 1993, Microchip created a cultural framework to unite its employees through shared workplace values, and to guide employees’ strategies, decisions, actions and job performance. Microchip’s culture is centered 10 Table of Contents on a values-based, highly-empowered, continuous-improvement oriented approach.
Culture and Core Values Before Microchip went public in 1993, Microchip created a cultural framework to unite its employees through shared workplace values, and to guide employees’ strategies, decisions, actions and job performance. Our culture is centered on a values-based, highly-empowered, continuous-improvement oriented approach. This corporate culture strengthens our business, and enables us to fulfill our purpose.
Sanghi served on the board of Mellanox Technologies Ltd., a publicly traded supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyper-converged infrastructure, from February 2018 through April 2020. Mr.
Sanghi served on the board of Mellanox Technologies Ltd., a publicly traded supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyper-converged infrastructure, from February 2018 through April 2020. Mr. Sanghi was elected to the Board of Directors of Impinj, Inc. in March 2021 and assumed the role of Board Chair in June 2022.
Refer to "Item 2. Properties" for further information regarding the location and principal operations of our manufacturing facilities. Wafer Fabrication Fab 2 currently produces 8-inch wafers and supports various manufacturing process technologies, and predominantly utilizes our 0.25 microns to 1.0 microns processes.
We comply with several quality systems, including: ISO9001 (2015 version), IATF16949 (2016 version), AS9100 (2016 version), and TL9000. Refer to "Item 2. Properties" for further information regarding the location and principal operations of our manufacturing facilities. Wafer Fabrication Fab 2 currently produces 8-inch wafers and supports various manufacturing process technologies, and predominantly utilizes our 0.25 microns to 1.0 microns processes.
This corporate culture strengthens our business, and enables us to fulfill our purpose. Our focus on communication aims to provide transparency among leadership, to promote trust among employees, and is a critical part of Microchip’s culture.
Our focus on communication aims to provide transparency among leadership, to promote trust among employees, and is a critical part of Microchip’s culture.
Refer to Note 3 for a summary of our long-lived assets, consisting of property, plant and equipment and right-of-use assets, by geography. We have many suppliers of raw materials and subcontractors that provide our various materials and service needs.
In order to respond to such requirements, we have historically maintained a significant work-in-process and finished goods inventory. Refer to Note 3 for a summary of our long-lived assets, consisting of property, plant and equipment and right-of-use assets, by geography. We have many suppliers of raw materials and subcontractors that provide our various materials and service needs.
We also generate fees for engineering services related to these technologies. We license our Non-Volatile Memory technologies to foundries, integrated device manufacturers and design partners throughout the world for use in the manufacture of their advanced mixed-signal microcontroller products, gate array, RF, analog and neuromorphic compute products that require embedded non-volatile memory.
We license our Non-Volatile Memory technologies to foundries, integrated device manufacturers and design partners throughout the world for use in the manufacture of their advanced mixed-signal microcontroller products, gate array, RF, analog and neuromorphic compute products that require embedded non-volatile memory. Our memory products consist of EEPROMs, Serial Flash memories, Parallel Flash memories, Serial SRAM memories and EERAMs.
In February 2023, we announced our plan to invest $880 million over the next several years to expand our silicon carbide (SiC) and silicon production capacity, including the production of 8-inch wafers, at our Fab 5 facility.
In February 2023, we announced our plan to invest $880 million over the next several years to expand our silicon carbide (SiC) and silicon production capacity, including the production of 8-inch wafers, at our Fab 5 facility. While select investments are still being made, in the fourth quarter of fiscal 2024, we paused most of our expansion activity.
In fiscal 2023, approximately 63% of our sales came from products that were produced at outside wafer foundries. Assembly and Test We perform product assembly and test at various facilities located around the world. During fiscal 2023, we increased capacity at our Thailand and Philippines facilities to support more technologies by making process improvements, upgrading existing equipment, and adding equipment.
Assembly and Test We perform product assembly and test at various facilities located around the world. During fiscal 2024, we increased capacity and capabilities at our Thailand and Philippines facilities to support more technologies by making process improvements, upgrading existing equipment, and adding equipment.
The analog segment of the semiconductor market was $93.8 billion 1 in calendar year 2022, and this market is fragmented into a large number of sub segments. 1 Source: 2022 Gartner Worldwide Semiconductor Market Share by End Market Our Products Our strategic focus is on providing cost-effective embedded control solutions that also offer the advantages of small size, high performance, extreme low power usage, wide voltage range operation, mixed-signal integration, and ease of development, thus enabling timely and cost-effective integration of our solutions by our customers in their end products.
Our Products Our strategic focus is on providing cost-effective embedded control solutions that also offer the advantages of small size, high performance, extreme low power usage, wide voltage range operation, mixed-signal integration, and ease of development, thus enabling timely and cost-effective integration of our solutions by our customers in their end products.
Sanghi holds an M.S. degree in Electrical and Computer Engineering from the University of Massachusetts and a B.S. degree in Electronics and Communication from Punjab University. Mr.
He served as President from August 1990 to February 2016 and has served as a director since August 1990. Mr. Sanghi holds an M.S. degree in Electrical and Computer Engineering from the University of Massachusetts and a B.S. degree in Electronics and Communication from Punjab University. Mr.
FPGAs are programmable integrated circuits that are used to implement complex logic functions and can be re-programmed at any time, allowing for multiple implementations and revisions during or after the customer system is manufactured.
FPGAs are programmable integrated circuits that are used to implement complex logic functions and can be re-programmed at any time, allowing for multiple implementations and revisions during or after the customer system is manufactured. Some versions of FPGAs also include a mixed-signal microcontroller or microprocessor core to provide additional system on chip functionality to compute intensive tasks.
We outsource a significant portion of our manufacturing requirements to third parties and the amount of our outsourced manufacturing has increased in recent years due to our acquisitions of Microsemi and other companies that outsourced all or substantial portions of their manufacturing. We comply with several quality systems, including: ISO9001 (2015 version), IATF16949 (2016 version), AS9100 (2016 version), and TL9000.
We outsource a significant portion of our manufacturing requirements to third parties and the amount of our outsourced manufacturing has increased in recent years due to our acquisitions of companies that outsourced all or substantial portions 6 Table of Contents of their manufacturing.
Moorthy was elected to the Board of Directors of Rogers Corporation in July 2013 and serves on the Audit Committee of the Board and as the Nominating and Governance Committee Chairperson. Mr. Sanghi transitioned to Executive Chair in March 2021.
Moorthy was elected to the Board of Directors of Celanese Corporation in December 2023 and serves on the Audit Committee and as the Nominating and Corporate Governance Committee Chairperson. Mr. Sanghi transitioned to Executive Chair in March 2021. He served as Chief Executive Officer from October 1991 to March 2021 and as Chair of the Board since October 1993.
In addition to the mixed-signal microcontroller, a complete embedded control system often incorporates application-specific software, various analog, mixed-signal, timing, connectivity, security and non-volatile memory components such as EEPROMs and Flash memory. The increasing demand for embedded control systems has made the market for mixed-signal microcontrollers a significant segment of the semiconductor market at $26.9 billion 1 in calendar year 2022.
In addition to the mixed-signal microcontroller, a complete embedded control system often incorporates application-specific software, various analog, mixed-signal, timing, connectivity, security and non-volatile memory components such as EEPROMs and Flash memory.
We sell our memory products primarily into the embedded control market, complementing our mixed-signal microcontroller offerings. 6 Table of Contents Development Tools We offer a comprehensive set of low-cost and easy-to-learn application development tools.
Serial EEPROMs, Serial Flash memories, Serial SRAMs and EERAMs have a very low I/O pin requirement, permitting production of very small footprint devices. We sell our memory products primarily into the embedded control market, complementing our mixed-signal microcontroller offerings. Development Tools We offer a comprehensive set of low-cost and easy-to-learn application development tools.
A significant amount of additional clean room capacity in Fab 4 has been brought on line to support incremental wafer fabrication capacity needs. Fab 5 currently manufactures discrete and specialty products in addition to a lower volume of a diversified set of standard products on 6-inch wafers.
Fab 5 currently manufactures discrete and specialty products in addition to a lower volume of a diversified set of standard products on 6-inch wafers.
Drehobl was promoted to Senior Vice President in 2019 and has served as Vice President of the MCU8 business unit and various other divisions and business units since July 2001. He has been employed by Microchip since August 1989 and has served as a Vice President in various roles since February 1997. Mr.
Bjornholt holds a Master's degree in Taxation from Arizona State University and a B.S. degree in Accounting from the University of Arizona. Mr. Drehobl was promoted to Senior Vice President in 2019 and has served as Vice President of the MCU8 business unit and various other divisions and business units since July 2001.
The manufacture of integrated circuits, particularly non-volatile, erasable complementary metal-oxide semiconductor (CMOS) memory and logic devices, such as those that we produce, are complex processes. These processes are sensitive to a wide variety of factors, including the level of contaminants in the manufacturing environment, impurities in the materials used and the performance of our manufacturing personnel and equipment.
The manufacture of integrated circuits, particularly non-volatile, erasable 7 Table of Contents complementary metal-oxide semiconductor (CMOS) memory and logic devices, such as those that we produce, are complex processes.
Simoncic held various roles in Design, Device/Yield Engineering and Quality Systems. Mr. Simoncic holds a B.S. degree in Electrical Engineering Technology from DeVry Institute of Technology. Available Information Microchip Technology Incorporated was incorporated in Delaware in 1989. Our executive offices are located at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199 and our telephone number is (480) 792-7200.
Available Information Microchip Technology Incorporated was incorporated in Delaware in 1989. Our executive offices are located at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199 and our telephone number is (480) 792-7200. Our Internet address is www.microchip.com.
We currently plan to continue to operate these fabrication facilities with modest investment to keep them operational with the exception of the facility in Santa Clara, California, which we closed in fiscal 2022. We continue to transition products to more advanced process technologies to reduce future manufacturing costs.
We currently plan to continue to operate these fabrication facilities with modest investment to keep them operational. We continue to transition products to more advanced process technologies to reduce future manufacturing costs. We believe that our ability to successfully transition to more advanced process technologies is important for us to remain competitive.
We market and sell our FPGA products and related solutions into a broad range of applications within the industrial, automotive, defense, aviation, space and communications markets. Our technology licensing business generates license fees and royalties associated with technology licenses for the use of our SuperFlash® embedded flash and other technologies.
Our technology licensing business generates license fees and royalties associated with technology licenses for the use of our SuperFlash® embedded flash and other technologies. We also generate fees for engineering services related to these technologies.
Sanghi was elected to the Board of Directors of Impinj, Inc. in March 2021 and assumed the role of Board Chair in June 2022. 11 Table of Contents Mr. Bjornholt was promoted to Senior Vice President in 2019 and has served as Vice President of Finance since 2008 and as Chief Financial Officer since January 2009.
Bjornholt was promoted to Senior Vice President in 2019 and has served as Vice President of Finance since 2008 and as Chief Financial Officer since January 2009. He has served in various financial management capacities since he joined Microchip in 1995. Mr.
Our facilities have been designed to comply with these regulations and we believe that our activities are conducted in material compliance with such regulations. Any changes in such regulations or in their enforcement could result in an increase in capital expenditures such as acquiring costly equipment or other significant expenses to comply with environmental regulations.
Our waste disposal programs in our facilities have been designed to comply with these regulations and we believe that our activities are conducted in material compliance with such regulations.
We believe the combined capacity of Fab 2, Fab 4, and Fab 5 will allow us to respond to future demand for internally fabricated products with incremental capital expenditures. 7 Table of Contents As a result of our acquisition of Microsemi, we acquired several smaller wafer fabrication facilities, which utilize older technologies that are appropriate for the discrete products they manufacture.
We plan to resume our expansion efforts as the business outlook improves. We believe the combined capacity of Fab 2, Fab 4, and Fab 5 will allow us to respond to future demand for internally fabricated products with incremental capital expenditures.
Historically, we have relied on our ability to respond quickly to customer orders as part of our competitive strategy, resulting in customers placing orders with relatively short delivery schedules. In order to respond to such requirements, we have historically maintained a significant work-in-process and finished goods inventory.
Our operating results will suffer if we are unable to maintain yields at or above approximately the current levels. Historically, we have relied on our ability to respond quickly to customer orders as part of our competitive strategy, resulting in customers placing orders with relatively short delivery schedules.
Drehobl holds a Bachelor of Technology degree from the University of Dayton. Mr. Simoncic was promoted to Executive Vice President in April 2023 and has served as Vice President, Analog Power and Interface Business Units since September 1999. From October 1995 to September 1999, he served as Vice President in various roles. Since joining Microchip in 1990, Mr.
From October 1995 to September 1999, he served as Vice President in various roles. Since joining Microchip in 1990, Mr. Simoncic held various roles in Design, Device/Yield Engineering and Quality Systems. Mr. Simoncic holds a B.S. degree in Electrical Engineering Technology from DeVry Institute of Technology. Mr.
During fiscal 2023, we increased Fab 2's capacity to support more advanced technologies by implementing process improvements, upgrading existing equipment, and adding equipment. Fab 4 currently produces 8-inch wafers using predominantly 0.13 microns to 0.5 microns manufacturing processes.
During fiscal 2024, we reduced wafer starts in Fab 2 to decrease production to be more in line with demand for our products. Fab 2 continues to add additional process technologies, implement process improvements, upgrade existing equipment, and add equipment to support future demand. Fab 4 currently produces 8-inch wafers using predominantly 0.13 microns to 0.5 microns manufacturing processes.
Any failure by us to adequately control the storage, use, discharge and disposal of regulated substances could result in significant future liabilities. Increasing public attention has been focused on the environmental impact of electronic manufacturing operations.
However, any changes in such regulations or in their enforcement could result in an increase in capital expenditures such as acquiring costly equipment or other significant expenses to comply with environmental regulations. Any failure by us to adequately control the storage, use, discharge and disposal of regulated substances could result in significant future liabilities.
Our FPGA products were primarily acquired as a part of our acquisition of Microsemi Corporation (Microsemi) in May 2018. Our portfolio of non-volatile FPGAs are recognized for their low power, high security and extended reliability.
Our portfolio of non-volatile FPGAs are recognized for their low power, high security and extended reliability. We market and sell our FPGA products and related solutions into a broad range of applications within the industrial, automotive, defense, aviation, space and communications markets.
As is typical in the semiconductor industry, we have from time to time experienced lower than anticipated manufacturing yields. Our operating results will suffer if we are unable to maintain yields at or above approximately the current levels.
These processes are sensitive to a wide variety of factors, including the level of contaminants in the manufacturing environment, impurities in the materials used and the performance of our manufacturing personnel and equipment. As is typical in the semiconductor industry, we have from time to time experienced lower than anticipated manufacturing yields.
We believe that our ability to successfully transition to more advanced process technologies is important for us to remain competitive. We augment our internal manufacturing capabilities by outsourcing a significant portion of our wafer production requirements to third-party wafer foundries. As a result of our acquisitions, we have become more reliant on outside wafer foundries for our wafer fabrication requirements.
We augment our internal manufacturing capabilities by outsourcing a significant portion of our wafer production requirements to third-party wafer foundries, including all of our 300mm wafer requirements and some of our 200mm and 150mm specialty process technologies. In fiscal 2024, approximately 64% of our sales came from products that were produced at outside wafer foundries.
While our global manufacturing sites have been fully operational in recent periods, we strategically implemented plans intended to provide more assurance of business continuity in the event severe outbreaks or government requirements were to impact our operations. 4 Table of Contents Industry Background Competitive pressures require OEMs to expand product functionality and provide differentiation while maintaining or reducing cost.
Industry Background Competitive pressures require OEMs to expand product functionality and provide differentiation while maintaining or reducing cost.
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Business and Macroeconomic Environment In the first half of fiscal 2021, the COVID-19 pandemic initially resulted in a global disruption in economic activity by adversely affecting production, creating supply chain and market disruption, and adversely impacting businesses and individuals.
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Microprocessors integrate 32-bit (or above) central processing units (CPUs) with various high performance peripherals, such as communications and graphics, and execute code from external memory, typically dynamic random access memory.
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However, in the second half of fiscal 2021, business conditions were unexpectedly strong as businesses and individuals adapted to the effects of the pandemic.
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While select investments are still being made, in the fourth quarter of fiscal 2024, we paused most of our multi-year $800 million expansion and capital equipment investment plan at Fab 4. We plan to resume our expansion efforts to increase Fab 4's capacity as the business outlook improves.
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In response to global supply constraints, we worked to mitigate the impact of the pandemic on our business by qualifying alternative suppliers, increasing our inventory of raw materials, ramping our internal factories and adding assembly and test capacity to increase our manufacturing capability while securing additional capacity with our subcontractors wherever possible.
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In light of the current macroeconomic environment, we have paused capacity expansion while continuing new technology implementation in all three facilities. As a result of our prior acquisition activity, we acquired several smaller wafer fabrication facilities, which utilize older technologies that are appropriate for the discrete products they manufacture.
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Strong customer demand for our products continued to outpace capacity in fiscal 2022 and fiscal 2023. However, in recent months, many of our customers felt the effects of slowing economic activity and increasing business uncertainty and customer requests to push out or cancel backlog increased in the March 2023 quarter.
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Increasing public attention has been focused on the environmental impact of electronic manufacturing operations.
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Consistent with the slowing macroeconomic environment, and the growth in our inventory, we have paused most of our factory expansion activity, reduced our planned capital investments for fiscal 2024, and taken steps to lower our inventory in the coming quarters. We are unable to predict the timing or impact of any such slowdown on our business.
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To assess and improve employee engagement, we conduct our annual employee engagement survey, which is administered in a manner that allows employees to respond confidentially. The survey solicits feedback on a variety of factors, including engagement, culture, leadership, continuous improvement, collaboration, work environment, and ethics. Training and Development Microchip’s culture focuses on continuous improvement.
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In order to provide prioritized capacity to our customers, we launched our Preferred Supply Program in February 2021, which provides our customers with prioritized capacity beginning six months after the customer places an order for 12 months of continuous, non-cancellable and non-reschedulable backlog.
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To support employee development, we provide opportunities to learn on-the-job through training courses, targeted development programs, mentoring and peer coaching, and ongoing feedback. We have a library of live and on-demand learning experiences. We create learning paths focused on our most common development needs and regularly upgrade our offerings to help ensure that our employees are exposed to current content.
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Although orders under such program cannot be cancelled or rescheduled by the customer, in recent periods, we have accommodated requests by customers to push-out certain orders to help them manage inventory levels and, in some cases, to help other customers that are experiencing supply shortages.
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We offer tuition reimbursement programs to 10 Table of Contents subsidize educational programs and advanced certifications. We have an employee resource group for women and one for employees from traditionally underrepresented groups in order to support readiness for future advancement.
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Since the March 2022 quarter, we have been entering into long-term supply agreements (LTSAs) with certain of our customers for products that will be shipped in future periods. We also entered into certain LTSAs with key suppliers.
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Benefit programs include 401(k) programs in the U.S., and statutory pension programs outside the U.S. Microchip has multiple equity programs in place including restricted stock unit awards and employee stock purchase plans that align employee interests with those of our shareholders.
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In response to the pandemic, we have taken proactive preventative measures to enable a safe environment for our employees and operation of our manufacturing sites.
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Moorthy served on the Board of Directors of Rogers Corporation from July 2013 to January 2024 and also served on the Audit Committee of the Board and as the Nominating, Governance and Sustainability Committee Chairperson. Mr.
Removed
Some versions of 5 Table of Contents FPGAs also include a mixed-signal microcontroller or microprocessor core to provide additional system on chip functionality to compute intensive tasks.
Added
Simoncic was promoted to Chief Operating Officer on April 1, 2024 and served as Executive Vice President Analog Power and Interface Business Unit from April 2023 to April 2024; as Senior Vice President, Analog Power and Interface Business Units from February 2019 to April 2023; and as Vice President, Analog Power and Interface Business Units from September 1999 to February 2019.
Removed
We market and sell our analog product line into our mixed-signal microcontroller, microprocessor and FPGA customer base, and to customers who use mixed-signal microcontrollers and FPGA products from other suppliers and to customers who use other products that may not fit our traditional mixed-signal microcontroller, FPGA and memory products customer base.
Added
He has been employed by Microchip since August 1989 and 11 Table of Contents has served as a Vice President in various roles since February 1997. Mr. Drehobl holds a Bachelor of Technology degree from the University of Dayton. In April 2024, Mr. Drehobl notified us of his decision to retire from Microchip effective June 7, 2024.
Removed
Our memory products consist of EEPROMs, Serial Flash memories, Parallel Flash memories, Serial SRAM memories and EERAMs. Serial EEPROMs, Serial Flash memories, Serial SRAMs and EERAMs have a very low I/O pin requirement, permitting production of very small footprint devices.
Removed
During fiscal 2023, we continued our multi-year $800 million expansion and capital equipment investment plan to increase Fab 4's capacity to support more advanced technologies by implementing process improvements, upgrading existing equipment, and adding new equipment and two clean rooms.
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He served as Chief Executive Officer from October 1991 to March 2021 and as Chair of the Board since October 1993. He served as President from August 1990 to February 2016 and has served as a director since August 1990. Mr.
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He has served in various financial management capacities since he joined Microchip in 1995. Mr. Bjornholt holds a Master's degree in Taxation from Arizona State University and a B.S. degree in Accounting from the University of Arizona. Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

174 edited+98 added−18 removed166 unchanged
Biggest changeSome of the factors that may affect our operating results include: • general economic, industry, public health or political conditions in the U.S. or internationally, including uncertain economic conditions in U.S., China and Europe, increases in interest rates, high inflation or instability in the banking sector; • disruptions in our business, our supply chain or our customers' businesses due to public health concerns (including viral outbreaks such as COVID-19), cybersecurity incidents, terrorist activity, armed conflict, war (including Russia's invasion of Ukraine), worldwide oil prices and supply, fires, natural disasters or disruptions in the transportation system; • the level of order cancellations or push-outs due to uncertain economic conditions or other factors; • availability of raw materials including rare earth minerals, supplies and equipment due to supply chain constraints or other factors; • constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers; • our ability to continue to increase our factory capacity as needed to respond to changes in customer demand; • our ability to secure sufficient wafer foundry, assembly and testing capacity; • increased costs and availability of raw materials, supplies, equipment, utilities, labor, and/or subcontracted services for wafers, assembly and test; • changes in demand or market acceptance of our products and products of our customers, and market 13 Table of Contents fluctuations in the industries into which such products are sold; • trade restrictions and increase in tariffs, including those on business in China, or focused on specific companies; • the mix of inventory we hold and our ability to satisfy orders from our inventory; • changes in utilization of our manufacturing capacity and fluctuations in manufacturing yields; • changes or fluctuations in customer order patterns and seasonality; • changes in tax regulations in countries in which we do business; • new accounting pronouncements or changes in existing accounting standards and practices; • levels of inventories held by our customers and the customers of our distributors; • risk of excess and obsolete inventories; • competitive developments including pricing pressures; • unauthorized copying of our products resulting in pricing pressure and loss of sales; • our ability to successfully transition to more advanced process technologies to reduce manufacturing costs; • the level of orders that are received and can be shipped in a quarter, including the impact of product lead times; • the level of sell-through of our products through distribution or resale; • our ability to continue to realize the expected benefits of our past or future acquisitions; • fluctuations in our mix of product sales; • announcements of other significant acquisitions by us or our competitors; • costs and outcomes of any current or future tax audits or any litigation, investigation or claims involving intellectual property, our Microsemi acquisition, customers or other issues; and • property damage or other losses, whether or not covered by insurance.
Biggest changeSome of the factors that may affect our operating results include: • general economic, industry, public health or political conditions in the U.S. or internationally, including uncertain economic conditions in U.S., China and Europe, increases in interest rates, high inflation or instability in the banking sector; • the level of order cancellations or push-outs due to uncertain economic conditions or other factors; • disruptions in our business, our supply chain or our customers' businesses due to public health concerns (including viral outbreaks and pandemics), cybersecurity incidents, terrorist activity, armed conflict, war (including military conflict in the Middle East and Russia's invasion of Ukraine), worldwide oil prices and supply, fires, natural disasters or disruptions in the transportation system; • changes in demand or market acceptance of our products and products of our customers, and market fluctuations in the industries into which such products are sold; • levels of inventories held by our customers and the customers of our distributors; • availability of raw materials including rare earth minerals, supplies and equipment due to supply chain constraints or other factors; • constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers; • our ability to continue to increase our factory capacity as needed to respond to changes in customer demand; • our ability to secure sufficient wafer foundry, assembly and testing capacity; 13 Table of Contents • trade restrictions and increase in tariffs, including those on business in China, or focused on specific companies; • increased costs and availability of raw materials, supplies, equipment, utilities, labor, and/or subcontracted services for wafers, assembly and test; • the mix of inventory we hold and our ability to satisfy orders from our inventory; • changes in utilization of our manufacturing capacity and fluctuations in manufacturing yields; • changes or fluctuations in customer order patterns and seasonality; • changes in tax regulations in countries in which we do business; • new accounting pronouncements or changes in existing accounting standards and practices; • risk of excess and obsolete inventories; • competitive developments including pricing pressures; • unauthorized copying of our products resulting in pricing pressure and loss of sales; • our ability to successfully transition to more advanced process technologies to reduce manufacturing costs; • the level of orders that are received and can be shipped in a quarter, including the impact of product lead times; • the level of sell-through of our products through distribution or resale; • our ability to realize the expected benefits of our past or future acquisitions; • fluctuations in our mix of product sales; • announcements of other significant acquisitions by us or our competitors; • costs and outcomes of any current or future tax audits or any litigation, investigation or claims involving intellectual property, our acquisitions, customers or other issues; and • property damage or other losses, whether or not covered by insurance.
The additional tariffs imposed on components or equipment that we or our suppliers source from China will increase our costs and could have an adverse impact on our operating results in future periods. We may also incur increases in manufacturing costs in mitigating the impact of tariffs on our operations. This could also impair sourcing flexibility.
The additional tariffs imposed on components or equipment that we or our suppliers source from China will increase our costs and could have an adverse impact on our operating results in future periods. We may also incur increases in manufacturing costs in mitigating the impact of tariffs on our operations. This could also impair our sourcing flexibility.
Such failure could also restrict our ability to ship certain products to certain countries, require us to modify our logistics, or require us to incur other significant costs and expenses. Environmental laws continue to expand with a focus on reducing or eliminating hazardous substances in electronic products and shipping materials.
Such failure could also restrict our ability to ship certain products to certain countries, require us to modify our products, shipping materials or logistics, or require us to incur other significant costs and expenses. Environmental laws continue to expand with a focus on reducing or eliminating hazardous substances in electronic products and shipping materials.
Conversion of our Convertible Debt will dilute the ownership interest of our existing stockholders. The conversion of some or all of our outstanding Convertible Debt will dilute the ownership interest of our existing stockholders to the extent we deliver common stock upon conversion of such debt.
The conversion of some or all of our outstanding Convertible Debt will dilute the ownership interest of our existing stockholders to the extent we deliver common stock upon conversion of such debt.
If the U.S. government fails to complete its annual budget process, provide for a continuing resolution to fund government operations or increase the federal debt limit, another federal government shutdown may occur, during which we may experience further delays, reductions in or terminations of government contracts or subcontracts, which could materially and adversely affect our operating results.
If, in the future, the U.S. government fails to complete its annual budget process, provide for a continuing resolution to fund government operations or increase the federal debt limit, another federal government shutdown may occur, during which we may experience further delays, reductions in or terminations of government contracts or subcontracts, which could materially and adversely affect our operating results.
From time to time, we or our licensees have contested the amount of royalty payments and related claims could result in significant legal fees and require significant attention from our management. These issues may adversely impact the success of our licensing business and adversely affect our future operating results.
From time to time, we or our licensees have contested the amount of royalty payments and related claims have resulted and could result in significant legal fees and require significant attention from our management. These issues may adversely impact the success of our licensing business and adversely affect our future operating results.
Sanctions against Belarus and certain Ukrainian regions were later implemented. Because the actions by Russia against Ukraine are in conflict with our Guiding Values, Microchip chose to cease shipments into Russia and Belarus, and we will continue to comply with applicable U.S. sanctions regarding Ukraine.
Sanctions against Belarus and certain Ukrainian regions were later implemented. Because the actions by Russia against Ukraine are in conflict with our Guiding Values, we chose to cease shipments into Russia and Belarus, and we will continue to comply with applicable U.S. sanctions regarding Ukraine.
When we enter into customer contracts (other than under our Preferred Supply Program and LTSAs), the contracts are generally cancelable based on standard terms and conditions. Under our Preferred Supply Program and LTSAs, customers may cancel contracts in the event of price increases.
When we enter into customer contracts (other than under our original Preferred Supply Program and LTSAs), the contracts are generally cancelable based on standard terms and conditions. Under our original Preferred Supply Program and LTSAs, customers may cancel contracts in the event of price increases.
We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods and expect to apply for other incentives provided by the legislation; however, there can be no assurance that we will receive any such other incentives, what the amount and timing of any incentive we receive will be, as to which other companies will receive incentives and whether the legislation will have a positive or negative impact on our competitive position.
We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods and have applied for other incentives provided by the legislation; however, there can be no assurance that we will receive any such other incentives, what the amount and timing of any incentive we receive will be, as to which other companies will receive incentives and whether the legislation will have a positive or negative impact on our competitive position.
Noncompliance with the conditions of the grants or arrangements could result in our forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date.
In addition, noncompliance with the conditions of the grants or arrangements could result in our forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date.
The success of our new product introductions depends on various factors, including, but not limited to: • effective new product selection; • timely completion and introduction of new product designs; • availability of skilled employees; • procurement of licenses for intellectual property rights from third parties under commercially reasonable terms, including those that may be needed to offer interoperability between our products and third-party products; • implementation of appropriate technical standards developed by standard setting organizations; • timely filing and protection of intellectual property rights for new product designs; • availability of development and support tools and collateral literature that make complex new products easy for engineers to understand and use; and • market acceptance of our customers' end products.
The success of our new product introductions depends on various factors, including, but not limited to: • effective new product selection; • timely completion and introduction of new product designs; • availability of skilled employees; • procurement of licenses for intellectual property rights from third parties under commercially reasonable terms, including those that may be needed to offer interoperability between our products and third-party products; • implementation of appropriate technical standards developed by standard setting organizations; • timely filing and protection of intellectual property rights for new product designs; • availability of development and support tools and collateral literature that make complex new products easy for engineers to understand and use; and 20 Table of Contents • market acceptance of our customers' end products.
As a result of the foregoing, we may incur charges in connection with obsolete or excess inventory, or we may not fully recover our costs, which would reduce our gross margins. Violations of the Foreign Corrupt Practices Act, export controls and sanction laws, or similar laws, by our distributors could have a material adverse impact on our business.
As a result of the foregoing, we have incurred charges in connection with obsolete or excess inventory, or we may not fully recover our costs, which would reduce our gross margins. Violations of the Foreign Corrupt Practices Act, export controls and sanction laws, or similar laws, by our distributors could have a material adverse impact on our business.
Although our business has not been materially adversely impacted by recent changes in the value of the U.S. dollar, there can be no assurance as to the future impact that any weakness or strength in the U.S. dollar will have on our business or results of operations. Item 1B. Unresolved Staff Comments None. 33 Table of Contents
Although our business has not been 37 Table of Contents materially adversely impacted by recent changes in the value of the U.S. dollar, there can be no assurance as to the future impact that any weakness or strength in the U.S. dollar will have on our business or results of operations. Item 1B. Unresolved Staff Comments None.
The financial failure of a large licensee, customer, reseller or distributor, an important supplier, or a group thereof, could have an adverse impact on our operating results and could result in our inability to collect our accounts receivable balances, higher allowances for credit losses, and higher operating costs as a percentage of net sales.
The financial decline of a large licensee, customer, reseller or distributor, an important supplier, or a group thereof, could have an adverse impact on our operating results and could result in our inability to collect our accounts receivable balances, higher allowances for credit losses, and higher operating costs as a percentage of net sales.
If one of our counterparties becomes insolvent, files for bankruptcy, has business leverage, or stronger contractual terms, then our ability to recover any losses suffered as a result of that counterparty's cessation of performance may be limited by their liquidity, the applicable laws, or their willingness to negotiate a resolution.
If one of our counterparties becomes insolvent, files for bankruptcy, has business leverage, or favorable contractual terms, then our ability to recover any losses suffered as a result of that counterparty's cessation of performance may be limited by their liquidity, the applicable laws, or their willingness to negotiate a resolution.
We have experienced verifiable attacks on our IT systems and data, including network compromises, attempts to breach our security measures and attempts to introduce malicious software into our IT systems. For example, in fiscal 2019, we learned of an ongoing compromise of our computer networks by what is believed to be sophisticated hackers.
We have experienced and continue to experience verifiable attacks on our IT systems and data, including network compromises, attempts to breach our security measures and attempts to introduce malicious software into our IT systems. For example, in fiscal 2019, we learned of an ongoing compromise of our computer networks by what is believed to be sophisticated hackers.
These risks could result in a material adverse impact on our results of operations and financial condition. Failure to adequately protect our intellectual property could result in lost revenue or market opportunities. Our ability to obtain patents, licenses and other intellectual property rights covering our products and manufacturing processes is important for our success.
These risks could result in a material adverse impact on our results of operations and financial condition. Failure to adequately protect our intellectual property could result in competitive harm, lost revenue or market opportunities. Our ability to obtain patents, licenses and other intellectual property rights covering our products and manufacturing processes is important for our success.
The success of our technology licensing business depends on various other factors, including, but not limited to: • proper identification of licensee requirements; • timely development and introduction of new or enhanced technology; • our ability to protect and enforce our intellectual property rights for our licensed technology, and enforce the terms of our licenses; • our ability to limit our liability and indemnification obligations to licensees; • availability of development and support services to assist licensees in their design and manufacture of products; • availability of foundry licensees with sufficient capacity to support OEM production; and • market acceptance of our customers' end products.
The success of our technology licensing business depends on various other factors, including, but not limited to: • proper identification of licensee requirements; 21 Table of Contents • timely development and introduction of new or enhanced technology; • our ability to protect and enforce our intellectual property rights for our licensed technology, and enforce the terms of our licenses; • our ability to limit our liability and indemnification obligations to licensees; • availability of development and support services to assist licensees in their design and manufacture of products; • availability of foundry licensees with sufficient capacity to support OEM production; and • market acceptance of our customers' end products.
Regulatory authorities in jurisdictions into or from which we ship our products or import supplies could issue new export controls or trade sanctions, levy fines, restrict or delay our ability to export products or import supplies, or increase costs associated with the manufacture or transfer of products. A significant portion of our sales require export and import activities.
Regulatory authorities in jurisdictions into or from which we ship our products or import supplies could issue new export controls or trade sanctions, levy fines, restrict or delay our ability to export products or import supplies, or increase costs associated with the manufacture or transfer of products. A significant portion of our sales involve export and import activities.
Integrated circuits manufacturing processes are complex and sensitive to many factors, including contaminants in the manufacturing environment or materials used, the performance of our personnel and equipment, and other quality issues. As is typical in the industry, we have from time to time experienced lower than anticipated manufacturing yields.
Integrated circuit manufacturing processes are complex and sensitive to many factors, including contaminants in the manufacturing environment or materials used, the performance of our personnel and equipment, and other quality issues. As is typical in the industry, we have from time to time experienced lower than anticipated manufacturing yields.
Some of our customers require that we implement practices that are more stringent than those required by applicable laws with respect to labor requirements, the materials contained in our products, energy efficiency, environmental matters or other items. To comply with such requirements, we also require our suppliers to adopt such practices.
Some of our customers require that we implement practices that are more stringent than those required by applicable laws with respect to labor requirements, the materials contained in our products, energy efficiency, environmental impact or other items. To comply with such requirements, we also require our suppliers to adopt such practices.
If we cannot certify that our supply chain is free from the risk of irresponsible sourcing, customers may demand that we change the sourcing of materials used in the manufacture of our products, even if the costs for compliant materials significantly increases or availability is limited.
If we cannot certify that our supply chain is free from the risk of irresponsible sourcing, customers and others may demand that we change the sourcing of materials used in the manufacture of our products, even if the costs for compliant materials significantly increases or availability is limited.
While we generally function as a subcontractor in these type of transactions, further changes in U.S. government procurement regulations and practices, particularly surrounding initiatives to reduce costs or increase compliance obligations (such as the Cybersecurity Maturity Model Certification and mandatory vaccine requirements), may adversely impact the contracting environment, our ability to hire and retain employees, and our operating results.
While we generally function as a subcontractor in these type of transactions, further changes in U.S. government procurement regulations and practices, particularly surrounding initiatives to reduce costs or increase compliance obligations (such as the Cybersecurity Maturity Model Certification), may adversely impact the contracting environment, our ability to hire and retain employees, and our operating results.
Our inability to timely obtain a license, for any reason, including a delay in license processing due to a federal government shutdown like that which occurred in 2018, or changes in government policies of approval or denial of licenses, could cause a delay in scheduled shipments which could have a material adverse impact on our revenue within the quarter of a shutdown, and in following quarters depending on the extent that license processing is delayed.
Our inability to timely obtain a license, for any reason, including a delay in license processing due to a federal government shutdown, or changes in government policies of approval or denial of licenses, could cause a delay in scheduled shipments which could have a material adverse impact on our revenue within the quarter of a shutdown, and in following quarters depending on the extent that license processing is delayed.
The outcome of future examinations of our income tax returns could have an adverse effect on our results of operations. We are subject to examination of our U.S. and certain foreign income tax returns for fiscal 2007 and later.
The outcome of future examinations of our income tax returns and existing tax disputes could have an adverse effect on our results of operations. We are subject to examination of our U.S. and certain foreign income tax returns for fiscal 2007 and later.
Our ability to make scheduled payments of principal, interest, or to refinance our indebtedness, including our outstanding Convertible Debt and Senior Notes, depends on our future performance, which is subject to economic, competitive and other factors.
Our ability to make scheduled payments of principal, interest, or to refinance our indebtedness, including our outstanding Senior Notes, Convertible Debt, and Commercial Paper, depends on our future performance, which is subject to economic, competitive and other factors.
The scope of these laws and regulations is rapidly evolving, subject to differing interpretations, and may be inconsistent among jurisdictions. Some of these laws create a broad definition of personal information, establish data privacy rights, impose data breach notification requirements, and create potentially severe statutory damages frameworks and private rights of action for certain data breaches.
The scope of these laws and regulations is rapidly evolving, subject to differing interpretations, and may be inconsistent among jurisdictions. Some of these laws create a broad definition of personal information, establish data privacy rights, impose data breach notification requirements, and create potentially severe statutory damages or other remedial frameworks and private rights of action for certain data breaches.
Additionally, over the last several years, the impact of unpredictable COVID-19 related lockdowns and the adverse impact of the rapid transmission of COVID-19 when lock-downs in China were lifted has adversely impacted Chinese customers and the supply chain.
Additionally, over the last several years, the impact of unpredictable COVID-19 related lockdowns and the adverse impact of the rapid transmission of COVID-19 when lockdowns in China were lifted has adversely impacted Chinese customers and the supply chain.
Our operating 18 Table of Contents results will suffer if we are unable to maintain yields at or above approximately the current levels. This could include delays in the recognition of revenue, loss of revenue, and penalties for failure to meet shipment deadlines. Our operating results are adversely affected when we operate below normal capacity.
Our operating results will suffer if we are unable to maintain yields at or above approximately the current levels. This could include delays in the recognition of revenue, loss of revenue, and penalties for failure to meet shipment deadlines. Our operating results are adversely affected when we operate below normal capacity.
If we are unable to alternately source 21 Table of Contents or manufacture certain of our products, or discontinue use of products from Prohibited Companies, if any, when the NDAA amendment goes into effect in December 2027, this could adversely impact our sales to U.S. government agencies and their prime customers.
If we are unable to alternately source or manufacture certain of our products, or discontinue use of products from Prohibited Companies, if any, when the NDAA amendment goes into effect in December 2027, this could adversely impact our sales to U.S. government agencies and their prime customers.
We may fund future acquisitions of new businesses or strategic alliances by utilizing cash, borrowings under our Revolving Credit Facility, raising debt, issuing shares of our common stock, or other mechanisms.
We may fund future acquisitions of new businesses or strategic alliances by utilizing cash, borrowings under our Revolving Credit Facility, issuing Commercial Paper, raising debt, issuing shares of our common stock, or other mechanisms.
If implemented, these changes could increase our effective tax rate, and increase our selling and/or manufacturing costs, which could have a material adverse effect on our business, results of operations or financial conditions.
If implemented, these changes could increase our effective tax rate, decrease our revenue and increase our selling and/or manufacturing costs, which could have a material adverse effect on our business, results of operations or financial conditions.
If we change materials or suppliers, there will likely be costs associated with qualifying new suppliers and production capacity and quality could be negatively impacted. Our relationships with customers and suppliers may be adversely affected if we are unable to certify that our products are free from the risk of irresponsible sourcing.
If we change materials or suppliers, there will likely be costs associated with qualifying new suppliers and production capacity, delivery times and quality could be negatively impacted. Our relationships with customers, suppliers and stockholders may be adversely affected if we are unable to certify that our products are free from the risk of irresponsible sourcing.
Any of the foregoing changes could adversely impact our operational costs due to the administrative impacts of complying with these regulations and may limit those with whom we conduct business.
Any of the foregoing changes to the regulatory requirements could adversely impact our operational costs due to the administrative impacts of complying with these regulations and may limit those with whom we conduct business.
If this occurs, it may limit the amounts of net sales that we can achieve or require us to make significant investments to be able to 15 Table of Contents manufacture these products in our own existing facilities, at new facilities or at other foundries and assembly and testing contractors.
If this occurs, it may limit the amounts of net sales that we can achieve or require us to make significant investments to be able to manufacture these products in our own existing facilities, at new facilities or at other foundries and assembly and testing contractors.
These expansion projects subject us to a number of risks, including the following: • availability of necessary funding, which may include external sources; • ability to realize expected grants, investment tax credits, and other government incentives, including through the CHIPS Act and foreign, state, and local grants; • increases to our cost structure until new production is ramped to adequate scale; • sufficient customer demand to utilize our increased capacity; • ability to timely ramp production in a cost-effective manner; • potential changes in laws or provisions of grants, investment tax credits, and other government incentives; • availability of labor, services, equipment, and construction materials; • ability to complete construction as scheduled, and within budget; and • availability of the necessary workforce to support the expanded capacity.
These expansion projects subject us to a number of risks, including the following: • availability of necessary funding, which may include external sources; • ability to realize expected grants, investment tax credits, and other government incentives, including through the CHIPS Act and foreign, state, and local grants; • increases to our cost structure until new production is ramped to adequate scale; • sufficient customer demand to utilize our increased capacity; • slowing macroeconomic business conditions; • growth in our inventories; • ability to timely ramp production in a cost-effective manner; • potential changes in laws or provisions of grants, investment tax credits, and other government incentives; • availability of labor, services, equipment, and construction materials; • ability to complete construction as scheduled, and within budget; and • availability of the necessary workforce to support the expanded capacity.
We may be unable to satisfy customers who require that all of the components of our products be certified as conflict free in a materially different manner than advocated by the Responsible Minerals Initiative or the Dodd-Frank Wall Street Reform and Consumer Protection Act.
We may be unable to satisfy those that require that all of the components of our products be certified as conflict free in a materially different manner than advocated by the Responsible Minerals Initiative or the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Our reliance on foreign operations, foreign suppliers, maintenance of substantially all of our finished goods inventory at foreign locations and significant foreign sales exposes us to foreign political and economic risks, including, but not limited to: • economic uncertainty in the worldwide markets served by us; • political instability, including changes in relations between China and Taiwan which could disrupt the operations of our Taiwan-based third-party wafer foundries, and subcontractors; • social and economic instability due to public health concerns, wars, or other factors; • trade restrictions and changes in tariffs; • supply chain disruptions or delays; 16 Table of Contents • potentially adverse tax consequences; • import and export license requirements and restrictions; • changes in laws related to taxes, trade, environmental, health and safety, technical standards and consumer protection; • restrictions on the transfer of funds, including currency controls in China, which could negatively affect the amount and timing of certain customer payments, and as a results our cash flows; • currency fluctuations and foreign exchange regulations; • difficulties in staffing and managing international operations; • employment regulations; • disruptions due to cybersecurity incidents; • disruptions in international transport or delivery; • public health conditions (including viral outbreaks such as COVID-19); and • difficulties in collecting receivables and longer payment cycles.
We use foundries and other foreign contractors for a significant portion of our assembly and testing and wafer fabrication requirements. 16 Table of Contents Our reliance on foreign operations, foreign suppliers, maintenance of substantially all of our finished goods inventory at foreign locations and significant foreign sales exposes us to foreign political and economic risks, including, but not limited to: • economic uncertainty in the worldwide markets served by us; • political instability, including changes in relations between China and Taiwan which could disrupt the operations of our Taiwan-based third-party wafer foundries, and subcontractors; • social and economic instability due to public health concerns, wars, or other factors; • trade restrictions and changes in tariffs; • supply chain disruptions or delays; • potentially adverse tax consequences; • import and export license requirements and restrictions; • changes in laws related to taxes, trade, environmental, health and safety, technical standards, climate change, and consumer protection; • restrictions on the transfer of funds, including currency controls in China, which could negatively affect the amount and timing of certain customer payments, and as a results our cash flows; • currency fluctuations and foreign exchange regulations; • difficulties in staffing and managing international operations; • employment regulations; • disruptions due to cybersecurity incidents; • disruptions in international transport or delivery; • public health conditions (including viral outbreaks such as COVID-19); and • difficulties in collecting receivables and longer payment cycles.
In April and May 2020, we received a greater number of order cancellations and requests by our customers to reschedule deliveries to future dates. Some customers requested order cancellations within our firm order window and claimed applicability of force 20 Table of Contents majeure clauses due to the impact of COVID-19.
In April and May 2020, we received a greater number of order cancellations and requests by our customers to reschedule deliveries to future dates. Some customers requested order cancellations within our firm order window and claimed applicability of force majeure clauses due to the impact of COVID-19.
These transactions are subject to a number of risks similar to those we face with our acquisitions including our ability to realize the expected benefits of any such transaction, to successfully market and sell products resulting from such transactions or to successfully integrate any technology developed through such transactions.
These transactions are subject to a number of risks similar to those we 23 Table of Contents face with our acquisitions including our ability to realize the expected benefits of any such transaction, to successfully market and sell products resulting from such transactions or to successfully integrate any technology developed through such transactions.
In recent years, we have regularly implemented improvements to our protective measures which include, but are not limited to, implementation of the following: firewalls, endpoint intrusion detection and response software, regular patches, log monitors, event correlation tools, network segmentation, routine backups with offsite retention of storage media, system audits, dual factor identification, data partitioning, privileged account segregation and monitoring, routine password modifications, and an enhanced information security program including training classes and phishing exercises for employees and contractors with system access, along with tabletop exercises conducted by information security personnel.
In recent years, we have regularly implemented improvements to our protective measures that have included, but have not been limited to, implementation of the following: firewalls, endpoint intrusion detection and response software, regular patches, log monitors, event correlation tools, network segmentation, routine backups with offsite retention of storage media, system audits, dual factor identification, data partitioning, privileged account segregation and monitoring, routine password modifications, and an enhanced information security program including training classes and phishing exercises for employees and contractors with system access, along with tabletop exercises conducted by information security personnel.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, in August 2012, the SEC released investigation, and disclosure requirements regarding the use of "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries. We filed a Form SD with the SEC regarding such matters on May 27, 2022. Other countries are considering similar regulations.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, in August 2012, the SEC released investigation, and disclosure requirements regarding the use of "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries. We filed a Form SD with the SEC regarding such matters on May 17, 2024. Other countries are considering similar regulations.
Should there be a loss or adverse judgment in an area for which we are self-insured, then our financial condition, results of operations and liquidity may be materially adversely affected. 24 Table of Contents Risks Related to Cybersecurity, Privacy, Intellectual Property, and Litigation We continue to be the target of attacks on our IT systems.
Should there be a loss or adverse judgment in an area for which we are self-insured, then our financial condition, results of operations and liquidity may be materially adversely affected. Risks Related to Cybersecurity, Products, Privacy, Intellectual Property, and Litigation We continue to be the target of attacks on our IT systems.
Our customers may have increased their order levels in recent previous periods to help ensure they have sufficient inventory of our products to meet their needs, or they may have been unable to sell their products at their forecasted levels which would reduce our level of turns orders.
Our customers may have increased their order levels in previous periods of tight supply to help ensure they have sufficient inventory of our products to meet their needs, or they may have been unable to sell their products at their forecasted levels which would reduce our level of turns orders.
As a result of our acquisition activity, including our acquisition of Microsemi in May 2018, our goodwill and intangible assets increased significantly and we may in the future incur impairments to goodwill or intangible assets. When we acquire a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets.
As a result of our acquisition activity our goodwill and intangible assets increased significantly and we may in the future incur impairments to goodwill or intangible assets. When we acquire a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets.
We are subject to numerous laws and regulations in the U.S. and internationally regarding privacy and data protection such as the European Union’s (EU) General Data Protection Regulation (GDPR), the U.K. equivalent to the GDPR, the California Consumer Privacy Act, and the California Privacy Rights Act.
We are subject to numerous laws and regulations in the U.S. and internationally regarding privacy, data protection and cybersecurity, such as the European Union’s (EU) General Data Protection Regulation (GDPR), the U.K. equivalent to the GDPR, the California Consumer Privacy Act (CCPA), and the California Privacy Rights Act (CPRA).
We, our customers, and the users of our products may not promptly learn of or have the ability to 25 Table of Contents fully assess the magnitude or effects of a vulnerability, including the extent, if any, to which a vulnerability has been exploited.
We, our customers, and the users of our products may not promptly learn of or have the ability to fully assess the magnitude or effects of a vulnerability, including the extent, if any, to which a vulnerability has been exploited.
While we had approximately 125,000 customers, and our ten largest direct customers accounted for approximately 12% of our total revenue in fiscal 2023, and four of our top ten direct customers are contract manufacturers that perform manufacturing services for many customers, cancellation of customer contracts could have an adverse impact on our revenue and profits.
While we had approximately 123,000 customers, and our ten largest direct customers accounted for approximately 12% of our total revenue in fiscal 2024, and four of our top ten direct customers are contract manufacturers that perform manufacturing services for many customers, cancellation of customer contracts could have an adverse impact on our revenue and profits.
We took steps to mitigate the costs of these tariffs on our business by making adjustments in operations and supply. Although these tariff increases did not result in a material adverse impact on our operating costs in fiscal 2019 or fiscal 2020, they did reduce demand for our products during fiscal 2019 and fiscal 2020.
We took steps to mitigate the costs of these tariffs on our business by adjusting our operations and supply chain. Although these tariff increases did not result in a material adverse impact on our operating costs in fiscal 2019 or fiscal 2020, they did reduce demand for our products during fiscal 2019 and fiscal 2020.
Operations at any of our facilities, at the facilities of any of our wafer fabrication or assembly and test subcontractors, or at any of our significant vendors, licensees or customers may be disrupted due to public health concerns (including outbreaks such as COVID-19), work stoppages or reduction in available labor, power loss, insufficient water, cyber attacks, computer network compromises, incidents of terrorism or security risk, political instability, governmental actions, telecommunications, transportation or other infrastructure failure, radioactive contamination, or fire, earthquake, floods, droughts, volcanic eruptions or other natural disasters.
Operations at any of our facilities, at the facilities of any of our wafer fabrication or assembly and test subcontractors, or at any of our significant vendors, licensees or customers may be disrupted due to public health concerns (including outbreaks such as COVID-19), work stoppages or reduction in available labor, power loss, insufficient water, cyber-attacks, computer network compromises, incidents of terrorism or security risk, political instability, governmental actions, telecommunications, transportation or other infrastructure failure, radioactive contamination, adverse changes in climate, or fires, earthquakes, floods, droughts, volcanic eruptions or other natural disasters.
We are dependent on wafer foundries and other contractors, as are our SuperFlash and other licensees. We rely on outside wafer foundries for a significant portion of our wafer fabrication needs. Specifically, during fiscal 2023 and fiscal 2022, approximately 63% and 60%, respectively, of our net sales came from products that were produced at outside wafer foundries.
We are dependent on wafer foundries and other contractors, as are our SuperFlash and other licensees. We rely on outside wafer foundries for a significant portion of our wafer fabrication needs. Specifically, during fiscal 2024 and fiscal 2023, approximately 64% and 63%, respectively, of our net sales came from products that were produced at outside wafer foundries.
Although we are continuing to expand our internal wafer fabrication, assembly and test capacity, we expect that our reliance on third-party contractors may increase over time as our business grows, and any inability to secure necessary external capacity could adversely affect our operating results.
Although we are continuing to expand our internal wafer fabrication, assembly and test capacity, we expect that our reliance on third-party contractors may increase over time as our business grows, and 15 Table of Contents any inability to secure necessary external capacity could adversely affect our operating results.
However, our system improvements have not been fully effective in preventing attacks on our IT systems and data, including breaches of our security measures, and there can be no assurance that any future system improvements will be effective in preventing future cyber-attacks or disruptions or limiting the damage from any future cyber-attacks or disruptions.
However, our system improvements have not been fully effective in preventing attacks on our IT systems and data, including breaches of our security measures, and there can be no assurance that any future system improvements will be effective in preventing future cyber-attacks or disruptions, a ransom-style attack, or limiting the damage from any future cyber-attacks or disruptions.
The repurchase authorization may be suspended or discontinued at any time at our discretion and may affect the trading price of our common stock and increase volatility. Our financial condition and results of operations could be adversely impacted if we do not effectively manage current or future debt.
The repurchase authorization may be suspended or discontinued at any time at our discretion and may affect the trading price of our common stock and increase volatility. 36 Table of Contents Our financial condition and results of operations could be adversely impacted if we do not effectively manage or refinance our current or future debt.
While sales of our products into the regions, and to customers that sell into these regions, have been negatively impacted by the Russian invasion of Ukraine, at this time, we have not experienced a material impact on our business, results of operations or financial conditions.
While sales of our products into Russia, Belarus and Ukraine and to customers that sell into these countries, have been negatively impacted by the Russian invasion of Ukraine, at this time, we have not experienced a material impact on our business, results of operations or financial conditions.
In the future, local governments could require us to reduce production, cease operations at any of our facilities, or implement mandatory vaccine requirements, and we could experience constraints in fulfilling customer orders. Additionally, operations at our customers and licensees may be disrupted for a number of reasons.
In the future, local governments could require us to reduce production or cease operations at any of our facilities, and we could experience constraints in fulfilling customer orders. Additionally, operations at our customers and licensees may be disrupted for a number of reasons.
Future sales into U.S. government projects are subject to uncertain government appropriations and national defense policies and priorities, including the budgetary process, changes in the timing and spending priorities, the impact of any past or future government shutdowns, contract terminations or renegotiations, future sequestrations, changes in regulations that we must comply with to be eligible to accept new contracts, such as the Cybersecurity Maturity Model Certification requirements and mandatory vaccine requirements, or the impact of the COVID-19 pandemic.
Future sales into U.S. government projects are subject to uncertain government appropriations and national defense policies and priorities, including the budgetary process, changes in the timing and spending priorities, the impact of any past or future government shutdowns, contract terminations or renegotiations, future sequestrations, changes in regulations that we must comply with to be eligible to accept new contracts, such as the Cybersecurity Maturity Model Certification requirements, or the impact of pandemics.
While our business recovery plans are intended to allow us to recover from natural disasters or other disruptive events, our plans may not protect us from all events. Customer demands and regulations related to conflict-free minerals may force us to incur additional expenses.
While our business recovery plans are intended to allow us to recover from natural disasters or other disruptive events, our plans may not protect us from all events. 34 Table of Contents Customer demands and regulations related to conflict-free minerals may force us to incur additional expenses.
If we are unable to meet customer requirements, customers may disqualify us as a supplier, resulting in a permanent or temporary loss of sales to such customer or reduce purchase from us, and we may have to write off inventory if it cannot be sold.
If we are unable to meet customer requirements, customers may disqualify us as a supplier, resulting in a permanent or temporary loss of sales to such customer or a reduction in purchases from us, and we may have to write off inventory if it cannot be sold.
Our U.S.-manufactured products or products based on U.S. technology or U.S. software are subject to laws and regulations that govern international trade, including but not limited to the Foreign Corrupt Practices Act, Export Administration Regulations (EAR), International Traffic in Arms Regulations and trade sanctions against embargoed countries and restricted parties, including those administered by the U.S.
Our U.S.-manufactured products or products based on U.S. technology or U.S. software are subject to laws and regulations that govern international trade, including but not limited to the Foreign Corrupt Practices Act, Export Administration Regulations (EAR), International Traffic in Arms Regulations and economic embargoes or trade sanctions against certain countries and parties, including those administered by the U.S.
The pandemic could adversely impact our business in future periods if the impact of COVID-19 again becomes severe in one or more of our key markets such as China or in areas where our suppliers or manufacturing operations are located.
The pandemic could adversely impact our business in future periods if the impact of COVID-19 or other public health issues again becomes severe in one or more of our key markets such as China or in areas where our suppliers or manufacturing operations are located.
We also use several contractors for a portion of the assembly and testing of our products. Specifically, during fiscal 2023, approximately 41% of our assembly requirements and 33% of our test requirements were performed by third-party contractors compared to approximately 41% of our assembly requirements and 36% of our test requirements during fiscal 2022.
We also use several contractors for a portion of the assembly and testing of our products. Specifically, during fiscal 2024, approximately 41% of our assembly requirements and 29% of our test requirements were performed by third-party contractors compared to approximately 41% of our assembly requirements and 33% of our test requirements during fiscal 2023.
The cost to implement such practices may cause us to incur higher costs and reduce our profitability, and if we do not implement such practices, such customers may disqualify us as a supplier, resulting in decreased revenue opportunities.
The cost to implement such practices may cause us to incur higher costs and reduce our profitability, and if we do not implement such practices, such 24 Table of Contents customers may disqualify us as a supplier, resulting in decreased revenue opportunities.
Although our Board of Directors has authorized share repurchases of up to $4.00 billion, of which $2.63 billion is still available, the authorization does not obligate us to acquire any particular amount of shares. We cannot guarantee that our share repurchase authorization will be fully consummated or that it will enhance long-term shareholder value.
Although our Board of Directors has authorized share repurchases of up to $4.00 billion, of which $1.65 billion is still available, the authorization does not obligate us to acquire any particular amount of shares. We cannot guarantee that our share repurchase authorization will be fully consummated or that it will enhance long-term stockholder value.
For example, under certain contracts we have committed to supply products on scheduled delivery dates, or extended 27 Table of Contents our obligations for liabilities such as warranties or indemnification for quality issues or intellectual property infringement.
For example, under certain contracts we have committed to supply products on scheduled delivery dates, or extended our obligations for liabilities such as warranties or indemnification for quality issues or intellectual property infringement.
These claims may be due to injuries, economic damage or environmental exposures related to manufacturing, a product's nonconformance to our or our customer’s specifications, changes in our manufacturing processes, or unexpected customer system issues due to the integration of our products or insufficient design or testing by our customers.
These claims may be due to injuries, economic damage, lost intellectual property, or environmental exposures related to manufacturing, a product's nonconformance to our or our customer’s specifications, changes in our manufacturing processes, security vulnerabilities, or unexpected customer system issues due to the integration of our products or insufficient design or testing by our customers.
The labor, supplies and equipment necessary for their businesses could become more difficult to obtain for various reasons not limited to business interruptions of suppliers, reduced availability of labor, consolidation in their supply chain, or sanctions, trade restrictions or tariffs or the impact of the COVID-19 pandemic that impair sourcing flexibility or increase costs.
The labor, supplies and equipment necessary for their businesses could become more difficult to obtain for various reasons not limited to business interruptions of suppliers, reduced availability of labor, consolidation in their supply chain, or sanctions, trade restrictions or tariffs or the impact of public health concerns that impair sourcing flexibility or increase costs.
Risks Related to Taxation, Laws and Regulations • impact on our reported financial results by new accounting pronouncements or changes in existing accounting standards and practices; • the issuance of new export controls or trade sanctions, fines, restrictions or delays in our ability to export or import products, or increase costs associated with the manufacture or transfer of products; • outcome of future examinations of our income tax returns; • exposure to greater than anticipated income tax liabilities, changes in or the interpretation of tax rules and regulations including the TCJA, or unfavorable assessments from tax audits; • impact of the legislative and policy changes implemented globally by the current or future administrations; • impact of stringent environmental, climate change, conflict-free minerals and other regulations or customer demands; • ESG considerations; and • requirement to fund our foreign pension plans.
Risks Related to Taxation, Laws and Regulations • impact on our reported financial results by new accounting pronouncements or changes in existing accounting standards and practices; • the issuance of new export controls or trade sanctions, fines, restrictions or delays in our ability to export or import products, or increase costs associated with the manufacture or transfer of products; • outcome of future examinations of our income tax returns; • exposure to greater than anticipated income tax liabilities, changes in or the interpretation of tax rules and regulations or unfavorable assessments from tax audits; • impact of the legislative and policy changes implemented globally by the current or future administrations; • impact of stringent environmental, climate change, conflict-free minerals and other regulations or customer demands; • failure to meet ESG expectations, standards or disclosure requirements; • impact regarding the responsible use of our technologies; and • requirement to fund our foreign pension plans.
Likewise, the China government increased tariffs on China imports with U.S. as their country of origin. We have taken steps to attempt to mitigate the costs of these tariffs on our business.
For example, in 2019, the U.S. government increased tariffs on U.S. imports with China as their country of origin. Likewise, the China government increased tariffs on China imports with U.S. as their country of origin. We have taken steps to attempt to mitigate the costs of these tariffs on our business.
Infringement of our intellectual property rights by a third-party could result in uncompensated lost market and revenue opportunities for us. Although we continue to aggressively defend and protect our intellectual property on a worldwide basis, there can be no assurance that we will be successful.
Infringement of our intellectual property rights by a third-party could result in harm to our competitive position, uncompensated lost market and revenue opportunities for us. Although we continue to aggressively defend and 30 Table of Contents protect our intellectual property on a worldwide basis, there can be no assurance that we will be successful.
Any inability to maintain our labor force at our facilities may disrupt our operations, delay production, shipments and revenue and result in us being unable to timely satisfy customer demand, and ultimately could materially and adversely affect our business, financial condition and results of operations.
We rely on a direct labor force at our manufacturing facilities. Any inability to maintain our labor force at our facilities may disrupt our operations, delay production, shipments and revenue and result in us being unable to timely satisfy customer demand, and ultimately could materially and adversely affect our business, financial condition and results of operations.
However, broad fluctuations in our business, changes in semiconductor industry and global economic conditions (including the impact of strong demand in the industry, the COVID-19 pandemic or trade tensions) and our acquisition activity (including our acquisition of Microsemi) have had and can have a more significant impact on our results than seasonality.
However, broad fluctuations in our business, changes in semiconductor industry and global economic conditions (including the impact of strong demand in the industry, public health conditions or trade tensions) and our acquisition activity have had and can have a more significant impact on our results than seasonality.
Failure to meet ESG expectations or standards, or achieve our ESG goals, could adversely affect our business, results of operations, financial condition, or stock price.
Failure to meet ESG expectations, standards or disclosure requirements or achieve our corporate responsibility goals, could adversely affect our business, results of operations, financial condition, or stock price.
The U.S. government and its contractors may terminate their contracts with us at any time. For example, in 2014, the U.S. government terminated a $75 million contract with Microsemi. Uncertainty in government spending and termination of contracts for government related projects could have a material adverse impact on the revenue from our government related business.
The U.S. government and its contractors may terminate their contracts with us at any time. Uncertainty in government spending and termination of contracts for government related projects could have a material adverse impact on the revenue from our government related business.
While we plan to continue to undertake efforts to conform to current regulatory obligations and evolving best practices, such efforts may be unsuccessful or result in significant costs.
While we plan to continue to undertake efforts to conform to current legal and regulatory obligations and to account for relevant best practices, such efforts may be unsuccessful or result in significant costs.
Moreover, third parties can release information regarding potential vulnerabilities of our products before mitigations are available. This, in turn, could lead to attempted or successful exploits of vulnerabilities, adversely affect our ability to introduce mitigations, or otherwise harm our business and reputation.
Moreover, third parties can release information regarding potential vulnerabilities of our products before mitigations are available. This, in turn, could lead to attempted or successful exploits of vulnerabilities, adversely affect our ability to introduce mitigations, or otherwise harm our business and reputation. We face risks to our business and proprietary confidential information due to use of AI.
Any downturn in global or regional economic conditions, as a result of rising interest rates, high inflation, instability in the banking sector, the enactment of broad sanctions by the U.S. or other countries against Russia or China, the COVID-19 pandemic or other factors, may adversely impact their financial viability.
Any downturn in global or regional economic conditions, as a result of rising interest rates, high inflation, instability in the banking sector, the enactment of broad sanctions by the U.S. or other countries against Russia or China, the enactment of broad sanctions against the U.S. by other countries, public health concerns, industry work stoppages or other factors, may adversely impact their financial viability.
The U.S. and other countries have levied tariffs and taxes on certain goods, implemented trade restrictions, and introduced national security protection policies. Trade tensions between the U.S. and China, which escalated in 2018, have continued and include the U.S. increasing tariffs on Chinese origin goods and China increasing tariffs on U.S. origin goods.
The U.S. and other countries have levied tariffs and taxes on certain goods, implemented trade restrictions, and introduced national security protection policies. Trade tensions between the U.S. and China, have continued to escalate from 2018 to present, and include the U.S. increasing tariffs on Chinese origin goods and China increasing tariffs on U.S. origin goods.
Further, our ability to avoid such liabilities may be limited by law. We have liability insurance which covers certain damages arising out of product defects, but we do not expect that insurance will fully protect against such claims. Payments we may make in connection with these customer claims may adversely affect the results of our operations.
We have liability insurance which covers certain damages arising out of product defects, but we do not expect that insurance will fully protect against such claims. Payments we may make in connection with these customer claims may adversely affect the results of our operations.
These requirements may increase our own costs, as well as those passed on to us by our supply chain. Climate change regulations and sustained adverse climate change pose risks that could harm our results of operations.
These requirements may increase our own costs, as well as those passed on to us by our supply chain. S ustained adverse climate change poses risks that could harm our results of operations.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changePrincipal Operations Gresham, Oregon 826,500 Wafer fabrication (Fab 4), R&D center, warehousing and administrative offices Chandler, Arizona 720,000 Executive and administrative offices, wafer probe, R&D center, sales and marketing, and computer and service functions Lamesa, Calamba, Philippines 610,300 Assembly and test, warehousing and administrative offices Chacherngsao, Thailand 498,100 Assembly and test, wafer probe, sample center, warehousing and administrative offices Colorado Springs, Colorado 480,000 Wafer fabrication (Fab 5), test and R&D Canlubang, Calamba, Philippines 460,000 Wafer probe, test, warehousing and administrative offices Tempe, Arizona 388,100 Wafer fabrication (Fab 2), R&D center, warehousing and administrative offices Bangalore, India 294,000 R&D center, sales and marketing support and administrative offices Chacherngsao, Thailand 287,300 Assembly and test, warehousing and administrative offices Chennai, India 187,000 R&D center Lawrence, Massachusetts 160,000 Manufacturing and administrative offices Rousset, France 144,500 Test, R&D and administrative offices Mount Holly Springs, Pennsylvania 100,000 Manufacturing, R&D and administrative offices Garden Grove, California 98,100 Manufacturing, R&D and administrative offices San Jose, California 98,000 R&D and administrative offices Neckarbischofsheim, Germany 83,800 Manufacturing and administrative offices Nantes, France 77,000 Wafer probe, test, R&D, warehousing and administrative offices San Jose, California 71,000 R&D and administrative offices San Jose, California 57,000 R&D and administrative offices Beverly, Massachusetts 52,100 Manufacturing Heilbronn, Germany 48,000 R&D and administrative offices Karlsruhe, Germany 46,000 R&D and administrative offices Ennis County, Ireland 40,000 Manufacturing, R&D and administrative offices Simsbury, Connecticut 32,500 Manufacturing, R&D and administrative offices Shanghai, China 21,000 R&D, sales and marketing and administrative offices Hsinchu, Taiwan 15,000 R&D and administrative offices In addition to the facilities we own, we lease several manufacturing, research and development facilities and sales offices in North America, Europe and Asia.
Biggest changePrincipal Operations Gresham, Oregon 826,500 Wafer fabrication (Fab 4), R&D center, warehousing and administrative offices Chandler, Arizona 720,000 Executive and administrative offices, wafer probe, R&D center, sales and marketing, and computer and service functions Lamesa, Calamba, Philippines 610,300 Assembly and test, warehousing and administrative offices Chacherngsao, Thailand 498,100 Assembly and test, wafer probe, sample center, warehousing and administrative offices Colorado Springs, Colorado 480,000 Wafer fabrication (Fab 5), test and R&D Canlubang, Calamba, Philippines 460,000 Wafer probe, test, warehousing and administrative offices Tempe, Arizona 388,100 Wafer fabrication (Fab 2), R&D center, warehousing and administrative offices Bangalore, India 294,000 R&D center, sales and marketing support and administrative offices Chacherngsao, Thailand 287,300 Assembly and test, warehousing and administrative offices Chennai, India 187,000 R&D center Hyderabad, India 167,554 Design and engineering Lawrence, Massachusetts 160,000 Manufacturing and administrative offices Rousset, France 144,500 Test, R&D and administrative offices Mount Holly Springs, Pennsylvania 100,000 Manufacturing, R&D and administrative offices Garden Grove, California 98,100 Manufacturing, R&D and administrative offices San Jose, California 98,000 R&D and administrative offices Neckarbischofsheim, Germany 83,800 Manufacturing and administrative offices Nantes, France 77,000 Wafer probe, test, R&D, warehousing and administrative offices San Jose, California 71,000 R&D and administrative offices San Jose, California 57,000 R&D and administrative offices Beverly, Massachusetts 52,100 Manufacturing Heilbronn, Germany 48,000 R&D and administrative offices Karlsruhe, Germany 46,000 R&D and administrative offices Ennis County, Ireland 40,000 Manufacturing, R&D and administrative offices Simsbury, Connecticut 32,500 Manufacturing, R&D and administrative offices Shanghai, China 21,000 R&D, sales and marketing and administrative offices Hsinchu, Taiwan 15,000 R&D and administrative offices In addition to the facilities we own, we lease several manufacturing, research and development facilities and sales offices in North America, Europe and Asia.
Item 2. Properties At March 31, 2023, we owned and used the facilities described below: Location Approximate Total Sq. Ft.
Item 2. Properties At March 31, 2024, we owned and used the facilities described below: Location Approximate Total Sq. Ft.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−1 removed1 unchanged
Biggest changeIssuer Purchases of Equity Securities The following table sets forth our purchases of our common stock in the three months ended March 31, 2023: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program (1) (in millions) January 1, 2023 - January 31, 2023 — $ — — February 1, 2023 - February 28, 2023 1,846,335 $ 83.08 1,846,335 March 1, 2023 - March 31, 2023 1,471,341 $ 81.87 1,471,341 3,317,676 3,317,676 $ 2,628.6 (1) In November 2021, our Board of Directors authorized the repurchase of up to $4.00 billion of our common stock in the open market or in privately negotiated transactions.
Biggest changeIssuer Purchases of Equity Securities The following table sets forth our purchases of our common stock in the three months ended March 31, 2024: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program (1) (in millions) January 1, 2024 - January 31, 2024 — $ — — February 1, 2024 - February 29, 2024 2,790,831 $ 83.05 2,790,831 March 1, 2024 - March 31, 2024 1,745,924 $ 89.10 1,745,924 4,536,755 4,536,755 $ 1,646.5 (1) In November 2021, our Board of Directors authorized the repurchase of up to $4.00 billion of our common stock in the open market or in privately negotiated transactions.
(www.researchdatagroup.com) The information in this Form 10-K appearing under the heading "Stock Price Performance Graph" is being "furnished" pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be "soliciting material" or "filed" with the SEC or subject 35 Table of Contents to Regulation 14A or 14C, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act except to the extent that we specifically request that it be treated as such.
(www.researchdatagroup.com) The information in this Form 10-K appearing under the heading "Stock Price Performance Graph" is being "furnished" pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be "soliciting material" or "filed" with the SEC or subject 42 Table of Contents to Regulation 14A or 14C, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act except to the extent that we specifically request that it be treated as such.
Refer to "Item 12. Security Ownership of Certain Beneficial Owners And Management And Related Stockholder Matters," at page 51 below, for the information required by Item 201(d) of Regulation S-K with respect to securities authorized for issuance under our equity compensation plans at March 31, 2023.
Refer to "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," at page 60 below, for the information required by Item 201(d) of Regulation S-K with respect to securities authorized for issuance under our equity compensation plans at March 31, 2024.
Comparison of 5 year Cumulative Total Return* *$100 invested on March 31, 2018 in stock or index, including reinvestment of dividends Fiscal year ending March 31. Copyright © 2023 Standard & Poor's, a division of S&P Global. All rights reserved.
Comparison of 5 year Cumulative Total Return* *$100 invested on March 31, 2019 in stock or index, including reinvestment of dividends Fiscal year ending March 31. Copyright © 2024 Standard & Poor's, a division of S&P Global. All rights reserved.
On May 22, 2023, there were approximately 547 holders of record of our common stock. This figure does not reflect beneficial ownership of shares held in nominee names. For a description of our dividend policies, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources," included herein.
On May 16, 2024, there were approximately 543 holders of record of our common stock. This figure does not reflect beneficial ownership of shares held in nominee names. For a description of our dividend policies, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources," included herein.
There is no expiration date associated with this authorization. Item 6. [Reserved] 36 Table of Contents
There is no expiration date associated with this authorization. Item 6. [Reserved] 43 Table of Contents
Removed
Cumulative Total Return March 2018 2019 2020 2021 2022 2023 Microchip Technology Incorporated 100.00 92.40 76.74 177.94 174.37 197.78 S&P 500 Stock Index 100.00 109.50 101.86 159.25 184.17 169.94 Philadelphia Semiconductor Index 100.00 107.11 118.23 248.25 275.69 263.73 Data acquired by Research Data Group, Inc.
Added
Cumulative Total Return March 2019 2020 2021 2022 2023 2024 Microchip Technology Incorporated 100.00 83.05 192.59 188.72 214.05 233.99 S&P 500 Stock Index 100.00 93.02 145.44 168.20 155.20 201.57 Philadelphia Semiconductor Index 100.00 110.38 231.77 257.39 246.23 378.21 Data acquired by Research Data Group, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

100 edited+30 added−25 removed48 unchanged
Biggest changeThese forward-looking statements include, without limitation, statements regarding the following: • The future impact on our business in response to the COVID-19 pandemic or other public health concerns; • Our expectation that we will experience period-to-period fluctuations in operating results, gross margins, product mix and average gross profit per unit; • The effects that uncertain global economic conditions and fluctuations in the global credit and equity markets may have on our financial condition and results of operations; • The effects and amount of competitive pricing pressure on our product lines and modest pricing declines in certain of our more mature proprietary product lines; • Our ability to moderate future average selling price declines; • The amount of, and changes in, demand for our products and those of our customers; • The impact of national security protections, trade restrictions and changes in tariffs, including those impacting China; • Our intent to vigorously defend our legal positions; • Our goal to continue to be more efficient with our selling, general and administrative expenses; • Our expectation that our days of inventory at June 30, 2023 will be 159 to 164 days; • Our belief that customers recognize our products and brand name and our use of distributors as an effective supply channel; • Our belief that familiarity with and adoption of development tools from us and from our third-party development tool partners will be an important factor in the future selection of our embedded control products; • The accuracy of our estimates of the useful life and values of our property, assets and other liabilities; • Fluctuations in our analog product line; • The impact of any supply disruption we may experience; • Our ability to effectively utilize our facilities at appropriate capacity levels; • Our ability to maintain manufacturing yields; • The maintenance of our competitive position based on our investments in new and enhanced products; • The cost effectiveness of using our own assembly and test operations; • Our plans to continue to transition certain outsourced assembly and test capacity to our internal facilities; • Our expectation of continued investment in expanding our manufacturing capacity during the next 12 months; • The continued development of the embedded control market based on our strong technical service presence; • Our anticipated level of capital expenditures; • The possibility that loss of, or disruption in the operations of, one or more of our distributors could reduce our future net sales and/or increase our inventory returns; • Our expectations regarding LTSAs and Preferred Supply Program; • The continuation and amount of quarterly cash dividends; • The sufficiency of our existing sources of liquidity to finance anticipated capital expenditures and otherwise meet our anticipated cash requirements, and the effects that our contractual obligations are expected to have on them; • Our belief that the capital expenditures to be incurred over the next 12 months will provide sufficient manufacturing capacity to support the growth of our production capabilities for our new products and technologies and to bring in-house more of the production requirements that are currently outsourced; • Our belief that our IT system compromise has not had a material adverse effect on our business or resulted in any material damage to us; • Our expectation that we will continue to be the target of cyber-attacks, computer viruses, unauthorized access and other attempts to breach or otherwise compromise the security of our IT systems and data; • The impact of the resolution of legal actions on our business, and the accuracy of our assessment of the probability of loss and range of potential loss; 37 Table of Contents • The amounts and timing, and our plans and expectations relating to the Statutory Notice of Deficiency and proposed income adjustment from the Malaysian Inland Revenue Board; • Our expectation regarding the treatment of our unrecognized tax benefits in calendar year 2023; • Our belief that the expiration of any tax holidays will not have a material impact on our effective tax rate; • The impact of the geographical dispersion of our earnings and losses on our effective tax rate; • Our belief that the estimates used in preparing our consolidated financial statements are reasonable; • Our actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis; • Our ability to obtain and maintain patents and intellectual property licenses and minimize the effects of litigation or other disputes or the loss of patent protection; • The level of risk we are exposed to for product liability claims or indemnification claims; • The effect of fluctuations in market interest rates on our income and/or cash flows; • The effect of fluctuations in currency rates; • The impact of inflation on our business; • Our ability to increase our borrowings or seek additional equity or debt financing to maintain or expand our facilities, or to fund cash dividends, share repurchases, acquisitions or other corporate activities, and that the timing and amount of such financing requirements will depend on a number of factors; • Our expectations regarding the amounts and timing of repurchases under our stock repurchase program; • Our expectation that our reliance on third-party contractors may increase over time as our business grows; • Our ability to collect accounts receivable; • The impact of the legislative and policy changes implemented or which may be implemented by the current administration, on our business and the trading price of our stock; • Our belief that our culture, values, and organizational development and training programs provide an inclusive work environment where our employees are empowered and engaged to deliver the best embedded control solutions; • Our belief that our continued success is driven by the skills, knowledge, and innovative capabilities of our personnel, a strong technical service presence, and our ability to rapidly commercialize new and enhanced products; • The potential impact of changes in regulations or in their enforcement, including with respect to the capital expenditures or other costs or expenses; • The impact of any failure by use to adequately control the storage, use, discharge and disposal of regulated substances; • Estimates and plans regarding pension liability and payments expected to be made for benefits earned; and • The impact on our business stemming from Russia’s invasion of Ukraine.
Biggest changeThese forward-looking statements include, without limitation, statements regarding the following: • The future impact on our business in response to the COVID-19 pandemic or other public health concerns; • Our expectation that we will experience period-to-period fluctuations in operating results, gross margins, product mix and average gross profit per unit; • The effects that uncertain global economic conditions and fluctuations in the global credit and equity markets may have on our financial condition and results of operations; • The effects and amount of competitive pricing pressure on our product lines and modest pricing declines in certain of our more mature proprietary product lines; • Our ability to moderate future average selling price declines; • The amount of, and changes in, demand for our products and those of our customers; • The impact of national security protections, trade restrictions and changes in tariffs, including those impacting China; • Our intent to vigorously defend our legal positions and our expectations of the impact of litigation on our operations; • Our goal to continue to be more efficient with our selling, general and administrative expenses; • Our belief that customers recognize our products and brand name and our use of distributors as an effective supply channel; • Our belief that familiarity with and adoption of development tools from us and from our third-party development tool partners will be an important factor in the future selection of our embedded control products; • The accuracy of our estimates of the useful life and values of our property, assets and other liabilities; • The possibility of future pricing fluctuations in our analog product line; • The impact of any supply disruption we may experience; • Our ability to effectively utilize our facilities at appropriate capacity levels; • Our ability to maintain manufacturing yields; • The maintenance of our competitive position based on our investments in new and enhanced products; • The cost effectiveness of using our own assembly and test operations; • Our plans to continue to transition certain outsourced assembly and test capacity to our internal facilities; • Our expectations regarding investments in our manufacturing capacity; • The continued development of the embedded control market based on our strong technical service presence; • Our anticipated level of capital expenditures; • The possibility that loss of, or disruption in the operations of, one or more of our distributors could reduce our future net sales and/or increase our inventory returns; • Our intent, including length, timing, and planned shutdown days, to reduce production levels at global fabrication facilities and its impact on inventory levels; • Our expectations regarding LTSAs, the Preferred Supply Program, and the realization of deferred revenue; • The continuation and amount of quarterly cash dividends; • The sufficiency of our existing sources of liquidity to finance anticipated capital expenditures and otherwise meet our anticipated cash requirements, and the effects that our contractual obligations are expected to have on them; • Our belief that the capital expenditures to be incurred over the next 12 months will provide sufficient manufacturing capacity to support the growth of our production capabilities for our new products and technologies and to bring in-house more of the production requirements that are currently outsourced; • Our belief that our IT system compromise has not had a material adverse effect on our business or resulted in any material damage to us; 44 Table of Contents • Our expectation that we will continue to be the target of cyber-attacks, computer viruses, unauthorized access and other attempts to breach or otherwise compromise the security of our IT systems and data; • Our plans to modify and enhance our cybersecurity risk management processes and strategy; • The impact of the resolution of legal actions on our business, and the accuracy of our assessment of the probability of loss and range of potential loss; • The amounts and timing, and our plans and expectations relating to the U.S.
Additionally, semiconductor industry conditions have resulted in increased costs throughout our supply chain, which we have been generally passing on to our customers in the form of price increases. Our price increases were implemented at various times and in various amounts throughout fiscal 2022 and fiscal 2023 with respect to our very broad range of customers and products.
Additionally, semiconductor industry conditions have resulted in increased costs throughout our supply chain, which we have been generally passing on to our customers in the form of price increases. Our price increases were implemented at various times and in various amounts throughout fiscal 2023 with respect to our very broad range of customers and products.
However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS and IRB were to prevail on their assertions, the assessed tax, penalties, and deficiency interest could have a material adverse impact on our financial position, results of operations or cash flows.
The ultimate outcome of disputes of this nature is uncertain, and if the IRS and IRB were to prevail on their assertions, the assessed tax, penalties, and deficiency interest could have a material adverse impact on our financial position, results of operations or cash flows.
Special (Income) Charges and Other, Net During fiscal 2023, we earned special income and other, net of $4.0 million primarily related to a favorable resolution of a previously accrued legal matter partially offset by restructuring costs of acquired and existing wafer fabrication operations to increase operational efficiency.
During fiscal 2023, we earned special income and other, net of $4.0 million primarily related to a favorable resolution of a previously accrued legal matter partially offset by restructuring costs of acquired and existing wafer fabrication operations to increase operational efficiency.
Operating Activities Net cash provided by operating activities was $3.62 billion in fiscal 2023, primarily due to higher net income of $2.24 billion, adjusted for non-cash and non-operating charges of $1.40 billion and net cash outflows of $16.0 million from changes in our operating assets and liabilities.
Net cash provided by operating activities was $3.62 billion in fiscal 2023 primarily due to net income of $2.24 billion, adjusted for non-cash and non-operating charges of $1.40 billion and net cash outflows of $16.0 million from changes in our operating assets and liabilities.
We plan to continue to invest in assembly and test equipment to increase our internal capacity capabilities and transition certain outsourced assembly and test capacity to our internal facilities. We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements.
We plan to continue to selectively invest in assembly and test equipment to increase our internal capacity capabilities and transition certain outsourced assembly and test capacity to our internal facilities. We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements.
We disclaim any obligation to update the information contained in any forward-looking statement. 38 Table of Contents Introduction The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document, as well as with other sections of this Annual Report on Form 10-K, including "Item 8.
We disclaim any obligation to update the information contained in any forward-looking statement. 45 Table of Contents Introduction The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document, as well as with other sections of this Annual Report on Form 10-K, including "Item 8.
We are subject to taxation in many jurisdictions in which we have operations. The effective tax rates that we pay in these jurisdictions vary widely, but they are generally lower than our combined U.S. federal and state effective tax rate. Our domestic blended statutory tax rate in each of fiscal 2023 and fiscal 2022 was approximately 22%.
We are subject to taxation in many jurisdictions in which we have operations. The effective tax rates that we pay in these jurisdictions vary widely, but they are generally lower than our combined U.S. federal and state effective tax rate. Our domestic blended statutory tax rate in each of fiscal 2024 and fiscal 2023 was approximately 22%.
We then discuss our results of operations for fiscal 2023 compared to fiscal 2022, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled "Liquidity and Capital Resources." Our liquidity and capital resources section generally discusses fiscal 2023 compared to fiscal 2022.
We then discuss our results of operations for fiscal 2024 compared to fiscal 2023, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled "Liquidity and Capital Resources." Our liquidity and capital resources section generally discusses fiscal 2024 compared to fiscal 2023.
Sales to direct customers usually do not meet the definition of a contract until the direct customer has sent in a purchase order, we have acknowledged the order and deemed the collectability of the consideration to be probable, and legally enforceable rights and obligations have been created.
Sales to customers do not meet the definition of a contract until the customer has sent in a purchase order, we have acknowledged the order, we have deemed the collectability of the consideration to be probable, and legally enforceable rights and obligations have been created.
Our non-U.S. blended statutory tax rates in fiscal 2023 and fiscal 2022 were lower than this amount. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, tax holidays, financing arrangements and other factors.
Our non-U.S. blended statutory tax rates in fiscal 2024 and fiscal 2023 were lower than this amount. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, tax holidays, financing arrangements and other factors.
We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the change in our net sales in fiscal 2023 or fiscal 2022.
We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the change in our net sales in fiscal 2024 or fiscal 2023.
In determining whether there is a risk of obsolescence, we evaluate projected demand over periods that align with demand forecasts used to develop manufacturing plans and inventory build decisions and write down inventory on hand that is in excess of estimated demand. Management reviews and adjusts the estimates as appropriate based on specific situations.
In determining whether there is a risk of excess or obsolete inventory, we evaluate projected demand over periods that align with demand forecasts used to develop manufacturing plans and inventory build decisions and write down inventory on hand that is in excess of estimated demand. Management reviews and adjusts the estimates as appropriate based on specific situations.
We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained based on their technical merits under currently enacted law. If this threshold 46 Table of Contents is not met, no tax benefit of the uncertain tax position is recognized.
We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained based on their technical merits under currently enacted law. If this threshold is not met, no tax benefit of the uncertain tax position is recognized.
We apply the following five-step approach to determine the timing and amount of revenue recognition: (i) identify the contract with the customer, (ii) identify performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the performance obligation is satisfied.
We apply the following five-step approach to determine the timing and amount of revenue recognition: (i) identify the contract with the customer, (ii) identify performance obligations in the contract, (iii) determine the transaction 46 Table of Contents price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the performance obligation is satisfied.
Our current intent is to regularly repurchase shares of our common stock over time based on our cash generation, leverage metrics, and market conditions. In October 2002, we announced that our Board of Directors had approved and instituted a quarterly cash dividend on our common stock. To date, our cumulative dividend payments have totaled approximately $5.74 billion.
Our current intent is to regularly repurchase shares of our common stock over time based on our cash generation, leverage metrics, and market conditions. In October 2002, we announced that our Board of Directors had approved and instituted a quarterly cash dividend on our common stock. To date, our cumulative dividend payments have totaled approximately $6.65 billion.
The timing and amount of any such financing requirements will depend on a number of factors, including our level of dividend payments, changes in tax laws and regulations regarding the repatriation of offshore cash, demand for our products, changes in industry conditions, product mix, competitive factors and our ability to identify suitable acquisition candidates.
The timing and amount of any such financing requirements will depend on a number of factors, including the maturity dates of our existing debt, our level of dividend payments, changes in tax laws and regulations regarding the repatriation of offshore cash, demand for our products, changes in industry conditions, product mix, competitive factors and our ability to identify suitable acquisition candidates.
For our discussion of our fiscal 2022 results compared to fiscal 2021 for both our results of operations and our liquidity and capital resources sections, refer to "Item 7.
For our discussion of our fiscal 2023 results compared to fiscal 2022 for both our results of operations and our liquidity and capital resources sections, refer to "Item 7.
Results of Operations The following table sets forth certain operational data as a percentage of net sales for fiscal 2023 and fiscal 2022: Fiscal Year Ended March 31, 2023 2022 Net sales 100.0 % 100.0 % Cost of sales 32.5 34.8 Gross profit 67.5 65.2 Research and development 13.3 14.5 Selling, general and administrative 9.5 10.5 Amortization of acquired intangible assets 7.8 12.7 Special (income) charges and other, net — 0.4 Operating income 36.9 % 27.1 % Net Sales We operate in two industry segments and engage primarily in the design, development, manufacture and sale of semiconductor products as well as the licensing of our SuperFlash and other technologies.
Results of Operations The following table sets forth certain operational data as a percentage of net sales for fiscal 2024 and fiscal 2023: Fiscal Year Ended March 31, 2024 2023 Net sales 100.0 % 100.0 % Cost of sales 34.6 32.5 Gross profit 65.4 67.5 Research and development 14.4 13.3 Selling, general and administrative 9.6 9.5 Amortization of acquired intangible assets 7.9 7.8 Special (income) charges and other, net (0.2) — Operating income 33.7 % 36.9 % Net Sales We operate in two industry segments and engage primarily in the design, development, manufacture and sale of semiconductor products as well as the licensing of our SuperFlash and other technologies.
Other factors that we believe contributed to changes in our reported net sales for fiscal 2023 compared to fiscal 2022 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include: • semiconductor industry conditions; • our various new product offerings that have increased our served available market; • customers’ increasing needs for the flexibility offered by our programmable solutions; and • increasing semiconductor content in our customers’ products through our Total Systems Solutions.
Other factors that we believe contributed to changes in our reported net sales for fiscal 2024 compared to fiscal 2023 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include: • semiconductor industry conditions; • our various new product offerings that have increased our served available market; • customers’ increasing needs for the flexibility offered by our programmable solutions; and • increasing semiconductor content in our customers’ products through our TSS product portfolio.
The loss of, or the disruption in the operations of, one or more of our distributors could reduce our future net sales in a given quarter and could result in an increase in inventory returns. At March 31, 2023, our distributors maintained 24 days of inventory of our products compared to 17 days at March 31, 2022.
The loss of, or the disruption in the operations of, one or more of our distributors could reduce our future net sales in a given quarter and could result in an increase in inventory returns. At March 31, 2024, our distributors maintained 41 days of inventory of our products compared to 24 days at March 31, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the SEC on May 20, 2022 which is incorporated by reference herein.
Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed with the SEC on May 25, 2023 which is incorporated by reference herein.
Our effective tax rate in fiscal 2023 includes a $63.8 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 2.2%; an $11.4 million tax benefit for share-based compensation deductions, which reduced our effective tax rate by 0.4%; a $50.6 million tax expense related to changes in various tax reserves, which increased our effective tax rate by 1.7%; and a $258.9 million tax expense for the effects of foreign operations, which increased our effective tax rate by 8.9%.
Our effective tax rate in fiscal 2023 includes a $63.8 million tax benefit received from R&D credits, which reduced our effective tax rate by 2.2%; an $11.4 million tax benefit for share-based compensation deductions, which reduced our effective 52 Table of Contents tax rate by 0.4%; a $50.6 million tax expense related to changes in various tax reserves, which increased our effective tax rate by 1.7%; and a $258.9 million tax expense for the effects of foreign operations, which increased our effective tax rate by 8.9%.
Business." We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.
We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with a discussion of our Business and Macroeconomic Environment followed by the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.
We may increase our borrowings under our Revolving Credit Facility or seek additional equity or debt financing from time to time to maintain or expand our wafer fabrication and product assembly and test facilities, for cash dividends, for share repurchases or for acquisitions or other purposes.
We may increase our borrowings under our Revolving Credit Facility or our Commercial Paper program or seek additional equity or debt financing from time to time to refinance our existing debt, maintain or expand our wafer fabrication and product assembly and test facilities, for cash dividends, for share repurchases or for acquisitions or other purposes.
The semiconductor industry is capital intensive and in order to remain competitive, we must constantly evaluate the need to make significant investments in capital equipment for both production and research and development and to expand our existing facilities or potentially construct new facilities.
Income Taxes" to our consolidated financial statements. The semiconductor industry is capital intensive and in order to remain competitive, we must constantly evaluate the need to make significant investments in capital equipment for both production and research and development and to expand our existing facilities or potentially construct new facilities.
Generally, adjustments will be recorded in periods subsequent to the initial recognition in light of changing facts and circumstances, such as the closing of a tax audit, the refinement of an estimate, the closing of a statutory audit period or 40 Table of Contents changes in applicable law.
Generally, adjustments will be recorded in periods subsequent to the initial recognition in light of changing facts and 47 Table of Contents circumstances, such as the closing of a tax audit, the closing of a statutory audit period or changes in applicable law.
Investing Activities Net cash used in investing activities was $599.5 million for fiscal 2023 compared to $477.7 million for fiscal 2022. Fiscal 2023 and fiscal 2022 investing cash flows primarily related to capital purchases and investments in other assets. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions.
Investing Activities Net cash used in investing activities was $392.1 million for fiscal 2024 compared to $599.5 million for fiscal 2023. Fiscal 2024 and fiscal 2023 investing cash flows primarily related to capital purchases and investments in other assets. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions.
We do not expect the future expiration of any of our tax holiday periods in Thailand to have a material impact on our effective tax rate. In September 2021, we received a Statutory Notice of Deficiency (Notice) from the United States Internal Revenue Service (IRS) for fiscal 2007 through fiscal 2012. The disputed amounts largely relate to transfer pricing matters.
We do not expect the future expiration of any of our tax holiday periods in Thailand to have a material impact on our effective tax rate. In September 2021, we received a Statutory Notice of Deficiency (2007 to 2012 Notice) from the United States Internal Revenue Service (IRS) for fiscal 2007 through fiscal 2012.
Capital expenditures were $486.2 million and $370.1 million in fiscal 2023 and fiscal 2022, respectively. Capital expenditures were primarily for the expansion of production capacity and the addition of research and development equipment.
Capital expenditures were $285.1 million and $486.2 million in fiscal 2024 and fiscal 2023, respectively. Capital expenditures were primarily for the expansion of production capacity and the addition of research and development equipment.
Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia. 43 Table of Contents Gross Profit Our gross profit in fiscal 2023 was $5.70 billion, or 67.5% of net sales, compared to $4.45 billion, or 65.2% of net sales, in fiscal 2022.
Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia. 50 Table of Contents Gross Profit Our gross profit in fiscal 2024 was $5.00 billion, or 65.4% of net sales, compared to $5.70 billion, or 67.5% of net sales, in fiscal 2023.
There can be no assurance that any financing will be available on acceptable terms due to uncertainties resulting from rising interest rates, higher inflation, economic uncertainty, instability in the banking sector, the COVID-19 pandemic, or other factors, and any additional equity financing would result in incremental ownership dilution to our existing stockholders.
There can be no assurance that any financing will be available on acceptable terms due to uncertainties resulting from rising interest rates, higher inflation, economic uncertainty, instability in the banking sector, public health concerns, or other factors, and any additional equity financing or convertible debt financing would result in incremental ownership dilution to our existing stockholders.
Approximately 59% of our assembly requirements were performed in our internal assembly facilities during each of fiscal 2023 and fiscal 2022. During fiscal 2023, approximately 67% of our test requirements were performed in our internal facilities, compared to approximately 64% during fiscal 2022.
Approximately 59% of our assembly requirements were performed in our internal assembly facilities during each of fiscal 2024 and fiscal 2023. During fiscal 2024, approximately 71% of our test requirements were performed in our internal facilities, compared to approximately 67% during fiscal 2023.
We believe that our existing sources of liquidity combined with cash generated from operations and borrowings under our Revolving Credit Facility will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months.
We believe that our existing sources of liquidity combined with cash generated from operations, borrowings under our Revolving Credit Facility and our 2025 Term Loan Facility, and proceeds from issuance of our Commercial Paper will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months.
Our long-term liquidity requirements primarily arise from working capital requirements, interest and principal repayments related to our outstanding indebtedness, capital expenditures, cash dividends, share repurchases, and income tax payments. For additional information regarding our cash requirements see "Note 10. Commitments and Contingencies", "Note 9. Leases", "Note 5. Debt" and "Note 11. Income Taxes" to our consolidated financial statements.
Our long-term liquidity requirements primarily arise from working capital requirements, interest and principal repayments related to our outstanding indebtedness, capital expenditures, cash dividends, share repurchases, and income tax payments. For additional information regarding our cash requirements see "Note 10. Commitments and Contingencies", "Note 9. Leases", "Note 5. Debt" and "Note 55 Table of Contents 11.
Amortization of Acquired Intangible Assets Amortization of acquired intangible assets in fiscal 2023 was $669.9 million compared to $862.5 million in fiscal 2022. The primary reason for the decrease in acquired intangible asset amortization was due to the use of accelerated amortization methods for assets placed in service in previous fiscal years.
Amortization of Acquired Intangible Assets Amortization of acquired intangible assets in fiscal 2024 was $605.4 million compared to $669.9 million in fiscal 2023. The primary reason for the decrease in acquired intangible asset amortization was due to the use of accelerated amortization methods for assets placed in service in previous fiscal years.
Capital Returns In November 2021, our Board of Directors authorized the repurchase of up to $4.00 billion of our common stock in the open market or in privately negotiated transactions. In fiscal 2023, we repurchased approximately 12.9 million shares of our common stock for $945.8 million under this authorization.
Capital Returns In November 2021, our Board of Directors authorized the repurchase of up to $4.00 billion of our common stock in the open market or in privately negotiated transactions. In fiscal 2024, we repurchased approximately 11.9 million shares of our common stock for $982.1 million under this authorization.
We 48 Table of Contents also plan to pursue incentives under the CHIPS Act to increase our domestic manufacturing capacity; however, there can be no assurance that we will receive any such incentives or what the amount and timing of any incentive we receive will be.
We are also pursuing incentives under the CHIPS Act to increase our domestic manufacturing capacity; however, there can be no assurance that we will receive any such incentives or what the amount and timing of any incentive we receive will be.
Due to the inherent uncertainty in the estimation process and in consideration of the criteria of the accounting model, amounts recognized in the financial statements in periods subsequent to the initial recognition may significantly differ from the estimated exposure of the position under the accounting model.
Due to the inherent uncertainty in the estimation process, including the complexity involved to interpret and apply tax laws, and in consideration of the criteria of the accounting model, amounts recognized in the financial statements in periods subsequent to the initial recognition may significantly differ from the estimated exposure of the position under the accounting model.
Net sales by product line for fiscal 2023 and fiscal 2022 were as follows (dollars in millions): Fiscal Year Ended March 31, 2023 % 2022 % Mixed-signal Microcontrollers $ 4,755.7 56.3 $ 3,814.8 56.0 Analog 2,376.9 28.2 1,939.1 28.4 Other 1,306.1 15.5 1,067.0 15.6 Total net sales $ 8,438.7 100.0 $ 6,820.9 100.0 Mixed-signal Microcontrollers Our mixed-signal microcontroller product line represents the largest component of our total net sales.
Net sales by product line for fiscal 2024 and fiscal 2023 were as follows (dollars in millions): Fiscal Year Ended March 31, 2024 % 2023 % Mixed-signal Microcontrollers $ 4,272.4 56.0 $ 4,755.7 56.3 Analog 2,016.4 26.4 2,376.9 28.2 Other 1,345.6 17.6 1,306.1 15.5 Total net sales $ 7,634.4 100.0 $ 8,438.7 100.0 Mixed-signal Microcontrollers Our mixed-signal microcontroller product line represents the largest component of our total net sales.
These price increases also contributed to the increase in net sales during fiscal 2023 compared to fiscal 2022. Due to the complexity of the implementation of the price increases and the changes in product, geographic and customer mix, we are not able to quantify the impact of the price increases on our net sales.
These price increases contributed to the change in net sales during fiscal 2024. Due to the complexity of the implementation of the price increases and the changes in product, geographic and customer mix, we are not able to quantify the impact of the price increases on our net sales.
Consistent with the slowing macroeconomic environment in the March 2023 quarter, we have paused most of our factory expansion actions and reduced our planned capital investments for fiscal 2024. We currently intend to invest between $300 million and $400 million in equipment and facilities during the next 12 months.
Consistent with the slowing macroeconomic environment which began in the March 2023 quarter, we have paused most of our factory expansion actions and reduced our planned capital investments for fiscal 2025. We currently intend to invest about $175 million in equipment and facilities during the next 12 months.
A quarterly dividend of $0.383 per share was declared on May 4, 2023 and will be paid on June 5, 2023 to stockholders of record as of May 22, 2023. We expect the aggregate cash dividend for the June 2023 quarter to be approximately $209.0 million.
A quarterly dividend of $0.452 per share was declared on May 6, 2024 and will be paid on June 5, 2024 to stockholders of record as of May 22, 2024. We expect the aggregate cash dividend for the June 2024 quarter to be approximately $243.0 million.
R&D expenses fluctuate over time, primarily due to revenue and operating expense investment levels. 44 Table of Contents Selling, General and Administrative Selling, general and administrative expenses for fiscal 2023 were $797.7 million, or 9.5% of net sales, compared to $718.9 million, or 10.5% of net sales, for fiscal 2022.
R&D expenses fluctuate over time, primarily due to revenue and operating expense investment levels. 51 Table of Contents Selling, General and Administrative Selling, general and administrative expenses for fiscal 2024 were $734.2 million, or 9.6% of net sales, compared to $797.7 million, or 9.5% of net sales, for fiscal 2023.
Distribution Distributors accounted for approximately 47% and 48% of our net sales in fiscal 2023 and fiscal 2022, respectively. With the exception of Arrow Electronics, our largest distributor, which made up 11% of our net sales, no other distributor or direct customer accounted for more than 10% of our net sales in fiscal 2023.
With the exception of Arrow Electronics, our largest distributor, which made up 12% and 11% of our net sales in fiscal 2024 and in fiscal 2023, respectively, no other distributor or direct customer accounted for more than 10% of our net sales in fiscal 2024 or in fiscal 2023.
R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments. R&D expenses increased $129.2 million, or 13.1%, for fiscal 2023 compared to fiscal 2022.
R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments. R&D expenses decreased $20.9 million, or 1.9%, for fiscal 2024 compared to fiscal 2023.
Sales by Geography Sales by geography for fiscal 2023 and fiscal 2022 were as follows (dollars in millions): Fiscal Year Ended March 31, 2023 % 2022 % Americas $ 2,169.0 25.7 $ 1,659.3 24.3 Europe 1,774.8 21.0 1,391.0 20.4 Asia 4,494.9 53.3 3,770.6 55.3 Total net sales $ 8,438.7 100.0 $ 6,820.9 100.0 Americas sales include sales to customers in the U.S., Canada, Central America and South America.
Sales by Geography Sales by geography for fiscal 2024 and fiscal 2023 were as follows (dollars in millions): Fiscal Year Ended March 31, 2024 % 2023 % Americas $ 2,215.4 29.0 $ 2,169.0 25.7 Europe 1,851.7 24.3 1,774.8 21.0 Asia 3,567.3 46.7 4,494.9 53.3 Total net sales $ 7,634.4 100.0 $ 8,438.7 100.0 Americas sales include sales to customers in the U.S., Canada, Central America and South America.
Mixed-signal microcontrollers and associated application development systems accounted for approximately 56.3% and 56.0% of our net sales in fiscal 2023 and fiscal 2022, respectively. Net sales of our mixed-signal microcontroller products increased approximately 24.7% in fiscal 2023 compared to fiscal 2022.
Mixed-signal microcontrollers and associated application development systems accounted for approximately 56.0% and 56.3% of our net sales in fiscal 2024 and fiscal 2023, respectively. Net sales of our mixed-signal microcontroller products decreased approximately 10.2% in fiscal 2024 compared to fiscal 2023.
We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods and expect to apply for other incentives provided by the legislation; however, there can be no assurance that we will receive any such other incentives, what the amount and timing of any incentive we receive will be, as to which other companies will receive incentives and whether the legislation will have a positive or negative impact on our competitive position.
We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods and expect to apply for other incentives provided by the legislation; however, there can be no assurance that we will receive any such other incentives, what the amount and timing of any incentive we receive will be, as to which other companies will receive incentives and whether the legislation will have a positive or negative impact on our competitive position. 54 Table of Contents Financing Activities Net cash used in financing activities was $2.41 billion for fiscal 2024 compared to $3.10 billion for fiscal 2023.
Restructuring expenses incurred during fiscal 2023 and fiscal 2022 include $16.8 million and $21.1 million, respectively, related to the restructuring of our wafer fabrication operations. Other Income (Expense) Interest income in fiscal 2023 was $2.1 million compared to $0.5 million in fiscal 2022. Interest expense in fiscal 2023 was $203.9 million compared to $257.0 million in fiscal 2022.
Restructuring expenses incurred during fiscal 2024 and fiscal 2023 include $6.2 million and $16.8 million, respectively, related to the restructuring of our wafer fabrication operations. Other Income (Expense) Interest income in fiscal 2024 was $7.6 million compared to $2.1 million in fiscal 2023. Interest expense in fiscal 2024 was $198.3 million compared to $203.9 million in fiscal 2023.
The Inflation Reduction Act includes a new Corporate AMT of 15.0% on the AFSI of corporations with average AFSI exceeding $1.00 billion over a three-year period, as well as a 1% excise tax on the net fair market value of stock repurchases made after December 31, 2022. The Corporate AMT is effective for us beginning in fiscal 2024.
The Inflation Reduction Act includes a new corporate alternative minimum tax (Corporate AMT) of 15.0% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.00 billion over a three-year period, as well as a 1% excise tax on the net fair market value of stock repurchases made after December 31, 2022.
Companies of our size and complexity are regularly audited by the taxing authorities in the jurisdictions in which they conduct significant operations. We are currently being audited by the tax authorities in the U.S. and in various foreign jurisdictions. At this time, we do not know what the outcome of these audits will be.
We are currently being audited by the tax authorities in the U.S. and in various foreign jurisdictions. At this time, we do not know what the outcome of these audits will be.
Our analog product line accounted for approximately 28.2% and 28.4% of our net sales in fiscal 2023 and fiscal 2022, respectively. Net sales from our analog product line increased approximately 22.6% in fiscal 2023 compared to fiscal 2022.
Our analog product line accounted for approximately 26.4% and 28.2% of our net sales in fiscal 2024 and fiscal 2023, respectively. Net sales from our analog product line decreased approximately 15.2% in fiscal 2024 compared to fiscal 2023.
Cash dividends paid per share were $1.263 and $0.910 during fiscal 2023 and fiscal 2022, respectively. Total dividend payments amounted to $695.3 million and $503.8 million during fiscal 2023 and fiscal 2022, respectively.
Cash dividends paid per share were $1.682 and $1.263 during fiscal 2024 and fiscal 2023, respectively. Total dividend payments amounted to $911.5 million and $695.3 million during fiscal 2024 and fiscal 2023, respectively.
We may from time to time seek to refinance certain of our outstanding notes or Convertible Debt through issuances of new notes or convertible debt, tender offers, exchange transactions or open market repurchases.
We plan to refinance certain of our existing notes as they mature and we may from time to time seek to refinance certain of our other outstanding debt or Convertible Debt through issuances of new notes or convertible debt, term loans, Commercial Paper, tender offers, exchange transactions or open market repurchases.
Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 17 days and 40 days. Inventory holding patterns at our distributors may have a material impact on our net sales.
Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 17 days and 41 days. Inventory holding patterns at our distributors may have a material impact on our net sales. Due to the relatively high level of inventory days, we have accommodated efforts by our distributors to manage their inventory levels.
Our inventory levels are impacted by the timing of receipt of raw materials, foundry wafers, and strategic last time buy materials and completion of finished goods. We expect our days of inventory levels at June 30, 2023 to be 159 to 164 days. We operate assembly and test facilities in Thailand, the Philippines, and other locations throughout the world.
Our inventory amounts are impacted by timing of shipment activity in the quarter, the timing of receipt of raw materials, foundry wafers, and strategic last time buy materials and completion of finished goods. We operate assembly and test facilities in Thailand, the Philippines, and other locations throughout the world.
Net cash provided by operating activities was $2.84 billion in fiscal 2022, primarily due to net income of $1.29 billion, adjusted for non-cash and non-operating charges of $1.52 billion and net cash inflows of $34.2 million from changes in our operating assets and liabilities.
Operating Activities Net cash provided by operating activities was $2.89 billion in fiscal 2024 primarily due to net income of $1.91 billion, adjusted for non-cash and non-operating charges of $1.06 billion and net cash outflows of $76.7 million from changes in our operating assets and liabilities.
Revenue Recognition We generate revenue primarily from sales of our semiconductor products to distributors and non-distributor customers (direct customers) and, to a lesser extent, from royalties paid by licensees of our intellectual property.
Revenue Recognition We generate revenue primarily from sales of our semiconductor products to distributors and non-distributor customers (direct customers).
Depending on the outcome of the IRB audit, we may need to take the matter to court in Malaysia, and if we do, we may be required to pay the assessment and then request a refund from the court upon a series of favorable rulings.
Depending on the outcome of the IRB audit, we may need to adjudicate this matter in Malaysia, and if we do, we may be required to pay the assessment and then, upon a series of favorable court rulings, request a refund of the amount. The timing of adjudicating this matter is uncertain but could commence in the next 12 months.
Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives.
We believe these investments are significant factors in maintaining our competitive position. R&D costs are expensed as incurred. Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives.
In August 2022, the U.S. government enacted the CHIPS Act which is to provide billions of dollars of cash incentives and a new investment tax credit to increase domestic manufacturing capacity in our industry.
While select investments are still being made, in the fourth quarter of fiscal 2024, we paused most of our expansion activity. In August 2022, the U.S. government enacted the CHIPS Act which is to provide billions of dollars of cash incentives and a new investment tax credit to increase domestic manufacturing capacity in our industry.
Financial Statements and Supplementary Data." For an overview of our business and recent trends, refer to "Part I Item 1.
Financial Statements and Supplementary Data." For an overview of our business and recent trends, refer to our "Business and Macroeconomic Environment" discussed below.
Sales to our distributors are governed by a distributor agreement, a purchase order, and an order acknowledgment.
Sales of semiconductor products to our customers are governed by a purchase order, an order acknowledgment, and a distributor agreement in the case of our distributor customers.
Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable.
If actual market conditions are less favorable than those we projected, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable.
Loss on settlement of debt in fiscal 2023 was $8.3 million compared to $113.4 million in fiscal 2022. In fiscal 2023, the losses related to the settlement of a portion of our outstanding 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, and our 2017 Junior Convertible Debt.
In fiscal 2024 and in fiscal 2023, the losses related to the settlement of a portion of our outstanding Convertible Debt. Other loss, net, in fiscal 2024 was $2.2 million compared to other income, net of $3.8 million in fiscal 2023.
In fiscal 2022, we repurchased approximately 5.6 million shares of our common stock for $425.6 million under this authorization. As of March 31, 2023, approximately $2.63 billion remained available for repurchases under the program. As of March 31, 2023, we held approximately 32.3 million shares as treasury shares.
In fiscal 2023, we repurchased approximately 12.9 million shares of our common stock for $945.8 million under this authorization. As of March 31, 2024, approximately $1.65 billion remained available for repurchases under the program. As of March 31, 2024, we held approximately 41.1 million shares as treasury shares.
We intend to vigorously defend our positions and we are confident in our ability to prevail on the merits. We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves.
We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves.
Selling, general and administrative expenses increased $78.8 million, or 11.0%, for fiscal 2023 compared to fiscal 2022. The primary reasons for the increase in selling, general and administrative expenses were increases in headcount and employee compensation. Selling, general and administrative expenses fluctuate over time, primarily due to revenue and operating expense investment levels.
Selling, general and administrative expenses decreased $63.5 million, or 8.0%, for fiscal 2024 compared to fiscal 2023. The primary reason for the decrease in selling, general and administrative expenses was lower employee compensation costs. Selling, general and administrative expenses fluctuate over time, primarily due to revenue and operating expense investment levels.
Significant transactions affecting our net financing cash flows included: • in fiscal 2023, $1.47 billion of cash used to pay down certain principal of our debt, including our 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, our 2017 Junior Convertible Debt, and our Revolving Credit Facility, and 47 Table of Contents • in fiscal 2022, $1.38 billion of cash used to pay down certain principal of our debt, including the cash portion of the settlement of our 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt and our 2017 Junior Convertible Debt, our Revolving Credit Facility and our 3.922% 2021 Notes, partially funded by the issuance of our senior notes, and • in fiscal 2023 and fiscal 2022, we paid cash dividends to our stockholders of $695.3 million and $503.8 million, respectively, and • in fiscal 2023 and fiscal 2022, we repurchased shares of our common stock for $945.8 million and $425.6 million, respectively.
Significant transactions affecting our net financing cash flows included: • in fiscal 2024, $537.7 million of cash used to pay down certain principal of our debt, including our 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, our 2017 Junior Convertible Debt, our 4.333% 2023 Notes, our 2.670% 2023 Notes, our 0.972% 2024 Notes, and our Revolving Credit Facility, partially funded by proceeds from borrowings on our 2025 Term Loan Facility, proceeds from the issuance of our Commercial Paper, and proceeds from the issuance of our 5.050% 2029 Notes, and • in fiscal 2023, $1.47 billion of cash used to pay down certain principal of our debt, including our 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, our 2017 Junior Convertible Debt, and our Revolving Credit Facility, and • in fiscal 2024 and fiscal 2023, we paid cash dividends to our stockholders of $911.5 million and $695.3 million, respectively, and • in fiscal 2024 and fiscal 2023, we repurchased shares of our common stock for $982.1 million and $945.8 million, respectively.
Generally, we do not have long-term agreements with our distributors and we, or our distributors, may terminate our relationships with each other with little or no advance notice, with the exception of orders placed under our Preferred Supply Program or otherwise designated as non-cancellable.
Generally, we do not have long-term agreements with our distributors and we, or our distributors, may terminate our relationships with each other with little or no advance notice.
We write down our inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those we projected, additional inventory write-downs may be required.
We record a charge to cost of sales to write down our inventory for estimated excess, obsolete or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.
Revenue from these services and products accounted for approximately 15.5% and 15.6% of our net sales in fiscal 2023 and fiscal 2022, respectively. Net sales related to these products and services increased approximately 22.4% in fiscal 2023 compared to fiscal 2022.
Revenue from these services and products accounted for approximately 17.6% and 15.5% of our net sales in fiscal 2024 and fiscal 2023, respectively. Net sales related to these products and services increased approximately 3.0% in fiscal 2024 compared to fiscal 2023. The increase in net sales was primarily due to strength in our FPGA product line.
The primary reason for the increase in gross profit in fiscal 2023 compared to fiscal 2022 was the net impact of product mix and average gross profit per unit of $1.31 billion in fiscal 2023.
The primary reason for the decrease in gross profit of $545.3 million in fiscal 2024 compared to fiscal 2023 was an unfavorable net impact of sales volume, product mix and average gross profit per unit in fiscal 2024.
In May 2023, we received a proposed income adjustment from the Malaysian Inland Revenue Board (IRB) for fiscal 2020, which if upheld by the highest court that has jurisdiction over this matter in Malaysia, could result in income taxes up to $420.0 million, exclusive of interest and penalties. The disputed amounts largely relate to the characterization of certain assets.
If the adjustment is upheld by the highest court that has jurisdiction over this matter in Malaysia, it could result in income taxes and penalties up to $410.0 million. The disputed amounts largely relate to the characterization of certain assets.
Our effective tax rate in fiscal 2022 includes a $49.5 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 3.3%; a $17.6 million tax benefit for share-based compensation deductions, which reduced our effective tax rate by 1.2%; a $47.1 million tax benefit related to changes in various tax reserves, which reduced our effective tax rate by 3.2%; a $139.9 million tax expense for the effects of foreign operations, which increased our effective tax rate by 9.4%; and a $25.5 million tax benefit related to the settlement of convertible debt, which reduced our effective tax rate by 1.7%.
Our effective tax rate in fiscal 2024 includes a $69.8 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 3.0%; and a $62.9 million tax expense for the effects of foreign operations, which increased our effective tax rate by 2.7%.
During fiscal 2023, approximately 63% of our net sales came from products that were produced at outside wafer foundries, compared to approximately 60% during fiscal 2022.
During fiscal 2024, approximately 64% of our net sales came from products that were produced at outside wafer foundries, compared to approximately 63% during fiscal 2023. This percentage may vary based on supply and demand conditions in the market.
Sales to foreign customers accounted for approximately 78% of our total net sales in each of fiscal 2023 and fiscal 2022.
Distribution Distributors accounted for approximately 47% of our net sales in each of fiscal 2024 and fiscal 2023.
In fiscal 2022, no distributor or direct customer accounted for more than 10% of our net sales. Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base.
Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base and that customers recognize Microchip for its products and brand name and use distributors as an effective supply channel.
Substantially all of the revenue generated from contracts with direct customers is recognized at, or near to, the time risk and title of the inventory transfers to the customer. 39 Table of Contents We entered into LTSAs with certain of our customers that purchase through distributors or directly from us.
Substantially all of the revenue generated from contracts with customers is recognized at, or near to, the time risk and title of the inventory transfers to the customer, which is generally upon shipment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe intend to finance the repayment of a portion of our fixed rate debt maturing within the next 12 months using available borrowings under our Revolving Credit Facility, at which point, changes in interest rates will have a more significant impact on our interest expense. For additional information, refer to "Note 5.
Biggest changeWe intend to finance the repayment of a portion of our fixed rate debt maturing within the next 12 months using available borrowings under our Revolving Credit Facility, new fixed rate notes, term loans, convertible debt, Commercial Paper or other instruments at which point, changes in interest rates will have a more significant impact on our interest expense if we refinance such fixed rate debt with variable rate debt.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of March 31, 2023, our current and long-term debt totaled $6.47 billion. We have no interest rate exposure to rate changes on our fixed rate debt, which totaled $6.37 billion as of March 31, 2023.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of March 31, 2024, our current and long-term debt totaled $6.02 billion. We have no interest rate exposure to rate changes on our fixed rate debt, which totaled $5.27 billion as of March 31, 2024.
Debt" for a summary of our debt obligations by maturity date. Inflation Risk Inflation has not had a material adverse impact on our operating results in recent periods.
For additional information, refer to "Note 5. Debt" for a summary of our debt obligations by maturity date. Inflation Risk Inflation has not had a material adverse impact on our operating results in recent periods.
We have interest rate exposure with respect to the $100.0 million of our variable interest rate debt outstanding under our Revolving Credit Facility as of March 31, 2023. A 50-basis point increase in interest rates would increase our expected annual interest expense for the next 12 months by approximately $0.5 million.
We have interest rate exposure with respect to the $750.0 million of our variable interest rate debt outstanding under our 2025 Term Loan Facility, as of March 31, 2024. A 50-basis point increase in interest rates would increase our expected annual interest expense for the next 12 months by approximately $3.8 million.

Other MCHPP 10-K year-over-year comparisons