Despite a seasonal slowdown in the overall semiconductor industry, Microchip Technology Inc. last week smashed Wall Street's estimates for its fourth fiscal-2007 quarter and broke the $1 billion plateau in annual sales for the fiscal year.
The supplier of analog chips and microcontrollers is also off to a strong start in calendar 2007 but faces a number of pressing questions: Can the company sustain its sizable growth rates, maintain its leadership position in 8-bit microcontrollers and grow its fledgling 16-bit MCU business?
Last year, Microchip secured the No. 1 spot in worldwide 8-bit MCU revenue, according to Gartner Inc. (Stamford, Conn.). It has been the segment's unit shipments leader since 2002 but faces stiff competition from Atmel, Freescale, NEC and Renesas.
But average selling prices for microcontrollers declined across all categories in 2006 and are expected to continue doing so this year, according to Semico Research Corp. Nevertheless, the MCU market grew 3 percent, to reach $12.4 billion, according to Semico.
"Tremendous unit growth for 16-bit MCUs was largely responsible for the overall growth in 2006," said Tony Massimini, chief of technology and micrologic at Semico (Phoenix). "The 16-bit segment will continue to show strong growth, surpassing 8-bit unit sales in 2011."
Steve Sanghi, president and CEO of Microchip (Chandler, Ariz.), is upbeat about the company's prospects despite the mixed forecast. "We expect another record year," he said in a recent interview.
For its fiscal year ended March 31, Microchip reported sales of $1.039 billion, up 12 percent from the like period a year ago. Net income was $357 million, an increase of 47 percent from $242.4 million in the prior year.
Net sales for the fourth quarter of fiscal 2007 were $258.2 million, up 2.9 percent from $251 million in the previous quarter and up 4.5 percent from $247.2 million in the year-ago quarter. Net income was a record $127.7 million, or 57 cents per share, up 75.3 percent from net income of $72.8 million, or 33 cents a share, in the preceding quarter. That bested the estimates of Wall Street, which had expected the company to earn 33 cents a share on sales of $251.6 million in the quarter. "The results for the March quarter exceeded our guidance," Sanghi said.
Going forward, net sales for the quarter ending June 30 are expected to rise by about 5 percent from the March quarter. "As we are moving into a stronger period for Microchip in the June and September quarters, we are taking appropriate actions to ramp production levels in both our wafer fabrication and assembly and test facilities," Sanghi said.