‘Insatiable’ Chip Demand Persists Despite Capacity Growth: Microchip CEO

Business conditions “continue to be strong” as viewed through Microchip Technology’s “internal indicators,” said CEO Ganesh Moorthy on an earnings call Tuesday for fiscal Q1 ended June 30. Microchip’s revenue increased 25.1% year over year to $1.96 billion, marking the seventh straight quarter of record revenue growth, said Moorthy. Microchip expects to remain “supply-constrained” through the rest of 2022 and into 2023, he said. Demand in the quarter “continued to be insatiable despite the capacity increases we have implemented so far,” he said. Microchip’s “unsupported backlog,” defined as backlog that customers wanted shipped to them in the June quarter but couldn’t be delivered, climbed again, he said. “We exited the June quarter with our highest unsupported backlog ever, with unsupported backlog ... well above the actual revenue we achieve,” said the CEO. “We are cognizant of the weakening macro conditions resulting from rising inflation and the actions being taken by central banks in response.” Microchip is aware that there has been some “inventory build” at its major customers, “as can be seen in their balance sheet,” said Moorthy. Some of the build is likely due to “strategic” buffering, as a hedge against running out of supply, he said. “At the same time, the level of expedites and customer escalations we’re experiencing has not abated, indicating that demand and supply remain imbalanced from many customer situations.” Microchip is working “to best utilize the available supply,” he said. Its strategy is to “thoughtfully reallocate” future supply to “customers in distress,” he said.