Microchip Technology (MCHP) Risk Factor Changes

We use forward currency exchange contracts in an attempt to reduce the adverse earnings impact from the effect of exchange rate fluctuations on our non-U.S.

agencies.

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…

As of March 31, 2026, the principal amount of our outstanding indebtedness was $5.54 billion.

The amount, timing, and execution of repurchases of shares of our common stock may fluctuate based on the share price of our common stock, general business and market conditions, tax regulations impacting share repurc…

rates, persistent inflation, instability in the banking sector, tariffs, public health concerns or other factors;

•some customers may choose not to do business with us, or we may choose to discontinue or restrict business with certain customers due to our policies;

•reputational harm, including damage to our relationship with customers, suppliers, investors, governments, or other stakeholders;

social responsibility.

In addition to concerns over "conflict" minerals mined from the Democratic Republic of Congo, our customers may require that other minerals and substances used within our supply chain, manufacturing processes, or cont…

Customer demands and regulations related to conflict-free minerals and other substances incorporated into or used to manufacture our products may force us to incur additional expenses.

Our failure to comply, or the failure of entities that we have acquired over time to have complied, with regulations could result in significant fines, litigation or administrative actions by regulators or others, lia…

Our income tax expense is computed based on tax rates at the time of the respective financial period.

Exposure to greater than anticipated income tax liabilities, changes in tax rates, laws and regulations, changes in the interpretation of tax laws and regulations, or unfavorable assessments from tax audits and examin…

In May 2023, we received a proposed income adjustment from the Malaysian Inland Revenue Board (IRB) for fiscal 2020.

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.

In November 2023, the U.S.

A significant portion of our sales involve export and import activities.

Our ability to obtain patents, licenses and other intellectual property rights covering our products and manufacturing processes is important for our success.

Furthermore, the GDPR and the U.K.

We have relied mainly on the European Commission’s Standard Contractual Clauses (SCCs), for transfers of personal information from the EEA to the U.S.

We are subject to numerous laws and regulations in the U.S.

We limit our employees’ use of AI tools, such as ChatGPT, in accordance with our internal guidelines and procedures.

Our products, or IP that we purchase or license from third parties for use in our products, as well as industry-standard specifications that we implement in our products, may be subject to security vulnerabilities.

In addition, employees and former employees, in particular former employees who become employees of our competitors, customers, licensees, or other third parties, including state actors, have in the past and may in th…

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 res…

We rely on the uninterrupted operation of complex IT systems and networks to operate our business.

premium costs.

In the fourth quarter of fiscal 2025, we implemented a global reduction of our work force, which we completed in the first quarter of fiscal 2026.

Our business relies on our ability to attract and retain qualified employees across various functions, including management, technical, marketing, sales, research and development, manufacturing, and operations.

Ensuring that we have adequate internal financial and accounting controls and procedures so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re…

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 have acquired, and expect in the future to acquire, additional businesses that we believe will complement or augment our existing businesses.

From time to time we receive grants from governments, agencies and research organizations, or enter into tax arrangements.

The U.S.

A significant portion of our sales are from or are derived from government agencies or customers who sell to U.S.

Because our licensed technologies are complex, there may be delays from time to time in developing and enhancing such technologies.

Also, Thailand has experienced periods of severe flooding in recent years.

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 h…

Future adverse conditions in the U.S.

The semiconductor industry is characterized by seasonality and wide fluctuations of supply and demand.

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 othe…

Because our products are complex, we have experienced delays from time to time in completing new product development.

Our future operating results depend on our ability to develop and timely introduce new products that compete effectively on the basis of price and performance and which address customer requirements.

We have experienced, and may experience in the future, pricing declines in certain of our proprietary product lines, primarily due to competitive conditions.

Starting in the first quarter of calendar 2022, we began entering into LTSAs, which offer our customers the ability to receive prioritized capacity.

Our net sales in any given quarter depend upon a combination of shipments from backlog, and orders that are both received and shipped in the same quarter, which we call turns orders.

equipment, and raw materials including rare earth minerals, may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, or…

If any of these risks occur or are worse than we anticipate, our sales could decrease and our operating results could suffer, we could face an increase in the cost of components, production delays, business interrupti…

We purchase a substantial portion of our raw materials and equipment from foreign suppliers.

Further, increasing investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities are intended to advance China's stated national policy objectives.

Sales to foreign customers account for a substantial portion of our net sales.

We regularly review the financial viability and performance of our licensees, customers, distributors, resellers and suppliers.

•unauthorized counterfeiting of our products resulting in pricing pressure and loss of sales;

•our ability to increase or decrease our factory capacity as needed to respond to changes in customer demand;

•trade restrictions and increase in tariffs, including those on business in China, or focused on specific companies or types of products;

•risks related to compliance with laws and regulations regarding privacy, data protection, AI, cybersecurity (including U.S.

•risks related to internal use of artificial intelligence (AI);

impact that any weakness or strength in the U.S.

As of March 31, 2025, the principal amount of our outstanding indebtedness was $5.66 billion.

In March 2022, the SEC proposed a rule entitled Enhancement and Standardization of Climate-Related Disclosures for Investors which it then adopted March 6, 2024.

New technology trends, such as AI and cyber resiliency and security requirements, require us and our customers to keep pace with evolving regulations and industry standards.

the imposition of sanctions could have a material adverse effect on our business, results of operations or financial condition.

The ultimate outcome of disputes of this nature is uncertain, and if the IRS, IRB, and GTA were to prevail on their assertions, the assessed tax, penalties, and deficiency interest could have a material adverse impact…

In January 2025, we received several assessments from the German Tax Authorities (GTA) regarding the German extraterritorial taxation of royalty payments between nonresidents (referred to as offshore receipts in respe…

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.

The U.S.

Governments and courts are considering new issues in intellectual property law with respect to works created by AI technology, which could result in changing and inconsistent intellectual property rights in developmen…

Our ability to obtain patents, licenses and other intellectual property rights covering our products and manufacturing processes is important for our success.

the EEA and other third countries, covered by a European Commission 'adequacy decision' through the continued use of SCCs and binding corporate rules, these laws and regulations are subject to change, and any such cha…

Concerns relating to the responsible use of technologies, including new and evolving technologies such as AI, in our internal operations, products and services may result in reputational or financial harm and liabilit…

maintaining, training, monitoring and enforcement of appropriate guidelines and procedures governing the use of AI tools, and the results of any such use, by us or our partners.

In addition, employees and former employees, in particular former employees who become employees of our competitors, customers, licensees, or other third parties, including state actors, have in the past and may in th…

Due to the types of products we sell and the significant amount of sales we make to government agencies or customers whose principal sales are to U.S.

business or competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages, and may result in lower revenue, lower margins, regulatory investigations, inqu…

We must attract and retain qualified personnel to be successful, and competition for qualified personnel and available labor may intensify for a variety of reasons, including the increase in work-from-home arrangement…

When we acquire a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets.

certain limitations on our business, which would adversely affect our operating results and financial position.

Delays, reductions in or terminations of government contracts or subcontracts, including those caused by any past or future shutdown of the U.S.

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.

Additionally, operations at our customers and licensees may be disrupted for a number of reasons.

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 h…

•timely completion and introduction of new product designs;

Consistent with the slowing macroeconomic environment, and the growth in our inventory, we have paused our factory expansion actions at Fab 4 and Fab 5 and reduced our planned capital investments through fiscal 2026.

•product introductions by our competitors;

•the rate at which the markets that we serve redesign and change their own products;

In August 2022, the U.S.

We rely on outside wafer foundries for a significant portion of our wafer fabrication needs.

Additionally, certain materials are primarily available in a limited number of countries, including rare earth elements, minerals, and metals.

and distributors located in Russia and Belarus.

We do not, nor have we historically, purchased significant amounts of equipment from Russia, Belarus, or Ukraine.

Our customers may also be adversely affected by the tariffs and other issues described above.

Additional tariffs imposed on components, raw materials, or equipment may increase our costs and have an adverse impact on our operating results in future periods.

Our manufacturing operations require raw and processed materials and equipment that must meet exacting standards.

We may lose sales if suppliers of raw materials, components or equipment fail to meet our or our customers' needs, increase prices, are impacted by increases in tariffs, or such raw materials, components or equipment…

We regularly review the financial viability and performance of our licensees, customers, distributors and suppliers.

•our ability to successfully transition to more advanced process technologies to reduce manufacturing costs;

•ability to introduce new products on a timely basis;

•impact of price increases, increased tariffs, raw material availability or other factors affecting our suppliers;

operational costs in our European and Thailand subsidiaries are adversely affected.