US chipmaker Microchip lifts Q3 revenue forecast on strong bookings

Microchip Technology raised its Q3 revenue forecast to US$1.2 billion, up from its previous estimate of US$1.1 billion to US$1.2 billion.

The chipmaker said the rise was driven by stronger bookings and a recovery in demand as customers work through excess inventory built up during the pandemic.

Shares of Microchip rose 5.6% in after-hours trading after the announcement.

CEO Steve Sanghi said bookings activity remained strong in the December quarter, and the company started the March quarter with a higher backlog than the previous quarter.

Microchip also said it has cut internal inventory levels and plans to ramp up factory output in the March quarter.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

The $1.2B guide signals an early recovery while underutilization weighs on margins

Microchip lifted its Q3 revenue outlook to $1.19 billion 1, up about 4.4% from Q2’s $1.14 billion 2. That pace signals a slow recovery that management calls “gradual” 2.
Strong December bookings (new orders) and a better backlog (orders waiting to be fulfilled) 1 have Microchip lifting factory output in the March quarter to cut underutilization charges 1, so operating margins may stay soft as revenue improves.
Inventory days outstanding, a measure of sales held in stock, is 198 days 2, down from 213 yet still 27 above the five-year average 2. Destocking is not finished. Write-offs, accounting charges for obsolete or excess items, should ease as internal inventory was cut back 1.

MCU buyers can track lead times before supply tightens

Microchip plans to raise factory production in the March quarter 1 to work down backlog. Lead times, the time from order to delivery, in microcontroller units (MCUs) and analog chips often tighten 1 to 2 quarters later as channel inventory thins.
Procurement teams overseeing microcontroller unit (MCU) plus analog sourcing should track lead times and distributor stock now, as Microchip’s planned output increase hints at faster demand not yet in spot pricing, current market prices for immediate delivery.
Investors in semiconductor equipment or materials can watch the company’s utilization ramp (higher factory usage rates) 1 for an early demand read before wider utilization recovery across semiconductor fabrication plants (fabs) in the analog and MCU sector.