Microchip Technology Inc. (NASDAQ:MCHP) Q4 2018 Earnings Conference Call - Final Transcript

May 08, 2018 • 08:30 am ET

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Microchip Technology Inc. (NASDAQ:MCHP) Q4 2018 Earnings Conference Call - Final Transcript

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Q & A
Operator
operator

(Operator Instructions) William Stein, SunTrust.

Analyst
William Stein

You highlighted earlier in your prepared remarks that you've added capacity. I think it's related to the Atmel products to reduce the lead times there. I'm wondering if you can talk about your anticipation for lead times as we go forward. Do you expect that to get in the normal range in the current quarter? And I'd also like to know, as it relates to your raw materials and lead time from foundries, whether you see that as already within the normal range or if it's extended and if there's anything remarkable about that. I'd love to hear details.

Executive
Steve Sanghi

The normal lead times are four to eight weeks usually on 85%, 90% of the products. That's what we call a normal lead time. There'll always be some strange products or specialized projects that need extra work or strange circumstances where the lead time would be longer. So for a majority of the products, four to eight weeks lead time is normal. We are currently at four to 10, so we got a little more progress to make.

And as we have been saying for about one year or longer, it is that we expect the lead times to essentially become normal by the end of June, and we are really on schedule for that. The other part of your question was lead times at suppliers and foundries and all that. Scattered issues here and there. But in general, the foundry lead times are normal. We're able to get the capacity we need from our foundries. We're able to get the assembly test equipment that we are requiring.

Again, the lead time could be two to four weeks longer to get some of the test equipment, but it also largely depends on what you're buying and what the mix of equipment is, what you're trying to buy and what the particular set-up you need. But lead times are really not excessive either on foundry wafers or on assembly test equipment.

Operator
operator

Craig Hettenbach, Morgan Stanley.

Analyst
Craig Hettenbach

Steve, any update on industry pricing, be it from some of the consolidation, some of the favorable impact there, also relative to just the tight conditions today and how that might be influencing pricing?

Executive
Steve Sanghi

Type of what?

Analyst
Craig Hettenbach

The pricing environment today. Just if you can talk about just how the consolidation of the industry is influencing that as well as just the tight industry conditions.

Executive
Steve Sanghi

Okay, tight industry condition. So the pricing is very normal. We have been saying for quite a while that the historic industry practice, where the prices went down every year, we are really no longer following that trend. We have seen some others follow it. We are winning a lot more often at customers not giving them year-to-year price reduction. Five years ago, we'll succeed some of the times.

Today, we succeed most of the time. So industry pricing for us really looks very normal. We did some price increases in the last two years. I think that's