Microchip
Annual Report 2021

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A (RULE 14a-101) SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant Filed by a Party other than the Registrant ý o Check the appropriate box: o Preliminary proxy statement. o Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)). ý Definitive Proxy Statement. o Definitive Additional Materials. o Soliciting Material Pursuant to § 240.14a-12. Microchip Technology Incorporated (Name of Registrant as Specified In Its Charter) ____________________________________________________________________ (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (check the appropriate box): ý No fee required. ¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) (2) (3) (4) (5) Title of each class of securities to which transaction applies: Aggregate number of securities to which transaction applies: Per unit price or other underlying value of transaction computed to Exchange Act Rule 0-11 (set forth the amount on which the fee is calculated and state how it was determined): Proposed maximum aggregate value of transaction: Total fee paid: ¨ Fee paid previously with preliminary materials. ¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: Table of Contents MICROCHIP TECHNOLOGY INCORPORATED 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS August 24, 2021 TIME: PLACE: 9:00 a.m. Mountain Standard Time Microchip Technology Incorporated 2355 West Chandler Boulevard Chandler, Arizona 85224-6199 ITEMS OF BUSINESS: (1) The election of each of Matthew W. Chapman, Esther L. Johnson, Karlton D. Johnson, Wade F. Meyercord, Ganesh Moorthy, Karen M. Rapp and Steve Sanghi to our Board of Directors to serve for the ensuing year and until their successors are elected and qualified. (2) To approve an amendment and restatement of our Certificate of Incorporation to increase the number of authorized shares of common stock for the purpose of effecting a two-for- one forward stock split. (3) To approve an amendment and restatement of our 2004 Equity Incentive Plan to extend the term of the plan by ten years, to August 24, 2031. (4) To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2022. (5) To hold an advisory (non-binding) vote regarding the compensation of our named executives. (6) To transact such other business as may properly come before the annual meeting or any adjournment(s) thereof. The Microchip Board of Directors recommends that you vote FOR each of the foregoing items. RECORD DATE: Holders of Microchip common stock of record at the close of business on June 28, 2021 are entitled to vote at the annual meeting. ANNUAL REPORT: Microchip's fiscal 2021 Annual Report, which is not a part of the proxy soliciting material, is enclosed. PROXY: It is important that your shares be represented and voted at the annual meeting. Whether or not you expect to attend the annual meeting in person, please vote your shares as promptly as possible using the enclosed proxy card, or via the internet or telephone as instructed in the enclosed materials, in order to ensure your representation at the annual meeting. You can revoke your proxy at any time prior to its exercise at the annual meeting by following the instructions in the accompanying proxy statement. /s/ Kim van Herk Kim van Herk Secretary Table of Contents Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on August 24, 2021 The Microchip Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended March 31, 2021 are available at www.microchip.com/annual_reports. Chandler, Arizona July 19, 2021 Table of Contents Letter from Your Executive Chair and Your CEO and President This past fiscal year has been a year of remarkable performance and resilience for Microchip. With the rest of the global community, we faced the COVID-19 pandemic and its health, social and economic challenges. Our business focus and Guiding Values remained constant, helping us navigate these challenges. Key among the principles within our Guiding Values is our commitment to people who are our stakeholders - our employees, customers, sales channel partners, supplier partners, investors, and the communities in which we live and work. It is this commitment to people that drives us to connect with them, and work together to empower innovation which enhances the human experience, and in the process meet our corporate goals and stakeholder obligations. Microchip’s Strong Performance In Light of COVID-19 In fiscal 2021, the COVID-19 pandemic adversely impacted people and businesses. There were negative impacts on production, that created supply chain and market disruption, and a global disruption of economic activity. In response to the early indications of the COVID-19 pandemic, we took proactive measures to safeguard the health of our employees. We quickly shifted to a work from home model wherever possible, pivoted to virtual engagement with all of our stakeholders, curtailed business travel, and implemented an enhanced cleaning schedule and other precautions for our facilities. Due to uncertainties related to the impact of the COVID-19 pandemic, in April 2020, we implemented a salary reduction program for our management and many other employees, as well as reducing cash bonuses and other discretionary expenses. The salary reduction program was comprised of a 20% salary reduction for our executive management, and a 10% reduction for U.S. non-manufacturing employees. Our Board also took a 20% cut in their cash compensation. In our U.S. factories some employees took salary reductions and others had rotating time off depending on the factory loading levels. Cost reduction actions in our non-U.S. locations depended on local law requirements in certain jurisdictions and employee consent for salary cuts in other jurisdictions. We believe it is a testament to our strong culture of shared sacrifices and shared rewards that about 98% of our worldwide team voluntarily participated in these expense reduction programs. Incredibly, about 5% of our worldwide team volunteered to take temporary salary reductions above the levels asked of them as a show of solidarity with Microchip at a time of extreme business uncertainty! As the uncertainties related to the COVID-19 virus abated and business conditions improved, board and management compensation reductions were reinstated later in the year. In the second half of fiscal 2021, business conditions were very strong as businesses and individuals adapted to the effects of the pandemic. Supply chains, however, were stressed as many suppliers were not expecting the level of economic strength that occurred. Nonetheless, with this improvement in business conditions, Microchip was able to achieve records for net sales and non-GAAP gross margins, operating income, net income and EPS in fiscal 2021. It was heartening to see the “One World, One Microchip” spirit of our employees, and this spirit continues to give us strength and resolve to navigate the opportunities and challenges ahead of us. It is unfortunate that the impact of the COVID-19 pandemic on individuals and in certain locations in which we operate remains uncertain, and the ultimate impact of the pandemic will depend on many factors, such as the effectiveness of the pandemic containment efforts, including the use and effectiveness of vaccines. We regularly monitor new information regarding the severity of COVID-19 and the ability to contain, treat, or prevent it, and continue to take precautions in our facilities to safeguard the health of our employees and communities. Our CEO Transition Succession planning at all levels is the hallmark of companies that are built to last. We have been working together in a shared leadership model for many years in order to effect a seamless transition for Microchip when the time was right. As part of our succession planning process, effective March 1, 2021, Mr. Sanghi transitioned to an Executive Chair role and Mr. Moorthy was appointed CEO with a continuing role as President. Mr. Moorthy has been with Microchip since Table of Contents 2001 and during this time has provided strong leadership and strategic development that have enabled Microchip to grow and continue to be an industry leader. Mr. Moorthy has a deep knowledge of Microchip’s technology, industry, people and culture. Our Board is confident that Mr. Moorthy, and the rest of our leadership team, will deliver on our vision to be the very best embedded control solutions company ever! Board Member Changes Our board desires diversity in the background and experience of its members. We choose nominees whose backgrounds, attributes and experiences, taken as a whole, will contribute to the high standard of board service at Microchip. We actively seek women and minority candidates for the pool from which board candidates are chosen. As a result of our recent process we were able to identify and appoint three new members to our Board: Mr. Moorthy and Ms. Rapp in January 2021, and Mr. Johnson in April 2021. Mr. Day is retiring from the Board effective on the date of the annual meeting and as such was not nominated for re-election to the Board. Our board, and our executive management are committed to fostering an environment where a diversity of perspectives is heard. Our board nominees at our 2021 annual meeting include 43% people of color and 29% female. Each of our board nominees brings extensive experience and their own perspectives to board discussions. With respect to our new board members, Mr. Moorthy, our current CEO, brings his extensive knowledge of Microchip and our industry, Ms. Rapp brings her background in finance and financial reporting, and Mr. Johnson is well-grounded in cyber and data security matters as well as government procurement. ESG / Sustainability In fiscal 2021, we established an ESG Steering Committee to assist in the development and coordination of our corporate ESG Goals. It is a matrixed team, comprised of executives and senior managers from various disciplines such as compliance, facilities, finance, human resources, legal, marketing communications, operations, sales, and technology. Our ESG Steering Committee has oversight of programs, training and goal setting for our ESG areas, and in fiscal 2021 focused on our programs related to environmental sustainability, supply chain transparency, combatting forced labor, and diversity and inclusion. For more information on our programs, please see our website, and our 2020 Sustainability Report at https:// www.microchip.com/en-us/about/corporate-responsibility/sustainability. Thank you for your continued support of Microchip. Steve Sanghi Executive Chair Ganesh Moorthy President and CEO Table of Contents TABLE OF CONTENTS Page PROXY STATEMENT THE BOARD OF DIRECTORS CERTAIN TRANSACTIONS PROPOSAL ONE - ELECTION OF DIRECTORS PROPOSAL TWO - APPROVAL OF AN AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FOR THE PURPOSE OF EFFECTING A TWO-FOR-ONE FORWARD STOCK SPLIT PROPOSAL THREE - APPROVAL OF AN AMENDMENT AND RESTATEMENT OF OUR 2004 EQUITY INCENTIVE PLAN PROPOSAL FOUR - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PROPOSAL FIVE - APPROVAL OF EXECUTIVE COMPENSATION SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS EXECUTIVE COMPENSATION - COMPENSATION DISCUSSION AND ANALYSIS COMPENSATION OF NAMED EXECUTIVE OFFICERS EQUITY COMPENSATION PLAN INFORMATION CODE OF BUSINESS CONDUCT AND ETHICS OTHER MATTERS APPENDIX - A EXHIBIT - A APPENDIX - B 1 4 13 14 18 21 30 32 33 35 48 64 66 66 A-1 A-1-1 B-1 Table of Contents MICROCHIP TECHNOLOGY INCORPORATED 2355 West Chandler Boulevard Chandler, Arizona 85224-6199 PROXY STATEMENT You are cordially invited to attend our annual meeting on Tuesday, August 24, 2021, beginning at 9:00 a.m., Mountain Standard Time. The annual meeting will be held at our Chandler facility located at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199. We are providing these proxy materials in connection with the solicitation by the Board of Directors (the "Board") of Microchip Technology Incorporated ("Microchip") of proxies to be voted at Microchip's 2021 annual meeting of stockholders and at any adjournment(s) thereof. Our fiscal year begins on April 1 and ends on March 31. References in this proxy statement to fiscal 2021 refer to the 12-month period from April 1, 2020 through March 31, 2021; references to fiscal 2020 refer to the 12-month period from April 1, 2019 through March 31, 2020; and references to fiscal 2019 refer to the 12-month period from April 1, 2018 through March 31, 2019. We anticipate first mailing this proxy statement and accompanying form of proxy on July 19, 2021 to holders of record of Microchip's common stock on June 28, 2021 (the "Record Date"). Our principal executive offices are located at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199. PROXIES AND VOTING PROCEDURES YOUR VOTE IS IMPORTANT. Because many stockholders cannot attend the annual meeting in person, it is necessary that a large number of stockholders be represented by proxy. Stockholders may have a choice of voting over the internet, by using a toll-free telephone number or by completing a proxy card and mailing it in the postage-paid envelope provided. Please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you. Under Delaware law, stockholders may submit proxies electronically. Please be aware that if you vote over the internet, you may incur costs such as telephone and internet access charges for which you will be responsible. You can revoke your proxy at any time before it is exercised by timely delivery of a properly executed, later-dated proxy (including an internet or telephone vote if these options are available to you) or by voting by ballot at the annual meeting. The method by which you vote will in no way limit your right to vote at the annual meeting if you later decide to attend in person. If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote at the annual meeting. All shares entitled to vote and represented by properly completed proxies received prior to the annual meeting and not revoked will be voted at the annual meeting in accordance with the instructions on such proxies. IF YOU DO NOT INDICATE HOW YOUR SHARES SHOULD BE VOTED ON A MATTER, THE SHARES REPRESENTED BY YOUR PROPERLY COMPLETED PROXY WILL BE VOTED AS OUR BOARD OF DIRECTORS RECOMMENDS. If any other matters are properly presented at the annual meeting for consideration, including, among other things, consideration of a motion to adjourn the annual meeting to another time or place, the persons named as proxies and acting thereunder will have discretion to vote on those matters according to their best judgment to the same extent as the person 1 Table of Contents delivering the proxy would be entitled to vote. At the date this proxy statement went to press, we did not anticipate that any other matters would be raised at the annual meeting. Stockholders Entitled to Vote Stockholders of record at the close of business on the Record Date, June 28, 2021, are entitled to notice of and to vote at the annual meeting. Each share is entitled to one vote on each of the seven director nominees and one vote on each other matter properly brought before the annual meeting. On the Record Date, there were 274,040,144 shares of our common stock issued and outstanding. In accordance with Delaware law, a list of stockholders entitled to vote at the annual meeting will be available for examination by any stockholder beginning ten days prior to the annual meeting at 2355 West Chandler Boulevard, Chandler, Arizona, on any business day between the hours of 10:00 a.m. and 4:30 p.m., Mountain Standard Time. If you would like to view the list, please contact our Corporate Secretary to schedule an appointment by calling (480) 792-4039 or writing to her at the address of our principal executive offices indicated above. Required Vote Quorum, Abstentions and Broker Non-Votes The presence, in person or by proxy, of the holders of a majority of the shares entitled to vote at the annual meeting is necessary to constitute a quorum at the annual meeting. Abstentions and broker "non-votes" are counted as present and entitled to vote for purposes of determining a quorum. A broker "non-vote" occurs when a nominee holding shares for a beneficial owner (i.e., in "street name") does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Under the rules of the New York Stock Exchange ("NYSE"), which apply to NYSE member brokers trading in non-NYSE stock, brokers have discretionary authority to vote shares on certain routine matters if customer instructions are not provided. Proposal Two and Proposal Four to be considered at the annual meeting are expected to be treated as routine matters. Consequently, if you do not return a proxy card, your broker will have discretion to vote your shares on such matters. Election of Directors (Proposal One) A nominee for director shall be elected to the board of directors if the votes cast for such nominee's election exceed the votes cast against such nominee's election. For this purpose, votes cast shall exclude abstentions, withheld votes or broker non- votes with respect to that director's election. Notwithstanding the immediately preceding sentence, in the event of a contested election of directors, directors shall be elected by the vote of a plurality of the votes cast. A contested election shall mean any election of directors in which the number of candidates for election as director exceeds the number of directors to be elected. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee. Approval of an Amendment and Restatement of Our Certificate of Incorporation (Proposal Two) The affirmative vote of the holders of a majority of the outstanding shares of our common stock on the record date is required to amend and restate our Certificate of Incorporation to increase the number of authorized shares of our common stock for the purpose of effecting a two-for-one forward stock split. Abstentions will have the same effect as voting against this proposal. Approval of an Amendment and Restatement of Our 2004 Equity Incentive Plan (Proposal Three) The affirmative vote of the holders of a majority of the votes cast at the annual meeting is required to approve an amendment and restatement of our 2004 Equity Incentive Plan to extend the term of the plan by ten years, to August 24, 2031. Abstentions and broker "non-votes" are not counted for purposes of approving this matter, and thus will not affect the outcome of the voting on this proposal. 2 Table of Contents Ratification of Independent Registered Public Accounting Firm (Proposal Four) The affirmative vote of the holders of a majority of the votes cast at the annual meeting is required for ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2022. Abstentions will not affect the outcome of the voting on this proposal. Advisory Vote Regarding the Compensation of our Named Executives (Proposal Five) The affirmative vote of the holders of a majority of the votes cast at the annual meeting is required to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the rules of the Securities and Exchange Commission (the "SEC"). Abstentions and broker "non-votes" are not counted for purposes of approving this matter, and thus will not affect the outcome of the voting on this proposal. Electronic Access to Proxy Statement and Annual Report This proxy statement and our fiscal 2021 Annual Report are available at www.microchip.com/annual_reports. We will post our future proxy statements and annual reports on Form 10-K on our website as soon as reasonably practicable after they are electronically filed with the SEC. All such filings on our website are available free of charge. The information on our website is not incorporated into this proxy statement. Our internet address is www.microchip.com. Cost of Proxy Solicitation Microchip will pay its costs of soliciting proxies including the cost of any proxy solicitor if a proxy solicitor is engaged. Proxies may be solicited on behalf of Microchip by its directors, officers or employees in person or by telephone, facsimile or other electronic means. We may also reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of Microchip common stock. 3 Table of Contents Corporate Governance Guidelines THE BOARD OF DIRECTORS Microchip’s Board of Directors has adopted a set of Corporate Governance Guidelines. The Nominating, Governance, and Sustainability Committee reviews the guidelines periodically and recommends changes to the Board as appropriate. The Board oversees administration and interpretation of, and compliance with, the guidelines. These guidelines, which are published on our website at https://www.microchip.com/en-us/about/investors/investor- information/mission-statement, along with our other corporate governance practices, compare favorably under the Investor Stewardship Group’s (ISG) Corporate Governance Framework for U.S. Listed Companies, as shown in the table below. ISG Principle Principle 1 Boards are accountable to stockholders. Principle 2 Stockholders should be entitled to voting rights in proportion to their economic interest. Principle 3 Boards should be responsive to stockholders and be proactive in order to understand their perspectives. Principle 4 Boards should have a strong, independent leadership structure. Microchip Practice • All directors are elected annually • Majority voting in uncontested director election • Proxy access with market terms (3% for three years, up to the greater of 2 directors or 20% of the Board) • No dual-class share structure • Each stockholder is entitled to one vote per share • • • Executive management met with investors owning more than 50% of shares outstanding in fiscal 2021 Engagement topics included strategy, financial and operational matters; culture; and issues concerning ESG matters The Board has made a number of changes in response to investor feedback, including: • •  adding three new board members who bring greater diversity representation; and  enhancing further the integration of ESG disclosure into our public filings, and Corporate Sustainability Report; • We have also added a three-year TSR (Stock-price performance and dividends paid) as a performance metric for performance-based RSUs • • • • Board Chair is separate from CEO Board considers appropriateness of its leadership structure at least annually Independent committee chairs Independent directors meet in executive session at least four times per year 4 Table of Contents Principle 5 Boards should adopt structures and practices that enhance their effectiveness. • • 71% of the director nominees are independent 43% of the director nominees are ethnically diverse, 29% of the director nominees are gender diverse, and we have a policy of seeking out women and minority candidates, as well as candidates with diverse backgrounds, experiences, and skills, as part of each Board search Board refreshment, with three new board members joining since our 2020 annual meeting, and an average tenure of 10.6 years Limits on outside boards, with no independent director permitted to serve on more than five public company boards (including Microchip) • No restrictions on directors’ access to senior • • Principle 6 Boards should develop management incentive structures that • are aligned with the long-term strategy of the company. Compensation Committee reviews and approves incentive program design, goals, and objectives for alignment with compensation and business strategies management • Annual and long-term incentive programs are designed to reward financial and operational performance that furthers short- and long-term strategic objectives Meetings of the Board of Directors Our Board of Directors met 17 times in fiscal 2021. All of our directors attended 100% of the total number of meetings of the Board of Directors held during fiscal 2021 during such time as such person was a director, except that one director attended 94% of the total number of applicable meetings. All of our directors attended 100% of the total number of meetings held by all of the committees of the Board of Directors on which he or she served during fiscal 2021 during such time as such person was a director. The Board of Directors has a practice of meeting in executive session on a periodic basis without management or management directors (i.e., Mr. Sanghi and Mr. Moorthy) present. The Board of Directors has determined that each of Mr. Chapman, Mr. Day, Ms. Johnson, Mr. Johnson, Mr. Meyercord and Ms. Rapp is an independent director as defined by applicable SEC rules and NASDAQ listing standards. Board Leadership Structure The Board of Directors believes that Mr. Sanghi is best situated to serve as Executive Chair of the Board because he served as our Chief Executive Officer and/or President for over 30 years and is the director with the most experience with Microchip's business and industry. As our current Chief Executive Officer and President, Mr. Moorthy identifies strategic priorities and leads the discussion and execution of strategy with input from Mr. Sanghi and the other members of the Board. The Board's independent directors have different perspectives and roles in strategic development. In particular, Microchip's independent directors bring experience, oversight and expertise from outside the company and the industry, while Mr. Sanghi and Mr. Moorthy bring company-specific experience and industry expertise. The Board of Directors believes that the role of the Executive Chair facilitates information flow between management and the Board of Directors, which is essential to effective governance. Microchip does not have a lead independent director. 5 Table of Contents Board Oversight of Risk Management The Board of Directors and the Board committees oversee risk management in a number of ways. The Audit Committee oversees the management of financial and accounting related risks as an integral part of its duties. Similarly, the Compensation Committee considers risk management when setting the compensation policies and programs for Microchip's executive officers. As part of this process, our Compensation Committee concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on Microchip. The Board periodically assesses the programs and initiatives that support the environment, health, safety, innovation and technology objectives of our business. As discussed below, we have formed an ESG Steering Committee to assist the Nominating, Governance, and Sustainability Committee in its oversight of sustainability matters. The Board of Directors and the Audit Committee regularly receive reports on various risk-related items including risks related to manufacturing operations, cybersecurity, IT system continuity, taxes, intellectual property, litigation, products and personnel matters. The Board and the Audit Committee also receive periodic reports on Microchip's efforts to manage such risks through safety measures, system improvements, insurance or self-insurance. The Board considers the various risks related to our business and discusses such risk areas and risk mitigation actions with our management team. The Board of Directors believes that the leadership structure described above facilitates the Board's oversight of risk management because it allows the Board, working through its committees, to participate actively in the oversight of management's actions. Nominating, Governance, and Sustainability Committee’s Oversight of Sustainability Matters Our Nominating, Governance, and Sustainability Committee oversees our policies and practices relating to environmental, social, governance and other public policy matters relevant to Microchip. In this regard, the committee reviews and reports to the Board, and discusses with management, on a periodic basis, matters of corporate responsibility and sustainability performance, including potential long and short-term trends and impacts to our business of environmental, social, human capital, diversity and inclusion, and governance issues, including our public reporting on these topics. In fiscal 2021, we instituted a corporate ESG Steering Committee that is comprised of executives and senior managers from various disciplines such as compliance, facilities, finance, human resources, legal, marketing communications, operations, sales, and technology. The ESG Steering Committee has oversight of programs, training and goal setting for our ESG areas, and, in fiscal year 2021, the committee focused on our programs related to environmental sustainability, supply chain transparency, combatting forced labor, and diversity and inclusion. For more information on these programs, please see our website, and our 2020 Sustainability Report that is published on our website at https://www.microchip.com/en-us/about/ corporate-responsibility/sustainability. Protecting our Environment with a Focus on Sustainability We believe that a consistent, ongoing commitment to corporate sustainability is a key pillar in our business strategy. Our commitment to the environment goes beyond our compliance with regulatory obligations at our global manufacturing facilities. Our ESG Steering Committee has operational oversight of goal setting, progress tracking and reporting for ESG matters, and our Board receives reports on such matters and provides additional oversight. We continuously work to identify technologies for reducing our carbon emissions, energy and water usage, and wastewater generation, and have found many ways to implement improvements to our process efficiency and resource utilization. Our senior management fully supports these efforts and encourages a proactive approach toward mitigating our impact on the environment, both globally, and in the communities in which we live and work. Emissions - We are currently working towards our published goal of reducing carbon emissions from our three primary U.S. semiconductor manufacturing facilities by 15% over a five-year period, using 2018 as our baseline year. We continue to invest additional capital in abatement technologies in our factories to support this reduction goal, and closely monitor our progress. 6 Table of Contents Energy - We have been increasing renewable energy sources within the mix of our electricity consumption at our three primary U.S. semiconductor manufacturing facilities (Tempe, Gresham and Colorado Springs). Today, 5% of the electricity used at these facilities comes from renewable energy sources, but we are committed to increasing this to 25% by the end of calendar year 2025. Our three primary U.S. manufacturing facilities account for over 50% of our annual global electricity consumption, and offer us the best opportunity to focus our increased commitment to renewable energy in the short- term. Water - While the semiconductor industry is a large consumer of water due to manufacturing process requirements, we have been reducing our use through implementation of more efficient processes, and increased water recycling. Since 2010, the installed technologies in our three primary U.S. manufacturing facilities have saved an estimated 2 billion gallons of water as compared to our earlier technologies. We continue to identify opportunities for water reduction projects, and fund those that will improve our reclamation of wastewater and reduce usage. Human Capital, Culture and Diversity Addressing Human Rights Risks in the Workplace We believe corporate sustainability should include requiring our suppliers to have high standards with respect to human rights principles. We are committed to being a responsible corporate citizen and acting ethically and transparently in accordance with local, national and international laws and regulations and industry standards. We set minimum compliance expectations for our supply chain partners including working conditions, health and safety, human rights, conflict minerals and the environment. At our Annual Meeting of Stockholders held on August 20, 2019, our stockholders approved a proposal for our Board to report on our processes for identifying and analyzing potential and actual human rights risks to workers in our operations and our supply chain. We published our first report on July 28, 2020, which has been updated as of June 15, 2021. A copy of our most recent report is available at https://www.microchip.com/en-us/about/corporate-responsibility/ethics-and-conduct. As part of our assessment of these risks, in 2020, we aligned our Supplier Code of Conduct to the terms of the Responsible Business Alliance Code of Conduct, which includes elements specific to preventing forced labor, such as requiring: • • • • employment be freely chosen by the employee; no workers under the age of 15, or the minimum age of the country, whichever is greater; wages and benefits comply with all applicable wage laws; no harsh and inhumane treatment including any sexual harassment, sexual abuse, corporal punishment, mental or physical coercion or verbal abuse of workers; and • workplaces free of harassment and unlawful discrimination, etc. Our terms and conditions of purchase require all of our suppliers to perform their obligations in conformance with the latest version of the RBA’s Code of Conduct. Culture and Core Values Over 30 years ago, Microchip created a cultural framework to unite its employees through shared workplace values, and to guide employees’ strategies, decisions, actions and job performance. Microchip’s culture has been centered on a values- based, highly-empowered, continuous-improvement oriented approach. At the core of our culture are employee empowerment, teamwork, collaboration, and communication, with the goal of driving engagement, and inspiring creativity and innovation. Today, this corporate culture continues to strengthen all aspects of our business, enables us to fulfill our purpose, and serves as the platform for Microchip to consistently gain market share while maintaining strong profitability. 7 Table of Contents Microchip’s guiding values convey our overall philosophy, dictate the basis from which we make our day-to-day decisions, and establish our corporate culture. Our focus on communication provides transparency among leadership, promotes trust among employees, and is a critical part of Microchip’s culture. Compensation Programs Microchip has competitive compensation programs which include bonuses and equity components that allow employees to participate in our success and profitability. Eligible employees receive restricted stock units ("RSUs") at hiring and annually under various equity plans. Our employee stock purchase plans allow eligible employees an opportunity to purchase our common stock at a discount. Our employee cash bonus plan is a discretionary quarterly cash bonus program that is paid to all eligible employees based on the company’s operating performance. Please see the “Compensation Discussion and Analysis” section of this proxy statement for more detailed information our compensation philosophy and programs. Diversity, Non-discrimination and Equal Opportunity Employment We value diversity and inclusion and believe employees of all backgrounds contribute to our ongoing success. It is important that we support the needs of our employees and ensure equity for all, without regard to race, color, ethnicity, national origin, religion, age, disability, gender (including gender expression and gender identity), sex, or sexual orientation. Through diversity of backgrounds and perspectives, we gain the knowledge and experience that each of our employees brings. Our CEO’s Diversity Statement is available at https://www.microchip.com/en-us/about/corporate-responsibility. We design jobs and provide opportunities promoting employee teamwork, productivity, creativity, pride in work, trust, integrity, fairness, involvement, development, and empowerment. We base recognition, advancement, and compensation on an employee’s achievement of excellence in company, and both team and individual performance. We foster our employees’ health and welfare by offering competitive and comprehensive employee benefits. All managers, supervisors and employees are responsible for maintaining a work environment that is free from discrimination and harassment, and for promptly reporting violations. Our policy on Non-Discrimination and Equal Opportunity Employment is available at https://www.microchip.com/ en-us/about/corporate-responsibility. Microchip provides equal employment opportunities and respects and values the diverse experiences and backgrounds of all applicants. In the U.S., Microchip operates in compliance with EEO guidelines for recruitment and hiring practices. Regular and updated training is provided to recruiters as well as hiring managers to ensure understanding of hiring practices. U.S. hiring managers must record and pass an affirmative action training course prior to creating a requisition and starting their hiring process. Multiple recruiting sources are utilized by Microchip, including: our company career site, university job boards, Direct Employers, our Employment Service Delivery System (ESDS), the system that posts jobs to state job boards and diversity agencies, Microchip social media postings, attendance at many university, diversity and veteran career fairs and events. Communications from Stockholders Stockholders may communicate with the Board of Directors or individual members of the Board of Directors, provided that all such communication is submitted in writing to the attention of the Secretary at Microchip Technology Incorporated, 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199, who will then forward such communication to the appropriate director or directors. 8 Table of Contents Committees of the Board of Directors The following table lists our three standing Board committees, the directors who served on them at March 31, 2021, and the number of committee meetings held in fiscal 2021: MEMBERSHIP ON BOARD COMMITTEES IN FISCAL 2021 Name Mr. Chapman Mr. Day Ms. Johnson(1) Mr. Meyercord Ms. Rapp(2) Mr. Moorthy Mr. Sanghi Meetings held in fiscal 2021 Audit C l l 14 Compensation Nominating, Governance and Sustainability l l C 12 l C 4 (1) Ms. Johnson served on the Audit Committee during fiscal 2021 until January 4, 2021, and she joined the Compensation Committee on January 4, 2021. (2) Ms. Rapp joined the Audit Committee on January 4, 2021. C = Chair l = Member Audit Committee The responsibilities of our Audit Committee are to appoint, compensate, retain and oversee Microchip's independent registered public accounting firm, oversee the accounting and financial reporting processes of Microchip and audits of its financial statements, and provide the Board of Directors with the results of such monitoring. These responsibilities are further described in the committee charter which was amended and restated as of November 12, 2019. A copy of the Audit Committee charter is available at the About/Investor Relations section under Mission Statement, Guiding Values, and Corporate Governance on www.microchip.com. Our Board of Directors has determined that all members of the Audit Committee are independent directors as defined by applicable SEC rules and NASDAQ listing standards. The Board of Directors has also determined that each of Mr. Chapman, Mr. Meyercord and Ms. Rapp meet the requirements for being an "audit committee financial expert" as defined by applicable SEC rules. In fiscal 2005, our Board and our Audit Committee adopted a policy with respect to (i) the receipt, retention and treatment of complaints received by us regarding questionable accounting, internal accounting controls or auditing matters; (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting, internal accounting controls or auditing matters; and (iii) the prohibition of harassment, discrimination or retaliation arising from submitting concerns regarding questionable accounting, internal accounting controls or auditing matters or participating in an investigation regarding questionable accounting, internal accounting controls or auditing matters. In fiscal 2012, our Board and our Audit Committee approved an amended policy to include matters regarding violations of federal or state securities laws, or the commission of bribery. This policy, called "Reporting Legal Non-Compliance," was created in accordance with applicable SEC rules and NASDAQ listing requirements. A copy of this policy is available at the About/Investor Relations section under Mission Statement, Guiding Values, and Corporate Governance on www.microchip.com. 9 Table of Contents Compensation Committee Our Compensation Committee has oversight responsibility for the compensation and benefit programs for our executive officers and other employees, and for administering our equity incentive and employee stock purchase plans adopted by our Board of Directors. The responsibilities of our Compensation Committee are further described in the committee charter which was amended and restated as of February 26, 2021. The committee charter is available at the About/Investor Relations section under Mission Statement, Guiding Values, and Corporate Governance on www.microchip.com. The Board of Directors has determined that all members of our Compensation Committee are independent directors as defined by applicable SEC rules, NASDAQ listing standards and other requirements. For more information on our Compensation Committee, please refer to the "Compensation Discussion and Analysis" at page 35. Nominating, Governance, and Sustainability Committee Our Nominating, Governance, and Sustainability Committee has the responsibility to help ensure that our Board is properly constituted to meet its fiduciary obligations to our stockholders and Microchip and that we have and follow appropriate governance standards. In so doing, the Nominating, Governance, and Sustainability Committee identifies and recommends director candidates, develops and recommends governance principles, and recommends director nominees to serve on committees of the Board of Directors. The responsibilities of our Nominating, Governance, and Sustainability Committee are further described in the committee charter, as amended as of May 25, 2021, which is available at the About/Investor Relations section under Mission Statement, Guiding Values, and Corporate Governance on www.microchip.com. Our Nominating, Governance, and Sustainability Committee also oversees our policies and practices relating to environmental, social, governance and other public policy matters relevant to Microchip. In this regard, the committee reviews and reports to the Board, and discusses with management, on a periodic basis, matters of corporate responsibility and sustainability performance, including potential long and short-term trends and impacts to our business of environmental, social, human capital, diversity and inclusion, and governance issues, including our public reporting on these topics. The Board of Directors has determined that all members of the Nominating, Governance, and Sustainability Committee are independent directors as defined by applicable SEC rules and NASDAQ listing standards. When considering a candidate for a director position, the Nominating, Governance, and Sustainability Committee looks for demonstrated character, judgment, relevant business, functional and industry experience, and a high degree of skill. The Nominating, Governance, and Sustainability Committee believes it is important that the members of the Board of Directors represent diverse viewpoints. Accordingly, the Nominating, Governance, and Sustainability Committee considers issues of diversity in identifying and evaluating director nominees, including differences in education, professional experience, viewpoints, technical skills, individual expertise, ethnicity and gender. The Nominating, Governance, and Sustainability Committee evaluates director nominees recommended by a stockholder in the same manner as it would any other nominee. The Nominating, Governance, and Sustainability Committee will consider nominees recommended by stockholders provided such recommendations are made in accordance with procedures described in this proxy statement under "Requirements, Including Deadlines, for Receipt of Stockholder Proposals for the 2022 Annual Meeting of Stockholders; Discretionary Authority to Vote on Stockholder Proposals" at page 66. We do not pay any third party to identify or assist in identifying or evaluating potential nominees for director. 10 Table of Contents Attendance at the Annual Meeting of Stockholders All directors are encouraged, but not required, to attend our annual meeting of stockholders. All directors attended our fiscal 2020 annual meeting of stockholders which was held via webcast on August 18, 2020. REPORT OF THE AUDIT COMMITTEE (*) Our Board of Directors has adopted a written charter setting out the purposes and responsibilities of the Audit Committee. The Board of Directors and the Audit Committee review and assess the adequacy of the charter on an annual basis. A copy of the Audit Committee Charter is available at the About/Investor Relations section under Mission Statement, Guiding Values, and Corporate Governance on www.microchip.com. Each of the directors who serves on the Audit Committee meets the independence and experience requirements of the SEC rules and NASDAQ listing standards. This means that the Microchip Board of Directors has determined that no member of the Audit Committee has a relationship with Microchip that may interfere with such member's independence from Microchip and its management, and that all members have the required knowledge and experience to perform their duties as committee members. We have received from Ernst & Young LLP the written disclosure and the letter required by Rule 3526 of the Public Company Accounting Oversight Board (Communication with Audit Committees Concerning Independence) and have discussed with Ernst & Young LLP their independence from Microchip. We also discussed with Ernst & Young LLP all matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) standards. We have considered whether and determined that the provision of the non-audit services rendered to us by Ernst & Young LLP during fiscal 2021 was compatible with maintaining the independence of Ernst & Young LLP. We have reviewed and discussed with management the audited annual financial statements included in Microchip's Annual Report on Form 10-K for the fiscal year ended March 31, 2021 and filed with the SEC, as well as the unaudited financial statements filed with Microchip's quarterly reports on Form 10-Q. We also met with both management and Ernst & Young LLP to discuss those financial statements. Based on these reviews and discussions, we recommended to the Board of Directors that Microchip's audited financial statements be included in Microchip's Annual Report on Form 10-K for the fiscal year ended March 31, 2021 for filing with the SEC. By the Audit Committee of the Board of Directors: Matthew W. Chapman (Chair) Wade F. Meyercord Karen M. Rapp ________________________ (*) The Report of the Audit Committee is not "soliciting" material and is not deemed "filed" with the SEC, and is not incorporated by reference into any filings of Microchip under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date of this proxy statement and irrespective of any general incorporation language contained in such filings. 11 Table of Contents Director Compensation Procedures Regarding Director Compensation The Board of Directors sets non-employee director compensation. Microchip does not pay employee directors for services provided as a member of the Board of Directors. Our program of cash and equity compensation for non-employee directors is designed to achieve the following goals: compensation should fairly pay directors for work required for a company of Microchip's size and scope; compensation should align directors' interests with the long-term interests of stockholders; compensation should be competitive so as to attract and retain qualified non-employee directors; and the structure of the compensation should be simple, transparent and easy for stockholders to understand. Non-employee director compensation is typically reviewed once per year to assess whether any adjustment is needed to further such goals. The Board of Directors has not used outside consultants in setting non-employee director compensation. Director Fees During fiscal 2021, non-employee directors were scheduled to receive an annual retainer of $75,000, paid in quarterly installments, and $3,000 for each meeting attended in person (or via video conference during the COVID-19 pandemic). Directors do not receive any additional compensation for telephonic meetings of the Board of Directors, for meetings of committees of the Board, or for serving as a committee chair. Effective April 1, 2021, the annual retainer was increased to $78,000. However, in response to uncertainties related to the impact of the COVID-19 virus and in connection with other expense reduction actions taken by our management team, our Board of directors approved a 20% reduction in non-employee director cash compensation effective April 20, 2020. This compensation reduction was modified to a 15% reduction effective August 10, 2020, and the compensation was fully reinstated effective November 16, 2020. Equity Compensation During fiscal 2021, under the terms of our 2004 Equity Incentive Plan, on the date of our annual meeting of stockholders, each non-employee director is automatically granted that number of RSUs equal to $123,000 divided by the fair market value of a share of our common stock on the grant date, which RSUs shall vest in full on the earlier of (i) one day prior to the next annual meeting of stockholders, or (ii) one year from the date of grant. When a non-employee director is first appointed to the Board, the number of RSUs to be granted to such new director shall be pro-rated to reflect the portion of the year that the new director served on the Board. Effective April 1, 2021, the value of the RSU grant was increased to $170,000. All vesting of the above grants is contingent upon the non-employee director maintaining his or her continued status as a non-employee director through the applicable vesting date. In accordance with the foregoing, on August 18, 2020, each of Mr. Chapman, Mr. Day, Ms. Johnson and Mr. Meyercord was granted 1,145 RSUs, Ms. Rapp was granted 555 RSUs when she joined the Board on January 4, 2021. 12 Table of Contents The following table details the total compensation for Microchip's non-employee directors for fiscal 2021: DIRECTOR COMPENSATION Fees Earned or Paid in Cash Stock Awards(1) Option Awards Non-Equity Incentive Plan Compensation All Other Compensation Total Name Steve Sanghi (2) Ganesh Moorthy (2) $ — $ — — $ — Matthew W. Chapman 78,357 121,244 L.B. Day Esther L. Johnson Wade F. Meyercord Karen M. Rapp (3) 78,357 121,244 78,357 121,244 78,357 121,244 21,750 75,275 — $ — $ — $ — — — — — — — — — — — — — — — — — — — — 199,601 199,601 199,601 199,601 97,025 (1) The award of 1,145 RSUs to each of the non-employee directors (other than Ms. Rapp) on August 18, 2020 had a fair value on the grant date of $105.89 per share and a market value on the grant date of $107.35 per share with an aggregate market value of each award of approximately $123,000. (2) Mr. Sanghi and Mr. Moorthy are executive officers of Microchip and do not receive any additional compensation for their service on our Board of Directors. (3) The award of 555 RSUs to Ms. Rapp on January 4, 2021 had a fair value on the grant date of $135.63 per share and a market value on the grant date of $137.18 per share with an aggregate market value of approximately $76,000. Compensation Committee Interlocks and Insider Participation The Compensation Committee is currently comprised of Mr. Meyercord (Chair), Mr. Day and Ms. Johnson. Each such person is an independent director. None of Mr. Meyercord, Mr. Day, or Ms. Johnson had any related-party transaction with Microchip during fiscal 2021 other than compensation for service as a director. In addition, none of such directors has a relationship that would constitute a compensation committee interlock under applicable SEC rules. During fiscal 2021, no Microchip executive officer served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officer(s) served either on Microchip's Compensation Committee or Board of Directors. CERTAIN TRANSACTIONS During fiscal 2021, Microchip had no related-party transactions within the meaning of applicable SEC rules. Pursuant to its charter, the Audit Committee reviews issues involving potential conflicts of interest and reviews and approves all related-party transactions as contemplated by NASDAQ and SEC rules and regulations. The Audit Committee may consult with the Board of Directors regarding certain conflict of interest matters that do not involve a member of the Board. 13 Table of Contents PROPOSAL ONE ELECTION OF DIRECTORS The Board currently consists of eight directors: Matthew W. Chapman, L.B. Day, Esther L. Johnson, Karlton D. Johnson, Wade F. Meyercord, Ganesh Moorthy, Karen M. Rapp and Steve Sanghi. Mr. Day is retiring from the Board effective on the date of the annual meeting and was not nominated for re-election to the Board at the annual meeting. Each of the other seven directors has been nominated for re-election to the Board at the annual meeting and has agreed to continue serving if re- elected. Unless proxy cards are otherwise marked, the persons named in the proxy card will vote such proxy for the election of the nominees named below. If any of the nominees becomes unable or declines to serve as a director at the time of the annual meeting, the persons named in the proxy card will vote such proxy for any nominee designated by the current Board of Directors to fill the vacancy. We do not expect that any of the other nominees will be unable or will decline to serve as a director. The Board and the Nominating, Governance, and Sustainability Committee have carefully considered the experience, structure, culture, diversity, operation, interactions, collaboration and performance of the current Board; the talents, expertise and contributions of individual directors; the growth and creation of stockholder value under the Board's leadership; the continued evolution of Microchip; the Board's role in continuing to develop and lead the strategic direction of Microchip; the continued change and consolidation in the semiconductor industry; anticipated future challenges and opportunities facing Microchip; and the Board's ongoing commitment to ensuring the long-term sustainability of Microchip to the benefit of its stockholders. Our Board of Directors has determined that each of the following nominees for director is an independent director as defined by applicable SEC rules and NASDAQ listing standards: Mr. Chapman, Ms. Johnson, Mr. Johnson, Mr. Meyercord and Ms. Rapp. The term of office of each person who is elected as a director at the annual meeting will continue until the 2022 annual meeting of stockholders and until a successor has been elected and qualified. Vote Required; Board Recommendation A nominee for director in an uncontested election shall be elected to the Board of Directors if the votes cast for such nominee's election exceed the votes cast against such nominee's election (with votes cast excluding abstentions, withheld votes or broker non-votes). The Board and the Nominating, Governance, and Sustainability Committee believe that fostering continuity on the Board by nominating all of our current directors for re-appointment (other than Mr. Day who is retiring) is instrumental to the ongoing execution of our mission and strategy, as well as to the delivery of sustainable long-term value to our stockholders. Our Board desires a mix of background and experience among its members. Our Board does not follow any ratio or formula to determine the appropriate mix. Rather, it uses its judgment to identify nominees whose backgrounds, attributes and experiences, taken as a whole, will contribute to the high standards of board service at Microchip. Our Board actively seeks women and minority candidates for the pool from which board candidates are chosen. Maintaining a balance of tenure among the directors is also part of the Board's consideration. The effectiveness of the Board's approach to board composition decisions is evidenced by the directors' participation in the insightful and robust, yet respectful, deliberation that occurs at Board and Board committee meetings, and in shaping the agendas for those meetings. Our Board and our executive management are committed to fostering an environment where a diversity of perspectives is heard and considered. As illustrated in the following graphs, the director nominees at our 2021 annual meeting are 43% 14 Table of Contents people of color and 29% female. Each of our board members brings their own experience and perspectives to our board discussions. Based on these considerations, among others, the Board of Directors unanimously recommends that stockholders vote "FOR" the nominees listed below. Steve Sanghi transitioned to Executive Chair of our Board in March 2021. He served as Chief Executive Officer from October 1991 to March 2021 and as Chairman of the Board since October 1993. He served as President from August 1990 to February 2016 and has served as a director since August 1990. Mr. Sanghi holds an M.S. degree in Electrical and Computer Engineering from the University of Massachusetts and a B.S. degree in Electronics and Communication from Punjab University. Mr. Sanghi served on the Board of Directors of Myomo, Inc., a publicly traded commercial stage medical robotics company that offers expanded mobility for those suffering from neurological disorders and upper-limb paralysis, from November 2016 through October 2019. Mr. Sanghi served on the board of Mellanox Technologies Ltd., a publicly traded supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyper-converged infrastructure, from February 2018 through April 2020. Mr. Sanghi was elected to the Board of Directors of Impinj, Inc. in March 2021. Mr. Sanghi is 65 years old as of June 30, 2021. The Board of Directors concluded that Mr. Sanghi should be nominated to serve as a director since he previously served as Chief Executive Officer of Microchip for over 30 years and has provided very strong leadership to Microchip over this period. The Board of Directors believes that Mr. Sanghi's management skills have been instrumental to Microchip's extraordinary growth and profitability over the past 30 years and to the strong position Microchip has attained in its key markets. Ganesh Moorthy was appointed as Chief Executive Officer in March 2021 and to the Board of Directors in January 2021. Mr. Moorthy has served as President since February 2016 and Chief Operating Officer since June 2009. He also served as Executive Vice President from October 2006 to August 2012 and as a Vice President in various roles since he joined Microchip in 2001. Prior to this time, he served in various executive capacities with other semiconductor companies. Mr. Moorthy holds an M.B.A. in Marketing from National University, a B.S. degree in Electrical Engineering from the University of Washington and a B.S. degree in Physics from the University of Mumbai, India. Mr. Moorthy was elected to the Board of Directors of Rogers Corporation in July 2013 and serves on the Audit Committee and as the Nominating, Governance, and Sustainability Committee Chairperson of the Board of Directors of Rogers Corporation. Mr. Moorthy is 61 years old as of June 30, 2021. 15 Gender Diversity29.0%71.0%MaleFemaleRacial Diversity43.0%57.0%CaucasianPeople of ColorTable of Contents The Board of Directors concluded that Mr. Moorthy should be nominated to serve as a director since he has served in leadership positions with Microchip for nearly 20 years and has provided very strong leadership to Microchip over this period. The Board of Directors believes that Mr. Moorthy's management skills have been instrumental to Microchip's extraordinary growth and profitability for many years and to the strong position Microchip has attained in its key markets. Matthew W. Chapman has served as a director of Microchip since May 1997. After serving for over 11 years, Mr. Chapman retired in February 2018 from his position as Chief Executive Officer of Northwest Evaluation Association, a not-for-profit education services organization providing computer adaptive testing for millions of students throughout the United States and in 140 other countries. In his career, Mr. Chapman has served as CEO and Chairman of Concentrex Incorporated, a publicly held company specializing in supplying software solutions and service to U.S. financial institutions. Mr. Chapman is 70 years old as of June 30, 2021. The Board of Directors concluded that Mr. Chapman should be nominated to serve as a director due to his significant CEO-level experience at several corporations. The Board of Directors also recognizes Mr. Chapman's experience in financial matters and that his background establishes him as an audit committee financial expert under applicable rules and makes him well suited to serve as Chair of the Audit Committee of the Board of Directors. Esther L. Johnson has served as a director of Microchip since October 2013. From April 2007 until her April 2012 retirement, Ms. Johnson served as the Vice President and General Manager of Carrier Electronics, a provider of high technology heating, air-conditioning and refrigeration solutions, and a part of United Technology Corporation, a publicly held company that provides high technology products and services to the aerospace and building systems industries. Prior to her position as Vice President and General Manager, since 1983, Ms. Johnson held a variety of other management positions with Carrier Electronics, including Director of Operations and Global Supply Chain Manager. Ms. Johnson was instrumental in Carrier being recognized by Industry Week as one of the "Top 10 Factories in North America." She has served as a board member on multiple private company boards. Ms. Johnson is 69 years old as of June 30, 2021. The Board of Directors concluded that Ms. Johnson should be nominated to serve as a director due to her significant executive-level experience in the technology industry. The Board of Directors recognizes the knowledge and experience Ms. Johnson has gained through her service on the boards of various private companies. The Board of Directors also recognizes Ms. Johnson's experience in financial matters. The Board of Directors believes that Ms. Johnson's background makes her well suited to serve on the Board of Directors' Compensation Committee and as Chair of the Nominating, Governance, and Sustainability Committee. Karlton D. Johnson has served as a director of Microchip since April 2021. He is currently the Chief Executive Officer of DeLaine Strategy Group LLC, a strategic advisory practice providing counsel to C-suite leaders in the public, private, non-profit and government sectors. A decorated combat veteran, Mr. Johnson previously served as the Chief Information Officer (CIO) for the Multinational Security Transition Command-Iraq, and in his final posting, served with distinction as the Senior U.S. military executive/CIO and lead cyberspace expert adviser to the 4-star Commander at United States Forces- Korea, Seoul, Republic of Korea. In 2014, Mr. Johnson retired from U.S.A.F. Active Duty as a Colonel after 26 years of honorable service, and he has held senior leadership roles within the Fortune 500 marketplace. Additionally, he serves in senior leadership positions on other private Boards, and he holds several Master’s Degrees and executive Graduate Certifications from various institutions to include George Washington University, National Defense University, West Virginia University, ISACA and the U.S. government. Mr. Johnson is 55 years old as of June 30, 2021. The Board of Directors concluded that Mr. Johnson should be nominated to serve as a director due to his visionary leadership and subject matter expertise in strategic leadership and risk, partnership creation, organizational excellence, mission 16 Table of Contents assurance, cybersecurity and enterprise communications technologies. The Board of Directors believes that Mr. Johnson's background makes him well suited to serve on the Board of Directors. Wade F. Meyercord has served as a director of Microchip since June 1999. Since October 2002, he has served as President of Meyercord & Associates, Inc., a privately held management consulting firm specializing in executive compensation matters and stock plan consulting for technology companies, a position he previously held part time beginning in 1987. Mr. Meyercord served as a member of the Board of Directors of Endwave Corporation, a publicly held company, from March 2004 until it was acquired in 2011. Mr. Meyercord served as a member of the Board of Directors of California Micro Devices Corporation, a publicly held company, from January 1993 to October 2009, and Magma Design Automation, Inc., a publicly held company, from January 2004 to June 2005. Mr. Meyercord is 80 years old as of June 30, 2021. The Board of Directors concluded that Mr. Meyercord should be nominated to serve as a director due to his significant experience as a senior executive and board member of a number of companies in the technology industry. Mr. Meyercord gained further industry experience through his consulting practice. The Board of Directors believes that Mr. Meyercord's background makes him well suited to serve on the Board of Directors' Audit Committee and Compensation Committee. The Board of Directors also recognizes his experience in financial matters and that his background establishes him as an audit committee financial expert under applicable rules. Karen M. Rapp has served as a director of Microchip since January 2021. Since 2017, she has served as Chief Financial Officer of National Instruments Corporation, a publicly traded company specializing in automated test and measurement systems. Ms. Rapp served as Senior Vice President of Corporate Development of NXP Semiconductors N.V. (“NXP”), a Dutch global semiconductor manufacturer, after NXP acquired Freescale Semiconductor in December 2015. Ms. Rapp previously served in several positions at Freescale, including serving as Vice President and Chief Information Officer from April 2013 to December 2015 and as Director of Operations and Finance, Global Sales and Marketing from April 2010 to April 2013. Ms. Rapp holds a bachelor’s degree in Finance from Northern Illinois University, and an M.B.A. from the University of Texas at Austin. Ms. Rapp has served as a member of the Board of Directors and as a member of the Audit Committee and Compensation Committee at Plexus Corp. since March 2018. Ms. Rapp is 53 years old as of June 30, 2021. The Board of Directors concluded that Ms. Rapp should be nominated to serve as a director due to her significant experience as a senior executive and board member of a number of companies in the technology industry. The Board of Directors believes that Ms. Rapp's background makes her well suited to serve on the Board of Directors' Audit Committee. The Board of Directors also recognizes her experience in financial matters and that her background establishes her as an audit committee financial expert under applicable rules. 17 Table of Contents PROPOSAL TWO APPROVAL OF AN AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FOR THE PURPOSE OF EFFECTING A TWO-FOR-ONE FORWARD STOCK SPLIT Description of the Proposed Amendment and Restatement Our Certificate of Incorporation currently authorizes the issuance of up to 450 million shares of common stock, par value $0.001 per share, and up to 5 million shares of preferred stock, par value $0.001 per share. On May 25, 2021, our Board adopted resolutions approving an amendment and restatement (the “Amendment”) of our Certificate of Incorporation to increase the number of authorized shares of common stock from 450 million shares to 900 million shares for the purpose of effecting a two-for-one forward stock split (the “Stock Split”) of our issued and outstanding common stock following the effectiveness of such Amendment and providing for a proportional increase in our authorized but unissued shares of common stock. The Board determined that the Amendment is advisable and in the best interests of our stockholders and directed that the proposed Amendment be submitted for adoption and approval by the stockholders at the Annual Meeting. This summary of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment set forth in Appendix A to this proxy statement. The Amendment would not affect the number of authorized shares of preferred stock. Currently, there are no shares of preferred stock issued and outstanding. Purposes and Effects of the Proposed Amendment On the Record Date, there were 274 million shares of our common stock issued and outstanding. Based on the number of shares of common stock outstanding on the Record Date, following the filing of the Amendment and after giving effect to the Stock Split and a proportional increase in our authorized but unissued shares of common stock, we will have approximately 548.1 million shares of common stock outstanding and the number of authorized shares of our common stock will be increased to 900 million. Our Board is recommending the proposed increase in the number of authorized shares of common stock to provide adequate shares of common stock for the Stock Split, including to provide for a proportional increase in our authorized but unissued shares of common stock. Our Board intends to approve, subject to and contingent upon stockholder adoption and approval and the effectiveness of the Amendment, the Stock Split, which would be effected pursuant to a stock dividend (the "Stock Dividend") of one share of our common stock to the holders of record of each share of our common stock. The Board anticipates approving a record date as of the close of business on September 7, 2021 (the "Split Record Date") for determining the stockholders of record entitled to receive the Stock Dividend and a payment date for the Stock Dividend of September 20, 2021 (the "Payment Date"). If our stockholders adopt and approve the Amendment, the Amendment will become effective on the date that it is filed with the Secretary of State of the State of Delaware. Upon declaration of the Stock Dividend by the Board and approval of the Split Record Date and Payment Date therefor, each stockholder of record at the close of business on the Split Record Date will become the record owner of, and be entitled to receive, one additional share of common stock for each share of common stock then owned of record by such stockholder. If the Amendment is adopted and approved by the stockholders, we currently anticipate filing the Amendment with the Secretary of State of the State of Delaware on August 24, 2021. If the Amendment is not adopted and approved by the stockholders or is subsequently abandoned by the Board, the Stock Split will not be effected and the Stock Dividend will not be made to the stockholders. Further, if the Board subsequently determines not to proceed with the currently anticipated Stock Split, the Amendment, even if it is approved by stockholders, will not be filed with the Secretary of State of the State of Delaware. The Stock Split and its Effects. The trading price of our common stock has risen significantly over the past several years. Our Board has evaluated the data demonstrating that our employees have a high level of interest and ownership in our common stock as well as the feedback from those employees that a higher stock price can limit those who desire to invest in our stock, especially those who are earlier in their careers. The closing market price of our common stock on the Record Date, was 18 Table of Contents $152.32 as reported on the NASDAQ Global Market. The Board believes in our long-term strategy and continued growth and, in consideration of the factors above, the Board believes that effecting the Stock Split would be in the best interests of Microchip and its stockholders. Following the Payment Date of the Stock Dividend, each stockholder will own two times the number of shares of our common stock such stockholder held prior to the Stock Split. The Stock Split will affect all of our stockholders uniformly and will not affect any stockholder's percentage ownership of our common stock. Proportionate voting rights and other rights and preferences of the holders of our common stock will not be affected by the Stock Split. The number of stockholders of record will also not be affected by the Stock Split. The Stock Split will also result in a proportionate increase in the number of shares of common stock available for issuance under our equity compensation plans due to the adjustment provisions set forth in such plans. With respect to outstanding stock options to purchase shares of our common stock, the Stock Split would result in an increase in the number of shares subject to such outstanding stock options proportional to the two-for-one ratio of the Stock Split and would also result in a proportionate decrease in the exercise price of such outstanding stock options (rounded up to the nearest whole cent) due to the adjustment provisions set forth in such options. With respect to other outstanding awards to acquire shares of our common stock, the Stock Split would result in an increase in the number of shares subject to such outstanding awards proportional to the two-for-one ratio of the Stock Split due to the adjustment provisions set forth in such awards. Accounting Consequences of the Stock Split. The par value per share of our common stock will remain unchanged at $0.001 per share after the Stock Split. As a result, on the Payment Date of the Stock Dividend, the stated capital on our consolidated balance sheet attributable to common stock will be increased proportionately and the additional paid-in-capital account will be decreased by the amount by which the stated capital is increased. Per share net income or loss will be decreased for current and prior periods because there will be additional shares of our common stock outstanding. We do not anticipate that any other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any period, will arise as a result of the Stock Split. Other Purposes and Effects of the Amendment. As a general matter, the additional proportional increase in our authorized but unissued shares of common stock as a result of the Amendment would enable the Board to issue additional shares of common stock in its discretion from time to time without further action or approval of our stockholders, subject to and as limited by any rules or listing requirements of NASDAQ or of any other applicable rules or regulations. However, the proportion of such additional shares of authorized common stock in relation to our issued and outstanding common stock will be the same both before and after the Stock Split. The corporate purposes for which our Board may issue additional shares of common stock include future acquisitions, capital-raising or financing transactions involving common stock, convertible securities or other equity securities, stock splits, stock dividends and current or future equity compensation plans. Our Board believes the proportionate increase in our authorized but unissued common stock is appropriate to maintain the flexibility currently available to us to issue shares in the future without the potential expense or delay incident to obtaining stockholder approval for any particular issuance. Except for shares of common stock reserved for grants pursuant to our equity compensation plans and shares of common stock expected to be distributed to stockholders to effect the planned Stock Split, we do not currently have any other plans, agreements, commitments or understandings with respect to the issuance of the additional shares (or the currently authorized but unissued shares) of common stock, nor do we currently have any plans, arrangements, commitments or understandings with respect to the issuance of any shares of preferred stock. The Stock Split will affect all of our stockholders uniformly and will not affect any stockholder's percentage ownership of our common stock. However, other future issuances of shares of common stock or securities convertible into shares of common stock could, under certain circumstances, be construed as having an anti-takeover effect (for example, by diluting the stock ownership of a person seeking to effect a change in the composition of the Board or contemplating a tender offer or other transaction for the combination of Microchip with another company). While we do not intend the Amendment to deter or to prevent a change in control, we could use the additional shares of common stock (as we could use the currently authorized but unissued shares of our common stock) to hinder persons seeking to acquire or take control of us or to dilute voting power of the outstanding shares. We are not aware of any efforts to obtain control of us and we have not made this Proposal Two in response to any such efforts. 19 Table of Contents Rights of Additional Authorized Shares of Common Stock Any additional authorized shares of common stock, if and when issued, would be part of our existing class of common stock, and would have the same rights and privileges as the currently outstanding shares of common stock. The holders of common stock are not entitled to preemptive rights or cumulative voting. Procedure for Implementing Stock Split Subject to and contingent upon stockholder adoption and approval and the effectiveness of the Amendment, our Board intends to approve the Stock Split, and establish the Split Record Date and Payment Date for the Stock Dividend. Accordingly, the Board anticipates that the Stock Dividend will be payable on September 20, 2021 to the record holders of each share of our common stock as of the close of business on September 7, 2021. All shares issued as a result of the proposed Stock Split will be uncertificated, issued in book-entry form, either through the Direct Registration System or as a credit to an existing account of a stockholder of record. Consequently, certificates representing shares of common stock currently issued will remain valid for the number of shares shown and should be retained by each stockholder and should not be returned to Microchip or to its transfer agent, as it will not be necessary to submit outstanding certificates for exchange. You will receive information about the additional shares to which you are entitled on or around the payment date. PLEASE DO NOT DESTROY OR RETURN YOUR EXISTING STOCK CERTIFICATES. CERTIFICATES REPRESENTING SHARES OF COMMON STOCK ISSUED PRIOR TO THE STOCK SPLIT WILL CONTINUE TO REPRESENT THE SAME NUMBER OF SHARES OF COMMON STOCK AFTER THE EFFECTIVE DATE OF THE STOCK SPLIT. Effective Date of Proposed Amendment If the Amendment is adopted by the required vote of stockholders, such Amendment will become effective on the date the Amendment is filed with the Secretary of State of the State of Delaware. If the Amendment is adopted and approved and becomes effective, we anticipate the Stock Dividend will be paid on September 20, 2021 to the record holders of each share of our common stock as of the close of business on the Split Record Date. Reservation of Right to Abandon Amendment and Stock Split Our Board reserves the right to not proceed with the Amendment and to abandon the Amendment without further action by our stockholders at any time before the effectiveness of the filing of the Amendment with the Secretary of State of the State of Delaware, even if the Amendment is adopted and approved by our stockholders at the Annual Meeting. By voting in favor of the Amendment, you are expressly also authorizing our Board to delay, not proceed with, and abandon, the proposed Amendment if it should so decide, in its sole discretion, that such action is in the best interests of Microchip and its stockholders. If the Board elects to abandon the Amendment, the number of authorized shares of common stock will remain at 450 million and the Stock Dividend will not be paid and the Stock Split will not be effected. Vote Required; Board Recommendation The affirmative vote of the holders of a majority of the outstanding shares of our common stock on the record date is required to amend and restate our Certificate of Incorporation to increase the number of authorized shares of our common stock for the purpose of effecting a two-for-one forward stock split. Abstentions will have the same effect as voting against such proposal. Our Board of Directors unanimously recommends voting "FOR" Proposal Two, the approval of an amendment and restatement of our Certificate of Incorporation to increase the number of authorized shares of our common stock for the purpose of effecting a two-for-one forward stock split, as described in this Proxy Statement. 20 Table of Contents PROPOSAL THREE APPROVAL OF AN AMENDMENT AND RESTATEMENT OF OUR 2004 EQUITY INCENTIVE PLAN TO EXTEND THE TERM OF THE PLAN BY TEN YEARS, TO AUGUST 24, 2031 Our stockholders most recently approved our 2004 Equity Incentive Plan (the "Plan") in August 2017. The Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards (which may be granted in the form of restricted stock or RSUs), performance shares, performance units, and deferred stock units to our employees and consultants as well as for automatic grants of RSUs to the non-employee members of our Board of Directors. Our Board of Directors is asking our stockholders to approve the Plan, as amended and restated, to extend the term of the Plan to August 24, 2031 which would be the ten year anniversary of stockholder approval of this Proposal. We are not seeking stockholder approval for an increase in the number of shares available for issuance under the Plan. We believe that, as amended and restated, the Plan will be an essential element of our competitive compensation package. Reasons for Voting for this Proposal Extending the Plan will Enable us to Continue to Grant Long-Term Equity. If not extended, the Plan will expire on May 22, 2022. Our Board of Directors believes that our success depends on the ability to attract and retain the best available personnel and that the ability to grant equity awards is crucial to recruiting and retaining the services of such individuals. Our employees are our most valuable assets and we strive to provide them with compensation packages that are competitive, reward personal and company performance, and help meet our retention needs. Our Board of Directors believes that equity awards, the value of which depends on our stock performance and which require continued service over time before any value can be realized, help achieve these objectives and are a key element to achieving our compensation goals. In addition, our Board of Directors believes that equity awards align the interests of our employees and other service providers and stockholders by giving our employees and other service providers an ownership stake in the company, motivate our employees and other service providers to achieve outstanding performance, and provide an effective means of rewarding service providers for their contributions to our success. If stockholders do not approve this Proposal, we will be unable to continue our equity incentive program after our Plan expires in May 2022, which could prevent us from successfully attracting and retaining the highly skilled talent we need to grow and expand our business. Extension of Plan is Reasonable and Required to Meet our Forecasted Needs. Our Board of Directors believes it is necessary to extend the term of the Plan to meet our future equity compensation needs. Our Board of Directors is not requesting our stockholders increase the number of shares reserved for issuance under this Proposal. In determining not to increase the number of shares subject to the Plan, our Board of Directors considered the following factors: • Number of Shares Remaining under the Plan. As of March 31, 2021, outstanding equity awards under the Plan covered 5,945,062 shares of our common stock and 6,554,463 shares remained available for issuance under the Plan. • Overhang. As of March 31, 2021, shares subject to outstanding equity awards under the Plan represented approximately 2.17% of our outstanding shares of common stock as of March 31, 2021, which consisted of approximately 5,854,615 shares subject to RSUs and 86,447 shares subject to performance-based RSUs (assuming performance at 100% of target). • Burn Rate. In fiscal 2021, fiscal 2020 and fiscal 2019, our usage of shares of our common stock for our stock plans as a percentage of our outstanding stock (i.e., our "burn rate") was 0.90%, 0.91%, and 0.83%, respectively. Our burn rate was calculated by dividing the number of shares subject to awards granted during the fiscal year by the weighted average number of shares outstanding during the fiscal year. Our average annual burn rate over this three-year period was 0.88%. 21 Table of Contents • Historical Grant Practices. Our Board of Directors considered the number of equity awards we granted in our last three fiscal years. In fiscal 2021, fiscal 2020, and fiscal 2019 we granted equity awards covering 2.3 million, 2.2 million, and 2.0 million shares, respectively, for approximately 6.5 million shares over that three-year period. • Forecasted Grants. Our Board of Directors anticipates that the remaining shares available for issuance under the Plan will be sufficient for us to continue granting equity awards under the Plan through at least fiscal 2026. We are unable to predict our actual burn rate which will depend on a number of factors including the competitive dynamics for attracting, retaining and motivating our current and future employees, our future stock price, the impact of any future acquisitions we may make, any changes in tax laws, any changes in accounting rules related to share-based compensation and other factors. Our Board of Directors approved the amended and restated Plan on May 25, 2021. If stockholders approve this Proposal, the amended and restated Plan will become effective as of the date of stockholder approval and expire on the tenth anniversary of the date this Proposal is approved, unless sooner terminated in accordance with the terms of the amended and restated Plan. If stockholders do not approve this Proposal, our ability to attract and retain the individuals necessary to drive our performance and increase long-term stockholder value will be limited, as the Plan will expire in May 2022. The Plan Includes Compensation and Governance Best Practices The Plan, as amended and restated, includes provisions that are considered best practices for compensation and corporate governance purposes. These provisions protect our stockholders' interest, as follows: • No Annual "Evergreen" Provision. The Plan does not contain an annual "evergreen" provision to automatically increase the number of shares available for issuance each year. Stockholder approval is required to increase the maximum number of shares that can be granted under the Plan when the existing share reserve is no longer sufficient to meet our needs. • Annual Limits on Awards. The Plan sets reasonable, annual limits as to each type of award that individuals may receive during any fiscal year. • Administration. The Plan is administered by the Compensation Committee, which consists entirely of independent non-employee directors. • Repricing or Exchange Programs are Not Allowed. The Plan does not permit outstanding options or stock appreciation rights to be repriced or exchanged for other awards. • Minimum Vesting Requirements. In general, awards will vest no earlier than the one-year anniversary of the grant date, although up to 5% of the maximum number of shares reserved under the Plan may be granted without this minimum vesting requirement. • Limited Transferability. Awards under the Plan generally may not be sold, assigned, transferred, pledged, or otherwise encumbered, unless otherwise approved by the administrator. • No Single-Trigger Vesting Acceleration upon a Change of Control. The Plan provides that only in the event an award is not assumed or replaced will vesting accelerate on a Change of Control. • No Tax Gross-ups. The Plan does not provide for any tax gross-ups. • No Dividends on Unvested Restricted Stock or RSUs. The Plan provides that a participant has no right to receive dividends on restricted stock or RSUs until the vesting conditions on the restricted shares or units lapse. • Our executive officers and directors have an interest in the Proposal because they are eligible to receive equity awards under the Plan. Please see the summary of our Plan, as amended and restated, below. 22 Table of Contents Description of the 2004 Equity Incentive Plan The essential features of the Plan, as amended and restated, are summarized below. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the amended and restated Plan, which is attached as Appendix B. Capitalized terms used in this proposal and not defined herein shall have the meanings set forth in the Plan. General. The purposes of the Plan are to attract and retain the best available personnel, provide additional incentive to our employees, consultants and non-employee directors and promote the success of our business. Shares Available for Issuance. Upon approval of the amended and restated Plan and subject to adjustment for changes in our capitalization, the maximum aggregate number of shares of common stock which may be issued under the Plan is 36,387,887 shares of common stock. If an award expires or becomes unexercisable without having been exercised in full, or with respect to restricted stock, RSUs, performance shares, performance units or deferred stock units, is forfeited to or repurchased by us, the unpurchased shares (or for awards other than stock options and stock appreciation rights, the forfeited or repurchased shares) which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to stock appreciation rights, the gross shares issued (i.e., shares actually issued pursuant to a stock appreciation right, as well as the shares that represent payment of the exercise price and any applicable tax withholdings pursuant to a stock appreciation right) shall cease to be available under the Plan. Shares that have actually been issued under the Plan under any award shall not be returned to the Plan and shall not become available for future distribution under the Plan; provided, however, that if shares of restricted stock, performance shares, performance units or deferred stock units are repurchased by us at their original purchase price or are forfeited to us, such shares shall become available for future grant under the Plan. Shares used to pay the exercise price or purchase price, if applicable, of an award shall become available for future grant or sale under the Plan. To the extent an award under the Plan is paid out in cash rather than stock, such cash payment shall not result in reducing the number of shares available for issuance under the Plan. Administration. The Plan may be administered by our Board of Directors or a committee or committees, which may be appointed by our Board of Directors (the "Administrator"). Subject to the provisions of the Plan, the Administrator has the authority to: (i) construe and interpret the plan and awards; (ii) prescribe, amend or rescind rules and regulations relating to the Plan; (iii) select the service providers to whom awards are to be granted (apart from the non-employee director automatic grant provisions); (iv) subject to the limits set forth in the Plan, determine the number of shares or equivalent units to be granted subject to each award; (v) determine whether and to what extent awards are to be granted; (vi) determine the terms and conditions, not inconsistent with the terms of the Plan, applicable to awards granted under the Plan; (vii) modify or amend any outstanding award subject to applicable legal restrictions and the restrictions set forth in the Plan; (viii) authorize any person to execute, on our behalf, any instrument required to effect the grant of an award; (ix) approve forms of agreement for use under the Plan; (x) allow participants to satisfy tax withholding obligations by electing to have Microchip withhold from the shares or cash to be issued upon exercise, vesting of an award (or distribution of a deferred stock unit) that number of shares or cash having a fair market value equal to the minimum amount required to be withheld; (xi) determine the fair market value of the shares of our common stock and (xii) subject to certain limitations, take any other actions deemed necessary or advisable for the administration of the Plan. All decisions, interpretations and other actions of the Administrator shall be final and binding on all holders of options or rights and on all persons deriving their rights therefrom. Plan Term. Unless previously terminated by the Board of Directors, the Plan shall terminate on August 24, 2031. Discount Award Limitations. No stock options or stock appreciation rights may be granted with an exercise price that is less than 100% of fair market value on the date of grant. No Repricing. The Plan prohibits option or stock appreciation right repricing, including by way of an exchange for another award or for cash. 23 Table of Contents Eligibility. The Plan provides that awards may be granted to our employees, consultants and non-employee directors. As of March 31, 2021, there were approximately 13,096 employees (including executive officers), 6 non-employee directors, and no consultants who were eligible to participate in the Plan. Minimum Vesting Requirements. Except with respect to 5% of the maximum number of shares issuable under the Plan, no award will vest earlier than one year following the date of grant. Vesting of an award may be accelerated upon the participant’s death or disability or pursuant to a change of control, each as defined in the Plan. Terms and Conditions of Options. Each option granted under the Plan is evidenced by a written stock option agreement between the participant and the company and is subject to the following terms and conditions: (a) Exercise Price. The Administrator determines the exercise price of options at the time the options are granted. However, the exercise price of a stock option may not be less than 100% of the fair market value of the common stock on the date the option is granted. For purposes of the Plan, "fair market value" is generally the closing sale price for the common stock (or the closing bid if no sales were reported) on the date the option is granted. The closing market price of our common stock on March 31, 2021 was $155.22 as reported on the NASDAQ Global Market. (b) Form of Consideration. The means of payment for shares issued upon exercise of an option is specified in each option agreement and generally may be made by cash, check, other shares of our common stock owned by the participant, delivery of an exercise notice together with irrevocable instructions to a broker to deliver to us the exercise price from sale proceeds, by a combination thereof, or by such other consideration and method of payment to the extent permitted by applicable laws. (c) Exercise of the Option. Each stock option agreement will specify the term of the option and the date when the option is to become exercisable. However, in no event shall an option granted under the Plan be exercised more than ten years after the date of grant. Until the shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the underlying shares. (d) Termination of Employment. If a participant's employment terminates for any reason (other than death or permanent disability), all options held by such participant under the Plan expire upon the earlier of (i) such period of time as is set forth in his or her option agreement or (ii) the expiration date of the option. In the absence of a specified time in the option agreement, the option will remain exercisable for three months following the participant's termination. The participant may exercise all or part of his or her option at any time before such expiration to the extent that such option was exercisable at the time of termination of employment. (e) Permanent Disability. If an employee is unable to continue employment with us as a result of permanent and total disability (as defined in the Code), all options held by such participant under the Plan shall expire upon the earlier of (i) such period of time as is set forth in his or her option agreement or (ii) the expiration date of the option. In the absence of a specified time in the option agreement, the option will remain exercisable for six months following the participant's termination. The participant may exercise all or part of his or her option at any time before such expiration to the extent that such option was exercisable at the time of termination of employment. (f) Death. If a participant dies while employed by us, 100% of his or her awards shall immediately vest, and his or her option shall expire upon the earlier of (i) such period of time as is set forth in his or her option agreement or (ii) the expiration date of the option. In the absence of a specified time in the option agreement, the option will remain exercisable for 12 months following the participant's termination. The executors or other legal representatives or the participant may exercise all or part of the participant's option at any time before such expiration with respect to all shares subject to such option. (g) Other Provisions. The stock option agreement may contain terms, provisions and conditions that are consistent with the Plan as determined by the Administrator. Annual Share Limit. No participant may be granted stock options and stock appreciation rights to purchase more than 1,500,000 shares of common stock in any fiscal year, except that up to 4,000,000 shares may be granted in the participant's first fiscal year of service. 24 Table of Contents Terms and Conditions of Stock Appreciation Rights. The Administrator determines the exercise price of stock appreciation rights (or "SARs") at the time they are granted. However, the exercise price of a SAR may not be less than 100% of the fair market value of the common stock on the date the SAR is granted. Otherwise, the Administrator, subject to the provisions of the Plan (including the annual share limit referred to above and the minimum vesting requirements), shall have complete discretion to determine the terms and conditions of SARs granted under the Plan. However, in no event shall a SAR granted under the Plan be exercised more than ten years after the date of grant. Until the shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the underlying shares. (a) Payment of Stock Appreciation Right Amount. Upon exercise of an SAR, the holder of the SAR shall be entitled to receive payment in an amount equal to the product of (i) the difference between the fair market value of a share on the date of exercise and the exercise price and (ii) the number of shares for which the SAR is exercised. (b) Payment upon Exercise of Stock Appreciation Right. At the discretion of the Administrator, payment to the holder of an SAR may be in cash, shares of our common stock or a combination thereof. To the extent that an SAR is settled in cash, the shares available for issuance under the Plan shall not be diminished as a result of the settlement. (c) Stock Appreciation Right Agreement. Each SAR grant shall be evidenced by an agreement that specifies the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the committee, in its sole discretion, shall determine. (d) Expiration of Stock Appreciation Rights. SARs granted under the Plan expire as determined by the Administrator, but in no event later than ten years from date of grant. No SAR may be exercised by any person after its expiration. The same provisions regarding termination of service that apply to options apply to SARs. Terms and Conditions of Restricted Stock. Subject to the terms and conditions of the Plan, restricted stock may be granted to our employees and consultants at any time and from time to time at the discretion of the Administrator. Subject to the minimum vesting requirements, the Administrator has complete discretion to determine (i) the number of shares subject to a restricted stock award granted to any participant and (ii) the conditions for grant or for vesting that must be satisfied, which typically will be based principally or solely on continued provision of services but may include a performance-based component. However, no participant shall be granted a restricted stock award covering more than 300,000 shares in any of our fiscal years, except that up to 750,000 shares may be granted in the participant's first fiscal year of service. Until the shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the underlying shares. Restricted stock may also be granted in the form of RSUs. Each RSU granted is a bookkeeping entry representing an amount equal to the fair market value of a share of our common stock. Restricted Stock Award Agreement. Each restricted stock grant shall be evidenced by an agreement that specifies the purchase price (if any) and such other terms and conditions as the Administrator shall determine; provided, however, that if the restricted stock grant has a purchase price, the purchase price must be paid no more than ten years following the date of grant. Terms and Conditions of Performance Shares. Subject to the terms and conditions of the Plan, performance shares may be granted to our employees and consultants at any time and from time to time as determined at the discretion of the Administrator. The Administrator has complete discretion to determine (i) the number of shares of our common stock subject to a performance share award granted to any participant and (ii) the conditions that must be satisfied for grant or for vesting, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component. However, no participant shall be granted performance share award covering more than 300,000 shares in any of our fiscal years, except that up to 750,000 shares may be granted on the participant's first fiscal year of service. Performance Share Award Agreement. Each performance share grant shall be evidenced by an agreement that specifies such other terms and conditions as the Administrator, in its sole discretion, shall determine. Terms and Conditions of Performance Units. Performance units are similar to performance shares, except that they are settled in cash equivalent to the fair market value of the underlying shares of our common stock, determined as of the vesting date. The shares available for issuance under the Plan shall not be diminished as a result of the settlement of a performance unit. No participant shall be granted a performance unit award covering more than $1,500,000 in any of Microchip's fiscal 25 Table of Contents years, except that a newly hired participant may receive a performance unit award covering up to $4,000,000 in the participant's first fiscal year of service. Performance Unit Award Agreement. Each performance unit grant shall be evidenced by an agreement that shall specify such terms and conditions as shall be determined at the discretion of the Administrator. Terms and Conditions of Deferred Stock Units. Deferred stock units consist of restricted stock, performance share or performance unit awards that the Administrator, in its sole discretion, permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Administrator. Deferred stock units are subject to the individual annual limits that apply to each type of award. Dividend Equivalent Right Restrictions. The Plan does not permit the granting of dividend equivalent rights, including but not limited to, on options or SARs. Accordingly, in no event will dividend equivalent rights be paid out on unearned service-based or performance-based vesting awards under the Plan. Awards to Non-Employee Directors. The Plan provides for initial and annual awards to individuals who become non- employee directors on or after August 1, 2021 within prescribed parameters. Specifically, each non-employee director is entitled to receive the following automatic grants: (i) for new non-employee directors, a grant of that number of RSUs equal to (x) $170,000 divided by the fair market value of a share on the date of grant, multiplied by (y) a fraction with a numerator of (A) 12 minus the number of months between the last annual stockholder meeting and the date the director joins our Board of Directors, and a denominator of (B) 12, rounded down to the nearest whole share (the "Initial RSU Grant"), and (ii) for continuing non-employee directors on the date of the annual meeting, a grant of that number of RSUs equal to $170,000 divided by the fair market value of a share on the date of grant, rounded down to the nearest whole share (the "Annual RSU Grant"). The Initial RSU Grant vests 100% on the earlier of one year following the date of grant or one day prior to the next annual stockholder meeting. The Annual RSU Grant vests 100% on the earlier of one year following the date of grant or one day prior to the next annual stockholder meeting. Vesting of the Initial RSU Grant and the Annual RSU Grant is contingent upon the applicable non-employee director maintaining continued status as a non-employee director through the applicable vesting date. Non-Transferability of Awards. Unless determined otherwise by the Administrator, an award granted under the Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the recipient, only by the recipient. In no event may an award granted under the Plan be exchanged for consideration. If the Administrator makes an award granted under the Plan transferable, such award shall contain such additional terms and conditions as the Administrator deems appropriate. Acceleration upon Death. In the event that a participant dies while a service provider, 100% of his or her awards shall immediately vest. Leave of Absence. In the event that a participant goes on an unpaid leave of absence, award vesting will cease until he or she returns to work, except as required by law or as determined by the Administrator. Forfeiture on Misconduct. Should (i) a participant's service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement), or (ii) a participant makes any unauthorized use or disclosure of confidential information or trade secrets of Microchip or its parent or subsidiary, then all outstanding awards held by the participant will terminate immediately and cease to be outstanding, including both vested and unvested awards. Adjustment Upon Changes in Capitalization. In the event that our capital stock is changed by reason of any stock split, reverse stock split, stock dividend, combination or reclassification of our common stock or any other increase or decrease in the number of issued shares of common stock effected without receipt of consideration by us, appropriate proportional adjustments shall be made in the number and class of shares of stock subject to the Plan, the individual fiscal year limits applicable to restricted stock, RSUs, performance share awards, SARs and options, the number and class of shares of stock subject to any award outstanding under the Plan, and the exercise price of any such outstanding option or SAR or other award, provided that such automatic adjustments will not be made to the number of shares to be granted to our non-employee directors under the Plan. Any such adjustment shall be made by the Compensation Committee of our Board of Directors, whose determination shall be conclusive. 26 Table of Contents Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of Microchip, the Administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a participant to have the right to exercise his or her option or SAR until ten days prior to such transaction as to all the shares covered by the award, including shares as to which the award would not otherwise be exercisable. The Administrator may provide that any repurchase option or forfeiture rights held by Microchip will lapse 100% and vesting will accelerate 100%, provided that the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent that it has not been exercised (with respect to options or SARs) or vested (with respect to other awards), an award will terminate immediately prior to the consummation of the proposed action. Change of Control. In the event of a change of control of Microchip, the successor corporation (or its parent or subsidiary) will assume or substitute each outstanding award. If the successor corporation refuses to assume the awards or to substitute equivalent awards, such awards shall become 100% vested. In such event, the Administrator shall notify the participant that each award subject to exercise is fully exercisable for 30 days from the date of such notice and that the award terminates upon expiration of such period. Amendment, Suspensions and Termination of the Plan. Our Board of Directors may amend, suspend or terminate the Plan at any time; provided, however, that stockholder approval is required for any amendment to the extent necessary to comply with any applicable law, rule or regulation. The Plan will terminate in August 2031 unless earlier terminated by the Board of Directors. Federal Tax Information The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and us of awards granted under the Plan. Tax consequences for any particular individual may be different. Options. Options granted under the Plan are nonstatutory options that do not qualify as incentive stock options under Section 422 of the Code. A participant will not recognize any taxable income at the time the participant is granted a nonstatutory option. However, upon its exercise, the participant will recognize taxable income generally measured as the excess of the then-fair market value of the shares purchased over the exercise price of the option. Any taxable income recognized in connection with an option exercise by a participant who is also our employee will be subject to tax withholding by us. Upon resale of such shares by the participant, any difference between the sale price and the participant's exercise price, to the extent not recognized as taxable income as described above, will be treated as short-term or long-term capital gain or loss, depending on the holding period. Stock Appreciation Rights. No taxable income is reportable when an SAR is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the fair market value of any shares of our common stock received and/or the amount of cash received. Any taxable income recognized in connection with exercise of an SAR by a participant who is also our employee will be subject to tax withholding by us. Any additional gain or loss recognized upon any later disposition of the shares of our common stock would be a capital gain or loss. Restricted Stock, Performance Units and Performance Shares. A participant will not have taxable income upon grant (unless, with respect to restricted stock that is not in the form of RSUs, he or she elects to be taxed at that time). Instead, he or she will recognize ordinary income at the time of vesting/delivery equal to the fair market value (on the vesting date) of the vested shares or cash received minus any amount paid for the shares of our vested common stock. Any taxable income recognized in connection with an award of restricted stock, performance units, and performance shares by a participant who is also our employee will be subject to tax withholding by us. Deferred Stock Units. Typically, a participant will recognize employment taxes upon the vesting of a deferred stock unit and income upon its delivery. The participant may be subject to additional taxation, interest and penalties if the deferred stock unit does not comply with Section 409A of the Code. 27 Table of Contents Tax Effect for Microchip. We generally will be entitled to a tax deduction in connection with an award under the Plan in an amount equal to the ordinary income realized by a participant at the time the participant recognizes such income (for example, the exercise of a non-qualified stock option). Special rules limit the deductibility of compensation paid to our covered employees. Under Section 162(m), the annual compensation paid to any of these specified employees will be deductible only to the extent that it does not exceed $1,000,000. Section 409A of the Code. Section 409A of the Code imposes certain requirements on non-qualified deferred compensation arrangements. These include requirements with respect to an individual's election to defer compensation and the individual's selection of the timing and form of distribution of the deferred compensation. Section 409A of the Code also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual's separation from service, a predetermined date, or the individual's death). Section 409A of the Code imposes restrictions on an individual's ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are officers, Section 409A of the Code requires that such individual's distribution commence no earlier than six months after such officer's separation from service. Awards granted under the Plan with a deferral feature will be subject to the requirements of Section 409A of the Code. If an award is subject to and fails to satisfy the requirements of Section 409A of the Code, the recipient of that award will recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A of the Code fails to comply with the provisions of Section 409A of the Code, Section 409A of the Code imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as possible interest charges and penalties. Certain states have enacted laws similar to Section 409A of the Code which impose additional taxes, interest and penalties on non-qualified deferred compensation arrangements. We will also have reporting requirements with respect to such amounts, and will have certain withholding requirements. THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND MICROCHIP UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A SERVICE PROVIDER'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH A SERVICE PROVIDER MAY RESIDE. Accounting Treatment. Under current accounting rules mandating expensing for all compensatory equity awards, including stock options and RSUs, we recognize compensation expense for all awards granted under the Plan. This will result in a direct charge to our reported earnings. Number of Awards Granted to Employees, Consultants, and Directors The amount, timing, and value of discretionary awards under the Plan, including grants to our Executive Chairman, CEO and our four other most highly compensated executive officers, is in the discretion of the Administrator and therefore not determinable in advance. The number of shares subject to future awards of RSUs to non-employee directors is subject to the election of such individuals as directors and the fair market value of the common stock on the date the RSUs are granted. No options were granted under the Plan during fiscal 2021. The following table sets forth the aggregate number of time-based RSUs and performance-based RSUs granted under the Plan during fiscal 2021 to each of our named executive officers; executive officers as a group; directors who are not executive officers as a group; and all employees who are not executive officers as a group: 28 Table of Contents Name of Individual or Group Steve Sanghi Executive Chair Ganesh Moorthy CEO and President Stephen V. Drehobl Senior VP, MCU8 and MCU16 Business Units Mitchell R. Little Senior VP, Worldwide Client Engagement J. Eric Bjornholt Senior VP and CFO Richard Simoncic Senior VP, Analog/Interface Business Unit All executive officers, as a group All directors who are not executive officers, as a group All employees who are not executive officers, as a group Number of Shares Subject to time-based RSUs Granted Dollar Value of Shares Subject to time-based RSUs Granted(1) Number of Shares Subject to performance-based RSUs Granted Dollar Value of Shares Subject to performance-based RSUs Granted(1) 41,443 $ 4,178,342 25,676 $ 3,205,736 16,488 1,638,536 12,269 1,531,843 7,590 752,118 5,810 725,413 6,560 654,317 4,619 576,702 5,901 585,097 4,468 557,878 5,214 83,196 519,628 8,328,038 3,704 56,546 462,470 7,060,042 5,135 560,251 N/A N/A 2,180,836 219,427,387 13,534 1,689,779 (1) Reflects the aggregate grant date fair value of awards computed under ASC 718. Vote Required and Recommendation An affirmative vote of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote at our Annual Meeting is required to approve our amended and restated Plan. Abstentions will have the same effect as voting against this Proposal. Broker "non-votes" are not counted for purposes of approving our amended and restated Plan and thus will not affect the outcome of the voting on such Proposal. Our Board of Directors unanimously recommends a vote "FOR" Proposal Three, the approval of an amendment and restatement of our 2004 Equity Incentive Plan to extend the term of the plan by ten years. 29 Table of Contents PROPOSAL FOUR RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee of our Board of Directors has appointed Ernst & Young LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending March 31, 2022. Ernst & Young LLP has audited our financial statements since the fiscal year ended March 31, 2002 and has served as our independent registered public accounting firm since June 2001. The partner in charge of our audit is rotated every five years. Other partners and non- partner personnel are rotated on a periodic basis as required. We anticipate that a representative of Ernst & Young LLP will be present at the annual meeting, will have the opportunity to make a statement if he or she desires and will be available to respond to appropriate questions. Stockholder ratification of the appointment of Ernst & Young LLP is not required by our Bylaws or applicable law. However, our Board of Directors chose to submit such appointment to our stockholders for ratification. In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection. Fees Paid to Independent Registered Public Accounting Firm Audit Fees This category includes fees associated with our annual audit, the reviews of our quarterly reports on Form 10-Q, and statutory audits required internationally. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of our interim financial statements, statutory audits and the assistance with review of our SEC registration statements. This category also included fees associated with the audit of our internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. The aggregate fees billed or to be billed by Ernst & Young LLP in each of the last two fiscal years for such services were approximately $6,421,958 for fiscal 2021 and $6,742,921 for fiscal 2020. Audit-Related Fees This category includes fees associated with employee benefit plan audits, internal control reviews, accounting consultations and attestation services that are not required by statute or regulation. The aggregate fees billed or to be billed by Ernst & Young LLP for such services were approximately $36,921 for fiscal 2021 and $43,985 fees for fiscal 2020. Tax Fees This category includes fees associated with tax return preparation, tax advice and tax planning. The aggregate fees billed or to be billed by Ernst & Young LLP in the last two fiscal years for such services were approximately $1,974,975 for fiscal 2021 and $1,885,904 for fiscal 2020. All Other Fees This category includes fees for support and advisory services not related to audit services or tax services. There were no such fees in fiscal 2021 or fiscal 2020. Our Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by our independent registered public accounting firm. Under the policy, pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget or limit. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Chair of the Audit Committee has the delegated authority from the Audit Committee to pre-approve a specified level of services, and such pre-approvals are then communicated to the full Audit Committee at its next scheduled meeting. During fiscal 2021, all audit and non-audit services rendered by Ernst & Young LLP were approved in accordance with our pre-approval policy. 30 Table of Contents Our Audit Committee has determined that the non-audit services rendered by Ernst & Young LLP during fiscal 2021 and fiscal 2020 were compatible with maintaining the independence of Ernst & Young LLP. Vote Required; Board Recommendation The affirmative vote of a majority of the votes cast on the proposal at the annual meeting is required to approve the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2022. Abstentions will have no effect on this proposal. Upon the recommendation of our Audit Committee, our Board of Directors unanimously recommends that stockholders vote "FOR" Proposal Four, the ratification of our independent registered public accounting firm, as described in this Proxy Statement. 31 Table of Contents PROPOSAL FIVE APPROVAL OF EXECUTIVE COMPENSATION As contemplated in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), Section 14A of the Securities Exchange Act of 1934 enables our stockholders to vote to approve, on an advisory (non- binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC's rules (commonly referred to as a "Say-on-Pay"). As described under the heading "Executive Compensation — Compensation Discussion and Analysis," our executive compensation program is a comprehensive package designed to motivate our executive officers to achieve our corporate objectives and is intended to be competitive and allow us to attract and retain highly qualified executive officers. We believe that the various elements of our executive compensation program work together to promote our goal of ensuring that total compensation should be related to both our performance and individual performance. Stockholders are urged to read the "Executive Compensation — Compensation Discussion and Analysis" section of this Proxy Statement, beginning on page 35, which discusses how our executive compensation policies implement our compensation philosophy, and the "Compensation of Named Executive Officers" section of this Proxy Statement, which contains tabular information and narrative discussion about the compensation of our named executive officers. These sections provide additional details about our executive compensation programs, including information about the fiscal 2021 compensation of our named executive officers. The Compensation Committee and our Board of Directors believe that these policies are effective in implementing our compensation philosophy and in achieving our goals. We are asking our stockholders to indicate their support for our executive compensation as described in this Proxy Statement. This Say-on-Pay proposal gives our stockholders the opportunity to express their views on our named executive officers' compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking our stockholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures. The Say-on-Pay vote is advisory, and therefore not binding on us, the Compensation Committee or our Board of Directors. However, our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our stockholders' concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. Our current policy is to provide stockholders with an opportunity to approve the compensation of our named executive officers each year at our annual meeting of stockholders. Thus, it is expected that the next such vote will occur at our 2022 annual meeting. Vote Required; Board Recommendation The affirmative vote of a majority of the votes cast on the proposal at the annual meeting is required to approve the compensation of our named executive officers on an advisory (non-binding) basis. Abstentions and broker "non-votes" are not counted for purposes of approving the compensation of our named executive officers on an advisory (non-binding) basis and thus will not affect the outcome of the voting on such proposal. Our Board of Directors unanimously recommends voting "FOR" Proposal Five, the approval, on an advisory (non-binding) basis, of the compensation of our named executive officers, as described in this Proxy Statement. 32 Table of Contents SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information concerning the beneficial ownership of our common stock as of June 25, 2021 for: (a) each director, (b) our CEO, our former CEO, our CFO and the three other most highly compensated executive officers named in the Summary Compensation Table, (c) all directors and executive officers as a group, and (d) each person who is known to us to own beneficially more than 5% of our common stock. Except as otherwise indicated in the footnotes to this table, and subject to applicable community property laws and joint tenancies, the persons named in this table have sole voting and investment power with respect to all shares of common stock held by such person: Name and Address of Beneficial Owner Number of Shares Beneficially Owned (1) Percent of Common Stock (1) The Vanguard Group, Inc.(2) BlackRock, Inc. (3) Dodge and Cox(4) Steve Sanghi (5) Ganesh Moorthy (6) Matthew W. Chapman (7) Wade F. Meyercord (8) Esther L. Johnson (9) L.B. Day (10) Karen M. Rapp (11) Karlton D. Johnson (12) Rich Simoncic (13) J. Eric Bjornholt (14) Stephen V. Drehobl (15) Mitchell R. Little (16) 29,709,164 20,222,766 18,281,484 5,028,414 344,521 20,693 17,980 10,229 9,851 555 297 54,925 31,941 25,416 10,946 10.84 7.38 6.67 1.83 * * * * * * * * * * * All directors and executive officers as a group (12 people) (17) 5,555,768 2.03 * Represented less than 1% of the outstanding shares of common stock as of June 25, 2021. Our shares of common stock outstanding at June 25, 2021 were 274,040,144. (1) For each individual and group included in the table, the number of shares beneficially owned includes shares of common stock issuable to the identified individual or group pursuant to RSUs that will vest and stock options that are exercisable within 60 days of June 25, 2021. With respect to RSUs that will vest within 60 days of June 25, 2021, the full vesting amount of shares has been included in the table, however, the actual shares issued is expected to be lower as the shares actually issued will be net of taxes. In calculating the percentage of ownership of each individual or group, share amounts that are attributable to options and RSUs that vest within 60 days of June 25, 2021 are deemed to be outstanding for the purpose of calculating the percentage of shares of common stock owned by such individual or group, but are not deemed to be outstanding for the purpose of calculating the percentage of shares of common stock owned by any other individual or group. Unless otherwise indicated, the address for each stockholder listed is: c/o Microchip Technology Incorporated, 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199. (2) Address is 100 Vanguard Boulevard, Malvern, PA 19355. All information is based solely on the Schedule 13G/A filed by The Vanguard Group, Inc. on February 10, 2021, with the exception of the percentage of common stock held which is based on shares outstanding at June 25, 2021. Such Schedule 13G/A indicates that The Vanguard Group, Inc. (i) has sole 33 Table of Contents power to dispose of or direct the disposition of 28,578,848 shares of common stock and shared power to dispose of or direct the disposition of 1,130,316 shares of common stock; and (ii) has shared power to vote or direct the vote of 432,629 shares of common stock. (3) Address is 55 East 52nd Street, New York, NY 10055. All information is based solely on the Schedule 13G/A filed by BlackRock, Inc. on January 29, 2021 with the exception of the percentage of common stock held which is based on shares outstanding at June 25, 2021. Such Schedule 13G/A indicates that BlackRock, Inc. (i) has sole power to dispose of or direct the disposition of 20,222,766 shares of common stock; and (ii) has sole power to vote or direct the vote of 18,298,828 shares of common stock. (5) (7) (6) (4) Address is 555 California Street, 40th Floor, San Francisco, CA 94104. All information is based solely on the Schedule 13G/A filed by Dodge & Cox on February 11, 2021 with the exception of the percentage of common stock held which is based on shares outstanding at June 25, 2021. Such Schedule 13G/A indicates that Dodge & Cox (i) has sole power to dispose of or direct the disposition of 18,281,484 shares of common stock; and (ii) has sole power to vote or direct the vote of 17,305,184 shares of common stock. Includes 2,049,861 shares held of record by The Sanghi Trust (the "Sanghi Trust") 2,952,936 shares held of record by The Sanghi Family Limited Partnership (the "Family Limited Partnership"), and includes an aggregate of 25,617 shares subject to RSUs that vest within 60 days of June 25, 2021. Steve Sanghi and Maria T. Sanghi are the sole trustees of the Sanghi Trust. The Sanghi Trust is the sole member of the Sanghi LLC which is the sole general partner of the Family Limited Partnership. Includes 333,511 shares held of record by Ganesh Moorthy and Hema Moorthy as trustees, and includes an aggregate of 11,010 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 1,837 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes 16,143 shares held of record by Wade F. Meyercord and Phyllis Meyercord as trustees, and 1,837 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 1,837 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 1,837 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 555 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 297 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 3,691 RSUs that vest within 60 days of June 25, 2021. Includes 28,646 shares held of record by J. Eric Bjornholt and Lynn Bjornholt as trustees, and includes an aggregate of 3,295 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 5,041 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 4,456 shares subject to RSUs that vest within 60 days of June 25, 2021. Includes an aggregate of 61,310 RSUs that vest within 60 days of June 25, 2021. (12) (11) (10) (15) (14) (17) (13) (16) (8) (9) 34 Table of Contents EXECUTIVE COMPENSATION COMPENSATION DISCUSSION AND ANALYSIS Overview of the Compensation Program The Compensation Committee of our Board of Directors, presently comprised of Mr. Meyercord (Chair), Mr. Day and Ms. Johnson, reviews the performance of our executive officers and makes compensation decisions regarding our executive officers. Our policies for setting compensation for each of our named executive officers (i.e., our CEO, our former CEO, our CFO, and our three other most highly paid executive officers) are the same as those for the rest of our executive officers. Our compensation program is a comprehensive package designed to motivate the executive officers to achieve our corporate objectives and is intended to be competitive and allow us to attract and retain highly qualified executive officers. In general, the types of compensation and benefits provided to our executive officers are similar to those provided to a broad base of Microchip employees, and include salary, cash bonuses, RSUs, and other benefits described below. Our Executive Compensation Policy and Objectives Our compensation policy for executive officers, including our named executive officers, and key employees is based on a "pay-for-performance" philosophy. This "pay-for-performance" philosophy emphasizes variable compensation, primarily by placing a large portion of pay at risk. We believe that this philosophy meets the following objectives: • • • • • • rewards performance that may contribute to increased stockholder value, attracts, retains, motivates and rewards individuals with competitive compensation opportunities, aligns an executive officer's total compensation with our business objectives, fosters a team environment among our management that focuses their energy on achieving our financial and business objectives consistent with Microchip's "guiding values," balances short-term and long-term strategic goals, and builds and encourages ownership of our common stock. Decisions regarding cash and equity compensation also include subjective determinations and consideration of various factors with the weight given to a particular factor varying from time to time and in various individual cases, such as an executive officer's experience in the industry and the perceived value of the executive officer's position to Microchip as a whole. We believe that the overall compensation levels for our executive officers, including our named executive officers, in fiscal 2021 were consistent with our "pay-for-performance" philosophy and were commensurate with our fiscal 2021 performance. Recent Compensation Related Developments CEO Transition. Effective March 1, 2021, Mr. Sanghi transitioned from CEO and Chair of the Board of Directors to an Executive Chair role, and Mr. Moorthy was appointed as CEO and continued to serve as President. In connection with the foregoing, effective March 1, 2021, Mr. Sanghi's base salary was reduced by 40.0% to $483,556 and effective May 31, 2021, Mr. Moorthy's base salary was increased by 25.0% to $583,450. COVID-19 Salary Reductions. In response to uncertainties related to the impact of the COVID-19 virus and in connection with other expense reduction actions being taken by our management team, on April 8, 2020, the Compensation Committee approved a 20% salary cut for our former CEO (Mr. Sanghi), our current CEO and President (Mr. Moorthy) and our other executive staff members (including our other named executive officers, Mr. Bjornholt, Mr. Drehobl, Mr. Little and Mr. Simoncic) effective April 20, 2020. As the uncertainties related to the COVID-19 virus abated and business conditions improved, such salaries were partially reinstated in August 2020 and October 2020, and fully reinstated in November 2020. Performance Based RSUs. Beginning with the fourth quarter of fiscal 2020, we modified the vesting methodology for RSU awards under our quarterly evergreen grant program to provide that RSUs for 50% of the total evergreen award would be subject to 35 Table of Contents performance vesting based on the relative total shareholder return of our common stock compared to a peer group of twenty companies. Such performance-based awards, and the other 50% of the evergreen RSU awards, will also be subject to time-based vesting and will only vest subject to the continued service of the officer on the vesting date which is approximately four years from the grant date. Executive Compensation Process The Compensation Committee evaluates and establishes the compensation of our executive officers, including our named executive officers. The Compensation Committee seeks input from our CEO when discussing the performance of, and compensation levels for, the executive officers other than himself. Our CEO does not participate in deliberations relating to his own compensation. The Compensation Committee designs our executive compensation program to be competitive with those of other companies in the semiconductor or related industries in our market. The Compensation Committee determines appropriate levels of compensation for each executive officer based on their level of responsibility within the organization, performance, and overall contribution. After such determination, the Compensation Committee makes allocations between long-term and short-term as well as the cash and non-cash elements of compensation. Microchip's financial and business objectives, the salaries of executive officers in similar positions with comparable companies and individual performance are considered in making these determinations. To the extent compensation information is reviewed for other companies, it is obtained from published materials such as proxy statements, and information gathered from such companies directly. We do not engage consultants to conduct such review process for us, or utilize a specific peer group. The executive officer compensation process begins with consideration of Microchip's overall budget for employee compensation. The Compensation Committee considers the budgeted salary data and individual executive officer salary increases are determined with the goal of keeping the executive officer salary increases within the budgeted range for other employees. In setting salaries for executive officers, the Compensation Committee may consider relevant industry data but does not target any overall industry percentage level or peer group average. Microchip's compensation budget is created as part of its annual and quarterly operating plan processes under which business and financial objectives are initially developed by our executive officers, in conjunction with their respective business units, and then discussed with and approved by our CEO. These objectives are then reviewed by our Board of Directors and are the overall financial and business objectives on which incentive compensation is based. The Compensation Committee sets the compensation of our Executive Chair and our CEO in the same manner as each of our other executive officers. In particular, the Compensation Committee considers such executive’s level of responsibility, performance, and overall contribution to the results of the organization. The Compensation Committee also considers the compensation of executives of other companies in the semiconductor or related industries in our market. Mr. Sanghi and Mr. Moorthy participate in the same cash incentive, equity incentive and benefit programs as our other executive officers. For example, their compensation is subject to the same performance metrics as our other executive officers under our Executive Management Incentive Compensation Plan ("EMICP"). The Compensation Committee recognizes that, in his role as our former CEO, Mr. Sanghi's total compensation package was significantly higher than that of our other executive officers and the Compensation Committee believed this was appropriate in consideration of Mr. Sanghi's superior leadership of Microchip over a long period of time. In particular, the Compensation Committee believed that Mr. Sanghi's leadership has been key to the substantial revenue and profitability growth, strong market position and substantial increase in the market value of Microchip since taking Microchip public in 1993, and to leading Microchip's strong performance relative to others in the industry over a number of years. For fiscal 2021, the Compensation Committee reviewed and approved the total compensation package of all of our executive officers, including the elements of compensation discussed below, and determined the amounts to be reasonable and competitive. At our last annual meeting of stockholders held in August 2020, our stockholders approved an advisory (non-binding) proposal concerning our executive compensation program with approximately 94.6% of the votes cast in favor of the proposal. The Compensation Committee considered the results of this vote in establishing the compensation program for fiscal 2021. 36 Table of Contents Elements of Compensation Our executive compensation program is currently comprised of four major elements: • • • • annual base salary, incentive cash bonuses, equity compensation, and compensation and employee benefits generally available to all of our employees. The retirement benefits and other benefits offered to our executive officers are largely the same as those we provide to a broad base of employees. While our executive officers' level of participation in our management incentive compensation plans and equity incentive plans is typically higher than for our non-executive employees, based on the officers' level of responsibility and industry experience, the plans in which our executive officers are eligible to participate are very similar to those for many of our other employees. The Compensation Committee reviews each element of compensation separately and total compensation as a whole, other than those benefits which are available to all employees. The Compensation Committee determines the appropriate mix of elements to meet our compensation objectives and to help ensure that we remain competitive with the compensation practices in our industry and market. Although our executive officers are entitled to certain severance and change of control benefits (as described below), the Compensation Committee does not consider such benefits to be elements of compensation for purposes of annual compensation reviews because such benefits may never be paid. Base Salaries. When setting base salaries, we review the business and financial objectives for Microchip as a whole, as well as the objectives for each of the individual executive officers relative to their respective areas of responsibility. In particular, we consider our overall level of end-market demand and the level of end-market demand in our strategic business units, non-GAAP gross margins, non-GAAP operating expenses, non-GAAP net income per diluted share, cash generation, expected capital expenditures and other financial considerations in setting our budgets for salaries. We also consider the individual performance of our named executive officers including the officer's level of responsibility (including the increased level of responsibility of our officers as a result of our acquisition activity), performance, overall contribution to the results of the organization, the officer's base salary relative to the salaries of our other officers, salary relative to comparable positions in the industry and market, the officer's overall compensation including incentive cash bonuses and equity compensation and the officer's performance relative to expectations. We do not assign any specific weight to any such factor but consider such factors as a whole for each executive. This review encompasses the objectives for both the immediately preceding fiscal year and the upcoming fiscal year. In response to uncertainties related to the impact of the COVID-19 virus and in connection with other expense reduction actions being taken by our management team, on April 8, 2020, the Compensation Committee approved a 20% salary cut for our former CEO (Mr. Sanghi), our current CEO and President (Mr. Moorthy) and our other executive staff members (including our other named executive officers, Mr. Bjornholt, Mr. Drehobl, Mr. Little and Mr. Simoncic) effective April 20, 2020. As the uncertainties related to the COVID-19 virus abated and business conditions improved, such salaries were partially reinstated in August 2020 and October 2020, and fully reinstated in November 2020. Effective March 1, 2021, Mr. Sanghi transitioned from CEO and Chair of the Board to an Executive Chair role, and Mr. Moorthy was appointed as CEO and continued to serve as President. In connection with the foregoing, effective March 1, 2021, Mr. Sanghi’s base salary was reduced by 40.0% to $483,556, and effective May 31, 2021, Mr. Moorthy's base salary was increased by 25.0% to $583,450. Due to the uncertainties related to the COVID-19 virus, we did not adjust base salaries for our other executive officers in fiscal 2021. We did adjust base salaries for our executive officers (other than Mr. Sanghi and Mr. Moorthy) on April 1, 2021 to be effective May 31, 2021. In connection with such salary increases, a budget for salary increases was established with any increases in salary determined on a discretionary basis based on the performance reviews of the executives. Incentive Cash Bonuses. The Compensation Committee sets performance goals which, if met, result in quarterly payments to our executive officers under the EMICP. Executive officers may also receive quarterly payments under the Discretionary Management Incentive Compensation Plan ("DMICP"). The Compensation Committee establishes performance goals which it 37 Table of Contents believes are challenging, require a high level of performance and motivate participants to drive stockholder value, but which goals are expected to be achievable in the context of business conditions anticipated at the time the goals are set. When setting the performance goals, the Compensation Committee places more emphasis on the overall expected financial performance of Microchip rather than on the achievement of any one individual goal. The Compensation Committee believes that this focus on the overall payout incentivizes outstanding performance across the corporation and drives the overall financial success of the corporation. The Compensation Committee uses the DMICP to help achieve the overall objectives of the performance bonus program. The performance metrics under the EMICP are determined by the Compensation Committee at the beginning of each quarter and may be based on GAAP financial results, non-GAAP financial results or end-market demand for our products at the discretion of the Compensation Committee. In each quarter of fiscal 2021, the Compensation Committee used the end-market demand metric when setting the targets because it believes such metric is more useful in understanding our operating results. End-market demand is the net dollar amount of our products, licensing revenue, and services delivered to our direct (non-distributor) customers and by our distributors to their customers. We believe that our end-market demand metric reflects true end-market demand based on when product is sold to direct customers or by our distributors to an end customer. Certain other performance metrics under the EMICP such as those based on gross margin, operating expenses, operating profit and earnings per share are based on end-market demand and also reflect non-GAAP adjustments, as applicable, for the effect of share-based compensation, COVID-19 shelter-in-place restrictions on manufacturing activities, manufacturing excursion, expenses related to our acquisition activities (including intangible asset amortization, severance and other restructuring costs, and legal and other general and administrative expenses associated with acquisitions including legal fees and expenses for litigation and investigations related to our Microsemi acquisition), professional services associated with certain legal matters, IT security remediation costs, non-cash interest expense on our convertible debentures, losses on the settlement of debt, and gains related to equity investments. Each of the performance metrics is reviewed each quarter but may be the same for multiple quarters. The earnings per share metric changes each quarter. The table below sets forth the performance metrics under the EMICP for each quarter of fiscal 2021. 38 Table of Contents Target Quarterly Measurement Actual Results Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Performance Metric % Target % of Bonus % Target % of Bonus % Target % of Bonus % Target % of Bonus Perf. % Bonus Payout % Perf. % Bonus Payout % Perf. % Bonus Payout % Perf. % Bonus Payout % FY21 Performance Metrics Total sequential end-market demand growth High performance micro- controller sequential end-market demand growth Analog sequential end-market demand growth Field- programmable gate array (FPGA) sequential end-market demand growth End-market demand gross margin percentage End-market demand operating expenses as a percentage of end-market demand End-market demand operating income as a percentage of end-market demand Days of inventory (quarterly) End-market demand earnings per share (quarterly) 1.50 10.00 1.50 10.00 1.50 12.00 1.50 12.00 (2.22) (2.40) (0.87) 2.09 7.05 34.20 8.11 38.42 1.50 3.00 1.50 3.00 1.50 4.00 1.50 4.00 (4.01) (2.51) (4.78) (3.28) 3.50 6.67 12.30 18.40 1.50 3.00 1.50 3.00 1.50 3.00 1.50 3.00 (0.72) 0.78 (1.77) (0.27) 8.02 9.52 7.34 8.84 1.50 1.00 1.50 1.00 1.50 1.00 1.50 1.00 (6.48) (1.66) 13.81 5.10 5.23 2.24 (31.99) (10.16) 60.00 14.00 60.00 14.00 60.00 15.00 61.50 15.00 61.42 18.97 61.97 20.89 62.94 26.03 63.90 24.00 26.00 14.00 26.00 14.00 26.00 15.00 24.50 15.00 23.38 26.22 23.40 26.10 22.79 31.05 23.06 22.22 34.00 14.00 34.00 14.00 34.00 15.00 37.00 15.00 38.04 23.43 38.56 24.65 40.15 30.38 40.84 24.61 125 7.00 122 7.00 N/A N/A N/A N/A 117.26 20.55 120.00 10.50 N/A N/A N/A N/A $1.38 14.00 $1.35 14.00 $1.41 15.00 $1.73 15.00 150.75 22.62 148.25 23.16 167.05 33.48 189.34 24.45 EMICP Total N/A 80.00 N/A 80.00 N/A 80.00 N/A 80.00 N/A DMICP Total (5) 20.00 (5) 20.00 (5) 20.00 (5) 20.00 N/A (1) (1) N/A N/A (2) (2) N/A N/A (3) (3) N/A N/A (4) (4) (1) For the first quarter of fiscal 2021, the calculated bonus payout percentage under the EMICP was 106.0%; however, no payments were made under the EMICP or the DMICP due to uncertainties related to the COVD-19 virus. As a retention mechanism, our executive officers were granted RSUs that will vest on August 15, 2021, subject to continued service on such date. Information regarding such RSU grants are set forth in the “Grants of Plan-Based Awards” table. (2) For the second quarter of fiscal 2021, the calculated bonus payout percentage under the EMICP was 108.94%; however, the Compensation Committee approved an overall cash bonus payout under the EMICP and DMICP of 50.0%. All of our executives 39 Table of Contents participated in the salary reduction program and were also granted RSUs that will vest on November 15, 2021, subject to continued service on such date. Information regarding such RSU grants are set forth in the “Grants of Plan-Based Awards” table. (3) For the third quarter of fiscal 2021, the calculated bonus payout percentage under the EMICP was 173.56%; however, the Compensation Committee approved an overall cash bonus payout under the EMCIP and DMICP of 100.0%. All of our executives participated in the salary reduction program and were also granted RSUs that will vest on February 15, 2021, subject to continued service on such date. Information regarding such RSU grants are set forth in the “Grants of Plan-Based Awards” table. (4) For the fourth quarter of fiscal 2021, the calculated bonus payout percentage under the EMICP was 150.77%; however, the Compensation Committee approved an overall cash bonus payout under the EMCIP and DMICP of 100.0%. All of our executives participated in the salary reduction program and also received a cash amount equal to 40% of the EMICP target and were granted RSUs that will vest on June 1, 2022, subject to continued service on such date. Information regarding such RSU grants are set forth in the “Grants of Plan-Based Awards” table. (5) Each quarter, the Target Quarterly Measurement under the DMICP is discretionary. The total amount payable to each executive under the EMICP and the DMICP is based on a percentage of the executive's base salary at the beginning of the quarter. The participation percentage for each executive is determined at the beginning of the fiscal year based on the executive's base salary at that time and typically stays at the same level for each quarter of the fiscal year. However, the Compensation Committee may change the participation level of an executive each quarter to reflect changes in the performance or responsibilities of the executive or other factors. The dollar amount of the target bonus for each executive is based on assumed achievement of all performance metrics under the EMICP (as disclosed in the tables above) and payment of 20% as a discretionary award under the DMICP (as disclosed in the tables above). The aggregate budgeted bonus pool under the various management incentive compensation plans is calculated by multiplying each eligible executive officer's bonus target percentage by the executive's base salary. Bonuses under the EMICP are subject to a maximum award of $2,500,000 per individual per performance period (which can be a fiscal quarter, a fiscal year, or a longer period not exceeding five fiscal years); however, all awards to date have been substantially less than such maximum amount. The actual awards under the EMICP are based on our actual quarterly financial performance compared to the performance metrics (or such lesser amount as determined in the discretion of our Compensation Committee) and the actual awards under the DMICP are determined in the discretion of our Compensation Committee and can be significantly higher or lower than the 20% target. The actual awards are calculated by multiplying the overall award percentage payout for the quarter by the applicable percentage of the executive's salary at the end of the fiscal quarter that the award relates to. Thus, if an executive's salary or participation percentage changes during the year, up or down, this would affect the executive's actual bonus payment during the fiscal year. For fiscal 2021, the specific total bonus percentages under both the EMICP and DMICP for each of our named executive officers were as follows: for Mr. Sanghi it was 200% of his salary for the associated quarter; for Mr. Moorthy it was 82% of his salary; for Mr. Little it was 46% of his salary; for Mr. Drehobl it was 46% of his salary; for Mr. Simoncic it was 41% of his salary; and for Mr. Bjornholt it was 37% of his salary. These bonus percentages did not change from the percentages used for fiscal 2020. In connection with Mr. Sanghi’s transition to an Executive Chair role and Mr. Moorthy appointment as CEO, effective April 1, 2021, Mr. Sanghi’s bonus participation level was reduced from 200% to 120%, and Mr. Moorthy’s bonus participation level was increased from 82% to 125%. As indicated in the above table, for the first quarter of fiscal 2021, 1.0% of the quarterly EMICP payment was based on Microchip's FPGA business unit achieving total sequential revenue growth of 1.5%. Accordingly, if Microchip's FPGA business unit's sequential revenue growth for the first quarter was 1.5%, then each executive would be paid the corresponding 1.0% of the EMICP target bonus amount for that quarter. If Microchip's FPGA business unit's revenue growth for the first quarter was 0.75%, then each executive would be paid a corresponding 0.5% of the target bonus amount for that quarter (i.e., 1/2 of the 1.0%) and if Microchip's FPGA business unit's revenue growth for the third quarter was 3.0%, then each executive would be paid a corresponding 2.0% of the target bonus amount for that quarter (i.e., 3.0/1.5 of the 1.0%). A similar methodology is applied each quarter to each of the performance metrics listed in the above table. In response to uncertainties related to the impact of the COVID-19 virus and in connection with other expense reduction actions being taken by our management team, on June 1, 2020, the Compensation Committee determined that no amounts would be 40 Table of Contents paid under the EMICP and DMICP for the first quarter of fiscal 2021. As set forth in the above tables and the footnotes to the tables, during fiscal 2021, our Executive Chair, our CEO and our other executive officers received cash bonuses under the EMICP/DMICP for the second, third and fourth quarters of fiscal 2021, and RSUs awards. Applying the award percentages to each named executive officer's participation level in the plans, for fiscal 2021, the total bonus payments made in cash under the EMICP and the DMICP for our named executive officers, other than Mr. Sanghi and Mr. Moorthy, ranged from $76,553 to $111,081. In fiscal 2021, Mr. Sanghi earned an aggregate EMICP bonus payment made in cash of $1,168,596, and Mr. Moorthy earned an aggregate EMICP bonus payment made in cash of $277,510. Please see footnote 4 to the Summary Compensation Table on page 48 of this Proxy Statement which sets forth the actual amount of the EMICP and DMICP awards for each named executive officer for fiscal 2021. In fiscal 2021, the portion of the DMICP awards that were paid in RSUs for our named executive officers, other than Mr. Sanghi and Mr. Moorthy, ranged from 409 shares to 590 shares, Mr. Moorthy earned RSUs for 1,451 shares and Mr. Sanghi earned RSUs for 6,046 shares. The differences in the levels of compensation under these programs for the various executive officers are based upon their relative contribution, performance, experience, and responsibility level within the organization. Equity Compensation. Equity compensation, such as RSUs, constitutes a significant portion of our incentive compensation program because we believe that executive officers and key employees should hold a long-term equity stake in Microchip to align their collective interests with the interests of our stockholders. Accordingly, in fiscal 2021, equity grants in the form of RSUs were a significant portion of our executive officers' total compensation package. We typically make equity compensation grants to executive officers and key employees in connection with their initial employment, and we also typically make quarterly evergreen grants of equity to incentivize employees on a continuing basis as their initial equity awards vest. In setting the amount of the equity compensation grants, the estimated value of the grants is considered, as well as the intrinsic value of the outstanding equity compensation held by the executive officer. In setting these amounts and any performance goals, the Compensation Committee uses its judgment after considering the effect of the overall RSU amounts and the percentage of RSUs granted to executive officers in connection with the overall financial results and performance of Microchip. Beginning with the evergreen grants of RSUs for the fourth quarter of fiscal 2020, 50% of the evergreen awards were subject to performance vesting based on the relative total shareholder return of our common stock compared to a peer group of twenty companies over a two-year period. In February 2021, the Compensation Committee determined to use a three-year period instead of a two-year period for future evergreen awards. Such performance-based awards and the other 50% of the evergreen RSU awards will also be subject to time-based vesting and will only vest subject to the continued service of the officer on the vesting date which is approximately four years from the grant date. Under this performance-based criteria, Mr. Sanghi and Mr. Moorthy were granted 25,676 RSUs and 12,269 RSUs, respectively, and our other executive offers were granted from 3,704 RSUs to 5,810 RSUs for fiscal 2021, and each executive was also granted time-based RSUs. The current list of peer group companies for purposes of our performance based evergreen RSU awards is as follows: Amkor Technology, Inc. MACOM Technology Solutions Holdings, Inc. Renesas Electronics Corporation Analog Devices, Inc. Marvell Technology Group, Ltd. Semtech Corporation Arrow Electronics, Inc. Maxim Integrated Products, Inc. Silicon Laboratories Inc. Avnet, Inc. Broadcom Inc. Monolithic Power Systems, Inc. STMicroelectronics N.V. NXP Semiconductors N.V. Synaptics Incorporated Infineon Technologies AG ON Semiconductor Corporation Texas Instruments Incorporated Lattice Semiconductor Corporation Power Integrations, Inc. Grants of RSUs in fiscal 2021 typically were scheduled to vest approximately four years from the grant date. RSUs do not have a purchase price and therefore have immediate value to recipients upon vesting. On March 31, 2021, approximately 67.2% of 41 Table of Contents our employees worldwide were eligible to receive RSUs under our 2004 Equity Incentive Plan. For more than ten years, RSUs have been the principal equity compensation vehicle for Microchip executive officers and key employees. Grants of RSUs may also be made in connection with promotions, other changes in responsibilities or in recognition of other individual or Microchip developments or achievements. In this regard, on June 1, 2020, the Compensation Committee approved RSU awards to executive officers as a retention mechanism in light of the salary reduction program which was implemented in April 2020. These RSU awards vested in full on June 1, 2021. In June 2020, the Employee Committee approved RSU awards to non-executive employees who participated in the salary reduction program as a retention mechanism. In granting equity compensation awards to executive officers, we consider numerous factors, including: • • • • the individual's position, experience, and responsibilities, the individual's future potential to influence our mid- and long-term growth, the vesting schedule of the awards, and the number and value of awards previously granted. We do not separately target the equity element of our executive officer compensation programs at a specific percentage of overall compensation. However, overall total compensation is structured to be competitive so that we can attract and retain executive officers. In setting equity award levels, we also take into consideration the impact of the equity-based awards on the dilution of our stockholders' ownership interests in our common stock. The Compensation Committee grants RSUs to executive officers and current employees on a quarterly basis in an attempt to more evenly record stock-based compensation expense. Grants of RSUs to new employees (other than executives) are made once per month by the Employee Committee at a meeting of such committee. The Employee Committee was appointed by our Board of Directors and our Compensation Committee and is comprised of our Executive Chair, our President and CEO, and our Senior Vice President of Global Human Resources. Grants of RSUs to any new executive officer would be made at the first meeting of the Compensation Committee following the election of such officer. Microchip does not have any program, plan or practice to time grants of RSUs in coordination with the release of material non-public information. Microchip does not time, nor do we plan to time, the release of material non-public information for the purposes of affecting the value of executive compensation. See the table under "Grants of Plan-Based Awards for Fiscal Year Ended March 31, 2021" at page 50 for information regarding RSUs granted during fiscal 2021 to our named executive officers. Stock Ownership Guidelines for Key Employees and Directors. To help ensure alignment of the interests of our management and Board of Directors with those of our stockholders, we have put in place a stock holding policy that applies to each member of our management and Board of Directors. This policy was proposed by our Nominating, Governance, and Sustainability Committee and ratified by our Board of Directors in October 2003 and was amended in May 2021. Under this policy, each of our directors, executive officers, vice presidents and internal director-level employees must maintain a specified minimum level of ownership of our stock during their tenure in their respective office or position. During fiscal 2021, all of our executive officers and directors were in compliance with the terms of such policy. Microchip's insider trading policy prohibits executive officers from speculating in Microchip stock, which includes a prohibition on short selling, buying and selling options (including writing covered calls) or hedging or any type of arrangement that has a similar economic effect. Other Compensation and Employee Benefits Generally Available to All Employees. We maintain compensation and employee benefits that are generally available to all Microchip employees, including: our employee stock purchase plans, • • medical, dental, vision, employee assistance program, flexible spending, and disability insurance, • • • life insurance benefits, a 401(k) retirement savings plan, an employee cash bonus plan, and 42 Table of Contents • vacation and paid time off. Since these programs are generally available to all employees, these forms of compensation are not independently evaluated by the Compensation Committee in connection with the determination of executive officer compensation. Employee Stock Purchase Plans. Our 2001 Employee Stock Purchase Plan is a Section 423 qualified employee stock purchase plan that allows all U.S. employees the opportunity to purchase our common stock through payroll deductions at 85% of the fair market value at the lower of the price as of the opening of the two-year offering period, or at the end of any six-month purchase period. A significant portion of our international employees have the ability to participate in our 1994 International Employee Stock Purchase Plan that allows them the opportunity to purchase our common stock through payroll deductions at 85% of the fair market value at the lower of the price as of the opening or the end of any six-month offering period. Medical, Dental, Vision, Employee Assistance Program, Flexible Spending, Disability Insurance and Accidental Death and Dismemberment. We make medical, dental, vision, employee assistance program, flexible spending, and disability insurance generally available to all of our employees through our active benefit plans. Under these generally available plans, our named executive officers are eligible to receive between $1,000 and $10,000 per month in long-term disability coverage depending on which plan they elect. Short-term disability coverage is provided which allows for 100% of base salary to be paid for six months in the event of disability. Accidental death and dismemberment insurance, which is generally available to our U.S. employees, is provided by Microchip to our executives with a benefit of one times the executive's annual salary. Since all of our U.S. employees participate in these plans on a non-discriminatory basis, the value of these benefits to our named executive officers is not required to be included in the Summary Compensation Table on page 48 pursuant to SEC rules and regulations. Life Insurance. In fiscal 2021, we provided life insurance coverage to our named executive officers in the amount up to one and a half times the executive's annual salary (up to a maximum of $500,000). The named executive officers may purchase supplemental life insurance at their own expense. 401(k). We maintain a 401(k) plan for the benefit of all of our U.S. employees to allow our employees to save for retirement. We contribute to our 401(k) plan each year based on our profitability during the year, subject to maximum contributions and other rules prescribed by federal law governing such plans. Our named executive officers are permitted to participate in the plans to the same extent as our other U.S. employees. Our Compensation Committee approved discretionary matching contributions for the first, second, third, and fourth quarters of fiscal 2021 equal to $0.50 for each dollar contributed by the employee for the first 4% of their salary contributions. There are no required matching contributions under the plan. Employee Cash Bonus Plan. All of our employees worldwide participate in our Employee Cash Bonus Plan ("ECBP"). The ECBP is a discretionary bonus plan designed to allow our full-time employees, not just our executive officers, to share in the success of the company. The target bonus under the ECBP is 2.5 days of base salary per quarter, or on an annual basis, two weeks of annual base salary which may be granted by the Compensation Committee if certain Microchip operating profitability objectives are achieved. Under the ECBP, the Compensation Committee can set the eligibility requirements and targets and has discretion to pay more or less than the stated target. Other eligibility terms also apply, such as an attendance requirement and a performance requirement. The payout under the ECBP is approved by the Compensation Committee based on our actual quarterly operating results. In response to uncertainties related to the impact of the COVID-19 virus and in connection with other expense reduction actions being taken by our management team, on August 5, 2021, the Compensation Committee determined that there would be no payments under the ECBP for the first quarter of fiscal 2021. For the second, third, and fourth quarters of fiscal 2021, bonus awards were paid out to executives and other employees who participate in such plan at 50%, 75%, and 100% of target, respectively. For each such quarter, an additional award was paid out to selected employees on a discretionary basis based on performance achievements by such employees during the quarter. In addition, for the third and fourth quarters of fiscal 2021, an additional six hours of pay was made under the ECBP to those employees who participated in the salary reduction program. Under the ECBP, for fiscal 2021, our named executive officers other than our Executive Chair and CEO received total payments ranging from $7,684 to $9,128, and Mr. Sanghi and Mr. Moorthy received $22,086 and $12,792, respectively. 43 Table of Contents Vacation and Paid Time-Off Benefits. We provide vacation and other paid holidays to all of our employees, including our named executive officers. We believe our vacation and holidays are comparable to others in the industry. Non-Qualified Deferred Compensation Plan. We maintain a non-qualified deferred compensation plan for certain employees, including our named executive officers, who receive compensation in excess of the 401(k) contribution limits imposed under the Internal Revenue Code and desire to defer more compensation than they would otherwise be permitted under a tax-qualified retirement plan, such as our 401(k) plan. Microchip does not make contributions to this non-qualified deferred compensation plan. This plan allows our executive officers to make pre-tax contributions to this plan which would be fully taxed to the executive officers after the executive officer's termination of employment with Microchip. We do not have pension plans or other retirement plans for our named executive officers or our other U.S. employees. Employment Contracts, Termination of Employment and Change of Control Arrangements. We do not have employment contracts with our Executive Chair, CEO, CFO or any of our executive officers, nor agreements to pay severance on involuntary termination (other than as stated in the change of control agreements described below) or upon retirement. Our Executive Chair, CEO, CFO, and our executive officers have entered into change of control agreements with us. The change of control agreements were designed to help ensure the continued services of our key executive officers in the event that a change of control of the company is effected, and to assist our key executive officers in transitioning from Microchip if, as a result of a change of control, they lose their positions. We believe that the benefits provided by these agreements help to ensure that our management team will be incentivized to remain employed with Microchip during a change of control. Capitalized terms used herein and not defined shall have the meanings set forth in the change of control agreements. Additionally, our 2004 Equity Incentive Plan has a change of control provision which provides that any successor company shall assume each outstanding award or provide an equivalent substitute award; however, if the successor fails to do so, vesting of awards shall accelerate. The Compensation Committee considered prevalent market practices in determining the severance amounts and the basis for selecting the events triggering payment in the agreements. With respect to our Executive Chair, CEO, CFO and Senior VP of Worldwide Client Engagement, if the executive officer's employment terminates for reasons other than Cause within the Change of Control Period, the executive officer will be entitled to receive severance benefits consisting of the following primary components: • • • • a one-time payment of the executive's base salary in effect immediately prior to the Change of Control or termination date, whichever is greater, for the following periods: (1) in the case of the Executive Chair, two years; (2) in the case of the CEO, CFO and the Senior VP of Worldwide Client Engagement, one year; a one-time payment of the executive's bonuses for which the executive was or would have been eligible in the year in which the Change of Control occurred or for the year in which termination occurred, whichever is greater, for the following periods: (1) in the case of the Executive Chair, two years; (2) in the case of the CEO, CFO and the Senior VP of Worldwide Client Engagement, one year; a continuation of medical and dental benefits (subject to any required employee contributions) for the following periods: (1) in the case of the Executive Chair, two years; (2) in the case of the CEO, CFO and Senior VP of Worldwide Client Engagement, one year; provided in each case that such benefits would cease sooner if and when the executive officer becomes covered by the plans of another employer; and a payment to cover any excise tax that may be due under Section 4999 of the Code, if the payments provided for in the change of control agreement constitute "parachute payments" under Section 280G of the Code and the value of such payments is more than three times the executive officer's "base amount" as defined by Section 280G(b)(3) of the Code. With respect to our Executive Chair, the CFO and the Senior VP of Worldwide Client Engagement, immediately prior to a Change of Control (regardless of whether the executive officer's employment terminates), all equity compensation held by the executive officer shall become fully vested. 44 Table of Contents With respect to our executive officers other than the Executive Chair, CEO, the CFO and the Senior VP of Worldwide Client Engagement, if the executive officer terminates his or her employment for Good Reason, or the executive's employment is terminated for reasons other than Cause within the Change of Control Period, the executive officer will be entitled to receive severance benefits consisting of the following primary components: • • • • a one-time payment of the executive's base salary in effect immediately prior to the Change of Control or termination date, whichever is greater, for one year; a one-time payment of the bonuses for which the executive was or would have been eligible in the year in which the Change of Control occurred or for the year in which termination occurred, whichever is greater, for one year; a continuation of medical and dental benefits (subject to any required employee contributions) for one year (provided in each case that such benefits would cease sooner if and when the executive officer becomes covered by the plans of another employer); and a payment to cover any excise tax that may be due under Section 4999 of the Code, if the payments provided for in the change of control agreement constitute "parachute payments" under Section 280G of the Code and the value of such payments is more than three times the executive officer's "base amount" as defined by Section 280G(b)(3) of the Code. With respect to our executive officers other than the Executive Chair, CFO and the Senior VP of Worldwide Client Engagement, immediately upon termination during the Change of Control Period other than for Cause, all equity compensation held by the executive officer shall become fully vested. The following table sets forth the aggregate dollar value of payments, to the extent calculable, in the event of a termination of a named executive officer on March 31, 2021, the last business day of our last completed fiscal year. Name Salary Bonus Equity Compensation Due to Accelerated Vesting (1) Tax Gross-up on Change of Control (2) Continuation of Certain Benefits (3) Steve Sanghi (4) Ganesh Moorthy (5) Stephen V. Drehobl (5) Mitchell R. Little (5) J. Eric Bjornholt (5) Rich Simoncic (5) $ 967,114 $ 1,971,425 $ 44,571,423 $ 466,796 400,727 20,782,251 305,950 152,504 9,705,779 333,078 166,027 8,027,202 285,380 116,567 6,733,288 280,390 125,744 6,642,019 — — — — — — 2 years 1 year 1 year 1 year 1 year 1 year (1) Value represents the gain that our named executive officers would receive, calculated as the amount of unvested RSUs multiplied by our stock price on March 31, 2021. (2) This payment covers any excise tax that may be payable under Section 4999 of the Code if the payments provided for under the change of control agreement constitute "parachute payments" under Section 280G of the Code and the value of the payments is more than three times the executive officer's "base amount" as defined by Section 280G(b)(3) of the Code. (3) Benefits continued under the change of control agreements are limited to company-paid medical, dental, vision and life insurance coverage at the same level of coverage the executive was provided immediately prior to termination of employment with Microchip. Amounts are not determinable at this time and are dependent on each executive officer's individual circumstances. (4) The change of control payment includes an amount equal to twice the annual salary of the executive plus a bonus equal to two times the targeted annual amount payable to such executive under our management incentive compensation plans (EMICP and DMICP) and our ECBP. 45 Table of Contents (5) The change of control payment includes an amount equal to one times the annual salary of the executive plus a bonus equal to the targeted annual amounts payable to such executive under our management incentive compensation plans (EMICP and DMICP) and our ECBP. Performance-Based Compensation and Financial Restatement To date, Microchip has not experienced a financial restatement and has not considered or implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to its executive officers and other employees where such payments were predicated upon the achievement of certain financial results that would subsequently be the subject of a restatement. No Tax Deductibility As a result of the enactment of the Tax Cuts and Jobs Act in December 2017, the Code disallows a corporate income tax deduction for executive compensation in excess of $1.0 million paid to certain of our named executive officers. To maintain flexibility in compensating Microchip's executive officers in a manner designed to promote varying corporate goals, it is not the policy of the Compensation Committee that executive compensation must be tax deductible. We intend to review the deductibility of executive officer compensation from time to time to determine whether any actions are advisable to obtain deductibility. Conclusion We believe that our executive team provided outstanding service to Microchip in fiscal 2021. We will work to assure that the executive compensation programs continue to meet Microchip's strategic goals as well as the overall objectives of the compensation program. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION (*) The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of this proxy statement required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. By the Compensation Committee of the Board of Directors: Wade F. Meyercord (Chair) Esther L. Johnson L.B. Day _________________________ (*) The Compensation Committee Report on executive compensation is not "soliciting" material and is not deemed "filed" with the SEC, and is not incorporated by reference into any filings of Microchip under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings. 46 Table of Contents CEO PAY RATIO DISCLOSURE As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our "median employee" and that of our former CEO, Mr. Steve Sanghi, who was serving as our principal executive officer on the date we selected to identify our median employee. We believe the pay ratio information provided below is a reasonable estimate calculated in a manner consistent with the pay ratio disclosure rules. For fiscal 2021, our last completed fiscal year: • • • The estimated median of the annual total compensation of all our employees, excluding our former CEO, was $43,011. The total compensation of our former CEO during the portion of fiscal 2021 that he served as our principal executive officer, as annualized over the entire fiscal year, was $9,314,709. The ratio of the annual total compensation of our former CEO to the median of the annual total compensation of employees was 217 to 1. To identify the median of the annual total compensation of all of our employees, as well as to determine the annual total compensation of the "median employee," the methodology and the material assumptions, adjustments, and estimates that we used were as follows: • We selected January 1, 2021 as the date upon which we identified the median employee. We compiled a list of all full-time, part-time, temporary and seasonal employees who were employed on that date, including employees working both within and outside of the United States. • We identified the "median employee" by taking all employees on this list (including international employees, but excluding the former CEO), and ranking them based on a consistently applied compensation measure that incorporated the adjusted gross wages paid over the twelve-month period preceding the determination date (including the grant date value of equity, as opposed to realized equity values). We converted pay for international employees to United States Dollars using the exchange rates on January 1, 2021, and we annualized the pay for full and part time employees who were hired during the period. • After identifying a representative "median employee," we identified and calculated the elements of such employee's compensation for fiscal 2021 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $43,011. • With respect to the annual total compensation for the former CEO, we used the amount reported in the "Total" column of our 2021 Summary Compensation Table. 47 Table of Contents COMPENSATION OF NAMED EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following table lists the annual compensation for our former CEO (Mr. Sanghi, who served as CEO until March 1, 2021), our current CEO (Mr. Moorthy, who has served as CEO since March 1, 2021), our CFO and our three other most highly compensated executive officers (referred to as the "named executive officers") earned in the last three fiscal years: Name and Principal Position Salary (1) Bonus (2) Stock Awards (3) Year Non-Equity Incentive Plan Compensation (4) All Other Compensation (5) Total Steve Sanghi, Executive Chair and Former CEO 2021 $ 702,087 $ 22,086 $ 7,384,078 $ 1,168,596 $ 13,065 $ 9,289,912 2020 811,046 21,571 5,135,465 906,713 8,586 6,883,381 2019 749,700 21,626 11,386,308 700,389 6,916 12,864,939 2021 421,014 12,792 3,170,379 277,510 2020 469,571 12,404 2,330,292 215,312 2019 424,360 12,240 5,218,861 158,539 Ganesh Moorthy, CEO and President Stephen V. Drehobl, Senior VP, MCU8 and MCU16 Business Units Mitchell R. Little, Senior VP, Worldwide Client Engagement J. Eric Bjornholt, Senior VP and CFO Richard Simoncic Senior VP, Analog Power and Interface Business Unit 2021 275,943 2020 307,768 2019 278,136 2021 300,410 2020 335,335 2019 317,217 2021 257,391 2020 287,077 2019 259,437 2021 252,891 2020 282,171 2019 260,828 8,384 8,131 7,087 9,128 8,983 8,083 7,821 7,584 6,611 7,684 7,505 6,646 9,772 8,201 7,602 7,824 6,796 7,211 3,891,467 3,035,780 5,821,602 1,871,716 1,492,492 2,732,716 1,477,531 102,034 1,090,558 2,381,844 79,239 58,438 1,231,020 111,081 12,208 1,663,847 880,816 1,984,654 1,142,976 854,278 1,513,668 982,099 724,638 1,654,264 86,177 68,151 76,553 59,308 38,759 83,346 64,671 49,929 11,180 1,322,491 10,671 2,388,776 6,437 5,544 5,963 7,126 6,289 6,896 1,491,178 1,213,791 1,824,438 1,333,146 1,085,274 1,978,563 (1) Represents the base salary earned by each executive officer in the specified fiscal year. (2) Represents bonuses earned by each executive officer in the specified fiscal year under our ECBP. (3) Represents the aggregate grant date fair value of awards of RSUs made in the specified fiscal year computed in accordance with ASC 718 Compensation - Stock Compensation. For information on the valuation assumptions made with respect to the grants of RSUs in fiscal 2021, please refer to Note 15, "Share-Based Compensation" to Microchip's audited financial statements for the fiscal year ended March 31, 2021 included in our Annual Report on Form 10-K filed with the SEC on May 18, 2021. (4) Represents the aggregate amount of cash bonuses earned by each executive officer in the specified fiscal year under our EMICP and DMICP. In fiscal 2021, a portion of the amounts earned under the EMICP were paid in RSUs not in cash. Such RSUs are not included in the Non-Equity Incentive Plan Compensation column in the above table; however, all of such RSU grants made during fiscal 2021 are included in the Stock Awards column in the above table and such outstanding RSUs are also included in the Outstanding Equity Awards at 2021 Fiscal Year End table. Each executive officer received the following cash payments under each of such plans in the specified fiscal year: 48 Table of Contents Named Executive Officer Steve Sanghi Ganesh Moorthy Stephen V. Drehobl Mitchell R. Little J. Eric Bjornholt Richard Simoncic Year 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 EMICP DMICP $ 1,168,596 $ 906,713 700,389 277,510 215,312 158,539 102,034 79,239 58,438 111,081 86,177 68,151 76,553 59,308 38,759 83,346 64,671 49,929 — — — — — — — — — — — — — — — — — — (5) Consists of company-matching contributions under our 401(k) retirement savings plan and the full dollar value of premiums paid by Microchip for life insurance for the benefit of the named executive officer in the amounts shown below: Named Executive Officer Steve Sanghi Ganesh Moorthy Stephen V. Drehobl Mitchell R. Little J. Eric Bjornholt Richard Simoncic 401(k) Life Insurance $ 5,725 $ 3,824 3,870 5,725 4,200 5,245 5,260 4,105 5,061 5,568 4,200 5,245 5,126 4,117 4,905 5,036 3,772 4,746 7,340 4,762 3,046 4,047 4,001 2,357 2,564 2,691 2,150 6,640 6,980 5,426 1,311 1,427 1,058 2,090 2,517 2,150 Year 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 49 Table of Contents Grants of Plan-Based Awards During Fiscal 2021 The following table sets forth information with respect to our EMICP, our DMICP, and our ECBP, as well as RSUs granted to our named executive officers under our 2004 Equity Incentive Plan, including the grant date fair value of the RSUs. Amounts listed in the "Estimated Future Payouts Under Non-Equity Incentive Plan Awards" column are annual targets based on the salaries of the named executive officers at the end of fiscal 2021. Actual payments for our bonus plans in fiscal 2021 are reflected in the Summary Compensation Table above. Equity awards in the table below were granted in fiscal 2021. GRANTS OF PLAN-BASED AWARDS For Fiscal Year Ended March 31, 2021 Estimated Future Payouts Under Non- Equity Incentive Plan Awards Name Grant Date Threshold ($) (1) Target ($) Maximum ($) (1) All Other Stock Awards: Number of Shares of Stock or Units (#) (2) Grant Date Fair Value of Stock and Option Awards ($) (3) Steve Sanghi — — — — — — — — — — — — — — — — — — 773,691 (4) 193,423 (5) 18,598 (6) — — — — — — — — — — — — — — — — — — — — — 8,376 8,375 4,573 6,372 330 150 6,372 78 5,326 6,138 152 335 6,138 2,459 4,790 4,790 149 2,216 — — — 808,787 609,700 431,142 794,270 33,073 15,249 620,697 7,569 516,835 621,902 16,050 34,890 818,748 304,473 783,931 627,921 19,981 318,860 — — — 4/9/2020 4/9/2020 6/1/2020 7/1/2020 7/1/2020 7/1/2020 7/1/2020 8/5/2020 8/5/2020 10/1/2020 10/1/2020 10/1/2020 10/1/2020 11/6/2020 1/4/2021 1/4/2021 1/4/2021 2/5/2021 — — — — — — — — — — — — — — — — — — — — — — — — 50 Table of Contents Estimated Future Payouts Under Non- Equity Incentive Plan Awards Name Grant Date Threshold ($) (1) Target ($) Maximum ($) (1) All Other Stock Awards: Number of Shares of Stock or Units (#) (2) Grant Date Fair Value of Stock and Option Awards ($) (3) Ganesh Moorthy Stephen V. Drehobl — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 4,002 4,002 1,113 3,045 191 87 3,044 45 1,292 2,932 88 194 2,933 600 2,289 2,288 86 526 — — — 1,895 1,894 422 1,442 125 57 1,441 29 488 1,388 58 127 1,389 229 1,084 1,083 56 193 — — — 386,433 291,346 104,934 379,559 19,142 8,844 296,516 4,367 125,376 297,070 9,292 20,205 391,233 74,292 374,618 299,934 11,533 75,686 — — — 182,981 137,883 39,786 179,745 12,528 5,795 140,368 2,814 47,356 140,632 6,124 13,227 185,279 28,355 177,407 141,970 7,510 27,771 — — — 4/9/2020 4/9/2020 6/1/2020 7/1/2020 7/1/2020 7/1/2020 7/1/2020 8/5/2020 8/5/2020 10/1/2020 10/1/2020 10/1/2020 10/1/2020 11/6/2020 1/4/2021 1/4/2021 1/4/2021 2/5/2021 — — — 4/9/2020 4/9/2020 6/1/2020 7/1/2020 7/1/2020 7/1/2020 7/1/2020 8/5/2020 8/5/2020 10/1/2020 10/1/2020 10/1/2020 10/1/2020 11/6/2020 1/4/2021 1/4/2021 1/4/2021 2/5/2021 — — — — — — — — — — — — — — — — — — — — — 306,218 (4) 76,555 (5) 17,954 (6) — — — — — — — — — — — — — — — — — — 112,590 (4) 28,147 (5) 11,767 (6) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 51 Table of Contents Estimated Future Payouts Under Non- Equity Incentive Plan Awards Name Grant Date Threshold ($) (1) Target ($) Maximum ($) (1) All Other Stock Awards: Number of Shares of Stock or Units (#) (2) Grant Date Fair Value of Stock and Option Awards ($) (3) Mitchell R. Little 4/9/2020 4/9/2020 6/1/2020 7/1/2020 7/1/2020 7/1/2020 7/1/2020 8/5/2020 8/5/2020 10/1/2020 10/1/2020 10/1/2020 10/1/2020 11/6/2020 1/4/2021 1/4/2021 1/4/2021 2/5/2021 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 122,573 (4) 30,643 (5) 12,811 (6) — — — — — — — — — — — — — — — — — — — — — 1,507 1,506 460 1,146 136 62 1,146 32 531 1,104 63 138 1,104 249 862 861 62 210 — — — 145,516 109,637 43,369 142,849 13,630 6,303 111,632 3,105 51,528 111,857 6,652 14,373 147,263 30,831 141,075 112,868 8,314 30,217 — — — 52 Table of Contents Estimated Future Payouts Under Non- Equity Incentive Plan Awards Name Grant Date Threshold ($) (1) Target ($) Maximum ($) (1) All Other Stock Awards: Number of Shares of Stock or Units (#) (2) Grant Date Fair Value of Stock and Option Awards ($) (3) J. Eric Bjornholt Richard Simoncic 4/9/2020 4/9/2020 6/1/2020 7/1/2020 7/1/2020 7/1/2020 7/1/2020 8/5/2020 8/5/2020 10/1/2020 10/1/2020 10/1/2020 10/1/2020 11/6/2020 1/4/2021 1/4/2021 1/4/2021 2/5/2021 — — — 4/9/2020 4/9/2020 6/1/2020 7/1/2020 7/1/2020 7/1/2020 7/1/2020 8/5/2020 8/5/2020 10/1/2020 10/1/2020 10/1/2020 10/1/2020 11/6/2020 1/4/2021 1/4/2021 1/4/2021 2/5/2021 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 84,472 (4) 21,118 (5) 10,976 (6) — — — — — — — — — — — — — — — — — — 91,968 (4) 22,992 (5) 10,784 (6) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,457 1,457 322 1,109 117 53 1,108 28 372 1,068 53 118 1,068 174 834 833 53 145 — — — 1,208 1,208 348 919 115 52 919 27 402 885 53 116 886 188 691 691 52 158 — — — 140,688 106,070 30,358 138,237 11,726 5,388 107,930 2,717 36,099 108,210 5,596 12,290 142,461 21,545 136,492 109,198 7,107 20,864 — — — 116,644 87,942 32,809 114,553 11,525 5,286 89,520 2,620 39,010 89,668 5,596 12,081 118,184 23,278 113,089 90,583 6,973 22,735 — — — (1) Individual awards under our EMICP, DMICP and ECBP are made quarterly and are not stated in terms of a threshold or maximum amount for an award period. The EMICP does provide that the maximum amount payable to any participant is $2.5 million for any performance period (which can be a fiscal quarter, a fiscal year or a longer period not exceeding five fiscal years). 53 Table of Contents (2) Represents RSUs granted under Microchip's 2004 Equity Incentive Plan. (3) This column shows the full grant date fair value of RSU awards to the named executives in fiscal 2021. Generally, the full grant date fair value is the amount that Microchip would expense in its financial statements over the award's vesting schedule. (4) This annual target represents the amount targeted for estimated future payout in fiscal 2022 under Microchip's EMICP based on the executive officer's base salary at the end of fiscal 2021. (5) This annual target represents the amount targeted for estimated future payout in fiscal 2022 under Microchip's DMICP based on the executive officer's base salary at the end of fiscal 2021. (6) This annual target represents the amount targeted for future payout in fiscal 2022 under Microchip's ECBP based on the executive officer's base salary at the end of fiscal 2021. Summary Compensation Table and Grants of Awards Table Discussion Based on the data in the Summary Compensation Table, the level of salary, bonus, non-equity incentive plan compensation, and other compensation in proportion to total compensation ranged from approximately 18.5% to 26.3% for our named executive officers in fiscal 2021. See the "Compensation Discussion and Analysis" section of this proxy statement for further discussion of overall compensation and how compensation is determined. We do not have employment contracts with our named executive officers, nor agreements to pay severance on involuntary termination (other than as stated in the change of control agreements discussed above under the heading "Employment Contracts, Termination of Employment and Change of Control Arrangements") or retirement. For a discussion of the material terms of the awards listed in the Grants of Awards Table, see our discussion of the equity awards and incentive cash bonuses in the "Compensation Discussion and Analysis" section of this proxy statement under the headings "Incentive Cash Bonuses," "Equity Compensation," and "Employee Cash Bonus Plan." Microchip has not repriced any stock options or made any material modifications to any equity-based awards during the last fiscal year. 54 Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR END Name Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested $ (19) Stock Awards Steve Sanghi 2,218,715 709,821 2,083,984 23,283 12,107 826,702 1,809,244 23,593 381,686 1,796,516 343,968 1,927,677 51,223 1,939,163 51,999 2,298,808 23,128 2,486,004 2,028,105 9,271,756 1,940,560 1,908,896 947,773 947,929 1,299,968 1,300,123 989,062 989,062 952,740 952,740 743,504 743,504 14,294 (1) 4,573 (2) 13,426 (3) 150 (3) 78 (3) 5,326 (3) 11,656 (4) 152 (4) 2,459 (4) 11,574 (5) 2,216 (5) 12,419 (6) 330 (6) 12,493 (7) 335 (7) 14,810 (8) 149 (8) 16,016 (9) 13,066 (10) 59,733 (11) 12,502 (12) 12,298 (13) 6,106 (14) 6,107 (14) 8,375 (15) 8,376 (15) 6,372 (16) 6,372 (16) 6,138 (17) 6,138 (17) 4,790 (18) 4,790 (18) 55 Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR END Name Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested $ (19) Stock Awards Ganesh Moorthy 1,060,153 172,760 995,736 13,504 6,985 200,544 864,420 13,659 93,132 858,367 81,646 921,075 29,647 926,508 30,113 1,098,337 13,349 1,187,743 969,038 4,429,979 927,284 912,073 452,932 452,932 621,190 621,190 472,490 472,645 455,260 455,105 355,299 355,143 6,830 (1) 1,113 (2) 6,415 (3) 87 (3) 45 (3) 1,292 (3) 5,569 (4) 88 (4) 600 (4) 5,530 (5) 526 (5) 5,934 (6) 191 (6) 5,969 (7) 194 (7) 7,076 (8) 86 (8) 7,652 (9) 6,243 (10) 28,540 (11) 5,974 (12) 5,876 (13) 2,918 (14) 2,918 (14) 4,002 (15) 4,002 (15) 3,044 (16) 3,045 (16) 2,933 (17) 2,932 (17) 2,289 (18) 2,288 (18) 56 Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR END Name Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested $ (19) Stock Awards Stephen V. Drehobl 501,826 65,503 471,403 8,848 4,501 75,747 409,160 9,003 35,545 406,366 29,957 436,013 19,403 438,652 19,713 519,987 8,692 562,362 458,830 1,997,526 438,962 431,822 214,359 214,514 293,987 294,142 223,672 223,827 215,601 215,445 168,258 168,103 3,233 (1) 422 (2) 3,037 (3) 57 (3) 29 (3) 488 (3) 2,636 (4) 58 (4) 229 (4) 2,618 (5) 193 (5) 2,809 (6) 125 (6) 2,826 (7) 127 (7) 3,350 (8) 56 (8) 3,623 (9) 2,956 (10) 12,869 (11) 2,828 (12) 2,782 (13) 1,381 (14) 1,382 (14) 1,894 (15) 1,895 (15) 1,441 (16) 1,442 (16) 1,389 (17) 1,388 (17) 1,084 (18) 1,083 (18) 57 Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR END Name Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested $ (19) Stock Awards Mitchell R. Little 435,858 71,401 409,315 9,624 4,967 82,422 355,454 9,779 38,650 352,970 32,596 364,146 21,110 348,779 21,420 413,506 9,624 447,189 364,767 1,667,994 349,090 343,347 170,432 170,587 233,761 233,917 177,882 177,882 171,363 171,363 133,800 133,644 2,808 (1) 460 (2) 2,637 (3) 62 (3) 32 (3) 531 (3) 2,290 (4) 63 (4) 249 (4) 2,274 (5) 210 (5) 2,346 (6) 136 (6) 2,247 (7) 138 (7) 2,664 (8) 62 (8) 2,881 (9) 2,350 (10) 10,746 (11) 2,249 (12) 2,212 (13) 1,098 (14) 1,099 (14) 1,506 (15) 1,507 (15) 1,146 (16) 1,146 (16) 1,104 (17) 1,104 (17) 862 (18) 861 (18) 58 Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR END Name Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested $ (19) Stock Awards J. Eric Bjornholt 1,397 318,511 49,981 1,242 8,227 299,109 4,346 57,742 1,242 259,683 8,227 27,008 1,087 257,976 22,507 18,161 24,990 276,757 23,904 278,309 18,316 23,593 329,998 8,227 20,334 356,851 335,430 1,267,682 320,995 315,717 156,772 156,772 226,156 226,156 171,984 172,139 165,775 165,775 129,453 129,298 9 (1) 2,052 (1) 322 (2) 8 (3) 53 (3) 1,927 (3) 28 (3) 372 (3) 8 (4) 1,673 (4) 53 (4) 174 (4) 7 (5) 1,662 (5) 145 (5) 117 (6) 161 (6) 1,783 (6) 154 (7) 1,793 (7) 118 (7) 152 (8) 2,126 (8) 53 (8) 131 (9) 2,299 (9) 2,161 (10) 8,167 (11) 2,068 (12) 2,034 (13) 1,010 (14) 1,010 (14) 1,457 (15) 1,457 (15) 1,108 (16) 1,109 (16) 1,068 (17) 1,068 (17) 834 (18) 833 (18) 59 Table of Contents OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR END Name Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested $ (19) Stock Awards Richard Simoncic 365,233 54,017 343,036 8,071 4,191 62,398 297,867 8,227 29,181 295,849 24,525 305,163 17,850 292,279 18,006 346,606 8,071 374,856 305,783 1,398,067 292,590 287,778 136,749 136,749 187,506 187,506 142,647 142,647 137,525 137,370 107,257 107,257 2,353 (1) 348 (2) 2,210 (3) 52 (3) 27 (3) 402 (3) 1,919 (4) 53 (4) 188 (4) 1,906 (5) 158 (5) 1,966 (6) 115 (6) 1,883 (7) 116 (7) 2,233 (8) 52 (8) 2,415 (9) 1,970 (10) 9,007 (11) 1,885 (12) 1,854 (13) 881 (14) 881 (14) 1,208 (15) 1,208 (15) 919 (16) 919 (16) 886 (17) 885 (17) 691 (18) 691 (18) 60 Table of Contents (1) The award vested in full on May 15, 2021. (2) The award vested in full on June 1, 2021. (3) The award vests in full on August 15, 2021, subject to continued service on such date. (4) The award vests in full on November 15, 2021, subject to continued service on such date. (5) The award vests in full on February 15, 2022, subject to continued service on such date. (6) The award vests in full on May 15, 2022, subject to continued service on such date. (7) The award vests in full on August 15, 2022, subject to continued service on such date. (8) The award vests in full on November 15, 2022, subject to continued service on such date. (9) The award vests in full on February 15, 2023, subject to continued service on such date. (10) The award vests in full on May 15, 2023, subject to continued service on such date. (11) The award vests in equal quarterly installments through May 15, 2023, subject to continued service on such vesting dates. (12) The award vests in full on August 15, 2023, subject to continued service on such date. (13) The award vests in full on November 15, 2023, subject to continued service on such date. (14) The award vests in full on February 15, 2024, subject to continued service on such date. (15) The award vests in full on May 15, 2024, subject to continued service on such date. (16) The award vests in full on August 15, 2024, subject to continued service on such date. (17) The award vests in full on November 15, 2024, subject to continued service on such date. (18) The award vests in full on February 15, 2025, subject to continued service on such date. (19) Represents the number of RSUs multiplied by $155.22, the closing price of our common stock on March 31, 2021. 61 Table of Contents STOCK VESTED For Fiscal Year Ended March 31, 2021 The following table provides information, on an aggregate basis, about stock awards that vested during the fiscal year ended March 31, 2021 for each of our named executive officers. Microchip has not granted stock options, other than options assumed in acquisitions, since 2008. No named executive officer held any Microchip stock options during fiscal 2021. Name Stock Awards Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($)(1) Steve Sanghi, Executive Chair and Former CEO 132,509 15,158,255 Ganesh Moorthy, CEO and President Stephen V. Drehobl, Senior VP, MCU8 and MCU16 Business Units Mitchell R. Little, Senior VP, Worldwide Client Engagement J. Eric Bjornholt, Senior VP and CFO Richard Simoncic, Senior VP, Analog Power and Interface Business Unit 60,495 28,973 25,134 18,434 21,015 6,948,962 3,309,348 2,868,364 2,106,058 2,398,248 (1) The values realized upon vesting for RSUs are based on the closing price of our common stock on the vesting dates. Non-Qualified Deferred Compensation for Fiscal Year 2021 All of our U.S. employees in director-level and above positions, including our executive officers, are eligible to defer a portion of their salary and cash bonuses into our Non-Qualified Deferred Compensation Plan (the "Deferred Compensation Plan"). Pursuant to the Deferred Compensation Plan, eligible employees can defer up to 50% of their base salary and/or cash bonuses. In general, deferral elections are made prior to January of each year for amounts to be earned in the upcoming year. Participants may invest amounts in various funds available under the Deferred Compensation Plan (in general, any of those funds traded on a nationally recognized exchange). Plan earnings are calculated by reference to actual earnings of mutual funds or other securities chosen by individual participants. Except for a change in control or certain unforeseeable emergencies (as defined under the Deferred Compensation Plan), benefits under the plan will not be distributed until a "distribution event" has occurred. The distribution event occurs upon termination of employment. We incur incidental expenses for administration of the Deferred Compensation Plan, and the receipt of any tax benefit we might obtain based on payment of a participant's compensation is delayed until funds (including earnings or losses on the amounts invested pursuant to the plan) are eventually distributed. We do not pay any additional compensation or guarantee minimum returns to any participant in the Deferred Compensation Plan. 62 Table of Contents The following table shows the non-qualified deferred compensation activity for each named executive officer for the fiscal year ended March 31, 2021. NON-QUALIFIED DEFERRED COMPENSATION Name Steve Sanghi Ganesh Moorthy Stephen V. Drehobl Mitchell R. Little J. Eric Bjornholt Richard Simoncic Executive Contributions in Last FY (1) Company Contributions in Last FY Aggregate Earnings in Last FY (1) Aggregate Withdrawals/ Distributions Aggregate Balance at Last FYE (1) $ — $ — 98,763 72,310 16,400 — — $ — $ — $ — — — — — — 174,324 136,950 164,911 206,515 — — — — — — 433,592 1,519,308 566,994 555,053 — (1) The executive contribution amounts shown in the table were previously reported in the "Summary Compensation Table" as salary and/or bonus for fiscal 2021 or prior fiscal years. The earnings amounts shown in the table were not previously reported for fiscal 2021 or prior years under applicable SEC rules as such earnings were not under a defined benefit or actuarial pension plan and there were no above-market or preferential earnings on such amounts made or provided by Microchip. 63 Table of Contents EQUITY COMPENSATION PLAN INFORMATION The table below provides information about our common stock that, as of March 31, 2021, may be issued upon the vesting of RSUs and the exercise of options and rights under the following equity compensation plans (which are all of our equity compensation plans; provided, however, that new equity awards or stock purchase rights may only be issued under the Microchip 2004 Equity Incentive Plan, the Microchip 1994 International Employee Stock Purchase Plan and the Microchip 2001 Employee Stock Purchase Plan): SMSC 2009 Long Term Incentive Plan (the "SMSC 2009 LTIP"), Supertex 2009 Equity Plan, • Microchip 1994 International Employee Stock Purchase Plan (the "IESPP"), • Microchip 2001 Employee Stock Purchase Plan (the "ESPP"), • Microchip 2004 Equity Incentive Plan, • • • Micrel 2003 Incentive Award Plan, • Micrel 2012 Equity Incentive Award Plan, • • • Microsemi 2008 Performance Incentive Plan. Vitesse 2010 Incentive Plan, Vitesse 2013 Incentive Plan, and Plan Category Equity Compensation Plans Approved by Stockholders(2) Equity Compensation Plans Not Approved by Stockholders Total (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 12,484,150 (4) — (b) Weighted average exercise price of outstanding options (1) $46.66 $30.92 $31.81 (6) 12,484,150 (a) Number of securities to be issued upon exercise of outstanding options and vesting of RSUs (3) (5) 5,945,062 67,344 6,012,406 (1) The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which have no exercise price. (2) Beginning January 1, 2005, the shares authorized for issuance under our ESPP are subject to an annual automatic increase equal to the lesser of (i) 1,500,000 shares, (ii) one-half of one percent (0.5%) of the then outstanding shares of our common stock, or (iii) such lesser amount as is approved by our Board of Directors. Upon the approval of our Board of Directors, no additional shares of common stock were reserved under the ESPP on January 1, 2021 based on the automatic increase provision. Beginning January 1, 2007, the shares authorized for issuance under our IESPP are subject to an annual automatic increase of equal to one-tenth of one percent (0.1%) of the then outstanding shares of our common stock. Upon the approval of our Board of Directors, 269,258 additional shares of common stock were reserved under the IESPP effective January 1, 2021 based on the automatic increase provision. (3) As of March 31, 2021, includes 5,941,062 shares issuable upon the vesting of RSUs granted under our 2004 Equity Incentive Plan, and 4,000 shares issuable upon the exercise of outstanding options granted under our 2004 Equity Incentive Plan. (4) As of March 31, 2021, includes 6,554,463 shares remaining available for future issuance under our 2004 Equity Incentive Plan. The remaining balance represents shares available for purchase under the IESPP and the ESPP. (5) Consists of the aggregate amount of options, warrants and other equity rights assumed by us in connection with mergers and acquisitions at the weighted-average exercise price in the table above. No additional awards may be granted under those assumed arrangements. As of March 31, 2021, the foregoing consists of 4,934 shares subject to outstanding options 64 Table of Contents under the SMSC 2009 LTIP; 31,921 shares subject to outstanding options under the 2009 Equity Plan that Supertex adopted prior to our acquisition of Supertex in April 2014; 4,995 shares issuable upon the exercise of outstanding options granted under the Micrel 2003 Incentive Award Plan; 19,480 shares issuable upon the exercise of outstanding options granted under the Micrel 2012 Equity Incentive Award Plan; 847 shares issuable upon the vesting of RSUs granted under the Microsemi 2008 Performance Incentive Plan; 861 shares subject to outstanding options under the Vitesse 2010 Incentive Plan; and 4,306 shares subject to outstanding options under the Vitesse 2013 Incentive Plan. (6) As of March 31, 2021, there were a total of 70,497 shares subject to outstanding options, with a weighted average exercise price of $31.81 per share and a weighted average term of 2.06 years. 65 Table of Contents CODE OF BUSINESS CONDUCT AND ETHICS In May 2004, our Board of Directors adopted a Code of Business Conduct and Ethics for our directors, officers (including our chief executive officer and chief financial officer), and employees. A copy of the Code of Business Conduct and Ethics, as amended to date, is available on our website at the About/Investor Relations section under Mission Statement, Guiding Values, and Corporate Governance on www.microchip.com. We intend to post on our website any amendment to, or waiver from, a provision of our code of ethics within four business days following the date of such amendment or waiver or such other time period required by SEC rules. Other Matters to be Presented at the Annual Meeting OTHER MATTERS At the date this proxy statement went to press, we did not anticipate that any other matters would be raised at the annual meeting. Requirements, Including Deadlines, for Receipt of Stockholder Proposals for the 2022 Annual Meeting of Stockholders; Discretionary Authority to Vote on Stockholder Proposals Under SEC rules, if a stockholder wants us to include a proposal in our proxy statement and form of proxy for our 2022 annual meeting, our Secretary must receive the proposal at our principal executive offices by March 21, 2022. Stockholders interested in submitting such a proposal are advised to contact knowledgeable counsel with regard to the detailed requirements of applicable securities laws. The submission of a stockholder proposal does not guarantee that it will be included in our proxy statement. Under our Bylaws, stockholders must follow certain procedures to nominate a person for election as a director or to introduce an item of business at our annual meeting. Under these procedures, stockholders must submit the proposed nominee or item of business by delivering a notice addressed to our Secretary at our principal executive offices. We must receive notice as follows: • • • • Normally we must receive notice of a stockholder's intention to introduce a nomination or proposed item of business for an annual meeting not less than 90 days before the first anniversary of the date on which we first mailed our proxy statement to stockholders in connection with the previous year's annual meeting of stockholders. Accordingly, a stockholder who intends to submit a nomination or proposal for our 2022 annual meeting must do so no later than April 20, 2022. However, if we hold our 2022 annual meeting on a date that is not within 30 days before or after the anniversary date of our 2021 annual meeting, we must receive the notice no later than the close of business on the later of the 90th day prior to our 2022 annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made. A stockholder's submission must include certain specified information concerning the proposal or nominee, as the case may be, and information as to the stockholder's ownership of our common stock. Proposals or nominations not meeting these requirements will not be considered at our 2022 annual meeting. If a stockholder does not comply with the requirements of this advance notice provision, the proxies may exercise discretionary voting authority under proxies it solicits to vote in accordance with its best judgment on any such proposal or nomination submitted by a stockholder. Proxy Access Under our amended Bylaws, a stockholder (or a group of not more than 20 stockholders) that has held at least 3% of our outstanding common stock continuously for at least three years may nominate and include in our proxy materials for our 2022 annual meeting (i) one director nominee if the number of directors to be elected at the annual meeting is seven or less, and (ii) if the number of directors to be elected at the annual meeting is greater than seven, director nominees constituting up to the 66 Table of Contents greater of 20% of the Board or two directors, provided in each case that the requirements set forth in the Bylaws are satisfied. To utilize such “proxy access” nomination process, among other things, the electing stockholder(s) and proposed nominee(s) must comply with the detailed requirements set forth in our Bylaws, including the provision of the proposing stockholder information, various other required information, representations, undertakings, agreements and other requirements as set forth in the Bylaws and as required by law. One such requirement is that the nomination(s) must be received in a timely manner between 120 days and 150 days prior to the anniversary of the date our proxy statement was first sent to stockholders in connection with the last annual meeting, which for our proxy materials for the 2021 annual meeting would be no earlier than February 19, 2022 and no later than March 21, 2022. The description of certain provisions of the Bylaws above is intended as a summary and is qualified in its entirety by reference to the relevant Bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. To make any submission or to obtain additional information as to the proper form and content of submissions, stockholders should contact our Secretary in writing at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199. Householding of Annual Meeting Materials Some brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of our proxy statement and annual report may have been sent to multiple stockholders in a stockholder's household. Additionally, you may have notified us that multiple stockholders share an address and thus you requested to receive only one copy of our proxy statement and annual report. While our proxy statement and 2021 Annual Report are available online (see "Electronic Access to Proxy Statement and Annual Report" on page 3), we will promptly deliver a separate copy of either document to any stockholder who contacts our investor relations department at 480-792-7761 or by mail addressed to Investor Relations, Microchip Technology Incorporated, 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199, requesting such copies. If a stockholder is receiving multiple copies of our proxy statement and annual report at the stockholder's household and would like to receive a single copy of the proxy statement and annual report for a stockholder's household in the future, stockholders should contact their broker, or other nominee record holder to request mailing of a single copy of the proxy statement and annual report. Stockholders receiving multiple copies of these documents directly from us, and who would like to receive single copies in the future, should contact our investor relations department to make such a request. Date of Proxy Statement The date of this proxy statement is July 19, 2021. 67 Table of Contents APPENDIX A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF MICROCHIP TECHNOLOGY INCORPORATED, a Delaware Corporation Microchip Technology Incorporated (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”) does hereby certify as follows: 1. The present name of the Corporation is Microchip Technology Incorporated. The Corporation was originally incorporated under the name Microchip Acquisition Corporation. The original Certificate of Incorporation of the Corporation was filed with the Secretary of the State of Delaware on February 14, 1989. 2. That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of the Corporation, declaring said amendment and restatement to be advisable and in the best interests of the Corporation and its stockholders, and authorizing the appropriate officers of the Corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows: RESOLVED, that the Certificate of Incorporation of the Corporation be amended and restated in its entirety to read as follows: The name of this corporation is Microchip Technology Incorporated. ARTICLE II ARTICLE I The address of the registered office of this corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The nature of the business or purposes of this corporation to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV (A) CLASSES OF STOCK. This corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the corporation is authorized to issue is nine hundred and five million (905,000,000) shares. Nine hundred million (900,000,000) shares shall be Common Stock, par value $0.001 per share, and five million (5,000,000) shares shall be Preferred Stock, par value $0.001 per share. (B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The Preferred Stock authorized by this Amended and Restated Certificate of Incorporation may be issued from time to time in series. The Board of Directors is hereby authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon any series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or of any of them. Subject to compliance with applicable protective voting rights which have been or may be granted to the Preferred Stock or any series thereof in Certificates of Designation or the corporation's Certificate of Incorporation, as amended from time to time (“Protective Provisions”), but notwithstanding any other rights of the Preferred Stock or any series thereof, the rights, privileges, preferences and restrictions of any such additional series may be subordinated to, PARI PASSU with (including, without limitation, inclusion in provisions with respect to liquidation and acquisition preferences, redemption and/or approval of matters by vote or written consent), or senior to any of those of any present or future class or series of Preferred or Common Stock. Subject to compliance with applicable Protective Provisions, the Board of Directors is also authorized to increase or A-1 Table of Contents decrease the number of shares of any series, prior or subsequent to the issue of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. (C) COMMON STOCK. 1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, after distribution in full of preferential amounts to be distributed to holders of shares of Preferred Stock, the holders of shares of the Common Stock shall be entitled to receive all of the remaining assets of the corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Common Stock held by them. 3. REDEMPTION. The Common Stock is not redeemable. 4. VOTING RIGHTS. The holder of each share of Common Stock shall have the right to one vote, and shall be entitled to notice of any stockholders' meeting in accordance with the By-laws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. On September 21, 1999, the Board of Directors adopted a resolution amending the rights, preferences and privileges of the series of 650,000 shares of Preferred Stock designated as Series A Participating Preferred Stock. Such rights, preferences and privileges are set forth in the Amended Certificate of Designations of Rights, Preferences and Privileges of Series A Participating Preferred Stock attached hereto as Exhibit A. ARTICLE V Except as otherwise provided in this Restated Certificate of Incorporation, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the corporation. The number of directors of the corporation shall be fixed from time to time by a bylaw or amendment thereof duly adopted by the Board of Directors or by the stockholders. ARTICLE VI ARTICLE VII Elections of directors need not be by written ballot unless the Bylaws of the corporation shall so provide. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the corporation. ARTICLE VIII ARTICLE IX A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize, with the A-2 Table of Contents approval of the corporation's stockholders, further reductions in the liability of the corporation's directors for breach of fiduciary duty, then a director of the corporation shall not be liable for any such breach to the fullest extent permitted by the Delaware General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article IX by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. Except as provided herein, the corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE X IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be duly executed on _____________, 2021. MICROCHIP TECHNOLOGY INCORPORATED By Name: Ganesh Moorthy Office: President and Chief Executive Officer A-3 Table of Contents EXHIBIT A AMENDED CERTIFICATE OF DESIGNATIONS OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A PARTICIPATING PREFERRED STOCK OF MICROCHIP TECHNOLOGY INCORPORATED (No shares of the class or series of stock have been issued.) The undersigned, Steve Sanghi and C. Philip Chapman do hereby certify: 1. That they are the duly elected and acting President and Secretary, respectively, of Microchip Technology Incorporated, a Delaware corporation (the “Corporation”). 2. That the Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of Microchip Technology Incorporated was originally filed with the Secretary of the State of Delaware on February 13, 1995 and is now being amended and restated in the following form. 3. That pursuant to the authority conferred upon the Board of Directors by the Restated Certificate of incorporation of the said Corporation, the said Board of Directors on September 21, 1999 adopted the following resolution amending the rights, preferences, and privileges of the series of 650,000 shares of Preferred Stock designated as Series A Participating Preferred Stock: “RESOLVED, that pursuant to the authority vested in the Board of Directors of the corporation by the Restated Certificate of Incorporation, the Board of Directors does hereby amend and restate the designations, powers, preferences and relative and other special rights and the qualifications, limitations and restrictions of the Series A Participating Preferred Stock as follows: Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as “SERIES A PARTICIPATING PREFERRED STOCK.” The Series A Participating Preferred Stock shall have a par value of $0.001 per share, and the number of shares constituting such series shall be 650,000. Section 2. PROPORTIONAL ADJUSTMENT. In the event the Corporation shall at any time after the issuance of any share or shares of Series A Participating Preferred Stock (i) declare any dividend on Common Stock of the Corporation (“Common Stock”) payable in shares of Common Stock. (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Corporation shall simultaneously effect a proportional adjustment to the number of outstanding shares of Series A Participating Preferred Stock. Section 3. DIVIDENDS AND DISTRIBUTIONS. (a) Subject to the prior and superior right of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of January, April, July and October in each year (each such date being referred to herein as a “QUARTERLY DIVIDEND PAYMENT DATE”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock- in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock. A-1-1 Table of Contents (b) The Corporation shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock). (c) Dividends shall begin to accrue on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares- or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 4. VOTING RIGHTS. The holders of shares of Series A Participating Preferred Stack shall have the following voting rights: (a) Each share of Series A Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the corporation. (b) Except as otherwise provided herein or by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common Stock shall vole together as one class on all matters submitted to a vote of stockholders of the Corporation. (c) Except as required by law, holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 5. CERTAIN RESTRICTIONS. (a) The Corporation shall not declare any dividend on, make any distribution on, or redeem or purchase or otherwise acquire for consideration any shares of Common Stock after the first issue of a share or fraction of a share of. Series A Participating Preferred Stock unless concurrently therewith it shall declare a dividend on the Series A Participating Preferred Stock as required by Section 3 hereof. (b) Whenever quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in Section 3 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare to pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock; (ii) declare or pay dividends on, make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with Series A Participating Preferred Stock, except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock. A-1-2 Table of Contents provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Participating Preferred Stock, or any shares of stock tanking on a parity with the Series A Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Hoard of Directors) to ell holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (c) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 5, purchase or otherwise acquire such shares at such time and in such manner. Section 6. REACQUIRED SHARES. Any shares of Series A Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions an issuance set forth herein and, in the Restated Certificate of Incorporation, as then amended. Section 7. LIQUIDATION DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive an aggregate amount per share equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends on such shares of Series A Participating Preferred Stock. Section 8. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to 100 times the aggregate amount of stock securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. Section 9. NO REDEMPTION. The shares of Series A Participating Preferred Stock shall not be redeemable. Section 10. RANKING. The Series A Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets. unless; the terms of any such series shall provide otherwise. Section 11. AMENDMENT. The Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preference or special rights of the Series A Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series A Participating Preferred Stock, voting separately as a class. Section 12. FRACTIONAL SHARES. Series A Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Participating Preferred Stock. RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of this corporation be, and they hereby are, authorized and directed to prepare and file a Certificate of Designation of Rights, Preferences and Privileges in accordance with the foregoing resolution and the provisions of Delaware law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution.” A-1-3 Table of Contents We further declare under penalty of perjury that the matters set forth in the foregoing Certificate of Designation are true and correct of our own knowledge. Executed at Chandler, Arizona on October 11, 1999. /s/ Steve Sanghi Steve Sanghi CHAIRMAN OF THE BOARD. PRESIDENT AND CHIEF EXECUTIVE OFFICER /s/ C. Philip Chapman C. Philip Chapman VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY A-1-4 Table of Contents APPENDIX B MICROCHIP TECHNOLOGY INCORPORATED 2004 EQUITY INCENTIVE PLAN As Amended and Restated on August 24, 2021 (subject to stockholder approval) 1. Purposes of the Plan. The purposes of this 2004 Equity Incentive Plan are: • • • to attract and retain the best available personnel, to provide additional incentive to Service Providers, and to promote the success of the Company’s business. Awards granted under the Plan may be Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units, as determined by the Administrator at the time of grant. 2. Definitions. As used herein, the following definitions shall apply: (a) “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan. (b) “Applicable Laws” means the legal requirements relating to the administration of equity compensation plans under state and federal corporate and securities laws and the Code. (c) “Award” means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units. (d) “Award Agreement” means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. (e) “Awarded Stock” means the Common Stock subject to an Award. (f) “Board” means the Board of Directors of the Company. (g) “Change of Control” means the occurrence of any of the following events, in one or a series of related transactions: (1) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Company, a subsidiary of the Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; or (2) a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (3) (4) the sale or disposition by the Company of all or substantially all of the Company’s assets; or a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are Directors as of the date this Plan is approved by the Board, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors and whose election or nomination was not in connection with any transaction described in (1) or (2) above or in connection with an actual or threatened proxy contest relating to the election of directors of the Company. B-1 Table of Contents (h) “Code” means the Internal Revenue Code of 1986, as amended. (i) “Committee” means a committee appointed by the Board in accordance with Section 4 of the Plan. (j) “Common Stock” means the common stock of the Company. (k) “Company” means Microchip Technology Incorporated. (l) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services and who is compensated for such services. The term Consultant shall not include Directors who are compensated by the Company only for their service as Directors. (m) “Deferred Stock Unit” means a deferred stock unit Award granted to a Participant pursuant to Section 13. (n) “Director” means a member of the Board. (o) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code. (p) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company. (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended. (r) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (1) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market of The Nasdaq Stock Market, the Fair Market Value of a Share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (2) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (3) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (s) “Fiscal Year” means a fiscal year of the Company. (t) “Fiscal Quarter” means a fiscal quarter of the Company. (u) “Non-Employee Director” means a member of the Board who is not an Employee. (v) “Nonstatutory Stock Option” means an Option not intended to qualify as an incentive stock option under Section 422 of the Code and regulations promulgated thereunder. (w) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Award. The Notice of Grant is part of the Option Agreement. (x) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (y) “Option” means a stock option granted pursuant to the Plan. B-2 Table of Contents (z) “Option Agreement” means a written or electronic agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (aa) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. (bb) “Participant” means the holder of an outstanding Award granted under the Plan. (cc) “Performance Share” means a performance share Award granted to a Participant pursuant to Section 11. (dd) “Performance Unit” means a performance unit Award granted to a Participant pursuant to Section 12. (ee) “Plan” means this 2004 Equity Incentive Plan, as amended and restated. (ff) “Restricted Stock” means Shares granted pursuant to Section 10 of the Plan. (gg) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (hh) “Section 16(b)” means Section 16(b) of the Exchange Act, as amended. (ii) “Service Provider” means an Employee, Consultant or Non-Employee Director. (jj) “Share” means a share of the Common Stock, as adjusted in accordance with Section 19 of the Plan. (kk) “Stock Appreciation Right” or “SAR” means an Award granted pursuant to Section 9 of the Plan. (ll) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 19 of the Plan, the maximum aggregate number of Shares which may be issued under the Plan is 36,387,887. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Award expires or becomes unexercisable without having been exercised in full, or with respect to Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and SARs, the forfeited or repurchased Shares) which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to SARs, the gross Shares issued (i.e., Shares actually issued pursuant to a Stock Appreciation Right, as well as the Shares that represent payment of the exercise price and any applicable tax withholdings) pursuant to a SAR will cease to be available under the Plan. Shares that have actually been issued under the Plan under any Award shall not be returned to the Plan and shall not become available for future distribution under the Plan; provided, however, that if Shares of Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units are repurchased by the Company at their original purchase price or are forfeited to the Company, such Shares shall become available for future grant under the Plan. Shares used to pay the exercise price or purchase price, if applicable, of an Award shall become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than stock, such cash payment shall not result in reducing the number of Shares available for issuance under the Plan. 4. Administration of the Plan. (a) Procedure. (1) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service Providers. (2) Reserved. B-3 Table of Contents 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3. (3) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws. (4) Other Administration. Other than as provided above, the Plan shall be administered by (A) (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: (1) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(r) of the Plan; automatic grants to Non-Employee Directors provided for in Section 17 of the Plan); (2) to select the Service Providers to whom Awards may be granted hereunder (other than the (3) to determine whether and to what extent Awards or any combination thereof, are granted under the Plan; (4) to determine the number of shares of Common Stock or equivalent units to be covered by each Award granted under the Plan; (5) to approve forms of agreement for use under the Plan; (6) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted under the Plan. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or SARs may be exercised or other Awards vest (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (7) (8) to construe and interpret the terms of the Plan and Awards; to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (9) to modify or amend each Award (subject to Sections 8(c), 9(b) and 21(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options and SARs longer than is otherwise provided for in the Plan; effect the grant of an Award previously granted by the Administrator; (10) to authorize any person to execute on behalf of the Company any instrument required to (11) to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award (or distribution of a Deferred Stock Unit) that number of Shares or cash having a Fair Market Value equal to the minimum amount required to be withheld, or such greater amount as the Administrator may determine if such amount would not have adverse accounting consequences, as the Administrator determines in its sole discretion, but not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of any Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; (12) (13) to determine the terms and restrictions applicable to Awards; and to make all other determinations deemed necessary or advisable for administering the Plan. B-4 Table of Contents (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards. 5 Eligibility. Restricted Stock, Performance Shares, Performance Units, Stock Appreciation Rights, Deferred Stock Units and Nonstatutory Stock Options may be granted to Service Providers. Non-Employee Directors shall only receive Awards pursuant to Section 17 of the Plan. 6 Limitations. (a) Nonstatutory Stock Option. Each Option shall be designated in the Notice of Grant as a Nonstatutory Stock Option. (b) No Employment Rights. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s employment with the Company or its Subsidiaries, nor shall they interfere in any way with the Participant’s right or the Company’s or Subsidiary’s right, as the case may be, to terminate such employment at any time, with or without cause or notice. (c) Annual Limitations. The following limitations shall apply to grants of Options and Stock Appreciation Rights to Participants: No Participant shall be granted, in any Fiscal Year, Options and Stock Appreciation Rights to purchase more than 1,500,000 Shares; provided, however, that such limit shall be 4,000,000 Shares in the Participant’s first Fiscal Year of Company service. (1) (2) the Company’s capitalization as described in Section 19(a). The foregoing limitations shall be adjusted proportionately in connection with any change in (d) Minimum Vesting Requirements. (1) General. Except as specified in Section 6(d)(2), Awards will vest no earlier than the one (1)- year anniversary of such Award’s grant date (except if accelerated pursuant to a Change of Control or a termination of the Participant’s status as a Service Provider due to a Participant’s death, or a Participant’s Disability) (each, an “Acceleration Event”). (2) Exception. Awards may be granted to any Service Provider without regard to the minimum vesting requirements set forth in Section 6(d)(1) if the Shares subject to such Awards would not result in more than five percent (5%) of the maximum aggregate number of Shares reserved for issuance pursuant to all outstanding Awards granted under the Plan (the “5% Limit”). Any Awards that have their vesting discretionarily accelerated (except if accelerated pursuant to an Acceleration Event) are subject to the 5% Limit. For purposes of clarification, the Administrator may accelerate the vesting of any Awards pursuant to an Acceleration Event without such vesting acceleration counting toward the 5% Limit. The 5% Limit applies in the aggregate to Awards that do not satisfy the minimum vesting requirements as set forth in Section 6(d)(1) and to the discretionary vesting acceleration of Awards specified in this Section 6(d)(2). 7. Term of Plan. The Plan is effective as of October 1, 2004 (the “Effective Date”). It shall continue in effect until August 24, 2031, unless sooner terminated under Section 21 of the Plan. 8. Stock Options. (a) Term. The term of each Option shall be stated in the Notice of Grant; provided, however, that the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Notice of Grant. Option Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of (b) an Option shall be determined by the Administrator and shall be no less than 100% of the Fair Market Value per share on the date of grant. B-5 Table of Contents No Repricing. The exercise price for an Option may not be reduced. This shall include, without (c) limitation, a repricing of the Option as well as an Option exchange program whereby the Participant agrees to cancel an existing Option in exchange for an Option, SAR, other Award or cash. (d) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator may specify that an Option may not be exercised until the completion of a service period. (e) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. Subject to Applicable Laws, such consideration may consist entirely of: (1) (2) (3) cash; check; other Shares which (A) in the case of Shares acquired upon exercise of an option have been owned by the Participant for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; (4) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the exercise price; (5) any combination of the foregoing methods of payment; or (6) permitted by Applicable Laws. such other consideration and method of payment for the issuance of Shares to the extent (f) Exercise of Option. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the optioned stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 19 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter available for sale under the Option, by the number of Shares as to which the Option is exercised. (g) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s misconduct, death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Participant’s termination. B-6 Table of Contents If, on the date of termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (h) Disability. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for six (6) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (i) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Option Agreement (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement), by the personal representative of the Participant’s estate, provided such representative has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such representative has been designated by the Participant, then such Option may be exercised by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following Participant’s death. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 9. Stock Appreciation Rights. (a) Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the number of SARs granted to any Participant. (b) Exercise Price and Other Terms. Subject to Section 4(c) of the Plan, the Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that no SAR may have a term of more than ten (10) years from the date of grant. The per share exercise price for the Shares or cash to be issued pursuant to exercise of an SAR shall be determined by the Administrator and shall be no less than 100% of the Fair Market Value per share on the date of grant. The exercise price may not be reduced. This shall include, without limitation, a repricing of the SAR as well as an SAR exchange program whereby the Participant agrees to cancel an existing SAR in exchange for an Option, SAR, other Award or cash. (c) Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (1) the difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times (2) the number of Shares with respect to which the SAR is exercised. With respect to SARs settled in Shares, until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the SAR, notwithstanding the exercise of the SAR. (d) in cash, Shares or a combination thereof. Payment Upon Exercise of SAR. At the discretion of the Administrator, payment for an SAR may be B-7 Table of Contents (e) SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, shall determine. (f) Expiration of SARs. An SAR granted under the Plan shall expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. (g) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability termination, the Participant may exercise his or her SAR within such period of time as is specified in the SAR Agreement to the extent that the SAR is vested on the date of termination (but in no event later than the expiration of the term of such SAR as set forth in the SAR Agreement). In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for three (3) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified by the Administrator, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan. (h) Disability. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her SAR within such period of time as is specified in the SAR Agreement to the extent the SAR is vested on the date of termination (but in no event later than the expiration of the term of such SAR as set forth in the SAR Agreement). In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for six (6) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan. (i) Death of Participant. If a Participant dies while a Service Provider, the SAR may be exercised following the Participant’s death within such period of time as is specified in the SAR Agreement (but in no event may the SAR be exercised later than the expiration of the term of such SAR as set forth in the SAR Agreement), by the personal representative of the Participant’s estate, provided such representative has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such representative has been designated by the Participant, then such SAR may be exercised by the person(s) to whom the SAR is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for twelve (12) months following Participant’s death. If the SAR is not so exercised within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan. 10. Restricted Stock. (a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock award granted to any Participant (provided that during any Fiscal Year, no Participant shall be granted more than 300,000 Shares of Restricted Stock); provided, however, that such limit shall be 750,000 Shares in the Participant’s first Fiscal Year of Company service, and (ii) the conditions that must be satisfied, which typically will be based principally or solely on continued provision of services but may include a performance-based component, upon which is conditioned the grant or vesting of Restricted Stock. (b) Restricted Stock Units. Restricted Stock may be granted in the form of Restricted Stock or units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. With respect to the units to acquire Shares, until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist. (c) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Restricted Stock granted under the Plan. Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded. The Administrator may B-8 Table of Contents require the recipient to sign a Restricted Stock Award agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator. (d) Restricted Stock Award Agreement. Each Restricted Stock grant shall be evidenced by an agreement that shall specify the purchase price (if any) and such other terms and conditions as the Administrator, in its sole discretion, shall determine; provided, however, that if the Restricted Stock grant has a purchase price, such purchase price must be paid no more than ten (10) years following the date of grant. (e) Dividends and Other Distributions. Until the restrictions set forth in the Restricted Stock Award agreement, including Award agreements for units to acquire Shares described in Section 10(b), have lapsed, Service Providers holding Shares of Restricted Stock will not be entitled to receive dividends and other distributions paid with respect to such Shares or units. However, to the extent the restrictions in the Restricted Stock Award have lapsed, Service Providers holding Shares of Restricted Stock will be entitled to receive dividends, even if there are other restrictions on the Shares of Restricted Stock (e.g., a lock up period due to a public offering or a restriction due to possession of material nonpublic information). 11. Performance Shares. (a) Grant of Performance Shares. Subject to the terms and conditions of the Plan, Performance Shares may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Performance Share award granted to any Participant (provided that during any Fiscal Year, no Participant shall be granted more than 300,000 units of Performance Shares); provided, however, that such limit shall be 750,000 Shares in the Participant’s first Fiscal Year of Company service, and (ii) the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Shares. Performance Shares shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the units to acquire Shares. (b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Shares granted under the Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign a Performance Shares agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator. (c) Performance Share Award Agreement. Each Performance Share grant shall be evidenced by an agreement that shall specify such other terms and conditions as the Administrator, in its sole discretion, shall determine. 12. Performance Units. (a) Grant of Performance Units. Performance Units are similar to Performance Shares, except that they shall be settled in a cash equivalent to the Fair Market Value of the underlying Shares, determined as of the vesting date. Subject to the terms and conditions of the Plan, Performance Units may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Units. Performance Units shall be granted in the form of units to acquire Shares. Each such unit shall be the cash equivalent of one Share of Common Stock. No right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Performance Units or the cash payable thereunder. (b) Number of Performance Units. The Administrator will have complete discretion in determining the number of Performance Units granted to any Participant, provided that during any Fiscal Year, no Participant shall receive Performance Units having an initial value greater than $1,500,000, provided, however, that such limit shall be $4,000,000 in the Participant’s first Fiscal Year of Company service. B-9 Table of Contents (c) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Units granted under the Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign a Performance Unit agreement as a condition of the award. Any certificates representing the Shares awarded shall bear such legends as shall be determined by the Administrator. (d) Performance Unit Award Agreement. Each Performance Unit grant shall be evidenced by an agreement that shall specify such terms and conditions as the Administrator, in its sole discretion, shall determine. 13. Deferred Stock Units. (a) Description. Deferred Stock Units shall consist of a Restricted Stock, Performance Share or Performance Unit Award that the Administrator, in its sole discretion permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Administrator. Deferred Stock Units shall remain subject to the claims of the Company’s general creditors until distributed to the Participant. (b) Annual Limits. Deferred Stock Units shall be subject to the annual limits applicable to the underlying Restricted Stock, Performance Share or Performance Unit Award. 14. Death of Participant. In the event that a Participant dies while a Service Provider, then 100% of his or her Awards shall immediately vest. 15. Leaves of Absence. Unless the Administrator provides otherwise or as otherwise required by Applicable Laws, vesting of Awards granted hereunder shall cease commencing on the first day of any unpaid leave of absence and shall only recommence upon return to active service. 16. Misconduct. Should (i) the Participant’s service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement), or (ii) the Participant makes any unauthorized use or disclosure of confidential information or trade secrets of the Company or any Parent or Subsidiary, then in any such event all outstanding Awards held by the Participant under the Plan shall terminate immediately and cease to be outstanding, including as to both vested and unvested Awards. 17. Non-Employee Director Awards. (a) Initial Grants. Each Non-Employee Director who first becomes a Non‑Employee Director on or after August 1, 2021 (excluding any Non‑Employee Director who previously served on the Board and excluding any Non‑Employee Director appointed on the date of the Company’s annual stockholders’ meeting) shall be automatically granted as of the date that the individual first is appointed or elected as a Non-Employee Director that number of Restricted Stock Units equal to (i)(A) $170,000 divided by (B) the Fair Market Value, multiplied by (ii) a fraction (A) the numerator of which is (x) 12 minus (y) the number of months between the date of the Company’s last annual stockholders’ meeting and the date the Non-Employee Director becomes a member of the Board and (B) the denominator of which is 12, rounded down to the nearest whole Share (the “Initial RSU Grant”). One hundred percent (100%) of the Initial RSU Grant will vest upon the earlier of the date that is one-year following the date of grant or one day prior to the date of the Company’s next annual stockholders’ meeting following the date of grant. Vesting of the Initial RSU Grant is contingent upon the Non‑Employee Director maintaining continued status as a Non- Employee Director through the vesting date. (b) Annual Grants. On the date of the Company’s annual stockholders’ meeting, each Non-Employee Director (including any Non-Employee Director appointed on the date of the Company’s annual stockholders’ meeting) shall be automatically granted that number of Restricted Stock Units equal to $170,000 divided by the Fair Market Value, rounded down to the nearest whole Share (the “Annual RSU Grant”), provided that such Non-Employee Director has been elected by the stockholders to serve as a member of the Board at that annual stockholders’ meeting. One hundred percent (100%) of the Annual RSU Grant will vest upon the earlier of the date that is one year following the date of grant or one day prior to the date of B-10 Table of Contents the Company’s next annual stockholders’ meeting following the date of grant. Vesting of the Annual RSU Grant is contingent upon the Non-Employee Director maintaining continued status as a Non-Employee Director through the applicable vesting date. 18. Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the recipient, only by the recipient. In no event may an Award be transferred in exchange for consideration. If the Administrator makes an Award transferable, such Award shall contain such additional terms and conditions as the Administrator deems appropriate. 19. Adjustments Upon Changes in Capitalization, Dissolution or Liquidation or Change of Control. (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Award, the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, as well as the price per share of Common Stock covered by each such outstanding Award and the Fiscal Year annual share issuance limits under Sections 6(c), 10(a) and 11(a) shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that any such change in capitalization shall not affect the number of shares awarded under the automatic grants to Non-Employee Directors described in Sections 17(a) and (b), and provided that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award. (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a Participant to have the right to exercise his or her Option or SAR until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby, including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised (with respect to Options and SARs) or vested (with respect to other Awards), an Award will terminate immediately prior to the consummation of such proposed action. (c) Change of Control. (1) Stock Options and SARs. In the event of a Change of Control, each outstanding Option and SAR shall be assumed or an equivalent option or SAR substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or SAR, the Participant shall fully vest in and have the right to exercise the Option or SAR as to all of the Awarded Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or SAR becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change of Control, the Administrator shall notify the Participant in writing or electronically that the Option or SAR shall be fully vested and exercisable for a period of thirty (30) days from the date of such notice, and the Option or SAR shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or SAR shall be considered assumed if, following the Change of Control, the option or stock appreciation right confers the right to purchase or receive, for each Share of Awarded Stock subject to the Option or SAR immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor corporation or its Parent, the B-11 Table of Contents Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or SAR, for each Share of Awarded Stock subject to the Option or SAR, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control. (2) Restricted Stock, Performance Shares, Performance Units and Deferred Stock Units. In the event of a Change of Control, each outstanding Restricted Stock, Performance Share, Performance Unit and Deferred Stock Unit award shall be assumed or an equivalent Restricted Stock, Performance Share, Performance Unit and Deferred Stock Unit award substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Restricted Stock, Performance Share, Performance Unit or Deferred Stock Unit award, the Participant shall fully vest in the Restricted Stock, Performance Share, Performance Unit or Deferred Stock Unit including as to Shares (or with respect to Performance Units, the cash equivalent thereof) which would not otherwise be vested. For the purposes of this paragraph, a Restricted Stock, Performance Share, Performance Unit and Deferred Stock Unit award shall be considered assumed if, following the Change of Control, the award confers the right to purchase or receive, for each Share (or with respect to Performance Units, the cash equivalent thereof) subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received, for each Share and each unit/right to acquire a Share subject to the Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control. 20. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant. 21. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. (b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Section 422 of the Code (or any successor rule or statute or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such stockholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule or regulation. (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. 22. Conditions Upon Issuance of Shares. (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award or the issuance and delivery of such Shares (or with respect to Performance Units, the cash equivalent thereof) shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) Investment Representations. As a condition to the exercise or receipt of an Award, the Company may require the person exercising or receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. B-12 Table of Contents 23. Liability of Company. (a) Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. (b) Grants Exceeding Allotted Shares. If the Awarded Stock covered by an Award exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional stockholder approval, such Award shall be void with respect to such excess Awarded Stock, unless stockholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 21(b) of the Plan. 24. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. B-13 Table of Contents MICROCHIP TECHNOLOGY INCORPORATED 2021 ANNUAL MEETING OF STOCKHOLDERS Tuesday, August 24, 2021 9:00 a.m. Mountain Standard Time This Proxy is solicited on behalf of the Board of Directors 2021 ANNUAL MEETING OF STOCKHOLDERS I (whether one or more of us) appoint Ganesh Moorthy and J. Eric Bjornholt, and each of them, each with full power of substitution, to be my Proxies. The Proxies may vote on my behalf, in accordance with my instructions, all of my shares entitled to vote at the 2021 Annual Meeting of Stockholders of Microchip Technology Incorporated and any adjournment(s) of that meeting. The meeting is scheduled for Tuesday, August 24, 2021, at 9:00 a.m., Mountain Standard Time, at Microchip's Chandler, Arizona facility at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199. The Proxies may vote on my behalf as if I were personally present at the meeting. This Proxy will be voted as directed or, if no contrary direction is indicated, will be voted (1) FOR the election of each of the director nominees; (2) FOR the approval of an amendment and restatement of our Certificate of Incorporation to increase the number of authorized shares of common stock for the purpose of effecting a two-for-one forward stock split; (3) FOR the approval of an amendment and restatement of our 2004 Equity Incentive Plan to extend the term of the plan by ten years, to August 24, 2031; (4) FOR the ratification of Ernst & Young LLP as Microchip's independent registered public accounting firm for the fiscal year ending March 31, 2022; and (5) FOR the approval, on an advisory (non-binding) basis, of the compensation of our named executives; and as my Proxies deem advisable on such other matters as may properly come before the meeting or any adjournment(s) thereof. The proposals described in the accompanying proxy statement have been proposed by the Board of Directors. IF VOTING BY MAIL, PLEASE COMPLETE, DATE AND SIGN ON REVERSE SIDE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. YOUR VOTE IS IMPORTANT! Thank you in advance for participating in our 2021 Annual Meeting Vote by Internet, Telephone or Mail 24 Hours a Day, 7 Days a Week Your phone or internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. : INTERNET/MOBILE www.proxypush.com/mchp ( PHONE 1-866-883-3382 * MAIL Use the internet to vote your proxy until 11:59 p.m. Eastern Time on August 23, 2021. Use a touch-tone telephone to vote your proxy until 11:59 p.m. Eastern Time on August 23, 2021. Mark, sign and date your proxy card and return it in the postage-paid envelope provided. If you vote your proxy by internet or by telephone, you do NOT need to mail back your Proxy Card. Table of Contents TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD. The Board of Directors recommends you vote FOR the following: 1. Election of Directors: 01 Matthew W. Chapman 02 Esther L. Johnson 03 Karlton D. Johnson 04 Wade F. Meyercord 05 Ganesh Moorthy 06 Karen M. Rapp 07 Steve Sanghi ¨ For ¨ Against ¨ Abstain ¨ For ¨ Against ¨ Abstain ¨ For ¨ Against ¨ Abstain ¨ For ¨ Against ¨ Abstain ¨ For ¨ Against ¨ Abstain ¨ For ¨ Against ¨ Abstain ¨ For ¨ Against ¨ Abstain The Board of Directors recommends you vote FOR proposals 2, 3, 4 and 5. 2. 3. 4. 5. Proposal to approve an amendment and restatement of our Certificate of Incorporation to increase the number of authorized shares of common stock for the purpose of effecting a two-for-one forward stock split. ¨ For ¨ Against ¨ Abstain Proposal to approve an amendment and restatement of our 2004 Equity Incentive Plan to extend the term of the plan by ten years, to August 24, 2031. Proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2022. ¨ For ¨ Against ¨ Abstain ¨ For ¨ Against ¨ Abstain Proposal to approve, on an advisory (non-binding) basis, the compensation of our named executives. ¨ For ¨ Against ¨ Abstain Please sign exactly as your name(s) appear(s) on the Proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations must provide full name of corporation and title of authorized officer signing the Proxy. Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.microchip.com/annual_reports UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ☐ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended March 31, 2021 OR Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to __________ Commission File Number: 0-21184 MICROCHIP TECHNOLOGY INCORPORATED (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.) Delaware 86-0629024 2355 W. Chandler Blvd., Chandler, AZ 85224-6199 (Address of Principal Executive Offices, Including Zip Code) (480) 792-7200 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol Name of Each Exchange on Which Registered Common Stock, $0.001 Par Value Per Share MCHP NASDAQ Stock Market LLC (Nasdaq Global Select Market) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act: Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company Emerging growth company ☐ ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No Aggregate market value of the voting and non-voting common equity held by non-affiliates as of September 30, 2020 based upon the closing price of the common stock as reported by the NASDAQ Global Market on such date was approximately $26.2 billion. Number of shares of Common Stock, $0.001 par value, outstanding as of May 7, 2021: 273,531,409 shares Document Annual Report on Form 10-K for the fiscal year ended March 31, 2020 Proxy Statement for the 2021 Annual Meeting of Stockholders Part of Form 10-K II III Documents Incorporated by Reference MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES FORM 10-K TABLE OF CONTENTS Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures PART I PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services PART IV Exhibits and Financial Statement Schedules Form 10-K Summary Exhibit Index Signatures Power of Attorney Page 4 12 29 30 30 30 31 32 33 47 47 47 48 49 49 49 49 50 50 50 50 51 56 57 Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Item 10. Item 11. Item 12. Item 13. Item 14. Item 15. Item 16. 2 MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES Defined Terms(1) Term 3.922% 2021 Notes 4.333% 2023 Notes 2.670% 2023 Notes 0.972% 2024 Notes 4.250% 2025 Notes 2015 Senior Convertible Debt 2017 Senior Convertible Debt 2020 Senior Convertible Debt 2017 Junior Convertible Debt ASU Bridge Loan Facility CEMs Convertible Debt Credit Agreement EAR EEPROM EERAM ESEs Exchange Act FASB FPGA LIBOR OEMs R&D Revolving Credit Facility RF ROU RSUs SEC Senior Credit Facilities Senior Indebtedness Senior Notes SRAM SARs TCJA Term Loan Facility U.S. GAAP Definition 2021 Senior Secured Notes, maturing June 1, 2021 2023 Senior Secured Notes, maturing June 1, 2023 2023 Senior Secured Notes, maturing September 1, 2023 2024 Senior Secured Notes, maturing February 15, 2024 2025 Senior Unsecured Notes, maturing September 1, 2025 2015 Senior Convertible Debt, maturing February 15, 2025 2017 Senior Convertible Debt, maturing February 15, 2027 2020 Senior Convertible Debt, maturing November 15, 2024 2017 Junior Convertible Debt, maturing February 15, 2037 Accounting Standards Update 364-Day Senior Secured bridge credit agreement which provides for a term loan facility Client engagement managers 2015 Senior Convertible Debt, 2017 Senior Convertible Debt, 2020 Senior Convertible Debt, and 2017 Junior Convertible Debt Credit agreement, dated as of May 29, 2018, as subsequently amended, among the Company, as borrower, the lenders from time to time party thereto, J.P.Morgan Chase Bank, N.A., as administrative agent, providing for the Revolving Credit Facility and the Term Loan Facility Export Administration Regulation Electrically erasable programmable read only memory Electrically erasable random access memory Embedded solutions engineers Securities Exchange Act of 1934, as amended Financial Accounting Standards Board Field-programmable gate array London Interbank Offered Rate Original equipment manufacturers Research and development $3.57 billion revolving credit facility created pursuant to the Credit Agreement Radio frequency Right-of-use Restricted stock units U.S. Securities and Exchange Commission Revolving Credit Facility and Term Loan Facility Revolving Credit Facility, Term Loan Facility, Bridge Loan Facility, 3.922% 2021 Notes, 4.333% 2023 Notes, 2.670% 2023 Notes, 0.972% 2024 Notes, and 4.250% 2025 Notes 3.922% 2021 Notes, 4.333% 2023 Notes, 2.670% 2023 Notes, 0.972% 2024 Notes, and 4.250% 2025 Notes Static random access memory Stock appreciation rights Tax Cuts and Jobs Act of 2017 $3.0 billion term loan facility created pursuant to the Credit Agreement U.S. Generally Accepted Accounting Principles (1) Certain terms used within this Form 10-K are defined in the above table. 3 Table of Contents PART I This Form 10-K contains certain forward-looking statements that involve risks and uncertainties, including statements regarding our strategy and future financial performance and those statements identified under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Note Regarding Forward-looking Statements." Our actual results could differ materially from the results described in these forward-looking statements as a result of certain factors including those set forth under "Item 1A. Risk Factors," beginning below at page 12, and elsewhere in this Form 10-K. Although we believe that the matters reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. We disclaim any obligation to update information contained in any forward-looking statement. In this Form 10-K, "we," "us," "our," and "Microchip" each refers to Microchip Technology Incorporated and its subsidiaries. Item 1. Business We develop, manufacture and sell smart, connected and secure embedded control solutions used by our customers for a wide variety of applications. With over 30 years of technology leadership, our broad product portfolio is a Total System Solution (TSS) for our customers that provides a large portion of the silicon requirements in their applications. TSS is a combination of hardware, software and services which help our customers increase their revenue, reduce their costs and manage their risks compared to other solutions. Our synergistic product portfolio empowers disruptive growth trends, including 5G, artificial intelligence and machine learning, Internet of Things (IoT), advanced driver assist systems (ADAS) and autonomous driving, and electric vehicles, in key end markets such as automotive, aerospace and defense, communications, consumer, data centers and computing, and industrial. Impact of COVID-19 on Our Business In the first half of fiscal 2021, the COVID-19 pandemic resulted in a global disruption in economic activity by adversely affecting production, creating supply chain and market disruption, and adversely impacting businesses and individuals. In the second half of fiscal 2021, business conditions were unexpectedly strong as businesses and individuals adapted to the effects of the pandemic. Supply chains, however, were stressed as they were not expecting the level of economic strength that occurred. The impact of the pandemic on individuals and in certain locations in which we operate remains uncertain and will depend on many factors, such as the effectiveness of the pandemic containment efforts including the use and effectiveness of vaccines. We regularly monitor new information regarding the severity of COVID-19 and the ability to contain, treat, or prevent it. In response to the early indications of the COVID-19 pandemic, we took proactive measures to safeguard the health of our employees, contractors, customers, suppliers, visitors to our facilities, other business partners, and our communities. While our global manufacturing sites are fully operational, we strategically implemented plans intended to provide more assurance of business continuity in the event severe outbreaks or government requirements were to impact our operations. We monitor governmental policies and CDC recommendations and take appropriate actions which are designed to prevent and control the spread of COVID-19. Industry Background Competitive pressures require OEMs of a wide variety of products to expand product functionality and provide differentiation while maintaining or reducing cost. To address these requirements, manufacturers often use integrated circuit- based embedded control systems that enable them to: differentiate their products replace less efficient electromechanical control devices reduce the number of components in their system add product functionality reduce the system level energy consumption • • • • • • make systems safer to operate add security to their products • decrease time to market for their products • significantly reduce product cost • 4 Table of Contents Embedded control systems have been incorporated into thousands of products and subassemblies in a wide variety of applications and markets worldwide, including: actuators applications requiring touch buttons, touch screens and graphical user interfaces automotive access control automotive comfort, safety, information and entertainment applications avionics communication infrastructure systems consumer electronics defense and military hardware electric vehicles handheld tools home and building automation industrial automation large and small home appliances • • • • • • • • • • • • • • medical devices • motor controls • • • • • • • • • • • portable computers and accessories power supplies residential and commercial security systems robotics routers and video surveillance systems satellites smart home and IoT edge devices smart meters and energy monitoring storage and server systems touch control wireless communication Embedded control systems typically incorporate a microcontroller as the principal active, and sometimes sole, component. A microcontroller is a self-contained computer-on-a-chip consisting of a central processing unit, often with on- board non-volatile program memory for program storage, random access memory for data storage and various analog and digital input/output peripheral capabilities. In addition to the microcontroller, a complete embedded control system often incorporates application-specific software, various analog, mixed-signal, timing, connectivity, security and non-volatile memory components such as EEPROMs and Flash memory. The increasing demand for embedded control systems has made the market for microcontrollers a significant segment of the semiconductor market at $17.5 billion in calendar year 2020. Microcontrollers are primarily available in 8-bit through 32- bit architectures. 8-bit microcontrollers remain very cost-effective and easy to use for a wide range of high-volume embedded control applications and, as a result, continue to represent a significant portion of the overall microcontroller market. 16-bit and 32-bit microcontrollers provide higher performance and functionality, and are generally found in more complex embedded control applications. FPGAs are programmable integrated circuits that are used to implement complex logic functions and can be re-programmed at any time, allowing for multiple implementations and revisions during or after the end customer system is manufactured. Some versions of FPGAs also include a microcontroller or microprocessor core to provide additional system on chip functionality for compute intensive tasks. The analog and mixed-signal segment of the semiconductor market was $54.0 billion in calendar year 2020, and this market is fragmented into a large number of sub segments. Our Products Our strategic focus is on providing cost-effective embedded control solutions that also offer the advantages of small size, high performance, extreme low power usage, wide voltage range operation, mixed signal integration, and ease of development, thus enabling timely and cost-effective integration of our solutions by our customers in their end products. Microcontrollers We offer a broad family of proprietary general purpose microcontroller products marketed under multiple brand names. We believe that our microcontroller product families provide leading function and performance characteristics in the worldwide microcontroller market. We target the 8-bit, 16-bit, and 32-bit microcontroller and 32-bit embedded microprocessor markets. We have shipped more than 29.5 billion microcontrollers to customers worldwide since 1990. We also offer 5 Table of Contents specialized microcontrollers for automotive, industrial, computing, communications, lighting, power supplies, motor control, human machine interface, security, wired connectivity and wireless connectivity applications. We leverage our circuit design, process technologies, development tools, applications knowledge, and manufacturing experiences to enable our customers to implement various embedded control functions in their end systems with our microcontrollers. Analog Our analog product line consists of several families including power management, linear, mixed-signal, high voltage, thermal management, discrete diodes and MOSFETS, RF, drivers, safety, security, timing, USB, ethernet, wireless and other interface products. We market and sell our analog product line into our microcontroller, microprocessor and FPGA customer base, and to customers who use microcontrollers and FPGA products from other suppliers and to customers who use other products that may not fit our traditional microcontroller, FPGA and memory products customer base. Other Our other product line includes FPGA products, royalties associated with licenses for the use of our SuperFlash and other technologies, sales of our intellectual property, fees for engineering services, memory products, timing systems, manufacturing services (wafer foundry and assembly and test subcontracting), legacy application specific integrated circuits, and products for aerospace applications. Our FPGA products were primarily acquired as a part of our acquisition of Microsemi Corporation (Microsemi) in May 2018. Our portfolio of non-volatile FPGAs are recognized for their low power, high security and extended reliability. We market and sell our FPGA products and related solutions into a broad range of applications within the industrial, automotive, defense, aviation, space and communications markets. Our technology licensing business generates license fees and royalties associated with technology licenses for the use of our SuperFlash® embedded flash and Smartbits® one time programmable NVM technologies. We also generate fees for engineering services related to these technologies. We license our NVM technologies to foundries, integrated device manufacturers and design partners throughout the world for use in the manufacture of their advanced microcontroller products, gate array, RF, analog and neuromorphic compute products that require embedded non-volatile memory. Our memory products consist of EEPROMs, Serial Flash memories, Parallel Flash memories, Serial SRAM memories and EERAM. Serial EEPROMs, Serial Flash memories, Serial SRAMs and EERAM have a very low I/O pin requirement, permitting production of very small footprint devices. We sell our memory products primarily into the embedded control market, complementing our microcontroller offerings. Microcontroller Development Tools We offer a comprehensive set of low-cost and easy-to-learn application development tools. These tools enable system designers to quickly and easily program our microcontroller and microprocessor products for specific applications and, we believe, they are an important factor for facilitating design wins. Our family of development tools for our microcontroller and microprocessor products range from entry-level systems, which include an assembler or a compiler and programmer or in-circuit debugging hardware, to fully configured systems that provide in-circuit emulation capability. We also offer a complete suite of compilers, software code configurators and simulators. Customers moving from entry-level designs to those requiring real-time emulation are able to preserve their investment in learning and tools as they migrate to future microcontroller devices in our portfolio. Many independent companies also develop and market application development tools that support our microcontroller and microprocessor product architectures, including an extensive amount of third-party tool suppliers whose products support our microcontroller architectures. We believe that familiarity with and adoption of development tools from Microchip as well as third-party development tool partners by an increasing number of product designers will be an important factor in the future selection of our embedded 6 Table of Contents control products. These development tools allow design engineers to develop thousands of application-specific products from our standard microcontrollers. Manufacturing Our manufacturing operations include wafer fabrication, wafer probe, assembly and test. The ownership of a substantial portion of our manufacturing resources is an important component of our business strategy, enabling us to maintain a high level of manufacturing control, resulting in us being one of the lowest cost producers in the embedded control industry. By owning wafer fabrication facilities and our assembly and test operations, and by employing statistical techniques (statistical process control, designed experiments and wafer level monitoring), we have been able to achieve and maintain high production yields. Direct control over manufacturing resources allows us to shorten our design and production cycles. This control also allows us to capture a portion of the wafer manufacturing and assembly and testing profit margin. We do outsource a significant portion of our manufacturing requirements to third parties and the amount of our outsourced manufacturing has increased in recent years due to our acquisitions of Microsemi and other companies that outsource all or substantial portions of their manufacturing. We comply with several quality systems, including: ISO9001 (2015 version), IATF16949 (2016 version), AS9100 (2016 version), and TL9000. Refer to "Item 2. Properties" for further information regarding the location and principal operations of our manufacturing facilities. Wafer Fabrication Fab 2 currently produces 8-inch wafers and supports various manufacturing process technologies, but predominantly utilizes our 0.25 microns to 1.0 microns processes. During fiscal 2021, we increased Fab 2's capacity to support more advanced technologies by making process improvements, upgrading existing equipment, and adding equipment. Fab 4 currently produces 8-inch wafers using predominantly 0.13 microns to 0.5 microns manufacturing processes. During fiscal 2021, we increased Fab 4's capacity to support more advanced technologies by making process improvements, upgrading existing equipment, and adding equipment. A significant amount of additional clean room capacity in Fab 4 can be brought on line in the future to support incremental wafer fabrication capacity needs. During fiscal 2020, we announced our intention to re-purpose Fab 5 to manufacture discrete and specialty products in addition to a lower volume of a diversified set of standard products. In connection with these efforts, we reduced the clean room footprint and transferred certain higher volume products from Fab 5 to our 8-inch wafer fabrication facilities in Arizona and Oregon. These restructuring efforts were substantially completed as of March 31, 2021. We believe the combined capacity of Fab 2, Fab 4, and Fab 5 will allow us to respond to future demand with incremental capital expenditures. As a result of our acquisition of Microsemi, we acquired several smaller wafer fabrication facilities, which utilize older technologies that are appropriate for the discrete products they manufacture. We plan to operate these fabrication facilities with modest investment to keep them operational with the exception of the facility in Santa Clara, California, which we plan to close by December 2021. We continue to transition products to more advanced process technologies to reduce future manufacturing costs. We believe that our ability to successfully transition to more advanced process technologies is important for us to remain competitive. We augment our internal manufacturing capabilities by outsourcing a significant portion of our wafer production requirements to third-party wafer foundries. As a result of our acquisitions in recent years, we have become more reliant on outside wafer foundries for our wafer fabrication requirements. In fiscal 2021, approximately 61% of our sales came from products that were produced at outside wafer foundries. Assembly and Test We perform product assembly and test at various facilities located around the world. During fiscal 2021, we increased capacity at our Thailand and Philippines facilities to support more technologies by making process improvements, upgrading existing equipment, and adding equipment. During fiscal 2021, approximately 53% of our assembly requirements were being performed in our internal facilities and approximately 57% of our test requirements were performed in internal facilities. We 7 Table of Contents use third-party assembly and test contractors for the balance of our assembly and test requirements. Over time, we intend to continue to migrate a portion of the outsourced assembly and test activities to our internal facilities. General Matters Impacting Our Manufacturing Operations Due to the high fixed costs inherent in semiconductor manufacturing, consistently high manufacturing yields have significant positive effects on our gross profit and overall operating results. Our continuous focus on manufacturing productivity has allowed us to maintain excellent manufacturing yields at our facilities. Our manufacturing yields are primarily driven by a comprehensive implementation of statistical process control, extensive employee training and effective use of our manufacturing facilities and equipment. Maintenance of manufacturing productivity and yields are important factors in the achievement of our operating results. The manufacture of integrated circuits, particularly non-volatile, erasable complementary metal-oxide semiconductor (CMOS) memory and logic devices, such as those that we produce, are complex processes. These processes are sensitive to a wide variety of factors, including the level of contaminants in the manufacturing environment, impurities in the materials used and the performance of our manufacturing personnel and equipment. As is typical in the semiconductor industry, we have from time to time experienced lower than anticipated manufacturing yields. Our operating results will suffer if we are unable to maintain yields at or above approximately the current levels. Historically, we have relied on our ability to respond quickly to customer orders as part of our competitive strategy, resulting in customers placing orders with relatively short delivery schedules. In order to respond to such requirements, we have historically maintained a significant work-in-process and finished goods inventory. Refer to Note 5 for a summary of our long-lived assets, consisting of property, plant and equipment and right-of-use assets, by geography. We have many suppliers of raw materials and subcontractors which provide our various materials and service needs. We generally seek to have multiple sources of supply for our raw materials and services, but, in some cases, we may rely on a single or limited number of suppliers. Sales and Distribution General We market and sell our products worldwide primarily through a network of direct sales personnel and distributors. Our direct sales force focuses on a wide variety of strategic accounts in three geographical markets: the Americas, Europe and Asia. We currently maintain sales and technical support centers in major metropolitan areas in all three geographic markets. We believe that a strong technical service presence is essential to the continued development of the embedded control market. Many of our CEMs, ESEs, and sales management have technical degrees or backgrounds and have been previously employed in high technology environments. We believe that the technical and business knowledge of our sales force is a key competitive advantage in the sale of our products. The primary mission of our ESE team is to provide technical assistance to customers and to conduct periodic training sessions for the balance of our sales team. ESEs also frequently conduct technical seminars and workshops in major cities around the world or through online webcasts. Our licensing division has dedicated sales, technology, design, product, test and reliability personnel that support the requirements of our licensees. In the fourth quarter of fiscal 2021, we launched our Preferred Supply Program, which provides our customers with prioritized capacity beginning 6 months after their order of 12 months of continuous, non-cancellable and non-reschedulable backlog. For information regarding our revenue, results of operations, and total assets for each of our last three fiscal years, refer to our financial statements included in this Form 10-K. Distribution Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base. We believe that customers recognize us for our products and brand name and use distributors as an effective supply channel. In each of fiscal 2021 and fiscal 2020, we derived 50% of our net sales through distributors and 50% of our net sales from customers serviced directly by us. With the exception of Arrow Electronics, our largest distributor, which accounted for 10% 8 Table of Contents of our net sales in fiscal 2020, no other distributor or end customer accounted for more than 10% of our net sales in fiscal 2021 or fiscal 2020. With the exception of orders placed under our Preferred Supply Program, we do not have long-term purchase commitments from our distributors and we, or our distributors, may each terminate our relationship with little or no advanced notice. The loss of, or the disruption in the operations of, one or more of our distributors could reduce our future net sales in a given quarter and could result in an increase in inventory returns. Competition The semiconductor industry is intensely competitive and has been characterized by price erosion and rapid technological change. We compete with major domestic and international semiconductor companies, some of which have greater market recognition and greater financial, technical, marketing, distribution and other resources than we have with which to pursue engineering, manufacturing, marketing and distribution of their products. We also compete with a number of companies that we believe have copied, cloned, pirated or reverse engineered our proprietary product lines in such countries as China and Taiwan. We are continuing to take actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis. We currently compete principally on the basis of the technical innovation and performance of our embedded control products, including the following product characteristics: performance analog, digital and mixed signal functionality and level of functional integration field programmability • • • • memory density • • • • • • low power consumption extended voltage ranges reliability security and functional safety packaging alternatives comprehensive suite of development tools We believe that other important competitive factors in the embedded control market include: • • • • • • • ease of use functionality of application development systems hardware, software and tool compatibility within product families to increase migration flexibility dependable delivery, quality and availability technical and innovative service and support time to market price We believe that we compete favorably with other companies on all of these factors, but we may be unable to compete successfully in the future, which could harm our business. Patents, Licenses and Trademarks We maintain a portfolio of U.S. and foreign patents, expiring on various dates from 2021 through 2039. We also have numerous additional U.S. and foreign patent applications pending. We do not expect that the expiration of any particular patent will have a material impact on our business. While our intention is to continue to patent our technology and manufacturing processes, we believe that our continued success depends primarily on the technological skills and innovative capabilities of our personnel and our ability to rapidly commercialize new and enhanced products. As with any operating company, the scope and strength of our intellectual property assets, including our pending and existing patents, trademarks, copyrights, and other intellectual property rights may be insufficient to provide meaningful protection or commercial advantage. Moreover, pursuing violations of intellectual property rights on a worldwide basis is a complex challenge involving multinational patent, trademark, copyright and trade secret laws. Further, the laws of particular foreign countries often fail to protect our intellectual property rights to the same extent as the laws of the U.S. We have also entered into certain in-bound and outbound intellectual property licenses and cross-licenses with other companies and those licenses relate to semiconductor products and manufacturing processes. As is typical in the semiconductor industry, we and our customers from time to time receive, and may continue to receive, demand letters from third parties 9 Table of Contents asserting infringement of patent and other intellectual property rights. We diligently investigate all such notices and respond as we believe appropriate. In most cases we believe that we can obtain necessary licenses on commercially reasonable terms, however, we cannot be certain that this would be the case, or that litigation or damages for any past infringement could be avoided. Licensees of our technology may become unable to pay, or dispute their obligations to pay us royalties or fees. Litigation, arbitration or other proceedings, which could result in substantial costs and require significant attention from management, may be necessary to enforce our intellectual property rights, or to defend against claimed infringement of the rights of others. The failure to obtain necessary licenses, the necessity of engaging in defensive legal proceedings, or any negative results of these proceedings could harm our business. Environmental Regulation We must comply with many different federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of certain chemicals and gases used in our manufacturing processes. Our facilities have been designed to comply with these regulations and we believe that our activities are conducted in material compliance with such regulations. Any changes in such regulations or in their enforcement could require us to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. Any failure by us to adequately control the storage, use, discharge and disposal of regulated substances could result in significant future liabilities. Increasing public attention has been focused on the environmental impact of electronic manufacturing operations. While we have not experienced any materially adverse effects on our operations from recently adopted environmental regulations, our business and results of operations could suffer if for any reason we fail to control the storage or use of, or to adequately restrict the discharge or disposal of, hazardous substances under present or future environmental regulations. Human Capital Resources Our Employees We invest in our highly-skilled global workforce of approximately 19,500 people in accordance with our Guiding Value: employees are our greatest strength. We believe that our culture, values, and organizational development and training programs provide an inclusive work environment where our employees are empowered and engaged to deliver the best embedded control solutions to our customers. Culture and Core Values Before Microchip went public in 1993, Microchip created a cultural framework to unite its employees through shared workplace values, and to guide employees’ strategies, decisions, actions and job performance. Microchip’s culture is centered on a values-based, highly-empowered, continuous-improvement oriented approach. This corporate culture strengthens our business, and enables us to fulfill our purpose. Our focus on communication provides transparency among leadership, promotes trust among employees, and is a critical part of Microchip’s culture. Our culture is important to our employees, and is a key reason why we have had a strong worldwide retention rate for many years, and have a significant number of employees with long tenure with Microchip that have grown from individual contributors in the early stages of their careers into senior leadership positions today. This long tenure among our employee-base results in deep relationships and trust being built among colleagues, retention of our knowledge base, and continuation of our culture. More information on our Guiding Values can be found at www.microchip.com/en-us/about/investors/investor-information/mission-statement. We promote employee adoption of our culture through a number of methods including training, mentorship, values-based performance reviews, employee engagement surveys, company-wide quarterly meetings, town hall meetings with the President and Chief Executive Officer and other executive team members, and an open-door policy of communication where employees are encouraged to interact directly with management. Training and Development Microchip’s culture focuses on continuous improvement. We provide training on our culture, management skills, communication, technical skills, and personal improvement. Microchip also has a leadership program that provides for the growth and development of its future leaders. This program helps us develop leaders that serve as role models of Microchip culture, and support empowerment and open communication. 10 Table of Contents Compensation Programs We strive to provide competitive pay and benefits, that help meet the varying needs of our employees. Our total compensation package includes base pay, broad-based stock grants and bonuses, healthcare and retirement plans, employee stock purchase plans, and paid time off and family leave. Executive Officers of the Registrant The following sets forth certain information regarding our executive officers as of April 30, 2021: Name Ganesh Moorthy Steve Sanghi J. Eric Bjornholt Stephen V. Drehobl Mitchell R. Little Richard J. Simoncic Age 61 65 50 59 69 57 Position President, Chief Executive Officer, and Director Executive Chair Senior Vice President and Chief Financial Officer Senior Vice President, MCU8 and MCU16 Business Units Senior Vice President, Worldwide Client Engagement Senior Vice President, Analog Power and Interface Business Units Mr. Moorthy was appointed as Chief Executive Officer in March 2021 and to the Board of Directors in January 2021. Mr. Moorthy has served as President since February 2016 and Chief Operating Officer since June 2009. He also served as Executive Vice President from October 2006 to August 2012 and as a Vice President in various roles since he joined Microchip in 2001. Prior to this time, he served in various executive capacities with other semiconductor companies. Mr. Moorthy holds an M.B.A. in Marketing from National University, a B.S. degree in Electrical Engineering from the University of Washington and a B.S. degree in Physics from the University of Mumbai, India. Mr. Moorthy was elected to the Board of Directors of Rogers Corporation in July 2013 and serves on the Audit Committee of the Board and as the Nominating and Governance Committee Chairperson. Mr. Sanghi transitioned to Executive Chair in March 2021. He served as Chief Executive Officer from October 1991 to March 2021 and as Chairman of the Board since October 1993. He served as President from August 1990 to February 2016 and has served as a director since August 1990. Mr. Sanghi holds an M.S. degree in Electrical and Computer Engineering from the University of Massachusetts and a B.S. degree in Electronics and Communication from Punjab University. Mr. Sanghi served on the Board of Directors of Myomo, Inc., a publicly traded commercial stage medical robotics company that offers expanded mobility for those suffering from neurological disorders and upper-limb paralysis, from November 2016 through October 2019. Mr. Sanghi served on the board of Mellanox Technologies Ltd., a publicly traded supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyper-converged infrastructure, from February 2018 through April 2020. Mr. Sanghi was elected to the Board of Directors of Impinj, Inc. in March 2021. Mr. Bjornholt was promoted to Senior Vice President in 2019 and has served as Vice President of Finance since 2008 and as Chief Financial Officer since January 2009. He has served in various financial management capacities since he joined Microchip in 1995. Mr. Bjornholt holds a Master's degree in Taxation from Arizona State University and a B.S. degree in Accounting from the University of Arizona. Mr. Drehobl was promoted to Senior Vice President in 2019 and has served as Vice President of the MCU8 business unit and various other divisions and business units since July 2001. He has been employed by Microchip since August 1989 and has served as a Vice President in various roles since February 1997. Mr. Drehobl holds a Bachelor of Technology degree from the University of Dayton. Mr. Little was promoted to Senior Vice President in 2019 and has served as Vice President of Worldwide Sales since July 2000. He has been employed by Microchip since 1989 and has served as a Vice President in various roles since September 1993. Mr. Little holds a B.S. degree in Engineering Technology from United Electronics Institute. Mr. Simoncic was promoted to Senior Vice President in 2019 and has served as Vice President, Analog Power and Interface Business Units since September 1999. From October 1995 to September 1999, he served as Vice President in various roles. Since joining Microchip in 1990, Mr. Simoncic held various roles in Design, Device/Yield Engineering and Quality Systems. Mr. Simoncic holds a B.S. degree in Electrical Engineering Technology from DeVry Institute of Technology. 11 Table of Contents Available Information Microchip Technology Incorporated was incorporated in Delaware in 1989. Our executive offices are located at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199 and our telephone number is (480) 792-7200. Our Internet address is www.microchip.com. We post the following filings on our website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: • • • • • our annual report on Form 10-K our quarterly reports on Form 10-Q our current reports on Form 8-K our proxy statement any amendments to the above-listed reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act All of our SEC filings on our website are available free of charge. The information on our website is not incorporated into this Form 10-K. Item 1A. Risk Factors When evaluating Microchip and its business, you should give careful consideration to the factors below, as well as the information provided elsewhere in this Form 10-K and in other filings we make with the SEC. Risk Factor Summary Risks Related to Our Business, Operations, and Industry • • • • • • • • • • • • • • • • • • • • • impact of global economic conditions on our operating results, net sales and profitability; impact of economic conditions on the financial viability of our licensees, customers, distributors, or suppliers; impact of the COVID-19 pandemic, increased tariffs or other factors affecting our suppliers; dependence on foreign sales and operations, which exposes us to foreign political and economic risks; limited visibility to product shipments; dependency on wafer foundries and other contractors by our licensees and ourselves; intense competition in the markets we serve, leading to pricing pressures, reduced sales or market share; ineffective utilization of our manufacturing capacity or failure to maintain manufacturing yields; impact of seasonality and wide fluctuations of supply and demand in the industry; dependency on distributors; ability to introduce new products on a timely basis; business interruptions, including natural disasters, affecting our operations or that of key vendors, licensees or customers; technology licensing business exposes us to various risks; reliance on sales into governmental projects; risks related to grants from governments, agencies and research organizations; future acquisitions or divestitures; future impairments to goodwill or intangible assets; our failure to maintain proper and effective internal control and remediate future control deficiencies; customer demands to implement business practices that are more stringent than legal requirements; ability to attract and retain qualified personnel; and the occurrence of events for which we are self-insured, or which exceed our insurance limits. Risks Related to Cybersecurity, Privacy, Intellectual Property, and Litigation • • • • • attacks on our IT systems and data, interruptions in our IT systems, or improper handling of data; risks related to compliance with privacy and data protection laws and regulations; risks related to legal proceedings, investigations or claims; risks related to contractual relationships with our customers; and protecting and enforcing our intellectual property rights. Risks Related to Taxation, Laws and Regulations • • impact of new accounting pronouncements or changes in existing accounting standards and practices; fines, restrictions or delay in our ability to export products, or increase costs associated with the manufacture or transfer of products; 12 Table of Contents • • • • • outcome of future examinations of our income tax returns; exposure to greater than anticipated income tax liabilities, changes in or the interpretation of tax rules and regulations including the TCJA, the American Rescue Plan Act of 2021 (ARPA), or unfavorable assessments from tax audits; impact of the legislative and policy changes implemented by the new administration; impact of stringent environmental, climate change, conflict-free minerals and other regulations or customer demands; and requirement to fund our foreign pension plans. Risks Related to Capitalization and Financial Markets • • • • • impact of various factors on our future trading price of our common stock; our ability to effectively manage current or future debt; our ability to generate sufficient cash flows or obtain access to external financing; impact of conversion of our convertible debt on the ownership interest of our existing stockholders; and fluctuations in foreign currency exchange rates. 13 Table of Contents Risks Related to Our Business, Operations, and Industry Our operating results are impacted by global economic conditions and may fluctuate in the future due to a number of factors that could reduce our net sales and profitability. Our operating results are affected by a wide variety of factors that could reduce our net sales and profitability, many of which are beyond our control. Some of the factors that may affect our operating results include: • • • • • • • • • • • • • • • • • • • • • • • • • • • general economic, industry, public health or political conditions in the U.S. or internationally, including ongoing uncertainty surrounding the COVID-19 pandemic and its implications; disruptions in our business, our supply chain or our customers' businesses due to public health concerns (including viral outbreaks such as COVID-19), cybersecurity incidents, terrorist activity, armed conflict, war, worldwide oil prices and supply, fires, natural disasters or disruptions in the transportation system; constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers; our ability to increase our factory capacity to respond to changes in customer demand; our ability to secure sufficient wafer foundry, assembly and testing capacity; availability of raw materials, supplies and equipment; changes in demand or market acceptance of our products and products of our customers, and market fluctuations in the industries into which such products are sold; the level of order cancellations or push-outs due to the impact of the COVID-19 pandemic or other factors; trade restrictions and increase in tariffs, including those on business in China, or focused on specific companies; the mix of inventory we hold and our ability to satisfy orders from our inventory; our ability to continue to realize the expected benefits of our past or future acquisitions; changes in utilization of our manufacturing capacity and fluctuations in manufacturing yields; changes or fluctuations in customer order patterns and seasonality; changes in tax regulations in countries in which we do business; new accounting pronouncements or changes in existing accounting standards and practices; levels of inventories held by our customers; risk of excess and obsolete inventories; competitive developments including pricing pressures; unauthorized copying of our products resulting in pricing pressure and loss of sales; our ability to successfully transition to more advanced process technologies to reduce manufacturing costs; the level of orders that are received and can be shipped in a quarter, including the impact of product lead times; the level of sell-through of our products through distribution; fluctuations in our mix of product sales; announcements of other significant acquisitions by us or our competitors; costs and outcomes of any current or future tax audits or any litigation, investigation or claims involving intellectual property, our Microsemi acquisition, customers or other issues; fluctuations in commodity or energy prices; and property damage or other losses, whether or not covered by insurance. Period-to-period comparisons of our operating results are not necessarily meaningful and you should not rely upon any such comparisons as indications of our future performance. In future periods, our operating results may fall below our public guidance or the expectations of public market analysts and investors, which would likely have a negative effect on the price of our common stock. Uncertain global economic and public health conditions, such as the COVID-19 pandemic, have caused or may cause our operating results to fluctuate significantly and make comparisons between periods less meaningful. Our operating results may be adversely impacted if economic conditions impact the financial viability of our licensees, customers, distributors, or suppliers. We regularly review the financial performance of our licensees, customers, distributors and suppliers. Any downturn in global economic conditions, as a result of the COVID-19 pandemic or otherwise, may adversely impact their financial viability. The financial failure of a large licensee, customer or distributor, an important supplier, or a group thereof, could have an adverse impact on our operating results and could result in our inability to collect our accounts receivable balances, higher allowances for credit losses, and higher operating costs as a percentage of net sales. 14 Table of Contents We may lose sales if suppliers of raw materials, components or equipment fail to meet our or our customers' needs or increase costs due to the impact of the COVID-19 pandemic, increased tariffs or other factors. Our manufacturing operations require raw and processed materials and equipment that must meet exacting standards. We generally have multiple sources for these supplies, but there may be a limited number of suppliers capable of meeting our standards. We have experienced supply shortages from time to time in the past, and on occasion our suppliers have told us they need more time to fill our orders or that they will no longer support certain equipment with updates or parts. In particular, we have recently experienced longer lead times for some assembly raw materials required for production purposes. An interruption of any materials or equipment sources, or the lack of supplier support for a particular piece of equipment, could harm our business. The supplies necessary for our business could become more difficult to obtain as worldwide use of semiconductors increases. Additionally, consolidation in our supply chain due to mergers and acquisitions may reduce the number of suppliers or change our relationships with them. Also, the impact of the COVID-19 pandemic or the application of trade restrictions or tariffs by the U.S. or other countries may adversely impact the industry supply chain. For example, in 2019, the U.S. government increased tariffs on U.S. imports with China as their country of origin. Likewise, the China government increased tariffs on China imports with U.S. as their country of origin. We have taken steps to attempt to mitigate the costs of these tariffs on our business. Although these increases in tariffs did not significantly increase the operating costs of our business, they did, however, adversely impact demand for our products during fiscal 2020 and fiscal 2019. The additional tariffs imposed on components or equipment that we or our suppliers source from China will increase our costs and could have an adverse impact on our operating results in future periods. We may also incur increases in manufacturing costs in mitigating the impact of tariffs on our operations. This could also impair sourcing flexibility. Our customers may also be adversely affected by these same issues. The supplies and equipment necessary for their businesses could become more difficult to obtain for various reasons not limited to business interruptions of suppliers, consolidation in their supply chain, the impact of the COVID-19 pandemic, or trade restrictions or tariffs that impair sourcing flexibility or increase costs. If our customers are not able to produce their products, then their need for our products will decrease. Such interruptions of our customers’ businesses could harm our business. We are highly dependent on foreign sales and operations, which exposes us to foreign political and economic risks. Sales to foreign customers account for a substantial portion of our net sales. During fiscal 2021, approximately 77% of our net sales were made to foreign customers, including 22% in China and 16% in Taiwan. During fiscal 2020, approximately 78% of our net sales were made to foreign customers, including 21% in China and 15% in Taiwan. A strong position in the Chinese market is a key component of our global growth strategy. Although our sales in the Chinese market have been strong in recent quarters, competition in China is intense. Also, during the first quarter of fiscal 2021, economic weakness in the Chinese market adversely impacted our sales volumes in China. As discussed in the risk factor above, the trade relationship between the U.S. and China remains challenging, economic conditions in China remain uncertain, and we are unable to predict whether such uncertainty will continue or worsen in future periods. Weakening of foreign markets could result in lower demand for our products, which could have a material adverse effect on our business, results of operations or financial conditions. We purchase a substantial portion of our raw materials and equipment from foreign suppliers. In addition, we own product assembly and testing facilities, and finished goods warehouses near Bangkok, Thailand, which has experienced periods of political instability and severe flooding in the past. There can be no assurance that any future flooding or political instability in Thailand would not have a material adverse impact on our operations. We have a test facility in Calamba, Philippines. We use foundries and other foreign contractors for a significant portion of our assembly and testing and wafer fabrication requirements. Our reliance on foreign operations, foreign suppliers, maintenance of substantially all of our finished goods inventory at foreign locations and significant foreign sales exposes us to foreign political and economic risks, including, but not limited to: • • • • • • • • • • political, social and economic instability due to the COVID-19 pandemic or other factors; trade restrictions and changes in tariffs; potentially adverse tax consequences; economic uncertainty in the worldwide markets served by us; import and export license requirements and restrictions; changes in laws related to taxes, environmental, health and safety, technical standards and consumer protection; currency fluctuations and foreign exchange regulations; difficulties in staffing and managing international operations; employment regulations; disruptions due to cybersecurity incidents; 15 Table of Contents • • • disruptions in international transport or delivery; public health conditions (including viral outbreaks such as COVID-19); and difficulties in collecting receivables and longer payment cycles. 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 interruptions, delays in obtaining export licenses, tariffs and other restrictions, longer payment cycles, increased taxes, restrictions on the repatriation of funds and the burdens of complying with a variety of foreign laws, any of which could ultimately have a material adverse effect on our business. Further changes in trade policy, tariffs, additional taxes, or restrictions on supplies, 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 inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial conditions. We depend on orders that are received and shipped in the same quarter and have limited visibility to product shipments other than orders placed under our Preferred Supply Program. 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. We measure turns orders at the beginning of a quarter based on the orders needed to meet the shipment targets that we set entering the quarter. Historically, our ability to respond quickly to customer orders has been part of our competitive strategy, resulting in customers placing orders with relatively short delivery schedules. Shorter lead times generally mean that turns orders as a percentage of our business are relatively high in any particular quarter and reduce our visibility on future shipments. Turns orders correlate to overall semiconductor industry conditions and product lead times. Although our backlog has been very strong in recent periods due to favorable industry conditions and the impact of our Preferred Supply Program, turns orders remain important to our ability to meet our business objectives. Because turns orders can be difficult to predict, especially in times of economic volatility where customers may change order levels within the quarter, varying levels of turns orders make it more difficult to forecast net sales. As a significant portion of our products are manufactured at foundries, foundry lead times may affect our ability to satisfy certain turns orders. If we do not achieve a sufficient level of turns orders in a particular quarter relative to our revenue targets, our revenue and operating results will likely suffer. In February 2021, we announced our Preferred Supply Program which offers our customers the ability to receive prioritized capacity in the second half of calendar 2021 and the first half of calendar 2022. To participate in the program, customers have to place 12 months of orders, which cannot be cancelled or rescheduled. The capacity priority will begin for shipments in July 2021. The program is not a guarantee of supply; however, it will provide the highest priority for those orders which are under this program, and the capacity priority will be on a first-come, first-served basis until the available capacity is booked. A significant portion of our capacity is booked under this new program. We believe this program will enable us to be in a stronger position to make capacity and raw material commitments to our suppliers, buy capital equipment with confidence, hire employees and ramp up manufacturing and manufacture products more efficiently. Since this is a new program, there can be no assurance that the program will be successful or that it will benefit our business. In the event that customers under this program attempt to cancel or reschedule orders, we may have to take legal or other action to enforce the terms of the program, and any such actions could result in damage to our customer relationships or cause us to incur significant costs. We are dependent on wafer foundries and other contractors, as are our SuperFlash and other licensees. We rely on outside wafer foundries for a significant portion of our wafer fabrication needs. Specifically, during each of fiscal 2021 and fiscal 2020, approximately 61% of our net sales came from products that were produced at outside wafer foundries. We also use several contractors located primarily in Asia for a portion of the assembly and testing of our products. Specifically, during fiscal 2021, approximately 47% of our assembly requirements and 43% of our test requirements were performed by third party contractors compared to approximately 55% of our assembly requirements and 46% of our test requirements during fiscal 2020. Due to increased demand for our products, we have recently taken actions to increase our capacity allocation from our wafer fabrication, assembly and test subcontractors. However, we expect foundry capacity to continue to be tight due to strong demand for wafers across the industry and there can be no assurance that we will be able to secure further additional capacity or that such capacity will be available on acceptable terms. We expect that our reliance on third party contractors may increase over time as our business grows. Our use of third parties reduces our control over the subcontracted portions of our business. Our future operating results could suffer if a significant contractor were to experience production difficulties, insufficient capacity, decreased manufacturing, assembly and test yields, or increased costs due to disruptions from the COVID-19 pandemic, political upheaval 16 Table of Contents or infrastructure disruption. If third parties do not timely deliver products or services in accordance with our quality standards, we may be unable to qualify alternate manufacturing sources in a timely manner on favorable terms, or at all. Additionally, these subcontractors could abandon processes that we need, or fail to adopt technologies that we desire to control costs. In such event, we could experience an interruption in production, an increase in manufacturing costs or a decline in product reliability, and our business and operating results could be adversely affected. Further, use of subcontractors increases the risks of misappropriation of our intellectual property. Certain of our SuperFlash and other technology licensees rely on wafer foundries. If our licensees experienced disruption in supply at such foundries, this would reduce the revenue from our technology licensing business and would harm our operating results. Intense competition in the markets we serve may lead to pricing pressures, reduced sales or reduced market share. The semiconductor industry is intensely competitive and faces price erosion and rapid technological change. We compete with major domestic and international semiconductor companies, many of which have greater market recognition and substantially greater financial, technical, marketing, distribution and other resources than we do. The semiconductor industry has experienced significant consolidation in recent years which has resulted in several of our competitors becoming much larger in terms of revenue, product offerings and scale. We may be unable to compete successfully in the future, which could harm our business. Our ability to compete successfully depends on a number of factors, including, but not limited to: • • • • • • • • • • • • • the relative impact of the COVID-19 pandemic on us relative to our competitors; changes in demand in the markets that we serve and the overall rate of growth or contraction of such markets, including but not limited to the automotive, personal computing and consumer electronics markets; our ability to obtain adequate foundry and assembly and test capacity and supplies at acceptable prices; the quality, performance, reliability, features, ease of use, pricing and diversity of our products; our success in designing and manufacturing new products including those implementing new technologies; the rate at which customers incorporate our products into their applications and the success of such applications; the rate at which the markets that we serve redesign and change their own products; our ability to ramp production and increase capacity, at our wafer fabrication and assembly and test facilities; product introductions by our competitors; the number, nature and success of our competitors in a given market; our ability to protect our products and processes by effective utilization of intellectual property rights; our ability to address the needs of our customers; and general market and economic conditions. Historically, average selling prices in the semiconductor industry decrease over the life of a product. The average selling prices of our microcontroller, FPGA products, and proprietary products in our analog product line have remained relatively constant over time, while average selling prices of our memory and non-proprietary products in our analog product line have declined over time. The overall average selling price of our products is affected by these trends; however, variations in our product and geographic mix of sales can cause wider fluctuations in our overall average selling price in any given period. Generally, the selling prices of our products increased during fiscal 2021 compared to fiscal 2020 due to increased material costs and increased functionality of products. We have experienced, and expect to continue to experience, modest pricing declines in certain of our more mature proprietary product lines, primarily due to competitive conditions. We have moderated average selling price declines in many of our proprietary product lines by introducing new products with more features and higher prices. However, we may not be able to do so in the future. We have experienced in the past, and expect to continue to experience, competitive pricing pressures in our memory and non-proprietary products in our analog product line. We may be unable to maintain average selling prices due to increased pricing pressure, which could adversely impact our operating results. Our operating results will suffer if we ineffectively utilize our manufacturing capacity or fail to maintain manufacturing yields. Integrated circuits 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 other quality issues. As is typical in the industry, we have from time to time experienced lower than anticipated manufacturing yields. Our operating results will suffer if we are unable to maintain yields at or above approximately the current levels. This could include delays in the recognition of revenue, loss of revenue, and penalties for failure to meet shipment deadlines. Our operating results are adversely affected when we operate below optimal capacity. In fiscal 2021 and fiscal 2020, we operated at below normal capacity levels resulting in unabsorbed capacity charges of $29.6 million and $47.2 million, respectively. 17 Table of Contents Our operating results are impacted by seasonality and wide fluctuations of supply and demand in the industry. The semiconductor industry is characterized by seasonality and wide fluctuations of supply and demand. Historically, since a significant portion of our revenue is from consumer markets and international sales, our business generates stronger revenues in the first half and comparatively weaker revenues in the second half of our fiscal year. However, broad fluctuations in our business, changes in semiconductor industry and global economic conditions (including the impact of the COVID-19 pandemic or trade tensions) and our acquisition activity (including our acquisition of Microsemi) have had and can have a more significant impact on our results than seasonality. In periods when broad fluctuations, changes in business conditions or acquisitions occur, it is difficult to assess the impact of seasonality on our business. The semiconductor industry has had significant economic downturns, characterized by diminished product demand and production over-capacity. We have sought to reduce our exposure to this industry cyclicality by selling proprietary products, that cannot be quickly replaced, to a geographically diverse customer base across a broad range of market segments. However, we have experienced substantial period-to-period fluctuations in operating results and expect, in the future, to experience period-to-period fluctuations in operating results due to general industry or economic conditions. Our business is dependent on distributors to service our end customers. Sales to distributors accounted for approximately 50% of our net sales in each of fiscal 2021 and fiscal 2020, and our largest distributor accounted for approximately 10% of our net sales in fiscal 2020. We do not have long-term purchase agreements with our distributors, and we and our distributors may each terminate our relationship with little or no advance notice. Future adverse conditions in the U.S. or global economies (including the impact of the COVID-19 pandemic) or credit markets could materially impact distributor operations. Any deterioration in the financial condition, or disruption in the operations of our distributors, could adversely impact the flow of our products to our end customers and adversely impact our results of operation. In addition, during an industry or economic downturn, there may be an oversupply and decrease in demand for our products, which could reduce our net sales in a given period and increase inventory returns. Violations of the Foreign Corrupt Practices Act, or similar laws, by our distributors could have a material adverse impact on our business. Our success depends on our ability to introduce new products on a timely basis. 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. The success of our new product introductions depends on various factors, including, but not limited to: effective new product selection; timely completion and introduction of new product designs; procurement of licenses for intellectual property rights from third parties under commercially reasonable terms; timely filing and protection of intellectual property rights for new product designs; availability of development and support tools and collateral literature that make complex new products easy for engineers to understand and use; and • • • • • • market acceptance of our customers' end products. Because our products are complex, we have experienced delays from time to time in completing new product development. New products may not receive or maintain substantial market acceptance. We may be unable to timely design, develop and introduce competitive products, which could adversely impact our future operating results. Our success also depends upon our ability to develop and implement new design and process technologies. Semiconductor design and process technologies are subject to rapid technological change and require significant R&D expenditures. We and others in the industry have, from time to time, experienced difficulties in transitioning to advanced process technologies and have suffered reduced manufacturing yields or delays in product deliveries. Our future operating results could be adversely affected if any transition to future process technologies is substantially delayed or inefficiently implemented. Business interruptions to our operations or those of our key vendors, licensees or customers could harm our business. 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 health concerns (including outbreaks such as COVID-19), work stoppages, power loss, insufficient water, cyber attacks, computer network compromises, incidents of terrorism or security risk, political instability, telecommunications, transportation or other infrastructure failure, radioactive 18 Table of Contents contamination, or fire, earthquake, floods, droughts, volcanic eruptions or other natural disasters. We have taken steps to mitigate the impact of some of these events should they occur; however, we cannot be certain that we will avoid a significant impact on our business in the event of a business interruption. For example, in the first quarter of fiscal 2021, restrictions on travel adversely impacted our manufacturing operations in the Philippines and our subcontractors' manufacturing operations in Malaysia and China. Similar challenges arose for our logistics service providers, which adversely impacted their ability to ship product to our customers. The pandemic could adversely impact our business in future periods if the impact of COVID-19 increases. In the future, local governments could require us to temporarily reduce production further or cease operations at any of our facilities and we could experience constraints in fulfilling customer orders. Additionally, operations at our customers and licensees may be disrupted for a number of reasons. In April and May 2020, we received a greater number of order cancellations and requests by our customers to reschedule deliveries to future dates. Some customers requested order cancellations within our firm order window and claimed applicability of force majeure clauses. Likewise, if our licensees are unable to manufacture and ship products incorporating our technology, or if there is a decrease in product demand due to a business disruption, our royalty revenue may decline. Also, Thailand has experienced periods of severe flooding in recent years. While our facilities in Thailand have continued to operate normally, there can be no assurance that future flooding in Thailand would not have a material adverse impact on our operations. If operations at any of our facilities, or our subcontractors' facilities are interrupted, we may not be able to timely shift production to other facilities, and we may need to spend significant amounts to repair or replace our facilities and equipment. Business interruptions would likely cause delays in shipments of products to our customers, and alternate sources for production may be unavailable on acceptable terms. This could result in reduced revenues, cancellation of orders, or loss of customers. Although we maintain business interruption insurance, such insurance will likely not compensate us for any losses or damages, and business interruptions could significantly harm our business. Our technology licensing business exposes us to various risks. Our technology licensing business is based on our SuperFlash and other technologies. The success of our licensing business depends on the continued market acceptance of these technologies and on our ability to further develop such technologies and to introduce new technologies. To be successful, any such technology must be able to be repeatably implemented by licensees, provide satisfactory yield rates, address licensee and customer requirements, and perform competitively. The success of our technology licensing business depends on various other factors, including, but not limited to: proper identification of licensee requirements; timely development and introduction of new or enhanced technology; our ability to protect and enforce our intellectual property rights for our licensed technology; our ability to limit our liability and indemnification obligations to licensees; availability of development and support services to assist licensees in their design and manufacture of products; availability of foundry licensees with sufficient capacity to support OEM production; and • • • • • • • market acceptance of our customers' end products. Because our licensed technologies are complex, there may be delays from time to time in developing and enhancing such technologies. There can be no assurance that our existing or any enhanced or new technology will achieve or maintain substantial market acceptance. Our licensees may experience disruptions in production or reduced production levels which would adversely affect the revenue that we receive. Our technology license agreements generally include a clause that indemnifies the licensee against liability and damages (including legal defense costs) arising from certain intellectual property matters. We could be exposed to substantial liability for claims or damages related to intellectual property matters or indemnification claims. Any claim could result in significant legal fees and require significant attention from our management. These issues may adversely impact the success of our licensing business and adversely affect our future operating results. Reliance on sales into governmental projects could have a material adverse effect on our results of operations. A significant portion of the sales of Microsemi, which we acquired in May 2018, are from or are derived from government agencies or customers who sell to U.S. government agencies. Such sales are subject to uncertainties regarding governmental spending levels, spending priorities, regulatory and policy changes. Future sales into U.S. government projects are subject to uncertain government appropriations and national defense policies and priorities, including the budgetary process, changes in the timing and spending priorities, the impact of any past or future government shutdowns, contract terminations or renegotiations, future sequestrations, or the impact of the COVID-19 pandemic. For example, as a result of the COVID-19 pandemic, we have experienced suspensions and stop work orders for some of our subcontracts. Although such actions have not yet had a material adverse impact on our business, there can be no assurance as to the future costs or implications of such actions. Sales into government projects are also subject to uncertainties related to monetary, regulatory, tax and trade policies 19 Table of Contents implemented by current or future administrations or by the U.S. Congress. In the past, Microsemi has experienced delays and reductions in appropriations on programs that included its products. For example, in 2018 there were two federal government shutdowns. Further delays, reductions in or terminations of government contracts or subcontracts, including those caused by any past or future shutdown of the U.S. federal government, could materially and adversely affect our operating results. If the U.S. government fails to complete its annual budget process or to provide for a continuing resolution to fund government operations, another federal government shutdown may occur, during which we may experience further delays, reductions in or terminations of government contracts or subcontracts, which could materially and adversely affect our operating results. While we generally function as a subcontractor in these type of transactions, further changes in U.S. government procurement regulations and practices, particularly surrounding initiatives to reduce costs or increase compliance obligations (such as the Cybersecurity Maturity Model Certification), may adversely impact the contracting environment and our operating results. The U.S. government and its contractors may terminate their contracts with us at any time. For example, in 2014, the U.S. government terminated a $75 million contract with Microsemi. Uncertainty in government spending and termination of contracts for government related projects could have a material adverse impact on the revenue from our Microsemi acquisition. Our contracts with U.S. governmental agencies or prime customers requires us to comply with the contract terms, and governmental regulations, particularly for our facilities, systems and personnel that service such customers. Complying with these regulations, including audit requirements, requires that we devote significant resources to such matters in terms of training, personnel, information technology and facilities. Any failure to comply with these requirements may result in fines and penalties and loss of current or future business that may materially and adversely affect our operating results. From time to time we receive grants from governments, agencies and research organizations. If we are unable to comply with the terms of those grants, we may not be able to receive or recognize grant benefits or we may be required to repay grant benefits and recognize related charges, which would adversely affect our operating results and financial position. From time to time, we receive economic incentive grants and allowances from European governments, agencies and research organizations targeted at increasing employment at specific locations. The subsidy grant agreements typically contain economic incentive, headcount, capital and research and development expenditures and other covenants that must be met to receive and retain grant benefits, and these programs can be subjected to periodic review by the relevant governments. Noncompliance with the conditions of the grants could result in our forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date. We may not fully realize the anticipated benefits of our completed or future acquisitions or divestitures. We have acquired, and expect in the future to acquire, additional businesses that we believe will complement or augment our existing businesses. In May 2018, we acquired Microsemi, which was our largest and most complex acquisition ever. Integration of our acquisitions is complex and may be costly and time consuming and include unanticipated issues, expenses and liabilities. We may not successfully or profitably integrate, operate, maintain and manage any newly acquired operations or employees. We may not be able to maintain uniform standards, procedures and policies. We may not realize the expected synergies and cost savings from the integration. There may be increased risk due to integrating financial reporting and internal control systems. It may be difficult to develop, manufacture and market the products of a newly acquired company, or grow the business at the rate we anticipate. Following an acquisition, we may not achieve the revenue or net income levels that justify the acquisition. We may suffer loss of key employees, customers and strategic partners of acquired companies and it may be difficult to implement our corporate culture at acquired companies. We have been and may in the future be subject to claims from terminated employees, shareholders of Microchip or the acquired companies and other third parties related to the transaction. In particular, in connection with our Microsemi and Atmel acquisitions, we became involved with third-party claims, litigation, governmental investigations and disputes related to such businesses and transactions. See Note 12 to our consolidated financial statements for information regarding such matters. Acquisitions may also result in charges (such as acquisition-related expenses, write-offs, restructuring charges, or future impairment of goodwill), contingent liabilities, adverse tax consequences, additional share-based compensation expense and other charges that adversely affect our operating results. To fund our acquisition of Microsemi, we used a significant portion of our cash balances and incurred approximately $8.10 billion of additional debt. We may fund future acquisitions of new businesses or strategic alliances by utilizing cash, borrowings under our Revolving Credit Facility, raising debt, issuing shares of our common stock, or other mechanisms. Further, if we decide to divest assets or a business, it may be difficult to find or complete divestiture opportunities or alternative exit strategies, which may include site closures, timely or on acceptable terms. These circumstances could delay the achievement of our strategic objectives or cause us to incur additional expenses with respect to the desired divestiture, or the price or terms of the divestiture may be less favorable than we had anticipated. Even following a divestiture or other exit 20 Table of Contents strategy, we may have certain continuing obligations to former employees, customers, vendors, landlords or other third parties. We may also have continuing liabilities related to former employees, assets or businesses. Such obligations may have a material adverse impact on our results of operations and financial condition. In addition to acquisitions, we have in the past, and expect in the future, to enter into joint development agreements or other strategic relationships with other companies. These transactions are subject to a number of risks similar to those we face with our acquisitions including our ability to realize the expected benefits of any such transaction, to successfully market and sell products resulting from such transactions or to successfully integrate any technology developed through such transactions. As a result of our acquisition activity, our goodwill and intangible assets have increased significantly in recent years and we may in the future incur impairments to goodwill or intangible assets. When we acquire a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price which is allocated to goodwill is determined by the excess of the purchase price over the net identifiable assets acquired. As of March 31, 2021, we had goodwill of $6.67 billion and net intangible assets of $4.79 billion. In connection with the completion of our acquisition of Microsemi in May 2018, our goodwill and intangible assets increased significantly. We review our indefinite-lived intangible assets, including goodwill, for impairment annually in the fourth fiscal quarter or whenever events or changes in circumstances indicate that the carrying amount of those assets is more likely than not impaired. Factors that may be considered in assessing whether goodwill or intangible assets may be impaired include a decline in our stock price or market capitalization, reduced estimates of future cash flows and slower growth rates in our industry. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on experience and to rely heavily on projections of future operating performance. Because we operate in highly competitive environments, projections of our future operating results and cash flows may vary significantly from our actual results. No goodwill impairment charges were recorded in fiscal 2021 or fiscal 2020. No intangible asset impairment charges were recorded in fiscal 2021 compared to $2.2 million in fiscal 2020. If in future periods, we determine that our goodwill or intangible assets are impaired, we will be required to write down these assets which would have a negative effect on our consolidated financial statements. If we fail to maintain proper and effective internal control and remediate any future control deficiencies, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and our reputation with investors. As discussed in Item 9A “Controls and Procedures” in our annual report on Form 10-K for the fiscal year ended March 31, 2019, we identified a material weakness in our internal controls related to accounting for income taxes and we also identified a material weakness in our internal controls related to IT system access. Although such material weaknesses were remediated in fiscal 2020, there can be no assurance that similar control issues will not be identified in the future. If we cannot remediate future material weaknesses or significant deficiencies in a timely manner, or if we identify additional control deficiencies that individually or together constitute significant deficiencies or material weaknesses, our ability to accurately record, process, and report financial information and our ability to prepare financial statements within required time periods, could be adversely affected. Failure to maintain effective internal controls could result in violations of applicable securities laws, stock exchange listing requirements, and the covenants under our debt agreements, subject us to litigation and investigations, negatively affect investor confidence in our financial statements, and adversely impact our stock price and our ability to access capital markets. 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-evaluated frequently. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 which requires an annual management assessment of the effectiveness of our internal control over financial reporting and a report by our independent auditors. In addition to the identified material weaknesses related to accounting for income taxes and to IT system access, which were remediated as of March 31, 2020, we have from time to time identified other significant deficiencies. If we fail to remediate any future material weaknesses or significant deficiencies or to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, harm our ability to operate our business and reduce the trading price of our stock. Customer demands for us to implement business practices that are more stringent than legal requirements may reduce our revenue opportunities or cause us to incur higher costs. Some of our customers require that we implement practices that are more stringent than those required by applicable laws 21 Table of Contents with respect to labor requirements, the materials contained in our products, energy efficiency, environmental matters or other items. To comply with such requirements, we also require our suppliers to adopt such practices. Our suppliers may in the future refuse to implement these practices, or may charge us more for complying with them. If certain of our suppliers refuse to implement the practices, we may be forced to source from alternate suppliers. The cost to implement such practices may cause us to incur higher costs and reduce our profitability, and if we do not implement such practices, such customers may disqualify us as a supplier, resulting in decreased revenue opportunities. Developing, enforcing, and auditing customer-requested practices at our own sites and in our supply chain will increase our costs and may require more personnel. We must attract and retain qualified personnel to be successful, and competition for qualified personnel can be intense. Our success depends upon our personnel. The loss of or inability to attract key personnel, or the loss of or inability to attract sufficient numbers of non-key personnel, particularly production specialists in our manufacturing operations, could harm our business. We have no employment agreements with any member of our senior management team. The occurrence of events for which we are self-insured, or which exceed our insurance limits, may adversely affect our profitability and liquidity. We have insurance coverage related to many different types of risk; however, we self-insure for some potentially significant risks and obligations, because we believe that it is more cost effective for us to self-insure than to pay the high premium costs. The risks and exposures that we self-insure include, but are not limited to, employee health matters, certain property matters, product defects, cybersecurity matters, employment risks, environmental matters, political risks, and intellectual property matters. Should there be a loss or adverse judgment in an area for which we are self-insured, then our financial condition, results of operations and liquidity may be materially adversely affected. Risks Related to Cybersecurity, Privacy, Intellectual Property, and Litigation We continue to be the target of attacks on our IT systems and data and interruptions in our IT systems, unauthorized access to our IT systems, or improper handling of data, could adversely affect our business. We rely on the uninterrupted operation of complex IT systems and networks to operate our business. Any significant disruption to our systems or networks, including, but not limited to, new system implementations, computer viruses, security breaches, facility issues, natural disasters, terrorism, war, telecommunication failures or energy blackouts could have a material adverse impact on our business, operations, supply chain, sales and operating results. Such disruption could result in an unauthorized release of our, our suppliers’ or our customers’ intellectual property or confidential, proprietary or sensitive information, or the release of personal data. Any release of such information or data could harm our business or competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages. In addition, any release of such information or data or the failure to properly manage the collection, handling, transfer or disposal of such information may result in regulatory inquiries or penalties, enforcement actions, remediation obligations, claims for damages, litigation, and other sanctions. From time to time, we have experienced verifiable attacks on our IT systems and data, including network compromises, attempts to breach our security measures and attempts to introduce malicious software into our IT systems. For example, in fiscal 2019, we learned of an ongoing compromise of our computer networks by what is believed to be sophisticated hackers. We engaged experienced legal counsel and a leading forensic investigatory firm with experience in such matters. We took various steps to identify malicious activity on our network including a compromise of our network and, in May 2019, we began implementing a containment plan. We routinely evaluate the effectiveness of the containment mechanisms that were implemented and continue to implement additional measures from time to time. We have analyzed and continue to analyze the amount and content of the information that was compromised. We do not believe that this IT system compromise has had a material adverse effect on our business or resulted in any material damage to us. As a result of the IT system compromise, our management, including our chief executive officer and our chief financial officer, concluded that our internal controls related to IT system access were not effective resulting in a material weakness in our internal controls for fiscal 2019. Although this material weakness in our internal control was remediated in fiscal 2020, there can be no assurance that similar control issues will not be identified in future periods. 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. government agencies, we have experienced and expect to continue to experience in the future, attacks on our IT systems and data, including attempts to breach our security, network compromises and attempts to introduce malicious software into our IT systems. Were any future attacks to be successful, we may be unaware of the incident, its magnitude, or its effects until significant harm is done. In recent years, we have regularly implemented improvements to our 22 Table of Contents protective measures which include, but are not limited to, implementation of the following: firewalls, endpoint intrusion detection and response software, patches, log monitors, event correlation tools, routine backups with offsite retention of storage media, system audits, dual factor identification, data partitioning and routine password modifications. As a result of the material weakness in our internal controls resulting from the IT systems compromise in 2019, we have taken remediation actions and implemented additional controls and we are continuing to take actions to attempt to address evolving threats. However, recent system improvements have not been fully effective in preventing attacks on our IT systems and data, including breaches of our security measures, and there can be no assurance that any future system improvements will be effective in preventing future cyber-attacks or disruptions or limiting the damage from any future cyber-attacks or disruptions. Such system improvements have resulted in increased costs to us and any future improvements, attacks or disruptions could result in additional costs related to rebuilding our internal systems, defending litigation, complaints or other claims, providing notices to regulatory agencies or other third parties, responding to regulatory actions, or paying damages. Such attacks or disruptions could have a material adverse impact on our business, operations and financial results. Third-party service providers, such as wafer foundries, assembly and test contractors, distributors, credit card processors and other vendors have access to portions of our and our customers' data. In the event that these service providers do not properly safeguard the data that they hold, security breaches and loss of data could result. Any such breach or loss of data by our third-party service providers could negatively impact our business, operations and financial results, as well as our relationship with our customers. Our failure to comply with federal, state, or international privacy and data protection laws and regulations may materially adversely affect our business, results of operations and financial condition. We are subject to numerous laws and regulations in the U.S. and internationally regarding privacy and data protection such as the European Union’s (EU) General Data Protection Regulation (GDPR), the U.K. equivalent to the GDPR, the California Consumer Privacy Act, and the California Privacy Rights Act. The scope of these laws and regulations is rapidly evolving, subject to differing interpretations, and may be inconsistent among jurisdictions. Some of these laws create a broad definition of personal information, establish data privacy rights, impose data breach notification requirements, and create potentially severe statutory damages frameworks and private rights of action for certain data breaches. Some of the laws and regulations also place restrictions on our ability to collect, store, use, transmit and process personal information and other data across our business. For example, the GDPR restricts the ability of companies to transfer personal data from the European Economic Area (EEA) to the U.S. and other countries. Further, such laws and regulations have resulted and will continue to result in significantly greater compliance burdens and costs for companies such as us that have employees, customers, and operations in the EEA. In order to comply with the GDPR, 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. or other countries. However, the Court of Justice of the EU in a July 2020 decision (Schrems II) invalidated the EU-U.S. Privacy Shield Framework, and also called for stricter conditions in the use of the SCCs. Following the Schrems II decision, certain data protection authorities in the EU have issued statements advising companies within their jurisdiction not to transfer personal data to the U.S. under the SCCs. At present, there are few, if any, viable alternatives to the SCCs. If we are unable to implement sufficient safeguards to ensure that our transfers of personal information from the EEA are lawful, we may face increased exposure to regulatory actions and substantial fines and injunctions against processing personal information from the EEA. The loss of our ability to lawfully transfer personal data out of the EEA may cause reluctance or refusal by European customers to communicate with us as they are currently, and we may be required to increase our data processing capabilities in the EEA at significant expense. Additionally, other countries outside of the EEA have passed or are considering passing laws requiring local data residency which could increase the cost and complexity of providing our products in those jurisdictions. Furthermore, the GDPR and the U.K. equivalent of the GDPR expose us to two parallel data protection regimes in Europe, each of which potentially authorizes fines and enforcement actions for certain violations. Substantial fines may be imposed for breaches of data protection requirements, which can be up to 4% of a company’s worldwide revenue or 20 million Euros, whichever is greater. Although the U.K. data protection regime currently permits data transfers from the U.K. to 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 changes could have adverse implications for our transfer of personal data from the U.K. to the EEA and other third countries. While we plan to continue to undertake efforts to conform to current regulatory obligations and evolving best practices, such efforts may be unsuccessful or result in significant costs. We may also experience reluctance, or refusal by European or multi-national customers to continue to provide us with personal data due to the potential risk exposure of personal data transfers and the current data protection obligations imposed on them by applicable data protection laws or by certain data 23 Table of Contents protection authorities. These and any other data privacy laws and their interpretations continue to develop and their uncertainty and inconsistency may increase the cost of compliance, cause compliance challenges, restrict our ability to offer products in certain locations in the same way that we have been, potentially adversely affect certain third-party service providers, or subject us to sanctions by data protection regulators, all of which could adversely affect our business, financial condition and results of operations. We are exposed to various risks related to legal proceedings, investigations or claims. We are currently, and in the future may be, involved in legal proceedings, investigations or claims regarding intellectual property rights, product failures, our Microsemi acquisition, contracts and other matters. As is typical in the semiconductor industry, we receive notifications from third parties from time to time who believe that we owe them indemnification or other obligations related to claims made against us, our direct or indirect customers, or our licensees. These legal proceedings and claims, even if meritless, have in the past and could in the future result in substantial costs to us. If we are unable to resolve or settle a matter, obtain necessary licenses on reasonable terms, reengineer products or processes to avoid infringement, provide a cost-effective remedy, or successfully prosecute or defend our position, we could incur uninsured liability in any of them, be required to take a charge to operations, be enjoined from selling a material portion of our products or using certain processes, suffer a reduction or elimination in the value of our inventories, and our business, financial condition or results of operations could be harmed. It is also possible that from time to time we may be subject to claims related to the manufacture, performance, or use of our products. These claims may be due to injuries, economic damage or environmental exposures related to manufacturing, a product's nonconformance to our or our customer’s specifications, changes in our manufacturing processes, or unexpected customer system issues due to the integration of our products or insufficient design or testing by our customers. We could incur significant expenses related to such matters, including, but not limited to: • • • • • • • costs related to writing off the value of our inventory of nonconforming products; recalling nonconforming products; providing support services, product replacements, or modifications to products and the defense of such claims; diversion of resources from other projects; lost revenue or a delay in the recognition of revenue due to cancellation of orders or unpaid receivables; customer imposed fines or penalties for failure to meet contractual requirements; and a requirement to pay damages or penalties. Because the systems into which our products are integrated have a higher cost of goods than the products we sell, the expenses and damages we are asked to pay may be significantly higher than the revenue and profits we received. While we exclude consequential damages in our standard terms and conditions, certain of our contracts may not exclude such liabilities. Further, our ability to avoid such liabilities may be limited by law. We have liability insurance which covers certain damages arising out of product defects, but we do not expect that insurance will fully protect against such claims. Payments we may make in connection with these customer claims may adversely affect the results of our operations. Further, we sell to customers in industries such as automotive, aerospace, defense, safety, security, and medical, where failure of the application could cause damage to property or persons. We may be subject to claims if our products, or the integration of our products, cause system failures. We will face increased exposure to claims if there are substantial increases in either the volume of our sales into these applications or the frequency of system failures integrating our products. Our contractual relationships with our customers expose us to risks and liabilities. With the exception of orders placed under our Preferred Supply Program, we do not typically enter into long-term contracts with our non-distributor customers, and therefore we cannot be certain about future order levels from our customers. When we do enter into customer contracts, the contract is generally cancelable at the customer’s convenience. While we had approximately 114,000 customers, and our ten largest direct customers accounted for approximately 11% of our total revenue for fiscal 2021, and five of our top ten direct customers are contract manufacturers that perform manufacturing services for many customers, cancellation of customer contracts could have an adverse impact on our revenue and profits. For example, due to uncertainty related to the COVID-19 pandemic, we experienced an increase in order cancellations and requests to reschedule deliveries to future dates in the first quarter of fiscal 2021. Certain customer contracts differ from our standard terms of sale. For some of the markets that we sell into, such as the automotive and personal computer markets, our customers may have negotiating leverage over us as a result of their market size. For example, under certain contracts we may commit to supply products on scheduled delivery dates, or extend our obligations for liabilities such as warranties or indemnification for quality issues or intellectual property infringement. If we are 24 Table of Contents unable to supply the customer as contractually required, the customer may incur additional production costs, lost revenues due to delays in their manufacturing schedule, or quality-related issues. We may be liable for costs and damages associated with customer claims, and we may be obligated to defend the customer against claims of intellectual property infringement and pay associated legal fees. While we try to minimize the number of contracts which contain such provisions, manage the risks of such liabilities, and set caps on our liability exposure, sometimes we are unable to do so. In order to win important designs, avoid losing business to competitors, maintain existing business, or be permitted to bid on new business, we have, and may in the future, have to agree to uncapped liability for such items as intellectual property infringement or product failure. This exposes us to risk of liability far exceeding the purchase price of the products sold under such contracts, the lifetime revenues we receive under such contracts, or potential consequential damages. Further, where we do not have negotiated customer contracts, our customer's order terms may govern the transaction and contain terms unfavorable to us. These risks could result in a material adverse impact on our results of operations and financial condition. Failure to adequately protect our intellectual property could result in lost revenue or market opportunities. Our ability to obtain patents, licenses and other intellectual property rights covering our products and manufacturing processes is important for our success. To that end, we have acquired certain patents and licenses and intend to continue to seek patents on our technology and manufacturing processes. The process of seeking patent protection can be expensive, and patents may not be issued from currently pending or future applications. In addition, our existing and new patents, trademarks and copyrights that are issued may not have sufficient scope or strength to provide meaningful protection or commercial advantage to us. We may be subject to, or may initiate, interference proceedings in the U.S. Patent and Trademark Office, patent offices of a foreign country or U.S. or foreign courts, which can require significant financial resources. In addition, the laws of certain foreign countries do not protect our intellectual property rights to the same extent as the laws of the U.S. Infringement of our intellectual property rights by a third party could result in uncompensated lost market and revenue opportunities for us. Although we continue to aggressively defend and protect our intellectual property on a worldwide basis, there can be no assurance that we will be successful. Risks Related to Taxation, Laws and Regulations Our reported financial results may be adversely affected by new accounting pronouncements or changes in existing accounting standards and practices. We prepare our financial statements in conformity with U.S. GAAP. These accounting principles are subject to interpretation or changes by the FASB and the SEC. New accounting pronouncements and interpretations of accounting standards and practices have occurred in the past and are expected to occur in the future. New accounting pronouncements or a change in the interpretation of accounting standards or practices may have a significant effect on our reported financial results and may affect our reporting of transactions completed before the change is effective. Regulatory authorities in jurisdictions into or from which we ship our products could levy fines, restrict or delay our ability to export products, or increase costs associated with the manufacture or transfer of products. A significant portion of our sales require export and import activities. Our U.S.-manufactured products or products based on U.S. technology are subject to laws and regulations on international trade, including but not limited to the Foreign Corrupt Practices Act, EARs, International Traffic in Arms Regulations and trade sanctions against embargoed countries and denied entities, including those administered by the U.S. Department of the Treasury, Office of Foreign Assets Control. Licenses or license exceptions are required for the shipment of our products to certain countries. Our inability to timely obtain a license, for any reason, including a delay in license processing due to a federal government shutdown like that which occurred in 2018, could cause a delay in scheduled shipments which could have a material adverse impact on our revenue within the quarter of a shutdown, and in following quarters depending on the extent that license processing is delayed. Further, determination by a government that we have failed to comply with trade regulations or anti-bribery regulations can result in penalties which may include denial of export privileges, fines, penalties, and seizure of products, any of which could have a material adverse effect on our business, sales and earnings. A change in laws and regulations could restrict our ability to transfer product to previously permitted countries, customers, distributors or others. For example, in fiscal 2019, the U.S. Commerce Department banned U.S. companies from selling products or transferring technology to ZTE, a Chinese company, and certain subsidiaries. This ban was lifted in July 2018. In fiscal 2020, the U.S. Commerce Department banned U.S. companies from selling products or transferring technology to certain Chinese companies, including Huawei and certain subsidiaries. In fiscal 2020, the U.S. Federal Acquisition Regulation prohibited U.S. governmental agencies from buying equipment using covered telecommunications equipment as a substantial component or critical technology where the technology came from certain Chinese companies. On July 14, 2020, this was expanded to prohibit U.S. governmental agencies from entering into a contract with any company that uses covered telecommunications equipment whether or not the Chinese technology is related to the 25 Table of Contents procurement. Effective June 2020, amendments to the EAR regarding prohibitions of sales of items with a “military end use” into China, Russia, and Venezuela, and elimination of an EAR License Exception, apply to more of our products than the previous regulations. Any of the foregoing changes could adversely impact our operational costs due to the administrative impacts of complying with these regulations, and may limit those with whom we conduct business. Any one or more of these sanctions, future sanctions, a change in laws or regulations, or a prohibition on shipment of our products or transfer of our technology to significant customers could have a material adverse effect on our business, financial condition and results of operations. The U.S. and other countries have levied tariffs and taxes on certain goods, implemented trade restrictions, and introduced national security protection policies. Trade tensions between the U.S. and China, which escalated in 2018, have continued and include the U.S. increasing tariffs on Chinese origin goods and China increasing tariffs on U.S. origin goods. Some of our products were adversely affected and are continuing to be affected by the increased tariffs. We took steps to mitigate the costs of these tariffs on our business by making adjustments in operations and supply. Although these tariff increases did not result in a material adverse impact on our operating costs in fiscal 2019 or fiscal 2020, they did reduce demand for our products during fiscal 2019 and fiscal 2020. Increased tariffs on our customers' products could adversely impact their sales, and increased tariffs on our products in comparison to those of our competitors could each result in lower demand for our products. Further changes in trade or national security protection policy, tariffs, additional taxes, restrictions on exports or other trade barriers, may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, or reduce our ability to sell products, which could have a material adverse effect on our business, results of operations or financial conditions. The outcome of future examinations of our income tax returns could have an adverse effect on our results of operations. We are subject to examination of our U.S. and certain foreign income tax returns for fiscal 2007 and later. We regularly assess the likelihood of adverse outcomes of these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from current or future examinations. There can be no assurance that the final determination of any of these or any future examinations will not have an adverse effect on our effective tax rates, financial position and results of operations. Exposure to greater than anticipated income tax liabilities, changes in tax rules and regulations, changes in the interpretation of tax rules and regulations, or unfavorable assessments from tax audits could affect our effective tax rates, financial condition and results of operations. We are a U.S.-based multinational company subject to tax in many U.S. and foreign jurisdictions. Our income tax obligations could be affected by many factors, including changes to our operating structure, intercompany arrangements and tax planning strategies. Our income tax expense is computed based on tax rates at the time of the respective financial period. Our future effective tax rates, financial condition and results from operations could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, by changes in the tax rules and regulations or the interpretation of tax rules and regulations in the jurisdictions in which we do business or by changes in the valuation of our deferred tax assets. Currently, a majority of our revenue is generated from customers located outside the U.S., and a substantial portion of our assets, including employees, are located outside of the U.S. The adoption of the TCJA significantly changed the taxation of U.S.-based multinational corporations, by, among other things, reducing the U.S. corporate income tax rate, adopting elements of a territorial tax system, assessing a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creating new taxes on certain foreign-sourced earnings. The TCJA is unclear in some respects and will require interpretations and implementing regulations by the Internal Revenue Service (IRS), as well as state tax authorities, and the legislation could be subject to potential amendments and technical corrections, any of which could lessen or increase certain adverse impacts of the legislation. Changes to the taxation of certain foreign earnings resulting from the TCJA, along with the state tax impact of these changes and potential future cash distributions, will likely have an adverse effect on our effective tax rate. Furthermore, changes to the taxation of undistributed foreign earnings could change our future plans regarding reinvestment of such earnings. The foregoing items could have a material adverse effect on our business, cash flow, results of operations or financial conditions. The Organization for Economic Cooperation and Development has been working on a Base Erosion and Profit Shifting Project, and issued a report in 2015, an interim report in 2018, and is expected to continue to issue guidelines and proposals that may change aspects of the existing framework under which our tax obligations are determined in many of the countries where 26 Table of Contents we do business. Similarly, the European Commission and several countries have issued proposals that would change aspects of the current tax framework under which we are taxed. These proposals include changes to the existing income tax framework, and proposals to change or impose new types of non-income taxes, including taxes based on a percentage of revenue. Our business, financial condition and operating results may be adversely impacted by policies implemented by the new administration. As a result of the outcome of the 2020 U.S. elections, the new administration could make significant legislative and policy changes in areas including but not limited to tax, trade, labor and the environment. If implemented, these changes could increase our effective tax rate, and increase our selling and/or manufacturing costs, which could have a material adverse effect on our business, results of operations or financial conditions. Changes in tax policy, trade regulations or other matters, and any uncertainty surrounding the scope or timing of such changes, could negatively impact the stock market, and reduce the trading price of our stock. We are subject to stringent environmental and other regulations, which may force us to incur significant expenses. We must comply with federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of hazardous substances used in our products and manufacturing processes. 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, liability for clean- up, suspension of production, cessation of operations or future liabilities. Such regulations have required us in the past, and could require us in the future, to incur significant expenses to comply with such regulations. Our failure to control the use of, or adequately restrict the discharge of, hazardous substances could impact the health of our employees and others and could impact our ability to operate. Such failure could also restrict our ability to ship certain products to certain countries, require us to modify our logistics, or require us to incur other significant costs and expenses. Environmental laws continue to expand with a focus on reducing or eliminating hazardous substances in electronic products and shipping materials. Future environmental regulations could require us to reengineer certain of our existing products and may make it more expensive for us to manufacture, sell and ship our products. In addition, the number and complexity of laws focused on the energy efficiency of electronic products, the recycling of electronic products, and the reduction in the amount and the recycling of packing materials have expanded significantly. It may be difficult for us to timely comply with these laws and we may have insufficient quantities of compliant products to meet customers' needs, thereby adversely impacting our sales and profitability. We may have to write off inventory if we hold unsaleable inventory as a result of changes to regulations. We expect these risks to continue. These requirements may increase our own costs, as well as those passed on to us by our supply chain. Climate change regulations and sustained adverse climate change pose risks that could harm our results of operations. Climate change regulations could require us to limit emissions, change manufacturing processes, substitute materials which may cost more or be less available, fund offset projects, obtain new permits or undertake other costly activities. Failure to obtain permits could result in fines, suspension or cessation of production. Restrictions on emissions could result in significant costs such as higher energy costs, carbon taxes, and emission cap and trade programs. The cost of compliance with such regulations could restrict our manufacturing operations, and have an adverse effect on our operating results. Further, sustained adverse change in climate could have a direct adverse economic impact on us, such as utility shortages, and higher costs of utilities. Certain of our operations are located in arid or tropical regions, which some experts believe may become vulnerable to fires, storms, severe floods and droughts. While our business recovery plans are intended to allow us to recover from natural disasters or other disruptive events, our plans may not protect us from all events. Customer demands and regulations related to conflict-free minerals may force us to incur additional expenses. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, in August 2012, the SEC released investigation, and disclosure requirements regarding the use of "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries. We filed a Form SD with the SEC regarding such matters on May 29, 2020. Other countries are considering similar regulations. If we cannot certify that our supply chain is free from the risk of irresponsible sourcing, customers may demand that we change the sourcing of materials used in the manufacture of our products, even if the costs for compliant materials significantly increases or availability is limited. If we change materials or suppliers, there will likely be costs associated with qualifying new suppliers and production capacity and quality could be negatively impacted. Our relationships with customers and suppliers may be adversely affected if we are unable to certify that our products are free from the risk of irresponsible sourcing. We have incurred, and expect in the future to incur, additional costs associated with complying with these disclosure requirements, such as costs related to determining the source of any conflict minerals used in our products. We may be unable to satisfy customers who require that all of the components of our products be certified as 27 Table of Contents conflict free in a materially different manner than advocated by the Responsible Minerals Initiative or the Dodd-Frank Wall Street Reform and Consumer Protection Act. If we are unable to meet customer requirements, customers may disqualify us as a supplier and we may have to write off inventory if it cannot be sold. 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 be evaluated and reported on. An increase in reporting obligations will increase associated operating costs. This could have negative effects on our overall operating profits. A requirement to fund our foreign pension plans could negatively affect our cash position and operating capital. In connection with our acquisitions of Microsemi and Atmel, we assumed pension plans that cover certain French and German employees. Most of these plans are unfunded in compliance with statutory requirements, and we have no immediate intention of funding these plans. The projected benefit obligation totaled $83.0 million at March 31, 2021. Benefits are paid when amounts become due. We expect to pay approximately $1.6 million in fiscal 2022 for benefits earned. Should regulations require funding of these plans in the future, it could negatively affect our cash position and operating capital. Risks Related to Capitalization and Financial Markets The future trading price of our common stock could be subject to wide fluctuations in response to a variety of factors. The market price of our common stock has fluctuated significantly in the recent past and is likely to fluctuate in the future. The future trading price of our common stock could be subject to wide fluctuations in response to a variety of factors, many of which are beyond our control, including, but not limited to: • • • • • • • global economic and financial uncertainty due to the COVID-19 pandemic or other factors; quarterly variations in our operating results or the operating results of other technology companies; changes in our financial guidance or our failure to meet such guidance; changes in analysts' estimates of our financial performance or buy/sell recommendations; general conditions in the semiconductor industry; our ability to realize the expected benefits of our completed or future acquisitions; and actual or anticipated announcements of technical innovations or new products by us or our competitors. In addition, the stock market has recently and in the past experienced significant price and volume fluctuations that have affected the market prices for many companies and that often have been unrelated to their operating performance. These broad market fluctuations and other factors have harmed and may harm the market price of our common stock. The foregoing factors could also cause the market price of our Convertible Debt to decline or fluctuate substantially. Our financial condition and results of operations could be adversely impacted if we do not effectively manage current or future debt. As of March 31, 2021, the principal amount of our outstanding indebtedness was $9.21 billion. As a result of our acquisition of Microsemi, we have substantially more debt than we had prior to May 2018. At March 31, 2021, we had $2.35 billion in outstanding borrowings under our Revolving Credit Facility which provides up to $3.57 billion of revolving loan commitments that terminate in 2023. At March 31, 2021, we had $5.6 billion in aggregate principal amount of Senior Notes and $1.26 billion in aggregate principal of Convertible Debt outstanding. In fiscal 2021 and fiscal 2020, we repurchased $3.27 billion and $615.0 million, respectively, in principal amount of our convertible debt and repaid all amounts outstanding under our Term Loan Facility primarily through borrowings under our Revolving Credit Facility, issuance of senior notes, and issuance of convertible debt. Our maintenance of substantial levels of debt could adversely affect our ability to take advantage of opportunities and could adversely affect our financial condition and results of operations. We may need or desire to refinance our current or future debt and there can be no assurance that we will be able to do so on reasonable terms, if at all. 28 Table of Contents Servicing our debt requires a significant amount of cash, we may not have sufficient cash to fund payments and adverse changes in our credit ratings could increase our borrowing costs and adversely affect our ability to access the debt markets. Our ability to make scheduled payments of principal, interest, or to refinance our indebtedness, including our outstanding Convertible Debt and Senior Notes, depends on our future performance, which is subject to economic, competitive and other factors including those related to the COVID-19 pandemic. Our business may not continue to generate sufficient cash flow to service our debt and to fund capital expenditures, dividend payments, share repurchases or acquisitions. If we are unable to generate such cash flow, we may be required to undertake alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on onerous or highly dilutive terms. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. Our senior secured notes are rated by certain major credit rating agencies. These credit ratings impact our cost of borrowing and our ability to access the capital markets and are based on our financial performance and financial metrics including debt levels. There is no assurance that we will maintain our current credit ratings. A downgrade of our credit rating by a major credit rating agency could result in increased borrowing costs and could adversely affect our ability to access the debt markets to refinance our existing debt or finance future debt. Conversion of our Convertible Debt will dilute the ownership interest of our existing stockholders. The conversion of some or all of our outstanding Convertible Debt will dilute the ownership interest of our existing stockholders to the extent we deliver common stock upon conversion of such debt. Upon conversion, we may satisfy our conversion obligation by delivering cash, shares of common stock or any combination, at our option. If upon conversion we elect to deliver cash for the lesser of the conversion value and principal amount of the Convertible Debt, we would pay the holder the cash value of the applicable number of shares of our common stock. Upon conversion, we intend to satisfy the lesser of the principal amount or the conversion value in cash. If the conversion value of the Convertible Debt exceeds the principal amount, we may also elect to deliver cash in lieu of common stock for the conversion value in excess of the one thousand dollars principal amount (i.e., the conversion spread). There would be no adjustment to the numerator in the net income per common share computation for the cash settled portion of the Convertible Debt as that portion of the debt instrument will always be settled in cash. The conversion spread will be included in the denominator for the computation of diluted net income per common share. Any sales in the public market of any common stock issuable upon conversion of our Convertible Debt could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Debt may encourage short selling by market participants because the conversion of the Convertible Debt could be used to satisfy short positions, or anticipated conversion of the Convertible Debt into shares of our common stock could depress the price of our common stock. Fluctuations in foreign currency exchange rates could adversely impact our operating results. 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. dollar net balance sheet exposures. Nevertheless, in periods when the U.S. dollar significantly fluctuates in relation to the non-U.S. currencies in which we transact business, the value of our non-U.S. dollar transactions can have an adverse effect on our results of operations and financial condition. In particular, in periods when the value of a non-U.S. currency significantly declines relative to the U.S. dollar, customers transacting in that currency may be unable to fulfill their contractual obligations or to undertake new obligations to make payments or purchase products. In periods when the U.S. dollar declines significantly relative to the British pound, Euro, Thai baht and Taiwan dollar, the operational costs in our European and Thailand subsidiaries are adversely affected. Although our business has not been materially adversely impacted by recent changes in the value of the U.S. dollar, there can be no assurance as to the future impact that any weakness or strength in the U.S. dollar will have on our business or results of operations. Item 1B. Unresolved Staff Comments None. 29 Table of Contents Item 2. Properties At March 31, 2021, we owned and used the facilities described below: Location Gresham, Oregon Chandler, Arizona Chacherngsao, Thailand Colorado Springs, Colorado Calamba, Philippines Tempe, Arizona Bangalore, India Chacherngsao, Thailand Chennai, India Rousset, France Lawrence, Massachusetts Mount Holly Springs, Pennsylvania Garden Grove, California San Jose, California Neckarbischofsheim, Germany Nantes, France San Jose, California San Jose, California Beverly, Massachusetts Heilbronn, Germany Karlsruhe, Germany Ennis County, Ireland Simsbury, Connecticut Shanghai, China Hsinchu, Taiwan Approximate Total Sq. Ft. 826,500 687,000 489,000 Principal Operations Wafer fabrication (Fab 4), R&D center, warehousing and administrative offices Executive and administrative offices, wafer probe, R&D center, sales and marketing, and computer and service functions Assembly and test, wafer probe, sample center, warehousing and administrative offices 480,000 Wafer fabrication (Fab 5), test and R&D 460,000 457,000 294,000 215,000 187,000 170,000 160,000 Wafer probe, test, warehousing and administrative offices Wafer fabrication (Fab 2), R&D center, warehousing and administrative offices R&D center, sales and marketing support and administrative offices Assembly and test, warehousing and administrative offices R&D center Test, R&D and administrative offices Manufacturing and administrative offices 100,000 Manufacturing, R&D and administrative offices 98,100 98,000 80,000 77,000 71,000 57,000 52,103 46,000 43,000 40,000 32,500 21,000 15,000 Manufacturing, R&D and administrative offices R&D and administrative offices Manufacturing and administrative offices Wafer probe, test, R&D, warehousing and administrative offices R&D and administrative offices R&D and administrative offices Manufacturing R&D and administrative offices R&D and administrative offices Manufacturing, R&D and administrative offices Manufacturing, R&D and administrative offices R&D, sales and marketing support and administrative offices R&D and administrative offices In addition to the facilities we own, we lease several manufacturing, research and development facilities and sales offices in North America, Europe and Asia. We currently believe that our existing facilities are suitable and will be adequate to meet our requirements for at least the next 12 months. See page 42 for a discussion of the capacity utilization of our manufacturing facilities. Item 3. Legal Proceedings Refer to Note 12 to our consolidated financial statements for information regarding legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 30 Table of Contents PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Market under the symbol "MCHP." Stock Price Performance Graph The following graph and table show a comparison of the five-year cumulative total stockholder return, calculated on a dividend reinvestment basis, for Microchip Technology Incorporated, the Standard & Poor's (S&P) 500 Stock Index, and the Philadelphia Semiconductor Index. Comparison of 5 year Cumulative Total Return* *$100 invested on March 31, 2016 in stock or index, including reinvestment of dividends Fiscal year ending March 31. Copyright © 2021 Standard & Poor's, a division of S&P Global. All rights reserved. Cumulative Total Return March 2016 March 2017 March 2018 March 2019 March 2020 March 2021 Microchip Technology Incorporated S&P 500 Stock Index Philadelphia Semiconductor Index 100.00 100.00 100.00 156.77 117.17 152.17 197.49 133.57 203.28 182.47 146.25 217.73 151.54 136.05 240.33 351.41 212.71 504.64 Data acquired by Research Data Group, Inc. (www.researchdatagroup.com) On May 7, 2021, there were approximately 567 holders of record of our common stock. This figure does not reflect beneficial ownership of shares held in nominee names. 31 Among Microchip Technology Incorporated, the S&P 500 Indexand the PHLX Semiconductor IndexMicrochip Technology IncorporatedS&P 500PHLX Semiconductor201620172018201920202021$0$100$200$300$400$500 Table of Contents For a description of our dividend policies, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources," included herein. Refer to "Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters," at page 49 below, for the information required by Item 201(d) of Regulation S-K with respect to securities authorized for issuance under our equity compensation plans at March 31, 2021. Issuer Purchases of Equity Securities From time to time, our Board of Directors has authorized the repurchase of shares of our common stock in the open market or in privately negotiated transactions. In January 2016, our Board of Directors authorized an increase in the then existing share repurchase program to 15.0 million shares of common stock. There were no repurchases of common stock during fiscal 2021. There is no expiration date associated with this repurchase program. Item 6. Selected Financial Data Part II, Item 6 is no longer required as the Company has elected to early adopt the change to Item 301 of Regulation S-K contained in SEC Release No. 33-10890. 32 Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Note Regarding Forward-looking Statements This report, including “Item 1. Business,” “Item 1A. Risk Factors,” and “Item 7. Management's Discussion and Analysis of • • • • • • • • • • Financial Condition and Results of Operations,” contains certain forward-looking statements that involve risks and uncertainties, including statements regarding our strategy, financial performance and revenue sources. We use words such as "anticipate," "believe," "plan," "expect," "future," "continue," "intend" and similar expressions to identify forward-looking statements. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors including those set forth under "Risk Factors," beginning at page 12 and elsewhere in this Form 10- K. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. We disclaim any obligation to update information contained in any forward-looking statement. These forward- looking statements include, without limitation, statements regarding the following: The impact of the COVID-19 pandemic on demand for our products; Our expectation that certain supply chain constraints will continue through the remainder of calendar year 2021 and possibly into calendar year 2022; That if the impact of COVID-19 cases continues or worsens, the pandemic could adversely impact our business in future periods; That local governments could require us or our suppliers to temporarily reduce production further or cease operations and we could experience constraints in fulfilling customer orders; Our belief that our actions to combat the spread of COVID-19 will help preserve the health of our team members, customers, suppliers, visitors to our facilities, people with whom we conduct business and our communities, and allow us to safely continue operations; Our inability to predict how the COVID-19 pandemic, and actions taken by others in response to it, will affect our business; The effects that uncertain global economic conditions and fluctuations in the global credit and equity markets may have on our financial condition and results of operations; The effects and amount of competitive pricing pressure on our product lines and modest pricing declines in certain of our more mature proprietary product lines; Our ability to moderate future average selling price declines; The effect of product mix, capacity utilization, yields, fixed cost absorption, competition and economic conditions on gross margin; The amount of, and changes in, demand for our products and those of our customers; The impact of national security protections, trade restrictions and changes in tariffs, including those impacting China; Our expectation that in the future we will acquire additional businesses that we believe will complement our existing businesses; Our expectation that in the future we will enter into joint development agreements or other strategic relationships with other companies; The level of orders that will be received and shipped within a quarter, including the impact of our product lead times; Our expectation that our days of inventory at June 30, 2021 will be flat to down 5 days compared to the March 31, 2021 levels; Our belief that customers recognize our products and brand name and use distributors as an effective supply channel; The accuracy of our estimates of the useful life and values of our property, assets and other liabilities; Our ability to increase the proprietary portion of our analog product line and the effect of such an increase; The impact of any supply disruption we may experience; Our ability to effectively utilize our facilities at appropriate capacity levels and anticipated costs; That we adjust capacity utilization to respond to actual and anticipated business and industry-related conditions; That manufacturing costs will be reduced by transition to advanced process technologies; Our ability to maintain manufacturing yields; Continuing our investments in new and enhanced products; The cost effectiveness of using our own assembly and test operations; Our expectation that foundry capacity will continue to be tight due to strong demand for wafers across the industry; Our expectation that we will continue to operate our manufacturing facilities at or above normal capacity if the current supply constraints relative to demand continue through fiscal 2022; • • • • • • • • • • • • • • • • • • 33 Table of Contents • • • • • • • • • • • • • • • • • • • • • • • • • Our anticipated level of capital expenditures; Continuation and amount of quarterly cash dividends; The sufficiency of our existing sources of liquidity to finance anticipated capital expenditures and otherwise meet our anticipated cash requirements, and the effects that our contractual obligations are expected to have on them; The impact of seasonality on our business; Our belief that our IT system compromise has not had a material adverse effect on our business or resulted in any material damage to us; Our expectation that we will continue to be the target of cyber-attacks, computer viruses, unauthorized access and other attempts to breach or otherwise compromise the security of our IT systems and data; The accuracy of our estimates used in valuing employee equity awards; That the resolution of legal actions will not have a material effect on our business, and the accuracy of our assessment of the probability of loss and range of potential loss; The accuracy of our estimated tax rate; Our belief that the expiration of any tax holidays will not have a material impact on our effective tax rate; The impact of the geographical dispersion of our earnings and losses on our effective tax rate; That we expect to be able to realize the future tax benefit resulting from certain intra-group asset transfers; Our belief that the estimates used in preparing our consolidated financial statements are reasonable; Our actions to vigorously and aggressively defend and protect our intellectual property on a worldwide basis; Our ability to obtain patents and intellectual property licenses and minimize the effects of litigation; The level of risk we are exposed to for product liability claims or indemnification claims; The effect of fluctuations in market interest rates on our income and/or cash flows; The effect of fluctuations in currency rates; That we could increase our borrowings or seek additional equity or debt financing to maintain or expand our facilities, or to fund cash dividends, share repurchases, acquisitions or other corporate activities, and that the timing and amount of such financing requirements will depend on a number of factors; Our intention to satisfy the lesser of the principal amount or the conversion value of our Convertible Debt in cash; Our intention to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts; Changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings; Our expectation that our reliance on third party contractors may increase over time as our business grows; Our ability to collect accounts receivable; and The impact of the legislative and policy changes implemented or which may be implemented by the new administration, on our business and the trading price of our stock. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors including those set forth in "Item 1A. Risk Factors," and elsewhere in this Form 10-K. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. We disclaim any obligation to update the information contained in any forward-looking statement. 34 Table of Contents Introduction The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this document, as well as with other sections of this Annual Report on Form 10-K, including “Item 8. Financial Statements and Supplementary Data." For an overview of our business, refer to “Part I Item 1. Business." We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with a summary of COVID-19 developments followed by a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then discuss our results of operations for fiscal 2021 compared to fiscal 2020, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled “Liquidity and Capital Resources.” Our liquidity and capital resources section generally discusses fiscal 2021 compared to fiscal 2020. For our discussion of our fiscal 2020 results compared to fiscal 2019 for both our results of operations and our liquidity and capital resources sections, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed with the SEC on May 22, 2020, which is incorporated by reference herein. COVID-19 Developments In the first half of fiscal 2021, the COVID-19 pandemic resulted in a global disruption in economic activity by adversely affecting production, creating supply chain and market disruption, and adversely impacting businesses and individuals. In the second half of fiscal 2021, business conditions were unexpectedly strong as businesses and individuals adapted to the effects of the pandemic. Supply chains, however, were stressed as they were not expecting the level of economic strength that occurred. The impact of the pandemic on individuals and in certain locations in which we operate remains uncertain and will depend on many factors, such as the effectiveness of containment efforts including the use and effectiveness of vaccines. We regularly monitor new information regarding the severity of COVID-19 and the ability to contain, treat, or prevent it. Demand for our products that serve certain markets, such as consumer, automotive, and industrial increased in the second half of fiscal 2021, offsetting the adverse demand fluctuations in the early part of fiscal 2021 caused by the COVID-19 pandemic. Additionally, the markets that benefited earlier in fiscal 2021 from the stay-at-home economy, such as datacenters and communications reverted to normal demand levels by the second half of fiscal 2021 and remained at such levels at the end of fiscal 2021. While we have a diverse customer base operating in diverse industries, the extent of the impact of the COVID-19 pandemic on demand for our products depends on unpredictable future developments. At this time, our global manufacturing sites and our logistics channels are fully operational and local restrictions related to the COVID-19 pandemic that impacted us in the first quarter of fiscal 2021 have eased. During the second half of fiscal 2021, we experienced strong demand and low levels of inventory on our balance sheet and at our external distribution channel partners, and we continued to experience constraints in all our internal and external factories and their related manufacturing supply chains. We started ramping up production at our internal factories in September 2020, as well as investing in capital additions to expand our internal capacity. We also worked closely with our wafer fabrication, assembly and test subcontractors to secure additional capacity. While we expect our overall capacity to grow every quarter in calendar 2021, we expect the wafer fabrication, assembly and test constraints to persist through the remainder of calendar 2021 and possibly into calendar 2022. As a result, lead times continue to increase for many of our products. If the impact of COVID-19 continues or worsens, the pandemic could adversely impact our business in future periods. In the future, local governments could require us or our suppliers to temporarily reduce production or cease operations and we could experience constraints in fulfilling customer orders. In response to the early indications of the COVID-19 pandemic, we took proactive measures to safeguard the health of our employees, contractors, customers, suppliers, visitors to our facilities, other business partners, and our communities. We strategically implemented plans intended to ensure business continuity in the event severe outbreaks or government requirements were to impact our operations. We monitor governmental policies and CDC recommendations and take appropriate actions which are designed to prevent and control the spread of COVID-19. We continuously assess our efforts to combat the COVID-19 pandemic which have included the following: • We require social distancing, and have established distancing protocols at our facilities. We have suspended attendance at conferences and other gatherings and recently began to allow limited business travel. We generally require team members to work from home to the extent possible. Where work from home is not possible, all on- site team members are requested to take their temperatures before arriving to work, stay home if they do not feel well, stay home if they have been exposed to someone with COVID-19 or its symptoms, maintain a safe distance 35 Table of Contents • from others, wash their hands frequently, and wear a mask if they choose. We clean high touch surfaces at least daily. In partnership with our suppliers, we have evaluated our supply chain to identify gaps or weak points. In order to ensure continuity, in some cases, we have qualified alternative suppliers and increased our inventory of raw materials. • We have added and continue to add assembly and test capacity to provide redundant manufacturing capability through our network of subcontractors. • We implemented measures to help prepare for economic uncertainty, such as employee salary cuts, limiting hiring, reducing business travel costs, reducing discretionary spending, and limiting capital expenditures. In December 2020, we restored previous reductions in compensation, resumed hiring, and increased spending for certain capital expenditures to help meet business demands. • We are working with government authorities in the areas where we have a significant footprint. We continue to update ourselves on government requirements, relevant regulations, industry standards, and best practices to help safeguard our team members across the globe. We believe these actions are important and will help preserve the health of our team members, customers, suppliers, visitors to our facilities, people with whom we conduct business and our communities, and allow us to safely continue operations. However, we cannot predict how these actions, or the actions taken by government entities, suppliers, or customers in response to the COVID-19 pandemic will impact our business, revenues, or results of operations. Critical Accounting Policies and Estimates General Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. We review the accounting policies we use in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, business combinations, share-based compensation, inventories, income taxes, Convertible Debt and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. We review these estimates and judgments on an ongoing basis. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition We generate revenue primarily from sales of our semiconductor products to distributors and non-distributor customers (direct customers) and, to a lesser extent, from royalties paid by licensees of our intellectual property. We apply the following five-step approach to determine the timing and amount of revenue recognition: (i) identify the contract with the customer, (ii) identify performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the performance obligation is satisfied. Sales to our distributors are governed by a distributor agreement, a purchase order, and an order acknowledgment. Sales to distributors do not meet the definition of a contract until the distributor has sent in a purchase order, we have acknowledged the order, we have deemed the collectability of the consideration to be probable, and legally enforceable rights and obligations have been created; this generally occurs 30 days prior to the estimated ship date. As is customary in the semiconductor industry, we offer price concessions and stock rotation rights to many of our distributors. As these are forms of variable consideration, we estimate the amount of consideration to which we will be entitled using recent historical data and applying the expected value method. Usually, there is only a single performance obligation in the contract, and therefore the entire transaction price is allocated to the single performance obligation. After the transaction price has been allocated, we recognize revenue when the performance obligation is satisfied. Substantially all of the revenue generated from contracts with distributors is recognized at the time risk and title of the inventory transfers to the distributor. Sales to our direct customers are generally governed by a purchase order and an order acknowledgment. Sales to direct customers usually do not meet the definition of a contract until shipment of the product occurs. Generally, the transaction price associated with contracts with direct customers is set at the standalone selling price and is not variable. Usually, there is only a 36 Table of Contents single performance obligation in the contract, and therefore the entire transaction price is allocated to the single performance obligation. After the transaction price has been allocated, we recognize revenue when the performance obligation is satisfied. Substantially all of the revenue generated from contracts with direct customers is recognized at the time risk and title of the inventory transfers to the customer. Revenue generated from our licensees is governed by licensing agreements. Our primary performance obligation related to these agreements is to provide the licensee the right to use the intellectual property. The final transaction price is determined by multiplying the usage of the license by the royalty, which is fixed in the licensing agreement. Revenue is recognized as usage of the license occurs. Business Combinations All of our business combinations are accounted for at fair value under the acquisition method of accounting. Under the acquisition method of accounting, (i) acquisition-related costs, except for those costs incurred to issue debt or equity securities, will be expensed in the period incurred; (ii) non-controlling interests will be valued at fair value at the acquisition date; (iii) in- process research and development will be recorded at fair value as an intangible asset at the acquisition date and amortized once the technology reaches technological feasibility; (iv) restructuring costs associated with a business combination will be expensed subsequent to the acquisition date; and (v) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will be recognized through income tax expense. The measurement of the fair value of assets acquired and liabilities assumed requires significant judgment. The valuation of intangible assets, in particular, requires that we use valuation techniques such as the income approach. The income approach includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires the following significant estimates: revenue, expenses, capital spending and other costs, and discount rates based on the respective risks of the cash flows. Under the acquisition method of accounting, the aggregate amount of consideration we pay for a company is allocated to net tangible assets and intangible assets based on their estimated fair values as of the acquisition date. The excess of the purchase price over the value of the net tangible assets and intangible assets is recorded to goodwill. On an annual basis, we test goodwill for impairment and through March 31, 2021, we have never recorded an impairment charge related to goodwill. Share-based Compensation We measure at fair value and recognize compensation expense for all share-based payment awards, including grants of employee stock options, RSUs and employee stock purchase rights, to be recognized in our financial statements based on their respective grant date fair values. We utilize RSUs as our primary equity incentive compensation instrument for employees. Share-based compensation cost is measured on the grant date based on the fair market value of our common stock discounted for expected future dividends and is recognized as expense on a straight-line basis over the requisite service periods. Total share-based compensation expense recognized during the fiscal 2021 was $198.3 million, of which $171.7 million was reflected in operating expenses and $26.6 million was reflected in cost of sales. Total share-based compensation included in our inventory was $10.2 million at March 31, 2021. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that we grant additional equity awards to employees or we assume unvested equity awards in connection with acquisitions. Inventories Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method. We write down our inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those we projected, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable. In estimating our inventory obsolescence, we primarily evaluate estimates of demand over a 12-month period and record impairment charges for inventory on hand in excess of the estimated 12-month demand. Estimates for projected 12-month demand are generally based on the average shipments of the prior three-month period, which are then annualized to adjust for any potential seasonality in our business. The estimated 12-month demand is compared to our most recently developed sales forecast to further reconcile the 12-month demand estimate. Management reviews and adjusts the estimates as appropriate based on specific situations. For example, demand can be adjusted up for new products for which historic sales are not representative of future demand. Alternatively, demand can be adjusted down to the extent any existing products are being replaced or discontinued. 37 Table of Contents In periods where our production levels are substantially below our normal operating capacity, the reduced production levels of our manufacturing facilities are charged directly to cost of sales. As a result of production being below normal operating levels in our wafer fabrication facilities, approximately $29.6 million and $47.2 million was charged to cost of sales in fiscal 2021 and fiscal 2020, respectively. Income Taxes As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income within the relevant jurisdiction and to the extent we believe that recovery is not likely, we must establish a valuation allowance. We provided valuation allowances for certain of our deferred tax assets, where it is more likely than not that some portion, or all of such assets, will not be realized. Various taxing authorities in the U.S. and other countries in which we do business scrutinize the tax structures employed by businesses. Companies of our size and complexity are regularly audited by the taxing authorities in the jurisdictions in which they conduct significant operations. We are currently being audited by the tax authorities in the U.S. and in various foreign jurisdictions. At this time, we do not know what the outcome of these audits will be. We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained based on their technical merits under currently enacted law. If this threshold is not met, no tax benefit of the uncertain tax position is recognized. If the threshold is met, we recognize the largest amount of the tax benefit that is more than 50% likely to be realized upon ultimate settlement. The accounting model related to the valuation of uncertain tax positions requires us to presume that the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information and that each tax position will be evaluated without consideration of the possibility of offset or aggregation with other positions. The recognition requirement for the liability exists even if we believe the possibility of examination by a taxing authority or discovery of the related risk matters is remote or where we have a long history of the taxing authority not performing an exam or overlooking an issue. We will record an adjustment to a previously recorded position if new information or facts related to the position are identified in a subsequent period. All adjustments to the positions are recorded through the income statement. Generally, adjustments will be recorded in periods subsequent to the initial recognition if the taxing authority has completed an audit of the period that results in the position being effectively settled or if the statute of limitation expires. Due to the inherent uncertainty in the estimation process and in consideration of the criteria of the accounting model, amounts recognized in the financial statements in periods subsequent to the initial recognition may significantly differ from the estimated exposure of the position under the accounting model. Convertible Debt Upon issuance, we separately account for the liability and equity components of our Convertible Debt by estimating the fair values of the i) liability component without a conversion feature and ii) the conversion feature. This results in a bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our consolidated statements of income. Upon settlement of our Convertible Debt instruments, we allocate the total consideration between the liability and equity components based on the fair value of the liability component without the conversion feature. The difference between the consideration allocated to the liability component and the net carrying value of the liability component is recognized as an extinguishment loss or gain. The remaining settlement consideration is allocated to the equity component and recognized as a reduction of additional paid-in capital in our consolidated balance sheets. In addition, if the terms of the settlement are different from the contractual terms of the original instrument, we recognize an inducement loss, which is measured as the difference between the fair value of the original terms of the instrument and the fair value of the settlement terms. Determining the fair value of the liability component without the conversion feature upon issuance and settlement involves estimating the equivalent borrowing rate for a similar non-convertible instrument. Given the values of these transactions, fair value estimates are sensitive to changes in the equivalent borrowing rate conclusions. The measurement of the equivalent borrowing rate requires that we make estimates of volatility and credit spreads to align observable market inputs with the instrument being valued. 38 Table of Contents Lastly, we include the dilutive effect of the shares of our common stock issuable upon conversion of the outstanding Convertible Debt in our diluted income per share calculation regardless of whether the market price triggers or other contingent conversion features have been met. We apply the treasury stock method as we have the intent and have adopted an accounting policy to settle the principal amount of the Convertible Debt in cash. This method results in incremental dilutive shares when the average fair value of our common stock for a reporting period exceeds the conversion prices per share and adjusts as dividends are recorded in the future. Contingencies In the ordinary course of our business, we are exposed to various liabilities as a result of contracts, product liability, customer claims, governmental investigations and other matters. Additionally, we are involved in a limited number of legal actions, both as plaintiff and defendant. Consequently, we could incur uninsured liability in any of those actions. We also periodically receive notifications from various third parties alleging infringement of patents or other intellectual property rights, or from customers requesting reimbursement for various costs. With respect to pending legal actions to which we are a party and other claims, although the outcomes are generally not determinable, we believe that the ultimate resolution of these matters will not have a material adverse effect on our financial position, cash flows or results of operations. Litigation, governmental investigations and disputes relating to the semiconductor industry are not uncommon, and we are, from time to time, subject to such litigation, governmental investigations and disputes. As a result, no assurances can be given with respect to the extent or outcome of any such litigation, governmental investigations or disputes in the future. We accrue for claims and contingencies when losses become probable and reasonably estimable. As of the end of each applicable reporting period, we review each of our matters and, where it is probable that a liability has been or will be incurred, we accrue for all probable and reasonably estimable losses. Where we can reasonably estimate a range of losses we may incur regarding such a matter, we record an accrual for the amount within the range that constitutes our best estimate. If we can reasonably estimate a range but no amount within the range appears to be a better estimate than any other, we use the amount that is the low end of such range. Contingencies of an acquired company that exist as of the date of the acquisition are measured at fair value if determinable, which generally is based on a probability weighted model. If fair value is not determinable, contingencies of an acquired company are recognized when they become probable and reasonably estimable. Results of Operations The following table sets forth certain data as a percentage of net sales for fiscal 2021 and fiscal 2020: Net sales Cost of sales Gross profit Research and development Selling, general and administrative Amortization of acquired intangible assets Special charges and other, net Operating income Net Sales Fiscal Year Ended March 31, 2021 2020 100.0 % 37.9 62.1 15.4 11.2 17.1 — 18.4 % 100.0 % 38.5 61.5 16.6 12.8 18.9 0.9 12.3 % We operate in two industry segments and engage primarily in the design, development, manufacture and sale of semiconductor products as well as the licensing of our SuperFlash and other technologies. We sell our products to distributors and OEMs in a broad range of markets, perform ongoing credit evaluations of our customers and generally require no collateral. In certain circumstances, a customer's financial condition may require collateral, and, in such cases, the collateral would be typically provided in the form of letters of credit. The following table summarizes our net sales for fiscal 2021 and fiscal 2020 (dollars in millions): Net sales Fiscal Year Ended March 31, 2021 2020 Change $ 5,438.4 $ 5,274.2 3.1 % 39 Table of Contents The increase in net sales in fiscal 2021 compared to fiscal 2020 was primarily due to strength in our microcontroller product line. The net sales value of inventory at our distributor customers decreased $10.4 million during fiscal 2021 compared to a decrease of $68.2 million during fiscal 2020. Excluding the impact of changes in distributor inventory levels on net sales, net sales increased by 2.0% in fiscal 2021 compared to fiscal 2020 and was positively impacted by strength in our microcontroller product line. Due to the size, complexity and diversity of our customer base, we are not able to quantify any material factor contributing to the change other than net demand fluctuations in the end markets that we serve. Other factors that we believe contributed to changes in our reported net sales for fiscal 2021 compared to fiscal 2020 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include: • • • • semiconductor industry conditions; our various new product offerings that have increased our served available market; customers’ increasing needs for the flexibility offered by our programmable solutions; and increasing semiconductor content in our customers’ products through our Total Systems Solutions. We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the change in our net sales in fiscal 2021 or fiscal 2020. The overall average selling price of our products is affected by pricing declines over the life of individual products; however, variations in our product and geographic mix of sales can cause wider fluctuations in our overall average selling price in any given period. Generally, selling prices of our products increased during fiscal 2021 compared to fiscal 2020 due to increased material costs and increased functionality of products. Net sales by product line for fiscal 2021 and 2020 were as follows (dollars in millions): Fiscal Year Ended March 31, Microcontrollers Analog Other Total net sales Microcontrollers 2021 2,961.0 1,519.8 957.6 $ % 54.5 27.9 17.6 5,438.4 100.0 $ $ $ 2020 % 53.4 28.7 17.9 5,274.2 100.0 2,817.9 1,511.1 945.2 Our microcontroller product line represents the largest component of our total net sales. Microcontrollers and associated application development systems accounted for approximately 54.5% and 53.4% of our net sales in fiscal 2021 and fiscal 2020, respectively. Net sales of our microcontroller products increased approximately 5.1% in fiscal 2021 compared to fiscal 2020. The increase in net sales was due primarily to strength in demand for our microcontroller products in end markets that we serve. Historically, average selling prices in the semiconductor industry decrease over the life of any particular product. The overall average selling prices of our microcontroller products have remained relatively constant over time due to the proprietary nature of these products. We have experienced, and expect to continue to experience, moderate pricing pressure in certain microcontroller product lines, primarily due to competitive conditions. We have in the past been able to, and expect in the future to be able to, moderate average selling price declines in our microcontroller product lines by introducing new products with more features and higher prices. We may be unable to maintain average selling prices for our microcontroller products as a result of increased pricing pressure in the future, which would adversely affect our operating results. The average selling price of our microcontroller products is affected by these trends; however, variations in our product and geographic mix of sales can cause wider fluctuations in the average selling price of our microcontroller products in any given period. Analog Our analog product line includes analog, interface, mixed signal and timing products. Our analog product line accounted for approximately 27.9% and 28.7% of our net sales in fiscal 2021 and fiscal 2020, respectively. Net sales from our analog product line increased approximately 0.6% in fiscal 2021 compared to fiscal 2020. The increase in net sales was primarily due to strength in demand for our analog products in end markets that we serve, partially offset by adverse general economic conditions and the impact of the COVID-19 pandemic. 40 Table of Contents We consider a majority of the products in our analog product line to be proprietary in nature, where prices are relatively stable, similar to the pricing stability experienced in our microcontroller products. The non-proprietary portion of our analog product line will experience price fluctuations, driven primarily by the current supply and demand for those products. We may be unable to maintain the average selling prices of our analog product line as a result of increased pricing pressure in the future, which would adversely affect our operating results. Other Our other product line includes FPGA products, royalties associated with licenses for the use of our SuperFlash and other technologies, sales of our intellectual property, fees for engineering services, memory products, timing systems, manufacturing services (wafer foundry and assembly and test subcontracting), legacy application specific integrated circuits, and products for aerospace applications. Revenue from these services and products accounted for approximately 17.6% and 17.9% of our net sales in fiscal 2021 and fiscal 2020, respectively. Net sales related to these products and services increased approximately 1.3% in fiscal 2021 compared to fiscal 2020. Net sales of our other product line can fluctuate over time based on general economic and semiconductor industry conditions as well as changes in demand for our FPGA products, licenses, engineering services, memory products, and manufacturing services (wafer foundry and assembly and test subcontracting). Distribution Distributors accounted for approximately 50% of our net sales in each of fiscal 2021 and fiscal 2020. With the exception of Arrow Electronics, our largest distributor, which represented 10% of our net sales in fiscal 2020, no other distributor or end customer accounted for more than 10% of our net sales in fiscal 2021 or fiscal 2020. Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base. We believe that customers recognize Microchip for its products and brand name and use distributors as an effective supply channel. Generally, we do not have long-term agreements with our distributors and we, or our distributors, may terminate our relationships with each other with little or no advance notice. The loss of, or the disruption in the operations of, one or more of our distributors could reduce our future net sales in a given quarter and could result in an increase in inventory returns. At March 31, 2021, our distributors maintained 22 days of inventory of our products compared to 29 days at March 31, 2020. Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 22 days and 47 days. Our distributor inventory days were at historic lows due to the imbalance between the supply of and the demand for our products in the current supply-constrained environment. Sales by Geography Sales by geography for fiscal 2021 and 2020 were as follows (dollars in millions): Americas Europe Asia Total net sales Fiscal Year Ended March 31, 2021 1,389.1 1,042.9 3,006.4 5,438.4 % 25.5 $ 19.2 55.3 100.0 $ 2020 1,365.0 1,163.1 2,746.1 5,274.2 % 25.9 22.1 52.0 100.0 $ $ Americas sales include sales to customers in the U.S., Canada, Central America and South America. Sales to foreign customers accounted for approximately 77% and 78% of our net sales in fiscal 2021 and fiscal 2020, respectively. Substantially all of our foreign sales are U.S. dollar denominated. In fiscal 2021, the COVID-19 pandemic and the responses to it significantly affected our net sales by geography. Sales to customers in Europe as a percentage of total sales decreased in fiscal 2021 compared to fiscal 2020 primarily due to high COVID-19 infection rates and extensive governmental restrictions, which constrained demand at various times during the fiscal year. High infection rates also constrained demand in the Americas at various times during fiscal 2021, however, less stringent governmental restrictions resulted in only a slight decrease in Americas sales as a percentage of total sales in fiscal 2021 compared to fiscal 2020. Sales to customers in Asia as a percentage of total sales increased significantly in fiscal 2021 compared to fiscal 2020 as the COVID-19 pandemic was largely under control in China and Taiwan in early fiscal 2021 and China and Taiwan represent the highest percentage of our net sales 41 Table of Contents in Asia. Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia. Gross Profit Our gross profit in fiscal 2021 was $3.38 billion or 62.1% of net sales, compared to $3.24 billion, or 61.5% of net sales, in fiscal 2020. The following table summarizes the material and primary drivers of our change in gross profit as a percentage of net sales, with the material factors discussed in more detail below the table (dollars in millions): Gross Profit % of Net Sales $ $ 3,242.1 98.0 17.6 9.6 6.0 5.5 3,378.8 61.5 Fiscal Year Ended March 31, 2020 Increase in semiconductor net sales at prior year gross margins and excluding the impact of other factors quantified in this table Impact of unabsorbed capacity charges — 0.3 0.1 Net impact of product mix and average costs per unit 0.1 0.1 Net impact of excess and obsolete inventories 62.1 Fiscal Year Ended March 31, 2021 Increase in net sales to licensing customers, which has no associated cost of sales Unabsorbed capacity charges - When production levels are below normal capacity, which we measure as a percentage of the capacity of the installed equipment, we charge cost of sales for the unabsorbed capacity. We consider normal capacity at Fab 2 and Fab 4 to be 90% to 95%. We consider normal capacity at Fab 5 to be 70% to 75%. During fiscal 2021, we operated at below normal capacity levels primarily due to adverse general economic conditions and uncertainty from the COVID-19 pandemic resulting in unabsorbed capacity charges of $29.6 million, compared to unabsorbed capacity charges of $47.2 million in fiscal 2020. We adjust our wafer fabrication and assembly and test capacity utilization as required to respond to actual and anticipated business and industry-related conditions. By the end of fiscal 2021, our manufacturing facilities were operating at or above normal capacity and we expect this to continue if the current supply constraints relative to demand continue through fiscal 2022. Net impact of product mix and average cost per unit - The net impact of product mix and average cost per unit may fluctuate over time due to sales volumes of lower or higher margin products, changes in selling prices, and fluctuations in product costs. During fiscal 2021, product mix resulted in a decrease of $9.6 million in cost of goods sold and an increase in gross profit compared to fiscal 2020. Our overall inventory levels were $665.0 million at March 31, 2021, compared to $685.7 million at March 31, 2020. We maintained 112 days of inventory on our balance sheet at March 31, 2021 compared to 122 days of inventory at March 31, 2020. We expect our days of inventory levels at June 30, 2021 to be flat to down 5 days compared to the March 31, 2021 levels. We anticipate that our gross margins will fluctuate over time, driven primarily by capacity utilization levels, the overall product mix of microcontroller, analog, FPGA products, memory products, and technology licensing revenue and the percentage of net sales of each of these products in a particular quarter, as well as manufacturing yields, fixed cost absorption, and competitive and economic conditions in the markets we serve. We continue to transition products to more advanced process technologies to reduce future manufacturing costs. During fiscal 2020, we announced our intention to re-purpose Fab 5 to manufacture discrete and specialty products in addition to a lower volume of a diversified set of standard products. In connection with these efforts, we reduced the clean room footprint and transferred certain higher volume products from Fab 5 to our 8-inch wafer fabrication facilities in Arizona and Oregon. During fiscal 2021 and fiscal 2020, we incurred $8.0 million and $18.0 million, respectively, in costs associated with these actions all of which have been recorded within the special charges and other, net line item in our statements of income. These restructuring efforts were substantially completed as of March 31, 2021, and we anticipate that these actions will result in significant cost savings over the next several years. We operate assembly and test facilities in Thailand, the Philippines, and other locations throughout the world. During fiscal 2021, approximately 53% of our assembly requirements were performed in our internal assembly facilities, compared to approximately 45% during fiscal 2020. During fiscal 2021, approximately 57% of our test requirements were performed in our internal test facilities, compared to approximately 54% during fiscal 2020. The increases in the percentage of assembly and test operations that were performed internally in fiscal 2021 compared to fiscal 2020 are primarily due to our investments in 42 Table of Contents assembly and test equipment, which increased our internal capacity capabilities. Third-party contractors located primarily in Asia perform the balance of our assembly and test operations. The percentage of our assembly and test operations that are performed internally fluctuates over time based on supply and demand conditions in the semiconductor industry, our internal capacity capabilities and our acquisition activities. We believe that the assembly and test operations performed at our internal facilities provide us with significant cost savings compared to contractor assembly and test costs, as well as increased control over these portions of the manufacturing process. We plan to continue to transition certain outsourced assembly and test capacity to our internal facilities. We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements. Approximately 61% of our net sales came from products that were produced at outside wafer foundries in each of fiscal 2021 and fiscal 2020. Our use of third parties involves some reduction in our level of control over the portions of our business that we subcontract. While we review the quality, delivery and cost performance of our third-party contractors, our future operating results could suffer if any third-party contractor is unable to maintain manufacturing yields, assembly and test yields and costs at approximately their current levels. Research and Development R&D expenses for fiscal 2021 were $836.4 million, or 15.4% of net sales, compared to $877.8 million, or 16.6% of net sales, for fiscal 2020. We are committed to investing in new and enhanced products, including development systems software, and in our design and manufacturing process technologies. We believe these investments are significant factors in maintaining our competitive position. R&D costs are expensed as incurred. Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives. R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments. R&D expenses decreased $41.4 million, or 4.7%, for fiscal 2021 compared to fiscal 2020. The primary reason for the decrease in R&D expenses in fiscal 2021 compared to fiscal 2020 was due to management of discretionary spending, including reduced headcount costs due to reductions in compensation and travel expenses, in response to uncertainty surrounding the COVID-19 pandemic. R&D expenses fluctuate over time, primarily due to revenue and operating expense investment levels. Selling, General and Administrative Selling, general and administrative expenses for fiscal 2021 were $610.3 million, or 11.2% of net sales, compared to $676.6 million, or 12.8% of net sales, for fiscal 2020. Our goal is to continue to be more efficient with our selling, general and administrative expenses. Selling, general and administrative expenses include salary expenses related to field sales, marketing and administrative personnel, advertising and promotional expenditures and legal expenses as well as costs related to our direct sales force, CEMs and ESEs who work remotely from sales offices worldwide to stimulate demand by assisting customers in the selection and use of our products. Selling, general and administrative expenses decreased $66.3 million, or 9.8%, for fiscal 2021 compared to fiscal 2020. The primary reasons for the decrease in selling, general and administrative expenses were due to management of discretionary spending, including reduced headcount costs due to reductions in compensation and travel expenses, in response to uncertainty surrounding the COVID-19 pandemic as well as lower professional services and legal costs associated with our acquisitions and security remediation costs related to network compromises. Selling, general and administrative expenses fluctuate over time, primarily due to revenue and operating expense investment levels. Amortization of Acquired Intangible Assets Amortization of acquired intangible assets in fiscal 2021 was $932.3 million compared to $993.9 million in fiscal 2020. The primary reason for the decrease in acquired intangible asset amortization was lower amortization from our acquisition of Microsemi and from our prior acquisitions. 43 Table of Contents Special Charges and Other, Net During fiscal 2021, we incurred special charges and other, net of $1.7 million primarily related to the restructuring of our wafer fabrication operations partially offset by asset sales and other acquisition related activity. During fiscal 2020, we incurred special charges and other, net of $46.7 million comprised primarily of restructuring charges of $31.0 million and legal contingencies of $15.7 million. Restructuring expenses incurred during fiscal 2021 and fiscal 2020 include $15.0 million and $18.0 million, respectively, related to the restructuring of our wafer fabrication operations. Other restructuring expenses incurred during fiscal 2021 and fiscal 2020 were related to our most recent business acquisitions, and resulted from workforce, property and other operating expense rationalizations as well as combining product roadmaps and manufacturing operations. Other Income (Expense) Interest income in fiscal 2021 was $1.7 million compared to $2.8 million in fiscal 2020. Interest expense in fiscal 2021 was $356.9 million compared to $497.3 million in fiscal 2020. The primary reason for the decrease in interest expense in fiscal 2021 compared to fiscal 2020 relates to the cumulative pay down of our debt and lower interest rates on our outstanding variable rate debt. During fiscal 2021, we recognized losses of $299.6 million related to the settlement of a portion of our outstanding 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, and our 2017 Junior Convertible Debt as well as the payment of all amounts outstanding under our Bridge Loan Facility, and our Term Loan Facility. During fiscal 2020, we recognized losses of $5.4 million, consisting of $2.0 million primarily related to the voluntary prepayment of a portion of the outstanding balance on our Term Loan Facility and $3.4 million related to the settlement of $615.0 million in principal of our 2015 Senior Convertible Debt. The net losses recognized on the settlement of our Convertible Debt are comprised of two components (i) the inducement loss, which is the excess of the fair value of the consideration provided to the holder over the fair value of the debt and (ii) the extinguishment loss or gain, which is the difference between the fair value of the debt component and the carrying value on the settlement date. Other loss, net, in fiscal 2021 was $3.8 million compared to other income, net of $3.2 million in fiscal 2020. The primary reason for the change in other (loss) income, net during fiscal 2021 compared to fiscal 2020 related to foreign currency exchange rate fluctuations. Provision for Income Taxes Our provision or benefit for income taxes is attributable to U.S. federal, state, and foreign income taxes. A comparison of our effective tax rates in fiscal 2021 and fiscal 2020 is not meaningful due to the amount of pre-tax income, and income tax benefits recorded during the period. Our effective tax rate in fiscal 2021 includes a $48.4 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 14.3%; a $12.3 million tax benefit for share-based compensation deductions, which reduced our effective tax rate by 3.6%; a $4.4 million tax benefit related to audit closures and expirations of statute of limitations on various tax reserves, which reduced our effective tax rate by 1.3%; a $101.8 million tax expense for global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII), net of credits, which increased our effective tax rate by 30.0%; a $48.1 million tax benefit related to the settlement of convertible debt, which reduced our effective tax rate by 14.2%; and a $63.8 million tax benefit related to intra-group transfers of certain intellectual property rights, which reduced our effective tax rate by 18.8%. The tax benefit for the intra-group asset transfers primarily consisted of $155.5 million recorded as a deferred tax asset which represents the book and tax basis difference on the transferred assets measured based on the new applicable statutory tax rate, as well as, the reversal of the pre-existing deferred tax asset of $90.3 million, which represents the book and tax basis difference on the transferred assets measured based on the applicable statutory tax rate prior to the transfer. Over the next 15 years, we expect to be able to realize the future tax benefit of the deferred tax assets resulting from the intra-group asset transfers. It is not uncommon for taxing authorities of different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied with respect to the valuation of intellectual property rights. The taxing authorities of jurisdictions in which we operate may challenge our methodologies for valuing the intellectual property rights transferred, which could increase our future effective income tax rate and harm our future results of operations. Our effective tax rate in fiscal 2020 includes a $40.8 million tax benefit received from current year generated R&D credits, which reduced our effective tax rate by 27.2%; an $11.1 million tax benefit for share-based compensation deductions, which reduced our effective tax rate by 7.4%; a $28.5 million tax benefit related to audit closures and expirations of the statute of 44 Table of Contents limitations on various tax reserves, which reduced our effective tax rate by 19.0%; a $54.7 million tax expense for GILTI and FDII, net of credits, which increased our effective tax rate by 36.4%; and a $334.8 million tax benefit related to intra-group transfers of certain intellectual property rights, which reduced our effective tax rate by 222.9%. The tax benefit for the intra- group asset transfers primarily consisted of $78.0 million recorded as a deferred tax asset which represents the book and tax basis difference on the transferred assets measured based on the new applicable statutory tax rate, as well as, the reversal of the pre-existing deferred tax liability of $259.9 million, which represents the book and tax basis difference on the transferred assets measured based on the applicable statutory tax rate prior to the transfer. We are subject to taxation in many jurisdictions in which we have operations. The effective tax rates that we pay in these jurisdictions vary widely, but they are generally lower than our combined U.S. federal and state effective tax rate. Our domestic statutory tax rate in each of fiscal 2021 and fiscal 2020 was approximately 22%. Our non-U.S. blended statutory tax rates in fiscal 2021 and fiscal 2020 were much lower than this amount. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, tax holidays, financing arrangements and other factors. Our effective tax rate has been, and will continue to be impacted by the geographical dispersion of our earnings and losses. Our foreign tax rate differential benefit primarily relates to our operations and assets in Thailand, Malta and Ireland. Our Thailand manufacturing operations are currently subject to numerous tax holidays granted to us based on our investment in property, plant and equipment in Thailand. Our tax holiday periods in Thailand expire at various times in the future; however, we actively seek to obtain new tax holidays, otherwise we will be subject to tax at the statutory tax rate of 20%. We do not expect the future expiration of any of our tax holiday periods in Thailand to have a material impact on our effective tax rate. The remaining material components of foreign income taxed at a rate lower than the U.S. are earnings accrued in Ireland at a 12.5% statutory tax rate and earnings accrued in Malta at a 0% to 5% tax rate. Various taxing authorities in the U.S. and other countries in which we do business are increasing their scrutiny of the tax structures employed by businesses. Companies of our size and complexity are regularly audited by the taxing authorities in the jurisdictions in which they conduct significant operations. For U.S. federal, and in general for U.S. state tax returns, our fiscal 2007 and later tax returns remain effectively open for examination by the taxing authorities. We are currently being audited by the tax authorities in the U.S. and in various foreign jurisdictions. At this time, we do not know what the outcome of these audits will be. We record benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained based on their technical merits under currently enacted law. If this threshold is not met, no tax benefit of the uncertain tax position is recognized. If the threshold is met, we recognize the largest amount of the tax benefit that is more than 50% likely to be realized upon ultimate settlement. In July 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. In the July 2015 ruling, the Tax Court concluded that the sharing of the cost of employee stock compensation in a company’s cost-sharing arrangement was invalid under the U.S. Administrative Procedures Act. In June 2019, a panel of the Ninth Circuit of the U.S. Court of Appeals reversed this decision. In July 2019, Altera petitioned U.S. Court of Appeals for the Ninth Circuit to hold an en banc rehearing of the case. In November 2019, the en banc rehearing petition was denied, and Altera asked the U.S. Supreme Court for a judicial review. In June 2020, the U.S. Supreme Court declined to issue a writ of certiorari in Altera v Commissioner, leaving intact the decision reached by the Ninth Circuit of the U.S. Court of Appeals. Based on the Ninth Circuit Opinion, we recorded a cumulative income tax expense of $23.3 million in fiscal 2021. 45 Table of Contents Liquidity and Capital Resources We had $282.0 million in cash, cash equivalents and short-term investments at March 31, 2021, a decrease of $121.0 million from the March 31, 2020 balance. Net cash provided by operating activities was $1.92 billion for fiscal 2021 compared to $1.54 billion for fiscal 2020. The increase in net cash provided by operating activities in fiscal 2021 compared to fiscal 2020 was primarily due to efforts focused on working capital and discretionary spending management. Net cash used in investing activities was $173.3 million for fiscal 2021 compared to $133.2 million for fiscal 2020. Fiscal 2021 and fiscal 2020 investing cash flows primarily related to capital purchases and investments in other assets. Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions. Capital expenditures were $92.6 million and $67.6 million in fiscal 2021 and fiscal 2020, respectively. Capital expenditures, which were comparatively lower in fiscal 2020 and through the first half of fiscal 2021, related primarily to the expansion of production capacity and the addition of research and development equipment. Towards the second half of fiscal 2021 we started to invest more significantly to expand manufacturing capacity in response to supply constraints relative to current demand levels and we expect this to continue in fiscal 2022. We currently intend to invest between $225 million and $275 million in equipment and facilities during the next twelve months. We believe that the capital expenditures anticipated to be incurred over the next twelve months will provide sufficient manufacturing capacity to support the growth of our production capabilities for our new products and technologies and to bring in-house more of the assembly and test operations that are currently outsourced. We expect to finance our capital expenditures through our existing cash balances and cash flows from operations. Net cash used in financing activities was $1.86 billion for fiscal 2021 compared to net cash used in financing activities of $1.44 billion for fiscal 2020. Significant transactions affecting our net financing cash flows include: • • • in fiscal 2021, $1.41 billion of cash used to pay down certain principal of our debt, including our Revolving Credit Facility, Term Loan Facility and Bridge Loan Facility, and the cash portion of the settlement of our 2015 Senior Convertible Debt, our 2017 Senior Convertible Debt, and our 2017 Junior Convertible Debt, partially funded by the issuance of our senior notes, in fiscal 2020, $1.07 billion of cash used to pay down certain principal of our debt, including our Revolving Credit Facility, our Term Loan Facility and the cash portion of the settlement of our 2015 Senior Convertible Debt, partially funded by term loans made under the Bridge Loan Facility, and in fiscal 2021 and fiscal 2020, we paid cash dividends to our stockholders of $388.3 million and $350.1 million, respectively. In March 2020 and September 2019, we amended our Credit Agreement dated May 29, 2018, to, among other things, reduce the margin added to the interest rate on revolving loans under the Credit Agreement and amend certain negative covenants, including covenants that restrict our and our subsidiaries’ ability to, among other things, incur subsidiary indebtedness, grant liens and enter into certain restrictive agreements. The amendments also allow us the option to factor receivables and certain related assets. The amendments lowered the Revolving Credit Facility thereunder to $3.57 billion from $3.60 billion. The revolving loan commitments terminate in May 2023 and bear interest, at our option, at the base rate plus a spread of 0.00% to 0.75% or an adjusted LIBOR rate plus a spread of 1.00% to 1.75%, in each case, with such spread being determined based on the consolidated senior leverage ratio for the preceding four fiscal quarter period. As of March 31, 2021, the principal amount of our outstanding indebtedness was $9.21 billion. At March 31, 2021, we had $2.35 billion of outstanding borrowings under the Revolving Credit Facility compared to $2.39 billion at March 31, 2020. During fiscal 2021, we used borrowings under our Revolving Credit Facility and proceeds from the issuance of our 0.972% 2024 Notes to repay all amounts outstanding under our Term Loan Facility. See Note 7 of the notes to our consolidated financial statements for more information regarding our contractual obligations related to our long-term debt. The enactment of the TCJA imposed a tax on all previously untaxed earnings of non-U.S. subsidiaries of U.S. corporations. Due to this change, the jurisdiction in which our cash is at any given point in time no longer has a significant impact on our liquidity. Future distributions of a significant portion of our non-U.S. assets to the U.S. will no longer be subject to U.S. federal taxation. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts. During fiscal 2018, we recognized a one-time transition tax on accumulated unrepatriated foreign earnings, of which we expected cash payments of approximately $290.3 million. This tax is payable over a period of eight years, with 8% of the transition tax payable each year for fiscal 2019 through fiscal 2023, and 15%, 20%, and 25%, 46 Table of Contents respectively, payable during fiscal 2024, fiscal 2025, and fiscal 2026. As of March 31, 2021, our transition tax payable was $220.6 million, of which $23.2 million is payable within the next 12 months. We enter into derivative transactions from time to time in an attempt to reduce our exposure to currency rate fluctuations. Although none of the countries in which we conduct significant foreign operations has had a highly inflationary economy in the last five years, there is no assurance that inflation rates or fluctuations in foreign currency rates in countries where we conduct operations will not adversely affect our operating results in the future. At March 31, 2021, we had no foreign currency forward contracts outstanding. There were no repurchases of common stock in fiscal 2021 and fiscal 2020. As of March 31, 2021, we held approximately 11.0 million shares as treasury shares. On October 28, 2002, we announced that our Board of Directors had approved and instituted a quarterly cash dividend on our common stock. To date, our cumulative dividend payments have totaled approximately $4.5 billion. Cash dividends paid per share were $1.494 and $1.465 during fiscal 2021 and fiscal 2020, respectively. Total dividend payments amounted to $388.3 million and $350.1 million during fiscal 2021 and fiscal 2020, respectively. A quarterly dividend of $0.413 per share was declared on May 6, 2021 and will be paid on June 4, 2021 to stockholders of record as of May 21, 2021. We expect the aggregate cash dividend for the June 2021 quarter to be approximately $113.0 million. Our Board is free to change our dividend practices at any time and to increase or decrease the dividend paid, or not to pay a dividend on our common stock on the basis of our results of operations, financial condition, cash requirements and future prospects, and other factors deemed relevant by our Board. Our current intent is to provide for ongoing quarterly cash dividends depending upon market conditions, our results of operations, and potential changes in tax laws. We believe that our existing sources of liquidity combined with cash generated from operations and borrowings under our Revolving Credit Facility will be sufficient to meet our currently anticipated cash requirements for at least the next 12 months. However, the semiconductor industry is capital intensive. In order to remain competitive, we must constantly evaluate the need to make significant investments in capital equipment for both production and research and development. We may increase our borrowings under our Revolving Credit Facility or seek additional equity or debt financing from time to time to maintain or expand our wafer fabrication and product assembly and test facilities, for cash dividends, for share repurchases or for acquisitions or other purposes. The timing and amount of any such financing requirements will depend on a number of factors, including our level of dividend payments, changes in tax laws and regulations regarding the repatriation of offshore cash, demand for our products, changes in industry conditions, product mix, competitive factors and our ability to identify suitable acquisition candidates. We may from time to time seek to refinance certain of our outstanding notes or Convertible Debt through issuances of new notes or convertible debt, tender offers, exchange transactions or open market repurchases. Such issuances, tender offers or exchanges or purchases, if any, will depend on prevailing market conditions, our ability to negotiate acceptable terms, our liquidity position and other factors. There can be no assurance that any financing will be available on acceptable terms due to uncertainties resulting from the COVID-19 pandemic or other factors, and any additional equity financing would result in incremental ownership dilution to our existing stockholders. Recently Issued Accounting Pronouncements Refer to Note 1 to our consolidated financial statements regarding recently issued accounting pronouncements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of March 31, 2021, our long-term debt totaled $9.21 billion. We have no interest rate exposure to rate changes on our fixed rate debt, which totaled $6.86 billion as of March 31, 2021. We do have interest rate exposure with respect to the $2.35 billion of our variable interest rate debt outstanding as of March 31, 2021. A 50 basis point increase in interest rates would impact our expected annual interest expense for the next 12 months by approximately $11.7 million. Item 8. Financial Statements and Supplementary Data The consolidated financial statements listed in the index appearing under Item 15(a)(1) hereof are filed as part of this Form 10-K. See also Index to Financial Statements below. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 47 Table of Contents Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Annual Report on Form 10-K, as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act, we evaluated under the supervision of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met. Management Report on Internal Control Over Financial Reporting Our management, including our principal executive officer and our principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Management assessed our internal control over financial reporting as of March 31, 2021, the end of our fiscal year. Management based its assessment on criteria established in Internal Control – Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. This assessment is supported by testing and monitoring performed by our finance organization. Based on our assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP. We reviewed the results of management's assessment with the Audit Committee of our Board of Directors. Ernst & Young LLP, an independent registered public accounting firm, who audited our consolidated financial statements included in this Form 10-K has issued an attestation report on our internal control over financial reporting as of March 31, 2021, which is included on page F-5. Changes in Internal Control over Financial Reporting During the three months ended March 31, 2021, we transitioned certain of Microsemi's processes to our internal control processes and we expect to transition more of such processes throughout the remainder of calendar year 2021. Other than with respect to our transition of Microsemi to our systems and control environment as described above, during the three months ended March 31, 2021, there was no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 48 Table of Contents Item 9B. Other Information J. Eric Bjornholt, our Senior Vice President, Chief Financial Officer, Mitch Little, our Senior Vice President, Worldwide Client Engagement, Steve Drehobl, our Senior Vice President, MCU8 and MCU16 Business Units, Rich Simoncic, our Senior Vice President, Analog Power and Interface Business Units, Esther Johnson, our Board Member, L.B. Day, our Board Member, and Matthew W. Chapman, our Board Member, have entered into trading plans as contemplated by Rule 10b-5-1 under the Exchange Act and periodic sales of our common stock have occurred and are expected to occur under such plans. The foregoing disclosure is being made on a voluntary basis and not pursuant to any specific requirement under Form 10‑K, Form 8‑K or otherwise. Item 10. Directors, Executive Officers and Corporate Governance PART III Information on the members of our Board of Directors is incorporated herein by reference to our proxy statement for our 2021 annual meeting of stockholders under the captions "The Board of Directors," and "Proposal One – Election of Directors." Information on the composition of our audit committee and the members of our audit committee, including information on our audit committee financial experts, is incorporated by reference to our proxy statement for our 2021 annual meeting of stockholders under the caption "The Board of Directors – Committees of the Board of Directors – Audit Committee." Information on our executive officers is provided in Item 1, Part I of this Form 10-K under the caption "Executive Officers of the Registrant" at page 11, above. Information with respect to our code of ethics that applies to our directors, executive officers (including our principal executive officer and our principal financial and accounting officer) and employees is incorporated by reference to our proxy statement for our 2021 annual meeting of stockholders under the caption "Code of Business Conduct and Ethics." A copy of our Code of Business Conduct and Ethics is available on our website at the Investor Relations section under Mission Statement/ Corporate Governance on www.microchip.com. Information regarding material changes, if any, to procedures by which security holders may recommend nominees to our Board of Directors is incorporated by reference to our proxy statement for the 2021 annual meeting of stockholders under the caption "Requirements, Including Deadlines, for Receipt of Stockholder Proposals for the 2021 Annual Meeting of Stockholders; Discretionary Authority to Vote on Stockholder Proposals." Item 11. Executive Compensation Information with respect to executive compensation is incorporated herein by reference to the information under the caption "Executive Compensation" in our proxy statement for our 2021 annual meeting of stockholders. Information with respect to director compensation is incorporated herein by reference to the information under the caption "The Board of Directors – Director Compensation" in our proxy statement for our 2021 annual meeting of stockholders. Information with respect to compensation committee interlocks and insider participation in compensation decisions is incorporated herein by reference to the information under the caption "The Board of Directors – Compensation Committee Interlocks and Insider Participation" in our proxy statement for our 2021 annual meeting of stockholders. Our Board compensation committee report on executive compensation is incorporated herein by reference to the information under the caption "Executive Compensation – Compensation Committee Report on Executive Compensation" in our proxy statement for our 2021 annual meeting of stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information with respect to securities authorized for issuance under our equity compensation plans is incorporated herein by reference to the information under the caption "Executive Compensation – Equity Compensation Plan Information" in our proxy statement for our 2021 annual meeting of stockholders. 49 Table of Contents Information with respect to security ownership of certain beneficial owners, members of our Board of Directors and management is incorporated herein by reference to the information under the caption "Security Ownership of Principal Stockholders, Directors and Executive Officers" in our proxy statement for our 2021 annual meeting of stockholders. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item pursuant to Item 404 of Regulation S-K is incorporated by reference to the information under the caption "Certain Transactions" contained in our proxy statement for our 2021 annual meeting of stockholders. The information required by this Item pursuant to Item 407(a) of Regulation S-K regarding the independence of our directors is incorporated by reference to the information under the caption "Meetings of the Board of Directors" contained in our proxy statement for our 2021 annual meeting of stockholders. Item 14. Principal Accountant Fees and Services The information required by this Item related to principal accountant fees and services as well as related pre-approval policies is incorporated by reference to the information under the caption "Independent Registered Public Accounting Firm" contained in our proxy statement for our 2021 annual meeting of stockholders. Item 15. Exhibits and Financial Statement Schedules (a) The following documents are filed as part of this Form 10-K: PART IV (1) Financial Statements: Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Consolidated Balance Sheets as of March 31, 2021 and 2020 Consolidated Statements of Income for each of the three years in the period ended March 31, 2021 Consolidated Statements of Comprehensive Income for each of the three years in the period ended March 31, 2021 Consolidated Statements of Cash Flows for each of the three years in the period ended March 31, 2021 Consolidated Statements of Changes in Equity for each of the three years in the period ended March 31, 2021 Notes to Consolidated Financial Statements (2) Financial Statement Schedules (3) The Exhibits filed with this Form 10-K or incorporated herein by reference are set forth in the Exhibit Index beginning on page 51 hereof, which Exhibit Index is incorporated herein by this reference. Page F-1 F-5 F-6 F-7 F-8 F-9 F-11 F-12 None (b) See Item 15(a)(3) above. (c) See "Index to Financial Statements" included under Item 8 to this Form 10-K. Item 16. Form 10-K Summary Not applicable. 50 Included Herewith X Table of Contents EXHIBIT INDEX Exhibit Number 2.1 3.1 3.2** 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 Exhibit Description Agreement and Plan of Merger, dated as of March 1, 2018, by and among Microchip Technology Incorporated, Microsemi Corporation, and Maple Acquisition Corporation Form 8-K Incorporated by Reference File Number 000-21184 Exhibit 2.1 Filing Date March 2, 2018 Restated Certificate of Incorporation of Registrant Amended and Restated Bylaws of Registrant, as amended February 26, 2021 Indenture dated as of February 11, 2015 between Microchip Technology Incorporated and Wells Fargo Bank, N.A. Indenture dated as of February 15, 2017 between Microchip Technology Incorporated and Wells Fargo Bank, National Association Indenture dated as of February 15, 2017 between Microchip Technology Incorporated and Wells Fargo Bank, National Association Description of Registered Securities Senior Secured Notes Indenture, dated as of May 29, 2020, by and among Microchip Technology Incorporated, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as trustee and collateral agent Senior Notes Indenture, dated as of May 29, 2020, by and among Microchip Technology Incorporated, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as trustee Form of 2.670% Senior Secured Note due 2023 (included in Exhibit 4.1 of 8-K filed on June 3, 2020) Form of 4.250% Senior Note due 2025 (included in Exhibit 4.2 of 8-K filed on June 3, 2020) Indenture, dated as of December 1, 2020, between Microchip Technology Incorporated and Wells Fargo Bank, National Association, as trustee Form of 0.125% Convertible Senior Note due 2024 (included in Exhibit 4.1 of the 8-K filed on December 2, 2020) Senior Secured Notes Indenture, dated as of December 17, 2020, by and among Microchip Technology Incorporated, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as trustee and collateral agent 10-Q 000-21184 3.1 November 12, 2002 8-K 000-21184 4.1 February 11, 2015 8-K 000-21184 4.1 February 15, 2017 8-K 000-21184 4.3 February 15, 2017 10-K 8-K 000-21184 000-21184 4.4 4.1 May 22, 2020 June 3, 2020 8-K 000-21184 4.2 June 3, 2020 8-K 000-21184 4.3 June 3, 2020 8-K 000-21184 4.4 June 3, 2020 8-K 000-21184 4.1 December 2, 2020 8-K 000-21184 4.2 December 2, 2020 8-K 000-21184 4.1 December 18, 2020 51 Table of Contents EXHIBIT INDEX Exhibit Number 4.12 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 Exhibit Description Form of 0.972% Senior Secured Note due 2024 (included in Exhibit 4.1 of the 8-K filed on December 18, 2020) Form of Capped Call Confirmation Augmenting Lender Supplement, dated as of November 10, 2017, among Microchip Technology Incorporated, the lender party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent Master Increasing Lender Supplement, dated as of September 1, 2017, among Microchip Technology Incorporated, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent Master Increasing Lender Supplement dated as of March 19, 2015, by and among Microchip Technology Incorporated and the Increasing Lenders thereto Amended and Restated Credit Agreement, dated as of May 29, 2018, by and among Microchip Technology Incorporated, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent Amendment No.1 to Amended and Restated Credit Agreement, dated as of September 26, 2019, among Microchip Technology Incorporated, the Subsidiary Guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent Second Amendment to Amended and Restated Credit Agreement, dated as of March 21, 2020 Pledge and Security Agreement, dated as of February 8, 2017, by and among Microchip Technology Incorporated, the other grantors party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent Amended and Restated Pledge and Security Agreement, dated as of May 29, 2018, by and among Microchip Technology Incorporated, the other grantors party thereto and JPMorgan Chase Bank, N.A., as administrative agent Pledge and Security Agreement, dated as of March 27, 2020, by and among Microchip Technology Incorporated, the other grantors from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent Incorporated by Reference File Number 000-21184 Exhibit 4.2 Filing Date December 18, 2020 Included Herewith 000-21184 10.2 November 20, 2020 000-21184 10.1 November 13, 2017 Form 8-K 8-K 8-K 8-K 000-21184 10.1 September 1, 2017 10-K 000-21184 10.1 May 27, 2015 8-K 000-21184 10.1 May 29, 2018 8-K 000-21184 10.1 October 1, 2019 8-K 000-21184 10.1 March 24, 2020 8-K 000-21184 10.2 February 8, 2017 8-K 000-21184 10.2 May 29, 2018 8-K 000-21184 10.2 March 27, 2020 52 Table of Contents EXHIBIT INDEX Exhibit Number 10.11 Exhibit Description Pledge and Security Agreement, dated as of December 17, 2020, by and among Microchip Technology Incorporated, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as collateral agent Form 8-K Incorporated by Reference File Number 000-21184 Exhibit 10.1 Filing Date December 18, 2020 Included Herewith 10.12 10.13 10.14 10.15* 10.16* 10.17* 10.18* 10.19* 10.20* 10.21* 10.22* 10.23* 10.24* 10.25* Amended and Restated Guaranty, dated as of May 29, 2018, made by the subsidiaries of Microchip Technology Incorporated party thereto as guarantors in favor of JPMorgan Chase Bank, N.A., as Administrative Agent Form of Indemnification Agreement between Registrant and its directors and certain of its officers [Paper filing not on SEC website] Microchip Technology Incorporated 2012 Inducement Award Plan 2004 Equity Incentive Plan as Amended and Restated on April 1, 2021 Form of Notice of Grant of Restricted Stock Units (officer) for 2004 Equity Incentive Plan Form of Notice of Grant of Restricted Stock Units (non-officer) for 2004 Equity Incentive Plan Form of Notice of Grant for 2004 Equity Incentive Plan (including Exhibit A Stock Option Agreement) Form of Notice of Grant of Restricted Stock Units for 2004 Equity Incentive Plan (including Exhibit A Restricted Stock Units Agreement) Restricted Stock Units Agreement (Domestic) for 2004 Equity Incentive Plan Restricted Stock Units Agreement (Foreign) for 2004 Equity Incentive Plan Form of Global RSU Agreement for 2004 Equity Incentive Plan (including Notice of Grant of Restricted Stock Units) Form of RSU Grant Notice and Global RSU Agreement V-4004 Form of Notice of Stock Option Grant and Stock Option Agreement Form of CEO RSU Grant and RSU Agreement 8-K 000-21184 10.3 May 29, 2018 S-1 33-57960 10.1 February 5, 1993 S-8 333-183074 4.8 August 3, 2012 8-K 000-21184 10.1 April 7, 2021 S-8 333-192273 10.2 November 12, 2013 S-8 333-192273 10.3 November 12, 2013 S-8 333-119939 4.5 October 25, 2004 10-K 000-21184 10.6 May 31, 2006 10-Q 000-21184 10.3 November 7, 2007 10-Q 000-21184 10.4 November 7, 2007 8-K 000-21184 10.1 September 27, 2010 10-K 000-21184 10.17 May 30, 2019 10-K 000-21184 10.18 May 30, 2019 10-K 000-21184 10.19 May 30, 2019 10.26* Form of Notice of Grant of RSU Agreement 10-K 000-21184 10.20 May 30, 2019 10.27* Notice of Grant of Restricted Stock Units (TSR) 10.28* Microchip Technology Incorporated 2001 Employee Stock Purchase Plan as amended through February 19, 2019 8-K 000-21184 10.1 January 7, 2020 10-K 000-21184 10.21 May 30, 2019 53 Table of Contents EXHIBIT INDEX Exhibit Number Exhibit Description Form Incorporated by Reference File Number Exhibit Filing Date Included Herewith 10.29* Microchip Technology Incorporated 10-K 000-21184 10.22 May 30, 2019 International Employee Stock Purchase Plan as amended May 6, 2019 10.30* Executive Management Incentive Compensation Plan as amended on May 16, 2016 10.31* Discretionary Executive Management Incentive Compensation Plan 8-K 000-21184 10.1 August 18, 2016 8-K 000-21184 10.3 August 24, 2006 10.32* Management Incentive Compensation Plan 8-K 000-21184 10.1 March 2, 2021 (as amended through February 26, 2021) 10.33* Microchip Technology Incorporated S-8 333-101696 4.1.1 December 6, 2002 10.34* 10.35* 10.36* 10.37* 10.38* Supplemental Retirement Plan Adoption Agreement to the Microchip Technology Incorporated Supplemental Retirement Plan dated January 1, 1997 Amendment dated December 9, 1999 to the Adoption Agreement to the Microchip Technology Incorporated Supplemental Retirement Plan February 3, 2003 Amendment to the Adoption Agreement to the Microchip Technology Incorporated Supplemental Retirement Plan Amendments to Supplemental Retirement Plan Amended and Restated Adoption Agreement to the Microchip Technology Incorporated Supplemental Retirement Plan dated October 8, 2008, as amended December 15, 2008 S-8 333-101696 4.1.3 December 6, 2002 S-8 333-101696 4.1.4 December 6, 2002 10-K 000-21184 10.28 June 5, 2003 10-Q 000-21184 10.1 February 9, 2006 10-K 000-21184 10.28 May 24, 2016 10.39* Change of Control Severance Agreement 10.40* Change of Control Severance Agreement 8-K 8-K 000-21184 10.1 December 18, 2008 000-21184 10.2 December 18, 2008 10-Q 000-21184 10.1 February 13, 1998 10-K 000-21184 10.14 May 15, 2001 10-Q 000-21184 10.2 February 13, 1998 8-K 000-21184 10.1 June 3, 2020 10.41 10.42 10.43 10.44 Development Agreement dated as of August 29, 1997 by and between Registrant and the City of Chandler, Arizona Addendum to Development Agreement by and between Registrant and the City of Tempe, Arizona, dated May 11, 2000 Development Agreement dated as of July 17, 1997 by and between Registrant and the City of Tempe, Arizona Pledge and Security Agreement, dated as of May 29, 2020, by and among Microchip Technology Incorporated, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as collateral agent 21.1** Subsidiaries of Registrant 23.1** Consent of Independent Registered Public Accounting Firm X X 54 Table of Contents EXHIBIT INDEX Incorporated by Reference File Number Exhibit Filing Date Included Herewith X X X X X X X X X X X Exhibit Number 24.1** 31.1** 31.2** 32** Exhibit Description Power of Attorney included on Page 57 of this Form 10-K Form Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document - the instance document does not appear in the Interactive File because its XBRL tags are embedded within the Inline XBRL document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Presentation Linkbase Document 104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. *Compensation plans or arrangements in which directors or executive officers are eligible to participate ** Furnished herewith 55 Table of Contents Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. May 17, 2021 MICROCHIP TECHNOLOGY INCORPORATED (Registrant) By: /s/ Ganesh Moorthy Ganesh Moorthy President, Chief Executive Officer, and Director 56 Table of Contents Power of Attorney KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or director of Microchip Technology Incorporated, a Delaware corporation (the Company), does hereby constitute and appoint each of GANESH MOORTHY and J. ERIC BJORNHOLT, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys to execute, file or deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto relating to this annual report on Form 10-K, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign such person's name individually and on behalf of the Company as an officer or director (as indicated below opposite such person's signature) to the Company's annual report on Form 10-K or any amendments or supplements thereto; and each of the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, shall do or cause to be done by virtue hereof. This Power of Attorney revokes any and all previous powers of attorney granted by any of the undersigned which such power would have entitled said attorneys and agents, or any of them, to sign such person's name, individually or on behalf of the Company, to any Form 10-K. IN WITNESS WHEREOF, each of the undersigned has executed the foregoing power of attorney on this 17th day of May, 2021. 57 Table of Contents Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name and Signature Title Date /s/ Ganesh Moorthy Ganesh Moorthy /s/ Steve Sanghi Steve Sanghi /s/ Matthew W. Chapman Matthew W. Chapman /s/ L.B. Day L.B. Day /s/ Esther L. Johnson Esther L. Johnson Karlton D. Johnson /s/ Wade F. Meyercord Wade F. Meyercord /s/ Karen M. Rapp Karen M. Rapp /s/ J. Eric Bjornholt J. Eric Bjornholt President, Chief Executive Officer, and Director (Principal Executive Officer) May 17, 2021 Executive Chair May 17, 2021 May 17, 2021 May 17, 2021 May 17, 2021 May 17, 2021 May 17, 2021 May 17, 2021 Director Director Director Director Director Director Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 58 Table of Contents Annual Report on Form 10-K Item 8, Item 15(a)(1) and (2), (b) and (c) _________________________________ INDEX TO FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS EXHIBITS _________________________________ YEAR ENDED MARCH 31, 2021 MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CHANDLER, ARIZONA Table of Contents MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Consolidated Balance Sheets as of March 31, 2021 and 2020 Consolidated Statements of Income for each of the three years in the period ended March 31, 2021 Consolidated Statements of Comprehensive Income for each of the three years in the period ended March 31, 2021 Consolidated Statements of Cash Flows for each of the three years in the period ended March 31, 2021 Consolidated Statements of Changes in Equity for each of the three years in the period ended March 31, 2021 Notes to Consolidated Financial Statements Page F-1 F-5 F-6 F-7 F-8 F-9 F-11 F-12 i Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Microchip Technology Incorporated Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Microchip Technology Incorporated (the Company) as of March 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended March 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated May 17, 2021 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-1 Table of Contents Estimating variable consideration for distributor sales Description of the Matter The Company's sales arrangements provide certain distributors with price concessions, which results in variable consideration. During the year ended March 31, 2021, approximately $2,737.4 million of the Company's total $5,438.4 million in net sales represents sales to distributors, which has been adjusted for estimates of the price concessions that are expected to be claimed. As explained in Note 1 to the consolidated financial statements, the Company estimates the amount of consideration to which it will be entitled using recent, observable experience from the prior quarter and applying the expected value method. The Company records a reduction of the original sale amount for the estimated variable consideration resulting from price concessions. At March 31, 2021, such reserves totaled $350.7 million. Auditing management's estimates of variable consideration resulting from price concessions under the distributor contracts involved subjective auditor judgment because the estimates rely on a number of factors that could be affected by future economic and market conditions. The estimated concession rates are made using recent, observable experience from the prior quarter. The concession rates are evaluated to determine whether adjustments are needed for changes in pricing terms and economic and market conditions. Changes in those assumptions can have a material effect on the amount of variable consideration recognized. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process to calculate the variable consideration resulting from price concessions, including management's assessment of the price concession assumptions and data underlying the estimate. Our audit procedures included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management's estimate. This included comparing management’s accrual for future price concessions at a disaggregated level to historical results and testing the value of the inventory held by distributors at the end of the period through confirmations with the distributors. We confirmed contractual terms and conditions directly with a selection of distributor customers. We evaluated whether recent, observable experience from the prior quarter is a reasonable approximation for expected future concessions in consideration of the current contractual terms and economic and market conditions. In addition, we assessed the historical accuracy of management's estimates for variable consideration resulting from price concessions and the related assumptions by performing a retrospective review on the accuracy of prior period estimates. F-2 Table of Contents Unrecognized tax benefits Description of the Matter As more fully described in Note 13 to the consolidated financial statements, the Company operates in a number of tax jurisdictions and its income tax returns are subject to examination by tax authorities in those jurisdictions that may challenge any tax position on these returns. Because the matters challenged by authorities are typically complex and subject to interpretation, their ultimate outcome is uncertain. The Company uses significant judgment in (1) determining whether a tax position’s technical merits are more- likely-then-not to be sustained, and (2) measuring the amount of tax benefit that qualifies for recognition. As of March 31, 2021, the Company recognized accrued liabilities for unrecognized tax benefits associated with various tax positions totaling $826.3 million. Because of the complexity of tax laws and regulations, auditing the recognition and measurement of unrecognized tax benefits requires a high degree of auditor judgment and increased extent of effort, including the involvement of our tax professionals. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for unrecognized tax benefits. This included testing controls over management’s review of the technical merits of tax positions, including the process to measure the financial statement impact of these tax matters. Our audit procedures included, among others, evaluating the assumptions the Company used to develop its tax positions and related unrecognized tax benefit amounts by jurisdiction and testing the completeness and accuracy of the underlying data used by the Company to calculate its uncertain tax positions. We involved our tax professionals located in the respective jurisdictions to assess the technical merits of the Company’s tax positions and to evaluate the application of relevant tax laws in the Company’s recognition determination. We assessed the Company’s correspondence with the relevant tax authorities and evaluated tax or legal opinions or other third-party advice obtained by the Company. We also evaluated the adequacy of the Company’s disclosures included in Note 13 in relation to these tax matters. F-3 Table of Contents Convertible debt transactions Description of the Matter As described in Note 7 to the consolidated financial statements, the Company privately negotiated several transactions to settle an aggregate of (1) $968.6 million principal amount of its 2015 Senior Convertible Debt, (2) $1,736.7 million principal amount of its 2017 Senior Convertible Debt and (3) $563.7 million principal amount of its 2017 Junior Convertible Debt. Through these transactions the Company provided holders an aggregate of (1) $2,611.4 million of cash, (2) 26.1 million shares of the Company’s common stock and (3) $665.5 million principal amount of its 2020 Senior Convertible Debt. The transactions were complex because the Company used significant judgment to estimate the current comparable borrowing rates for otherwise identical non-convertible debt instruments to determine the fair value of the liability components at each transaction date. Auditing the valuation of the liability components was challenging because the Company used complex valuation methodologies and subjective assumptions, including the expected volatility and credit spread. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to estimate the fair value of the liability components of the convertible debt instruments, including controls over management’s review of the valuation model and the significant assumptions used in the calculation. Our audit procedures included, among others, inspecting the transaction agreements and involving our internal valuation specialist to assist in evaluating the reasonableness of valuation methodologies, models and significant assumptions. We also performed sensitivity analyses to evaluate the reasonableness of certain significant assumptions, including the current comparable borrowing rates. We tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We also evaluated the Company’s financial statement disclosures related to these matters included in Note 7 to the consolidated financial statements. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2001. Phoenix, Arizona May 17, 2021 F-4 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Microchip Technology Incorporated Opinion on Internal Control Over Financial Reporting We have audited Microchip Technology Incorporated’s internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Microchip Technology Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended March 31, 2021, and the related notes and our report dated May 17, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Phoenix, Arizona May 17, 2021 F-5 Table of Contents Item 1. Financial Statements MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except share and per share amounts) ASSETS March 31, 2021 2020 Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Other current assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Long-term deferred tax assets Other assets Total assets $ $ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable Accrued liabilities Current portion of long-term debt Total current liabilities Long-term debt Long-term income tax payable Long-term deferred tax liability Other long-term liabilities Stockholders' equity: Preferred stock, $0.001 par value; authorized 5,000,000 shares; no shares issued or outstanding Common stock, $0.001 par value; authorized 450,000,000 shares; 284,479,079 shares issued and 273,528,594 shares outstanding at March 31, 2021; 258,391,231 shares issued and 245,325,643 shares outstanding at March 31, 2020 Additional paid-in capital Common stock held in treasury: 10,950,485 shares at March 31, 2021; 13,065,588 shares at March 31, 2020 Accumulated other comprehensive loss Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ $ See accompanying notes to consolidated financial statements 280.0 $ 2.0 997.7 665.0 200.5 2,145.2 854.7 6,670.6 4,794.8 1,749.2 264.3 16,478.8 $ 292.4 $ 794.3 1,322.9 2,409.6 7,581.2 689.9 43.9 417.1 401.0 2.0 934.0 685.7 194.5 2,217.2 876.1 6,664.8 5,702.3 1,748.5 217.2 17,426.1 246.8 781.8 608.8 1,637.4 8,873.4 668.4 318.5 342.9 — — 0.3 2,403.3 (433.8) (26.2) 3,393.5 5,337.1 16,478.8 $ 0.2 2,675.1 (500.6) (21.6) 3,432.4 5,585.5 17,426.1 F-6 Table of Contents MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) Net sales Cost of sales Gross profit Research and development Selling, general and administrative Amortization of acquired intangible assets Special charges and other, net Operating expenses Operating income Losses on equity method investments Other income (expense): Interest income Interest expense Loss on settlement of debt Other (loss) income, net Income before income taxes Income tax benefit Net income Basic net income per common share Diluted net income per common share Dividends declared per common share Basic common shares outstanding Diluted common shares outstanding Fiscal Year Ended March 31, 2020 2019 2021 $ 5,438.4 $ 2,059.6 3,378.8 5,274.2 $ 2,032.1 3,242.1 836.4 610.3 932.3 1.7 2,380.7 998.1 — 1.7 (356.9) (299.6) (3.8) 339.5 (9.9) 349.4 $ 1.35 $ 1.29 $ 1.494 $ 259.6 270.6 877.8 676.6 993.9 46.7 2,595.0 647.1 — 2.8 (497.3) (5.4) 3.2 150.4 (420.2) 570.6 $ 2.39 $ 2.23 $ 1.465 $ 238.9 256.2 $ $ $ $ 5,349.5 2,418.2 2,931.3 826.3 682.9 674.1 33.7 2,217.0 714.3 (0.2) 8.1 (502.9) (12.6) (2.2) 204.5 (151.4) 355.9 1.51 1.42 1.457 236.2 249.9 See accompanying notes to consolidated financial statements F-7 Table of Contents MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Net income Components of other comprehensive (loss) income: Available-for-sale securities: Unrealized holding losses, net of tax effect Reclassification of realized transactions, net of tax effect Defined benefit plans: Actuarial (losses) gains related to defined benefit pension plans, net of tax effect Reclassification of realized transactions, net of tax effect Change in net foreign currency translation adjustment Other comprehensive (loss) income, net of tax effect Comprehensive income Fiscal Year Ended March 31, 2020 2019 2021 $ 349.4 $ 570.6 $ 355.9 — — (9.4) 1.1 3.7 (4.6) 344.8 $ — — 1.4 0.8 (1.8) 0.4 571.0 $ (5.6) 5.6 2.9 1.0 (5.3) (1.4) 354.5 $ See accompanying notes to consolidated financial statements F-8 Table of Contents MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Deferred income taxes Share-based compensation expense related to equity incentive plans Loss on settlement of debt Amortization of debt discount Amortization of debt issuance costs Losses on equity method investments Gains on sale of assets Losses on write-down of fixed assets Impairment of intangible assets Gains on equity investments Impairment of available-for-sale investments Amortization of premium on available-for-sale investments Changes in operating assets and liabilities, excluding impact of acquisitions: (Increase) decrease in accounts receivable Decrease in inventories Increase (decrease) in accounts payable and accrued liabilities Change in other assets and liabilities Change in income tax payable Net cash provided by operating activities Cash flows from investing activities: Purchases of available-for-sale investments Maturities of available-for-sale investments Sales of available-for-sale investments and marketable equity securities Acquisition of Microsemi, net of cash acquired Investments in other assets Proceeds from sale of assets Capital expenditures Net cash used in investing activities Cash flows from financing activities: (1) Proceeds from borrowings on revolving loan under credit facility Repayments of revolving loan under credit facility Proceeds from issuance of senior notes Proceeds from borrowings on bridge loan facility Repayment of bridge loan facility Proceeds from borrowings on term loan facility Repayments of term loan facility Payments on settlement of convertible debt Repayment of debt assumed in Microsemi acquisition Deferred financing costs Purchase of capped call options Payment of cash dividends Proceeds from sale of common stock F-9 Fiscal Year Ended March 31, 2020 2019 2021 $ 349.4 $ 570.6 $ 355.9 1,153.3 (138.9) 1,215.6 (490.3) 198.3 299.6 71.1 17.1 — (7.1) 0.9 — (0.2) — — (63.7) 18.4 17.6 (16.7) 17.4 1,916.5 — — — — (89.0) 8.3 (92.6) (173.3) 3,966.0 (4,007.9) 3,577.8 — (615.0) — (1,723.5) (2,611.4) — (21.2) (35.8) (388.3) 60.3 170.2 5.4 121.7 17.1 — (2.2) 2.7 2.2 (2.5) — — (53.3) 28.8 11.4 (13.1) (40.5) 1,543.8 (2.0) — 4.7 — (71.5) 3.2 (67.6) (133.2) 1,026.0 (1,904.0) — 611.9 — — (188.0) (615.0) — (8.9) — (350.1) 58.8 876.4 (62.2) 166.4 12.6 114.6 16.5 0.2 — 0.8 3.1 — 6.0 (0.2) 238.8 341.6 (180.7) (24.2) (190.8) 1,674.8 (167.7) 78.0 1,376.6 (7,850.6) (18.6) 0.2 (228.9) (6,811.0) 4,416.5 (1,150.0) 1,989.5 — — 3,000.0 (1,088.5) — (2,056.9) (72.7) — (344.4) 42.6 Table of Contents Tax payments related to shares withheld for vested restricted stock units Capital lease payments Net cash (used in) provided by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents, and restricted cash at beginning of period Cash and cash equivalents, and restricted cash at end of period Supplemental disclosure of cash flow information: Restricted cash Non-cash activities: ROU assets obtained in exchange of lease liabilities (2) Cash paid for: Interest Income taxes Operating lease payments in operating cash flows (2) $ $ $ $ $ $ Fiscal Year Ended March 31, 2020 2019 2021 (64.6) (0.6) (1,864.2) (121.0) (68.1) (0.8) (1,438.2) (27.6) 401.0 280.0 $ 428.6 401.0 $ (71.8) (0.8) 4,663.5 (472.7) 901.3 428.6 — $ 25.0 $ 38.4 65.6 $ 24.8 265.4 $ 87.3 $ 47.4 $ 355.2 $ 101.3 $ 46.5 347.9 77.6 (1) During the fiscal year ended March 31, 2021, the Company completed the December 2020 settlement of $1,086.5 million principal amount of convertible debt in exchange for $428.9 million in cash, 8.4 million shares of common stock and $665.5 million principal amount of 2020 Senior Convertible Debt. Refer to Note 7 for further information. (2) During the fiscal year ended March 31, 2020, the Company adopted Accounting Standards Codification Topic 842, Leases, using the retrospective cumulative effect adjustment transition method. The disclosures are not applicable for the fiscal year ended March 31, 2019. See accompanying notes to consolidated financial statements F-10 Table of Contents MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in millions) Common Stock Held in Treasury Shares Amount Accumulated Other Comprehensi ve Loss Retained Earnings Total Equity Balance at March 31, 2018 Net income Other comprehensive loss Adoption of ASU 2016-01, cumulative adjustment Adoption of ASC 606, cumulative adjustment Adoption of ASU 2016-16, cumulative adjustment Non-cash consideration, exchange of employee stock awards - Microsemi acquisition Proceeds from sales of common stock through employee equity incentive plans Restricted stock unit and stock appreciation right withholdings Treasury stock used for new issuances Share-based compensation Cash dividend Balance at March 31, 2019 Net income Other comprehensive income Adoption of ASU 2018-02, cumulative adjustment Proceeds from sales of common stock through employee equity incentive plans Restricted stock unit and stock appreciation right withholdings Treasury stock used for new issuances Shares issued to settle convertible debt Settlement of convertible debt Share-based compensation Cash dividend Balance at March 31, 2020 Net income Other comprehensive loss Proceeds from sales of common stock through employee equity incentive plans Restricted stock unit and stock appreciation right withholdings Treasury stock used for new issuances Shares issued to settle convertible debt Settlement of convertible debt Purchase of capped call options Issuance of 2020 Senior Convertible Debt Share-based compensation Cash dividend Balance at March 31, 2021 Common Stock and Additional Paid-in- Capital Shares Amount 253.2 $ 2,562.7 — — — — — — — — — — — 53.9 3.4 42.6 (0.8) (2.6) — — 253.2 — — (71.8) (80.4) 172.8 — 2,679.8 — — — — 3.2 58.8 18.2 $ (662.6) $ — — — — — — — — — — — — — — — (2.6) — — 15.6 — — — 80.4 — — (582.2) — — — — — — — — — — (0.7) (2.5) (68.1) (81.6) — (2.5) 5.2 — — — 258.4 — — 351.8 (438.1) 172.7 — 2,675.3 — — — — — — 13.1 — — 2.6 60.3 — (0.5) (2.1) (64.6) (66.8) — (2.1) 26.1 — — 3,171.1 (3,622.1) (35.8) — — — 87.7 198.5 — 284.5 $ 2,403.6 — — 81.6 — — — — (500.6) — — — — 66.8 — — — — — — 11.0 $ (433.8) $ See accompanying notes to consolidated financial statements F-11 — — — — — — — — — — — — — (17.6) $ 1,397.3 $ 3,279.8 355.9 355.9 (1.4) — — (1.4) (1.7) 1.7 — — 242.0 242.0 — 1,558.1 1,558.1 — — 53.9 42.6 — — — (344.4) (71.8) — 172.8 (344.4) 5,287.5 570.6 0.4 (20.7) 3,210.6 570.6 — — 0.4 — — — 58.8 (68.1) — — — — (350.1) 351.8 (438.1) 172.7 (350.1) 5,585.5 349.4 (4.6) (21.6) 3,432.4 349.4 — — (4.6) — — — — — — — — — — — — 60.3 (64.6) — 3,171.1 (3,622.1) (35.8) — — — 87.7 — 198.5 — (388.3) (388.3) (26.2) $ 3,393.5 $ 5,337.1 — (1.3) 1.3 — Table of Contents MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1. Significant Accounting Policies Nature of Business Microchip Technology Incorporated (Microchip or the Company) develops, manufactures and sells smart, connected and secure embedded control solutions used by its customers for a wide variety of applications. The Company provides cost- effective embedded control solutions that also offer the advantages of small size, high performance, extreme low power usage, wide voltage range operation, mixed signal integration, and ease of development, thus enabling timely and cost-effective integration of the Company's solutions by its customers in their end products. Principles of Consolidation The Company prepares its consolidated financial statements in accordance with U.S. GAAP. The consolidated financial statements include the accounts of Microchip and its majority-owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar amounts in the financial statements and tables in these notes, except per share amounts, are stated in millions of U.S. dollars unless otherwise noted. As further discussed in Note 2, on May 29, 2018, the Company completed its acquisition of Microsemi Corporation (Microsemi) and the Company's financial results include Microsemi's results beginning as of such acquisition date. Revenue Recognition The Company generates revenue primarily from sales of semiconductor products to distributors and non-distributor customers (direct customers) and, to a lesser extent, from royalties paid by licensees of intellectual property. The Company applies the following five-step approach to determine the timing and amount of revenue recognition: (i) identify the contract with the customer, (ii) identify performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the performance obligation is satisfied. Sales to distributors are governed by a distributor agreement, a purchase order, and an order acknowledgment. Sales to distributors do not meet the definition of a contract until the distributor has sent in a purchase order, the Company has acknowledged the order, the Company has deemed the collectability of the consideration to be probable, and legally enforceable rights and obligations have been created; this generally occurs 30 days prior to the estimated ship date. As is customary in the semiconductor industry, the Company offers price concessions and stock rotation rights to many of its distributors. As these are forms of variable consideration, the Company estimates the amount of consideration to which they will be entitled using recent historical data and applying the expected value method. Usually, there is only a single performance obligation in the contract, and therefore the entire transaction price is allocated to the single performance obligation. After the transaction price has been allocated, the Company recognizes revenue when the performance obligation is satisfied. Substantially all of the revenue generated from contracts with distributors is recognized at the time risk and title of the inventory transfers to the distributor. Sales to direct customers are generally governed by a purchase order and an order acknowledgment. Sales to direct customers usually do not meet the definition of a contract until shipment of the product occurs. Generally, the transaction price associated with contracts with direct customers is set at the standalone selling price and is not variable. Usually, there is only a single performance obligation in the contract, and therefore the entire transaction price is allocated to the single performance obligation. After the transaction price has been allocated, the Company recognizes revenue when the performance obligation is satisfied. Substantially all of the revenue generated from contracts with direct customers is recognized at the time risk and title of the inventory transfers to the customer. Revenue generated from licensees is governed by licensing agreements. The Company's primary performance obligation related to these agreements is to provide the licensee the right to use the intellectual property. The final transaction price is determined by multiplying the usage of the license by the royalty, which is fixed in the licensing agreement. Revenue is recognized as usage of the license occurs. F-12 Table of Contents Product Warranty The Company typically warrants its products against defects in materials and workmanship and non-conformance to specifications for 12 to 24 months. The majority of the Company's product warranty claims are settled through the return of the defective product and the shipment of replacement product. Warranty returns are included within the Company's allowance for returns, which is based on historical return rates. Actual future returns could differ from the allowance established. In addition, the Company accrues a liability for specific warranty costs expected to be settled other than through product return and replacement, if a loss is probable and can be reasonably estimated. Product warranty expenses were immaterial for the fiscal years ended March 31, 2021, 2020, and 2019. Advertising Costs The Company expenses all advertising costs as incurred. Advertising costs were immaterial for the fiscal years ended March 31, 2021, 2020 and 2019. Research and Development Research and development costs are expensed as incurred. Assets purchased to support the Company's ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their estimated useful lives. Renewals or extensions of these assets are expensed as incurred. Research and development expenses include expenditures for labor, share-based payments, depreciation, masks, prototype wafers, and expenses for development of process technologies, new packages, and software to support new products and design environments. Restructuring Charges Restructuring charges are included within special charges and other, net in the consolidated statements of income and are primarily comprised of employee separation costs, asset impairments, contract exit costs and costs of facility consolidation and closure, including the related gains or losses associated with the sale of owned facilities. Employee separation costs includes one-time termination benefits that are recognized as a liability at estimated fair value, at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Ongoing termination benefits are recognized as a liability at estimated fair value when the amount of such benefits are probable and reasonably estimable. Contract exit costs includes contract termination fees and ROU asset impairments recognized on the cease-use date of leased facilities. A liability for contract termination fees is recognized in the period in which the Company terminates the contract. Foreign Currency Translation Substantially all of the Company's foreign subsidiaries are considered to be extensions of the U.S. company and any translation gains and losses related to these subsidiaries are included in other (loss) income, net in the consolidated statements of income. As the U.S. dollar is utilized as the functional currency, gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiaries' functional currency) are also included in income. For fiscal 2021, 2020 and 2019, certain foreign subsidiaries acquired as part of the Company's acquisition activities had the local currency as the functional currency. For subsidiaries acquired as part of the Company's acquisition of Microsemi, the U.S. dollar will become the functional currency for such entities once integrated into the Company's legal structure and intercompany agreements are executed. Income Taxes As part of the process of preparing its consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves estimating its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the Company's consolidated balance sheets. The Company must then assess the likelihood that its deferred tax assets will be recovered from future taxable income within the relevant jurisdiction and to the extent the Company believes that recovery is not likely, it must establish a valuation allowance. The Company provided valuation allowances for certain of its deferred tax assets where it is more likely than not that some portion, or all of such assets, will not be realized. F-13 Table of Contents Various taxing authorities in the U.S. and other countries in which the Company does business scrutinize the tax structures employed by businesses. Companies of a similar size and complexity as the Company are regularly audited by the taxing authorities in the jurisdictions in which they conduct significant operations. During the fiscal year ended March 31, 2021, various jurisdictions finalized their audits. The close of these audits did not have an adverse impact on the financial statements. The Company is currently being audited by the tax authorities in the United States and various foreign jurisdictions. At this time, the Company does not know what the outcome of these audits will be. The Company records benefits for uncertain tax positions based on an assessment of whether it is more likely than not that the tax positions will be sustained based on their technical merits under currently enacted law. If this threshold is not met, no tax benefit of the uncertain tax position is recognized. If the threshold is met, the Company recognizes the largest amount of the tax benefit that is more than 50% likely to be realized upon ultimate settlement. The accounting model related to the valuation of uncertain tax positions requires the Company to presume that the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information and that each tax position will be evaluated without consideration of the possibility of offset or aggregation with other positions. The recognition requirement for the liability exists even if the Company believes the possibility of examination by a taxing authority or discovery of the related risk matters is remote or where it has a long history of the taxing authority not performing an exam or overlooking an issue. The Company will record an adjustment to a previously recorded position if new information or facts related to the position are identified in a subsequent period. All adjustments to the positions are recorded through the income statement. Generally, adjustments will be recorded in periods subsequent to the initial recognition if the taxing authority has completed an audit of the period or if the statute of limitation expires. Due to the inherent uncertainty in the estimation process and in consideration of the criteria of the accounting model, amounts recognized in the financial statements in periods subsequent to the initial recognition may significantly differ from the estimated exposure of the position under the accounting model. On December 22, 2017, the TCJA was enacted into law and established a new provision designed to tax low-taxed income of foreign subsidiaries known as global intangible low-taxed income (GILTI). The FASB allows taxpayers to make an accounting policy election of either (i) treating taxes due on GILTI inclusions as a current-period expense when incurred or (ii) recognizing deferred taxes for temporary basis differences that are expected to reverse as GILTI in future years. The Company has made a policy choice to include taxes due on the future GILTI inclusion in taxable income when incurred. On March 11, 2021, the American Rescue Plan Act of 2021 (ARPA) was enacted into law in the U.S. The ARPA, among other things, includes provisions to extend the $1.0 million limitation on deductions for compensation to executive offices to include the eight highest paid individuals rather than the top three in addition to the Chief Executive Officer and Chief Financial Officer, extends the period for which companies may claim an employee retention credit and repeals the election under which a U.S. affiliated group may allocate interest expense on a worldwide basis. The Company continues to examine the impacts the ARPA may have on its business. Cash and Cash Equivalents All highly liquid investments, including marketable securities with an original maturity to the Company of three months or less when acquired are considered to be cash equivalents. Derivative Instruments Derivative instruments are required to be recorded at fair value as either assets or liabilities in the Company's consolidated balance sheet. The Company's accounting policies for derivative instruments depends on whether the instrument has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. The Company does not apply hedge accounting to foreign currency forward contracts. Gains and losses associated with currency rate changes on forward contracts are recorded currently in income. These gains and losses have been immaterial to the Company's financial statements. The Company is exposed to fluctuations in prices for energy that it consumes, particularly electricity and natural gas. The Company also enters into variable-priced contracts for some purchases of electricity and natural gas, on an index basis. The Company seeks, or may seek, to partially mitigate these exposures through fixed-price contracts. These contracts meet the characteristics of derivative instruments, but generally qualify for the “normal purchases or normal sales” exception under authoritative guidance and require no mark-to-market adjustment. F-14 Table of Contents Inventories Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method. The Company writes down its inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable. In estimating reserves for obsolescence, the Company primarily evaluates estimates of demand over a 12-month period and provides reserves for inventory on hand in excess of the estimated 12-month demand. Estimates for projected 12-month demand are generally based on the average shipments of the prior three-month period, which are then annualized to adjust for any potential seasonality in the Company's business. The estimated 12-month demand is compared to the Company's most recently developed sales forecast to further reconcile the 12-month demand estimate. Management reviews and adjusts the estimates as appropriate based on specific situations. For example, demand can be adjusted up for new products for which historic sales are not representative of future demand. Alternatively, demand can be adjusted down to the extent any existing products are being replaced or discontinued. In periods where the Company's production levels are substantially below normal operating capacity, unabsorbed overhead production costs associated with the reduced production levels of the Company's manufacturing facilities are charged directly to cost of sales. Property, Plant and Equipment Property, plant and equipment are stated at cost. Major renewals and improvements are capitalized, while maintenance and repairs are expensed when incurred. The Company's property and equipment accounting policies incorporate estimates, assumptions and judgments relative to the useful lives of its property and equipment. Depreciation is provided for assets placed in service on a straight-line basis over the estimated useful lives of the relative assets, which range from 10 to 30 years for buildings and building improvements and 5 to 7 years for machinery and equipment. The Company evaluates the carrying value of its property and equipment when events or changes in circumstances indicate that the carrying value of such assets may be impaired. Asset impairment evaluations are, by nature, highly subjective. Leases The Company determines if an arrangement is a lease at its inception. Operating lease arrangements are comprised primarily of real estate and equipment agreements for which the ROU assets are included in other assets and the corresponding lease liabilities, depending on their maturity, are included in accrued expenses and other current liabilities or other long-term liabilities in the condensed consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. As the Company's leases generally do not provide an implicit rate, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease payments. Lease expense for these leases is recognized on a straight-line basis over the lease term. The Company accounts for the lease and non-lease components as a single lease component. Convertible Debt Upon issuance, the Company separately accounts for the liability and equity components of its Convertible Debt by estimating the fair values of the i) liability component without a conversion feature and ii) the conversion feature. This results in a bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in the Company's consolidated statements of income. Upon settlement of Convertible Debt instruments, the Company allocates the total consideration between the liability and equity components based on the fair value of the liability component without the conversion feature. The difference between the consideration allocated to the liability component and the net carrying value of the liability component is recognized as an extinguishment loss or gain. The remaining settlement consideration is allocated to the equity component and recognized as a F-15 Table of Contents reduction of additional paid-in capital in the Company's consolidated balance sheets. In addition, if the terms of the settlement are different from the contractual terms of the original instrument, the Company recognizes an inducement loss, which is measured as the difference between the fair value of the original terms of the instrument and the fair value of the settlement terms. Determining the fair value of the liability component without the conversion feature upon issuance and settlement involves estimating the equivalent borrowing rate for a similar non-convertible instrument. Given the values of these transactions, fair value estimates are sensitive to changes in the equivalent borrowing rate conclusions. The measurement of the equivalent borrowing rate requires that the Company make estimates of volatility and credit spreads to align observable market inputs with the instrument being valued. Lastly, the Company includes the dilutive effect of the shares of its common stock issuable upon conversion of the outstanding Convertible Debt in its diluted income per share calculation regardless of whether the market price triggers or other contingent conversion features have been met. The Company applies the treasury stock method as it has the intent and has adopted an accounting policy to settle the principal amount of the Convertible Debt in cash. This method results in incremental dilutive shares when the average fair value of the Company's common stock for a reporting period exceeds the conversion prices per share and adjusts as dividends are recorded in the future. Defined Benefit Pension Plans The Company maintains defined benefit pension plans, covering certain of its foreign employees. For financial reporting purposes, net periodic pension costs and pension obligations are determined based upon a number of actuarial assumptions, including discount rates for plan obligations, and assumed rates of compensation increases for employees participating in plans. These assumptions are based upon management's judgment and consultation with actuaries, considering all known trends and uncertainties. Contingencies In the ordinary course of business, the Company is exposed to various liabilities as a result of contracts, product liability, customer claims and other matters. Additionally, the Company is involved in a limited number of legal actions, both as plaintiff and defendant. Consequently, the Company could incur uninsured liability in any of those actions. The Company also periodically receives notifications from various third parties alleging infringement of patents or other intellectual property rights, or from customers requesting reimbursement for various costs. With respect to pending legal actions to which the Company is a party and other claims, although the outcomes are generally not determinable, the Company believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position, cash flows or results of operations. Litigation and disputes relating to the semiconductor industry are not uncommon, and the Company is, from time to time, subject to such litigation and disputes. As a result, no assurances can be given with respect to the extent or outcome of any such litigation or disputes in the future. The Company accrues for claims and contingencies when losses become probable and reasonably estimable. As of the end of each applicable reporting period, the Company reviews each of its matters and, where it is probable that a liability has been or will be incurred, it accrues for all probable and reasonably estimable losses. Where the Company can reasonably estimate a range of losses it may incur regarding such a matter, it records an accrual for the amount within the range that constitutes its best estimate. If the Company can reasonably estimate a range but no amount within the range appears to be a better estimate than any other, it uses the amount that is the low end of such range. Business Combinations All of the Company's business combinations are accounted for at fair value under the acquisition method of accounting. Under the acquisition method of accounting, (i) acquisition-related costs, except for those costs incurred to issue debt or equity securities, will be expensed in the period incurred; (ii) non-controlling interests will be valued at fair value at the acquisition date; (iii) in-process research and development will be recorded at fair value as an intangible asset at the acquisition date and amortized once the technology reaches technological feasibility; (iv) restructuring costs associated with a business combination will be expensed subsequent to the acquisition date; and (v) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will be recognized through income tax expense. The aggregate amount of consideration paid by the Company is allocated to net tangible assets and intangible assets based on their estimated fair values as of the acquisition date. The excess of the purchase price over the value of the net tangible assets and intangible assets is recorded to goodwill. The measurement of fair value of assets acquired and liabilities assumed requires significant judgment. The valuation of intangible assets, in particular, requires that the Company use valuation techniques such as the income F-16 Table of Contents approach. The income approach includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires the following significant estimates: revenue, expenses, capital spending and other costs, and discount rates based on the respective risks of the cash flows. Goodwill and Other Intangible Assets The Company's intangible assets include goodwill and other intangible assets. Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Other intangible assets include existing technologies, core and developed technology, in-process research and development, trademarks and trade names, distribution rights and customer-related intangibles. In-process research and development is capitalized until such time as the related projects are completed or abandoned at which time the capitalized amounts will begin to be amortized or written off. Indefinite-lived intangible assets consist of goodwill and in-process research and development intangible assets that have not yet been placed in service. All other intangible assets are definite-lived intangible assets, including in-process research and development assets that have been placed in service, and are amortized over their respective estimated lives, ranging from 1 to 15 years. The Company is required to perform an impairment review of indefinite-lived intangible assets, including goodwill annually, and more frequently under certain circumstances. Indefinite-lived intangible assets are subjected to this annual impairment test during the fourth quarter of the Company's fiscal year. The Company engages primarily in the development, manufacture and sale of semiconductor products as well as technology licensing. As a result, the Company concluded there are two reporting units, semiconductor products and technology licensing. The Company's impairment evaluation consists of a qualitative impairment assessment in which management evaluates whether it is more likely than not that the indefinite-lived intangible assets are impaired. If it is determined that it is more likely than not, the Company performs a quantitative impairment test, which compares the fair value of the reporting unit or indefinite-lived intangible asset to its carrying value. If the Company determines through the impairment process that the indefinite-lived intangible asset has been impaired, the Company will record the impairment charge in its results of operation. Through March 31, 2021, the Company has not had impaired goodwill. In the event that facts and circumstances indicate definite-lived intangible assets may be impaired, the Company evaluates the recoverability and estimated useful lives of such assets. If such indicators are present, recoverability is evaluated based on whether the sum of the estimated undiscounted cash flows attributable to the asset (group) in question is less than their carrying value. If less, the Company measures the fair value of the asset (group) and recognizes an impairment loss if the carrying amount of the assets exceeds their respective fair values. Impairment of Long-Lived Assets The Company assesses whether indicators of impairment of long-lived assets are present. If such indicators are present, the Company determines whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If less, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals or other methods. If the assets determined to be impaired are to be held and used, the Company recognizes an impairment loss through a charge to operating results to the extent the present value of anticipated net cash flows attributable to the asset are less than the asset's carrying value. The Company would depreciate the remaining value over the remaining estimated useful life of the asset. Share-Based Compensation The Company has equity incentive plans under which non-qualified stock options and RSUs have been granted to employees and non-employee members of the Board of Directors. The Company uses RSUs as its primary equity incentive compensation instrument for employees. The Company also has employee stock purchase plans for eligible employees. Share- based compensation cost is measured on the grant date based on the fair market value of the Company’s common stock discounted for expected future dividends and is recognized as expense on a straight-line basis over the requisite service periods. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate or increase any remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that the Company grants additional equity awards to employees or it assumes unvested equity awards in connection with acquisitions. F-17 Table of Contents Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. Concentrations of credit risk with respect to accounts receivable are generally not significant due to the diversity of the Company's customers and geographic sales areas. The Company sells its products primarily to OEMs and distributors in the Americas, Europe and Asia. The Company performs ongoing credit evaluations of its customers' financial condition and, as deemed necessary, may require collateral, primarily letters of credit. Distributor advances in the consolidated balance sheets, totaled $104.8 million and $141.0 million at March 31, 2021 and March 31, 2020, respectively. On sales to distributors, the Company's payment terms generally require the distributor to settle amounts owed to the Company for an amount in excess of their ultimate cost. The Company's sales price to its distributors may be higher than the amount that the distributors will ultimately owe the Company because distributors often negotiate price reductions after purchasing the products from the Company and such reductions are often significant. It is the Company's practice to apply these negotiated price discounts to future purchases, requiring the distributor to settle receivable balances, on a current basis, generally within 30 days, for amounts originally invoiced. This practice has an adverse impact on the working capital of the Company's distributors. As such, the Company has entered into agreements with certain distributors whereby it advances cash to the distributors to reduce the distributors' working capital requirements. These advances are reconciled at least on a quarterly basis and are estimated based on the amount of ending inventory as reported by the distributor multiplied by a negotiated percentage. Such advances have no impact on revenue recognition or the Company's consolidated statements of income. The terms of these advances are set forth in binding legal agreements and are unsecured, bear no interest on unsettled balances and are due upon demand. The agreements governing these advances can be canceled by the Company at any time. Use of Estimates The Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare its consolidated financial statements in conformity with U.S. GAAP. Actual results could differ from those estimates. Business Segments Operating segments are components of an enterprise about which separate financial information is regularly reviewed by the chief operating decision maker (CODM) to assess the performance of the component and make decisions about the resources to be allocated to the component. The Company's President and Chief Executive Officer has been identified as the CODM. Based on the Company's structure and manner in which the Company is managed and decisions are made, the Company's business is made up of two operating segments, semiconductor products and technology licensing. In the semiconductor products segment, the Company designs, develops, manufactures and markets microcontrollers, development tools and analog, interface, mixed-signal, timing, wired and wireless connectivity devices, and memory products. Under the leadership of the CODM, the Company is structured and organized around standardized roles and responsibilities based on product groups and functional activities. The Company's product groups are responsible for product research, design and development. The Company's functional activities include sales, marketing, manufacturing, information technology, human resources, legal and finance. The Company's product groups have similar products, production processes, types of customers and methods for distribution. In addition, the tools and technologies used in the design and manufacture of the Company's products are shared among the various product groups. The Company's product group leaders, under the direction of the CODM, define the product roadmaps and team with sales personnel to achieve design wins and revenue and other performance targets. Product group leaders also interact with manufacturing and operational personnel who are responsible for the production, prioritization and planning of the Company's manufacturing capabilities to help ensure the efficiency of the Company's operations and fulfillment of customer requirements. This centralized structure supports a global operating strategy in which the CODM assesses performance and allocates resources based on the Company's consolidated results. Subsequent Events The Company evaluated events after March 31, 2021, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements. F-18 Table of Contents Recently Adopted Accounting Pronouncements The Company adopted the following Accounting Standards Updates in fiscal 2021, none of which had a material impact on its consolidated financial statements. Accounting Standards Updates ASU 2020-04 ASU 2018-15 ASU 2018-13 ASU 2017-04 ASU 2016-13 Description Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Recently Issued Accounting Pronouncements Not Yet Adopted In August 2020, the FASB issued ASU 2020-06-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity, which simplifies the guidance for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 requires the application of the if- converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company expects the primary impacts of this new standard will be to increase the carrying value of its Convertible Debt and reduce its reported interest expense. In addition, the Company will be required to use the if-converted method for calculating diluted earnings per share. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance enhances and simplifies various aspects of the income tax accounting, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. The amendments are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. Note 2. Business Acquisitions Acquisition of Microsemi On May 29, 2018, the Company completed its acquisition of Microsemi Corporation, a publicly traded company headquartered in Aliso Viejo, California. The Company paid an aggregate of approximately $8.19 billion in cash to the stockholders of Microsemi. The total consideration transferred in the acquisition, including approximately $53.9 million of non-cash consideration for the exchange of certain share-based payment awards of Microsemi for stock awards of the Company, was approximately $8.24 billion. In addition to the consideration transferred, the Company recognized in its consolidated financial statements $3.23 billion in liabilities of Microsemi consisting of debt, taxes payable and deferred, restructuring, and contingent and other liabilities of which $2.06 billion of existing debt was paid off. The Company financed the purchase price using approximately $8.10 billion of borrowings consisting of $3.10 billion under its amended and restated Revolving Credit Facility, $3.00 billion under its Term Loan Facility provided under the Company's amended and restated Credit Agreement, and $2.00 billion in newly issued senior secured notes. The Company incurred $22.0 million in acquisition costs related to the acquisition. As a result of the acquisition, Microsemi became a wholly owned subsidiary of the Company. Microsemi offers a comprehensive portfolio of semiconductor and system solutions for aerospace and defense, F-19 Table of Contents communications, data center and industrial markets. The Company's primary reason for this acquisition was to expand the Company's range of solutions, products and capabilities by extending its served available market. The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer, and the operating results of Microsemi have been included in the Company's consolidated financial statements as of the closing date of the acquisition. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to Microsemi's net tangible assets and intangible assets based on their estimated fair values as of May 29, 2018. The excess of the purchase price over the value of the net tangible assets and intangible assets was recorded to goodwill. The factors contributing to the recognition of goodwill were based upon the Company's conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. The goodwill has been allocated to the Company's semiconductor products reporting segment. None of the goodwill related to the Microsemi acquisition is deductible for tax purposes. The Company retained independent third-party appraisers to assist management in its valuation of the acquired assets and liabilities. The table below represents the allocation of the purchase price to the net assets acquired based on their estimated fair values, as well as the associated estimated useful lives of the acquired intangible assets (in millions). Assets Acquired Cash and cash equivalents Accounts receivable Inventories Other current assets Property, plant and equipment Goodwill Purchased intangible assets Long-term deferred tax assets Other assets Total assets acquired Accounts payable Other current liabilities Long-term debt Deferred tax liabilities Long-term income tax payable Other long-term liabilities Total liabilities assumed Purchase price allocated Purchased Intangible Assets Core and developed technology In-process research and development Customer-related Backlog Other Total purchased intangible assets $ $ $ $ 340.0 215.6 576.2 85.2 201.5 4,364.9 5,634.5 5.9 53.3 11,477.1 (233.8) (149.3) (2,056.9) (565.1) (177.7) (49.8) (3,232.6) 8,244.5 May 29, 2018 (in millions) 4,569.1 847.1 200.2 12.3 5.8 5,634.5 Liabilities Assumed Weighted Average Useful Life (in years) 15 — 12 1 4 Purchased intangible assets include core and developed technology, in-process research and development, customer-related intangibles, acquisition-date backlog and other intangible assets. The estimated fair values of the core and developed technology and in-process research and development were determined based on the present value of the expected cash flows to be generated by the respective existing technology or future technology. The core and developed technology intangible assets are being amortized in a manner based on the expected cash flows used in the initial determination of fair value. F-20 Table of Contents In-process research and development is capitalized until such time as the related projects are completed or abandoned at which time the capitalized amounts will begin to be amortized or written off. Customer-related intangible assets consist of Microsemi's contractual relationships and customer loyalty related to its distributor and end-customer relationships. The fair values of the customer-related intangibles were determined using the distributor method, a form of the income approach based on distributor margin and expected attrition and revenue growth for Microsemi's existing customers as of the acquisition date. Customer relationships are being amortized in a manner based on the estimated cash flows associated with the existing customers and anticipated retention rates. Backlog relates to the value of orders not yet shipped by Microsemi at the acquisition date, and the fair values were determined based on the estimated profit associated with those orders. Backlog related assets have a one year useful life and are being amortized on a straight-line basis over that period. The total weighted average amortization period of intangible assets acquired as a result of the Microsemi transaction is 13 years. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Thus, approximately $856.7 million was established as a net deferred tax liability for the future amortization of the intangible assets. Note 3. Special Charges and Other, Net The following table summarizes activity included in the "special charges and other, net" caption on the Company's consolidated statements of income (in millions): Restructuring Employee separation costs Gain on sale of assets Impairment charges Contract exit costs Wafer fabrication restructuring Other Legal contingencies Contingent consideration revaluation Total Fiscal Year Ended March 31, 2020 2019 2021 $ $ (1.3) $ (5.8) — (1.6) 15.0 0.1 0.2 (4.9) 1.7 $ 6.0 $ (1.5) 0.7 5.2 18.0 2.6 15.7 — 46.7 $ 65.3 — 3.6 (4.7) — (0.3) (30.2) — 33.7 The Company continuously evaluates its existing operations in an attempt to identify and realize cost savings opportunities and operational efficiencies. This same approach is applied to businesses that are acquired by the Company and often the operating models of acquired companies are not as efficient as the Company's operating model which enables the Company to realize significant savings and efficiencies. As a result, following an acquisition, the Company will from time to time incur restructuring expenses; however, the Company is often not able to estimate the timing or amount of such costs in advance of the period in which they occur. The primary reason for this is that the Company regularly reviews and evaluates each position, contract and expense against the Company's strategic objectives, long-term operating targets and other operational priorities. Decisions related to restructuring activities are made on a "rolling basis" during the course of the integration of an acquisition whereby department managers, executives and other leaders work together to evaluate each of these expenses and make recommendations. As a result of this approach, at the time of an acquisition, the Company is not able to estimate the future amount of expected employee separation or exit costs that it will incur in connection with its restructuring activities. F-21 Table of Contents During the fiscal year ended March 31, 2021, the Company incurred net costs of $15.0 million associated with restructuring certain of its wafer fabrication operations consisting of $8.0 million to re-purpose its Colorado Springs (Fab 5) facility and $7.0 million associated with restructuring other acquired operations compared to net costs of $18.0 million during the fiscal year ended March 31, 2020 to re-purpose its Fab 5 facility, primarily consisting of $8.2 million in contract exit costs, $6.6 million in other relocation costs and $2.5 million in asset impairment charges. These wafer fabrication restructuring efforts were substantially completed as of March 31, 2021. The Company's other restructuring activities during the fiscal years ended March 31, 2021, March 31, 2020 and March 31, 2019 were primarily related to the Company's most recent business acquisitions, and resulted from workforce, property and other operating expense rationalizations as well as combining product roadmaps and manufacturing operations. The impairment charges in the fiscal year ended March 31, 2019 were primarily recognized as a result of writing off intangible assets purchased from Microsemi prior to the close of the acquisition and other intangible assets that were impaired as a result of changes in the combined product roadmaps after the acquisition that affected the use and life of the assets. Additional costs will be incurred in the future as additional synergies or operational efficiencies are identified in connection with the Microsemi transaction, other previous acquisitions, or the restructuring of wafer fabrication operations. The Company is not able to estimate the amount of other such future expenses at this time. During the fiscal year ended March 31, 2020, the Company incurred $15.7 million of net charges related to legal settlements, for which the majority of the cash settlement occurred early in the fiscal year ended March 31, 2021. All of the Company's restructuring activities occurred in its semiconductor products segment. The Company incurred $71.2 million in costs since the start of the fiscal year ended March 31, 2018 in connection with employee separation activities net of $1.3 million in credits during the fiscal year ended March 31, 2021 and $6.0 million and $65.3 million were incurred during the fiscal years ended March 31, 2020 and 2019, respectively. The Company could incur future expenses as additional synergies or operational efficiencies are identified. Beyond what is already accrued, the Company is not able to estimate future expenses, if any, to be incurred in employee separation costs. The Company has incurred $0.4 million in net credits in connection with contract exit activities since the start of the fiscal year ended March 31, 2018 which includes net credits of $1.6 million and $4.7 million for the fiscal years ended March 31, 2021 and March 31, 2019, respectively, compared to expense of $5.2 million for the fiscal year ended March 31, 2020. The liability for restructuring and other exit costs of $15.9 million is included in accrued liabilities and other long-term liabilities, on the Company's consolidated balance sheets as of March 31, 2021. Note 4. Net Sales The following table represents the Company's net sales by product line (in millions): Microcontrollers Analog Other Total net sales Fiscal Year Ended March 31, 2020 2019 2021 $ $ 2,961.0 $ 1,519.8 957.6 5,438.4 $ 2,817.9 $ 1,511.1 945.2 5,274.2 $ 2,921.9 1,530.7 896.9 5,349.5 The product lines listed above are included entirely in the Company's semiconductor product segment with the exception of the other product line, which includes products from both the semiconductor product and technology licensing segments. The following table represents the Company's net sales by contract type (in millions): Distributors Direct customers Licensees Total net sales Fiscal Year Ended March 31, 2020 2019 2021 $ $ 2,737.4 $ 2,598.1 102.9 5,438.4 $ 2,626.9 $ 2,550.4 96.9 5,274.2 $ 2,719.1 2,498.0 132.4 5,349.5 Distributors are customers that buy products with the intention of reselling them. Distributors generally have a distributor agreement with the Company to govern the terms of the relationship. Direct customers are non-distributor customers, which generally do not have a master sales agreement with the Company. The Company's direct customers primarily consist of OEMs and, to a lesser extent, contract manufacturers. Licensees are customers of the Company's technology licensing segment, which F-22 Table of Contents include purchasers of intellectual property and customers that have licensing agreements to use the Company's SuperFlash® embedded flash and Smartbits® one time programmable NVM technologies. All of the contract types listed in the table above are included in the Company's semiconductor product segment with the exception of licenses, which is included in the technology licensing segment. Substantially all of the Company's net sales are recognized from contracts with customers. Semiconductor Product Segment For contracts related to the purchase of semiconductor products, the Company satisfies its performance obligation when control of the ordered product transfers to the customer. The timing of the transfer of control depends on the agreed upon shipping terms with the customer, but generally occurs upon shipment, which is when physical possession of the product has been transferred and legal title of the product transfers to the customer. Payment is generally due within 30 days of the ship date. Payment is generally collected after the Company satisfies its performance obligation, therefore contract liabilities are uncommon. Also, the Company usually does not record contract assets because the Company has an unconditional right to payment upon satisfaction of the performance obligation, and therefore, a receivable is more commonly recorded than a contract asset. Refer to Note 10 for the opening and closing balances of the Company's receivables. Generally, there is only a single performance obligation in the Company's contracts with customers for semiconductor products; as such, the entire transaction price is allocated to the single performance obligation and allocation of the transaction price to individual performance obligations is not necessary. The consideration received from customers is fixed, with the exception of consideration from certain distributors. Certain of the Company's distributors are granted price concessions and return rights, which result in variable consideration. The amount of revenue recognized for sales to these certain distributors is adjusted for estimates of the price concessions and return rights that are expected to be claimed. These estimates are based on the recent history of price concessions and stock rotations. Technology Licensing Segment The technology licensing segment includes sales and licensing of the Company's intellectual property. For contracts related to the sale of the Company's intellectual property, the Company satisfies its performance obligation and recognizes revenue when control of the intellectual property transfers to the customer. For contracts related to the licensing of the Company's technology, the Company satisfies its performance obligation and recognizes revenue as usage of the license occurs. The transaction price is fixed by the license agreement. Payment is collected after the Company satisfies its performance obligation, and therefore no contract liabilities are recorded. The Company does not record contract assets due to the fact that the Company has an unconditional right to payment upon satisfaction of the performance obligation, and therefore, the Company recognizes a receivable instead of a contract asset. Refer to Note 10 for the opening and closing balances of the Company's receivables. Note 5. Geographic and Segment Information The Company's reportable segments are semiconductor products and technology licensing. The Company does not allocate operating expenses, interest income, interest expense, other income or expense, or provision for or benefit from income taxes to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance. Additionally, the Company does not allocate assets to segments for internal reporting purposes as it does not manage its segments by such metrics. The following table represents net sales and gross profit for each segment (in millions): 2021 Fiscal Year Ended March 31, 2020 2019 Net Sales Gross Profit Net Sales Gross Profit Net Sales Semiconductor products Technology licensing Total $ $ 5,335.5 $ 102.9 5,438.4 $ 3,275.9 $ 102.9 3,378.8 $ 5,177.3 $ 96.9 5,274.2 $ 3,145.2 $ 96.9 3,242.1 $ 5,217.1 $ 132.4 5,349.5 $ Gross Profit 2,798.9 132.4 2,931.3 The Company sells its products to distributors and OEMs in a broad range of market segments, performs on-going credit evaluations of its customers and, as deemed necessary, may require collateral, primarily letters of credit. The Company's operations outside the U.S. consist of product assembly and final test facilities in Thailand, and sales and support centers and F-23 Table of Contents design centers in certain foreign countries. Domestic operations are responsible for the design, development and wafer fabrication of products, as well as the coordination of production planning and shipping to meet worldwide customer commitments. The Company's Thailand assembly and test facility is reimbursed in relation to value added with respect to assembly and test operations and other functions performed, and certain foreign sales offices receive compensation for sales within their territory. Accordingly, for financial statement purposes, it is not meaningful to segregate sales or operating profits for the assembly and test and foreign sales office operations. Identifiable long-lived assets (consisting of property, plant and equipment net of accumulated amortization and ROU assets) by geographic area are as follows (in millions): United States Thailand Various other countries Total long-lived assets March 31, 2021 2020 $ $ 516.6 $ 178.1 314.3 1,009.0 $ 515.0 174.4 306.2 995.6 Sales to unaffiliated customers located outside the U.S., primarily in Asia and Europe, aggregated approximately 77%, 78% and 80% of consolidated net sales for fiscal 2021, fiscal 2020 and fiscal 2019, respectively. Sales to customers in Europe represented approximately 19%, 22% and 23% of consolidated net sales for fiscal 2021, fiscal 2020 and fiscal 2019, respectively. Sales to customers in Asia represented approximately 55% of consolidated net sales for fiscal 2021 and approximately 52% of consolidated net sales for each of fiscal 2020 and 2019. Within Asia, sales into China represented approximately 22%, 21% and 22% of consolidated net sales for fiscal 2021, 2020 and 2019, respectively. Sales into Taiwan represented approximately 16%, 15% and 13% of consolidated net sales for fiscal 2021, 2020 and 2019, respectively. Sales into any other individual foreign country did not exceed 10% of the Company's net sales for any of the three years presented. With the exception of Arrow Electronics, the Company's largest distributor, which accounted for 10% of net sales in fiscal 2020 and fiscal 2019, no other distributor or end customer accounted for more than 10% of net sales in fiscal 2021, fiscal 2020 or fiscal 2019. Note 6. Net Income Per Common Share The following table sets forth the computation of basic and diluted net income per common share (in millions, except per share amounts): Net income Basic weighted average common shares outstanding Dilutive effect of stock options and RSUs Dilutive effect of 2015 Senior Convertible Debt Dilutive effect of 2017 Senior Convertible Debt Dilutive effect of 2020 Senior Convertible Debt Dilutive effect of 2017 Junior Convertible Debt Diluted weighted average common shares outstanding Basic net income per common share Diluted net income per common share Fiscal Year Ended March 31, 2020 2019 2021 349.4 $ 259.6 3.5 4.7 1.7 — 1.1 270.6 1.35 $ 1.29 $ 570.6 $ 238.9 3.4 13.7 0.1 — 0.1 256.2 2.39 $ 2.23 $ 355.9 236.2 3.8 9.9 — — — 249.9 1.51 1.42 $ $ $ The Company computed basic net income per common share based on the weighted average number of common shares outstanding during the period. The Company computed diluted net income per common share based on the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. Potentially dilutive common shares from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding RSUs. Weighted average common shares exclude the effect of option shares which are not dilutive. There were no anti-dilutive option shares for each of the fiscal years ended March 31, 2021, 2020 and 2019. F-24 Table of Contents The Company's Convertible Debt has no impact on diluted net income per common share unless the average price of the Company's common stock exceeds the conversion price because the Company intends to settle the principal amount of the Convertible Debt in cash upon conversion. Prior to conversion, the Company will include, in the diluted net income per common share calculation, the effect of the additional shares that may be issued when the Company's common stock price exceeds the conversion price using the treasury stock method. The following is the weighted average conversion price per share used in calculating the dilutive effect (see Note 7 for details on the Convertible Debt): 2015 Senior Convertible Debt 2017 Senior Convertible Debt 2020 Senior Convertible Debt 2017 Junior Convertible Debt Note 7. Debt Fiscal Year Ended March 31, 2020 2019 2021 $ $ $ $ 60.90 $ 94.96 $ 186.86 $ 93.30 $ 61.80 $ 96.37 $ — $ 94.68 $ 62.86 98.03 — 96.31 Debt obligations included in the consolidated balance sheets consisted of the following (in millions): Coupon Interest Rate Effective Interest Rate Fair Value of Liability Component at Issuance (1) March 31, 2021 2020 3.922% 4.333% 2.670% 0.972% Senior Secured Indebtedness Revolving Credit Facility Term Loan Facility Bridge Loan Facility 3.922% 2021 Notes 4.333% 2023 Notes 2.670% 2023 Notes 0.972% 2024 Notes Senior Unsecured Indebtedness 4.250% 2025 Notes Total Senior Indebtedness Senior Subordinated Convertible Debt - Principal Outstanding 2015 Senior Convertible Debt 2017 Senior Convertible Debt 2020 Senior Convertible Debt Junior Subordinated Convertible Debt - Principal Outstanding 2017 Junior Convertible Debt Total Convertible Debt 1.625% 1.625% 0.125% 4.250% 2.250% Gross long-term debt including current maturities Less: Debt discount (2) Less: Debt issuance costs (3) Net long-term debt including current maturities Less: Current maturities (4) Net long-term debt 4.5% 4.7% 2.8% 1.1% 4.6% 5.9% 6.0% 5.1% 7.4% $ $ $ $ 120.9 260.9 555.5 64.0 $ 2,346.6 $ — — 1,000.0 1,000.0 1,000.0 1,400.0 1,200.0 7,946.6 141.4 333.3 665.5 122.6 1,262.8 2,388.5 1,723.5 615.0 1,000.0 1,000.0 — — — 6,727.0 1,110.0 2,070.0 — 686.3 3,866.3 9,209.4 (273.0) (32.3) 8,904.1 (1,322.9) 7,581.2 $ 10,593.3 (1,043.2) (67.9) 9,482.2 (608.8) 8,873.4 $ (1) As each of the convertible debt instruments may be settled in cash upon conversion, for accounting purposes, they were bifurcated into a liability component and an equity component. The amount allocated to the equity component is the difference between the principal value of the instrument and the fair value of the liability component at issuance. The resulting debt discount is being amortized to interest expense at the respective effective interest rate over the contractual term of the debt. F-25 Table of Contents (2) The unamortized discount consists of the following (in millions): Bridge Loan Facility 3.922% 2021 Notes 4.333% 2023 Notes 2.670% 2023 Notes 0.972% 2024 Notes 4.250% 2025 Notes 2015 Senior Convertible Debt 2017 Senior Convertible Debt 2020 Senior Convertible Debt 2017 Junior Convertible Debt Total unamortized discount (3) Debt issuance costs consist of the following (in millions): Revolving Credit Facility Term Loan Facility Bridge Loan Facility 3.922% 2021 Notes 4.333% 2023 Notes 2.670% 2023 Notes 0.972% 2024 Notes 4.250% 2025 Notes 2015 Senior Convertible Debt 2017 Senior Convertible Debt 2020 Senior Convertible Debt 2017 Junior Convertible Debt Total debt issuance costs March 31, 2021 2020 — $ (0.3) (2.4) (2.3) (3.8) (12.8) (20.1) (71.3) (101.6) (58.4) (273.0) $ (3.1) (2.1) (3.5) — — — (192.9) (504.2) — (337.4) (1,043.2) March 31, 2021 2020 (10.0) $ — — (0.7) (5.3) (1.3) (2.0) (1.7) (0.7) (1.8) (8.3) (0.5) (32.3) $ (14.6) (14.6) (3.1) (4.8) (7.7) — — — (7.0) (13.0) — (3.1) (67.9) $ $ $ $ (4) As of March 31, 2021, current maturities consist of the liability component of the 2017 Senior Convertible Debt and the 2017 Junior Convertible Debt, and the 3.922% 2021 Notes which are due June 1, 2021. As of March 31, 2020, current maturities included the Bridge Loan Facility. Expected maturities relating to the Company’s debt obligations as of March 31, 2021 are as follows (in millions): Fiscal year ending March 31, 2022 2023 2024 2025 2026 Thereafter Total Expected Maturities $ $ 1,000.0 — 5,746.6 806.9 1,200.0 455.9 9,209.4 Ranking of Convertible Debt - The Convertible Debt are unsecured obligations which are subordinated in right of payment to the amounts outstanding under the Company's Senior Indebtedness. The 2017 Junior Convertible Debt is expressly subordinated in right of payment to any existing and future senior debt of the Company (including the Senior Indebtedness and the Senior Subordinated Convertible Debt) and is structurally subordinated in right of payment to the liabilities of the Company's subsidiaries. The Senior Subordinated Convertible Debt is subordinated to the Senior Indebtedness; ranks senior to the Company's indebtedness that is expressly subordinated in right of payment to it, including the 2017 Junior Convertible Debt; ranks equal in right of payment to any of the Company's unsubordinated indebtedness that does not provide that it is F-26 Table of Contents senior to the Senior Subordinated Convertible Debt; ranks junior in right of payment to any of the Company's secured and unsecured unsubordinated indebtedness to the extent of the value of the assets securing such indebtedness; and is structurally subordinated to all indebtedness and other liabilities of the Company's subsidiaries. Summary of Conversion Features - Each series of Convertible Debt is convertible, subject to certain conditions, into cash, shares of the Company's common stock or a combination thereof, at the Company's election, at specified conversion rates (see table below), adjusted for certain events including the declaration of cash dividends. Except during the three-month period immediately preceding the maturity date of the applicable series of Convertible Debt, each series of Convertible Debt is convertible only upon the occurrence of (i) such time as the closing price of the Company's common stock exceeds the applicable conversion price (see table below) by 130% for 20 days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter or (ii) during the 5 business day period after any 10 consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of notes of a given series for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the applicable conversion rate on each such trading day or (iii) upon the occurrence of certain corporate events specified in the indenture of such series of Convertible Debt. In addition, for each series, with the exception of the 2020 Senior Convertible Debt, if at the time of conversion the applicable price of the Company's common stock exceeds the applicable conversion price at such time, the applicable conversion rate will be increased by up to an additional maximum incremental shares rate, as determined pursuant to a formula specified in the indenture for the applicable series of Convertible Debt, and as adjusted for cash dividends paid since the issuance of such series of Convertible Debt. However, in no event will the applicable conversion rate exceed the applicable maximum conversion rate specified in the indenture for the applicable series of Convertible Debt (see table below). The following table sets forth the applicable conversion rates adjusted for dividends declared since issuance of such series of Convertible Debt and the applicable incremental share factors and maximum conversion rates as adjusted for dividends paid since the applicable issuance date: Dividend adjusted rates as of March 31, 2021 2015 Senior Convertible Debt (1) 2017 Senior Convertible Debt (1) 2020 Senior Convertible Debt (1) 2017 Junior Convertible Debt (1) Conversion Rate Approximate Conversion Price 60.53 94.40 186.84 92.74 Incremental Share Factor Maximum Conversion Rate 8.2599 5.2967 — 5.3914 23.1276 15.0957 7.4929 15.0957 16.5197 $ 10.5934 $ 5.3521 $ 10.7826 $ (1) As of March 31, 2021, the 2020 Senior Convertible Debt was not convertible. As of March 31, 2021, the holders of each of the 2015 Senior Convertible Debt, 2017 Senior Convertible Debt, and 2017 Junior Convertible Debt have the right to convert their notes between April 1, 2021 and June 30, 2021 because the Company's common stock price has exceeded the applicable conversion price for such series by 130% for the specified period of time during the quarter ended March 31, 2021. As of March 31, 2021, the adjusted conversion rate for the 2015 Senior Convertible Debt, 2017 Senior Convertible Debt, and 2017 Junior Convertible Debt would be increased to 21.5583 shares of common stock, 12.6689 shares of common stock, and 12.9527 shares of common stock, respectively, per $1,000 principal amount of notes based on the closing price of $155.22 per share of common stock to include an additional maximum incremental share rate per the terms of the applicable indenture. As of March 31, 2021, each of the 2015 Senior Convertible Debt, 2017 Senior Convertible Debt, and 2017 Junior Convertible Debt had a conversion value in excess of par of $331.9 million, $322.2 million, and $123.9 million, respectively. With the exception of the 2020 Senior Convertible Debt, which may be redeemed by the Company on or after November 20, 2022, the Company may not redeem any series of Convertible Debt prior to the relevant maturity date and no sinking fund is provided for any series of Convertible Debt. Under the terms of the applicable indenture, the Company may repurchase any series of Convertible Debt in the open market through privately negotiated exchange offers. Upon the occurrence of a fundamental change, as defined in the applicable indenture of such series of Convertible Debt, holders of such series may require the Company to purchase all or a portion of their Convertible Debt for cash at a price equal to 100% of the principal amount plus any accrued and unpaid interest. F-27 Table of Contents Interest expense consists of the following (in millions): Debt issuance cost amortization Debt discount amortization Interest expense Total interest expense on Senior Indebtedness Debt issuance cost amortization Debt discount amortization Coupon interest expense Total interest expense on Convertible Debt Other interest expense Total interest expense Fiscal Year Ended March 31, 2020 2019 2021 14.7 $ 6.6 227.4 248.7 2.4 64.5 37.6 104.5 3.7 356.9 $ 13.2 $ 2.9 277.6 293.7 3.9 118.8 77.2 199.9 3.7 497.3 $ 12.9 2.2 291.8 306.9 3.6 112.4 77.1 193.1 2.9 502.9 $ $ The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 3.9 years, 5.9 years, 3.6 years, and 15.9 years for the 2015 Senior Convertible Debt, 2017 Senior Convertible Debt, 2020 Senior Convertible Debt, and 2017 Junior Convertible Debt, respectively. The Company's settlement transactions consists of the following (in millions)(1): Consideration Principal Amount Settled Cash Paid Value of Shares Issued Debt Issued Total Fair Value Settled(2) Equity Component(2) Net Loss on Inducements and Settlements February 2021(3) 81.0 $ 81.0 $ 2015 Senior Convertible Debt $ 2017 Senior Convertible Debt $ 122.2 $ 122.2 $ 2017 Junior Convertible Debt $ 156.0 $ 156.0 $ December 2020(4) 90.0 $ 48.5 $ 2015 Senior Convertible Debt $ 2017 Senior Convertible Debt $ 588.8 $ 155.4 $ 2017 Junior Convertible Debt $ 407.7 $ 225.0 $ Term Loan Facility $ 1,705.7 $ 1,705.7 $ August 2020(5) 2015 Senior Convertible Debt $ 414.3 $ 414.3 $ 2017 Senior Convertible Debt $ 381.8 $ 381.8 $ June 2020(6) 2015 Senior Convertible Debt $ 383.3 $ 383.3 $ 2017 Senior Convertible Debt $ 643.9 $ 643.9 $ $ Term Loan Facility 17.8 $ 17.8 $ Bridge Loan Facility $ 615.0 $ 615.0 $ March 2020(7) 2015 Senior Convertible Debt $ 615.0 $ 615.0 $ 79.2 $ 206.5 $ — $ 287.5 $ 166.4 $ — $ 288.6 $ 115.9 $ 217.9 $ — $ 373.9 $ 129.8 $ 79.4 $ 221.0 $ — $ 269.5 $ 408.7 $ 601.5 $ 1,165.6 $ 486.7 $ 530.4 $ 64.0 $ 819.4 $ 246.3 $ — $ — $ — $ 1,705.7 $ 208.1 $ 168.2 $ 243.9 $ 184.5 $ 655.3 $ 547.1 $ — $ 547.6 $ — $ 961.9 $ 351.7 $ 221.1 $ — $ 602.9 $ 299.0 $ 592.3 $ 292.2 $ 405.1 $ — $ 788.4 $ 314.4 $ 246.4 $ — $ 890.3 $ 481.0 $ — $ — $ — $ — $ 17.8 $ — $ — $ 615.0 $ 464.4 $ 390.9 $ — $ — $ 10.7 25.5 49.4 9.4 57.0 62.8 12.9 25.0 20.1 7.8 13.7 — 5.3 351.8 $ — $ 966.8 $ 460.4 $ 461.1 $ 3.4 (1) The Company settled portions of its convertible debt in privately negotiated transactions that are accounted for as induced conversions. (2) The total consideration for the convertible debt settlements was allocated to the liability and equity components using the equivalent rate that reflected the borrowing rate for a similar non-convertible debt instrument prior to the settlement. (3) The Company used borrowings under its Revolving Credit Facility to finance a portion of such settlement. F-28 Table of Contents (4) The Company used proceeds from the issuance of $665.5 million principal amount of 2020 Senior Convertible Debt and used borrowings under its Revolving Credit Facility to finance a portion of such settlement. The Company also issued $1.40 billion aggregate principal amount of 0.972% 2024 Notes and used the proceeds in addition to $213.0 million in borrowings under its Revolving Credit Facility, and cash on hand to repay all amounts outstanding under its Term Loan Facility. (5) The Company used borrowings under its Revolving Credit Facility to finance a portion of such settlement. (6) The Company used a portion of the proceeds from the issuance of the 2.670% 2023 Notes and the 4.250% 2025 Notes to (i) finance a portion of such settlement, and (ii) repay a portion of the amount outstanding under the Company's existing Revolving Credit Facility as well as for general corporate purposes. (7) The Company entered into a Bridge Loan Facility (which has since been repaid in full), for an aggregate principal amount of $615.0 million to finance a portion of such settlement. In December 2020, in connection with the issuance of the 2020 Senior Convertible Debt, the Company incurred issuance costs of $10.8 million, of which $9.0 million was recorded as debt issuance costs and will be amortized using the effective interest method over the term of the debt. The remainder of $1.8 million in fees was recorded to equity. The debt discount on the 2020 Senior Convertible Debt was the difference between the par value and the fair value of the debt resulting in a debt discount of $110.0 million which will be amortized to interest expense using the effective interest method over the term of the debt. Interest on the 2020 Senior Convertible Debt is payable semi-annually in arrears on May 15 and November 15 of each year. In connection with the issuance of the 2020 Senior Convertible Debt, the Company entered into capped call option transactions with several financial institutions at a cost of $35.8 million. The capped call options cover, subject to anti-dilution adjustments, the number of shares of the Company’s common stock initially underlying the 2020 Senior Convertible Debt. Upon conversion of the 2020 Senior Convertible Debt, the Company may exercise the capped call options subject to a cap strike price of $233.58 per share which would reduce the potential dilution to the Company’s common stock or offset any cash payments the Company is required to make in excess of the principal amount of converted notes. Upon conversion of the 2020 Senior Convertible Debt, there will be no economic dilution from the notes until the average market price of the Company’s common stock exceeds the cap price of $233.58 per share as the exercise of the capped call options will offset any dilution from the 2020 Senior Convertible Debt from the conversion price up to the cap price. As these transactions meet certain accounting criteria, the capped call options are recorded as a reduction of stockholders' equity and are not accounted for as derivatives. Senior Notes The 0.972% 2024 Notes mature on February 15, 2024 and interest accrues at a rate of 0.972% per annum, payable semi- annually in arrears on February 15 and August 15 of each year. The 2.670% 2023 Notes mature on September 1, 2023 and interest accrues at a rate of 2.670% per annum, payable semi-annually in arrears on March 1 and September 1 of each year. The 4.250% 2025 Notes mature on September 1, 2025 and interest accrues at a rate of 4.250% per annum, payable semi-annually in arrears on March 1 and September 1 of each year. The 3.922% 2021 Notes mature on June 1, 2021 and interest accrues at a rate of 3.922% per annum, payable semi-annually in arrears on June 1 and December 1 of each year. The 4.333% 2023 Notes mature on June 1, 2023 and interest accrues at a rate of 4.333% per annum, payable semi-annually in arrears on June 1 and December 1 of each year. The Company may, at its option, redeem some or all of the applicable series of Senior Notes in the manner set forth in the indenture governing the applicable series of Senior Notes. If the Company experiences a specified change of control triggering event set forth in the indenture governing the applicable series of Senior Notes, the Company must offer to repurchase each of the notes of such series at a price equal to 101% of the principal amount of each note of such series repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. The indenture governing each series of Senior Notes contains certain customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries' ability to, among other things, create or incur certain liens, and enter into sale and leaseback transactions, sell or otherwise dispose of any assets constituting collateral securing the Senior Notes, and consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets, to another person. These covenants are subject to a number of limitations and exceptions set forth in the indenture governing the applicable series of Senior Notes. Each series of Senior Notes is guaranteed by certain of the Company's subsidiaries that have also guaranteed the obligations under the Credit Agreement and under the Company’s existing Senior Indebtedness. In the future, each subsidiary of the Company that is a guarantor or other obligor of the Credit Agreement is required to guarantee each series of Senior Notes. The 0.972% 2024 Notes, the 2.670% 2023 Notes, the 3.922% 2021 Notes, and the 4.333% 2023 Notes and each of the associated guarantees are secured, on a pari passu first lien basis with the Credit Agreement, by substantially all of the tangible and intangible assets (other than certain excluded assets) of the Company and the guarantors that secure obligations under the F-29 Table of Contents Credit Agreement, in each case subject to certain thresholds, exceptions and permitted liens, as set forth in the respective security agreement, by and among the Company, the subsidiary guarantors party thereto and the collateral agent. Senior Credit Facilities In March 2020 and September 2019, the Company amended the Company's Credit Agreement to, among other things, provide the ability to factor receivables and, subject to the satisfaction of specified conditions, to permit the incurrence of secured debt. In addition, the amendments reduce the margin added to the interest rate on revolving loans under the Credit Agreement to 0.0% to 0.75% for base rate loans and 1.0% to 1.75% for the LIBOR rate loans, in each case determined based on the Company's senior leverage ratio. The amendments reduced the commitments for the Revolving Credit Facility thereunder to $3.57 billion from $3.60 billion. The Company's obligations under the Credit Agreement are guaranteed by certain of its subsidiaries meeting materiality thresholds set forth in the Credit Agreement. To secure the Company's obligations under the Credit Agreement and the subsidiary guarantors’ obligations under the guarantees, the Company and each of the subsidiary guarantors have granted a security interest in substantially all of their assets subject to certain exceptions and limitations. In May 2018, the Company borrowed $3.00 billion aggregate principal amount of loans under the Term Loan Facility. As of March 31, 2021, the Company has repaid all amounts outstanding under its Term Loan Facility. The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries' ability to, among other things, incur subsidiary indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into certain transactions with affiliates, pay dividends or make distributions, repurchase stock, enter into restrictive agreements and enter into sale and leaseback transactions, in each case subject to customary exceptions for a credit facility of this size and type. The Company is also required to maintain compliance with a senior leverage ratio, a total leverage ratio and an interest coverage ratio, all measured quarterly and calculated on a consolidated basis. As of March 31, 2021, the Company was in compliance with these financial covenants. Note 8. Fair Value of Financial Instruments Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company utilizes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1- Level 2- Level 3- Observable inputs such as quoted prices in active markets; Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying amount of cash equivalents approximates fair value because their maturity is less than three months. Management believes the carrying amount of the equity and cost-method investments materially approximated fair value at March 31, 2021 based upon unobservable inputs. The fair values of these investments have been determined as Level 3 fair value measurements. The carrying amount of accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term maturity of the amounts and are considered Level 2 in the fair value hierarchy. The fair values of the Company's Revolving Credit Facility, Term Loan Facility and Bridge Loan Facility are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of the Company's Revolving Credit Facility at March 31, 2021 approximated the carrying value excluding debt discounts and debt issuance costs and are considered Level 2 in the fair value hierarchy. The Company measures the fair value of its Convertible Debt and Senior Notes for disclosure purposes. These fair values are based on observable market prices for this debt, which is traded in less active markets and are therefore classified as a Level 2 fair value measurement. F-30 Table of Contents The following table shows the carrying amounts and fair values of the Company's debt obligations (in millions): Revolving Credit Facility Term Loan Facility Bridge Loan Facility 3.922% 2021 Notes 4.333% 2023 Notes 2.670% 2023 Notes 0.972% 2024 Notes 4.250% 2025 Notes 2015 Senior Convertible Debt 2017 Senior Convertible Debt 2020 Senior Convertible Debt 2017 Junior Convertible Debt Total March 31, 2021 2020 Carrying Amount (1) Fair Value Carrying Amount (1) Fair Value $ $ 2,336.6 $ — — 999.0 992.3 996.4 1,394.2 1,185.5 120.6 260.2 555.6 63.7 8,904.1 $ 2,346.6 $ — — 1,004.3 1,022.4 1,040.8 1,394.0 1,252.6 485.4 731.4 778.3 272.9 10,328.7 $ 2,373.9 $ 1,708.9 608.8 993.1 988.8 — — — 910.1 1,552.8 — 345.8 9,482.2 $ 2,388.5 1,723.5 615.0 985.0 990.0 — — — 1,601.8 2,130.3 — 656.2 11,090.3 (1) The carrying amounts presented are net of debt discounts and debt issuance costs (see Note 7 for further information). Note 9. Intangible Assets and Goodwill Intangible assets consist of the following (in millions): Core and developed technology Customer-related In-process research and development Distribution rights and other Total Core and developed technology Customer-related In-process research and development Distribution rights and other Total Gross Amount March 31, 2021 Accumulated Amortization Net Amount 7,371.3 $ 835.2 7.7 130.2 8,344.4 $ (2,771.0) $ (702.6) — (76.0) (3,549.6) $ 4,600.3 132.6 7.7 54.2 4,794.8 Gross Amount March 31, 2020 Accumulated Amortization Net Amount 7,331.9 $ 903.6 8.8 126.0 8,370.3 $ (1,924.6) $ (674.7) — (68.7) (2,668.0) $ 5,407.3 228.9 8.8 57.3 5,702.3 $ $ $ $ The following is an expected amortization schedule for the intangible assets for fiscal 2022 through fiscal 2026, absent any future acquisitions or impairment charges (in millions): Fiscal Year Ending March 31, 2022 2023 2024 2025 2026 F-31 Projected Amortization Expense $ $ $ $ $ 912.0 707.2 627.7 508.1 445.3 Table of Contents The Company amortizes intangible assets over their expected useful lives, which range between 1 and 15 years. Amortization expense attributed to intangible assets are assigned to cost of sales and operating expenses as follows (in millions): Amortization expense charged to cost of sales Amortization expense charged to operating expense Total amortization expense Fiscal Year Ended March 31, 2020 2019 2021 $ $ 9.4 $ 983.3 992.7 $ 8.9 $ 1,037.8 1,046.7 $ 9.6 686.2 695.8 There were no impairment charges in the fiscal year ended March 31, 2021. The Company recognized impairment charges of $2.2 million and $3.1 million in the fiscal years ended March 31, 2020 and March 31, 2019, respectively. Goodwill activity by segment was as follows (in millions): Balance at March 31, 2019 Additions Balance at March 31, 2020 Additions Balance at March 31, 2021 Semiconductor Products Reporting Unit Technology Licensing Reporting Unit $ $ 6,644.7 $ 0.9 6,645.6 5.8 6,651.4 $ 19.2 — 19.2 — 19.2 At March 31, 2021, the Company applied a qualitative goodwill impairment test to its two reporting units, concluding it was not more likely than not that goodwill was impaired. Through March 31, 2021, the Company has never recorded an impairment charge. Note 10. Other Financial Statement Details Accounts Receivable Accounts receivable consists of the following (in millions): Trade accounts receivable Other Total accounts receivable, gross Less: allowance for expected credit losses Total accounts receivable, net Inventories The components of inventories consist of the following (in millions): Raw materials Work in process Finished goods Total inventories March 31, 2021 2020 991.6 $ 11.3 1,002.9 5.2 997.7 $ 924.1 14.8 938.9 4.9 934.0 March 31, 2021 2020 115.7 $ 412.8 136.5 665.0 $ 92.3 441.7 151.7 685.7 $ $ $ $ Inventories are valued at the lower of cost and net realizable value using the first-in, first-out method. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later suggest that increased carrying amounts are recoverable. F-32 Table of Contents Property, Plant and Equipment Property, plant and equipment consists of the following (in millions): Land Building and building improvements Machinery and equipment Projects in process Total property, plant and equipment, gross Less: accumulated depreciation and amortization Total property, plant and equipment, net March 31, 2021 2020 83.2 $ 659.7 2,251.1 102.7 3,096.7 2,242.0 854.7 $ 83.4 659.5 2,123.1 100.1 2,966.1 2,090.0 876.1 $ $ Depreciation expense attributed to property, plant and equipment was $160.6 million, $168.9 million and $180.6 million for the fiscal years ended March 31, 2021, 2020 and 2019, respectively. As discussed in Note 1, the Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable. For the three years ended March 31, 2021, the Company’s evaluation of its property, plant and equipment did not result in any material impairments. Accrued Liabilities Accrued liabilities consists of the following (in millions): Accrued compensation and benefits Income taxes payable Sales related reserves Current portion of lease liabilities Accrued expenses and other liabilities Total accrued liabilities Note 11. Leases March 31, 2021 2020 166.7 $ 43.4 350.7 39.8 193.7 794.3 $ 137.5 38.0 353.0 44.5 208.8 781.8 $ $ Operating lease arrangements are comprised primarily of real estate and equipment agreements for which the ROU assets are included in other assets and the corresponding lease liabilities, depending on their maturity, are included in accrued liabilities or other long-term liabilities in the consolidated balance sheets. There are certain immaterial finance leases recorded in the consolidated balance sheets. The Company has elected to account for the lease and non-lease components as a single lease component. The details of the Company's total lease expense are as follows (in millions): Operating lease expense Fiscal Year Ended March 31, 2021 2020 $ 63.1 $ 70.4 F-33 Table of Contents The Company's leases are included as a component of the following balance sheet lines (in millions): Other assets: ROU assets Total lease assets Accrued liabilities: Current portion of lease liabilities Other long-term liabilities: Non-current portion of lease liabilities Total lease liabilities March 31, 2021 2020 $ $ $ $ 154.3 $ 154.3 $ 39.8 $ 125.4 165.2 $ 119.5 119.5 44.5 94.7 139.2 The following table presents the maturities of lease liabilities as of March 31, 2021 (in millions): Fiscal year ending March 31, 2022 2023 2024 2025 2026 Thereafter Total lease payments Less: Imputed lease interests Total lease liabilities Operating Leases 48.2 $ 32.4 24.2 17.9 16.4 61.4 200.5 35.3 165.2 $ The Company's weighted-average remaining lease-term and weighted-average discount rate are as follows: Weighted average remaining lease-term Weighted average discount rate Note 12. Commitments and Contingencies Purchase Obligations March 31, 2021 6.88 4.49 % The Company has agreements for the purchase of property, plant and equipment and other goods and services including outstanding purchase commitments with the Company's wafer foundries. Commitments for construction or purchases of property, plant and equipment totaled $143.0 million as of March 31, 2021, all of which will be due within the next year. Other purchase obligations and commitments totaled approximately $166.9 million, which includes outstanding purchase commitments with the Company's wafer foundries and other suppliers, for delivery in the fiscal year ended March 31, 2022. F-34 Table of Contents Indemnification Contingencies The Company's technology license agreements generally include an indemnification clause that indemnifies the licensee against liability and damages (including legal defense costs) arising from any claims of patent, copyright, trademark or trade secret infringement by the Company's proprietary technology. The terms of these indemnification provisions approximate the terms of the outgoing technology license agreements, which are typically perpetual unless terminated by either party for breach. The possible amount of future payments the Company could be required to make based on agreements that specify indemnification limits, if such indemnifications were required on all of these agreements, is approximately $168.1 million. There are some licensing agreements in place that do not specify indemnification limits. As of March 31, 2021, the Company had not recorded any liabilities related to these indemnification obligations and the Company believes that any amounts that it may be required to pay under these agreements in the future will not have a material adverse effect on its financial position, cash flows or results of operations. Warranty Costs and Product Liabilities The Company accrues for known product-related claims if a loss is probable and can be reasonably estimated. During the periods presented, there have been no material accruals or payments regarding product warranty or product liability. Historically, the Company has experienced a low rate of payments on product claims. Although the Company cannot predict the likelihood or amount of any future claims, the Company does not believe these claims will have a material adverse effect on its financial condition, results of operations or liquidity. Legal Matters In the ordinary course of the Company's business, it is exposed to various liabilities as a result of contracts, product liability, customer claims, governmental investigations and other matters. Additionally, the Company is involved in a limited number of legal actions, both as plaintiff and defendant. Consequently, the Company could incur uninsured liability in any of those actions. The Company also periodically receives notifications from various third parties alleging infringement of patents or other intellectual property rights, or from customers requesting reimbursement for various costs. With respect to pending legal actions to which the Company is a party and other claims, although the outcomes are generally not determinable, the Company believes that the ultimate resolution of these matters will not have a material adverse effect on its financial position, cash flows or results of operations. Litigation, governmental investigations and disputes relating to the semiconductor industry are not uncommon, and the Company is, from time to time, subject to such litigation, governmental investigations and disputes. As a result, no assurances can be given with respect to the extent or outcome of any such litigation, governmental investigations or disputes in the future. In connection with its acquisition of Microsemi, which closed on May 29, 2018, the Company became involved with the following legal matters: Federal Shareholder Class Action Litigation. Beginning on September 14, 2018, the Company and certain of its officers were named in two putative shareholder class action lawsuits filed in the United States District Court for the District of Arizona, captioned Jackson v. Microchip Technology Inc., et al., Case No. 2:18-cv-02914-ROS and Maknissian v. Microchip Technology Inc., et al., Case No. 2:18-cv-02924-JJT. On November 13, 2018, the Maknissian complaint was voluntarily dismissed. On December 11, 2018, the Court issued an order appointing the lead plaintiff in the Jackson matter. An amended complaint was filed on February 22, 2019. The complaint is allegedly brought on behalf of a putative class of purchasers of Microchip common stock between March 2, 2018 and August 9, 2018. The complaint asserts claims for alleged violations of the federal securities laws and alleges that the defendants issued materially false and misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects during the putative class period. The complaint seeks, among other things, compensatory damages and attorneys’ fees and costs on behalf of the putative class. Defendants filed a motion to dismiss the amended complaint on April 1, 2019, which motion was granted in part and denied in part on March 11, 2020. Plaintiff filed a motion for class certification, which was granted by the Court. Discovery is ongoing. F-35 Table of Contents Derivative Litigation. On January 22, 2019, a shareholder derivative lawsuit was filed against certain of the Company’s officers and directors in the Superior Court of Arizona for Maricopa County, captioned Reid v. Sanghi, et al., Case No. CV2019-002389. The Company is named as a nominal defendant. The complaint generally alleges that defendants breached their fiduciary duties by, among other things, purportedly failing to conduct adequate due diligence regarding Microsemi prior to its acquisition, misrepresenting the Company’s business prospects and health, and engaging in improper practices, and further alleges that certain defendants engaged in insider trading. The complaint asserts causes of action for breach of fiduciary duty, waste, and unjust enrichment and seeks unspecified monetary damages, corporate governance reforms, equitable and/or injunctive relief, restitution, and attorneys’ fees and costs. An amended complaint was filed on February 28, 2020, and a second amended complaint was filed on July 27, 2020. The Company and the individual defendants filed motions to dismiss, which are not currently scheduled to be heard by the Court. The Company’s Audit Committee has filed a motion to dismiss. Governmental Investigations. The SEC is investigating matters relating to the Company's acquisition of Microsemi. The Company believes that the investigation relates to distribution channel issues and business practices at Microsemi and the allegations made by the plaintiffs in the Peterson v. Sanghi lawsuit which was described in the Company’s prior filings on Form 10-Q and Form 10-K and which lawsuit has been settled and dismissed. The Department of Justice, which was also investigating those matters, has informed the Company that its investigation is closed and that no further action will be taken. As a result of its acquisition of Atmel, which closed April 4, 2016, the Company became involved with the following legal matters: Continental Claim ICC Arbitration. On December 29, 2016, Continental Automotive GmbH ("Continental") filed a Request for Arbitration with the ICC, naming as respondents the Company's subsidiaries Atmel Corporation, Atmel SARL, Atmel Global Sales Ltd., and Atmel Automotive GmbH (collectively, "Atmel"). The Request alleges that a quality issue affecting Continental airbag control units in certain recalled vehicles stems from allegedly defective Atmel application specific integrated circuits ("ASICs"). Continental seeks to recover from Atmel all current and future costs and damages incurred as a result of the vehicle manufacturers’ airbag control unit-related recalls, with current costs and damages alleged to be about $115 million to date. The Company's Atmel subsidiaries intend to defend this action vigorously. Southern District of New York Action by LFoundry Rousset ("LFR") and LFR Employees. On March 4, 2014, LFR and Jean-Yves Guerrini, individually and on behalf of a putative class of LFR employees, filed an action in the United States District Court for the Southern District of New York (the "District Court") against the Company's Atmel subsidiary, French subsidiary, Atmel Rousset S.A.S. ("Atmel Rousset"), and LFoundry GmbH ("LF"), LFR's German parent. The case purports to relate to Atmel Rousset's June 2010 sale of its wafer manufacturing facility in Rousset, France to LF, and LFR's subsequent insolvency, and later liquidation, more than three years later. The District Court dismissed the case on August 21, 2015, and the United States Court of Appeals for the Second Circuit affirmed the dismissal on June 27, 2016. On July 25, 2016, the plaintiffs filed a notice of appeal from the District Court's June 27, 2016 denial of their motion for relief from the dismissal judgment. On May 19, 2017, the United States Court of Appeals for the Second Circuit affirmed the June 27, 2016 order dismissing the case. Individual Labor Actions by former LFR Employees. In June 2010, Atmel Rousset sold its wafer manufacturing business in Rousset, France to LFoundry GmbH ("LF"), the German parent of LFoundry Rousset ("LFR"). LFR then leased the Atmel Rousset facility to conduct the manufacture of wafers. More than three years later, LFR became insolvent and later liquidated. In the wake of LFR's insolvency and liquidation, over 500 former employees of LFR filed individual labor actions against Atmel Rousset in a French labor court, and in 2019 a French labor court dismissed all of the employees’ claims against Atmel Rousset. Plaintiffs have filed appeals requesting reconsideration of the earlier dismissals. Furthermore, these same claims have been filed by this same group of employees in a regional court in France against Microchip Technology Incorporated and Atmel Corporation. The Company, and the other defendant entities, believe that each of these actions is entirely devoid of merit, and, further, that any assertion by any of the Claimants of a co-employment relationship with any of these entities is based substantially on the same specious arguments that the Paris Commercial Court summarily rejected in 2014 in related proceedings. The defendant entities therefore intend to defend vigorously against each of these claims. Additionally, complaints have been filed in a regional court in France on behalf of the same group of employees against Microchip Technology Rousset, Atmel Switzerland Sarl, Atmel Corporation and Microchip Technology Incorporated alleging that the sale of the Atmel Rousset production unit to LF was fraudulent and should be voided. These claims are specious and the defendant entities therefore intend to defend vigorously against these claims. The Company accrues for claims and contingencies when losses become probable and reasonably estimable. As of the end of each applicable reporting period, the Company reviews each of its matters and, where it is probable that a liability has been or will be incurred, the Company accrues for all probable and reasonably estimable losses. Where the Company can reasonably estimate a range of losses it may incur regarding such a matter, the Company records an accrual for the amount within the range F-36 Table of Contents that constitutes its best estimate. If the Company can reasonably estimate a range but no amount within the range appears to be a better estimate than any other, the Company uses the amount that is the low end of such range. As of March 31, 2021, the Company's estimate of the aggregate potential liability that is possible but not probable is approximately $100 million in excess of amounts accrued. Note 13. Income Taxes The income tax provision consists of the following (amounts in millions): Pretax (loss) income: U.S. Foreign Current expense (benefit): U.S. Federal State Foreign Total current expense (benefit) Deferred expense (benefit): U.S. Federal State Foreign Total deferred benefit Total income tax benefit Fiscal Year Ended March 31, 2020 2019 2021 $ $ $ $ $ $ (301.7) $ 641.2 339.5 $ 54.8 $ 2.0 72.2 129.0 $ (215.4) $ (22.9) 99.4 (138.9) (9.9) $ (485.2) $ 635.6 150.4 $ 21.1 $ 1.0 48.0 70.1 $ (127.8) $ (13.2) (349.3) (490.3) (420.2) $ (593.4) 797.9 204.5 (98.0) (5.3) 14.1 (89.2) 11.9 0.6 (74.7) (62.2) (151.4) The Company intends to invest substantially all of its foreign subsidiary earnings, as well as its capital in its foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which the Company would incur significant, additional costs upon repatriation of such amounts. It is not practical to estimate the additional tax that would be incurred, if any, if the permanently reinvested earnings were repatriated. F-37 Table of Contents The provision for income taxes differs from the amount computed by applying the statutory federal tax rate to income before income taxes. The sources and tax effects of the differences in the total income tax provision are as follows (amounts in millions): Computed expected income tax provision State income taxes, net of federal benefit Foreign income taxed at lower than the federal rate Impact of the TCJA - one-time transition tax, net of foreign tax credits GILTI and foreign-derived intangible income, net of credits Business realignment of intellectual property rights Net increases related to current year tax positions Net decreases related to prior year tax positions (1) Share-based compensation Research and development tax credits Intercompany prepaid tax asset amortization Foreign exchange Convertible debt settlement Subpart-F income Other Change in valuation allowance Total income tax benefit $ $ Fiscal Year Ended March 31, 2020 2019 2021 71.3 $ (3.8) (45.7) — 101.8 (63.8) 49.8 (4.4) (12.3) (48.4) — (6.5) (48.1) 6.4 7.1 (13.3) (9.9) $ 31.5 $ (5.4) (78.8) — 54.7 (334.8) 20.1 (28.5) (11.1) (40.8) — (0.9) — 4.1 (1.7) (28.6) (420.2) $ 43.0 (8.7) (94.0) 13.1 95.4 (90.6) 9.0 (75.1) (13.3) (27.5) 5.2 4.6 — 10.7 (13.3) (9.9) (151.4) (1) The release of prior year tax positions during fiscal 2021 increased each of the basic and diluted net income per common share by $0.02. The release of prior year tax positions during fiscal 2020 increased the basic and diluted net income per common share by $0.12 and $0.11, respectively. The release of prior year tax positions during fiscal 2019 increased the basic and diluted net income per common share by $0.32 and $0.30, respectively. The foreign tax rate differential benefit primarily relates to the Company's operations in Thailand, Malta and Ireland. The Company's Thailand manufacturing operations are currently subject to numerous tax holidays granted to the Company based on its investment in property, plant and equipment in Thailand. The Company's tax holiday periods in Thailand expire between fiscal 2022 and 2027, however, the Company actively seeks to obtain new tax holidays. The Company does not expect the future expiration of any of its tax holiday periods in Thailand to have a material impact on its effective tax rate. The aggregate dollar benefit derived from these tax holidays approximated $11.1 million and $11.4 million in fiscal 2021 and fiscal 2020 , respectively. The impact of the tax holidays during fiscal 2021 increased each of the basic and diluted net income per common share by $0.04. The impact of the tax holidays during fiscal 2020 increased the basic and diluted net income per common share by $0.05 and $0.04, respectively. The Company's effective tax rate for fiscal 2021 includes a $63.8 million tax benefit related to intra-group transfers of certain intellectual property rights, which reduced its effective tax rate by 18.8%. The tax benefit for the intra-group asset transfers primarily consisted of $155.5 million recorded as a deferred tax asset which represents the book and tax basis difference on the transferred assets measured based on the new applicable statutory tax rate, as well as, the reversal of the pre- existing deferred tax asset of $90.3 million, which represents the book and tax basis difference on the transferred assets measured based on applicable statutory tax rate prior to the transfer. The Company expects to be able to realize the future tax benefit of the deferred tax assets resulting from the intra-group asset transfers. It is not uncommon for taxing authorities of different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied with respect to the valuation of intellectual property rights. The taxing authorities of jurisdictions in which the Company operates may challenge its methodologies for valuing the intellectual property rights transferred, which could increase the Company's future effective income tax rate and harm future results of operations. F-38 Table of Contents The tax effects of temporary differences that give rise to significant portions of the Company's deferred tax assets and deferred tax liabilities are as follows (amounts in millions): Deferred tax assets: Inventory valuation Net operating loss carryforward Capital loss carryforward Share-based compensation Income tax credits Property, plant and equipment Accrued expenses Intangible assets Lease liabilities Other Gross deferred tax assets Valuation allowances Deferred tax assets, net of valuation allowances Deferred tax liabilities: Convertible debt Intangible assets ROU assets Other Deferred tax liabilities Net deferred tax asset Reported as: Non-current deferred tax assets Non-current deferred tax liability Net deferred tax asset March 31, 2021 2020 46.0 $ 68.0 6.3 46.5 331.1 32.7 83.6 1,581.5 37.1 17.4 2,250.2 (290.3) 1,959.9 (53.9) (158.1) (34.5) (8.1) (254.6) 1,705.3 $ 1,749.2 $ (43.9) 1,705.3 $ 48.5 74.8 9.4 39.8 351.1 31.7 80.4 1,694.8 20.2 14.0 2,364.7 (303.5) 2,061.2 (228.7) (365.1) (24.3) (13.1) (631.2) 1,430.0 1,748.5 (318.5) 1,430.0 $ $ $ $ In assessing whether it is more likely than not that deferred tax assets will be realized, the Company considers all available evidence, both positive and negative, including its recent cumulative earnings experience and expectations of future available taxable income of the appropriate character by taxing jurisdiction, tax attribute carryback and carryforward periods available for tax reporting purposes, and prudent and feasible tax planning strategies. A summary of additions and deductions related to the valuation allowance for deferred tax asset accounts for the years ended March 31, 2021, 2020 and 2019 follows (amounts in millions): Balance at Beginning of Year Additions Charged to Costs and Expenses Additions Charged to Other Accounts Deductions Balance at End of Year Fiscal 2021 Fiscal 2020 Fiscal 2019 $ $ $ 303.5 $ 332.1 $ 204.5 $ 8.1 $ 26.0 $ 16.2 $ — $ — $ 175.8 $ (21.3) $ (54.6) $ (64.4) $ 290.3 303.5 332.1 The Company had federal, state and foreign NOL carryforwards with an estimated tax effect of $68.0 million available at March 31, 2021. The federal, state and foreign NOL carryforwards expire at various times between fiscal 2022 and fiscal 2041, of which a portion of the NOL carryforwards do not expire. The Company had state tax credits of $163.0 million available at March 31, 2021. These state tax credits expire at various times between fiscal 2022 and fiscal 2041. The Company had capital loss carryforwards with an estimated tax effect of $6.3 million available at March 31, 2021. These capital loss carryforwards begin to expire in fiscal 2022. The Company had foreign tax credits of $1.9 million available at March 31, 2021. These foreign tax credits begin to expire in fiscal 2022. The Company had credits for increasing research activity in the amount of $85.0 million available at March 31, 2021. These credits begin to expire in fiscal 2022. The Company had U.S. prior year minimum tax credits in the amount of $4.7 million available at March 31, 2021. The Company had refundable tax credits in foreign F-39 Table of Contents jurisdictions of $56.6 million available at March 31, 2021. The Company had withholding tax credits in foreign jurisdictions of $19.9 million available at March 31, 2021. These credits expire at various times between fiscal 2022 and fiscal 2024. The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The Company files U.S. federal, U.S. state, and foreign income tax returns. For U.S. federal, and in general for U.S. state tax returns, the fiscal 2007 and later tax years remain effectively open for examination by tax authorities. For foreign tax returns, the Company is generally no longer subject to income tax examinations for years prior to fiscal 2007. Significant judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes. Although the Company believes that it has appropriately reserved for its uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different than expectations. The Company will adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, the refinement of an estimate, the closing of a statutory audit period or changes in applicable tax law. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences would impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to the reserves that are considered appropriate, as well as related net interest. The Company recognizes liabilities for anticipated tax audit issues in the U.S. and other domestic and international tax jurisdictions based on its estimate of whether, and the extent to which, the tax positions are more likely than not to be sustained based on the technical merits. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter. The Company believes it maintains appropriate reserves to offset any potential income tax liabilities that may arise upon final resolution of matters for open tax years. If such reserve amounts ultimately prove to be unnecessary, the resulting reversal of such reserves could result in tax benefits being recorded in the period the reserves are no longer deemed necessary. If such amounts prove to be less than an ultimate assessment, a future charge to expense would be recorded in the period in which the assessment is determined. The following table summarizes the activity related to the Company's gross unrecognized tax benefits from April 1, 2018 to March 31, 2021 (amounts in millions): Beginning balance Increases related to acquisitions Decreases related to settlements with tax authorities Decreases related to statute of limitation expirations Increases related to current year tax positions Increases (decreases) related to prior year tax positions Ending balance Fiscal Year Ended March 31, 2020 2019 2021 $ $ 757.3 $ — (6.0) (10.9) 35.4 50.5 826.3 $ 763.4 $ — (1.2) (30.9) 30.2 (4.2) 757.3 $ 436.0 329.7 (8.3) (16.2) 27.8 (5.6) 763.4 As of March 31, 2021 and March 31, 2020, the Company had accrued interest and penalties related to tax contingencies of $83.9 million and $74.6 million, respectively. Interest and penalties charged to operations during the fiscal year ended March 31, 2021 were $9.3 million. Previously accrued interest and penalties that were released during the fiscal years ended March 31, 2020 and March 31, 2019 were $13.5 million and $37.5 million, respectively. The Company is currently under income tax examination in various tax jurisdictions in which it operates. The years under examination range from fiscal 2007 through fiscal 2019. In some jurisdictions, the Company has received tax assessments in excess of established reserves. The Company is contesting these tax assessments, and will continue to do so, including pursuing all available remedies such as appeals and litigation, if necessary. During fiscal 2021, additional assessments were received for these issues and the Company’s position remains unchanged. The total amount of gross unrecognized tax benefits was $826.3 million and $757.3 million as of March 31, 2021 and March 31, 2020, respectively, of which $720.5 million and $654.0 million is estimated to impact the Company's effective F-40 Table of Contents tax rate, if recognized. The Company estimates that it is reasonably possible unrecognized tax benefits as of March 31, 2021 could decrease by approximately $10.0 million in the next 12 months. Positions that may be resolved include various U.S. and non-U.S. matters. In April 2020, the Company became aware of a withholding tax regulation that could be interpreted to apply to certain of its previous intra-group transactions. The Company evaluated whether the interpretation of this regulation could apply to its facts and circumstances, and, upon conclusion of its analysis, the Company established an immaterial reserve related to this matter during the fiscal year ended March 31, 2021. In July 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. In the July 2015 ruling, the Tax Court concluded that the sharing of the cost of employee stock compensation in a company’s cost-sharing arrangement was invalid under the U.S. Administrative Procedures Act. In June 2019, a panel of the Ninth Circuit of the U.S. Court of Appeals reversed this decision. In July 2019, Altera petitioned the U.S. Court of Appeals for the Ninth Circuit to hold an en banc rehearing of the case. In November 2019, the en banc rehearing petition was denied, and Altera has asked the Supreme Court for a judicial review. In June 2020, the U.S. Supreme Court declined to issue a writ of certiorari in Altera v Commissioner, leaving intact the decision reached by the Ninth Circuit of the U.S. Court of Appeals. Based on the Ninth Circuit Opinion, the Company recorded a cumulative income tax expense of $23.3 million in fiscal 2021. Note 14. Employee Benefit Plans Defined Benefit Plans The Company has defined benefit pension plans that cover certain French and German employees. Most of these defined pension plans, which were acquired in the Atmel and Microsemi acquisitions, are unfunded. Plan benefits are provided in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. Pension liabilities and charges are based upon various assumptions, updated annually, including discount rates, future salary increases, employee turnover, and mortality rates. The Company’s French pension plan provides for termination benefits paid to covered French employees only at retirement, and consists of approximately one to five months of salary. The Company's German pension plan provides for defined benefit payouts for covered German employees following retirement. The change in projected benefit obligation and the accumulated benefit obligation, were as follows (in millions): Projected benefit obligation at the beginning of the year Service cost Interest cost Actuarial losses (gains) Benefits paid Foreign currency exchange rate changes Projected benefit obligation at the end of the year Accumulated benefit obligation at the end of the year Weighted average assumptions: Discount rate Rate of compensation increase $ $ $ Fiscal Year Ended March 31, 2021 2020 $ $ $ 70.0 1.6 1.0 8.2 (1.5) 3.7 83.0 76.3 0.93 % 3.01 % 72.7 1.7 0.9 (2.6) (1.5) (1.2) 70.0 65.1 1.48 % 2.77 % The Company's pension liability represents the present value of estimated future benefits to be paid. The discount rate is based on the quarterly average yield for Euros treasuries with a duration of 30 years, plus a supplement for corporate bonds (Euros, AA rating). Net actuarial losses (gains), which are included in accumulated other comprehensive loss in the Company's consolidated balance sheets, will be recognized as a component of net periodic cost over the average remaining service period. F-41 Table of Contents Future estimated expected benefit payments for fiscal year 2022 through 2031 are as follows (in millions): Fiscal Year Ending March 31, 2022 2023 2024 2025 2026 2027 through 2031 Total Expected Benefit Payments 1.6 $ 1.7 2.2 2.4 2.6 14.6 25.1 $ The Company's net periodic pension cost for fiscal 2022 is expected to be approximately $3.6 million. Note 15. Share-Based Compensation Share-Based Compensation Expense The following table presents the details of the Company's share-based compensation expense (in millions): Cost of sales (1) Research and development Selling, general and administrative Special charges and other, net Pre-tax effect of share-based compensation Income tax benefit Net income effect of share-based compensation Fiscal Year Ended March 31, 2020 2019 2021 $ $ 26.6 $ 96.8 74.9 — 198.3 42.3 156.0 $ 20.9 $ 82.9 66.4 — 170.2 36.9 133.3 $ 14.9 72.0 62.3 17.2 166.4 35.5 130.9 (1) During the fiscal year ended March 31, 2021, $16.7 million of share-based compensation expense was capitalized to inventory and $26.6 million of previously capitalized share-based compensation expense in inventory was sold. During the fiscal year ended March 31, 2020, $19.8 million of share-based compensation expense was capitalized to inventory and $20.9 million of previously capitalized share-based compensation expense in inventory was sold. During the fiscal year ended March 31, 2019, $17.2 million of share-based compensation expense was capitalized to inventory and $14.9 million of previously capitalized share-based compensation expense in inventory was sold. Microsemi Acquisition-related Equity Awards In connection with its acquisition of Microsemi on May 29, 2018, the Company assumed certain RSUs, SARs, and stock options granted by Microsemi. The assumed awards were measured at the acquisition date based on the estimated fair value, which was a total of $175.4 million. A portion of that fair value, $53.9 million, which represented the pre-acquisition vested service provided by employees to Microsemi, was included in the total consideration transferred as part of the acquisition. As of the acquisition date, the remaining portion of the fair value of those awards was $121.5 million, representing post-acquisition share-based compensation expense that will be recognized as these employees provide service over the remaining vesting periods. Combined Incentive Plan Information The Company has granted RSUs and stock options to employees and non-employee members of the Board of Directors under the Company’s 2004 Equity Incentive Plan (the 2004 plan). The Company uses RSUs as its primary equity incentive compensation instrument for employees. Under the 2004 plan, 32,194,859 shares of common stock have been authorized for issuance and 6,554,463 shares of common stock remain available for future grants as of March 31, 2021. F-42 Table of Contents Restricted Stock Units RSU share activity under the 2004 Plan is set forth below: Nonvested shares at March 31, 2018 Granted Assumed upon acquisition Forfeited Vested Nonvested shares at March 31, 2019 Granted Forfeited Vested Nonvested shares at March 31, 2020 Granted Forfeited Vested Nonvested shares at March 31, 2021 Number of Shares Weighted Average Grant Date Fair Value 5,672,440 $ 1,951,408 $ 1,805,680 $ (408,242) $ (2,729,324) $ 6,291,962 $ 2,182,044 $ (340,659) $ (2,391,294) $ 5,742,053 $ 2,339,247 $ (257,055) $ (1,882,336) $ 5,941,909 $ 50.79 77.83 91.70 73.36 61.51 64.81 88.17 75.50 57.47 76.11 101.37 83.37 64.13 89.54 The total intrinsic value of RSUs which vested during the fiscal years ended March 31, 2021, 2020 and 2019 was $218.5 million, $223.9 million and $229.3 million, respectively. The aggregate intrinsic value of RSUs outstanding at March 31, 2021 was $922.3 million, calculated based on the closing price of the Company's common stock of $155.22 per share on March 31, 2021. The amount of unearned share-based compensation currently estimated to be expensed in the remainder of fiscal 2022 through fiscal 2026 related to unvested share-based payment awards at March 31, 2021 is $300.1 million. The weighted average period over which the unearned share-based compensation is expected to be recognized is approximately 1.84 years. Stock Options and Stock Appreciation Rights Stock option and SARs activity under the Company's stock incentive plans in the three years ended March 31, 2021 is set forth below: Outstanding at March 31, 2018 Assumed upon acquisition Exercised Forfeited or expired Outstanding at March 31, 2019 Exercised Forfeited or expired Outstanding at March 31, 2020 Exercised Forfeited or expired Outstanding at March 31, 2021 Number of Shares Weighted Average Exercise Price per Share 284,340 $ 141,751 $ (140,118) $ (4,091) $ 281,882 $ (130,419) $ (2,453) $ 149,010 $ (77,884) $ (629) $ 70,497 $ 31.21 25.86 27.67 39.62 30.16 28.71 20.02 31.59 31.48 19.47 31.81 The total intrinsic value of options and SARs exercised during the fiscal years ended March 31, 2021, 2020 and 2019 was $6.5 million, $8.4 million and $8.3 million, respectively. This intrinsic value represents the difference between the fair market value of the Company's common stock on the date of exercise and the exercise price of each equity award. The aggregate intrinsic value of options and SARs outstanding and exercisable at March 31, 2021 was $10.9 million. The aggregate intrinsic values were calculated based on the closing price of the Company's common stock of $155.22 per share on March 31, 2021. As of March 31, 2021, the weighted average remaining contractual term for options and SARs outstanding and exercisable was 2.06 years. F-43 Table of Contents As of March 31, 2021 and March 31, 2020, the number of option and SAR shares exercisable was 70,497 and 149,010, respectively, and the weighted average exercise price per share was $31.81 and $31.59, respectively. There were no stock options granted in the fiscal years ended March 31, 2021, 2020 and 2019. Employee Stock Purchase Plan The Company’s 2001 Employee Stock Purchase Plan and the 1994 International Employee Stock Purchase Plan (collectively referred to as the employee stock purchase plans) allows eligible employees to purchase shares of the Company's common stock at 85% of the value of its common stock on specific dates. Since the inception of the employee stock purchase plans, 17,222,291 shares of common stock have been authorized for issuance and 5,929,687 shares remain available for future purchases as of March 31, 2021. Employees purchased 712,220 shares of common stock in the fiscal year ended March 31, 2021 for a purchase price of $57.7 million under the employee stock purchase plans compared to 787,284 shares of common stock for a purchase price of $55.6 million in the fiscal year ended March 31, 2020 and 549,796 shares of common stock for a purchase price of $39.6 million in the fiscal year ended March 31, 2019. As of March 31, 2021, unrecognized share-based compensation costs related to the employee stock plans totaled $6.3 million, which will be recognized over a period of approximately five months. Note 16. Stock Repurchase Activity As of March 31, 2021, 15.0 million shares of common stock remained available for repurchase under the existing share repurchase program. There is no expiration date associated with the repurchase program. There were no repurchases of common stock during the fiscal years ended March 31, 2021, 2020 and 2019. Shares repurchased are recorded as treasury shares and used to fund share issuance requirements under the Company's equity incentive plans. As of March 31, 2021, the Company had approximately 11.0 million treasury shares. Note 17. Accumulated Other Comprehensive Loss The following table presents the changes in the components of accumulated other comprehensive loss, net of tax, (AOCI) (in millions): Balance at March 31, 2020 Other comprehensive (loss) income before reclassifications Reclassification of realized transactions Net other comprehensive (loss) income Balance at March 31, 2021 Balance at March 31, 2019 Impact of change in accounting principle Opening Balance as of April 1, 2019 Other comprehensive (loss) income before reclassifications Amounts reclassified from accumulated other comprehensive loss Net other comprehensive (loss) income Balance at March 31, 2020 Unrealized Holding Gains (Losses) Available-for- sale Securities $ — $ — — — — $ 0.2 $ (0.2) — — — — — $ $ $ $ Minimum Pension Liability Foreign Currency Total (5.1) $ (16.5) $ (9.4) 1.1 (8.3) (13.4) $ (6.2) $ (1.1) (7.3) 1.4 0.8 2.2 (5.1) $ 3.7 — 3.7 (12.8) $ (14.7) $ — (14.7) (1.8) — (1.8) (16.5) $ (21.6) (5.7) 1.1 (4.6) (26.2) (20.7) (1.3) (22.0) (0.4) 0.8 0.4 (21.6) F-44 Table of Contents The table below details where reclassifications of realized transactions out of accumulated other comprehensive loss are recorded on the consolidated statements of income (in millions): Description of AOCI Component Fiscal Year Ended March 31, 2020 2019 2021 Related Statement of Income Line Unrealized losses on available-for-sale securities Amortization of actuarial loss Reclassification of realized transactions, net of taxes $ $ — $ (1.1) (1.1) $ — $ (0.8) (0.8) $ (5.6) Other (loss) income, net Other (loss) income, net (1.0) (6.6) Net income Note 18. Dividends On October 28, 2002, the Company announced that its Board of Directors had approved and instituted a quarterly cash dividend on its common stock. The Company has continued to pay quarterly dividends and has increased the amount of such dividends on a regular basis. Cash dividends paid per share were $1.494, $1.465 and $1.457 during fiscal 2021, 2020 and 2019, respectively. Total dividend payments amounted to $388.3 million, $350.1 million and $344.4 million during fiscal 2021, 2020 and 2019, respectively. F-45 EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF MICROCHIP TECHNOLOGY INCORPORATED (as amended effective March 31, 2021) TABLE OF CONTENTS Registered Office Other Offices Place of Meetings Annual Meeting Special Meeting Advance Notice of Stockholder Nominees and Stockholder Business Notice of Stockholders Meetings Quorum Adjourned Meeting; Notice Voting ARTICLE I - CORPORATE OFFICES 1.1 1.2 ARTICLE II - STOCKHOLDERS 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 Waiver of Notice 2.10 Stockholder Action by Written Consent Without a Meeting 2.11 Record Date for Stockholder Notice; Voting; Giving Consents 2.12 Proxies 2.13 List of Stockholders Entitled to Vote 2.14 Conduct of Business 2.15 Inspectors of Election 2.16 Inspectors of Election and Procedures for Counting Written Consents 2.17 Election Not To Be Subject to Arizona Control Share Acquisitions Statute 2.18 Proxy Access for Director Nominees ARTICLE III - DIRECTORS Powers 3.1 Number of Directors 3.2 Election; Qualification and Term of Office of Directors 3.3 Resignation and Vacancies 3.4 Place of Meetings; Meetings by Telephone 3.5 Regular Meetings 3.6 Special Meetings; Notice 3.7 Quorum 3.8 3.9 Waiver of Notice 3.10 Adjourned Meeting; Notice 3.11 Board Action by Written Consent Without a Meeting 3.12 Fees and Compensation of Directors 3.13 Loans 3.14 Removal of Directors 3.15 Conduct of Business 3.16 Presumption of Assent ARTICLE IV - COMMITTEES Committees of Directors 4.1 Page 1 1 1 1 1 2 2 2 6 6 7 7 7 8 9 10 10 11 12 12 14 14 27 27 27 27 28 29 29 30 30 30 31 31 31 32 32 32 33 33 33 Committee Minutes Indemnification of Directors and Officers Indemnification of Others Insurance Officers Appointment of Officers Subordinate Officers Removal and Resignation of Officers Vacancies in Offices Chairman of the Board Chief Executive Officer President Vice Presidents Secretary 4.2 4.3 Meetings and Action of Committees ARTICLE V - OFFICERS 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 Chief Financial Officer 5.12 Treasurer 5.13 Assistant Secretary 5.14 Assistant Treasurer 5.15 Authority and Duties of Officers 5.16 Representation of Shares of Other Corporations ARTICLE VI - INDEMNITY 6.1 6.2 6.3 ARTICLE VII - RECORDS AND REPORTS 7.1 Maintenance and Inspection of Records 7.2 ARTICLE VIII - MANNER OF GIVING NOTICE AND WAIVER 8.1 8.2 8.3 8.4 Waiver of Notice ARTICLE IX - GENERAL MATTERS 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 Transfer of Stock 9.11 9.12 Registered Stockholders ARTICLE X - AMENDMENTS Checks Execution of Corporate Contracts and Instruments Stock Certificates; Partly Paid Special Designation on Certificates Lost Certificates Construction; Definitions Dividends Fiscal Year Seal Notices Notice to Stockholders Sharing an Address Notice to Person with whom Communicating is Unlawful Stock Transfer Agreements Inspection by Directors 34 34 35 35 35 35 35 36 36 36 36 36 37 37 38 38 38 38 38 39 39 39 40 40 40 40 41 41 42 42 43 43 43 43 44 44 45 45 46 46 46 46 47 47 47 AMENDED AND RESTATED BYLAWS OF MICROCHIP TECHNOLOGY INCORPORATED (as amended effective March 31, 2021) ARTICLE I CORPORATE OFFICES 1.1 Registered Office. The registered office of the corporation shall be in the City of Dover, County of Kent, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company. 1.2 Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCKHOLDERS 2.1 Place of Meetings. Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. The board of directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of Delaware. In the absence of any such designation, stockholders’ meetings shall be held at the registered office of the corporation. 2.2 Annual Meeting. The annual meeting of stockholders shall be held, each year, on a date and at a time designated by the board of directors. At the meeting, directors shall be elected and any other proper business may be transacted. 1 2.3 Special Meeting. A special meeting of the stockholders may be called at any time by the board of directors or by the chairman of the board or by one or more stockholders owning in the aggregate not less than fifty percent (50%) of the entire capital stock of the corporation issued and outstanding and entitled vote. If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, chief executive officer or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Section 2.5 and Article VIII, that a meeting will be held at the time requested by the person or persons who called the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 Advance Notice of Stockholder Nominees and Stockholder Business. (a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting business must be (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (B) otherwise properly brought before the meeting by or at the direction of the board of directors, or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the secretary of the corporation must have received timely notice in writing from the stockholder. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than ninety (90) calendar days before the date on which the corporation first mailed 2 its proxy statement to stockholders in connection with the previous year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the prior year, notice by the stockholder to be timely must be so received not later than the close of business on the later of ninety (90) calendar days in advance of such annual meeting or ten (10) calendar days following the date on which public announcement of the date of the meeting is first made. Such written notice to the secretary shall set forth, as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation's books, of the stockholder proposing such business and any Stockholder Associated Person (as defined below), (iii) the class and number of shares of stock of the corporation beneficially owned by such stockholder or any Stockholder Associated Person, (iv) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, (v) any material interest of such stockholder or any Stockholder Associated Person in such business, (vi) a statement whether either such stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the corporation's voting shares required under applicable law to carry the proposal and (vii) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934 Act"), in his or her capacity as a proponent to a stockholder proposal (such information provided and statements made as required by clauses (i) through (vii), a "Business Solicitation Statement"). Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder's meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. In addition, to be in proper written form, a stockholder's notice to the secretary must be supplemented not later than ten (10) days following the record date for the 3 determination of stockholders entitled to vote at the meeting to disclose the information contained in clauses (iii) and (iv) above as of the record date. For purposes of this Section 2.4, a "Stockholder Associated Person" of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (iii) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (i) and (ii). Notwithstanding any provision in the Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this paragraph (a). In addition, business proposed to be brought by a stockholder may not be brought before the annual meeting if such stockholder or a Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement applicable to such business or if the Business Solicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (a), and, if he or she should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted. (b) Only persons who are nominated in accordance with the procedures set forth in this paragraph (b) shall be eligible for election or re-election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (b). Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation. To be considered timely, (i) in the case of an annual meeting, such notice must be delivered in accordance with the provisions of paragraph (a) of this Section 2.4, and (ii) in the case of a special meeting, such notice must be received by the secretary of the corporation not later than the close of business on the later of the 90th day prior to such special 4 meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. Such stockholder's notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the corporation which are beneficially owned by such person, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of such person, (E) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under Delaware law with respect to the corporation and its stockholders, and (G) any other information relating to such person that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (a) of this Section 2.4 (except that the references to "business" in such clauses shall instead refer to nominations of directors for purposes of this paragraph). At the request of the board of directors, any person nominated by a stockholder for election as a director shall furnish to the secretary of the corporation that information required to be set forth in the stockholder's notice of nomination which pertains to the nominee and such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such nominee, and in the absence of the furnishing of such information if requested, such stockholder's nomination shall not be considered in proper form pursuant to this Section 2.4(b). No person shall be eligible for election or re- 5 election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (b). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he or she should so determine, he or she shall so declare at the meeting, and the defective nomination shall be disregarded. 2.5 Notice of Stockholders Meetings. All notices of meetings of stockholders shall be in writing and shall be sent or otherwise given in accordance with Article VIII of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the General Corporation Law of Delaware or the certificate of incorporation of the corporation). The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.6 Quorum. At any meeting of the stockholders, the holders of a majority, present in person or by proxy, of all of the shares of the stock entitled to vote at the meeting shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. Where a separate vote by a class or classes is required, a majority, present in person or by proxy, of the shares of such class or classes entitled to take action with respect to that vote on that matter shall constitute a quorum. If a quorum shall fail to attend any meeting, the chairman of the meeting may adjourn the meeting to another place, date or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, those present at such adjourned meeting shall constitute a quorum (but in no event shall a quorum consist of less than one-third 6 of the shares entitled to vote at the meeting), and all matters shall be determined by a majority of the votes cast at such meeting, except as otherwise required by law. 2.7 Adjourned Meeting; Notice. When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.8 Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Each stockholder shall have one (1) vote for every share of stock entitled to vote that is registered in his or her name on the record date for the meeting (as determined in accordance with Section 2.11 of these bylaws), except as otherwise provided herein or required by law. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or provided herein, all other matters shall be determined by a majority of the votes cast affirmatively or negatively; except that a nominee for director shall be elected to the board of directors if the votes cast for such nominee's election exceed the votes cast against such nominee's election. For this purpose, votes cast shall exclude abstentions, withheld votes or broker non-votes with respect to that director's election. Notwithstanding the immediately preceding sentence, in the event of a contested election of directors, directors shall be elected by the vote of a plurality of the votes cast. For the purpose of this bylaw, a contested election shall mean any election of directors in which the number of candidates for election as director exceeds the number of directors to be elected. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee. 7 2.9 Waiver of Notice. Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 2.10 Stockholder Action by Written Consent Without a Meeting. Any action required or able to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice, and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation at its registered office in Delaware, its principal place of business, or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery to the corporation's registered office shall be made by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days after the date the earliest dated consent is delivered to the corporation, a written consent or consents signed by holders of a sufficient number of votes to take action are delivered to the corporation in the manner prescribed in the first paragraph of this section. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting 8 thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. 2.11 Record Date for Stockholder Notice; Voting; Giving Consents. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall neither precede nor be more than ten (10) days after the date upon which such resolution is adopted by the board of directors. Any stockholder of record seeking to have the stockholders authorize or take action by written consent shall, by written notice to the secretary, request the board of directors to fix a record date. The board of directors shall promptly, but in all events within ten (10) days after the date on which such notice is received, adopt a resolution fixing the record date. 9 If the board of directors has not fixed a record date within such time, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in the manner prescribed in the first paragraph of Section 2.10 of these bylaws. If the board of directors has not fixed a record date within such time and prior action by the board of directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the board of directors adopts the resolution taking such prior action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.12 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by a written proxy or an electronic transmission permitted by law, filed in accordance with the procedure established for the meeting or taking of action in writing, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section 2.12 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. 2.13 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and 10 showing the address of each stockholder and the number of shares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. 2.14 Conduct of Business. The Board of Directors will appoint a Chairman of the meeting, and he/she shall be authorized to be the final authority on all matters of procedure at the meeting. The rules provided below will govern the conduct of the meeting of stockholders and will be strictly enforced to maintain an orderly meeting. Robert’s Rules of Order will not be applicable and will not be utilized. (i) Method of Obtaining the Floor. Stockholders who desire to address the meeting must raise their hands and wait to be recognized by the Chairman. Only when a stockholder is recognized as having the floor may he or she address the meeting. (ii) Discussion. Persons addressing the meeting must limit their remarks to the issue then under consideration by the stockholders and to not more than five minutes in duration. A stockholder will be permitted to address the meeting on a particular issue not more than three times. 11 (iii) Stockholder Proposals. Stockholders will only be permitted to address the meeting on proposals that are included in the proxy statement and proxy relating to that meeting. 2.15 Inspectors of Election. The corporation may, and to the extent required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. 2.16 Inspectors of Election and Procedures for Counting Written Consents. Within three (3) business days after receipt of the earliest dated consent delivered to the corporation in the manner provided in Section 228(c) of the General Corporation Law of Delaware or the determination by the board of directors of the corporation that the corporation should seek corporate action by written consent, as the case may be, the secretary may engage nationally recognized independent inspectors of elections for the purpose of performing a ministerial review of the validity of the consents and revocations. The cost of retaining inspectors of election shall be borne by the corporation. Consents and revocations shall be delivered to the inspectors upon receipt by the corporation, the stockholder or stockholders soliciting consents or soliciting revocations in opposition to action by consent proposed by the corporation (the "Soliciting Stockholders") or their proxy solicitors or other designated agents. As soon as consents and revocations are received, the inspectors shall review the consents and revocations and shall maintain a count of the number of valid and unrevoked consents. As soon as practicable after the earlier of (i) sixty (60) days after the date of the earliest dated consent delivered to the corporation in the manner provided in Section 228(c) of the General Corporation Law of Delaware or (ii) a written request therefor by the corporation or the Soliciting Stockholders (whichever is soliciting consents) (which request, except in the case of corporate action by written consent taken pursuant to the 12 solicitations of not more than ten (10) persons, may be made no earlier than after such reasonable amount of time after the commencement date of the applicable solicitation of consents as is necessary to permit the inspectors to commence and organize their count, but in no event less than five (5) days after such commencement date), notice of which request shall be given to the party opposing the solicitation of consents, if any, which request shall state that the corporation or Soliciting Stockholders, as the case may be, have a good faith belief that the requisite number of valid and unrevoked consents to authorize or take the action specified in the consents has been received in accordance with these bylaws, the inspectors shall issue a preliminary report to the corporation and the Soliciting Stockholders stating: (i) the number of valid consents; (ii) the number of valid revocations; (iii) the number of valid and unrevoked consents; (iv) the number of invalid consents; (v) the number of invalid revocations; and (vi) whether, based on their preliminary count, the requisite number of valid and unrevoked consents has been obtained to authorize or take the action specified in the consents. Unless the corporation and the Soliciting Stockholders shall agree to a shorter or longer period, the corporation and the Soliciting Stockholders shall have 48 hours to review the consents and revocations and to advise the inspectors and the opposing party in writing as to whether they intend to challenge the preliminary report of the inspectors. If no written notice of an intention to challenge the preliminary report is received within 48 hours after the inspectors' issuance of the preliminary report, the inspectors shall issue to the corporation and the Soliciting Stockholders their final report containing the information from the inspectors' determination with respect to whether the requisite number of valid and unrevoked consents was obtained to authorize and take the action specified in the consents. If the corporation or the Soliciting Stockholders issue written notice of an intention to challenge the inspectors' preliminary report within 48 hours after the issuance of that report, a challenge session shall be scheduled by the inspectors as promptly as practicable. A transcript of the challenge session shall be recorded by a certified court reporter. Following completion of the challenge session, the inspectors shall as promptly as practicable issue their final report to the corporation and the Soliciting Stockholders, which report shall contain the information included in the preliminary report, plus all changes made to the vote totals as a result of the challenge and a certification of whether the requisite number of valid and unrevoked consents was obtained to authorize or take the action specified in the consents. A copy of the final report of the 13 inspectors shall be included in the book in which the proceedings of meetings of stockholders are recorded. 2.17 Election Not To Be Subject to Arizona Control Share Acquisitions Statute. The corporation elects not to be subject to Title 10, Chapter 23, Article 2 of the Arizona Revised Statutes relating to "Control Share Acquisitions." 2.18 Proxy Access for Director Nominees. (a) Inclusion of Stockholder Nominees in Proxy Materials. Whenever the board of directors solicits proxies with respect to the election of directors at an annual meeting (beginning with the annual meeting to be held in 2020), subject to the provisions of this Section 2.18, the corporation will include in its proxy materials for such annual meeting, in addition to any persons nominated for election by the board of directors or a committee appointed by the board of directors, the name, together with the Required Information (as defined below), of any person properly nominated for election (a “Stockholder Nominee”) to the board of directors by an Eligible Stockholder (as defined below). An Eligible Stockholder must expressly elect, at the time of providing the notice required by this Section 2.18 (the “Nomination Notice”), to have each nominee of such Eligible Stockholder included in the corporation’s proxy materials pursuant to this Section 2.18. For the avoidance of doubt, if a Stockholder Nominee is included in the corporation’s proxy materials for an annual meeting, then the corporation will also include such Stockholder Nominee on (i) any ballot distributed at such annual meeting; (ii) the corporation’s proxy card; and (iii) any other format through which the corporation permits proxies to be submitted. (b) Definition of Eligible Stockholder. An “Eligible Stockholder” is a stockholder, or a group of no more than 20 stockholders, of the corporation that has satisfied (individually or, in the case of a group, collectively) all applicable conditions and has complied with all applicable procedures, in each case as set forth in this Section 2.18. No person may be a member of more than one group of persons constituting an Eligible Stockholder. A record holder acting on behalf of one or more beneficial owners will not be counted separately as a stockholder with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, but each such beneficial owner will 14 be counted separately, subject to the other provisions of this Section 2.18, for purposes of determining the number of stockholders whose holdings may be considered as part of an Eligible Stockholder’s holdings. For purposes of this Section 2.18, two or more funds or trusts will be treated as one stockholder or beneficial owner (a “Qualifying Fund”) if they are (i) under common management and investment control; (ii) under common management and funded primarily by the same employer; or (iii) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended. (c) Required Information. For purposes of this Section 2.18, the “Required Information” that the corporation will include in its proxy materials is (i) the information concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the corporation’s proxy statement by the rules and regulations of the Securities and Exchange Commission (the “SEC”) promulgated under the 1934 Act; and (ii) if the Eligible Stockholder so elects, one or more Supporting Statements (as defined below). (d) Delivery of Nomination Notice. To be timely, a Nomination Notice must be delivered to, or mailed and received at, the principal executive offices of the corporation not less than 120 days nor more than 150 days prior to the anniversary of the day on which the corporation’s proxy statement relating to the immediately preceding annual meeting was first released to stockholders. No adjournment, postponement or other delay of an annual meeting, or any public announcement thereof, will commence a new time period (or extend any time period) for the giving of a Nomination Notice. (e) Maximum Number of Stockholder Nominees. (i) Maximum Number; Reductions. The maximum aggregate number of Stockholder Nominees that will be included in the corporation’s proxy materials with respect to an annual meeting will depend on the number of directors to be elected at such annual meeting. Specifically, in the event that the number of directors to be elected at the annual meeting is seven (7) or less, the maximum aggregate number of Stockholder Nominees that will be included in the corporation’s proxy materials with respect to such annual meeting shall be one (1) and, if the number of directors to be elected at the 15 annual meeting is greater than seven (7), the maximum aggregate number of Stockholder Nominees that will be included in the corporation’s proxy materials with respect to such annual meeting will not exceed the greater of (A) two or (B) 20 percent of the number of directors in office as of the last day on which a Nomination Notice may be delivered pursuant to this Section 2.18, or if such amount is not a whole number, then the closest whole number below 20 percent. This maximum number will be reduced by (1) the number of persons serving as directors or as nominees for director who, in either case, were elected or appointed to the board of directors or will be included in the corporation’ proxy materials as an unopposed (by the corporation) nominee pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of shares of common stock of the corporation by such stockholder or group of stockholders from the corporation), other than any director whose term of office will expire at such annual meeting and who is not seeking (or agreeing) to be nominated at such annual meeting for another term of office; (2) any Stockholder Nominee whose name was submitted by an Eligible Stockholder for inclusion in the corporation’s proxy materials pursuant to this Section 2.18 but either (a) is subsequently withdrawn, disregarded or declared invalid or ineligible; or (b) that the board of directors or a committee appointed by the board of directors decides to nominate for election; (3) the number of incumbent directors (as of the last day on which a Nomination Notice may be delivered pursuant to this Section 2.18) who were Stockholder Nominees at any of the preceding three annual meetings (including any individual covered under clause (2) above) and whose election at the upcoming annual meeting is being recommended by the board of directors; and (4) the number of persons nominated in accordance with Section 2.4 (whether or not such nomination is subsequently withdrawn) at the annual meeting. (ii) Impact of Vacancies. If (A) one or more vacancies for any reason occurs on the board of directors after the last day on which a Nomination Notice may be delivered pursuant to this Section 2.18 but before the date of the annual meeting and (B) the board of directors resolves to reduce the size of the board of directors in connection with such vacancy, then the maximum number of Stockholder Nominees will be calculated based on the number of directors in office as so reduced. 16 (iii) Ranking of Stockholder Nominees. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the corporation’s proxy materials must rank its Stockholder Nominees in its Nomination Notice based on the order in which the Eligible Stockholder desires that such Stockholder Nominees be selected for inclusion in the corporation’s proxy materials. If the number of Stockholder Nominees submitted by Eligible Stockholders exceeds the maximum number of nominees provided for pursuant to Section 2.18(e)(i), then the highest-ranking qualifying Stockholder Nominee of each Eligible Stockholder will be selected by the corporation for inclusion in the corporation’s proxy materials until the maximum number of Stockholder Nominees is reached, going in order by the number (largest to smallest) of shares of common stock of the corporation that each Eligible Stockholder disclosed as Owned (as defined below) in its Nomination Notice. If the maximum number of Stockholder Nominees is not reached after the highest-ranking qualifying Stockholder Nominee of each Eligible Stockholder has been selected, then this process will continue with the next highest-ranked Stockholder Nominees as many times as necessary, following the same order each time, until the maximum number is reached. (f) Ownership. For purposes of this Section 2.18, an Eligible Stockholder will be deemed to “Own” only those outstanding shares of common stock of the corporation as to which the Eligible Stockholder possesses both (i) the full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares. The number of shares calculated in accordance with the prior sentence will not include any shares (A) sold by such Eligible Stockholder or any of its affiliates in any transaction that has not been settled or closed, including any short sale; (B) borrowed by such Eligible Stockholder or any of its affiliates for any purpose; (C) purchased by such Eligible Stockholder or any of its affiliates subject to an agreement to resell; or (D) subject to any option, warrant, forward contract, swap, contract of sale, or other derivative or similar agreement entered into by such Eligible Stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of common stock of the corporation, in any such case which instrument or agreement has, or is intended to have, or if exercised would have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, the full right to vote or direct the voting of any such shares by the 17 Eligible Stockholder or its affiliates; or (2) hedging, offsetting or altering to any degree any gain or loss arising from the full economic ownership of such shares by such Eligible Stockholder or its affiliates. A stockholder will “Own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s Ownership of shares will be deemed to continue during any period in which the stockholder has (a) loaned such shares so long as the stockholder has the power to recall such loaned shares on no more than five business days’ notice and includes with the Nomination Notice an agreement that it (i) will promptly recall such loaned shares upon being notified by the corporation that any of its Stockholder Nominees will be included in the corporation’s proxy materials and (ii) will continue to hold such recalled shares through the date of the annual meeting; or (b) delegated any voting power by means of a proxy, power of attorney, or other instrument or arrangement that is revocable at any time by the stockholder. The terms “Owned,” “Owning”, “Ownership” and other variations of the word “Own” will have correlative meanings. For purposes of this Section 2.18, the term “affiliate” will have the meaning given to it in Rule 405 promulgated under the Securities Act of 1933 (the “Securities Act”). (g) Eligible Stockholder Requirements. (i) Ownership Requirement. To make a nomination pursuant to this Section 2.18, an Eligible Stockholder must have Owned continuously for at least three years (the “Holding Period”) a number of shares representing at least three percent of the corporation’s common stock (such required number of shares, the “Required Shares”). For purposes of determining whether the Eligible Stockholder owned the Required Shares for the Holding Period, the number of shares of common stock will be determined by reference to the corporation’s most recent periodic filings with the SEC during the Holding Period prior to the submission of the Eligible Stockholder’s Notice. The Required Shares must also be Owned continuously as of (i) the date on which the Nomination Notice is delivered to, or mailed and received at, the principal executive offices of the corporation in accordance with this Section 2.18; (ii) the record date for determining stockholders entitled to vote at the annual meeting; and (iii) the date of the annual meeting. 18 (ii) Additional Requirements for Groups of Stockholders. If a group of stockholders aggregates Ownership of shares in order to meet the requirements under this Section 2.18, then (i) all shares held by each stockholder constituting their contribution to the Required Shares must have been held by that stockholder continuously for at least the Holding Period, and must also be Owned continuously as of (A) the date on which the Nomination Notice is delivered to, or mailed and received at, the principal executive offices of the corporation in accordance with this Section 2.18; (B) the record date for determining stockholders entitled to vote at the annual meeting; and (C) the date of the annual meeting; (ii) each provision in this Section 2.18 that requires the Eligible Stockholder to provide any written statements, representations, undertakings, agreements or other instruments or to meet any other conditions will be deemed to require each stockholder that is a member of such group to provide such statements, representations, undertakings, agreements or other instruments and to meet such other conditions (except that the members of such group may aggregate their stockholdings in order to meet the Required Shares); and (iii) a breach of any obligation, agreement or representation under this Section 2.18 by any member of such group will be deemed a breach by the Eligible Stockholder. (h) Information to be Provided by an Eligible Stockholder. Within the time period specified for providing the Nomination Notice, an Eligible Stockholder (which, for purposes of this Section 2.18(h), will be deemed to include any beneficial owner on whose behalf the nomination is made) making a nomination pursuant to this Section 2.18 must provide the following information in writing to the Secretary of the corporation at the principal executive offices of the corporation: (i) the name and address of the Eligible Stockholder; (ii) a statement by the Eligible Stockholder (A) setting forth and certifying as to the number of shares of common stock of the corporation that it Owns and has Owned continuously during Holding Period; (B) agreeing to continue to Own the Required Shares through the date of annual meeting; and (C) indicating whether it intends to continue to own the Required Shares for at least one year following the annual meeting (it being understood that this statement will not be deemed to impose any obligation on the Eligible Stockholder to hold any of the Required Shares following the annual meeting); 19 (iii) in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, (A) the designation by all group members of one group member that is authorized to receive communications, notices and inquiries from the corporation and to act on behalf of all such members with respect to the nomination and all related matters (including any withdrawal of the nomination); (B) the written acceptance by such group member of such designation; and (C) the address, phone number and email address of such group member, (iv) one or more written statements from each record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Holding Period) verifying that, as of a date within seven calendar days prior to the date that Nomination Notice is delivered or received at the principal executive offices of the corporation, the Eligible Stockholder then Owns, and has Owned continuously for the Holding Period, the Required Shares; (v) an undertaking by the Eligible Stockholder to provide, within seven calendar days after (A) the record date for the annual meeting (if, prior to such record date, the corporation (1) has made disclosure of the record date in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the SEC pursuant to Section 13, Section 14 or Section 15(d) of the 1934 Act; or (2) delivered a written notice (including by email) of the record date to the Eligible Stockholder) or (B) the date on which the corporation delivered to the Eligible Stockholder written notice (including by email) of the record date (if such notice is provided after the record date), one or more written statements from each record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Holding Period) verifying the Eligible Stockholder’s continuous Ownership of the Required Shares through the record date; (vi) in the case of a Qualifying Fund whose share Ownership is counted for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the board of directors that demonstrates that such Qualifying Fund meets the requirements of a Qualifying Fund; 20 (vii) the information, agreements, certifications, representations and other documents required to be set forth in or included with a stockholder’s notice of a nomination pursuant to Section 2.4; (viii) a copy of the Schedule 14N that has been or is concurrently being filed by such Eligible Stockholder with the SEC as required by Rule 14a-18 under the 1934 Act (or any successor rule); (ix) a representation and undertaking that (A) the Eligible Stockholder (1) did not acquire, and is not holding, securities of the corporation for the purpose or with the effect of influencing or changing control of the corporation; (2) has not nominated, and will not nominate, for election to the board of directors at the annual meeting any person other than any Stockholder Nominees being nominated by it pursuant to this Section 2.18; (3) has not engaged, and will not engage, in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the 1934 Act (or any successor rule) in support of the election of any individual as a director at the annual meeting (other than its Stockholder Nominees or a nominee of the board of directors); (4) has not distributed, and will not distribute, to any stockholder any form of proxy for the annual meeting other than the form distributed by the corporation; (5) has complied, and will comply, with all laws, rules and regulations applicable to any actions taken pursuant to this Section 2.18, including the nomination of its Stockholder Nominees and any permissible solicitation in connection with the annual meeting; and (6) consents to the public disclosure of the information provided pursuant to this Section 2.18; and (B) the facts, statements and other information in all communications with the corporation and its stockholders by the Eligible Stockholder are, and will be, true and correct in all material respects and do not, and will not, omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; (x) an undertaking that the Eligible Stockholder agrees to (A) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the corporation or out of the information that the Eligible Stockholder provides to the corporation; (B) indemnify and hold harmless the corporation and each of its 21 directors, officers, employees, agents and affiliates individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the corporation or any of its directors, officers, employees, agents or affiliates arising out of any nomination, solicitation or other activity by the Eligible Stockholder in connection with its efforts to elect any Stockholder Nominees pursuant to this Section 2.18; (C) comply with all requirements of this Section 2.18; and (D) upon request, provide to the corporation within five business days after such request, but in any event prior to the date of the annual meeting, such additional information as is reasonably requested by the corporation (including any information reasonably necessary to verify the Eligible Stockholder’s continuous Ownership of the Required Shares for the Holding Period and through the date of the annual meeting). (i) Representations and Agreement of any Stockholder Nominee. (i) Materials Required to be Provided. Within the time period specified in this Section 2.18 for delivering the Nomination Notice, each Stockholder Nominee must deliver to the Secretary of the corporation a written representation and agreement that the Stockholder Nominee (A) other than as disclosed to the corporation, (1) is not, and will not become, a party to any agreement, arrangement or understanding with, and has not given, and will not give, any commitment or assurance to, any person or entity as to how such Stockholder Nominee, if elected as a director, will act or vote on any issue or question; and (2) is not, and will not become, a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a Stockholder Nominee or director; (B) if elected, will comply with the corporation’s corporate governance guidelines, code of ethics, share ownership and trading policies and guidelines, and any other policies and guidelines of the corporation applicable to directors, as well as any applicable law, rule or regulation or listing requirement; (C) consents to being named in the corporation’s proxy statement for the annual meeting as a nominee of the applicable Eligible Stockholder or of the board of directors; (D) agrees to serve as a director if elected; (E) consents to the public disclosure of the information provided pursuant to this 22 Section 2.18; and (F) represents that such Stockholder Nominee intends to serve as director of the corporation for the full term if so elected. (ii) Additional Materials. At the written request of the corporation, the Stockholder Nominee must promptly, but in any event within five business days of such request, submit all (A) completed and signed questionnaires required of the corporation’s directors, nominees for director, and officers; and (B) additional information requested by the corporation (1) as may be reasonably necessary to permit the board of directors or any of its committees to determine if such Stockholder Nominee (a) is independent under the listing standards of the principal U.S. exchange upon which the corporation’s common stock is listed, any applicable rules of the SEC and any publicly disclosed standards used by the board of directors in determining and disclosing the independence of the corporation’s directors (collectively, the “Applicable Independence Standards”); (b) is eligible to serve as a director of the corporation; (c) has any direct or indirect relationship with the corporation; and (d) is not, and has not been, subject to any event specified in Item 401(f) of Regulation S-K promulgated under the Securities Act (or any successor rule) or any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act (or any successor rule); and (2) that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such Stockholder Nominee. (j) Supporting Statement. For each of its Stockholder Nominees, the Eligible Stockholder may provide to the Secretary of the corporation, within the time period specified for providing the Nomination Notice, a written statement, not to exceed 500 words, for inclusion in the corporation’s proxy statement for the annual meeting in support of the candidacy of such Stockholder Nominee (a “Supporting Statement”). No Supporting Statement may include any images, charts, pictures, graphic presentations or similar items. (k) True, Correct and Complete Information. If any information or communications provided by any Eligible Stockholder or Stockholder Nominee to the corporation or its stockholders is not, when provided, or thereafter ceases to be, true, correct and complete in all material respects (including omitting a material fact necessary to make the statements made, in light of the circumstances 23 under which they were made, not misleading), then such Eligible Stockholder or Stockholder Nominee, as the case may be, must promptly notify the Secretary of the corporation in writing and provide the information that is required to make such information or communication true, correct, complete and not misleading. In addition, any person or entity providing any information to the corporation pursuant to this Section 2.18 must further update and supplement such information, if necessary, so that all such information is true and correct as of the record date for the annual meeting and as of the date that is 10 business days prior to the annual meeting or any adjournment, postponement or other delay thereof. Any update or supplement (or a written certification that no such updates or supplements are necessary and that the information previously provided remains true and correct as of the applicable date) pursuant to this Section 2.18(k) must be delivered to, or mailed and received by, the Secretary of the corporation at the principal executive offices of the corporation no later than (i) five business days after the record date for the annual meeting (in the case of any update and supplement required to be made as of the record date); and (ii) seven business days prior to the date of the annual meeting or any adjournment, postponement or other thereof (in the case of any update and supplement required to be made as of 10 business days prior to the annual meeting). No notification, update or supplement provided pursuant to this Section 2.18(k) or otherwise will be deemed to cure any defect in any previously provided information or communications or limit the remedies available to the corporation relating to any such defect (including the right to omit a Stockholder Nominee from its proxy materials). (l) Disqualifications and Exclusions of Stockholder Nominees. (i) Bases for Disqualifying or Excluding Stockholder Nominees. Notwithstanding anything to the contrary in this Section 2.18, the corporation will not be required to include a Stockholder Nominee in its proxy materials (A) if the Eligible Stockholder who has nominated such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” (within the meaning of Rule 14a-1(l) under the 1934 Act (or any successor rule)) in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominees or a nominee of the board of directors; (B) who is not independent under the Applicable Independence Standards as of the date on which the Nomination Notice is delivered to, or 24 mailed and received at, the principal executive offices of the corporation, as determined in good faith by the board of directors or any of its committees; (C) whose election as a member of the board of directors would cause the corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules and listing standards of the principal exchanges upon which the corporation’s shares of common stock are listed or traded, or any applicable law, rule or regulation; (D) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914; (E) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years; (F) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act (or any successor rule); (G) if such Stockholder Nominee dies, becomes disabled or otherwise becomes ineligible for inclusion in the corporation’s proxy materials pursuant to this Section 2.18 or otherwise becomes unavailable for election at the annual meeting (including because such Stockholder Nominee is no longer willing to serve on the board of directors); (H) if such Stockholder Nominee or the Eligible Stockholder who has nominated such Stockholder Nominee has provided information to the corporation with respect to such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement made, in light of the circumstances under which it was made, not misleading, as determined by the board of directors; (I) if such Stockholder Nominee, or the Eligible Stockholder who has nominated such Stockholder Nominee, otherwise contravenes any of the agreements or representations made by such Stockholder Nominee or Eligible Stockholder, as applicable, or fails to comply with its obligations pursuant to this Section 2.18; (J) if the Eligible Stockholder who has nominated such Stockholder Nominee ceases to be an Eligible Stockholder for any reason, including, but not limited to, not Owning the Required Shares through the date of the annual meeting; or (K) if such Stockholder Nominee and the Eligible Stockholder (or a representative thereof) or, in the case of a nomination by a group of stockholders, the representative designated by the group in accordance with Section 2.18(h)(iii), do not appear at the annual meeting to, applicable, present the Stockholder Nominee for election. (ii) Process Following Disqualification or Exclusion. Following any determination in accordance with Section 2.18(l)(i), (A) the corporation will not be required to include in 25 its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder; (B) to the extent feasible, the corporation may remove the information concerning a Stockholder Nominee and any related Supporting Statement (or portion thereof) from its proxy materials or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting; and (C) the board of directors or the person presiding at the annual meeting will declare the nomination of such Stockholder Nominee to be invalid and such nomination will be disregarded notwithstanding that proxies in support of such Stockholder Nominee may have been received by the corporation. (m) Filing Obligation. The Eligible Stockholder (including any person or entity who Owns shares of common stock of the corporation that constitute part of the Ownership of such Eligible Stockholder for purposes of meeting the Required Shares) must file with the SEC any solicitation of the corporation’s stockholders relating to the annual meeting at which the Stockholder Nominee will be nominated, regardless of whether any such filing is required under Regulation 14A of the 1934 Act (or any successor rule) or whether any exemption from filing is available for such solicitation under Regulation 14A of the 1934 Act. (n) Omitted Disclosure by the Corporation. Notwithstanding anything to the contrary contained in this Section 2.18, the corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes (i) is not true in all material respects or omits a material statement necessary to make such information or Supporting Statement (or portion thereof) not misleading; (ii) directly or indirectly impugns the character, integrity or personal reputation of, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation, with respect to, any person; or (iii) violates any applicable law, rule, regulation or listing standard. (o) No Limitation on the Corporation. Nothing in this Section 2.18 will limit the corporation’s ability to (i) solicit against any Stockholder Nominee; (ii) include in its proxy materials its own statements or other information relating to any Eligible Stockholder or Stockholder Nominee 26 (including any information provided to the corporation pursuant to this Section 2.18); or (iii) include in its proxy materials any Stockholder Nominee as a nominee of the board of directors. (p) Exclusive Method for Proxy Access. This Section 2.18 provides the exclusive method for a stockholder to include nominees for election to the board of directors in the corporation’s proxy materials. ARTICLE III DIRECTORS 3.1 Powers. Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 Number of Directors. The number of directors of the corporation shall be eight (8). This number may be changed by a duly adopted amendment to the certificate of incorporation or by an amendment to this bylaw adopted by resolution of the board of directors or by the stockholders. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires. 3.3 Election, Qualification and Term of Office of Directors. Except as provided in Section 3.4 of these bylaws, at each annual meeting of stockholders, directors of the corporation shall be elected to hold office until the expiration of the term for which they are elected, and until their successors have been duly elected and qualified; except that if any such election shall not be so held, such election shall take place at a stockholders' meeting called and held in accordance with the General Corporation Law of Delaware. 27 Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Nominations for election to the board of directors of the corporation at an annual meeting of stockholders may be made by the board or on behalf of the board by a nominating committee appointed by the board, or by any stockholder of the corporation entitled to vote for the election of directors at such meeting. Such nominations, other than those made by or on behalf of the board, shall be made by notice in writing in accordance with Section 2.4(b) of these bylaws. The chairman of the annual meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure. If such determination and declaration is made, the defective nomination shall be disregarded. 3.4 Resignation and Vacancies. Any director may resign at any time upon written notice or electronic transmission to the corporation. When one or more directors so resigns and the resignation is effective at a future date, only a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies. Unless otherwise provided in the certificate of incorporation or these bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled only by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled only by a majority of the 28 directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable. 3.5 Place of Meetings; Meetings by Telephone. The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 Regular Meetings. Regular meetings of the board of directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the board of directors and publicized among all directors. A notice of each regular meeting shall not be required. 29 3.7 Special Meetings; Notice. Special meetings of the board of directors for any purpose or purposes may be called at any time by the president or secretary of the corporation, or by any two of the directors then in office and shall be held at a place, on a date and at a time as such officer or such directors shall fix. Notice of the place, date and time of special meetings, unless waived, shall be given to each director by mailing written notice not less than two (2) days before the meeting or by sending a facsimile transmission or electronic mail containing the same not less than two (2) hours before the time of the holding of the meeting. If the circumstances warrant, notice may also be given personally or by telephone not less than two (2) hours before the time of the holding of the meeting. Oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. 3.8 Quorum. At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. 3.9 Waiver of Notice. Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at 30 the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 3.10 Adjourned Meeting; Notice. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. 3.11 Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee. Any person (whether or not then a director) may provide, whether through instruction to an agent or otherwise, that a consent to action will be effective at a future time (including a time determined upon the happening of an event), no later than sixty (60) days after such instruction is given or such provision is made and such consent shall be deemed to have been given for purposes of this Section 3.11 at such effective time so long as such person is then a director and did not revoke the consent prior to such time. Any such consent shall be revocable prior to its becoming effective. 3.12 Fees and Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance of each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. 31 3.13 Loans (a) No Loans to Directors or Executive Officers. To the extent provided under the Sarbanes-Oxley Act of 2002 and regulations promulgated thereunder, the corporation may not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for the extension of credit, or renew an extension of credit, in the form of a personal loan, to, or for any director or executive officer (or equivalent thereof) in contravention of the Sarbanes-Oxley Act of 2002 and regulations promulgated thereunder. (b) Approval of Loans to Officers. Except as set forth in Section 3.13(a) above, the corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.14 Removal of Directors. Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office. 3.15 Conduct of Business. At any meeting of the board of directors, business shall be transacted in such order and manner as the board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. 32 3.16 Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. ARTICLE IV COMMITTEES 4.1 Committees of Directors. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designation and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any 33 other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), (ii) adopt an agreement of merger or consolidation under Section 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, a supplemental resolution of the board of directors, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 4.2 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 Meetings and Action of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment and notice of adjournment), and Section 3.11 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolutions of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. 34 ARTICLE V OFFICERS 5.1 Officers. The officers of the corporation shall be a chief executive officer, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, a president, one or more vice presidents, one or more assistant secretaries, a controller, one or more assistant controllers, a treasurer, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person. 5.2 Appointment of Officers. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or 5.5 of these bylaws, shall be appointed by the board of directors. 5.3 Subordinate Officers. The board of directors may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as such chief executive officer or president, as applicable, or the board of directors may from time to time determine. 5.4 Removal and Resignation of Officers. Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by the chief executive officer or any other officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. 35 5.5 Vacancies in Offices. Any vacancy occurring in any office of the corporation shall be filled in the manner prescribed in these bylaws for regular appointments to that office. 5.6 Chairman of the Board. The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him or her by the board of directors or as may be prescribed by these bylaws. If there is no chief executive officer or president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws. 5.7 Chief Executive Officer. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, the chief executive officer of the corporation shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He or she shall have the general powers and duties of management usually vested in the office of the chief executive officer of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. 5.8 President. Subject to the supervision, direction and control of the chief executive officer, if there be such an officer, the president shall have general supervision, direction, and control of the business and the officers of the corporation. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. 5.9 Vice Presidents. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively 36 by the board of directors, these bylaws, the chief executive officer, the president or the chairman of the board. 5.10 Secretary. The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. He or she shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. 5.11 Chief Financial Officer. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer shall deposit, or cause to be deposited, all money and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors or the chief executive officer. He or she shall disburse, or cause to be disbursed, the funds of the corporation as may be ordered by the board of directors or the chief executive officer, shall render to 37 the chief executive officer, the president and directors, whenever they request it, an account of all of his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors, the chief executive officer or these bylaws. The duties of the chief financial officer may be allocated by the board of directors or the chief executive officer among one or more persons, in its discretion. 5.12 Treasurer. The treasurer shall have such powers and discharge such duties relating to the financial aspects of the corporation's business as may be prescribed by the board of directors or the chief financial officer. 5.13 Assistant Secretary. The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe. 5.14 Assistant Treasurer. The assistant treasurer, or, if there is more than one, the assistant treasurers in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe. 5.15 Authority and Duties of Officers. In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors, the chief executive officer or the stockholders. 5.16 Representation of Shares of Other Corporations. The chairman of the board, the chief executive officer, the president, any vice president, the treasurer, the secretary or assistant secretary of this 38 corporation, or any other person authorized by the board of directors, the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. ARTICLE VI INDEMNITY 6.1 Indemnification of Directors and Officers. The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and executive officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a "director" or "executive officer" of the corporation includes any person (i) who is or was a director or executive officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or executive officer of another corporation partnership, joint venture, trust or other enterprise, or (iii) who was a director or executive officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.2 Indemnification of Others. The corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and executive officers) against expenses (including attorney's fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or executive officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who 39 is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.3 Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware. ARTICLE VII RECORDS AND REPORTS 7.1 Maintenance and Inspection of Records. The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records. 7.2 Inspection by Directors. Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 40 ARTICLE VIII MANNER OF GIVING NOTICE AND WAIVER 8.1 Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder shall be in writing and may in every instance be effectively given by (i) hand delivery, (ii) mail, postage paid, or (iii) a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such notice given by hand delivery or mail shall be addressed to such stockholder at his or her last known address as it appears on the books of the corporation. The time of the giving of the notice shall be the time when such notice shall be deemed received if hand delivered, or dispatched if sent by mail. Any such notice given by electronic transmission shall be deemed given: (i) if by facsimile transmission, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and stockholder. (iv) if by any other form of electronic transmission, when directed to the An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 41 Any such consent sent to a stockholder shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if: (i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent; and (ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice. However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. An "electronic transmission" means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process. Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the General Corporation Law of Delaware. 8.2 Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the General Corporation Law of Delaware, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the corporation under the provisions of the General Corporation Law of Delaware, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any stockholder who fails to object in writing to the corporation, within 60 days of having been given written notice by the corporation of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice. 8.3 Notice to Person with whom Communicating is Unlawful. Whenever notice is required to be given, under the General Corporation Law of Delaware, the certificate of incorporation or these 42 bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under the General Corporation Law of Delaware, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. 8.4 Waiver of Notice. Whenever notice is required to be given under any provision of the General Corporation Law of Delaware, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws. ARTICLE IX GENERAL MATTERS 9.1 Checks. From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. 43 9.2 Execution of Corporate Contracts and Instruments. The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 9.3 Stock Certificates; Partly Paid. The shares of a corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by any two authorized officers of the corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 44 9.4 Special Designation on Certificates. If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section 9.4 or Sections 156, 202(a) or 218(a) of the General Corporation Law of Delaware or with respect to this section 9.4 a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical. 9.5 Lost Certificates. Except as provided in this Section 9.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his or her legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 45 9.6 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the General Corporation Law of Delaware shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 9.7 Dividends. The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 9.8 Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 9.9 Seal. The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 9.10 Transfer of Stock. Stock of the corporation shall be transferable in the manner prescribed by law and in these bylaws. Transfers of stock shall be made on the books of the corporation only by the record holder of such stock or by his or her attorney lawfully constituted in writing and, if such stock is certificated, upon the surrender of the certificate therefore to the corporation or the transfer agent of the corporation, which shall be canceled before a new certificate shall be issued. Any transfer shall be accompanied by proper evidence of succession, assignment or authority and upon receipt of such evidence and compliance with the other applicable provisions of these bylaws and applicable law, it shall be the duty of the corporation to record the transaction in its books. 46 9.11 Stock Transfer Agreements. The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. 9.12 Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE X AMENDMENTS Any of these bylaws may be altered, amended or repealed by the affirmative vote of a majority of the board of directors or, with respect to bylaw amendments placed before the stockholders for approval and except as otherwise provided herein or required by law, by the affirmative vote of the holders of a majority of the shares of the corporation’s stock entitled to vote in the election of directors, voting as one class. * * * * * * 47 EXHIBIT 21.1 MICROCHIP TECHNOLOGY INCORPORATED LIST OF SIGNIFICANT SUBSIDIARIES Microsemi Corp. - Holding 2 Office 28, Verdala Business Centre, Level 2 LM Complex, Brewery Street Central Business District Birkirkara, CBDE, 3040, Malta MBarb Malta Limited Office 28, Verdala Business Centre, Level 2 LM Complex, Brewery Street Central Business District Birkirkara, CBDE 3040, Malta Microchip Malta BMD Limited Office 28, Verdala Business Centre, Level 2 LM Complex, Brewery Street Central Business District Birkirkara, CBDE 3040, Malta Microchip Technology (Thailand) Co., Ltd. 14 Moo 1, Tambol Wangtakien Amphur Muang Chacherngsao Chacherngsao - 24000 Thailand Microchip Communications, LLC 2355 W. Chandler Blvd. Chandler, Arizona - 85224 USA Microsemi Solutions UK Limited Castlegate Business Park, Unit 4 Caldicot, Monmouthshire, UK NP26 5AD Microsemi - IOM Limited 2nd Floor, St. Mary's Court 20 Hill Street Douglas, Isle of Man, IM1 1EU Microsemi Corp. – Holding Office 28, Verdala Business Centre, Level 2 LM Complex, Brewery Street Central Business District Birkirkara, CBDE 3040, Malta Silicon Storage Technology Inc. 2355 W. Chandler Boulevard Chandler, AZ 85224 Microsemi Corporation 2355 W. Chandler Boulevard Chandler, AZ 85224 MCHP Technology Malta Limited Office 28, Verdala Business Centre, Level 2 LM Complex, Brewery Street Central Business District Birkirkara, CBDE 3040, Malta Microchip Technology Ireland Limited Ground Floor, Block W East Point Business Park Dublin 3, Ireland Microsemi SoC Corp. 2355 W. Chandler Boulevard Chandler, AZ 85224 Microchip Technology LLC 2355 W. Chandler Boulevard Chandler, AZ 85224 Microsemi Solutions SDN BHD. Level 1, Building 3 Plot 10 Bayan Lepas Technoplex Bayan Lepas Industrial Zone, Phase 4 Penang, Malaysia 11900 Microsemi Storage Solutions, Inc. 2355 W. Chandler Boulevard Chandler, AZ 85224 EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following Registration Statements: (1) Form S-8 No. 33-59686, (2) Form S-8 No. 33-80072, (3) Form S-8 No. 33-81690, (4) Form S-8 No. 33-83196, (5) Form S-8 No. 333-00872, (6) Form S-8 No. 333-40791, (7) Form S-8 No. 333-93571, (8) Form S-8 No. 333-51322, (9) Form S-8 No. 333-73506, (10) Form S-8 No. 333-99655, (11) Form S-8 No. 333-103764, (12) Form S-8 No. 333-109486, (13) Form S-8 No. 333-119939, (14) Form S-8 No. 333-140773, (15) Form S-8 No. 333-149460, (16) Form S-8 No. 333-177889, (17) Form S-8 No. 333-183074, (18) Form S-8 No. 333-192273, (19) Form S-8 No. 333-197233, (20) Form S-8 No. 333-206210, (21) Form S-8 No. 333-213062, (22) Form S-8 No. 333-221420, (23) Form S-8 No. 333-225257, and (24) Form S-8 No. 333-236250 of our reports dated May 17, 2021 with respect to the consolidated financial statements of Microchip Technology Incorporated, and the effectiveness of internal control over financial reporting of Microchip Technology Incorporated, included in this Annual Report (Form 10-K) of Microchip Technology Incorporated for the year ended March 31, 2021. Phoenix, Arizona May 17, 2021 /s/ Ernst & Young LLP CERTIFICATION Exhibit 31.1 I, Ganesh Moorthy, certify that: 1. 2. 3. 4. I have reviewed this Form 10-K of Microchip Technology Incorporated; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and l5d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) (b) (c) (d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): (a) (b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 17, 2021 /s/ Ganesh Moorthy Ganesh Moorthy President, Chief Executive Officer, and Director CERTIFICATION Exhibit 31.2 I, J. Eric Bjornholt, certify that: 1. 2. 3. 4. I have reviewed this Form 10-K of Microchip Technology Incorporated; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and l5d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) (b) (c) (d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): (a) (b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 17, 2021 /s/ J. Eric Bjornholt J. Eric Bjornholt Senior Vice President and Chief Financial Officer CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32 I, Ganesh Moorthy, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Microchip Technology Incorporated on Form 10-K for the period ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Microchip Technology Incorporated. /s/ Ganesh Moorthy By: Name: Ganesh Moorthy Title: President, Chief Executive Officer, and Director Date: May 17, 2021 I, J. Eric Bjornholt, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Microchip Technology Incorporated on Form 10-K for the period ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Microchip Technology Incorporated. /s/ J. Eric Bjornholt By: Name: J. Eric Bjornholt Title: Senior Vice President and Chief Financial Officer Date: May 17, 2021 

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