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Steve Sanghi, president, ceo and chairman, Microchip

As economies come out of recession, Microchip believes it is well placed. Graham Pitcher talks with Steve Sanghi.

Microchip was unlike pretty much any other electronics company during the recent downturn, according to president, ceo and chairman Steve Sanghi.

The reason? "Shared sacrifice," he claimed. "We got through the recession with no layoffs and I don't know of any other company which didn't lay people off." That's not to say the downturn wasn't painful for Sanghi and the rest of the company's 4800 employees: for most of the last year, they have seen their salaries cut by 10%. Other measures included unpaid 'holiday', no bonuses, a serious reduction in expenses and factory shutdown days which reduced capacity by 45%. "Because of these measures," he noted, "Microchip is well positioned to take advantage of the upturn in the economy."

One of the benefits of the no lay off policy was keeping the company's design teams working. "We have been focusing on new product development when other companies weren't."

And the no lay off approach ensured that its workforce stayed certified and trained. "As business came back," Sanghi noted, "we could give staff more hours and we could increase manufacturing capacity quickly. Competitors, by contrast, have lost people and lost certification." He pointed to lead times as an example of where Microchip, in his opinion, has the edge. "Some of our competitors have lead times of up to 40 weeks on some products. Today, 60% of the products in our portfolio are available on a three week lead time and 90% have lead times of less than five weeks."

That's an impressive statistic, considering the breadth of Microchip's portfolio. Unlike other competitors – particularly in the microcontroller market – Microchip prides itself on having almost a part for every application. Renowned for its 8bit PIC micros, the company has moved into the 16bit market and, more recently, entered the burgeoning 32bit sector.

"We made another major product line launch last month," he noted, "which doubled the size of our 32bit portfolio."

Sanghi believes having a broad product portfolio has been the basis of Microchip's success over recent years, implying its 63,000 customers can't be wrong. "We can take a product to a customer, who will say they like the look of the architecture, but they can't use it because it doesn't have the right amount of memory or that it needs a USB port. Our ability to 'mix and match' means we can produce hundreds of products to cover the market."

Why doesn't Microchip offer micros with programmable peripherals if that's the case? "Some companies like to offer a 'super set' product, but that doesn't make money," he observed. Having said that, he noted that 'two or three' products in the PIC16 series are configurable. "But they are more expensive," he added. "When you add the ability to configure, you add circuitry and that means it won't be as cheap."

He compares the situation with that of fpgas. "A product that can be configured to look like 10 others is going to be more expensive – and customers are very cost sensitive."

According to Gartner, Microchip was the leading company in the 8bit microcontroller market in 2008 on a revenue basis. Sanghi added that it now has more than 2000 'large customers' in production with its 16bit micros, where there is still 'significant growth' and 125 'large customers' in designs in production based on the recently launched PIC32 range.

Despite its apparent strong position in microcontrollers, Sanghi looked to consolidate with an attempt to buy Atmel. "It was a unique opportunity," he reflected, "and we were willing to buy the four divisions (micros, asic, memory and automotive)." On Semiconductor was a willing partner, looking to pick up the memory and automotive operations, but the deal couldn't be brokered. "Microchip would have been the only company offering ARM and MIPS based 32bit micros," he added.

Now, Sanghi says he isn't interested in ARM cores. "I'm very happy with MIPS for our 32bit micros," he stressed. "The parts are proving to be faster and cheaper than competitive devices and we're winning designs every day."

Microchip is slowly carving out a piece of the analogue electronics market and it's no surprise this sector is of interest. "Analogue products surround the microcontroller," Sanghi noted, "and, for every $1 of micro, there's between $1.50 and $2 of analogue components, depending upon the part and the application."

Analogue sales are now running at $100million a year and there are 590 devices in production. "We're adding 60 or 70 new parts a year. It's the same situation as it is with micros; if you don't have the right products, the customer won't come back to you every time. A broad portfolio gives you more chance of winning."

Analogue revenue is now some 10% of Microchip's turnover. "In the next five years, that could rise to 15%," Sanghi believed, "outgrowing the rest of the company."
Sanghi was in the UK to officially open Microchip's new European headquarters in Winnersh, reflecting the importance of the region. European sales currently run at around $250m a year, with plans for that figure to double in the next five years, underpinned with design centres in Romania and Switzerland.
Sanghi is confident of the future. "The outlook is pretty positive and global sales have increased recently, including 10% in Europe. We are in a better position with customers," he concluded, "and we are seeing strong design wins."

Steve Sanghi

Steve Sanghi was appointed president of Microchip in August 1990, chief executive officer in October 1991 and the chairman of the board of directors in October 1993. Prior to joining Microchip, Sanghi was vice president of operations for Waferscale Integration. He has also held management and engineering positions with Intel.

Graham Pitcher

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