Analysis of Reportable Segments
Microchip Technology Inc. operates in 2 segments: Semiconductor products and Technology licensing.
Segment Profit Margin
Microchip Technology Inc., profit margin by reportable segment
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | |
|---|---|---|---|---|---|---|
| Semiconductor products | 64.60% | 61.40% | 60.75% | 53.65% | 59.75% | 50.23% |
| Technology licensing | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
The profit margin data for the reportable segments shows distinct trends and stable patterns over the analyzed periods.
- Semiconductor Products Segment
-
The profit margin for the semiconductor products segment exhibited variability but generally presented an upward trend from 2017 to 2022. Starting at 50.23% in 2017, the margin increased significantly to reach 59.75% in 2018. Following this, a decline was observed in 2019, where the margin decreased to 53.65%, indicating some challenges or increased costs during that year.
From 2019 onwards, the margin rebounded strongly, climbing to 60.75% in 2020 and achieving a slight increase to 61.4% in 2021. The latest data for 2022 reveals a continued positive trajectory with the segment reaching a profit margin of 64.6%. This progression suggests improving efficiency or advantageous market conditions contributing to higher profitability in the semiconductor products segment over time.
- Technology Licensing Segment
-
The technology licensing segment displays a consistently perfect profit margin of 100% throughout the entire span of years from 2017 to 2022. This uniformity indicates that this segment possibly operates with negligible costs relative to its revenue, or that all licensing revenues translate directly into profit. The stable 100% margin reflects a highly profitable and efficient segment without observable fluctuations.
Segment Profit Margin: Semiconductor products
Microchip Technology Inc.; Semiconductor products; segment profit margin calculation
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | 4,327,600) | 3,275,900) | 3,145,200) | 2,798,900) | 2,315,900) | 1,666,040) |
| Net sales | 6,698,900) | 5,335,500) | 5,177,300) | 5,217,100) | 3,876,000) | 3,316,651) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 64.60% | 61.40% | 60.75% | 53.65% | 59.75% | 50.23% |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 2022 Calculation
Segment profit margin = 100 × Gross profit ÷ Net sales
= 100 × 4,327,600 ÷ 6,698,900 = 64.60%
- Gross Profit
- The gross profit exhibited a consistent upward trend throughout the observed periods. Starting from approximately 1.67 billion USD in the fiscal year ending March 31, 2017, it increased steadily each year, reaching about 4.33 billion USD by March 31, 2022. This represents a significant growth, indicating improved profitability or expansion in core operations within the segment.
- Net Sales
- Net sales showed a generally positive trajectory with some fluctuations. Beginning around 3.32 billion USD in the year ending March 31, 2017, net sales rose gradually to a peak of approximately 5.22 billion USD by March 31, 2019. A slight decline is noted in the following year to about 5.18 billion USD, followed by a modest recovery to 5.34 billion USD in 2021. A substantial increase occurred in the final period, reaching nearly 6.70 billion USD as of March 31, 2022. This reflects growth with some variability, potentially due to market conditions or product demand fluctuations.
- Segment Profit Margin
- The segment profit margin demonstrated notable improvement over the six-year span. Beginning at 50.23% in 2017, the margin increased to a high of 59.75% in 2018, followed by a dip to 53.65% in 2019. Subsequently, it rose markedly to 60.75% in 2020, continuing an upward trend to 61.4% in 2021, and reaching 64.6% in 2022. This indicates enhanced efficiency or cost management resulting in higher profitability relative to sales.
- Overall Analysis
- The data reveals overall positive growth and improved profitability within the semiconductor products segment over the evaluated period. Both gross profit and net sales increased substantially, particularly between 2021 and 2022. The segment profit margin trend suggests better operational performance and cost controls contributing to a rising proportion of profit from net sales. The slight fluctuations in net sales and profit margin during 2019 and 2020 may reflect external factors impacting the segment, but the recovery and acceleration in growth in later years indicate robust segment performance.
Segment Profit Margin: Technology licensing
Microchip Technology Inc.; Technology licensing; segment profit margin calculation
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | 122,000) | 102,900) | 96,900) | 132,400) | 104,800) | 91,156) |
| Net sales | 122,000) | 102,900) | 96,900) | 132,400) | 104,800) | 91,156) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 2022 Calculation
Segment profit margin = 100 × Gross profit ÷ Net sales
= 100 × 122,000 ÷ 122,000 = 100.00%
The financial data for the Technology licensing segment exhibits notable trends over the six-year period ending March 31, 2022. Both gross profit and net sales display similar values each year, indicating a direct correlation between sales and profitability within this segment. The segment profit margin remains consistently at 100%, signifying that costs directly related to this segment are negligible or fully accounted for in a way that gross profit equals net sales.
- Gross Profit and Net Sales:
- Both gross profit and net sales follow the same pattern, starting at $91,156 thousand in 2017, increasing steadily to a peak of $132,400 thousand in 2019. This was followed by a decline to $96,900 thousand in 2020, then a recovery to $102,900 thousand in 2021, and a further increase to $122,000 thousand in 2022.
- This trend suggests a growth period until 2019, a temporary downturn in 2020, possibly reflecting market or operational challenges, and a subsequent rebound with substantial growth momentum by 2022.
- Segment Profit Margin:
- The segment maintained a perfect profit margin of 100% throughout the entire period, indicating that net sales are equivalent to gross profit. This reflects a licensing revenue model with minimal or no associated direct costs, or the margin is calculated after allocation methods that treat revenues as pure profit.
Net sales
Microchip Technology Inc., net sales by reportable segment
US$ in thousands
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | |
|---|---|---|---|---|---|---|
| Semiconductor products | 6,698,900) | 5,335,500) | 5,177,300) | 5,217,100) | 3,876,000) | 3,316,651) |
| Technology licensing | 122,000) | 102,900) | 96,900) | 132,400) | 104,800) | 91,156) |
| Total | 6,820,900) | 5,438,400) | 5,274,200) | 5,349,500) | 3,980,800) | 3,407,807) |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
The data presents the net sales figures for two reportable segments over a six-year period, measured in thousands of US dollars.
- Semiconductor products
- There is a clear upward trend in sales for semiconductor products from 2017 through 2022. Starting at approximately 3.32 billion in 2017, the segment experienced steady growth each year, with particularly notable increases between 2018 and 2019, as well as from 2021 to 2022. The sales rose from about 3.88 billion in 2018 to around 5.22 billion in 2019, and ultimately reached nearly 6.70 billion in 2022. Despite a slight dip from 2019 to 2020, the overall trajectory remains positive, indicating robust demand or successful market penetration within this segment.
- Technology licensing
- Sales associated with technology licensing exhibited more fluctuation across the observed period. Beginning at roughly 91 million in 2017, the segment increased steadily through 2019, peaking at approximately 132 million. Subsequently, there was a decline in 2020 to around 97 million, followed by moderate recovery in the following years, reaching 122 million in 2022. The pattern suggests sensitivity to market conditions or contract renewals inherent in licensing activities, with recovery evident after a downturn in 2020.
- Total net sales
- The combined net sales of the two segments show a consistent increase overall, moving from approximately 3.41 billion in 2017 to around 6.82 billion in 2022. Despite a marginal decrease between 2019 and 2020, total sales rebounded and continued to grow through 2021 and 2022. This trend aligns closely with the semiconductor products segment, which constitutes the majority of total sales, with technology licensing contributing a smaller but relatively stable share.
Gross profit
Microchip Technology Inc., gross profit by reportable segment
US$ in thousands
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | |
|---|---|---|---|---|---|---|
| Semiconductor products | 4,327,600) | 3,275,900) | 3,145,200) | 2,798,900) | 2,315,900) | 1,666,040) |
| Technology licensing | 122,000) | 102,900) | 96,900) | 132,400) | 104,800) | 91,156) |
| Total | 4,449,600) | 3,378,800) | 3,242,100) | 2,931,300) | 2,420,700) | 1,757,196) |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
The analysis of the annual reportable segment gross profit data reveals distinct trends in the semiconductor products and technology licensing segments over the six-year period ending March 31, 2022.
- Semiconductor Products
- The semiconductor products segment demonstrates a consistent upward trend in gross profit from 2017 through 2022. Starting at approximately $1.666 billion in 2017, the gross profit increased steadily each year, reaching about $4.328 billion in 2022. The growth rate appears robust, especially between 2021 and 2022, where the gross profit surged by roughly 32% from $3.276 billion to $4.328 billion. This indicates strong performance and expanding profitability within this core segment.
- Technology Licensing
- The technology licensing segment experienced more variability during the same period. Gross profit increased from approximately $91.2 million in 2017 to a peak of about $132.4 million in 2019. However, there was a noticeable decline in 2020 to roughly $96.9 million, followed by a modest recovery to around $122 million by 2022. This pattern suggests some volatility possibly due to fluctuations in licensing agreements or market demand, though the overall long-term trend remains positive with a moderate increase over the six years.
- Total Gross Profit
- The aggregate gross profit for both segments combined exhibits continuous growth over the entire timeframe. Total gross profit rose from approximately $1.757 billion in 2017 to about $4.450 billion in 2022. This represents a cumulative increase of over 150%, driven predominantly by growth in semiconductor products. Despite fluctuations in technology licensing, the substantial contribution from semiconductor products is the primary factor behind the total gross profit expansion.
In summary, the company's gross profit data shows a strong upward trajectory primarily fueled by the semiconductor products segment, demonstrating effective market positioning and operational performance. The technology licensing segment, while smaller and more volatile, maintains a generally positive trend, contributing to the overall profitability growth. The notable increase in total gross profit in the final reported year underlines successful strategic execution and enhanced revenue-generating capabilities in key business areas.