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).
An examination of segment profit margins between 2017 and 2022 reveals contrasting performance profiles between the primary product line and licensing activities.
- Semiconductor Products Margin
- The profit margin for semiconductor products exhibited a general upward trajectory over the six-year period, despite a period of volatility. Starting at 50.23% in 2017, the margin increased to 59.75% in 2018 before experiencing a contraction to 53.65% in 2019. Following this dip, a consistent expansion phase began, with margins rising to 60.75% in 2020, 61.40% in 2021, and reaching a peak of 64.60% in 2022. This overall growth suggests a sustained improvement in operational efficiency or pricing power within the core manufacturing segment.
- Technology Licensing Margin
- The technology licensing segment maintained a constant profit margin of 100.00% from 2017 through 2022. This indicates a revenue stream with no associated direct costs, reflecting absolute stability and maximum profitability throughout the analyzed timeframe.
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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%
The financial performance of the semiconductor products segment demonstrates a consistent upward trajectory in both top-line revenue and overall profitability over the six-year period ending March 31, 2022. A strong correlation exists between the growth in net sales and the expansion of gross profit, although the profit margin experienced intermittent volatility before achieving a sustained increase.
- Net Sales Performance
- Net sales grew from 3,316,651 thousand US dollars in 2017 to 6,698,900 thousand US dollars in 2022, representing more than a twofold increase. Growth was particularly aggressive between 2018 and 2019. A marginal contraction occurred in 2020, followed by a recovery in 2021 and a significant surge in 2022.
- Gross Profit Trends
- Gross profit exhibited uninterrupted annual growth throughout the analyzed period, rising from 1,666,040 thousand US dollars in 2017 to 4,327,600 thousand US dollars in 2022. This steady increase suggests a robust ability to manage production costs and maintain pricing power despite fluctuations in sales volume.
- Segment Profit Margin Analysis
- The segment profit margin shifted from 50.23% in 2017 to a peak of 64.60% in 2022. While a temporary decline to 53.65% was observed in 2019, the subsequent years showed consistent expansion. Notably, in 2020, the margin increased to 60.75% despite a slight dip in net sales, indicating improved operational efficiency or a shift toward higher-margin product mixes during that period.
Overall, the data indicates an strengthening financial position characterized by significant revenue scaling and a widening gap between cost of goods sold and net sales, resulting in a substantially improved profitability profile by the end of the reporting period.
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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 technology licensing segment is characterized by a total absence of direct costs associated with its revenue stream, resulting in a consistent and maximum profit margin over the six-year period ending March 31, 2022.
- Revenue Performance
- Net sales experienced an upward trend from March 31, 2017, to March 31, 2019, rising from $91.16 million to a peak of $132.40 million. A contraction occurred in the fiscal year ending March 31, 2020, where sales declined to $96.90 million. Subsequently, a recovery trend was established, with revenue increasing to $102.90 million in 2021 and reaching $122.00 million by March 31, 2022.
- Margin Stability and Cost Structure
- The segment profit margin remained stagnant at 100.00% across all reporting periods. This is a direct result of gross profit being identical to net sales in every year analyzed, indicating that the licensing of technology incurs no reportable cost of goods sold within this specific segment.
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Net sales
Microchip Technology Inc., net sales by reportable segment
US$ 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).
Total net sales demonstrate a consistent growth trajectory over the analyzed period, increasing from $3,407.8 million in March 2017 to $6,820.9 million by March 2022. This represents a significant overall expansion, characterized by a period of rapid acceleration between 2018 and 2019, followed by a phase of stabilization and a subsequent sharp increase in the final reporting year.
- Semiconductor Products Performance
- This segment serves as the primary revenue driver, exhibiting substantial growth from $3,316.7 million in 2017 to $6,698.9 million in 2022. The most pronounced growth occurred between 2018 and 2019, with sales increasing by approximately 34.6%. A marginal contraction of 0.7% was observed in 2020, which was followed by a recovery and a significant acceleration in 2022, where sales rose by 25.5% over the previous year.
- Technology Licensing Trends
- The licensing segment contributes a relatively small portion of total net sales and exhibits higher volatility compared to semiconductor products. Revenue in this segment peaked in 2019 at $132.4 million before experiencing a notable decline to $96.9 million in 2020. Although a recovery trend was observed reaching $122.0 million by 2022, the values remained below the 2019 peak.
- Revenue Composition and Concentration
- Analysis of the segment distribution reveals a high level of revenue concentration. Semiconductor products consistently accounted for the vast majority of total net sales, maintaining a share of over 97% throughout the six-year period. Consequently, the overall financial growth of the organization is almost entirely driven by the performance of the semiconductor products segment, with technology licensing providing a minimal contribution to the total top-line result.
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Gross profit
Microchip Technology Inc., gross profit by reportable segment
US$ 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).
Total gross profit exhibits a consistent and strong upward trajectory over the six-year period ending March 31, 2022. Aggregate gross profit increased from $1,757,196 thousand in 2017 to $4,449,600 thousand in 2022, reflecting a substantial expansion in the company's earning capacity.
- Semiconductor Products Growth
- The semiconductor products segment serves as the primary driver of profitability, demonstrating uninterrupted annual growth. A significant acceleration in gross profit is observed between March 31, 2021, and March 31, 2022, where the value rose from $3,275,900 thousand to $4,327,600 thousand. This represents the largest single-year increase in the observed period.
- Technology Licensing Volatility
- In contrast to the product segment, technology licensing shows a more volatile trend with a smaller financial impact. After peaking at $132,400 thousand in 2019, gross profit from licensing experienced a notable contraction in 2020, falling to $96,900 thousand. A subsequent recovery is evident, with values climbing back to $122,000 thousand by 2022.
- Segmental Revenue Composition
- The total gross profit is heavily dominated by semiconductor products, which account for the vast majority of the total value in every reporting year. Technology licensing contributes a marginal percentage to the overall gross profit, indicating that the business model is fundamentally reliant on the scale and performance of the semiconductor product line.
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