Steve Sanghi – Chairman, President & CEO Eric Bjornholt – VP, CFO and Corporate Secretary Ganesh Moorthy – EVP

Romit Shah – Barclays Capital Chris Danely – JPMorgan Harsh Kumar – Morgan Keegan Joanne Feeney – FTN Shroff [ph] – Credit Suisse Gill Alexander [ph] – Douglas Associates [ph] Steve Eliscu – UBS Brendan Furlong – Miller Tabak

Good day, everyone, and welcome to this Microchip Technology Third Quarter Fiscal Year 2009 Financial Results Conference Call. As a reminder, today’s call is being recorded. At this time, I would like to turn the call over to Microchip’s President and Chief Executive Officer, Mr. Steve Sanghi. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone, and welcome to our fiscal third quarter 2009 earnings conference call. In attendance with me today are Ganesh Moorthy, Executive Vice President, Eric Bjornholt, Chief Financial Officer, and Gordon Parnell. You all know Gordon from his position as CFO at Microchip, and we had previously told investors about his new role in business development. We have recently decided to add an Investor Relations function to Gordon’s activities, so he will support Eric and me in these efforts and you will continue to see Gordon at various conferences and investor meetings. With that I will pass the call to Eric Bjornholt.

Thanks, Steve, and good afternoon, everyone. During the course of this conference call, we will be making projections and other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions, and that actual events or results may differ materially. We refer you to our press release of today as well as our 10-K for the fiscal year ended March 31, 2008, and our 8-K reports that we have filed with the SEC, that identify important risk factors that may impact Microchip’s business and results of operations. I will comment on the third quarter fiscal 2009 results, reviewing geographic data and discussing balance sheet and cash information. And Steve and Ganesh will then give their comments on the results, discuss the current business environment, discuss our internal plans for the March quarter, and update other pertinent matters regarding our business. We will then be available to respond to specific investor and analyst questions. Net sales for the December quarter were $192.2 million, down approximately 28.8% from net sales of $269.7 million in the immediately preceding quarter, and down approximately 23.9% from net sales of $252.6 million in the prior year’s first quarter. We are continuing to include information in our press release on various GAAP and non-GAAP measures. Management believes that the non-GAAP measures are useful to investors because they enhance the understanding of our historical financial performance and comparability between periods. Non-GAAP results exclude share-based compensation expense, losses on trading securities, non-recurring tax events, and expenses associated with the acquisition of Hampshire Company. Earnings per share on a non-GAAP basis were $0.23 per diluted share in the December quarter, a decrease of 49.5% from $0.45 per diluted share in the immediately preceding quarter, and a decrease of…

Thank you, Eric, and good afternoon, everyone. I will now comment on the individual product line and let’s start with microcontrollers. Our microcontroller business was down 28% on a sequential basis and was down 23% from the year ago quarter. Flash microcontrollers now represent approximately 78.5% of our microcontroller business. In these difficult business conditions, we’re heartened by the innovation and ingenuity of our customers that enabled us to ship our 7 billionth cumulative microcontroller earlier this month, just 14 months after we shipped 6 billionth microcontroller. Against the backdrop of a challenging overall business environment, our 16-bit microcontroller business performed much better competitively. 16-bit revenue was only down 7% sequentially and was up 28% from the year ago quarter. New customers and new designs going into production helped offset most of the general market weakness experienced by older designs as the number of volume 16-bit customers grew approximately 2% sequentially to 1,670 customers. Our 32-bit microcontroller product line continues to make good progress. 18 products are now in production. Customer interest remains very high and we have a large number of designs incubating across a broad range of customers and applications. We expect the 32-bit product line to start contributing to our microcontroller revenue in fiscal year 2010. During the quarter, Microchip continued to make significant strides in establishing our leadership in the growing area of user interface solutions for the embedded market. In October, we completed the acquisition of Hampshire Company, a leader in the touch screen controller market, thus enabling us to address a broad range of new applications requiring touch screen control. We followed that in November with the introduction of the world’s first inductive touch sensing solution, which enables touch sense to be extended to a much broader range of applications where capacitive touch sense…

Thank you, Ganesh, and good afternoon everyone, again. Today I would like to first reflect on the results of the December quarter, then I will talk about our internal plan for the March 2009 quarter. The December quarter was the most difficult quarter ever in the history of our company. It was a quarter that the industry and I would like to forget. With the onset of the global financial crisis, the business environment deteriorated rapidly, the bookings and visibility dropped precipitously. As you saw, any company who gave any kind of guidance last quarter then had to revise their guidance a few weeks later. In response to the worsening business environment, Microchip implemented a series of cost and capital containment measures. First, we implemented a shutdown in both of our fabs at the end of the quarter. We reduced our production level by 20% from the peak utilization in September 2008 quarter. Second, we implemented a company wide pay cut and eliminated all bonuses and substantially reduced discretionary expenses. And third, we cancelled and pushed out a significant amount of capital that had been ordered for growth. Despite taking all these actions, we saw a significant increase in our inventory in days of sales. This is because our actions to cut production were somewhat negated by our distributors and customers continuing to reduce inventories in response to their business falling off dramatically. At the end, we still have high inventory at Microchip as well as our distributors, and it will take a couple of quarters to burn this inventory up. Meanwhile, Microchip will continue to run its fab at reduced levels. From the last quarter’s level, we have reduced manufacturing substantially more, and currently our fabs are running at 40% below their peak levels of our September 2008 quarter.…

Certainly. (Operator instructions). And our first question today will come from Romit Shah with Barclays Capital. Romit Shah – Barclays Capital: Good afternoon. Thanks for taking my question. Steve, there is a number of companies that a couple of quarters ago had similar margins, but today are in the red. Given the adjustments you have made to lower capacity and reduce expenses, can you give us a sense of what cash breakeven might be for Microchip?

Cash flow breakeven? Romit Shah – Barclays Capital: Yes.

Or operating profit breakeven, which one? Romit Shah – Barclays Capital: Either one is fine.

I don’t know if we have either of them. We are so profitable if you look at the numbers that the gross margin we talked about, internal plan is about 50% gross margin, substantial deterioration from the peak. But this is sort of where it bottoms. And you should see gross margins starting to inch up from starting the June quarter and operating expenses are in low 30s. So the company’s still very, very profitable, and you have to go way, way down in revenue to the point where I couldn’t fathom for the company to actually go below breakeven and start losing money. In any such eventuality, we will further cut manufacturing and expenses and all that much deeper, so I don’t think we will even get close to it. Romit Shah – Barclays Capital: Okay. And as an follow up, you guys have talked I think in the last quarter or so about acquisitions as a potential use of cash, and if these acquisitions are to go through, do you think you’ll be able to still support the dividend?

The answer to that is yes. I mean we have modeled it, there is no scenario we have put together internally where it becomes not possible for us to pay the dividend. We wouldn’t take any actions which would make that a problem. Romit Shah – Barclays Capital: Okay, thank you.

Okay. Now we will hear from Chris Danely with JPMorgan. Chris Danely – JPMorgan: Thanks. Steve, I guess you give us your rough guidance for sort of OpEx and gross margins for the March quarter. Assuming an extremely gradual stabilization/recovery for the rest of the year, how do you expect your OpEx and gross margins to trend after the March quarter?

We have designed our overall compensation system and OpEx to be of a highly variable nature. I mean it’s in our book, chapter 6, if you want to get more details. Chris Danely – JPMorgan: I read it.

Last quarter our OpEx went down 20%. I am not seeing a lot of other companies being able to cut OpEx 20% so rapidly with revenue deteriorating, and with the knife falling so fast. I have seen numbers in the 10%, 12%, 15% range. Our OpEx was down 20%, and we will go down more this quarter. So essentially, we are preparing on both sides of the spectrum. On one hand, we are prepared if this recession is long, goes all year or longer, conditions continue to be very, very difficult. We can maintain operating expense very low, keep manufacturing very low, and really continue to lower the inventory. On the other hand, we are seeing our backlog bottom out as I mentioned. Backlog is starting to grow, customers are expediting products, some of their inventories have gone so low, so we are cautiously optimistic there. So in either scenario, I think we are positioning the company very well. Chris Danely – JPMorgan: So I guess Steve, if business remains sort of sluggish, can you keep OpEx flattish after this quarter?

Yes, flattish or even lower. Chris Danely – JPMorgan: Okay great. And then as my follow-up, can you just talk about, if you guys have a goal for inventory, or when you think your utilization rates will bottom out?

Utilization rates basically depend on the revenue outlook. So with the current revenue internal plan, we believe utilization bottomed sort of where we are. We are running the fabs at 40% lower from the peak level, so call it 60% from where we were at the top. And with that, even with – you have to look at the inventory total, Microchip plus distributors. Because we don’t really know what the distributors will do, and in reality that total inventory, our plus distributors, really serves our customers. That total inventory will decline substantially this quarter, and we are – we can maintain the utilization at that rate. And even if the revenue stays flat going forward, the inventory will drop quite significantly. If the revenue has some increase in the next quarter and the second half, then the inventory will even drop faster. Chris Danely – JPMorgan: Can you give us an estimate of, let’s just say it’s flat, how much inventory would drop, or Eric can you take a stab at that?

11 [ph]. Chris Danely – JPMorgan: Okay, that is fine.

Our next question will come from Harsh Kumar with Morgan Keegan. Harsh Kumar – Morgan Keegan: Hi guys. Two quick questions. First of all, Steve, your guidance of 10% down, roughly is a lot better than what we are hearing from some of the other guys, down 15% to 20%. You’re also saying that the distri are reducing inventories, and your sales out. So should we think of demand the way you’re viewing demand to be better than 10%, is that what our take-away should be?:

Well, it often is the case whenever business is going down, usually it goes down lower than the real consumption level. That is the only way to really deplete the inventories out there, so I’m sure that is true. However, with a large number of customers, huge number of distributors, multiple geographies, not completely lined up week by week, and it is sort of kind of very hard to see.: So our – we did this modeling by extensive consultation with our distributors, customers, all of our sales regions, going through our normal processes, and we did that last quarter also. But you can see that in this environment, customers don’t know. In October, when we gave the guidance, customers told us what they were going to do, and then just three weeks later, customers were shutting down their factories for two weeks, three weeks, and pushing out backlog.: So the inputs can be very unreliable. So we took the inputs again, we added a substantial amount of judgment. We’re running this thing conservatively, and we realized that our 10% is substantially better than what we’re hearing from the competitors. And I guess time would tell either we’re gaining share or our mix is better or we took an uglier fall, because our markets in housing and all that bottomed out earlier versus other companies in PCs and cell phones and all that are seeing the correction now.:

Harsh Kumar – Morgan Keegan: I appreciate the color, Steve. Just one more question, switching gears a little bit, longer-term strategic question. You have got a pretty commanding share in the 8-bit micro controller globally, is it fair for us to assume that there’s not a lot of market share left for you to gain in 8-bit, that you’d probably go with the market, any color would be helpful, Steve?:

Okay. We expect and we will continue to gain market share. We are in the 15%, 16% share of the overall market. There’s a lot more to be had.:

Our next question comes from Joanne Feeney with FTN. Joanne Feeney – FTN: I was hoping maybe you could shed some light, I know it’s (inaudible) you guys to see which end markets are doing relatively well. But just searching from your conversations with your customers, can you perhaps contrast for us how things are going in the consumer versus computing versus industrial areas?

Well, in real honesty, no markets are doing well. Having said that, the housing section really burnt out much earlier. So later on when the crisis spread from housing to banks and then to the consumers and others, you saw significant impact on PCs and cell phones and consumer electronics. Consumer is really very misunderstood word in a way, there’s consumer electronics, and there is consumer, which looks more like industrial, thermostats and sprinklers and appliances and housing and all that. We are in that. We are left in the consumer electronics which are cell phones and toys and entertainment equipment and iPods and other stuff. So the consumer industrial type busted earlier and that’s why we took the fall from the housing earlier. And then what you are seeing now is a substantial drop. Some of the companies are down 50%, 40% to 50% over two quarters, which are much more exposed to the consumer electronics as well as PCs and cell phones. Joanne Feeney – FTN: Are you at all sort of concerned or rethinking given the data that came out today for the housing industry? Not today, yesterday rather.

No. The numbers have been so low that it isn’t – we are not seeing it really having a major further – there is no place to go down. Joanne Feeney – FTN: Okay. And then if you could just for a second –

Inventory of homes sold change on a daily basis. Definitely, what drives it is really, in the housing market, there is refurbishment and there are new stuff bought. 60% to 70% of our appliance sales are actually to existing consumers changing their washer or drier or air conditioner or whatever, and 30%, 35% are new going to the newer houses. The newer houses have gone to almost nothing and the business was down by that much percentage. Rest is refurbishment, so there is not a whole lot lower to go from there. Joanne Feeney – FTN: Okay. And then just one question on the gross margin, on the newer 16-bit effort, are those gross margins higher than sort of your average in 8-bit, can you let us know whether that change in mix might be pushing your margins up over the longer term?

Ganesh?

You know the – think of microcontrollers as kind of an overall segment, and the margins within them across the product lines are very similar, the gross margins are. The absolute margins change by the ASP of the products, but the gross margin percentage is really roughly the same across 8, 16, and eventually as we get into volume in 32-bit as well. Joanne Feeney – FTN: Okay, great. Thanks

(Operator instructions). Our next question will come from John Pitzer with Credit Suisse. Shroff – Credit Suisse: Hi. This is actually Shroff [ph] for John Pitzer. Thanks for taking our question. Any update or thoughts you can share with regards to any potential transactions with regards to Atmel, Steve?

There is nothing to say. There is absolutely nothing to say and you are representing the other side. Next question please. Shroff – Credit Suisse: My second question would be with regards to the Hampshire acquisition and extension into the touch screen technology, could you update us on which end markets you are most focused on and when you might see the first products being introduced?

That will be answered, Ganesh?

Well, Hampshire already had a set of product lines and they were shipping into certain customers. They are predominantly targeted at the industrial segments, where there is touch screen requirements there. And there is a little bit of it that goes into things like restaurant terminals and that kind of stuff. So it is not something that is waiting for some work to be done for revenue generation, it is already in revenue, although it is small in it size. And primarily it is not waiting on a consumer electronics boom, it’s really aimed at the – primarily at the industrial control end of things. It has lots of opportunities we believe in some of the other market segments, and that is part of what Microchip will do is develop and take that technology into these newer segments where we have channel and other coverage capabilities.

Moving on, we will hear from Gill Alexander [ph] with Douglas Associates [ph].

Hello, Gill. Gill Alexander – Douglas Associates: Good evening. Could you give us any guess, and you may have mentioned it, what your tax rate could be next year? The range?

Yes.

Our tax rate will be approximately 15% in that range, somewhere in that 13% to 16%. Gill Alexander – Douglas Associates: And if you look at the 8-bit field controllable market, what percentage of that market do you have?

Ganesh?

It has been in the 30s, I would guess about the mid 30s or so, of the programmable segment is where Microchip has our share at. Gill Alexander – Douglas Associates: Thank you very much.

We’ll now hear from Steve Eliscu with UBS. Steve Eliscu – UBS: Yes. This is Steve Eliscu for Uche Orji. First question regarding underutilization charges, when you get to the point where you are no longer incurring that, should we expect some sort of snapback in gross margin back up to somewhere in the 55% neighborhood? Or I think Steve you mentioned about a more gradual change, how are you thinking about that right now?

Well, so the quarter in which we increased production from the current utilization is the quarter you immediately see a bounce back in gross margin. How much you see depends on where you take it. If the demand is so strong and distributors are rebuilding inventory and all that, that you take it immediately from 60 to 100, the bounce back would be very, very dramatic. That is unlikely to happen. So, it just depends on where will our take would be in terms of internal plans for revenue, and based on that, we will set the internal production to that level, and there will be an appropriate bounce back in the gross margin. Steve Eliscu – UBS: Okay, that is helpful. With regards to the touch area, you talked about inductive touch, you talked about the touch screens with the Hampshire Company, how are you thinking in terms of as a percentage of overall growth that you're getting from touch, the inductive piece and the touch screen, are those going to contribute in a major way to the overall touch growth?

We never break that out. Why would we want to tell anybody how successful we are being into any other area, and that is either attracting competition in our investment or whatever. So that is just too detailed of a breakdown. Steve Eliscu – UBS: Yes, I was just looking qualitative. I guess – okay, that is fine. One last question, just based on your guidance, it seems like you're looking for essentially zero interest income, if I did the math right, is that the right way to think about it, the interest and other?

No, I don't think so.

No, that is not correct. We're still earning interest income. Steve Eliscu – UBS: Can you give a range that might be helpful there?

Yes. So I think maybe what you’re thinking is, on the interest income line, we are earning income that we have interest expense associated with our convertible debt, which is about $6.3 million per quarter. So I guess we look at the net of those, it is a very small number. Steve Eliscu – UBS: Okay, great. Thank you very much.

Our next question will come from Brendan Furlong with Miller Tabak. Brendan Furlong – Miller Tabak: Good afternoon gentlemen. How are you doing? A quick question on 16- bit, I don’t know if you can offer some color on fiscal year 2010. Obviously you are growing 8-bit this quarter, what are your thoughts going forward on 16?

It's been growing very strongly. We expect it to continue to grow well into fiscal year 2010. It is obviously growing a lot faster than Microchip average, and that trend is not abating. We expect it to do very well in fiscal year 2010. Brendan Furlong – Miller Tabak: And my second question would be one of your private equity competitors seems to be under a little bit of stress, do you think that's offered some benefits in the next couple of years, well next year, I would say?

It's been benefiting us for the last ten years, we'll continue to benefit. Brendan Furlong – Miller Tabak: Okay, great. Thank you.

And it appears at this point that we have no further questions. Gentlemen, I'll turn the call back over to you for additional or closing remarks.

Okay. We will be seeing many of you at conferences we go to this quarter. Which is the next one?

Thomas Weisel Conference.

Thomas Weisel Conference coming up, so we will see some of you on the road. Thank you very much. Bye, bye.

Once again that does conclude today's conference. Thank you for your participation and have a wonderful afternoon.