Microchip Technology IncMCHP

Tax and financial reporting · Audit and regulatory examinations

The outcome of future examinations of our income tax returns and existing tax disputes 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.

Data and privacy · Cross border data transfer regulations

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...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.

Data and privacy · Consumer privacy and consent

Some of these laws create a broad definition of regulated, protected or personal information, establish data privacy rights, impose risk assessment, certification and/or data breach notification requirements...Some of these laws and regulations also place restrictions on our ability to collect, store, use, transmit and process personal information and other data across our business.

Data and privacy · Regulatory investigations and penalties

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.

Industry regulation · Regulatory compliance and changes

We are subject to stringent environmental, climate change and other regulations, which may force us to incur significant expenses and impact our operations...We must comply with federal, state, local and foreign governmental regulations related to the use, storage, emissions, discharge and disposal of hazardous substances.

Industry regulation · Licensing and permits

Licenses or license exceptions are often required for the shipment of our products to certain countries as well as for releases of our technology and software to foreign nationals...Our inability to timely obtain a license, for any reason, not limited to a delay in license processing due to a federal government shutdown.

Industry regulation · Safety and environmental regulations

We must comply with federal, state, local and foreign governmental regulations related to the use, storage, emissions, discharge and disposal of hazardous substances used in our products and manufacturing processes...Regulations could require us to change manufacturing processes, substitute materials which may cost more or be less available.

Industry regulation · Professional standards and certifications

To be awarded new contracts after November 10, 2025 for the U.S. government, we may be required to meet a CMMC level that we may not meet, or may choose not to meet...Over time, more government contracts may require higher Cybersecurity Maturity Model requirements.

Legal and litigation · Product liability and warranty claims

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...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.

Legal and litigation · Intellectual property disputes

Failure to adequately protect our intellectual property could result in competitive harm, lost revenue or market opportunities...Infringement of our intellectual property rights by a third-party could result in harm to our competitive position, uncompensated lost market and revenue opportunities for us.

Legal and litigation · Contractual disputes and claims

Our contractual relationships with our customers expose us to risks and liabilities...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.

Tax and financial reporting · Tax compliance and changes in tax law

Exposure to greater than anticipated income tax liabilities, changes in tax rates, laws and regulations, changes in the interpretation of tax laws and regulations, or unfavorable assessments from tax audits and examinations could affect our effective tax rates, financial condition and results of operations.

Tax and financial reporting · Transfer pricing and international tax

In September 2021, we received a Statutory Notice of Deficiency (2007 to 2012 Notice) from the United States Internal Revenue Service (IRS) for fiscal 2007 through fiscal 2012. The disputed amounts largely relate to transfer pricing matters.

Tax and financial reporting · Financial reporting and accounting standards

Our reported financial results may be adversely affected by new accounting pronouncements or changes in existing accounting standards and practices...New accounting pronouncements or a change in the interpretation of accounting standards or practices may have a significant effect on our reported financial results.

Customer and revenue · Customer concentration and key customer dependence

While we had approximately 101,000 customers, and our ten largest direct customers accounted for approximately 11% of our total revenue in fiscal 2026, and two of our top ten direct customers are contract manufacturers...cancellation of customer contracts could have an adverse impact on our revenue and profits.

Customer and revenue · Revenue concentration in specific products or segments

Demand for AI-related products is subject to concentration and investment-cycle risk, and any slowdown or shift in AI spending could reduce demand for our products, pressure margins, and adversely affect our operating results.

Customer and revenue · Changing customer preferences and behavior

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 rate at which the markets that we serve redesign and change their own products, including in response to market changes caused by developing technologies such as AI.

Innovation and product development · Product development and randd investment risks

Our success depends on our ability to introduce new products on a timely basis...The success of our new product introductions depends on various factors, including, but not limited to: understanding and predicting changes in the market segments that we serve, including changes driven by AI.

Innovation and product development · Time to market and commercialization risks

Because our products are complex, we have experienced delays from time to time in completing new product development...We may be unable to timely design, develop and introduce competitive products, or produce them at desired volumes, which could adversely impact our future operating results.

Innovation and product development · Intellectual property protection and infringement

Failure to adequately protect our intellectual property could result in competitive harm, lost revenue or market opportunities...The process of seeking patent protection can be expensive, and patents may not be issued from currently pending or future applications.