Good day, everyone, and welcome to Microchip's fourth quarter fiscal 2021 financial results call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Microchip's Chief Financial Officer, Mr. Eric Bjornholt. Please go ahead, sir. Thank you, 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 results and events may differ materially. We refer you to our press release of today, as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations. In attendance with me today are Ganesh Moorthy, Microchip's President and CEO, and Steve Sanghi, Microchip's Executive Chairman. I will comment on our fourth quarter and full fiscal year 2021 financial performance. Ganesh will then give commentary on our results and discuss the current business environment as well as our guidance, and Steve will provide an update on our cash return strategy. We will then be available to respond to specific investor and analyst questions. We are including information in our press release and in this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on the investor relations page of our website at www.microchip.com, which we believe you will find useful when comparing our GAAP and non-GAAP results. We've also posted a summary of our outstanding debt and our leverage metrics on our website. I will now go through some of the operating results, including net sales, gross margin, and operating expenses. Other than net sales, I will be referring to these results on a non-GAAP basis, which is based on expenses prior to the effects of our acquisition activities, share-based compensation, and certain other adjustments as described in our press release. Net sales in the March quarter were $1.467 billion, which were up 8.5% sequentially and above the midpoint of our quarterly guidance. We have posted a summary of our GAAP net sales by product line and geography, as well as our total end market demand on our website for your reference. On a non-GAAP basis, gross margins were a record at 64.1%, operating expenses were at 23.4%, and operating income was a record 40.7%. Non-GAAP net income was a record $521.4 million. Non-GAAP earnings per diluted share was a record $1.85, $0.12 above the midpoint of our guidance. On a GAAP basis in the March quarter, gross margins were a record at 63.2%. Total operating expenses were $618.8 million and include acquisition intangible amortization of $232.4 million, special income of $7.2 million, $2.9 million of acquisition-related and other costs, and share-based compensation of $47.2 million. The GAAP net income was $116 million or $0.41 per diluted share and was adversely impacted by a $85.6 million loss on debt settlements associated with our convertible debt refinancing activities. Our March quarter GAAP tax expense was impacted by a variety of factors, notably the tax benefit recorded on the convertible debt exchange transactions occurring during the period. For fiscal year 2021, net sales were a record $5.438 billion. On a non-GAAP basis, gross margins were a record 62.8%, operating expenses were 23.2% of sales, and operating income was a record 39.6% of sales. Non-GAAP net income was a record $1.784 billion, and EPS was a record of $6.59 per diluted share. On a GAAP basis, gross margins were a record 62.1%, operating expenses were 43.7% of sales, and operating income was 18.4% of sales. Net income was $349.4 million, and EPS was $1.29 per diluted share. Our non-GAAP cash tax rate was 1.8% in the March quarter and 4.1% for fiscal year 2021. The non-GAAP cash tax rate in the March quarter was lower than originally forecasted due to a variety of factors, including the receipt of a tax refund that had not been forecasted to be received until a later date. We expect our non-GAAP cash tax rate for fiscal 2022 to be about 6%, exclusive of the transition tax, any potential tax associated with restructuring the Microsemi operations into the Microchip global structure, and any tax audit settlements related to taxes accrued in prior fiscal years. Our inventory balance at March 31st, 2021, was $665 million. We had 112 days of inventory at the end of the March quarter, which was down eight days from the prior quarter's level. Inventory at our distributors at the end of the March quarter were at 22 days, which is a record low level and down from 26 days at the end of the prior quarter. We are ramping capacity in our internal and external factories so we can ship as much product as possible to support customer requirements. In the March quarter, we exchanged $359.2 million of our 2025, 2027, and 2037 convertible subordinated notes for cash and shares of our common stock. While these transactions did not impact the overall level of debt on our balance sheet, we believe that these convertible exchanges will benefit stockholders by significantly reducing share count dilution to the extent our stock price appreciates over time. The principal amount of convertible debt on our balance sheet at the end of fiscal year 2021 is $1.263 billion compared to $4.481 billion at the beginning of calendar year 2020, putting our overall capital structure in a much better long-term position. Our cash flow from operating activities was $449.2 million in the March quarter. As of March 31st, our consolidated cash and total investment position was $282 million. We paid down $369.2 million of total debt in the March quarter. Over the last 11 full quarters since we closed the Microsemi acquisition and incurred over $8 billion in debt to do so, we have paid down $3.61 billion of debt and continue to allocate substantially all of our excess cash beyond dividends to aggressively bring down this debt. We have accomplished this despite the adverse macro and market conditions during most of this period, which we feel is a testimony to the cash generation capabilities of our business, as well as our ongoing operating discipline. We continue to expect our debt levels to reduce significantly over the next several years. Our adjusted EBITDA in the March quarter was a record $652.3 million, and our trailing 12-month adjusted EBITDA was also a record at $2.375 billion. Our net debt to adjusted EBITDA, excluding our very long-dated convertible debt that matures in 2037 and is more equity-like in nature, was 3.71 at March 31, 2021, down from 3.93 at December 31, 2020. Please note that the amount of the outstanding 2037 bonds were reduced by $156 million during the March quarter as part of our financing transaction. Without this transaction, our net debt to EBITDA would have been lower. Our dividend payment in the March quarter was $106.6 million. Capital expenditures were $55.4 million in the March 2021 quarter and $92.6 million for fiscal year 2021. Our fiscal year 2021 capital expenditures came in lower than originally planned due to longer equipment lead times and deliveries pushing out due to overall industry conditions. Our capital expenditures for fiscal year 2022 are expected to be between $225 million and $275 million. Our forecast for the June 2021 quarter's capital expenditures is between $70 million and $90 million. We continue to add capital equipment to maintain, grow, and operate our internal manufacturing operations to support the growth of our business. We expect these capital investments will bring gross margin improvement to our business and give us increased control over our production during periods of industry-wide constraints. Depreciation expense in the March quarter was $40.2 million. I will now turn it over to Ganesh to give his comments on the performance of the business in the March quarter, as well as our June quarter guidance. Ganesh? Thank you, Eric, and good afternoon, everyone. Our March quarter results were strong by every key metric, closing out a tumultuous fiscal year on a very positive note, which was otherwise dominated by the effects of the COVID-19 pandemic. March quarter revenue was an all-time record at $1.467 billion, growing by 8.5% sequentially. Non-GAAP gross margins were another record at 64.1%, up 110 basis points from the December quarter as we benefited from improved factory utilization and product mix. Non-GAAP operating margin was also a record at 40.7%, the first time we have broken through the 40% mark. Our journey towards our long-term business model of 65% gross margin and 42% operating margin is off to a good start, but still has a lot of hard work ahead of us to achieve. Our consolidated non-GAAP EPS was above the high end of our guidance at a record $1.85. EBITDA was very strong and achieved another record at $652.3 million, continuing to demonstrate the robust profitability and cash generation capabilities of our business through the business cycles. The March quarter also marked 122nd consecutive quarter of non-GAAP profitability. I would like to take this occasion to thank all our stakeholders who enabled us to achieve these outstanding and record results in the March quarter. Especially thank the worldwide Microchip team, whose tireless efforts not only delivered our strong financial results, but also supported our customers to navigate a difficult environment and who work constructively with our supply chain partners to find creative solutions in a hyper-constrained environment. Reflecting on our fiscal year 2021 results, we achieved a number of highlights and records in the last year. Revenue was a record at $5.438 billion. Non-GAAP gross margin was a record at 62.8%. Non-GAAP operating margin was a record at 39.6%, and non-GAAP EPS was a record at $6.59. All in all, the record March quarter results and the record March ending fiscal year 2021 results marks a seamless transition between Steve and I as we each embark on our new roles to build the next phase of Microchip's long-term success. I'm truly fortunate to be the beneficiary of Steve's years of managing Microchip for the long term. Taking a look at our business from a product line perspective, our microcontroller revenue was sequentially up 12.2% as compared to the December quarter and set new quarterly and fiscal year records. On a year-over-year basis, our March quarter microcontroller revenue was up 12.3%. Microcontrollers represented 55.6% of our revenue in the March quarter. Our analog revenue was sequentially up 11.3% as compared to the December quarter. Analog represented 28.3% of our revenue in the March quarter. Our revenue was sequentially down 6.4% for other, as compared to the December quarter, and represented 16.1% of our revenue in the March quarter. Last month, Gartner released their microcontroller market share report for calendar year 2020. Gartner continues to have a large discrepancy versus our publicly reported microcontroller revenue to the tune of $428 million of revenue understatement for all of 2020, predominantly in the 32-bit microcontroller revenue category. Adjusting the Gartner number to use our actual microcontroller revenue, we are pleased to report that for microcontrollers overall, we remain the number three spot. However, in 2020, we substantially closed the gap between us and the two players ahead of us. We are now within striking distance of each of the two players who are just 3.6% ahead of us in revenue as we continue our relentless march towards the number one spot. We gained market share in each of the 8 bit, 16 bit, and 32 bit microcontroller markets. While our 8 bit and 16 bit microcontroller businesses continue to do well, our 32 bit microcontroller business was our fastest growing microcontroller business. Our microcontroller portfolio and roadmap has never been stronger. We believe we have the new product momentum and customer engagement to continue to gain share in 2021 as we further build the best performing microcontroller franchise in the industry. Taking a look at our business from a geographic perspective, Americas was up 0.8% sequentially. Europe was up 30.4% sequentially, stronger than what is normally the seasonally strongest quarter. Asia was up 5% sequentially in a quarter when business is normally down due to the Lunar New Year holidays. Taking a look at our business from an end market perspective, the automotive, industrial, and consumer markets remain the strongest markets. The computing end market was strong, while the data center and communications end markets were flat to up a little. The aerospace and defense markets, which tend to be lumpy, was the only end market that was weak. Business conditions remained exceptionally strong through the quarter, with record bookings and backlog for product to be shipped over multiple quarters. Demand outpaced the capacity improvements we were able to implement, resulting in lead times continuing to extend out. In my 40 years in the semiconductor industry, I cannot recall a time when the imbalance between the supply and demand has been more acute. In response, we launched our Preferred Supply Program, or PSP, to provide customers with supply priority beginning six months after their order in exchange for at least 12 months of non-cancelable orders. Customer response to the program has exceeded our expectations with direct customers and distributors alike. About 44% of our backlog is now in the PSP category, although it is almost 100% of our backlog in some of the most constrained capacity corridors. Additional PSP backlog continues to come in every week. This gives us a solid foundation to enable us to prudently acquire constrained raw materials, invest in expanding factory capacity, and hire employees to support our factory ramps. With the strong demand, we're experiencing constraints in all of our internal and external factories and their related manufacturing supply chains. We started ramping our internal factories in September, as well as investing in capital additions to expand our internal capacity. We are making incremental capacity decisions for our internal factories where possible based on the strength of our backlog, especially our non-cancelable PSP backlog, which is reflected in our fiscal year 2022 capital forecast of $225 million-$275 million. We also work closely with our supply chain partners who provide wafer foundry, assembly, test, and materials to secure additional capacity wherever possible. Through the combination of internal and external capacity actions we've taken, we expect our overall capacity will continue to grow every quarter in calendar year 2021. While our capacity will continue to grow every quarter, we also believe that wafer fab, as well as assembly and test constraints, will persist through 2021 and quite likely into 2022. Now let's get into the guidance for the June quarter. Our backlog for the June quarter is very strong. In addition, we have considerable backlog requested by customers in the June quarter that currently cannot be fulfilled until later quarters, despite us growing capacity from the last quarter. This is because the entire semiconductor supply chain remains constrained. Taking all the factors we have discussed on the call today into consideration, we expect our net sales for the June quarter to be up between 3.5% and 7.5% sequentially. Our guidance range assumes continued operational constraints, some of which we will work through during the quarter and others that will carry over to be worked in future quarters. For the June quarter, we expect our non-GAAP gross margin to be between 64.1% and 64.5% of sales. We expect non-GAAP operating expenses to be between 23.1% and 23.5% of sales. We expect non-GAAP operating profit percentage to be between 40.6% and 41.4% of sales. We expect our non-GAAP earnings per share to be between $1.85 and $1.95. Please keep in mind that our non-GAAP EPS forecast for the June quarter includes a 420 basis point higher tax rate assumption than the March quarter. We also expect to pay down another approximately $325 million of our debt in the June quarter. Given all the complications of accounting for our acquisitions, including amortization and intangibles, restructuring charges, and inventory write-up on acquisitions, Microchip will continue to provide guidance and track its results on a non-GAAP basis, except for net sales, which will be on a GAAP basis. We believe that non-GAAP results provide more meaningful comparison to prior quarters, and we request that the analysts continue to report their non-GAAP estimates to First Call. As we announced on our February conference call, based on the strong cash generation characteristics of our business in up cycles and down cycles, we have modified our capital allocation thought process to pivot to a cash return strategy, which has received very positive investor feedback. Steve will now provide more details on this strategy as well as the long-term thinking that informs our actions in this regard. Steve? Thank you, Ganesh. Good afternoon, everyone. Today, I would like to provide you further updates on our cash return strategy. Before I do that, I would like to say how I continue to be very proud of all employees of Microchip that have delivered a flawless quarter and making new records in many respects. Namely, record net sales, record non-GAAP gross margin percentage, record non-GAAP operating margin percentage, and record EBITDA. Now I will turn to updating you on the cash return strategy. We completed the March quarter with a net debt leverage ratio of 3.71, excluding the long-dated 2037 maturity converts that are more equity-like in nature. At the rate we are paying down debt, we expect to break a net debt leverage ratio of three within a year and continue to decrease from there. Around that time, we would also expect to achieve an investment-grade rating, but the exact timing will depend on the analysis of the rating agencies. At that time, we expect to begin distributing more of our substantial amount of free cash flow to our investors in the form of dividends and stock buybacks. Regarding buybacks, through our various convertible debt exchanges, we have essentially bought a substantial amount of stock back from the future. This is because as the stock price rises and exceeds the conversion price of the debt, convertible debt dilutes the share count. Buying converts back prevents future dilution as the stock price rises. Our first convert buyback was in March of 2020, when Microchip stock price was about $71. Since then, we have done five other buyback transactions at various stock prices. By doing these various buyback transactions, we have purchased a total of $3.884 billion in face value of our convertible bonds. For the transactions from March 2020 to December 2020, we issued a total of about 27.5 million shares of our common stock to the investors for in-the-money value of their bonds. If these bonds had remained outstanding until an assumed stock price of $160 per share, the dilution would have been about 36.4 million shares. Our repurchases had the impact of creating a savings of about 8.9 million shares, worth $1.424 billion savings to our investors at that assumed price of $160 per share. This calculation does not include our February 2021 transaction, which was very recent and executed at $163.25 per share. It is not yet accretive. While we have not done any open market stock buybacks in the last one year, our convert transactions had the impact of a buyback of approximately 8.9 million shares, or about 3% of our outstanding shares. We expect to start stock buybacks from the open market after we have achieved an investment-grade rating, which we expect within a year, depending on the rating agencies. Meanwhile, we did not want to wait for starting higher dividends until our leverage ratio reaches a given number. We initiated a path to higher dividends in our February 2021 dividend announcement with a 5% dividend increase. We are continuing on this path as we announce today that the board of directors have approved a dividend increase of 5.9% sequentially to $0.413 per share, up from $0.39 previously. We expect to continue to increase dividends quarterly as part of our cash return strategy. With that, operator, will you please poll for questions? Absolutely. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Due to time constraints, we would like to ask that you please limit yourself to one question. You may then reenter the queue to ask a follow-up. Once again, that's star one if you'd like to ask a question. We'll take our first question from Mark Lipacis with Jefferies. Hi, thanks for taking my question and congratulations on the great execution, Steve. I had a question for you about the PSP program. On the surface, it seems like you instituted this program to help customers on a more tactical basis. I wonder if you believe there are secular drivers that ultimately may have led you to a PSP kind of a program anyway. Do you think, now that you have this program, do you think it becomes a more permanent part of your standard operating model going forward? Thank you. Going back to as we implemented the program and why we implemented the program, let's kind of revisit that history. The backlog was so strong and constraints were so widespread. As Ganesh mentioned, in his 40-year career and my 42-plus year careers, we have never seen this kind of shortage and constraints in the semiconductor industry. The question really became, how do we take our key customers in various segments, not only automotive, but industrial and communications and data centers and PCs and all, and allow them some mechanism where they can get preferred supply of parts, and it's something in it for them and something in it for us. The design of that program became this Preferred Supply Program, in which we asked that if you could give us 12 months of non-cancelable, non-reschedulable backlog, and there is a tremendous benefit to Microchip. We could buy supplies ahead, we could hire people, we could make capital investment. We could do all these things with the assurance of a very, very large, solid, non-cancelable, non-reschedulable backlog. That's the benefit to us. What the customer gets is, after a 6 months period, and we did that 6 months period because we didn't want to create a lot of churn in the first six months, and there was more availability of capacity after 6 months. At that point in time, we said anybody who gives a PSP backlog, they will get the Preferred Supply. If there's any shortage at that time, it will be spread among the non-PSP customers. Long answer, but that's really how the program came about, not knowing what the acceptance would be, and the results just have been absolutely tremendous. We have billions of dollars of PSP backlog, 44% of the total backlog. On some of the most constrained supply corridors, the PSP backlog is almost equal to 100% of capacity. You can see the advantage where we could go ahead, make those investments or buy additional equipment. Leading then to your question, could this become a permanent landscape? I think it will depend largely on the experience of our customers and Microchip together in the year as we progress. When the cycle ends on the other cycle, when there is a lot of capacity available, customers may not be willing to make a year-long commitment that is non-changeable. That's what the customers would be thinking. The environments will come back and forth, so our intent would be to show the customers how well we serve them because they had PSP and what the benefits are if they continue with that program going forward. I think, let Ganesh comment on that. It's really going to be how we manage it going forward. My view is we're in the early innings of PSP. We've just launched it. It's a couple of months. It's going extremely well. I think we continue to make fine-tuning of the program. It's too early to tell how long-term it will be. I think for many, many customers, they've learned in this cycle that running low on inventory or low on backlog visibility can have extreme impact on their business. Give it a few more months. Let's see how it looks. Thank you. A lot of buzzwords, programs the industry develops, some of them last for a short period of time in a cycle or so, and some of them last a very long period of time. I think you're seeing the beginning of the end of the word JIT. The losses in the industry by our customers due to constraints are so large that they have lost more money than all the money they saved for a decade on JIT. That could be the long-term benefit where industry plans better rather than just in time, give me 50% more. Where does it come from? Lead times are very long. Yeah, let's go to our next question. Thank you. We'll take our next question from Vivek Arya with Bank of America Securities. Thanks for taking my question. When investors look at this extreme level of supply-demand imbalance, their reaction is that this will surely create a hard landing. I'm curious to get your perspectives, Ganesh or Steve. Will this situation be resolved in an orderly way? When does the industry get back to a more balanced environment? What is your visibility into inventory at your end customers? Just when do we get back to normal and what does normal look like? Is there a hard or soft landing that we have to go through? Thank you. We do not have a line of sight for when things get to be normal. As I mentioned, the gap between demand and supply grew in the March quarter and continues to be quite large. We have taken a number of steps to get ahead of when whatever change in cycle will come, to soften how that landing will take place. We just discussed the PSP in quite a bit of detail, and that gives us 12 months of continuous non-cancelable backlog. That will enable us to spot, and plan for, whenever that change becomes apparent to us on longer term backlog. The capacity additions we're making. We're not trying to solve the entire gap all in one quarter. We're making measured steps every quarter, and improvements over multiple quarters. To the extent we see a change, we will taper off the build plans and capacity additions, consistent with that. Third is, if you look at where our inventory is and where you look at our channel inventories are, they are at historic lows from the channel perspective and pretty low for us as well. That gives us time and ability to continue to replenish that inventory. It will help to minimize any under-absorption that might have happened otherwise. It positions us well to capitalize on whatever the subsequent upcycle will be. There's going to be an upcycle to whatever next down cycle there's going to be. When that happens, we actually push out capital requirements, because we will have replenished some of that inventory. Finally, on that, if and when there is that next hard landing or soft landing, for us, what we are doing is our bonus programs and other variable compensation programs, as you have seen in prior cycles, give us a fair amount of ability to mitigate which way our expenses go as we go through the cycles. That flexibility in operating expenses is one more item that helps us in terms of getting to a soft landing. Thank you. You're welcome. Thank you. We'll hear next from Gary Mobley from Wells Fargo Securities. Hey, guys. Thanks for taking my question. Congrats on a strong finish to the year. What a difference a year makes. I wanted to ask about your target margin goals, 65% and 42% on gross and operating margin, respectively. It would seem to me that you're in the most optimal of conditions to see the achievement of those goals with respect to revenue mix and manufacturing utilization. My question to you is that target a best case scenario, or is it sustainable over the long term? What revenue level are you looking for to achieve those targets? We're making good progress towards that. We obviously, from quarter to quarter, can make rapid progress and sometimes it will be a little slower beyond that. I wouldn't take last quarter and apply that as how it's going to be every quarter going forward. We just introduced this new model in December, so it's not been that long. We've made a good start here. Conditions are strong for where we're at. We're executing well in the many different areas we outlined for investors as to how will we achieve the gross margins. There are also other pressures. There are cost pressures in some of the materials and input costs as well that we're working through. The operating expenses, we continue to have investments we need to make so that the long-term growth and profitability of the business can be realized. Let's continue to have several more quarters as we go through this, but we feel good about these long-term targets. We think we're working on the right things operationally, as well as in our business units and our other operating expenses to get to the place where we have a combination, a good balance between growth and profitability. Thanks, Ganesh. Thank you. We'll hear next from Harsh Kumar with Piper Sandler. Hey, Steve, congratulations as well. Ganesh, congratulations on a strong quarter. I had a philosophical question. With this kind of a supply-demand environment, is seasonality out the door in the near to midterm? I have a follow-up. Seasonality has been hard for us for many quarters. There hasn't been a normal environment for quite a while. We went through trade and tariff, which was an overriding issue. We went through COVID, which was an overriding issue. We're now in this significant demand growth environment. Clearly, there is an underlying seasonality that has a contribution, but these externalities are driving a much higher multiplier on that. For the moment, we don't have clear bearings on seasonality other than directional statements as to where they will be. Ganesh, one more for you. With the PSP program, you're seeing tremendous amount of success. Are you seeing that backlog in the PSP program mostly for the sole source kind of items, or the ones that are mostly very constrained? Is there also a risk that you may lose some of the customers that are not able to commit, or is supply simply that bad that there's no place for these guys to go? Pretty much, just about everything we do is sole source proprietary products. We don't have a commodity product line that's a big piece of this thing. Some of our memory products may come the closest, and even there, we're often in very highly protected positions in those sockets as well. I think the short answer is exactly what you said. There is not another place people can go to get capacity today. In fact, there's a lot more coming to us trying to find ways in which we can help support them as they flee some of the other suppliers who are not able to provide them capacity in today's environment. Harsh Kumar, let me add a comment. PSP is not an absolute requirement. A customer who does not have visibility into their own business and does not want to give us non-cancelable 12 months backlog can just place normal orders over 12 months and 90 days of those orders would be firm non-cancelable, and after that they can change it. The only difference is they would not be preferred, and if there was a strong demand among the PSP customers, then they could get allocated much more harshly. That doesn't mean that they won't get any parts and they should really go with somebody else. If they go with somebody else, other people that similarly constrained and may not have a PSP program to really help them. I think there is no reason for loss of business. We're actually gaining business in this environment, have people coming from other companies where they cannot get the support. That's a great point, Steve. Thank you. Thank you. Thank you. We'll hear next from Chris Caso with Raymond James. Yes, thank you. I've got a two-part question on some of the capacity additions that you spoke of. First, if you give us some sense of the timing of these capacity additions, we know you're growing CapEx all through the year, but there's some constraints in getting tools. When does capacity become available to you? Secondly, if you are adding this capacity through the year, and you're expecting to remain supply constrained with, I guess, some visibility from the PSP program, is there any reason why your revenue wouldn't just continue to grow sequentially as we go through the end of the calendar year? Firstly, on the capacity additions, they are happening. There's not a single discrete event when it's happening. It's happening every month, every quarter. We have equipment on order, we have materials on order, we're hiring people. There's a number of activities that are all going in place to be able to do it. It'll be a more continuous process through the year. Sometimes we get delays on equipment, sometimes we are able to get the equipment on the time we have. That's the way we see it for the rest of the year, and therefore we are expecting that we will have capacity to be higher quarter than the prior quarter, which should give us the ability to have continued growth as you go into the second half of this year. Thank you. Thank you. Thank you, Chris. We'll take our next question from Ambrish Srivastava from BMO. Hi. Thank you very much. Steve, I had a question on a follow-up on, actually on the comments on capital allocation. That's a pretty substantial increase on divvy over the last couple of quarters. What's the right way to think until you get to the net leverage that you're targeting? Longer term, what are your thoughts on divvy versus buyback? Any color or any thoughts you could share on that would be helpful. I had a quick follow-up on PSP. Ganesh, assuming that pricing is set earlier on when the customers are committing to this, how do you hedge for the cost side of it when cost goes up on plan? Just help us understand that factor as well. Thank you. Let me take the capital allocation part of that, and then Ganesh will take the pricing on the PSP backlog. We have internally had discussions with the board, what happens now till we get investment-grade rating and what happens after as we bring the stock buyback into the mix. We're not prepared to dollarize that for you well into the future regarding how much stock buyback and how much dividend and when does it start and all that. I think it's directionally, the board is committed to continue to increase dividend every quarter, and then as we get to the investment-grade rating, then add the stock buyback into the mix. What that mix would be could also change from time to time, depending on market conditions and stock price and all that. It's really not all figured out for the next five years. There have been some discussions, but I think we will continue to advise you every quarter as we make further decisions Ambrish on your PSP. Yeah, I wasn't thinking. Sorry. Sorry, go ahead. I wasn't thinking dollars. Sorry, I wasn't thinking dollars, Steve. I was thinking more in terms of% of free cash, but that's fine. We'll wait. They're not willing to disclose well into the future what percentage of our free cash flow we will give it to the investors back. When we get an investment-grade rating, we would still have a leverage on the books of about three, and desire is to continue to decrease that leverage further. Three is not a number where we want to stop and give 100% cash back. The leverage will continue to go down, but the rate at which that leverage go down could change as we start to give more cash back. That's fair. Thank you. Ambrish on your PSP question. PSP is a priority for capacity. It is not a guarantee of price. We will not be just making price changes without good reason. If there are input costs that are unexpected that need to be passed on, PSP backlog can receive price changes at that point in time. We're not anticipating that it needs to, but nothing in PSP backlog precludes price adjustments if there are significant cost increases. Okay. Thank you. You're welcome. Thank you. Once again, that's star one if you'd like to ask a question. We'll hear next from Harlan Sur with JP Morgan. Good afternoon, and congratulations on the strong results and execution. With the current PSP backlog, it paints a pretty good picture of forward demand. Based on that and combine that with your current booking trends, how far above your current supply capabilities is overall demand trending? Is it 20% higher? Is it 30% higher? Given the strong demand trends, it seems like you and your distribution partners are building and buying products and immediately shipping them out. Given that, and despite your capacity increases, do you guys anticipate your days of inventory and disty inventories declining again in the June quarter? Firstly, to give you a sense of what is our unsupported in a given quarter look like, I think a quarter ago we had said, "Hey, we have 30% more that we could be shipping than what we are planning to ship." That number has since grown to over 40% that we could be shipping. That's what we meant earlier as in, even as we add capacity, demand grows even faster. There is a significant amount of unsupported demand into each quarter, and what happens is every quarter we ship a little more, and we squeeze some of it out into subsequent quarters. Was there a second part of the question? Yeah. He was asking what our expectations were for distribution inventory. Go ahead. That's a very difficult thing to forecast. It went down four days last quarter. Distribution inventory is at record lows. What we're shipping in, they're shipping out right away to meet their customers' demands. I don't anticipate it going up. It's at very low historic levels, so I don't anticipate a large change. Okay, great. Thank you. Thank you. We'll take our next question from John Pitzer with Credit Suisse. Yeah. Good afternoon, guys. I've got a two-part question that speaks to the supply-demand imbalance that both Steve and Ganesh, you've talked about. I'm just kind of curious, on the supply side, we've seen a significant amount of consolidation in the semi industry over the last decade. You guys have been a big driver of that. I'm wondering, Steve or Ganesh, if you can comment on how that's impacting both yours and the industry's ability to actually grow supply. On the demand side, I'm just kind of curious, typically, when your demand is this strong, we're usually in an economy that's firing on all cylinders, and yet we still have an economic backdrop which is probably best described as under potential. If we go into the back half of the year, Steve, and when we start to see a macro recovery, is there a real risk that supply shortages actually accelerate even further? Why not get ahead of that with even more CapEx? Let me start on the supply side. If you look at our eight, 10 years of acquisitions that we have done, and the consolidations from our perspective, the percentage of what we build, particularly from a fab standpoint, internal versus external, has changed. We used to have a higher percentage of it in our in-house fabs. We are now down to about 39% of it is in-house. The balance is down to the foundries. We obviously have a higher degree of control and ability to influence in a shorter period of time, the capacity that we build in-house than we do from a foundry standpoint. In that sense, that is something that has changed over this period of time. It has never been an issue until this cycle where the imbalance has been so large that the instantaneous response from foundry has been difficult. A high percentage of what Microchip does through foundry is what foundry would consider to be the trailing edge of capacity they have. That has also been not where all their investments have gone. They're making some, but the majority of the investments have been in leading edge, which is where not a lot of our capacity requirements are into. Packaging and testing, we've been able to do more in-house, and we have reported on the increases. We're now into the mid-50s as a% of our packaging that had been as low as in the high 30s and low 40s as a%. There, as and when we can, we're going as fast as we can. We are looking at our capital investments and what do we need to be doing and how. A bit of this is finding the right mix between stepping on the accelerator where we have high confidence, PSP backlog, for example, gives us high confidence, and being a little more thoughtful where we have risk of putting a lot of capital in place, and then perhaps having under-absorbed capacity. That's always a judgment call. We make that every month, every quarter, with what should our capital posture be. We could yet change and have an increased capital posture as we go into the second half of this year if that demand imbalance continues and persists at the level that it is. Steve, you want to add some more? Well, let me add to a little economic macro side of his question. John, what happened last year was that the biggest destruction of demand really was on the service side. The hospitality, hotels, airlines, travel, restaurants, golf courses, basically, the service side of the industry got decimated last year because of social distancing and all that. The manufacturing side didn't do that bad. There was really not a single quarter where our revenue even went down 10%. Most companies in the technology industry and manufacturing industry did reasonably well. Automotive was really bad for one quarter, but overall not too bad. Now when you get to the recovery side of it, a fair amount of recovery is likely to take place on the service side, which got so decimated, restaurants and hotels and airlines and travel and vacationers and cruise lines and all that coming back. As they come back, people have more money in their pocket with more jobs, certainly some of that money will flow to the hardware, electronics, and cars and other things where our product goes, and we will benefit from it. The big part of the upcoming surge is really going to be on the service side. Having said all that, I think demand is very strong now, as you mentioned, when the economy picks up further steam with all these people coming back into job, could it really even get more heated? The answer to that is it's definitely possible. The other part of your question was why not add more capital now? Well, we can't get it. We have so much capital on order, lead time is long, some of the scheduled capital gets delayed by a month, with a short notice because the supplier is also constrained. It's not a question of what you can order. We're willing to order more. It's a question of what you can get. We can't get everything we want. That's really helpful color. Thanks, guys. Thank you. Thank you. We'll take our next question from Toshiya Hari with Goldman Sachs. Hi, good afternoon. Thanks so much for taking the question. Ganesh, you talked about higher utilization rates and better mix being positive for gross margins in the quarter. I'm curious what you saw from a pricing perspective in March relative to December. I was a little surprised how fast you were able to grow your microcontroller business and analog business on a sequential basis. I'm guessing pricing played a role there, but if you can kind of speak to that would be super helpful. Separately, assuming you guys manage to execute on the CapEx that you have planned today for the year, where do you see your internal capacity exiting the fiscal year versus where it is today? Thank you. First on the pricing front. We announced and we did raise prices in the March quarter. It wasn't in place for the entire quarter, but it was in place for a good amount of that quarter. Not all prices changed all at the same time, there are contractual requirements, different product lines and different things. The prices go up. With that, we also had cost go up that we were trying to offset with these price increases. We continue to have increases coming through in our supply chain. We think the price increases contributed some, but was really not the major part of what drove our growth in the March quarter. Do you want to take the second part, Eric? The second part was on what our internal capacity can do in fiscal 2022, which we're just entering. I don't expect the fab mix to be much different. Last year, the year we just finished, we did 39% of our fab internally. I don't expect that mix to change. For fiscal 2021, we did 53% of our assembly and 57% of our test in-house. Those percentages should go up as we're continuing to invest and then bring some more capacity internal, but I don't have a specific number by the end of the year. That's going to depend on what the demand environment is and how quickly we can respond with the CapEx. Some of the internal capacity, it takes time as it comes through, and it may have an ongoing impact as we go into the next fiscal year. Yeah, my question wasn't so much on the mix exiting the year, but again, assuming you guys do get all the tools that you're asking for and you manage to spend $250 million, how much higher could your internal capacity be in 12 months? Is it 10%, 20%? A rough ballpark number would be super helpful. Yeah, I don't think that's a number we're willing to disclose. As Ganesh says, it takes time for the capacity to come on board at different stages. Something in fab is going to take longer than it might in assembly or test. We're obviously not giving revenue guidance outside of the current quarter. There are too many corridors of capacity both internally and externally, by process, by wafer size, by technology complexity, and somewhere the capacity is being added, the other capacity is not being added. To roll all that into a just general number, our capacity goes up X%, when we are not really sure from foundries what we can get. We know what we can do internally in terms of the capital we are adding. I think that number is a complex one I'm not willing to share. Got it. Thank you. Thank you. We'll take our next question from Vijay Rakesh from Mizuho. Yeah, hi. Thanks, guys. Just briefly, I know you mentioned shortages. Could you give us an idea of which segment you're seeing the highest shortages and where things are getting to more normalizing in terms of lead times? I think if you listen to the media, you would think that automotive is the only place where there are shortages. Clearly they've been the most vocal. Shortages are in every single segment that are taking place to varying degrees. We do not see any segment starting to come back to some form of equilibrium where it is. There are shortages and growing imbalances in every market segment we're in. Got it. I know you mentioned very strong backlog orders as you look at the June quarter here. Wondering as you look into the back half in terms of calendar Q3 and out, are you expecting a better than seasonal outlook given how strong demand is and the pretty strong sign up on the PSP side as well? We talked earlier on about seasonality and all of that. Right now, our revenue is not limited by the demand side of the equation, and often seasonality speaks to where is the demand at and how does that come about. Our growth at this point is limited by how much can we manufacture and ship, and that's where all hands on deck are. Seasonality by itself is not as meaningful in the current environment. Got it. Thanks, Ganesh. You're welcome. Thank you. We'll take our next question from Craig Hettenbach from Morgan Stanley. Yes, thanks. I had a question on data center and comm. That's been an area that's been consolidating for a number of quarters. Just want to get a sense of what you see in that market and if there's any visibility as to how you think it'll trend as we go through the year. We're not trying to provide guidance on how those are going to do by market segment as we go through the year. I think clearly in the December quarter, we indicated to you that it seems to have bottomed out. That came to be the way the March quarter ended up, a slight bit of improvement from there. We're quite optimistic about the data center segment in particular as we look into fiscal year 2022. The communication sector has its own set of infrastructure rollouts that are taking place. That's about as much as we're able to provide. We don't really track at the level of specificity with exact numbers. We have more of a directional statement, which is kind of what we've included in our conference call notes. Understood. Thanks. Thank you. We'll take our next question from Rajvindra Gill with Needham & Company. Hi, this is Dennis here asking a question for Raji. I was wondering, could you guys just speak about, as far as these component supply constraints go up, which end markets are currently maybe kind of doing the best in terms of having some inventory available? Also, what proportion of these constraints is kind of on the front end or the back end? As I said in the earlier question, there is no end market in which there is available supply that's any better or not. They're all constrained to varying degrees. There's nothing from an end market to thing. As far as back end and front end, we have constraints in both internal and external factories, in the back end and in the front end, in the material supply chain. Depending on what exact combination, what capacity corridor you're in, there might be more constraints or maybe less constraint, but they're all constrained. Got it. Thank you. Thank you. We'll take our next question from David O'Connor from BNP Paribas. Great. Thanks for taking my question. Maybe a follow-up on the just-in-time, Steve, that you mentioned earlier. What changes do you foresee in the level of inventory that the industry needs to hold? Who in the supply chain is going to be forced to carry more inventory if that's the case? Who's going to foot the bill for these higher inventories? If you could talk around that, how you see that'd be great. Thank you. Let me take a shot at that, and Steve may want to add to this as well. I think what inventory people need to carry is going to have to be determined by the ultimate end market equipment manufacturer, the OEMs. I think it can be very different in different product lines, right? When you build a $80,000 car, and you're constrained by $10 of semiconductor content, the decision you may arrive there could be different from when you're building $200 consumer product that you have. Each industry, depending on the value of the product they're creating, the profitability of that industry, has to decide, based on their experience, what is the inventory level that they need to assure themselves of the value of the product that they're trying to ship. Those answers are going to be different. I think some got burned quite badly. I suspect they will be the ones that want to do the most here. There is not a single answer that comes with it. As far as who foots the bill, ultimately, the original equipment manufacturer will foot the bill and more than likely have to pass that on in terms of what they're building to their end customer to the extent that they can. If the choice is to invest in inventory that is two, three orders of magnitude less than the value of the product that they're creating, many of them will have to rethink that equation of what kind of just-in-time makes sense for them. Steve, you want to add to that? I don't really have a whole lot to add. I would say that if you look at some of the Japanese car manufacturers did much better this time around because they learned their lesson during the tsunami. When a lot of the Renesas and other factories were shut down due to earthquake and radiations and all that. They learned from that time and built a structure where they were not as much relying on JIT and reach the current time with a level of inventory on the semiconductor parts. They did a lot better. That's really the lesson the U.S. and European auto manufacturers need to learn. Time will tell when the cycle goes the other way, is it all lost and it's just the same standoff? We don't really know. They have to start thinking that building semiconductors is different than getting bent metal for a doorknob or something. Right now, we get some comments that are sometimes laughable. What's the big deal about the lead frame? Just bend the metal and make my parts. It's just not that simple, building semiconductors. I think a lot of learning needs to happen, and we don't directly ship the parts to the car manufacturers. We have the people in between, like the Continental and Gentex and Aptiv and HELLA and all these people. They're in between. We have a buffer, but the car manufacturers really need to really take the bull by the horn and drive the process to get out of JIT. I don't know whether they will. I don't know that. A positive step is, many of the car makers have been at the forefront of embracing the PSP program and requiring the tier 1s to be participants. At least for the moment, you can see how they're trying to drive towards having a level of inventory that assures them they can build their very expensive or very highly valuable end products. How that will persist a year or two years from now, we don't know. Great. Thank you. Okay, we'll take our Thanks. We'll move on to our next question from Christopher Rolland from Susquehanna. Hey, guys. Thanks for the question. It's a little bit more open-ended here. Ganesh Moorthy, you said in 40 years, you haven't seen such an imbalance between supply and demand as acute as this one. Steve Sanghi, you may want to chime in here as well. Can you guys talk about maybe something that was similar, the number two most acute time or number three? Are there any analogies to this, and how did that eventually unwind where we had that match of supply and demand, and do you see something like that taking place here? Thanks. All cycles eventually come to an end as the participants in the battlefield work on how they adjust to where the situation is. In prior cycles, the semiconductor companies put in the additional capacity in place and began to get closer in their self-interest to be able to grow. The players in the market began to adjust with what they were building and how they were building. I would say in my time frame, probably the sharpest rebound was probably 2008, 2009. Again, we were extremely fortunate in that time because we did not shut down our factories, and we kept things running, and we grew our inventory. Not all people did that, and we know it did create dislocations as a result of doing that. Steve, do you want to add to that? Well, finishing your thought, in 2008, 2009, we didn't shut down our factory and continued to run the factories, although we had some rotating time off. We entered the upcycle with a very good amount of inventory position, and through that, we grew a lot, and we did very well. We didn't repeat that this time because this time we had a very substantial debt leverage, which was very high, and therefore, we didn't choose to really put the money into inventory and kept the factories running and all that. At that time, I recall investor concern was, "What happens if your demand goes down 35%? Do you miss the covenant?" Sometimes your memories can be short, but this environment presented different challenges, so we were not able to repeat the experience of 2009 and did not reach this time with a high inventory internally. We're trying to build it now, unsuccessful because we're shipping as we build. The other point I wanted to make is, people use this word double ordering. We don't really get double ordering because our parts are all proprietary. You cannot buy from us and from another company for the same socket, nor can two distributors ship the product into the same socket in the way we register and make it economically impossible for the non-designing distributor to ship the parts into that socket. The only other remaining avenue is, a customer orders a little more than what they need, which we never know, and we cannot detect. If you want to call it double ordering, there could be some excess ordering by the customers we can't be sure of. One thing we are sure of is there's no double fulfillment. We are in daily phone calls, escalation meetings with a number of customers, threatened line downs and actual lines down for many of the car manufacturers and others. There is no double fulfillment. Everybody's getting a fraction of what they need. Therefore, there is a fair amount of runway ahead. With such a large amount of demand, I think it's going to be the rest of the fiscal year, we're just trying to get our head above the water. Unlike prior cycles, we have non-cancelable windows that are significantly longer than we have had in other cycles. That puts a lot more responsibility on the customer to have orders that they need and not orders that they don't need. Thank you, guys. Very insightful. Thank you. Thank you. We'll take our follow-up question from John Pitzer from Credit Suisse. Yeah, guys. Thanks for letting me ask another question. Just Eric, on the target model, I'm just kind of curious on the gross margin line. What's been really impressive is the incremental margins you guys have been able to put up over the last, call it, six to eight quarters. I mean, on quarters where you've had sequential growth, I think incremental gross margins have been right around that 80% mark. Was there something unusual about the last kind of six to eight quarters that drove such high incremental gross margins? Where should we think about that going forward? Well, I think there's a couple things. In the more recent quarters, we had significant underutilization charges, which have now gone away, right? Those costs are now being capitalized to inventory. We're running the factories more full, so that's gone away. Then we had a large acquisition in Microsemi that we were integrating over that timeframe too, and finding ways to improve margins on the acquired business. Those are the two things that I would point to. Steve or Ganesh, anything else? The only other thing I would add is we continue to add value into many of our products through a combination of hardware and software, which makes them more valuable, has improved the gross margins we have on those products. As you then get to a weighted average of all these products and what are we doing to make them more valuable, it shows up in the aggregate gross margin. Thank you. You're welcome. Thank you. That does conclude today's question and answer session. I'd like to turn the conference back over to Mr. Ganesh Moorthy for any additional closing remarks. Okay. We want to thank everyone for taking the time to join us. We do have investor meetings that are coming up that we look forward to meeting and talking to more of you. Have a good afternoon. Thank you. Thank you. That does conclude today's conference. We do thank you all for your participation. You may now disconnect.