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Microchip (MCHP) Launches World's First Single-Core MPU

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Microchip Technology (MCHP - Free Report) recently launched its new SAMA7G54 Arm Cortex A7-based microprocessor unit (MPU), which extends its offerings that ensure high performance at a lower consumption rate.

The embedded control systems market is in dire need of high-performing AI solutions to perform edge computing. To perform this task, AI solutions require advanced imaging and audio capabilities, which are, till now, limited to multi-core processors with significantly high power consumption.

To address this problem, Microchip has launched its new MPU that will help developers to access high-performing AI solutions without worrying about power consumption.

The SAMA7G54 is the first single-core MPU, which includes both a MIPI CSI-2 camera interface and a traditional parallel camera interface that runs up to 1 GHz. This will enable designers to create high-performing imaging and audio-centric AI applications without utilizing multi-core MPUs, thus reducing power consumption.

To protect customers’ systems against any cyber threats, Microchip’s new MPU is integrated with Arm TrustZone technology with secure boot, secure key storage and cryptography solutions. The new MPU meets customers' need to develop power and performance-optimized AI solutions with advanced security solutions.

Microchip Diversifies Analog Business Portfolio

The microcontroller business of the company continues to outperform the industry as demand for its 8-bit, 16-bit and 32-bit microcontrollers rise globally, thus enabling it to gain significant market share.

However, supply chain constraints due to the lockdown in China, which extended from March to May and is still persisting, have disrupted operations in several factories of the company. Microchip anticipates supply chain constraints to continue through 2022 to 2023, consequently increasing backlogs as it fails to meet increasing demand with adequate supply. In order to meet rising demand, the company has to improve capital spending to increase the capacity of production.

Nevertheless, this is a risky maneuver for Microchip since its balance sheet is extremely leveraged. As of Mar 31, 2022, the company’s cash and short-term investments totaled $319.4 million, while total debt (long-term plus current portion) amounted to $7.9 billion. Owing to significant debt levels, the company has to constantly generate adequate operating cash flow to service its debt.

In order to diversify income from the supply chain issue-riddled microcontroller business, the company continues to develop and introduce a wide range of innovative and proprietary new linear, mixed-signal, power, interface, and timing products to spur future growth of the analog business. These enable the company to maintain sustainable revenue growth and expand margins.

In the fourth quarter of 2022, analog net sales of $514.5 million increased 3% sequentially and 24.2% year over year. Analog contributed 27.9% to total revenues. Positive growth in the analog business segment offers a lucrative investment proposition for investors looking to own blue-chip stocks that promise a healthy return on investments.

Microchip, currently carrying a Zacks Rank #3 (Hold), has slumped 24% in the year-to-date period compared with the Zacks Semiconductor - Analog and Mixed industry’s decline of 15.3%. The broader Zacks Computer and Technology sector has fallen 24.8% in the same time frame.

Stocks to Consider

While MCHP is a stock worth retaining in the portfolio, here are some better-ranked stocks to consider in the broader sector to gain more returns.

Analog Devices (ADI - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ADI’s shares have fallen 7.9% in the year-to-date period compared with the Zacks Semiconductor - Analog and Mixedindustry’s decline of 18.7%.

Avnet (AVT - Free Report) sports a Zacks Rank of 1.

Avnet’s shares have increased 10.1% in the year-to-date period against the Zacks Electronics - Parts Distributionindustry’s decline of 9.8%.

Axcelis Technologies (ACLS - Free Report) carries a Zacks Rank #2 (Buy).

ACLS’ shares have fallen 27.4% in the year-to-date period compared with the Zacks Electronics - Manufacturing Machineryindustry’s decline of 29.6%.