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Microchip (MCHP) Launches First Automotive Touchscreen Controller

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Microchip Technology (MCHP - Free Report) recently launched the world’s first automotive-grade touchscreen controller — the maXTouch Knob-on-Display (KoD) family of touchscreen controllers.

The company has launched its first touch screen controllers to address the changing dynamics in the current market. Several automotive and industrial touch HMI designers intend to merge the benefits of a mechanical rotary encoder input with a multi-touch display.

Microchip addresses this issue with its recent product portfolio, which natively supports the detection and reporting of capacitive rotary encoders. The new technology enables the mounting of knobs directly onto the display without any customization, thus increasing design flexibility and reducing system savings cost.

The data-driven fourth industrial revolution has already begun, and automation is at the forefront of this evolution. Microchip intends to address the new trend to attract new customers. The latest product has developed the Human-Machine interface module, which is increasingly popular in-home appliances and industrial applications.

Microchip’s Wide Array of New Solutions Driving Performance

The entire Semiconductor - Analog and Mixed industry is reeling from various operational challenges due to the macro-economic turmoil and geopolitical tensions. This has impacted Microchip’s shares along with its peers Analog Devices (ADI - Free Report) , onsemi (ON - Free Report) and NXP Semiconductors (NXPI - Free Report) negatively.

Microchip has fallen 35.5% in the year-to-date period (YTD) compared with the Zacks Semiconductor - Analog and Mixed industry’s decline of 29.7%.

onsemi shares have fallen 31% in the YTD period despite revenues increasing year over year in double digits. Increasing backlogs due to the current market scenario have been impacting the share price negatively.

ADI shares are down 18.7% even though the company has been enjoying solid demand for high-performance analog and mixed-signal solutions, which has been impacting its revenue growth positively. Overall negative sentiment in the market has made investors bearish on the stock.

NXPI shares have tumbled 35.9% in the YTD period. All-time high inflation, which increases input costs, is one of the primary macro-economic factors leading to a fall in the share price of NXPI.

A persistent supply chain constraint due to the lockdown in China, which extended from March to May and is still continuing, has disrupted operations in several factories of Microchip. The company anticipates supply chain constraints to persist through 2022 to 2023, consequently increasing backlogs as it fails to meet rising demand.

In order to meet rising demand, the company has to improve capital spending to increase the capacity of production.

However, 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. This will impact the share price positively in the long term.

The company’s short-term price growth looks tepid, and the current market scenario reflects that the share price can fall further.

Although it is not a good time to buy the stock, current shareholders should hold onto the shares to garner positive ROI. Microchip currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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