Microchip Technology Faces 'Multiple Headwinds' Heading Into 2025 Turns Analyst Bearish

Microchip Technology Inc MCHP has put the brakes on its application for US semiconductor grants worth $162 million from the Chips Act.

Microchip Technology is facing multiple headwinds into 2025, which are both industry and company-related, according to Bank of America Securities.

Analyst Vivek Arya downgraded the rating for Microchip Technology from Neutral to Underperform, while slashing the price target from $80 to $65.

The Microchip Technology Thesis: All chipmakers are facing the risk of a "severe downturn" due to weak global demand and high customer and channel inventories, Arya said in the downgrade note.

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He added that Microchip Technology has even higher exposure to "industrial microcontrollers that saw (in hindsight) unsustainable pricing, take/pay contracts and excess inventory issues," which resulted in a more than 50% correction in quarterly sales from the peak in the June 2023 quarter.

Added to this are headwinds like its CEO transition, the announced closure of the Arizona fab and the return of CHIPS Act funds, all of which suggest "a lack of any meaningful demand recovery near-term," the analyst further stated.

Price Action: Shares of Microchip Technology had declined by 1.80% to $58.85 at the time of publication on Monday.

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