Edgar Filing: MICROCHIP TECHNOLOGY INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12

MICROCHIP TECHNOLOGY INCORPORATED
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[MICROCHIP LOGO]

MICROCHIP TECHNOLOGY INCORPORATED

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 15, 2003

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TIME: 9:00 a.m. Arizona Time

PLACE: Microchip Auditorium, Offices of Microchip Technology Incorporated
2355 West Chandler Boulevard, Chandler, Arizona 85224

ITEMS OF
BUSINESS: (1) To elect directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified.

(2) To approve an amendment to our 2001 Employee Stock Purchase Plan
to increase by 975,000 shares the number of shares of common stock
reserved for issuance under such plan.

(3) To approve an amendment to our 2001 Employee Stock Purchase Plan
to add, commencing January 1, 2005, an annual automatic increase in
the number of shares of common stock reserved for issuance under such
plan.

(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.

RECORD
DATE: Holders of Microchip common stock of record at the close of business
on June 20, 2003 are entitled to vote at the Meeting.

ANNUAL
REPORT: Microchip's 2003 annual report, which is not a part of the proxy
soliciting material, is enclosed.

PROXY: It is important that your shares be represented and voted at the
Meeting. You can vote your shares by completing and returning the
proxy card sent to you. Stockholders who hold their shares in "street
name" may also have a choice of voting their shares over the Internet
or by telephone. If Internet or telephone voting is available to you,
voting instructions are printed on the proxy card sent to you. You
can revoke a proxy at any time prior to its exercise at the Meeting
by following the instructions in the accompanying proxy statement.

J. Eric Bjornholt
Secretary
Chandler, Arizona
July 3, 2003

[MICROCHIP LOGO]

MICROCHIP TECHNOLOGY INCORPORATED
2355 WEST CHANDLER BOULEVARD
CHANDLER, ARIZONA 85224-6199

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PROXY STATEMENT

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You are cordially invited to attend our Annual Meeting on Friday, August
15, 2003, beginning at 9:00 a.m., Arizona time. The Annual Meeting will be held
in the Microchip Auditorium, located at our facility at 2355 West Chandler
Boulevard, Chandler, Arizona 85224.

We are providing these proxy materials in connection with the solicitation
by the Board of Directors of Microchip Technology Incorporated of proxies to be
voted at Microchip's 2003 Annual Meeting of Stockholders and at any adjournment
thereof.

Our fiscal year begins on April 1 and ends on March 31. References in this
proxy statement to the year 2003 or fiscal 2003 refer to the 12-month period
from April 1, 2002 through March 31, 2003.

On June 20, 2003, the closing price of a share of our common stock as
reported by the Nasdaq National Market was $23.62.

We anticipate first mailing this proxy statement and accompanying form of
proxy on July 3, 2003 to holders of Microchip's common stock on June 20, 2003,
the Record Date for the Annual Meeting.

PROXIES AND VOTING PROCEDURES

YOUR VOTE IS IMPORTANT. Because many stockholders cannot attend the Meeting
in person, it is necessary that a large number of stockholders be represented by
proxy. Stockholders who hold their shares in "street name" may have a choice of
voting over the Internet, by using a toll-free telephone number or by completing
a proxy card and mailing it in the postage-paid envelope provided. Please refer
to your proxy card or the information forwarded by your bank, broker or other
holder of record to see which options are available to you. Under Delaware law,
stockholders may submit proxies electronically. Please be aware that if you vote
over the Internet, you may incur costs such as telephone and Internet access
charges for which you will be responsible.

You can revoke your proxy at any time before it is exercised by timely
delivery of a properly executed, later-dated proxy (including an Internet or
telephone vote if these options are available to you) or by voting by ballot at
the Meeting.

The method by which you vote will in no way limit your right to vote at the
Meeting if you later decide to attend in person. If your shares are held in the
name of a bank, broker or other holder of record, you must obtain a proxy,
executed in your favor, from the holder of record, to be able to vote at the
Meeting.

All shares entitled to vote and represented by properly completed proxies
received prior to the Meeting and not revoked will be voted at the Meeting in
accordance with the instructions on such proxies. IF YOU DO NOT INDICATE HOW
YOUR SHARES SHOULD BE VOTED ON A MATTER, THE SHARES REPRESENTED BY YOUR PROPERLY
COMPLETED PROXY WILL BE VOTED AS OUR BOARD OF DIRECTORS RECOMMENDS.

If any other matters are properly presented at the Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Meeting to another time or place, the persons named as proxies and
acting thereunder will have discretion to vote on those matters according to
their best judgment to the same extent as the person delivering the proxy would
be entitled to vote. At the date this proxy statement went to press, we did not
anticipate that any other matters would be raised at the Meeting.

STOCKHOLDERS ENTITLED TO VOTE

Stockholders of record at the close of business on the Record Date, June
20, 2003, are entitled to notice of and to vote at the Meeting. Each share is
entitled to one vote on each matter properly brought before the Meeting. On the
Record Date, there were 204,196,193 shares of our common stock issued and
outstanding.

In accordance with Delaware law, a list of stockholders entitled to vote at
the Meeting will be available at the Meeting on August 15, 2003, and for 10 days
prior to the Meeting at 2355 West Chandler Boulevard, Chandler, Arizona, between
the hours of 9:00 a.m. and 4:30 p.m., Arizona time.

REQUIRED VOTE

QUORUM, ABSTENTIONS AND BROKER NON-VOTES

The presence, in person or by proxy, of the holders of a majority of the
shares entitled to vote at the Meeting is necessary to constitute a quorum at
the Meeting. Abstentions and broker "non-votes" are counted as present and
entitled to vote for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner (i.e., in "street
name") does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. Under the rules of the New York Stock
Exchange, which apply to NYSE member brokers trading in non-NYSE stock, brokers
have discretionary authority to vote shares on certain routine matters if
customer instructions are not provided. The proposals to be considered at the
Meeting may be treated as routine matters. Consequently, if you do not return a
proxy card, your broker may have discretion to vote your shares on the matters
presented.

ELECTION OF DIRECTORS

A plurality of the votes duly cast is required for the election of
Directors (i.e., the nominees receiving the greatest number of votes will be
elected). Abstentions and broker "non-votes" will not affect the election of
Directors.

OTHER MATTERS

The affirmative vote of the holders of a majority of the shares of common
stock present in person or represented by proxy and entitled to vote at the
meeting is required to adopt the amendments to our Employee Stock Purchase Plan
described in Proposal Two and Proposal Three.

Abstentions will have the same effect as voting against these proposals.
Broker "non-votes" ARE NOT counted for purposes of approving the amendments to
our Employee Stock Purchase Plan.

ELECTRONIC ACCESS TO PROXY STATEMENT AND ANNUAL REPORT

This proxy statement and our 2003 Annual Report are available on our
Internet site at http://www.microchip.com. Our stockholders can elect to view
future proxy statements and annual reports over the Internet instead of
receiving paper copies in the mail.

If you are a stockholder of record, you can choose this option and save
Microchip the cost of producing and mailing these documents by marking the
appropriate box on your proxy card. You can also choose between paper documents
and electronic access by calling Microchip's Investor Relations Department at
480-792-7761.

If you choose to view future proxy statements and annual reports over the
Internet, you will receive a proxy card in the mail next year with instructions
containing the Internet address of those materials. Your choice will remain in
effect until you contact Microchip's Investor Relations Department and instruct
us otherwise. You do not have to elect Internet access each year.

If you hold your Microchip stock through a bank, broker or other holder of
record, please refer to the information provided by that entity for instructions
on how to elect to view future proxy statements and annual reports over the
Internet.

Most stockholders who hold their Microchip stock through a bank, broker or
other holder of record and who elect electronic access will receive an e-mail
message next year containing the Internet address to use to access Microchip's
proxy statement and annual report.

COST OF PROXY SOLICITATION

Microchip will pay the cost of soliciting proxies. Proxies may be solicited
on behalf of Microchip by its directors, officers or employees in person or by
telephone, facsimile or other electronic means. We may also, at our expense,
engage a proxy solicitation firm to assist us in the distribution and
solicitation of proxies. If we do so, we believe that the expense will not
exceed $50,000. We may also reimburse brokerage firms and other custodians,
nominees and fiduciaries for their expenses incurred in sending proxies and
proxy materials to beneficial owners of Microchip common stock.

THE BOARD OF DIRECTORS

MEETINGS OF THE BOARD OF DIRECTORS

Our Board of Directors met nine times in fiscal 2003. Each Director
attended at least 75% of the meetings of the Board of Directors and of the
committees on which the Director served. During fiscal 2003, the Board of
Directors implemented the practice of meeting in executive session on at least a
quarterly basis without management or Mr. Sanghi present.

COMMITTEES OF THE BOARD OF DIRECTORS

The following table lists our three committees, the Directors who currently
serve on them and the number of committee meetings held in fiscal 2003:

MEMBERSHIP ON BOARD COMMITTEES

NOMINATING AND
NAME AUDIT COMPENSATION GOVERNANCE
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Mr. Chapman C o
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Mr. Day o C
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Mr. Hugo-Martinez o C o
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Mr. Meyercord o o
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Meetings held in Fiscal 2003 11 6 *
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C = CHAIR
o = MEMBER
* COMMITTEE WAS FORMED IN APRIL 2003

AUDIT COMMITTEE. The responsibilities of our Audit Committee are described
in the committee charter, which is attached as Appendix A to this proxy
statement, and in the following Report of the Audit Committee.

The Board has determined that all members of the Audit Committee are
independent directors as defined by the applicable rules of the National
Association of Securities Dealers. The Board has also determined that each of
Messrs. Chapman, Hugo-Martinez and Meyercord meet the requirements for being an
"audit committee financial expert" as defined by the rules of the Securities and
Exchange Commission adopted in January 2003.

COMPENSATION COMMITTEE. The Compensation Committee has oversight
responsibility for the compensation and benefit programs for our executive
officers and other employees, including administration of our stock option and
employee stock purchase plans. For more information on our Compensation
Committee, please turn to the "BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION" at page 14, below.

NOMINATING AND GOVERNANCE COMMITTEE. The responsibilities of our Nominating
and Governance Committee are described in the committee charter, which is
attached as Appendix B to this proxy statement. Such committee was formed in
April 2003 and held its first meeting in May 2003.

The Nominating and Governance Committee will consider nominees recommended
by stockholders provided such recommendations are made in accordance with
procedures described in this proxy statement under "Requirements, Including
Deadlines, For Receipt of Stockholders' Proposals For the 2004 Annual Meeting of
Stockholders; Discretionary Authority to Vote on Stockholder Proposals."

REPORT OF THE AUDIT COMMITTEE

The Board of Directors has adopted a written charter setting out the
purposes and responsibilities of the Audit Committee. The Board and the Audit
Committee review and assess the adequacy of the charter on no less than an
annual basis. A copy of that charter, as amended and restated through May 1,
2003, is attached to this proxy statement as Appendix A.

Each of the Directors who serves on the Audit Committee meets the
independence and experience requirements of the National Association of
Securities Dealers. What this means is that the Microchip Board of Directors has
determined that no member of the Audit Committee has a relationship to Microchip
that may interfere with such member's independence from Microchip and its
management, and that all members have the required knowledge and experience to
perform their duties as committee members.

We have received from Ernst & Young the written disclosure and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and have discussed with Ernst & Young their
independence from Microchip. We also discussed with Ernst & Young any matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees). We have considered whether and
determined that the provision of the non-audit services rendered to Microchip by
Ernst & Young during fiscal year 2003 was compatible with maintaining the
independence of Ernst & Young.

We have reviewed with management Microchip's audited annual financial
statements included in its Annual Report on Form 10-K for the fiscal year ended
March 31, 2003 and filed with the Securities and Exchange Commission, as well as
the unaudited financial statements filed with Microchip's quarterly reports on
Form 10-Q. We also met with both management and Ernst & Young to discuss those
financial statements.

Based on these reviews and discussions, we recommended to the Board of
Directors that Microchip's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2003
for filing with the SEC.

By the Audit Committee of the Board of Directors(1):

Matthew W. Chapman (Chairman) Wade F. Meyercord Albert J. Hugo-Martinez

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(1) The Report of the Audit Committee is not "soliciting" material and is not
deemed "filed" with the Securities and Exchange Commission, and is not
incorporated by reference into any filings of Microchip under the Securities Act
of 1933 or the Securities Exchange Act of 1934, whether made before or after the
date of this proxy statement and irrespective of any general incorporation
language contained in such filings.

DIRECTOR COMPENSATION

DIRECTOR FEES

Non-employee Directors currently receive a $13,600 annual retainer, paid in
quarterly installments and $1,700 for each meeting attended in person. Directors
do not receive any compensation for telephonic meetings of the Board or for
meetings of committees of the Board.

STOCK OPTIONS

Under the terms of our 1993 Stock Option Plan, each non-employee Director
is automatically granted:

o an option to purchase 12,000 shares of common stock upon his or her
first election to the Board of Directors, and

o an option to purchase 6,000 shares of common stock immediately
following the annual election of directors, granted as of the first
business day of the month in which the annual stockholders' meeting is
held.

During fiscal 2003, each of Mr. Hugo-Martinez, Mr. Day, Mr. Chapman and Mr.
Meyercord were granted the following options:

(1) Effective as of August 1, 2002, an option to acquire 5,000 shares of
common stock at an exercise price of $21.00 per share. Each such
option vests in a series of 12 equal and successive monthly
installments starting one month after the grant date.

(2) Effective as of August 16, 2002, and following approval by our
stockholders at our 2002 annual meeting of an amendment to our 1993
Stock Option Plan to increase the annual option grant to directors, an
option to acquire 1,000 shares of common stock at an exercise price of
$22.81 per share. Each such option vests in a series of 12 equal and
successive monthly installments starting one month after the grant
date.

(3) Effective as of August 16, 2002, and following approval by our
stockholders at our 2002 annual meeting of a special one-time option
grant to non-employee directors, an option to acquire 3,000 shares of
common stock at an exercise price of $22.81 per share. Each such
option vests as follows: 1,000 shares vest in full 12 months from the
grant date, and the remaining 2,000 shares vest ratably over the
succeeding 24 months (i.e., 83.33 shares per month in months 13-36).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In fiscal 2003, Mr. Hugo-Martinez and Mr. Day, two of our independent
Directors, served on the Compensation Committee. Neither Mr. Hugo-Martinez nor
Mr. Day had any contractual or other relationship or transaction with Microchip
during fiscal 2003 except as a Director, and neither has ever served as an
officer or employee of Microchip.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) and related rules under the Securities Exchange Act of 1934
requires our Directors, executive officers and stockholders holding more than
10% of our common stock to file reports of holdings and transactions in
Microchip stock with the SEC and to furnish us with copies of all Section 16(a)
forms they file. Based solely on our review of the copies of such forms received
by us during fiscal 2003, and written representations from our Directors and
executive officers that no other reports were required, we believe that all
Section 16(a) filing requirements applicable to our Directors, executive
officers and stockholders holding more than 10% of our common stock with respect
to fiscal 2003 were met, except that Mr. Chapman filed one late Form 4 with
respect to a purchase of shares on March 5, 2002.

PROPOSAL ONE

ELECTION OF DIRECTORS

A board of five Directors will be elected at the Meeting. The persons named
in the proxy card will vote such proxy for the election of each of the nominees
named below, unless you indicate that your vote should be withheld. Each of the
nominees is currently serving as a Director. If any of the nominees becomes
unable or declines to serve as a Director at the time of the Meeting, the
persons named in the proxy card will vote such proxy for any nominee designated
by the current Board of Directors to fill the vacancy. We do not expect that any
of the nominees will be unable or will decline to serve as a Director.

The term of office of each person who is elected as a Director at the
Meeting will continue until the 2004 annual meeting of stockholders and until a
successor has been elected and qualified.

INFORMATION ON NOMINEES FOR DIRECTOR

NAME AGE POSITION(S) HELD
---- --- ----------------
Steve Sanghi........................ 47 Chairman, President and CEO
Albert J. Hugo-Martinez............. 57 Director
L.B. Day ........................... 58 Director
Matthew W. Chapman.................. 52 Director
Wade F. Meyercord................... 62 Director

STEVE SANGHI is currently, and has been since August 1990, a Director and
President of the Company. Since October 1991, he has served as CEO of the
Company, and since October 1993, as Chairman of the Board of Directors.

ALBERT HUGO-MARTINEZ has served as a Director of the Company since October
1990. Since February 2000, he has served as Chief Executive Officer of
Hugo-Martinez Associates, a consulting and advisory firm. From February 1999 to
February 2000, he served as Chairman and Chief Executive Officer of Network
Webware, Inc., an Internet software company. From March 1996 until November
1999, he served as President and Chief Executive Officer and a member of the
board of directors of GTI Corporation, a manufacturer of ISDN-ADSL and local
area network subcomponents. Mr. Hugo-Martinez is also a member of the board of
directors of Ramtron International Corporation.

L.B. DAY has served as a Director of the Company since December 1994. Since
1976, he has served as President of L.B. Day & Company, Inc., a management
consulting firm specializing in organizational development and strategic
planning for the technology industry.

MATTHEW CHAPMAN has served as a Director of the Company since May 1997.
Since January 2002, he has served as President and CEO of Centrisoft
Corporation, an emerging software provider for application performance
management. From August 2000 to January 2002, Mr. Chapman served as an advisor
to early-stage technology companies in connection with developing business plans
and securing funding. From 1988 until August 2000, he served as Chief Executive
Officer, and from 1991 until August 2000 as Chairman, of Concentrex
Incorporated, a supplier of integrated software solutions and services to
financial institutions throughout the United States.

WADE MEYERCORD has served as a Director of the Company since June 1999.
Since October 2002, he has served as full-time President of Meyercord &
Associates, a management consulting firm specializing in high technology company
compensation matters (CEO, executive officer and board) and in stock plan
consulting, a position he had held part-time since 1987. From June 1999 to
October 2002, Mr. Meyercord served as Senior Vice President and Chief Financial
Officer of Rioport.com, an Internet applications service provider for the music
industry. From October 1997 to June 1999, he served as Senior Vice President,
e-commerce and Quality Assurance of Diamond Multimedia Systems, Inc., a supplier
of Internet multimedia appliances. Mr. Meyercord is also a member of the board
of directors of California Micro Devices Corporation.

PROPOSAL TWO

PROPOSAL TO AMEND OUR
EMPLOYEE STOCK PURCHASE PLAN TO INCREASE
THE NUMBER OF SHARES THAT CAN BE ISSUED UNDER THE PLAN BY 975,000 SHARES

We are asking our stockholders to approve the addition of 975,000 shares of
common stock to our 2001 Employee Stock Purchase Plan, referred to as the ESPP.

Since the adoption of the ESPP, a total of 2,450,000 shares of common stock
have been reserved for issuance under the ESPP. As of the Record Date, 491,479
shares of common stock have been issued under the ESPP.

As of March 31, 2003, approximately 1,781 employees were eligible to
participate in the ESPP, and 1,541 of these employees were participants.

The principal features of the ESPP are described at "APPENDIX C -
DESCRIPTION OF OUR 2001 EMPLOYEE STOCK PURCHASE PLAN."

WHY WE APPROVED THE PROPOSED INCREASE IN SHARES

The ESPP is intended to promote the best interests of Microchip and our
stockholders by providing all eligible employees, including officers, with the
opportunity to become stockholders by purchasing common stock at discounted
prices through payroll deductions. Our Board of Directors believes that the ESPP
encourages employees to remain employed with Microchip and aligns our employees'
collective interests with those of our stockholders. Our continued success
depends upon our ability to attract and retain talented employees. Equity
incentives are necessary for us to remain competitive in the marketplace for
qualified personnel, and an employee stock purchase plan is a key element of our
equity incentive package.

We believe that over the term of the current offering period, we will
experience headcount growth and that participation in the ESPP will increase.
The number of shares consumed in the ESPP during the current offering period
requires us to estimate the number of employees who will participate in the ESPP
and their level of participation and our stock price at four measurement points.
Also, it is critical that the ESPP have sufficient shares at the start of each
two-year purchase period to meet the purchase requirements of the entire
two-year period in order to avoid potential adverse accounting consequences and
allow our ESPP program to continue uninterrupted.

Based on the above factors, the Board of Directors believes that the
shares currently reserved for issuance under the ESPP may not be sufficient to
meet anticipated purchase requirements at the beginning of the next two-year
offering period commencing March 1, 2004.

We believe that the ESPP is an indispensable equity incentive made
available to our employees that allows us to remain a competitive employer.
Thus, we believe it is in the best interests of the Company and our stockholders
to ensure that our ESPP program continues uninterrupted.

OTHER MATTERS

The Board of Directors has not determined what action it will take if the
additional shares are not approved by stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
TWO. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.

PROPOSAL THREE

PROPOSAL TO AMEND OUR
EMPLOYEE STOCK PURCHASE PLAN TO ADD, COMMENCING JANUARY 1, 2005,
AN ANNUAL AUTOMATIC INCREASE
IN THE NUMBER OF SHARES THAT CAN BE ISSUED UNDER THE PLAN

We are asking our stockholders to approve an annual automatic increase in
the number of shares of common stock issuable under our ESPP beginning on
January 1, 2005. This proposal is in addition to the one-time share increase
that we are asking our stockholders to approve in Proposal Two. The automatic
annual increase will not take effect until January 1, 2005, at which time we
expect that we will need additional shares under our ESPP. The amount of the
annual automatic share increase that would take effect on January 1, 2005, and
on each January 1 thereafter during the term of the ESPP, would be equal to the
lesser of (i) 1,500,000 shares, (ii) one half of one percent (0.5%) of the then
outstanding shares of our common stock, or (iii) such lesser amount as is
approved by our Board of Directors.

Since the adoption of the ESPP, a total of 2,450,000 shares of common stock
have been reserved for issuance under the ESPP. Under Proposal Two, our
stockholders are being asked to increase the number of shares reserved for
issuance under the ESPP by 975,000 shares. As of the Record Date, 491,479 shares
of common stock have been issued under the ESPP.

As of March 31, 2003, approximately 1,781 employees were eligible to
participate in the ESPP, and 1,541 of these employees were participants.

The principal features of the ESPP are described at "APPENDIX C -
DESCRIPTION OF OUR 2001 EMPLOYEE STOCK PURCHASE PLAN."

WHY WE APPROVED THE PROPOSED AUTOMATIC INCREASE IN SHARES

As noted in Proposal Two, it is critical that the ESPP have sufficient
shares at the start of each two-year purchase period to meet the purchase
requirements of the entire two-year period in order to avoid potential adverse
accounting consequences and allow our ESPP program to continue uninterrupted.
The automatic annual share increase will not take effect until January 1, 2005
at which time we expect that we will need additional shares under our ESPP.
Thus, we believe that approval of this proposal will help mitigate the risk of
an ESPP share shortfall that could result in adverse accounting consequences to
us in future years.

We believe that the ESPP is an indispensable equity incentive made
available to our employees that allows us to remain a competitive employer.
Thus, we believe it is in the best interests of Microchip and our stockholders
to ensure that our ESPP program continues uninterrupted.

OTHER MATTERS

Our Board of Directors has not determined what action it will take if the
automatic annual increase in shares is not approved by stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
THREE. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.

INDEPENDENT AUDITORS

Ernst & Young has audited our financial statements since the fiscal year
ended March 31, 2002 and has served as our independent auditors since June 6,
2001. The partner in charge of our audit will be rotated every five years. Other
partners and non-partner personnel are rotated on a periodic basis.

One or more representatives of Ernst & Young will be present at the Meeting
with the opportunity to make a statement if he or she desires to do so and will
be available to respond to appropriate questions.

On May 1, 2003, our Board of Directors amended the charter of the Audit
Committee to, among other things, provide that the Audit Committee shall be
responsible for the appointment, compensation, retention and oversight of our
independent auditors. In light of the recent changes in its charter, the Audit
Committee has not yet undertaken the process of selecting independent public
accountants for our fiscal year ending March 31, 2004. The Audit Committee has
determined that until such process is completed, Ernst & Young LLP will continue
to serve as our principal accountant.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

CHANGE IN INDEPENDENT AUDITORS

In June 2001, the Board of Directors, upon the recommendation of the Audit
Committee, determined not to renew the engagement of KPMG LLP as our independent
auditors. KPMG had served as our independent auditors for the fiscal years ended
March 31, 1993 through and including March 31, 2001. The decision to not renew
KPMG's engagement did not occur due to any existing or previous accounting
disagreements with KPMG, and KPMG has expressed no disclaimer of opinion,
adverse opinion, qualification or limitation regarding our financial statements
or the audit process, for the fiscal years ended March 31, 2001 or 2000, or the
interim period beginning April 1, 2001. Neither have there been any accounting
disagreements nor reportable events within the meaning of Item 304(a)(1)(iv) and
Item 304(a)(1)(v) of Securities and Exchange Commission Regulation S-K for those
periods. KPMG concurred with the foregoing statements in this paragraph in a
letter addressed to the Securities and Exchange Commission. That letter was
included as an exhibit to our Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 22, 2001.

Upon the recommendation of the Audit Committee, on June 6, 2001, the Board
of Directors engaged Ernst & Young to audit the Company's consolidated financial
statements for the fiscal year ending March 31, 2002. We did not seek the advice
of Ernst & Young on specific audit issues relating to our consolidated financial
statements prior to engagement of that firm. We reported the engagement of Ernst
& Young in our Current Report on Form 8-K filed June 7, 2001.

AUDIT FEES

This category includes fees associated with our annual audit, the reviews
of our quarterly reports on Form 10-Q, and statutory audits required
internationally. This category also includes advice on audit and accounting
matters that arose during, or as a result of, the audit or the review of our
interim financial statements, statutory audits, and the assistance with review
of our SEC registration statements. The aggregate fees billed or to be billed by
Ernst & Young in each of the last two fiscal years for such services were
$478,000 for fiscal 2003 and $314,000 for fiscal 2002.

AUDIT-RELATED FEES

This category includes fees associated with employee benefit plan audits,
internal control reviews, accounting consultations, and attest services that are
not required by statute or regulation. The aggregate fees billed or to be billed
by Ernst & Young in each of the last two fiscal years for such services were
$111,000 for fiscal 2003 and $33,000 for fiscal 2002.

TAX FEES

This category includes fees associated with tax return preparation, tax
advice, expatriate tax services and tax planning. The aggregate fees billed or
to be billed by Ernst & Young in each of the last two fiscal years for such
services were $151,000 for fiscal 2003 and $795,000 for fiscal 2002.

ALL OTHER FEES

This category includes fees for support and advisory services not related
to audit services or tax services. There were no such fees in 2003 or 2002.

Our Audit Committee has determined that the non-audit services rendered by
Ernst & Young during fiscal 2003 and fiscal 2002 were compatible with
maintaining the independence of Ernst & Young.

Our Audit Committee has adopted a pre-approval policy for all audit and
non-audit services to be provided by our independent auditors. The pre-approval
policy is attached to the proxy statement as Appendix D.

PERFORMANCE GRAPH

The following graph indicates the cumulative total stockholder return for
Microchip compared with the CRSP Total Return Index for the Nasdaq Stock Market
(U.S.) (Nasdaq U.S. Composite) and the Philadelphia Semiconductor Index (SOXX)
weighted by market value at the beginning of the measurement period. The graph
covers the five-year period from March 31, 1998 through March 31, 2003.

HISTORIC STOCK PRICE PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
STOCK PERFORMANCE.

[BEGIN LINE GRAPH]

Microchip
Technology Nasdaq
Incorporated US Composite SOXX
------------ ------------ ----
Mar-98 100.00 100.00 100.00
Jun-98 124.41 102.75 82.33
Sep-98 104.16 92.71 71.23
Dec-98 176.20 120.47 117.36
Mar-99 164.88 135.08 124.11
Jun-99 225.60 147.62 162.19
Sep-99 244.65 151.25 167.08
Dec-99 325.91 223.42 235.88
Mar-00 469.66 250.99 395.68
Jun-00 416.20 218.27 381.83
Sep-00 354.26 201.31 285.09
Dec-00 235.05 134.80 193.04
Mar-01 271.22 100.60 182.47
Jun-01 358.20 118.56 208.94
Sep-01 287.16 82.27 125.11
Dec-01 415.09 106.94 174.81
Mar-02 448.20 101.32 199.28
Jun-02 440.86 80.76 129.76
Sep-02 328.67 64.80 79.76
Dec-02 392.96 73.93 96.83
Mar-03 319.83 74.37 99.19

[END LINE GRAPH]

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the beneficial
ownership of our common stock as of May 30, 2003 for: (a) each Director, (b) our
CEO and the four other most highly compensated executive officers named in this
proxy statement, (c) all Directors and executive officers as a group, and (d)
each person who is known to us to own beneficially more than five percent of our
common stock. Except as otherwise indicated in the footnotes to this table, and
subject to applicable community property laws and joint tenancies, the persons
named in this table have sole voting and investment power with respect to all
shares of common stock held by such person:

NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK
------------------------------------ --------------------- ------------

AIM Management Group Inc. (2)............................... 13,138,475 6.44%
Steve Sanghi (3)............................................ 5,240,197 2.54%
Matthew W. Chapman (4)...................................... 73,772 *
L.B. Day (1)................................................ 39,250 *
Albert J. Hugo-Martinez (1)................................. 152,828 *
David S. Lambert (5)........................................ 698,885 *
Mitchell R. Little (1)...................................... 31,150 *
Wade F. Meyercord (1)....................................... 68,125 *
Gordon W. Parnell (6)....................................... 168,593 *
Richard J. Simoncic (7)..................................... 323,391 *
All Directors and executive officers as a group (10 people) (1) 6,838,620 3.29%

----------
* Less than 1% of the outstanding shares of common stock.

(1) As indicated below, the number of shares beneficially owned includes shares
of common stock issuable to the identified person pursuant to stock options
and stock purchase rights that may be exercised within 60 days of May 30,
2003. In calculating the percentage of ownership, such shares are deemed to
be outstanding for the purpose of computing the percentage of shares of
common stock owned by such person but are not deemed to be outstanding for
the purpose of computing the percentage of shares of common stock owned by
any other stockholder:

o L.B. Day -- 39,250 shares o Mitchell R. Little -- 29,318 shares
o Albert J. Hugo-Martinez -- 115,376 shares o Wade F. Meyercord -- 68,125 shares
o Directors and executive officers as a group
(10 people) -- 3,582,935 shares

(2) Address is 11 Greenway Plaza, Suite 100, Houston, TX 77046. Information is
based on the Schedule 13G filed by AIM Management Group Inc. dated February
10, 2003. Such Schedule 13G indicates that AIM Management Group Inc. has
sole power to vote or direct the vote and to dispose of and direct the
disposition of the common stock. AIM Management Group Inc. is the parent
holding company of a group of investment management companies that hold
investment power and, in some cases, voting power over the securities
reported in the referenced Schedule 13G.
(3) Includes 2,489,231 shares issuable upon exercise of options and 2,726,506
shares held of record by Steve Sanghi and Maria T. Sanghi as trustees.
(4) Includes 59,875 shares issuable upon exercise of options, 262 shares held
in Testamentary Trust of Regan Chapman and 135 shares held by Mr. Chapman's
minor children.
(5) Includes 367,595 shares issuable upon exercise of options and 4,000 shares
held by Mr. Lambert's children.
(6) Includes 155,884 shares issuable upon exercise of options and 12,709 shares
held of record by Gordon W. Parnell and Jeanette Parnell as trustees.
(7) Includes 222,053 shares issuable upon exercise of options, 96,326 shares
held of record by Richard J. Simoncic and Melody Simoncic as trustees, and
225 shares jointly held by Mr. Simoncic's wife and mother-in-law.

EXECUTIVE COMPENSATION

--------------------------------------------------------------------------------

COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION

--------------------------------------------------------------------------------

THE COMPENSATION COMMITTEE

The Compensation Committee of the Board, presently comprised of Mr.
Hugo-Martinez and Mr. Day, reviews the performance of the executive officers and
makes compensation decisions regarding the executive officers. The Compensation
Committee generally seeks input from Mr. Sanghi when discussing the performance
of, and compensation levels for, the executive officers other than Mr. Sanghi.
Mr. Sanghi does not participate in deliberations relating to his own
compensation.

OUR COMPENSATION POLICY

Our compensation policy for officers and key employees is based on a
"pay-for-performance" philosophy. This "pay-for-performance" philosophy
emphasizes variable compensation, primarily by placing a large portion of pay at
risk. We believe that this philosophy meets the following objectives:

o rewards performance that increases the value of our common stock
o attracts, retains, motivates and rewards individuals with competitive
compensation opportunities
o aligns an executive's total compensation with our business objectives
o fosters a team environment among our management that focuses their
energy on achieving our financial and performance objectives,
consistent with Microchip's "guiding values"
o balances short-term and long-term strategic goals, and
o builds and encourages ownership of our common stock.

Compensation decisions also include subjective determinations and
consideration of various factors with the weight given to a particular factor
varying from time to time and in various individual cases.

We believe that the overall compensation levels for the executive officers
in fiscal 2003 were consistent with our "pay-for-performance" philosophy and are
commensurate with the Company's fiscal 2003 performance.

ELEMENTS OF COMPENSATION

Our executive compensation program is currently comprised of four major
elements:

o annual base salary
o incentive cash bonuses
o stock options, and
o compensation and employee benefits generally available to all
Microchip employees.

BASE SALARIES. We review the base salaries of the executive officers each
year, primarily by considering the salaries of executive officers in similar
positions with comparably sized companies in the semiconductor industry.

When setting base salaries, we also review the performance objectives for
the Company as a whole, as well as the performance objectives for each of the
individual officers relative to their respective areas of responsibility. This
review encompasses the objectives for both the immediately preceding fiscal year
and the upcoming fiscal year. Performance objectives are initially developed by
the individual officers, in conjunction with their respective operating units,

and then discussed with and approved by the CEO to generate the Company's
quarterly operating objectives. The operating objectives are then reviewed and
approved by the Board of Directors.

We also consider subjective factors when reviewing and setting base
salaries, such as an executive's experience and tenure in the industry and the
perceived value of the executive's position to the Company as a whole.

After consideration of the factors described above, average base salaries
for the executive officers were increased by approximately 5.3% in August of
fiscal 2003. During fiscal 2002, in response to industry conditions, all
Microchip employees, including the CEO and all executive officers, participated
in two unpaid one-week shutdowns. There were also no increases in the base
salaries of the executive officers during fiscal 2002. After making adjustments
for the two unpaid one-week shutdowns in fiscal 2002, base salaries of the
executive officers increased by approximately 3.2% in fiscal 2003 over fiscal
2002.

INCENTIVE CASH BONUSES. Quarterly incentive cash bonuses may be payable to
officers and key employees under the Management Incentive Compensation Plan,
referred to as the "MICP." The Compensation Committee approves any quarterly
payments under the MICP in conjunction with its review of the Company's
quarterly operating results. The MICP is an aggregate bonus pool derived from a
percentage of our annual operating profit. This bonus pool may then be allocated
among the eligible participants based upon the Company's operating results and
various subjective determinations.

Consistent with our "pay-for-performance" philosophy, due to our operating
results throughout fiscal 2003 and the uncertain and volatile conditions in the
semiconductor industry, no MICP bonus payments were made during fiscal 2003.

STOCK OPTIONS. Stock options constitute a significant portion of our
incentive compensation program because we believe that officers and key
employees should hold substantial, long-term equity stakes in the Company to
align their collective interests with your interests. We typically grant stock
options to officers and key employees in connection with their initial
employment and on an annual basis thereafter. Grants may also be made in
connection with promotions, other changes in responsibilities or in recognition
of other individual or Company developments or achievements. At March 31, 2003,
approximately 62% of our employees worldwide held options to purchase our common
stock.

In granting stock options to executive officers, we consider numerous
factors, including:

o the individual's position and responsibilities
o the individual's future potential to influence the Company's mid- and
long-term growth
o the vesting schedule of the options awarded, and
o the number of options previously granted.

See the table under "OPTION GRANTS IN LAST FISCAL YEAR," at page 19, below,
for information regarding options to purchase common stock granted during fiscal
2003 to the CEO and each of the four other most highly compensated executive
officers named in this proxy statement.

OTHER COMPENSATION AND EMPLOYEE BENEFITS GENERALLY AVAILABLE TO ALL
EMPLOYEES. We maintain compensation and employee benefits that are generally
available to all Company employees, including:

o the employee stock purchase plan
o medical, dental and life insurance benefits
o a 401(k) retirement savings plan, and
o a cash bonus plan.

The cash bonus plan awards each eligible employee with up to two and
one-half days of pay, based on base salary, every quarter, if certain operating
profitability objectives are achieved. For the first three quarters of fiscal
2003, each eligible employee received 75% of the target cash bonus payment
permitted under the cash bonus plan for such quarters. No cash bonus was paid
for the fourth quarter of fiscal 2003.

We also maintain a supplementary retirement plan for certain employees,
including the CEO and the executive officers, who receive compensation in excess
of the 401(k) contribution limits imposed under the Internal Revenue Code.

CEO COMPENSATION

We use the same factors and criteria described above in making compensation
decisions regarding the CEO. Mr. Sanghi's base salary was increased by
approximately 5.5% in August of fiscal 2003. During fiscal 2002, in response to
industry conditions, all Microchip employees, including the CEO, participated in
two unpaid one-week shutdowns. There was also no increase in the base salary of
the CEO during fiscal 2002. After making adjustments for the two unpaid one-week
shutdowns in fiscal 2002, the base salary of Mr. Sanghi increased by
approximately 3.4% in fiscal 2003 over fiscal 2002.

Mr. Sanghi did not receive any MICP bonus for fiscal 2003.

During fiscal 2003, Mr. Sanghi was granted options to acquire 603,752
shares of common stock at a weighted average exercise price of $25.10 per share.
For additional information concerning these option grants, including vesting
information, refer to the table under "OPTION GRANTS IN LAST FISCAL YEAR," at
page 19, below. We determined that the amounts of the grants and the vesting
terms provide an appropriate long-term incentive for Mr. Sanghi.

We believe that Mr. Sanghi's fiscal 2003 compensation was:

o consistent with Microchip's "pay-for-performance" philosophy
o commensurate with Microchip's fiscal 2003 operating objectives, and
o reasonable based on Microchip's overall performance in fiscal 2003 and
Microchip's performance compared to the semiconductor industry as a
whole.

TAX CODE CONCERNS

Section 162(m) of the Internal Revenue Code disallows a corporate income
tax deduction for executive compensation paid to senior executives in excess of
$1 million per year, unless that income meets permitted exceptions. We
anticipate that a substantial portion of each executive officer's compensation
will be "qualified performance-based compensation," that is not limited under
Internal Revenue Code Section 162(m). We, therefore, do not currently anticipate
that any executive officer's compensation will exceed that limitation of
deductibility in fiscal 2004. We intend to review the deductibility of executive
compensation from time to time to determine whether any additional actions are
advisable to maintain deductibility.

CONCLUSION

We believe that the executive team provided outstanding service to
Microchip throughout fiscal 2003. We will work to assure that the executive
compensation programs continue to meet Microchip's strategic goals as well as
the overall objectives discussed in this Report.

By the Compensation Committee of the Board of Directors(2):

Albert J. Hugo-Martinez (Chair) L.B. Day

----------
(2) The Board Compensation Committee Report on Executive Compensation is not
"soliciting" material and is not deemed "filed" with the Securities and Exchange
Commission, and is not incorporated by reference into any filings of Microchip
under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether
made before or after the date hereof and irrespective of any general
incorporation language contained in such filings.

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- ------------
AWARDS
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION (1) YEAR SALARY BONUS(2) OPTIONS/SARS COMPENSATION
------------------------------- ---- ------ -------- ------------ ------------

Steve Sanghi, 2003 $ 458,937 $ 9,956 603,752 $ 2,961 (3)
President and 2002 426,839 2,134 267,557 2,148
CEO 2001 437,408 201,413 247,500 361,949

Mitchell R. Little, 2003 214,043 4,641 78,724 140 (3)
VP, Worldwide Sales and 2002 200,265 1,001 53,499 1,980
Applications 2001 202,450 92,620 67,500 2,941

Gordon W. Parnell, 2003 195,405 4,237 76,138 2,920 (3)
VP, Chief Financial Officer (4) 2002 182,826 914 45,609 1,956
2001 187,480 6,216 60,750 75,263

David S. Lambert, 2003 185,896 4,031 75,578 2,886 (3)
VP, Fab Operations (5) 2002 173,669 868 44,946 1,943

Richard J. Simoncic 2003 163,184 3,540 73,089 2,532 (3)
VP, Analog and Interface Products 2002 151,771 759 39,804 1,730
Division (6)

----------
(1) Includes those individuals who in fiscal 2003 were the CEO or one of the
four other most highly compensated executive officers as measured by salary
and bonus for fiscal 2003.
(2) Includes the portion of MICP bonus and cash bonus payments under our cash
bonus plan earned in year shown but not paid until the following year.
(3) Except as otherwise noted, consists of: (a) Company-matching contributions
to our 401(k) retirement savings plan, which for fiscal 2003 were $2,961
for Mr. Sanghi, $140 for Mr. Little, $2,920 for Mr. Parnell, $2,886 for Mr.
Lambert and $2,532 for Mr. Simoncic, and (b) an additional payment by the
Company in connection with a split-dollar life insurance program which is
distributable to the individual executive officer when he is no longer an
employee. There were no payments made under the split-dollar life insurance
program during fiscal 2003 or fiscal 2002.

We discontinued the split-dollar life insurance program following the
implementation of the Sarbanes-Oxley Act of 2002. Certain provisions of
Sarbanes-Oxley made it illegal for companies to directly or indirectly
extend or maintain credit, arrange for the extension of credit, or renew an
extension of credit, in the form of a personal loan, to, or for any
director or executive officer loan. Certain split-dollar life insurance
programs, such as the program maintained by the Company, include a
collateral assignment provision that may be considered to be an illegal
extension of credit under Sarbanes-Oxley. Because of the uncertainty
surrounding this provision of Sarbanes-Oxley, and because no regulatory
guidance was forthcoming, the Company determined that no further premiums
would be paid or contributions made into the executive officers'
split-dollar programs.
(4) Mr. Parnell was named an executive officer effective May 19, 2000.
(5) Mr. Lambert was named an executive officer effective January 22, 2001.
(6) Mr. Simoncic was named an executive officer effective January 22, 2001.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
-----------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES EXERCISE OR PRICE APPRECIATION
OPTIONS IN FISCAL BASE PRICE EXPIRATION OPTION TERM
NAME GRANTED YEAR ($/SH) DATE 5% (5) 10% (5)
---- ------- ---- ------ ---- ------ -------

Steve Sanghi................. 202,500(1) 4.0% $ 27.15 4/3/12 $3,457,966 $8,763,165
49,940(2) 1.0% 27.15 4/3/12 852,785 2,161,126
47,562(3) 0.9% 21.00 8/1/12 628,141 1,591,833
303,750(4) 6.0% 24.04 10/25/12 4,592,283 11,637,747

Mitchell R. Little........... 39,000(1) 0.8% $ 27.15 4/3/12 $665,979 $1,687,721
7,029(2) 0.1% 27.15 4/3/12 120,030 304,179
6,695(3) 0.1% 21.00 8/1/12 88,419 224,072
26,000(4) 0.5% 24.04 10/25/12 393,084 996,153

Gordon W. Parnell............ 39,000(1) 0.8% $ 27.15 4/3/12 $665,979 $1,687,721
5,705(2) 0.1% 27.15 4/3/12 97,412 246,862
5,433(3) 0.1% 21.00 8/1/12 71,752 181,835
26,000(4) 0.5% 24.04 10/25/12 393,084 996,153

David S. Lambert............. 39,000(1) 0.8% $ 27.15 4/3/12 $665,979 $1,687,721
5,418(2) 0.1% 27.15 4/3/12 92,520 234,463
5,160(3) 0.1% 21.00 8/1/12 68,147 172,698
26,000(4) 0.5% 24.04 10/25/12 393,084 996,153

Richard J. Simoncic.......... 39,000(1) 0.8% $ 27.15 4/3/12 $665,979 $1,687,721
4,143(2) 0.1% 27.15 4/3/12 70,747 179,288
3,946(3) 0.1% 21.00 8/1/12 52,114 132,067
26,000(4) 0.5% 24.04 10/25/12 393,084 996,153

----------
(1) Each stock option becomes exercisable over a one-year vesting period, in 12
successive monthly installments commencing on March 31, 2006, and has a
maximum term of 10 years from the date of grant. Vesting may be accelerated
under certain circumstances in connection with an acquisition of the
Company or a change of control. The exercise price may be paid in cash,
shares of common stock or through a cashless exercise procedure involving a
same-day sale of the purchased shares.
(2) Each stock option becomes fully exercisable on July 3, 2003, and has a
maximum term of 10 years from the date of the grant. Vesting may be
accelerated under certain circumstances in connection with an acquisition
of the Company or a change in control. The exercise price may be paid in
cash, shares or common stock or through a cashless exercise procedure
involving a same-day sale of the purchased shares.
(3) Each stock option becomes fully exercisable on August 1, 2003, and has a
maximum term of 10 years from the date of the grant. Vesting may be
accelerated under certain circumstances in connection with an acquisition
of the Company or a change in control. The exercise price may be paid in
cash, shares of common stock or through a cashless exercise procedure
involving a same-day sale of the purchased shares.
(4) Each stock option becomes exercisable over a two-year vesting period, in 24
successive monthly installments commencing on October 25, 2003. Vesting may
be accelerated under certain circumstances in connection with an
acquisition of the Company or a change in control. The exercise price may
be paid in cash, shares of common stock or through a cashless exercise
procedure involving a same-day sale of the purchased shares.
(5) No assurance can be given that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. The rates of appreciation are specified by rules of
the Securities and Exchange Commission and are for illustrative purposes
only; they do not represent our estimate of future stock price. Unless the
market price of the common stock does, in fact, appreciate over the option
term, no value will be realized from the option grant. The exercise price
of each of the options was equal to the closing sales price of the common
stock as quoted on the Nasdaq National Market on the date of grant.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT MARCH 31, 2003 AT MARCH 31, 2003 (2)
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ------------ ----------- ------------- ----------- -------------

Steve Sanghi ........... 1,040,001 $18,332,989 2,424,449 1,415,627 $33,131,779 $ 4,957,502
Mitchell R. Little ..... 96,088 1,576,165 9,915 282,724 84,441 1,219,305
Gordon W. Parnell ...... 18,000 392,441 118,679 232,288 1,170,954 907,189
David S. Lambert ....... 118,001 2,320,600 403,224 237,578 5,700,386 1,004,457
Richard J. Simoncic .... 35,437 998,367 221,410 218,289 2,803,604 897,630

----------
(1) Calculated based on the market price per share of the common stock at date
of exercise multiplied by the number of shares issued upon exercise less
the total exercise price of the options exercised.
(2) Calculated based on $19.90 per share, which was the closing sales price of
the common stock as quoted on the Nasdaq National Market on March 31, 2003,
multiplied by the number of applicable shares in-the-money less the total
exercise price for such shares.

EQUITY COMPENSATION PLAN INFORMATION

The table below provides information about our common stock that, as of
March 31, 2003, may be issued upon the exercise of options and rights under the
following existing equity compensation plans (which are all of our equity
compensation plans):

o Microchip 1993 Stock Option Plan
o Microchip 1997 Nonstatutory Stock Option Plan
o Microchip 2001 Employee Stock Purchase Plan
o Microchip International Employee Stock Purchase Plan
o TelCom Semiconductor, Inc. 1994 Stock Option Plan
o TelCom Semiconductor, Inc. 1996 Director Stock Option Plan
o TelCom 2000 Nonstatutory Stock Option Plan, and
o PowerSmart, Inc. 1998 Stock Incentive Plan.

(c) NUMBER OF SECURITIES
(a) NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON (b) WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS (d) TOTAL OF
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a)) COLUMNS (a) AND (c)
------------- ------------------- ------------------- ------------------------ -------------------

Equity Compensation
Plans Approved by
Stockholders 9,315,553 $12.03 10,564,526 19,880,079

Equity Compensation
Plans Not Approved by
Stockholders 15,919,363 $17.45 11,775,184 27,694,547

Total 25,234,916 $15.45 22,339,710 47,574,626

MICROCHIP TECHNOLOGY INCORPORATED 1997 NONSTATUTORY STOCK OPTION PLAN. In
November 1997, our Board of Directors approved the Microchip 1997 Nonstatutory
Stock Option Plan. Under our 1997 Plan, nonqualified stock options may be
granted to our employees who are not officers or directors of Microchip and to
our consultants. The 1997 Plan has not been submitted to our stockholders for
approval. As of March 31, 2003, options to acquire 15,654,959 shares were
outstanding under the 1997 Plan and 11,730,654 shares were available for future
grant.

Our 1997 Plan is intended to promote Microchip's and our stockholders' best
interests by providing our employees and consultants with the opportunity to
acquire or otherwise increase their equity interest in Microchip as an incentive
to remain in service to Microchip and to align their collective interests with
those of our stockholders. The participation of employees in stock option plans
has always been an essential component of Microchip's "pay-for-performance"
compensation program. Approximately 62% of our employees worldwide (excluding
officers who cannot participate in the 1997 Plan) have been granted options
under the 1997 Plan.

The expiration date, maximum number of shares purchasable and other
provisions of options granted under the 1997 Plan, including vesting provisions,
are established at the time of grant by either the Compensation Committee or the
employee committee appointed by the Board of Directors, provided that the
exercise price of an option may not be less than the fair market value of our
common stock on the date of grant and no option may have a term of more than 10
years. If Microchip is acquired by merger, consolidation or asset sale, each
outstanding option that is not assumed by the successor corporation or otherwise
replaced with a comparable option will automatically accelerate and vest in
full. In connection with a change of control of Microchip by tender offer or
proxy contest for board membership, our Board of Directors can accelerate
outstanding options. Our Board of Directors or Compensation Committee may amend
or terminate the 1997 Plan without stockholder approval, but no amendment or
termination of the 1997 Plan may adversely affect any award previously granted
under the 1997 Plan without the written consent of the stock option holder.

MICROCHIP INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN. In June 1994, our
Board of Directors adopted the International ESPP to provide eligible employees
of non-U.S. subsidiaries of Microchip the opportunity to acquire shares of our
common stock through payroll deductions in the currency in which they are paid.
The International ESPP has not been submitted to our stockholders for approval.
As of March 31, 2003, 204,063 shares had been issued under the International
ESPP and 44,530 shares were available for future purchases.

Participants may authorize payroll deductions, in the currency in which
they are paid, of up to 10% of their base salary. Common stock is offered for
purchase under the International ESPP through a series of successive purchase
periods, each of six months' duration. Purchase periods run from the first U.S.
business day of December to the last U.S. business day of May, and from the
first U.S. business day in June to the last U.S. business day of November. The
purchase price per share of common stock is equal to the lesser of (a) the
market price of the common stock on the first day of the six-month purchase
period or (b) the market price of the common stock on the purchase date. The
International ESPP is administered, with respect to a participating foreign
subsidiary's employees, by a committee of at least two members of that foreign
subsidiary's senior management. Committee members are appointed by Microchip's
Board of Directors and may be removed by Microchip's Board of Directors at any
time. All questions of interpretation or application of the International ESPP
are determined by the committee and, subject to ratification by Microchip's
Board of Directors, are final and binding upon all participants. Our Board of
Directors may alter or amend the provisions of the International ESPP following
the close of any purchase period, and such action will be binding upon all
participants, effective as of the start of the next purchase period.

TELCOM SEMICONDUCTOR, INC. 2000 NONSTATUTORY STOCK OPTION PLAN. On April
18, 2000, the TelCom board of directors adopted a nonstatutory stock option plan
pursuant to which nonqualified stock options to acquire TelCom common stock
would be granted to non-executive employees of and consultants to TelCom. The
TelCom nonstatutory stock option plan was not submitted to the TelCom
stockholders for approval. On January 16, 2001, TelCom merged with Microchip and
Microchip assumed the outstanding options under the TelCom nonstatutory stock
option plan. As a result, upon exercise of such options, participants will be
issued shares of Microchip common stock. From and after January 16, 2001, no
further options could be granted under the TelCom nonstatutory stock option
plan. As of March 31, 2003, options to acquire 264,403 shares of Microchip
common stock remained outstanding under the TelCom nonstatutory stock option
plan.

The expiration date, maximum number of shares purchasable and other
provisions of options granted under the TelCom nonstatutory stock option plan,
including vesting provisions, were established by either the compensation

committee of TelCom's board or by the employee committee appointed by the TelCom
board at the time of grant, provided that no option may have a term in excess of
10 years.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

We do not have employment contracts with our CEO or any of the four other
most highly compensated executive officers named in this proxy statement.

Our CEO and certain of the other most highly compensated executive officers
named in this proxy statement have entered into an Executive Officer Severance
Agreement. These agreements provide for the automatic acceleration of vesting
and exercisability of all unvested stock options upon the first to occur of any
of the following events:

o as of the date immediately preceding a change of control in the event
any such stock options are or will be terminated or canceled (except
by mutual consent) or any successor to Microchip fails to assume and
agree to perform all such stock option agreements at or prior to such
time as any such person becomes a successor to Microchip, or

o as of the date immediately preceding such change in control if the
executive does not or will not receive upon exercise of such
executive's stock purchase rights under any such stock option
agreement the same identical securities and/or other consideration as
is received by all other stockholders in any merger, consolidation,
sale, exchange or similar transaction occurring upon or after such
change of control, or

o as of the date immediately preceding any involuntary termination of
such executive occurring upon or after any such change of control, or

o as of the date six months following the first such change of control,
provided that the executive shall have remained an employee of the
Company continuously throughout such six-month period.

OTHER MATTERS

OTHER MATTERS TO BE PRESENTED AT THE MEETING

At the date this proxy statement went to press, we did not anticipate that
any other matters would be raised at the Meeting.

REQUIREMENTS, INCLUDING DEADLINES, FOR RECEIPT OF STOCKHOLDERS' PROPOSALS FOR
THE 2004 ANNUAL MEETING OF STOCKHOLDERS; DISCRETIONARY AUTHORITY TO VOTE ON
STOCKHOLDER PROPOSALS

Under SEC rules, if a stockholder wants us to include a proposal in our
proxy statement and form of proxy for the 2004 annual meeting, our Secretary
must receive the proposal at our principal executive offices by March 5, 2004.
Stockholders interested in submitting such a proposal are advised to contact
knowledgeable counsel with regard to the detailed requirements of applicable
securities laws. The submission of a stockholder proposal does not guarantee
that it will be included in the Company's proxy statement.

Under our By-laws, stockholders must follow certain procedures to nominate
a person for election as a Director or to introduce an item of business at our
annual meeting. Under these procedures, stockholders must submit the proposed
nominee or item of business by delivering a notice to the Secretary of the
Company at our principal executive offices. We must receive notice as follows:

o Normally we must receive notice of a stockholder's intention to
introduce a nomination or proposed item of business for an annual
meeting not less than 90 days before the first anniversary of the date
on which we first mailed our proxy statement to stockholders in
connection with the previous year's annual meeting of stockholders.
Accordingly, a stockholder who intends to submit a nomination or
proposal for our 2004 annual meeting must do so no later than April 4,
2004.

o However, if we hold our 2004 annual meeting on a date that is not
within 30 days before or after the anniversary date of our 2003 annual
meeting, we must receive the notice no later than the close of
business on the later of the 90th day prior to our 2004 annual meeting
or the 10th day following the day on which public announcement of the
date of such meeting is first made.

o A stockholder's submission must include certain specified information
concerning the proposal or nominee, as the case may be, and
information as to the stockholder's ownership of our common stock.
Proposals or nominations not meeting these requirements will not be
considered at our 2004 annual meeting.

o If a stockholder does not comply with the requirements of this advance
notice provision, the proxies may exercise discretionary voting
authority under proxies it solicits to vote in accordance with its
best judgment on any such proposal or nomination submitted by a
stockholder.

To make any submission or to obtain additional information as to the proper
form and content of submissions, stockholders should contact the Company's
Secretary in writing at 2355 W. Chandler Boulevard, Chandler, AZ 85224.

DATE OF PROXY STATEMENT

The date of this proxy statement is July 3, 2003.

APPENDIX A

CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
MICROCHIP TECHNOLOGY INCORPORATED

AMENDED AND RESTATED MAY 1, 2003

PURPOSE:

The purpose of the Audit Committee of the Board of Directors (the
"Committee") of Microchip Technology Incorporated (the "Company") shall be:

o to be responsible for the appointment, compensation, retention and
oversight of the Company's independent auditors;

o to provide oversight and monitoring of Company management and the
independent auditors and their activities with respect to the
Company's financial reporting process and internal controls;

o to provide the Company's Board of Directors with the results of its
monitoring and recommendations derived therefrom; and

o to provide to the Board of Directors such additional information and
materials as it may deem necessary to make the Board of Directors
aware of significant financial matters that require the attention of
the Board of Directors.

The Committee will undertake those specific duties and responsibilities
listed below and such other duties as the Board of Directors may from time to
time prescribe.

MEMBERSHIP:

The Committee members will be appointed annually by, and will serve at the
discretion of, the Board of Directors and will consist of at least three members
of the Board of Directors. The members will meet the following criteria:

1. Each member will be an independent director, in accordance with the
audit committee requirements of the Nasdaq National Market ("Nasdaq") and
the Securities and Exchange Commission ("SEC"), as determined by the
Company's Board of Directors;

2. Each member will be able to read and understand fundamental
financial statements, in accordance with the requirements of Nasdaq and the
SEC;

3. At least one member will have past employment experience in finance
or accounting, requisite professional certification in accounting, or other
comparable experience or background, including a current or past position
as a chief executive or financial officer or other senior officer with
financial oversight responsibilities; and

A-1

4. At least one member shall qualify as an "audit committee financial
expert" as defined by SEC rules and regulations and as determined by the
Company's Board of Directors.

POWERS:

The Committee shall have the power to:

o conduct or authorize investigations into any matters within the
Committee's scope of responsibilities; and

o engage independent counsel and other advisers, as it determines
necessary to carry out its duties, and to determine the appropriate
funding level for such activities.

RESPONSIBILITIES:

The responsibilities of the Committee shall include:

o The appointment, compensation, retention and oversight of the
Company's independent auditors;

o Providing oversight and monitoring of Company management and their
activities with respect to the Company's financial reporting process,
accounting policies, tax matters, disclosure controls and procedures
and internal controls;

o The pre-approval of all audit and audit related services and non-audit
services provided by the independent auditors to the Company, as
required under applicable law and Nasdaq and SEC rules and
regulations. The Committee may delegate to one or more designated
Committee members the authority to grant preapprovals required by the
foregoing sentence. The decisions of any Committee member to whom
authority is delegated hereunder shall be presented to the Committee
at its next scheduled meeting;

o Reviewing the independent auditors' proposed audit scope and approach;

o Periodically and to the extent appropriate under the circumstances, it
may be advisable for the Committee, with the assistance of the
independent auditors and/or management, to consider and review the
following:

- Any significant changes required in the independent auditors'
audit plan.

- The effect or potential effect of any accounting initiatives or
similar accounting developments on the Company's financial
statements.

- Any correspondence with regulators or governmental agencies and
any employee complaints or published reports that raise material
issues regarding the Company's financial statements or accounting
policies.

- Other matters related to the conduct of the audit, which are to
be communicated to the Committee under generally accepted
auditing standards, applicable law and Nasdaq and/or SEC rules
and regulations.

o Reviewing the performance of the independent auditors, who shall be
accountable to the Audit Committee;

A-2

o Reviewing the independence of the independent auditors, including a
review of the services provided by the independent auditors and
related fees, consistent with applicable laws and Nasdaq and SEC rules
and regulations. Requesting from the independent auditors of a formal
written statement delineating all relationships between the auditor
and the Company, consistent with Independent Standards Board Standard
No. 1, and engaging in a dialogue with the auditors with respect to
any disclosed relationships or services that may impact the
objectivity and independence of the auditors;

o Obtaining from the independent auditor assurance that it has complied
with Section 10A of the Securities Exchange Act of 1934;

o Monitoring partner rotation of the Company's independent auditors and
hiring of former employees of the Company's independent auditors in
accordance with applicable laws and Nasdaq and SEC rules and
regulations;

o Monitoring the Company's independent auditors compliance with records
retention requirements in accordance with applicable laws and Nasdaq
and SEC rules and regulations;

o Directing the Company's independent auditors to review before filing
with the SEC the Company's interim financial statements included in
Quarterly Reports on Form 10-Q, using professional standards and
procedures for conducting such reviews;

o Discussing with the Company's independent auditors the matters
required to be discussed by Statement on Accounting Standard No. 61,
as it may be modified or supplemented;

o In consultation with the independent auditors and management, consider
and review at the completion of the annual examinations and such other
times as the Committee may deem appropriate:

- The Company's annual financial statements and related notes.

- The independent auditors' audit of the financial statements and
their report thereon.

- The independent auditors' report regarding critical accounting
policies, alternative treatments of financial information and
other material written communications between the independent
auditors and management as defined under applicable law and the
rules and regulations of Nasdaq and the SEC.

- Whether the Company has entered into any "off-balance sheet
transactions" as defined by applicable SEC rules and regulations.

- Any deficiency in, or suggested improvement to, the procedures or
practices employed by the Company as reported by the independent
auditors in their annual management letter.

o Reviewing and discussing with management, before filing with the SEC,
the audited financial statements and Management's Discussion and
Analysis in the Company's Annual Report on Form 10-K. Making a
recommendation to the Board of Directors whether the audited financial
statements should be included in the Company's Annual Report on Form
10-K;

o Reviewing and discussing with management, before release, the
unaudited interim financial results in the Company's quarterly
earnings releases;

A-3

o Reviewing and discussing with management and the independent auditors
their respective evaluations of the Company's internal controls;

o Overseeing compliance with the requirements of the SEC for disclosure
of independent auditor's services and audit committee members and
activities;

o Establish procedures to promote and protect employee reporting of
suspected fraud or wrongdoing relating to accounting, auditing or
financial reporting, including procedures for:

- Receiving, retaining and addressing complaints received by the
Company relating to such matters;

- Enabling employees to submit to the Committee, on a confidential
and anonymous basis, any concerns regarding such matters; and

- Protecting reporting employees from retaliation.

o Reviewing management's monitoring of compliance with the Company's
code of conduct;

o Reviewing and approving all related party transactions as required by
applicable laws and Nasdaq and SEC rules and regulations;

o Providing the Audit Committee Report in the Company's proxy statement
as required by Item 306 of Regulation S-K, as well as the additional
disclosures required by Item 7(d)(3) of Schedule 14A;

o Reviewing the Committee's own structure, processes and membership
requirements;

o Reviewing and assessing the adequacy of this Charter at least
annually; and

o Performing such other duties as may be requested by the Board of
Directors.

MEETINGS:

The Committee will meet at least quarterly during each fiscal year, or more
frequently as circumstances dictate. The Committee may establish its own
schedule, which it will provide to the Board of Directors in advance.

The Committee will meet separately with the independent auditors as well as
members of the Company's management, as it deems appropriate in order to review
the financial controls of the Company.

MINUTES:

The Committee will maintain written minutes of its meetings, which minutes
will be filed with the minutes of the meetings of the Board of Directors.

COMPENSATION:

Members of the Committee shall receive such fees, if any, for their service
as Committee members as may be determined by the Board of Directors in its sole
discretion. Such fees may include retainers or per meeting fees. Fees may be
paid in such form of consideration as is determined by the Board of Directors.

A-4

Members of the Committee may not receive any compensation from the Company
except the fees that they receive for service as a member of the Board of
Directors or any committee thereof.

REPORTS:

Apart from the report prepared pursuant to Item 306 of Regulation S-K and
Item 7(d)(3) of Schedule 14A, the Committee will summarize its examinations and
recommendations to the Board from time to time as may be appropriate, consistent
with this Charter.

A-5

APPENDIX B

CHARTER FOR THE
NOMINATING AND GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
OF
MICROCHIP TECHNOLOGY INCORPORATED

-----------------------

PURPOSE:

The purpose of the Nominating and Governance Committee is to help ensure
that the Board of Directors is properly constituted to meet its fiduciary
obligations to stockholders and the Company and that the Company has and follows
appropriate governance standards. To carry out this purpose, the Nominating and
Governance Committee shall:

o assist the board by identifying prospective director nominees and to
recommend to the board the director nominees for the next annual
meeting of stockholders;

o assist the board by identifying prospective director nominees to fill
any vacancies on the board and to recommend to the board the director
nominees to fill such vacancies;

o develop and recommend to the board the governance principles
applicable to the Company; and

o recommend to the board director nominees for each committee.

COMMITTEE MEMBERSHIP AND ORGANIZATION:

o The Nominating and Governance Committee shall be comprised of no fewer
than three (3) members.

o The members of the Nominating and Governance Committee shall meet the
independence requirements of the Nasdaq and any applicable SEC rules.

o The members of the Nominating and Governance Committee shall be
appointed and replaced by the board.

COMMITTEE RESPONSIBILITIES AND AUTHORITY:

o Evaluate the current composition, organization and governance of the
board and its committees, determine future requirements and make
recommendations to the board for approval.

o Determine on an annual basis desired board qualifications, expertise
and characteristics and conduct searches for potential board members
with corresponding attributes. Evaluate and propose nominees for
election to the board.

o Form and delegate authority to subcommittees when appropriate.

B-1

o Evaluate and make recommendations to the board concerning the
appointment of directors to board committees, the selection of board
committee chairs, and proposal of the board slate for election.
Consider stockholder nominees for election to the board.

o Evaluate and recommend termination of membership of individual
directors in accordance with the board's governance principles, for
cause or for other appropriate reasons.

o Conduct a periodic review on succession planning, report its findings
and recommendations to the board, and work with the board in
evaluating potential successors to executive management positions.

o Advise and make recommendations to the board concerning the frequency
of board and committee meetings.

o Consider matters of corporate governance.

o Conduct a periodic review of the Company's stockholder rights plan

o Make regular reports to the board.

o Review and re-examine this Charter annually and make recommendations
to the board for any proposed changes.

o Annually review and evaluate its own performance.

In performing its responsibilities, the Nominating and Governance Committee
shall have the authority to obtain advice, reports or opinions from internal or
external counsel and expert advisors.

B-2

APPENDIX C

DESCRIPTION OF OUR 2001 EMPLOYEE STOCK PURCHASE PLAN

BACKGROUND

The 2001 Employee Stock Purchase Plan, referred to as the ESPP, was adopted
by the Board of Directors in May 2001 and approved by the stockholders at the
2001 annual meeting. 2,450,000 shares of common stock are currently reserved for
issuance under the ESPP. At the 2003 Annual Meeting, the stockholders are being
asked to approve the reservation of 975,000 additional shares under the ESPP
and, commencing January 1, 2005, an automatic annual increase in the number of
shares reserved for issuance under such plan.

ADMINISTRATION

The ESPP is administered by a committee made up of members of the Board of
Directors. The committee has full power to interpret the ESPP, and its decisions
will be final and binding upon all participants.

ELIGIBILITY

Generally, all employees of the Company or any of the subsidiaries
designated by the committee are eligible to participate in the ESPP. However, no
employee who normally works less than 20 hours per week or five months in a
calendar year is eligible to participate. Also, no employee will be eligible to
participate in the ESPP if, immediately after the grant of an option to purchase
stock under the ESPP, that employee would own 5% of either the voting power or
the value of the common stock. No employee's rights to purchase the common stock
pursuant to the ESPP may accrue at a rate that exceeds $25,000 per calendar
year.

Non-employee Directors are not eligible to participate in the ESPP.

PARTICIPATION AND PURCHASES

Under the ESPP a participant must authorize payroll deductions, which may
not exceed 10% of their eligible compensation. Generally, when an employee
terminates employment with the Company or any designated subsidiary, the
employee's right to participate in the ESPP terminates.

The ESPP provides for offering periods of up to 24 months. Each offering
period will include one or more purchase periods. The duration of each offering
period and purchase period are determined by the committee. Currently, the ESPP
is implemented with overlapping 24 month offering periods beginning on the first
business day of March and the first business day of September of each year, and
each offering period consists of four approximately six-month purchase periods.
The first day of each offering period is referred to as an entry date.

Eligible employees participate in the ESPP through accumulated payroll
deductions. At the end of each approximately six-month purchase period, these
accumulated payroll deductions are used to purchase shares of common stock at a
price per share equal to the lower of 85% of the closing price of a share of
common stock on (1) the relevant entry date or (2) the relevant purchase date,
whichever is less. Currently, purchase dates under the ESPP are the first
business day of March and the first business day of September of each year. The
ESPP also provides that no participant may purchase more than 7,500 shares of
common stock in any one purchase period. This limitation may be changed by the
committee.

C-1

TERMINATION OF EMPLOYMENT

Termination of a participant's employment other than by reason of death or
disability immediately cancels his or her option and participation in the ESPP.
If this occurs, the payroll deductions credited to the participant's account
will be returned without interest to him or her. If a participant dies, or
terminates employment due to disability, at the election of the participant (or
if applicable the participant's estate), his or her accumulated payroll
deductions will be used to purchase shares on the next purchase date or the
accumulated payroll deductions will be refunded to the participant or his or her
estate.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR SALE OF ASSETS

In the event of any stock split, stock dividend, spin-off,
reclassification, recapitalization or other similar event affecting the common
stock, adjustments may be made in the number of shares of stock subject to the
ESPP, the number and kind of shares of stock to be purchased pursuant to each
option and the price per share of common stock covered by each option. Any such
adjustment will be made by the committee, whose determination shall be final. In
the event of a proposed sale of all or substantially all of the assets of the
Company or the merger or consolidation of the Company with another company each
option will be assumed by, or an equivalent option substituted, by the successor
company or an affiliate. If the successor company or affiliate refuses to assume
or substitute for the option, the next purchase date will be automatically
accelerated to the date immediately before the proposed sale or merger.

AMENDMENT AND TERMINATION

Generally, the Board of Directors may terminate or amend the ESPP at any
time. The ESPP will continue until all of the shares authorized for the ESPP are
sold unless terminated sooner by the Board of Directors.

WITHDRAWAL

If a participant chooses to withdraw from a purchase period, the
participant may elect to have all accumulated payroll deductions refunded or
have the accumulated payroll deductions used to purchase common stock on the
next purchase date. The committee may also establish rules limiting the
frequency with which participants may withdraw and may establish a waiting
period for participants wishing to re-authorize payroll deductions.

U.S. FEDERAL INCOME TAX CONSEQUENCES

Since our stockholders have approved the ESPP, the ESPP, and the right of
participants to make purchases thereunder, qualify for treatment under the
provisions of Internal Revenue Code Sections 421 and 423. Under these
provisions, no income will be taxable to a participant until the shares
purchased under the ESPP are sold or otherwise disposed of.

Upon sale or other disposition of the shares, the participant will
generally be subject to tax and the amount of the tax will depend upon the
holding period. If the shares are sold or otherwise disposed of more than two
years from the applicable entry date and more than one year from the applicable
purchase date, then the participant generally will recognize ordinary income
measured as the lesser of

o the excess of the fair market value of the shares at the time of such
sale or disposition over the purchase price, or

o an amount equal to 15% of the fair market value of the shares as of
the applicable entry date. Any additional gain should be treated as
long-term capital gain.

C-2

If the shares are sold or otherwise disposed of before the expiration of
this holding period, the participant will recognize ordinary income generally
measured as the excess of the fair market value of the shares on the date the
shares are purchased over the purchase price. Any additional gain or loss on
such sale or disposition will be long-term or short-term capital gain or loss,
depending on the holding period.

The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent ordinary income is
recognized by a participant upon a sale or disposition of shares prior to the
expiration of the holding period(s) described above. In all other cases, no
deduction is allowed to the Company.

The foregoing discussion is not intended to cover all tax consequences of
participation in the ESPP. The tax consequences outlined above apply only with
respect to an employee whose income is subject to United States federal income
tax during the period beginning with the grant of an option and ending with the
disposition of the common stock acquired through the exercise of the option.
Different or additional rules may apply to individuals who are subject to income
tax in a foreign jurisdiction and/or are subject to state/local income tax in
the United States.

PLAN BENEFITS

Participation in the ESPP is voluntary. Because benefits under the ESPP
depend on employees' elections to participate and the fair market value of the
common stock at various future dates, it is not possible to determine the
benefits that will be received by executive officers and other employees. The
following table sets forth, as to the CEO and the four other most highly
compensated executive officers named in this proxy statement, all current
executive officers as a group, all non-executive officer directors as a group,
and all non-executive employees who participated in the ESPP: (a) the number of
shares of common stock purchased under the ESPP during fiscal 2003, and (b) the
dollar value of the benefit, which is calculated as the fair market value per
share of the common stock on the date of purchase, minus the purchase price per
share of common stock under the ESPP:

C-3

PLAN BENEFITS UNDER
EMPLOYEE STOCK PURCHASE PLAN

NUMBER OF SHARES DOLLAR VALUE
NAME OF INDIVIDUAL OR IDENTITY OF GROUP AND POSITION PURCHASED OF BENEFIT
---------------------------------------------------- --------- ----------

Steve Sanghi
Director, Chairman, President and CEO.................................... 1,003 $ 7,518

Mitchell R. Little
Vice President, Worldwide Sales and Applications......................... 1,304 6,660

Gordon W. Parnell
Vice President, Chief Financial Officer.................................. 1,191 6,086

David S. Lambert
Vice President, Fab Operations........................................... 1,132 5,784

Richard J. Simoncic
Vice President, Analog and Interface Products Division................... 993 5,083

All current executive officers as a group (6 people)..................... 6,574 36,013

All non-executive officer directors as a group........................... -- --

All non-executive employees as a group................................... 484,905 2,513,849

C-4

APPENDIX D

AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
MICROCHIP TECHNOLOGY INCORPORATED
AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY
MAY 1, 2003

I. STATEMENT OF PRINCIPLES.

As contemplated by the Sarbanes-Oxley Act of 2002 (the "Sarbanes Act") and
related SEC rules, and as provided in the charter of the Audit Committee of the
Board of Directors, the Audit Committee is responsible for the appointment,
compensation, retention and oversight of the work of the Company's independent
auditor. In connection with such responsibilities, the Audit Committee is
required to pre-approve the audit and non-audit services performed by the
Company's independent auditor. As part of the pre-approval process, the Audit
Committee shall consider whether the services to be performed by the auditor are
consistent with the SEC's rules on auditor independence.

The Audit Committee shall pre-approve, by resolution, the type and amount
of Audit, Audit-related, Tax and All Other services to be performed by the
Company's independent auditor. The term of such pre-approval is 12 months from
the date of pre-approval, unless otherwise specified in such resolutions. The
Audit Committee shall adopt its pre-approval resolutions at least annually and
may modify the types and amount of services as it determines in its discretion.

II. DELEGATION.

As contemplated by the Sarbanes Act and applicable SEC rules, the Audit
Committee hereby delegates to the Chairman of the Audit Committee the authority
to approve the engagement of the independent auditor to provide non-audit
services as permitted by the Sarbanes Act, to the extent that such non-audit
services are not pre-approved as set forth in this Policy and if such engagement
is less than $50,000.00. The Chairman shall report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its next scheduled
meeting.

III. AUDIT SERVICES.

The annual Audit services engagement terms and fees will be subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit (including required quarterly reviews), subsidiary
audits, equity investment audits and other procedures required to be performed
by the independent auditor to be able to form an opinion on the Company's
consolidated financial statements. These other procedures include information
systems and procedural reviews and testing performed in order to understand and
place reliance on the systems of internal control, and consultations relating to
the audit or quarterly review. Audit services also include the attestation
engagement for the independent auditor's report on management's report on
internal controls for financial reporting. The Audit Committee will monitor the
Audit services engagement as necessary, but no less than on a quarterly basis,
and will also approve, if necessary, any changes in terms, conditions and fees
resulting from changes in audit scope, Company structure or other items.

In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may pre-approve other Audit services, which are
those services that only the independent auditor reasonably can provide. Other
Audit services may include statutory audits or financial audits for subsidiaries
or affiliates of the Company and services associated with SEC registration
statements, periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.

D-1

IV. AUDIT-RELATED SERVICES.

Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements or that are traditionally performed by the independent
auditor. The Audit Committee may pre-approve Audit-related services, including,
among others, due diligence services pertaining to potential business
acquisitions/dispositions; accounting consultations related to accounting,
financial reporting or disclosure matters not classified as "Audit services";
assistance with understanding and implementing new accounting and financial
reporting guidance from rulemaking authorities; financial audits of employee
benefit plans; agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with financial,
accounting or regulatory reporting matters; and assistance with internal control
reporting requirements.

V. TAX SERVICES.

The Audit Committee may pre-approve those Tax services that have
historically been provided by the auditor, that the Audit Committee has reviewed
and believes would not impair the independence of the auditor, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee may
consult with management or its independent advisors, including counsel, to
determine that the tax planning and reporting positions are consistent with this
Policy.

VI. ALL OTHER SERVICES.

The Audit Committee may pre-approve those All Other Services that the Audit
Committee has reviewed and believes would not impair the independence of the
auditor, and that are consistent with the SEC's rules on auditor independence.

A list of the SEC's prohibited non-audit services is attached to this
policy as Exhibit 1. The independent auditors shall not provide any of these
services to the Company.

VII. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS.

Pre-approval fee levels or budgeted amounts for all services to be provided
by the independent auditor will be established annually by the Audit Committee
and reviewed as the Audit Committee deems appropriate. Any proposed services
exceeding these levels or amounts will require specific pre-approval by the
Audit Committee, or its designee pursuant to Section II hereof. The Audit
Committee is mindful of the overall relationship of fees for audit and non-audit
services in determining whether to pre-approve any such services. For each
fiscal year, the Audit Committee shall consider the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services, and the
total amount of fees for services classified as All Other services.

VIII. PROCEDURES.

All requests or applications for services to be provided by the independent
auditor will be submitted to the Chief Financial Officer and shall include a
description of the services to be rendered. The Chief Financial Officer will
determine whether such services are included within the list of services that
have been pre-approved by the Audit Committee. The Audit Committee will be
informed on a periodic basis of the services rendered by the independent
auditor. The Chief Financial Officer shall consult as necessary with the
Chairman of the Audit Committee in determining whether any particular service
has been pre-approved by the Audit Committee.

The Audit Committee has designated the Chief Financial Officer to monitor
the performance of all services provided by the independent auditor and to
determine whether such services are in compliance with this Policy. The Chief
Financial Officer will report to the Audit Committee on a periodic basis on the
results of such monitoring. The Chief Financial Officer will immediately report
to the Chairman of the Audit Committee any breach of this Policy that comes to
the attention of the Chief Financial Officer.

D-2

EXHIBIT 1

PROHIBITED NON-AUDIT SERVICES

o Bookkeeping or other services related to the accounting records or
financial statements of the audit client

o Financial information systems design and implementation

o Appraisal or valuation services, fairness opinions or contribution-in-kind
reports

o Actuarial services

o Internal audit outsourcing services

o Management functions

o Human resources

o Broker-dealer, investment adviser or investment banking services

o Legal services

o Expert services unrelated to the audit