SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Microchip Technology Incorporated
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(Name of Registrant as Specified In Its Charter)
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June 20, 1997
Mr/Mrs. __________
XYZ Investment Co.
Dear ________:
We are sending the enclosed proxy materials to your personal attention due to
the importance of one of the issues requiring stockholder approval. This
concerns Proposal No. 3 in which Microchip is requesting approval for an
increase to the Company's employee stock option program of two million shares,
or 3.5% of the outstanding capital stock of the Company.
As you are probably aware, Microchip has experienced extraordinary financial
success since its initial public offering in March 1993, with a 1,600% increase
in effective share price and market value over the subsequent four years. A key
element of Microchip's growth and profitability strategy has been to grant
employee stock options to the majority of its worldwide employees. Such stock
options are initially characterized by vesting periods of four years, and
additional options granted each year generally vest in the fifth year. This
creates a long-term alignment of the interests of our employees to the interests
of our stockholders. Our widespread use of stock options has allowed Microchip
to maintain both its salary expenses and employee turnover substantially lower
than most of our global competitors.
The issue of employee retention is particularly keen at the present time. There
is a growing shortage of skilled labor in the semiconductor industry. This is
particularly true in the Phoenix metropolitan area, where Microchip's two wafer
fabrication facilities are located, and in Taiwan, where a majority of the
Company's testing resources are situated. The Phoenix high-technology labor
market has been impacted by recent start-ups of large fabrication facilities by
Intel, Motorola, SGS-Thomson and Sumitomo Sitix, as well as sophisticated
recruiting efforts from competing fabs located throughout the western U.S. in
California, Washington, Idaho, Utah and Texas. And, the Taiwan skilled labor
market has been impacted primarily by the continued growth of numerous local
semiconductor foundry operations and semiconductor assembly and test firms.
In this environment, the use of our stock option program to recruit and retain
skilled employees becomes even more critical. We and our Board believe that, in
order to maintain our historical competitiveness in this market environment, it
is vital that Microchip continues to use its long-term stock option program to
retain and motivate our critical employee resources. Since Microchip did not
request an increase last year in the number of shares eligible for grant under
its employee stock option program, it is especially urgent that our stockholders
do so this year. We ask you to ensure that your firm votes "YES" to approve the
stock option increase proposed in this year's proxy.
Your firm will also receive these materials from the normal proxy mailing
service. However, for your convenience, we have also enclosed a duplicate proxy
card.
If you or your proxy personnel have any questions on this matter, please feel
free to contact either of us directly.
Sincerely,
Steve Sanghi Philip Chapman
President & Chief Executive Officer Chief Financial Officer
602-786-7380 602-786-7379
