MICROCHIP TECHNOLOGY INC
DEF 14A, 1999-07-06
SEMICONDUCTORS & RELATED DEVICES
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            SCHEDULE 14A INFORMATION
                     INFORMATION REQUIRED IN PROXY STATEMENT
                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
[X]  Definitive Proxy Statement                   Commission Only (as permitted
[ ]  Definitive Additional Materials              by Rule 14a-6(e)(2))
[ ]  Soliciting Material Pursuant to
     Rule 14a-11(c) or Rule 14a-12

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

- --------------------------------------------------------------------------------
    (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)(1) and 0-11.

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

- --------------------------------------------------------------------------------
2)   Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------
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):

- --------------------------------------------------------------------------------
4)   Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
5)   Total fee paid:

- --------------------------------------------------------------------------------
[ ] 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:
                                ------------------------------------------
    2)   Form, Schedule or Registration Statement No.:
                                                      --------------------
    3)   Filing Party:
                      ----------------------------------------------------
    4)   Date Filed:
                    ------------------------------------------------------
<PAGE>
                                [MICROCHIP LOGO]

                        MICROCHIP TECHNOLOGY INCORPORATED

- --------------------------------------------------------------------------------
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                                 August 20, 1999
- --------------------------------------------------------------------------------

     The Annual Meeting of Stockholders of Microchip Technology Incorporated,  a
Delaware  corporation (the  "Company"),  will be held at 9:00 a.m. local time on
Friday,  August 20, 1999, at the  Company's  facility at 1200 South 52nd Street,
Tempe, Arizona, for the following purposes:

     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 the Company's Employee Stock Purchase Plan to
increase by 400,000 the number of shares of Common  Stock  reserved for issuance
thereunder;

     3. To ratify the appointment of KPMG LLP as the independent auditors of the
Company for the fiscal year ending March 31, 2000; and

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

     The  foregoing  items of  business  are more fully  described  in the Proxy
Statement accompanying this Notice.

     Only  stockholders  of record at the close of business on June 25, 1999 are
entitled to notice of and to vote at the meeting.

     All stockholders are cordially invited to personally attend the meeting. To
assure your representation at the meeting, however, you are urged to mark, sign,
date  and  return  the   enclosed   proxy  as   promptly   as  possible  in  the
postage-prepaid  envelope enclosed for that purpose.  Any stockholder  attending
the  meeting  may vote in person  even if he or she  previously  has  returned a
proxy.

                                        Sincerely,

                                        /s/ C. Philip Chapman
                                        C. Philip Chapman
                                        Secretary


Chandler, Arizona
July 14, 1999
<PAGE>
                                [MICROCHIP LOGO]

                        MICROCHIP TECHNOLOGY INCORPORATED
                          2355 West Chandler Boulevard
                          Chandler, Arizona 85224-6199

- --------------------------------------------------------------------------------
                                PROXY STATEMENT
- --------------------------------------------------------------------------------

                            VOTING AND OTHER MATTERS

GENERAL

     The  enclosed  proxy  is  solicited  on  behalf  of  Microchip   Technology
Incorporated,  a Delaware corporation (the "Company"), by the Company's board of
directors  (the  "Board  of  Directors")  for  use  at  the  Annual  Meeting  of
Stockholders to be held at 9:00 a.m. local time on Friday,  August 20, 1999 (the
"Meeting"),  or at any adjournment  thereof,  for the purposes set forth in this
Proxy   Statement  and  in  the   accompanying   Notice  of  Annual  Meeting  of
Stockholders.  The Meeting will be held at the Company's  facility at 1200 South
52nd Street, Tempe, Arizona.

     These proxy  solicitation  materials were first mailed on or about July 14,
1999, to all stockholders entitled to vote at the Meeting.

VOTING SECURITIES AND VOTING RIGHTS

     Stockholders  of  record  at the close of  business  on June 25,  1999 (the
"Record  Date") are  entitled  to notice of and to vote at the  Meeting.  On the
Record Date, 51,232,157 shares of Common Stock were issued and outstanding.

     The  presence,  in person or by proxy,  of the holders of a majority of the
total  number  of  shares  of  Common  Stock  outstanding  on  the  Record  Date
constitutes a quorum for the transaction of business at the Meeting. Shares that
are voted "FOR,"  "AGAINST,"  or  "WITHHELD  FROM" a matter are treated as being
present  at the  Meeting  for  purposes  of  establishing  a quorum and are also
treated as shares  entitled  to vote at the  Meeting  (the  "Votes  Cast")  with
respect to such matter. Each stockholder voting at the Meeting, either in person
or represented by proxy, may cast one vote per share of Common Stock held on all
matters to be voted on at the Meeting.  Assuming  that a quorum is present,  the
affirmative  vote of a majority of the Votes Cast is required:  (i) to amend the
Company's  Employee  Stock  Purchase  Plan, as proposed;  and (ii) to ratify the
appointment of the Company's independent auditors. In the election of directors,
the five nominees  receiving the highest  number of  affirmative  votes shall be
elected as directors.  Votes withheld from any director are counted for purposes
of  determining  the presence of a quorum,  but have no other legal effect under
Delaware law.

VOTING OF PROXIES; ABSTENTIONS; BROKER NON-VOTES

     Votes cast in person or by proxy at the Meeting  will be  tabulated  by the
election  inspector(s)  appointed  for the  Meeting.  When a proxy  is  properly
executed and returned,  the shares it represents will be voted at the Meeting as
directed.  Any proxy that is returned  using the form of proxy enclosed and that
is not marked as to a particular  item will be voted:  (i) "FOR" the election of
each of the nominees set forth in this Proxy  Statement;  (ii) "FOR" approval of
each of the other matters presented to stockholders in this Proxy Statement; and
(iii) as the proxy holders deem  advisable on other matters that may come before
the Meeting.  A stockholder may indicate on the enclosed proxy or its substitute
that it is abstaining from voting on a particular  matter (an  "abstention").  A
broker may indicate on the  enclosed  proxy or its  substitute  that it does not
have discretionary authority as to certain shares to vote on a particular matter
(a "broker  non-vote").  Abstentions  and broker  non-votes  are each  tabulated
separately. The election inspector(s) will determine whether a quorum is present
at the Meeting. In general,  Delaware law provides that a majority of the shares
entitled  to vote,  present in person or  represented  by proxy,  constitutes  a
quorum. Abstentions and broker non-votes of shares that are entitled to vote are
treated  as  shares  that are  present  in person  or  represented  by proxy for
purposes of  determining  the  presence of a quorum.  In  determining  whether a
proposal has been  approved,  abstention of shares that are entitled to vote are
treated as Votes Cast with respect to such proposal,  but not as voting for such
proposal and hence have the same effect as votes against such  proposal;  broker
non-votes of shares that are entitled to vote are not treated as Votes Cast with
respect to the particular  proposal on which the broker has expressly not voted,
and hence  have no effect  on the  outcome  of the  voting  on a  proposal  that
requires  a  majority  of  the  Votes  Cast  (such  as  the  approval  of a plan
amendment).  However, with respect to a proposal that requires a majority of the
outstanding  shares of Common Stock, a broker  non-vote has the same effect as a
vote against the proposal.
<PAGE>
REVOCABILITY OF PROXIES

     Any person  giving a proxy may revoke the proxy at any time  before its use
by  delivering  to the Company  written  notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.

SOLICITATION

     The Company will pay all expenses of this  solicitation.  In addition,  the
Company may reimburse brokerage firms and other persons representing  beneficial
owners of shares for expenses incurred in forwarding  solicitation  materials to
such  beneficial  owners.  Proxies  also  may be  solicited  by  certain  of the
Company's directors and officers, personally or by telephone, without additional
compensation.  The  Company  may  also,  at its  sole  expense,  retain  a proxy
solicitation firm to assist in the distribution of proxy solicitation  materials
and in the collection of proxies.  If so, the Company  believes that the expense
will not exceed $15,000.

                             ELECTION OF DIRECTORS

NOMINEES

     A board of five directors is to be elected at the Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for each of
the nominees  named below.  All of the nominees are  currently  directors of the
Company.  In the event that any such nominee is unable or declines to serve as a
director at the time of the  Meeting,  the proxies will be voted for any nominee
designated  by the current  Board of Directors  to fill the  vacancy.  It is not
expected that any nominee will be unable or will decline to serve as a director.
The term of office of each  person  elected as a director  at the  Meeting  will
continue until the next annual meeting of stockholders and until a successor has
been elected and qualified.

     The following table sets forth certain  information  regarding the nominees
for director of the Company:

                NAME                     AGE           POSITION(S) HELD
                ----                     ---           ----------------
Steve Sanghi .........................    43    Chairman of the Board, President
                                                  and Chief Executive Officer
Albert J. Hugo-Martinez(1)(2) ........    53    Director
L.B. Day(1) ..........................    54    Director
Matthew W. Chapman(2) ................    48    Director
Wade F. Meyercord ....................    58    Director

- ----------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee

     Mr. Sanghi is currently,  and has been since August 1990,  President of the
Company,  since October 1991,  Chief  Executive  Officer and since October 1993,
Chairman of the Board of  Directors.  He has served as a director of the Company
since August  1990.  He served as the  Company's  Chief  Operating  Officer from
August 1990 through October 1991 and as Senior Vice President of Operations from
February 1990 through  August 1990. Mr. Sanghi is also the chairman of the board
of  directors  of  ADFlex   Solutions,   Inc.,  a  U.S.   supplier  of  flexible
circuit-based interconnect solutions.

     Mr.  Hugo-Martinez  has served as a director of the Company  since  October
1990.  Since  February  1999,  he has served as  President  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 and
local area network subcomponents.  From 1987 to 1995, he served as President and
Chief Executive Officer of Applied Micro Circuits Corporation, a manufacturer of
high-performance bipolar and BiCMOS gate arrays.

                                        2
<PAGE>
     Mr. Day has served as a director since  December  1994.  Since 1976, he has
served as President of L.B. Day & Company,  Inc., a management  consulting  firm
specializing in organizational  structure,  development and strategic  planning.
Mr. Day is also a member of the board of directors of CFI  ProServices,  Inc., a
supplier of integrated software solutions and services to financial institutions
throughout the United States.

     Mr.  Chapman has served as a director  since May 1997.  Since 1988,  he has
served as Chief  Executive  Officer of CFI  ProServices,  Inc.,  a  supplier  of
integrated software solutions and services to financial institutions  throughout
the United  States  ("CFI"),  and since 1991,  he has also served as Chairman of
CFI.

     Mr.  Meyercord has served as a director since June 1999. Since 1997, he has
served as Senior Vice  President,  e-commerce  and Quality  Assurance of Diamond
Multimedia  Systems,  Inc., a supplier of Internet multimedia  appliances.  From
1987 to 1997,  he served as President of  Meyercord &  Associates,  a management
consulting firm  specializing in strategy and  infrastructure  improvement.  Mr.
Meyercord is also a member of the board of directors of California Micro Devices
Corporation, an integrated passive electronics components manufacturer.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

     The  Company's  By-Laws  authorize  the Board of  Directors to appoint from
among its members one or more committees comprised of one or more directors. The
Board of Directors has appointed a standing Audit Committee, currently comprised
of directors  Hugo-Martinez and Chapman, and a standing Compensation  Committee,
currently  comprised  of directors  Hugo-Martinez  and Day. The Company does not
have a nominating  committee or any  committee  that performs the functions of a
nominating   committee.   The  Audit  Committee  is  primarily  responsible  for
appointing  the  Company's  independent  accounting  firm and for  reviewing and
evaluating  the  Company's  accounting  principles  and its  systems of internal
controls.  The Audit  Committee  also reviews the annual  financial  statements,
significant accounting and tax issues and the scope of the annual audit with the
Company's independent auditors.  The Compensation  Committee reviews and acts on
all matters relating to compensation  levels and benefit plans for the Company's
key  executives.   See  "Board   Compensation   Committee  Report  on  Executive
Compensation," below.

     The Board of Directors met six times during the fiscal year ended March 31,
1999. The Company's  Audit Committee met twice,  and the Company's  Compensation
Committee  met four  times,  during the fiscal  year ended  March 31,  1999.  No
director  has  attended  fewer  than  75% of the  aggregate  number  of Board of
Directors'  and  committee  meetings held during the fiscal year ended March 31,
1999.

DIRECTOR COMPENSATION AND OTHER INFORMATION

     Director Fees

     During fiscal 1999 and through the first quarter of fiscal 2000,  directors
received a $10,000 annual retainer, paid in quarterly  installments,  and $1,000
per  meeting  for each  regular  and  special  Board of  Directors  meeting.  No
compensation  was paid for telephonic  meetings of the Board of Directors or for
meetings of committees of the Board of Directors.

     Commencing July 1, 1999,  directors will receive a $12,500 annual retainer,
paid in quarterly installments (prorated for the remaining three fiscal quarters
of fiscal  2000),  and $1,500 per meeting for each regular and special  Board of
Directors meeting that a director attends in person. No compensation is paid for
telephonic  meetings of the Board of Directors or for meetings of  committees of
the Board of Directors.

     Stock Options

     Under the terms of the Company's 1993 Stock Option Plan, each  non-employee
director is automatically  granted an option to purchase 10,000 shares of Common
Stock  upon  his  or her  first  election  to the  Board  of  Directors,  and an
additional  option to  purchase  5,000  shares  of Common  Stock as of the first
business day of the month in which the annual stockholders'  meeting is held. On
August 3, 1998, each of directors Hugo-Martinez,  Day and Chapman was granted an
option to acquire 5,000 shares of Common Stock at an exercise price of $29.5625,
such options to vest in a series of 12 equal and successive monthly installments
commencing one month after the grant date.  Following his initial appointment to
the Board of Directors on June 16, 1999, Mr.  Meyercord was granted an option to
acquire 10,000 shares of Common Stock at an exercise price of $49.625 per share.
This option vests in a series of 36 equal and  successive  monthly  installments
commencing one month after the grant date.

                                        3
<PAGE>
                             EXECUTIVE COMPENSATION

SUMMARY OF CASH AND OTHER COMPENSATION

     The following table sets forth the  compensation for the three fiscal years
ended March 31,  1999,  1998 and 1997 earned by the  Company's  Chief  Executive
Officer and each of the Company's four other most highly  compensated  executive
officers whose salary plus bonus for fiscal 1999 exceeded  $100,000 for services
rendered in all capacities to the Company  (collectively,  the "Named  Executive
Officers"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                   LONG-TERM
                                   ANNUAL COMPENSATION            COMPENSATION
                              -----------------------------     ----------------
                                                                    AWARDS
                                                                ----------------
                                                                   SECURITIES         ALL OTHER
                                                      BONUS        UNDERLYING        COMPENSATION
NAME AND PRINCIPAL POSITION   YEAR     SALARY($)     ($)(1)     OPTIONS/SARS (#)        ($)(2)
- ---------------------------   ----     ---------     ------     ----------------     ------------
<S>                           <C>      <C>           <C>        <C>                  <C>
Steve Sanghi,                 1999      390,056        3,601         106,819            158,027
 President and Chief          1998      365,548       40,607          85,000            191,166
 Executive Officer            1997      342,693       11,346         165,000            272,542
Timothy B. Billington,        1999      193,983       40,394          30,433                  0
 Vice President,              1998      181,490       59,695          24,000                  0
 Manufacturing and            1997      171,267       72,681          56,250                  0
 Technology Group
George P. Rigg,               1999      179,092        1,686           3,475             27,362
 Vice President,              1998      175,350        5,396          20,000             38,587
 Advanced Microcontroller     1997      172,299        5,692          47,250             63,540
 and Systems Group
C. Philip Chapman,            1999      175,667        1,627          26,416             33,718
 Vice President,              1998      165,449        5,107          24,000             51,336
 Chief Financial Officer      1997      155,097        5,145          45,750             62,683
 and Secretary
Mitchell R. Little,           1999      175,760       33,204          26,418              2,160
 Vice President,              1998      164,996       27,953          24,000             25,825
 Americas Sales               1997      154,760       33,237          45,000             33,785
</TABLE>

- ------------
(1) Includes  portion of MICP bonus and cash bonus  payments under the Company's
    cash bonus plan earned in year shown but not paid until the following  year.
    See "Board Compensation  Committee Report on Executive  Compensation," below
    for descriptions of the MICP bonus program and the cash bonus plan.

(2) Except  as  otherwise   noted,   consists   of:  (i)  the   Company-matching
    contributions  to the Company's 401(k)  retirement  savings plan, which were
    $2,533 for Mr. Sanghi,  $0 for Mr.  Billington,  $2,168 for Mr. Rigg, $2,159
    for Mr. Chapman,  and $2,160 for Mr. Little;  and (ii) 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 of the Company, in the amount of $155,494 for Mr. Sanghi,
    $0 for Mr. Billington,  $25,194 for Mr. Rigg, $31,559 for Mr. Chapman and $0
    for Mr.  Little.  See  "Board  Compensation  Committee  Report on  Executive
    Compensation,"  below for a description of the  split-dollar  life insurance
    program.

EQUITY COMPENSATION PLANS

     The 1993 Stock Option Plan and the 1997 Nonstatutory Stock Option Plan (the
"Plans")

     Under the Plans,  the  Company's  primary  equity  incentive  program,  key
employees,  non-employee  members  of the  Board of  Directors  and  independent
contractors  who  provide  valuable  services  to the  Company  may  be  granted
incentive  stock options or  non-statutory  stock options to purchase  shares of
Common  Stock at a price  not less  than  100% of the fair  market  value of the
option shares on the grant date.  Options  granted under the Plans vest over the
period  determined  by the Board of Directors  at the date of grant,  at periods
generally  ranging  from one year to four  years.  Generally,  if the Company is
acquired by merger,  consolidation or asset sale,  outstanding  options that are
not assumed by the successor corporation or otherwise replaced with a comparable
option will automatically accelerate and become exercisable in full. Any options
so assumed may be accelerated if the optionee's  employment is terminated within
a designated  period following the  acquisition.  In connection with a change in
control of the Company by tender  offer or proxy  contest for board  membership,
the Stock Option Committee of the Board of Directors can accelerate  outstanding
options.  At March 31, 1999, options to acquire 6,238,977 shares of Common Stock
were outstanding at a weighted average exercise price of $16.83,  and options to
acquire  3,940,780  shares of Common  Stock were  available  for grant under the
Plans.

                                       4
<PAGE>
     The Employee Stock Purchase Plan (the "Purchase Plan")

     The  Purchase  Plan allows  eligible  employees  of the Company to purchase
shares  of  Common  Stock at  semi-annual  intervals  through  periodic  payroll
deductions.   The  purchase  price  per  share  for  an  eligible  employee  who
participates  in the  Purchase  Plan is the lower of (i) 85% of the fair  market
value of a share of Common Stock on the employee's  entry date into the Purchase
Plan's  then-current  offering  period or (ii) 85% of the fair market value of a
share of Common Stock on the  semi-annual  purchase  date.  The Purchase Plan is
more fully  discussed  below at "Proposal to Amend the Company's  Employee Stock
Purchase Plan."

OPTION GRANTS

     The following  table  contains  information  concerning  the grant of stock
options to the Named  Executive  Officers during the fiscal year ended March 31,
1999:

                       OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                INDIVIDUAL GRANTS
                             ------------------------------------------------------
                                              PERCENT                                   POTENTIAL REALIZABLE
                             NUMBER OF       OF TOTAL                                     VALUE AT ASSUMED
                             SECURITIES       OPTIONS                                  ANNUAL RATES OF STOCK
                             UNDERLYING      GRANTED TO                                PRICE APPRECIATION FOR
                              OPTIONS        EMPLOYEES     EXERCISE OR                       OPTION TERM
                              GRANTED        IN FISCAL     BASE PRICE    EXPIRATION    ----------------------
           NAME                (#)(1)          YEAR          ($/SH)         DATE       5%($)(4)     10%($)(4)
           ----              ----------      ----------    -----------   ----------    --------     ---------
<S>                          <C>             <C>           <C>           <C>           <C>          <C>
Steve Sanghi  ............     85,000(1)        6.4%          21.13        4/01/08     1,129,259    2,861,764
                                7,089(2)        0.5%          19.50        10/9/08        86,936      220,312
                               14,730(3)        1.1%          28.88        1/29/09       267,487      677,864
Timothy B. Billington  ...     25,000(1)        1.9%          21.13        4/01/08       332,135      841,695
                                1,765(2)        0.1%          19.50        10/9/08        21,645       54,853
                                3,668(3)        0.3%          28.88        1/29/09        66,608      168,799
George P. Rigg   .........      1,129(2)        0.1%          19.50        10/9/08        13,845       35,087
                                2,346(3)        0.2%          28.88        1/29/09        42,602      107,961
C. Philip Chapman   ......     22,000(1)        1.7%          21.13        4/01/08       292,279      740,692
                                1,435(2)        0.1%          19.50        10/9/08        17,598       44,597
                                2,981(3)        0.2%          28.88        1/29/09        54,133      137,184
Mitchell R. Little  ......     22,000(1)        1.7%          21.13        4/01/08       292,279      740,692
                                1,435(2)        0.1%          19.50        10/9/08        17,598       44,597
                                2,983(3)        0.2%          28.88        1/29/09        54,169      137,276
</TABLE>

- ----------
(1)  Each stock option becomes exercisable over a one-year vesting period, in 12
     successive  monthly  installments  commencing  on July 1,  2002,  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, in
     shares of Common Stock valued at fair market value on the exercise  date or
     through a cashless  exercise  procedure  involving  a same-day  sale of the
     purchased shares.

                                       5
<PAGE>
(2)  Each stock option  becomes fully  exercisable on October 9, 1999, 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, in shares of Common Stock valued at fair market value on the exercise
     date or through a cashless exercise procedure  involving a same-day sale of
     the purchased shares.

(3)  Each stock option becomes fully  exercisable on January 29, 2000, 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, in shares of Common Stock valued at fair market value on the exercise
     date or through a cashless exercise procedure  involving a same-day sale of
     the purchased shares.

(4)  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 (the "SEC") and are for illustrative
     purposes only; they do not represent the Company's 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 Stock Market on the
     date of grant.

OPTION EXERCISES AND HOLDINGS

     The following table provides  information on option exercises in the fiscal
year ended,  and option  holdings  at, March 31,  1999,  by the Named  Executive
Officers and the value of such officers' unexercised options at March 31, 1999:

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

<TABLE>
<CAPTION>
                                                             NUMBER OF SECURITIES           VALUE OF UNEXERCISED
                             SHARES                      UNDERLYING UNEXERCISED OPTIONS      IN-THE-MONEY OPTIONS
                           ACQUIRED ON       VALUE           AT MARCH 31, 1999(#)          AT MARCH 31, 1999($)(2)
            NAME           EXERCISE(#)   REALIZED($)(1)   EXERCISABLE   UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
            ----           -----------   --------------   -----------   -------------    -----------   -------------
<S>                        <C>           <C>              <C>           <C>              <C>           <C>
Steve Sanghi .............        0                0        711,250         469,319      18,729,610       6,221,449
Timothy B. Billington ....   28,077          674,594         38,294         144,433         800,472       1,963,429
George P. Rigg ...........   61,999        1,029,763          2,826         104,475          59,078       1,431,080
C. Philip Chapman ........   30,000          931,413         37,885         123,166         797,129       1,617,161
Mitchell R. Little .......   28,125          347,638          4,688         122,793          98,000       1,627,209
</TABLE>

- ----------
(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 $34.625 per share,  which was the closing  sales price
     per share of the Common Stock as quoted on the NASDAQ Stock Market on March
     31, 1999,  multiplied by the number of applicable shares  in-the-money less
     the total exercise price for such shares.

                                        6
<PAGE>
EMPLOYMENT   CONTRACTS,   TERMINATION   OF  EMPLOYMENT  AND  CHANGE  IN  CONTROL
ARRANGEMENTS

     The Company has not entered into employment contracts with any of the Named
Executive  Officers.  Each of the Named  Executive  Officers has entered into an
Executive  Officer   Severance   Agreement  with  the  Company  (the  "Severance
Agreement").  The Severance Agreement provides for the automatic acceleration in
vesting  of all  unvested  stock  options  upon the first to occur of any of the
following events:  (i) 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 the Company 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 the  Company;  (ii) as of the  date
immediately preceding such change of control in the event 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;  (iii)  as of  the  date  immediately  preceding  any
involuntary  termination  of such  executive  occurring  upon or after  any such
change of control;  or (iv) 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.  For purposes of
the Severance Agreement,  "change of control" means the occurrence of any of the
following  events:  (a) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities  Exchange Act of 1934, as amended [the "Exchange Act"]),
is or  becomes  the  "beneficial  owner" (as  defined  in Rule  13d-3  under the
Exchange Act), directly or indirectly, of securities of the Company representing
50% or  more  of the  total  voting  power  represented  by the  Company's  then
outstanding voting  securities;  or (b) a change in the composition of the Board
of  Directors  as a result of which fewer than a majority of the  directors  are
"Incumbent  Directors." "Incumbent Directors" means directors who either (A) are
directors  of the  Company as of the date the  Severance  Agreement  was entered
into, or (B) are elected,  or nominated for election,  to the Board of Directors
with the  affirmative  votes  (either by a specific  vote or by  approval of the
proxy  statement  of the  Company in which such person is named as a nominee for
election  as a  director  without  objection  to such  nomination)  of at  least
three-quarters  of the  Incumbent  Directors  at the  time of such  election  or
nomination (but shall not include an individual  whose election or nomination is
in  connection  with an actual  or  threatened  proxy  contest  relating  to the
election of directors of the Company);  or (c) the  stockholders  of the Company
approve a merger or  consolidation  of the Company  with any other  corporation,
other than a merger or consolidation which would result in the voting securities
of the Company  outstanding  immediately  prior thereto  continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving  entity) at least 50% of the total voting power represented by the
voting   securities  of  the  Company  or  such  surviving  entity   outstanding
immediately  after such  merger or  consolidation,  or the  stockholders  of the
Company  approve a plan of complete  liquidation  of the Company or an agreement
for the sale or  disposition  by the  Company  of all or  substantially  all the
Company's assets.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     The Compensation Committee; General

     The Board of Directors maintains a Compensation Committee (the "Committee")
comprised of one or more outside directors. The Committee is presently comprised
of Messrs.  Hugo-Martinez  and Day.  The  Committee,  with input from  directors
Chapman and Sanghi,  conducted  performance  reviews for fiscal  1999,  and made
compensation  decisions for fiscal 2000, with respect to the Company's executive
officers other than Mr. Sanghi. The Committee, with input from director Chapman,
conducted  the  performance  review  for  fiscal  1999,  and  made  compensation
decisions  for fiscal 2000,  with  respect to Mr.  Sanghi.  Mr.  Sanghi does not
participate in deliberations relating to his own compensation. Mr. Meyercord was
elected to the Board of Directors on June 16, 1999.  He did not  participate  in
any decision  related to fiscal 1999  compensation  for the executive  officers,
and,  as of the  date of this  Proxy  Statement,  has  not  participated  in any
compensation decision for fiscal 2000.

     The Stock Option Committee

     The Board of Directors also maintains a Stock Option Committee comprised of
two or more outside directors.  The Stock Option Committee administers the Plans
and determines, within the confines of the Plans, the timing, amount and vesting
of stock options to be granted to the Company's executive  officers.  Currently,
the Committee serves as the Stock Option Committee.

                                        7
<PAGE>
     Compensation Policy

     The  Company  bases  its  compensation  policy  on  a   pay-for-performance
philosophy  for all  corporate  officers  and  key  employees.  This  philosophy
emphasizes  variable  compensation,  primarily by setting base salaries  after a
review  of  average  base  salary   levels  of   comparable   companies  in  the
semiconductor  industry,  with an  opportunity  to  enhance  total  compensation
through  various   incentives.   The  Company   believes  that  this  philosophy
successfully  aligns  an  executive's  total  compensation  with  the  Company's
business  objectives and performance and the interests of the stockholders,  and
serves to attract,  retain and reward  individuals  who  contribute  both to the
Company's short-term and long-term success.  Compensation decisions also include
subjective determinations and a consideration of various factors with the weight
given to a particular factor varying from time to time and in various individual
cases.  The Company  believes  that its overall  pay-for-performance  philosophy
fosters a team  environment  among the Company's  management  that focuses their
energy  on  achieving  the  Company's  financial  and  performance   objectives,
consistent with the Company's guiding values.

     The  Committee  believes  that  the  overall  compensation  levels  for the
Company's  executive  officers for fiscal 1999 are consistent with the Company's
pay-for-performance  philosophy and are  commensurate  with the Company's fiscal
1999 performance.  Overall, the semiconductor industry achieved a revenue growth
rate of approximately  -10% for the period ended December 31, 1998. By contrast,
the  Company's  net sales  increased  2.4% and  18.7% in  fiscal  1999 and 1998,
respectively;  its net income before special charges increased 4.7% and 20.1% in
fiscal 1999 and 1998,  respectively;  and its return on average equity was 20.3%
and 20.5% in fiscal 1999 and 1998, respectively.

     Elements of Compensation

     There  are  currently  four  major  elements  of  the  Company's  executive
compensation program:  annual base salary,  incentive cash bonuses and long-term
compensation  programs,  stock options,  and compensation and employee  benefits
generally available to all Company employees.

     Base  Salaries.  The  Committee  establishes  annual base  salaries for the
Company's executive officers at the beginning of each fiscal year,  primarily by
considering  the  salaries  of  executive  officers  in similar  positions  with
comparably-sized   companies  (the  "Reference  Group").   The  Reference  Group
currently  consists of five  companies that have annual sales of $300 million to
$1.2  billion,  have market  capitalizations  of between  $500  million and $8.0
billion,  and operate in recognized market segments,  such as logic,  memory and
mixed-signal,  within the semiconductor industry. Monitoring the Reference Group
provides a stable and  continuing  frame of reference  for reviewing and setting
base salary  compensation.  The composition of the Reference Group is subject to
change from year to year based on the Committee's  assessment of  comparability,
including the extent to which the Reference  Group  reflects  changes  occurring
within the Company and in the  semiconductor  industry as a whole. The Reference
Group companies also comprise the Peer Group used in the performance  graph. See
"Performance   Graph,"  below.  In  addition,   consistent  with  the  Company's
pay-for-performance philosophy, the Committee reviews the performance objectives
for the  Company as a whole for the  immediately  preceding  fiscal year and the
upcoming  fiscal year,  as well as the  performance  objectives  for each of the
individual  officers  relative to their respective areas of  responsibility  for
both periods.  Performance  objectives are initially developed by the individual
officers,  in  conjunction  with  their  respective  operating  units,  and then
discussed  with and  approved by the Chief  Executive  Officer to  generate  the
Company's annual operating plan ("AOP"). The Board of Directors then reviews and
approves  the AOP.  In setting  base  salaries,  the  Committee  also  considers
subjective factors such as an executive's  experience and tenure in the industry
and perceived value of the executive's position to the Company as a whole. After
consideration of all of the above-described  factors,  average base salaries for
the Company's executive officers increased 5.9% in fiscal 1999.

     Incentive Cash Bonuses and Long-Term Compensation Programs.  Incentive cash
bonuses  may be  payable  to the  Company's  officers,  managers  and  other key
employees under the Company's Management  Incentive  Compensation Plan ("MICP").
The Board of  Directors  approved the MICP for fiscal 1999 as part of the fiscal
1999 AOP at the  beginning of fiscal 1999.  The MICP is an aggregate  bonus pool
derived from a percentage of the Company's annual operating  profit.  This bonus
pool may then be  allocated  among  the  eligible  participants  based  upon the
achievement  of  individual   performance   objectives  and  various  subjective
determinations,  with no particular weight being assigned to any one factor. The
Board of Directors and the Committee  generally give Mr. Sanghi wide  discretion
with respect to the designation of employees eligible to participate in the MICP
and the amount of any MICP bonus to be  awarded to each  participant,  including
executive  officers other than himself.  The Committee  determines the amount of
the  MICP  bonus,  if  any,  to be  awarded  to  Mr.  Sanghi.  In  fiscal  1999,
approximately  315  employees,  including the  executive  officers and the Chief
Executive Officer, participated in the MICP.

                                        8
<PAGE>
     In  conjunction  with the MICP,  the  executive  officers  are  eligible to
participate  in a program  designed to provide longer term  compensation  to the
executive  officers.  In light of the  importance  of  retaining  the  executive
officers  in  the  Company's  long-term  employ  and  in  order  to  provide  an
alternative  to immediately  taxable cash bonuses,  in fiscal 1995 the Committee
created a longer term benefit for key  executives in the form of a  split-dollar
life insurance  program.  The split-dollar  life insurance  program provides key
officers with an incentive to remain in the long-term employ of the Company,  an
insurance  benefit,  and a cash value  benefit  payable  in the future  when the
executive is no longer in the Company's  employ.  The Committee  determines what
portion of an  executive's  overall MICP cash bonus will be paid in cash or into
the  split-dollar  life  insurance  program.  During  fiscal 1999,  three of the
executive officers,  including Mr. Sanghi, participated in the split-dollar life
insurance  program.  See the  "Summary  Compensation  Table"  and the  footnotes
thereto, above.

     Numerous  objective and subjective  factors were considered in establishing
the total MICP bonus compensation for fiscal 1999, including the Company's sales
and net income growth,  return on equity and industry  conditions.  MICP bonuses
for  fiscal  1999  were  paid at the rate of 45% of the total  MICP  bonus  pool
established in the fiscal 1999 AOP. As a result,  the average MICP bonus for the
Company's four executive officers, excluding Mr. Sanghi, was approximately 17.5%
of base salary, a decrease of  approximately  7.4% in fiscal 1999 as compared to
fiscal 1998 when the average MICP bonus for such officers, excluding Mr. Sanghi,
was approximately 24.9% of base salary. See the "Summary Compensation Table" and
footnotes   thereto,   above.  The  Committee   believes  that  the  MICP  bonus
compensation    for   fiscal   1999   is    consistent    with   the   Company's
pay-for-performance  philosophy and is commensurate  with the Company's  overall
performance, as well as the fiscal 1999 AOP objectives.

     Stock  Options.  The  Company  believes  that  executive  officers,   other
corporate  officers and key employees should hold substantial,  long-term equity
stakes in the Company so that their collective  interests will coincide with the
interests of the  stockholders.  Thus,  stock  options  constitute a significant
portion of the  Company's  incentive  compensation  program.  At March 31, 1999,
approximately  54.7%  of the  Company's  employees  worldwide  held  options  to
purchase  Common Stock.  In granting  stock options to executive  officers,  the
Committee  considers  numerous  factors,  such as the individual's  position and
responsibilities   with  the  Company,  the  individual's  future  potential  to
influence the Company's mid- and long-term  growth,  the vesting schedule of the
options  awarded  and the number of options  previously  granted.  See the table
under "Option Grants--Option Grants in Last Fiscal Year," above, for information
regarding  options to  purchase  Common  Stock  granted  to the Named  Executive
Officers during fiscal 1999.

     Other  Compensation and Employee  Benefits  Generally  Available to Company
Employees.  The Company  maintains  compensation and employee  benefits that are
generally available to all Company employees, including medical, dental and life
insurance  benefits,  the Purchase  Plan, a 401(k)  retirement  savings  plan, a
supplemental  retirement  savings  plan  (an  unfunded,  non-qualified  deferred
compensation plan maintained  primarily for the purpose of providing deferral of
compensation  for a select  group of  management  employees  as defined in ERISA
Sections  201, 301 and 401),  and 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 the Company meets certain  operating  profitability
objectives established by the Board of Directors. For fiscal 1999, each eligible
employee received 30% of the maximum cash bonus payment permitted under the cash
bonus plan.

     Chief Executive Officer Compensation

     The Committee uses the same factors and criteria  described above in making
compensation  decisions regarding the Chief Executive Officer.  For fiscal 1999,
Mr.  Sanghi's base salary was increased by 6.7%. The Committee  believes this is
an  appropriate  increase  considering  the base  salaries  of  chief  executive
officers in the  Reference  Group and the Company's  performance  in a difficult
industry  environment.  Mr.  Sanghi's  aggregate  MICP bonus for fiscal 1999 was
determined  after  considering   numerous  objective  and  subjective   factors,
including the  Company's  performance  as compared to that of the  semiconductor
industry as a whole,  and resulted in a total MICP bonus payment for fiscal 1999
(which was made as a contribution to the split-dollar life insurance program) of
approximately  39.9% of his base salary.  As a result,  Mr. Sanghi's fiscal 1999
MICP bonus  represented  a decrease  of  approximately  19.7% in fiscal  1999 as
compared to fiscal 1998 when Mr. Sanghi's MICP bonus was approximately  59.6% of
his base salary.  See the "Summary  Compensation  Table" and footnotes  thereto,
above.  The Committee  believes that Mr. Sanghi's fiscal 1999 MICP bonus was (i)
consistent with the Company's pay-for-performance philosophy and is commensurate
with  the  Company's  overall  performance,  as  well  as the  fiscal  1999  AOP
objectives;  and (ii) reasonable based on the Company's  overall  performance in
fiscal 1999, its performance as compared to the Reference Group and Mr. Sanghi's
leadership and influence over the Company's performance. During fiscal 1999, Mr.
Sanghi  was  granted  options  to acquire  106,819  shares of Common  Stock at a
weighted average exercise price of $22.09 per share. For additional  information
concerning these option grants,  including  vesting  information,  see the table
under "Option Grants in Last Fiscal Year," above.  The amounts of the grants and
the vesting terms were determined to provide an appropriate  long-term incentive
for Mr. Sanghi.

                                        9
<PAGE>
     Deductibility of Executive Compensation

     Section  162(m) of the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code"), limits the deductibility by the Company for federal income tax purposes
of compensation paid to the Company's Chief Executive Officer and to each of the
Company's other four most highly  compensated  executive  officers to $1 million
each, subject to certain exceptions.  The Company anticipates that a substantial
portion  of  each   executive   officer's   compensation   will  be   "qualified
performance-based  compensation," that is not limited under Code Section 162(m).
The  Committee,  therefore,  does not  currently  anticipate  that any executive
officer's  compensation  will exceed that limitation of  deductibility in fiscal
2000.  The  Committee   intends  to  review  the   deductibility   of  executive
compensation from time to time to determine  whether any additional  actions are
advisable to maintain deductibility.

   By The Compensation and Stock Option Committees of the Board of Directors:

                    Albert J. Hugo-Martinez     L.B. Day


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The  Board  of  Directors  maintains  a  Compensation  Committee,  which is
currently  comprised  of  Messrs.  Hugo-Martinez  and Day.  Neither  of  Messrs.
Hugo-Martinez  or Day had any  contractual or other  relationship or transaction
with the Company  during  fiscal 1999 except as a director  and neither has ever
served as an officer or employee of the Company.

                                       10
<PAGE>
PERFORMANCE GRAPH

     The  following  graph shows a comparison of  cumulative  total  stockholder
return  for:  (i) the Common  Stock;  (ii) a  self-constructed  Peer Group Index
comprised of five companies that operate in recognized market segments,  such as
logic, memory and mixed-signal,  within the semiconductor industry and that have
annual  sales  between  $300 and $1.2  billion  and a market  capitalization  of
between $500 million and $8.0  billion  (the "Peer  Group");  and (iii) the CRSP
Total  Return  Index for the  NASDAQ  Stock  Market  (U.S.).  The Peer  Group is
comprised  of  Altera   Corporation,   Atmel   Corporation,   Linear  Technology
Corporation, Maxim Integrated Products, Inc. and Xilinx, Inc. The Peer Group was
changed in fiscal 1999 by deleting  Zilog,  Inc.  because,  during  fiscal 1999,
Zilog, Inc. ceased to be a publicly traded company.

     The  Peer  Group  is identical to the Reference Group used by the Committee
in  reviewing  executive  compensation. See "Board Compensation Committee Report
on Executive Compensation," above.

     In preparing the following  graph, it was assumed that $100 was invested in
the Common Stock at the initial  offering  price on March 22, 1993,  the date on
which shares of Common Stock were first publicly traded.  No cash dividends have
been declared or paid with respect to the Common Stock.

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

<TABLE>
<CAPTION>
                         03/31/93     04/30/93    05/28/93    06/30/93     07/30/93    08/31/93    09/30/93     10/29/93
- -------------------------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>         <C>         <C>          <C>         <C>         <C>          <C>
Microchip Technology      100.00       131.77      144.18      181.38       176.73      288.35      322.46       396.87
Peer Group Index          100.00        98.36      115.21      118.07       123.69      139.01      152.44       139.12
Broad Market Index        100.00        95.73      103.51      103.99       104.11      109.49      112.75       115.29

                         11/30/93     12/31/93    01/31/94    02/28/94     03/31/94    04/29/94    05/31/94     06/30/94
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology      396.87       483.69      492.99      551.90       474.39      520.88      576.69       655.77
Peer Group Index          136.20       157.51      168.39      178.55       169.42      186.99      172.02       161.07
Broad Market Index        111.85       114.97      118.45      117.35       110.13      108.70      108.97       104.98

                         07/29/94     08/31/94    09/30/94    10/31/94     11/30/94    12/30/94    01/31/95     02/28/95
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology      595.30       683.68      730.17      863.33       830.18      767.39      624.38       704.61
Peer Group Index          152.62       178.53      186.83      209.38       202.86      211.37      203.61       232.96
Broad Market Index        107.13       113.96      113.67      115.91       112.06      112.38      113.01       118.98

                         03/31/95     04/30/95    05/31/95    06/30/95     07/29/95    08/31/95    09/29/95     10/31/95
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology      784.84       788.32      830.18     1015.05      1074.35     1060.40     1056.91      1107.50
Peer Group Index          244.22       276.10      292.26      333.84       399.93      429.94      443.85       433.86
Broad Market Index        122.51       126.37      129.63      140.13       150.43      153.47      157.01       156.11

                         11/30/95     12/29/95    01/31/96    02/29/96     03/29/96    04/30/96    05/31/96     06/28/96
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology     1130.16      1018.54      927.85      774.37       767.39      711.58      718.56       690.65
Peer Group Index          401.82       360.53      416.85      417.78       367.43      397.70      377.16       315.51
Broad Market Index        159.77       158.94      159.76      165.89       166.35      180.15      188.43       179.93

                         07/31/96     08/30/96    09/30/96    10/31/96     11/29/96    12/31/96    01/31/97     02/28/97
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology      889.48      1023.79     1042.96     1011.57      1332.48     1419.68     1595.83      1564.44
Peer Group Index          320.33       337.39      366.40      358.34       469.72      440.45      541.09       505.02
Broad Market Index        163.91       173.09      186.34      184.30       195.72      195.50      209.36       194.01

                         03/31/97     04/30/97    05/30/97    06/30/97     07/31/97    08/29/97    09/30/97     10/31/97
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology     1255.74      1308.06     1485.95     1245.27      1559.21     1692.63     1890.13      1669.08
Peer Group Index          470.58       510.86      541.36      531.52       627.32      609.23      623.18       522.76
Broad Market Index        181.12       186.53      207.60      214.04       236.37      235.77      250.54       237.03

                         11/28/97     12/31/97    01/30/98    02/27/98     03/31/98    04/30/98    05/30/98     06/30/98
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology     1465.03      1255.74      966.67     1012.46       879.02     1187.72     1025.52      1093.54
Peer Group Index          531.40       473.40      497.21      576.69       516.32      669.45      558.45       501.21
Broad Market Index        237.52       233.53      240.67      263.61       273.68      279.00      263.49       281.96

                         07/31/98     08/29/98     09/30/98   10/31/98      11/28/98   12/31/98    01/30/99     02/27/99
- --------------------------------------------------------------------------------------------------------------------------
Microchip Technology     1283.19       766.54       915.64    1132.80       1457.20     1548.74     1208.65     1140.63
Peer Group Index          522.02       419.20       464.84     573.48        654.55      802.69      924.23      768.65
Broad Market Index        278.60       223.60       254.70     265.70        292.59      330.49      378.65      344.53

                         03/31/99
- -----------------------------------
Microchip Technology     1449.33
Peer Group Index          917.14
Broad Market Index        369.42
</TABLE>

                                       11
<PAGE>
                  SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
                        DIRECTORS AND EXECUTIVE OFFICERS

     The following table sets forth certain information regarding the beneficial
ownership of the Common  Stock,  as of April 30, 1999 by: (i) each  director and
nominee  for  director;  (ii) each of the Named  Executive  Officers;  (iii) all
directors and executive  officers as a group;  and (iv) each person who is known
to the Company to own beneficially more than five percent of the Common Stock:

                                            NUMBER OF SHARES        PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER    BENEFICIALLY OWNED(1)(2)   COMMON STOCK
- ------------------------------------    ------------------------   ------------
AMVESCAP PLC(3) ......................         6,675,825              13.02%
Capital Research & Management(4) .....         5,815,000              11.34%
FMR Corp.(5) .........................         5,693,590              11.11%
J. & W. Seligman & Co., Inc.(6) ......         5,160,258              10.65%
Steve Sanghi(7) ......................         1,365,061               2.62%
George P. Rigg(8) ....................           108,939                   *
C. Philip Chapman(9) .................            46,548                   *
Albert J. Hugo-Martinez(10) ..........            45,557                   *
Timothy B. Billington(11) ............            27,088                   *
L.B. Day(12) .........................            21,167                   *
Matthew W. Chapman(13) ...............            16,111                   *
Mitchell R. Little(14) ...............             5,219                   *
Wade F. Meyercord(15) ................                 0                  0
All directors and executive officers
 as a Group (nine persons) (16) ......         1,635,690               3.13%

- ----------
*    Less than 1% of the outstanding shares of Common Stock

(1)  Except as otherwise  indicated in the  footnotes to this table and pursuant
     to applicable community property laws, the persons named in this table have
     sole  voting  and  investment  power  with  respect to all shares of Common
     Stock.

 (2) 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 April 30, 1999. 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.

 (3) 11 Devonshire Square,  London,  EC2M 4YR, England.  Information is based on
     the  Schedule  13G filed by  AMVESCAP  PLC dated  February  8,  1999.  Such
     Schedule 13G indicates that AMVESCAP PLC has shared power to vote or direct
     the vote and to dispose of and direct the disposition of such Common Stock.
     AMVESCAP  PLC 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.

(4)  333 South Hope Street,  Los Angeles,  CA 90071.  Information  is based on a
     Schedule  13G filed with the SEC by Capital  Research  &  Management  dated
     February 8, 1999.  Such  Schedule 13G indicates  that Capital  Research and
     Management is the beneficial  owner of 5,815,000 shares of the Common Stock
     as a result of acting as an  investment  adviser  to  investment  companies
     registered under Section 8 of the Investment  Company Act of 1940.  Capital
     Research  and  Management  has the sole  power to dispose of and direct the
     disposition  of such Common  Stock.  The Growth Fund of America,  Inc.,  an
     investment company registered under Section 8 of the Investment Company Act
     of 1940,  which is advised  by  Capital  Research  and  Management,  is the
     beneficial  owner of 2,675,000  shares of the Common Stock. The Growth Fund
     of America,  Inc.  has sole power to vote or direct the vote of such Common
     Stock

(5)  82 Devonshire Street, Boston, MA 02109.  Information is based on a Schedule
     13G filed  with the SEC by FMR  Corp.  dated  February  1,  1999.  Fidelity
     Management & Research Company,  a wholly-owned  subsidiary of FMR Corp. and
     an  investment  adviser  registered  under  Section  203 of the  Investment
     Advisers Act of 1940, is the  beneficial  owner of 5,654,590  shares of the
     Common Stock.  Neither FMR Corporation  nor Fidelity  Management & Research
     Company  have the sole  power to vote or direct  the  voting of the  Common
     Stock.

                                       12
<PAGE>
(6)  100 Park Avenue, New York, NY 10017. Information is based on a Schedule 13G
     filed with the SEC by J. & W.  Seligman & Co.,  Inc.  dated March 10, 1999.
     Such  Schedule  13G  indicates  that J. & W.  Seligman & Co.,  Inc.  is the
     beneficial  owner of 5,160,258 shares of Common Stock as a result of acting
     as an investment adviser to investment companies registered under Section 8
     of the  Investment  Company  Act of 1940.  J. & W.  Seligman  & Co. has the
     shared power to vote or direct the vote of  4,792,500  shares of the Common
     Stock and has the shared power to dispose of and direct the  disposition of
     5,160,258   shares  of  such  Common  Stock.   Seligman   Communications  &
     Information fund, Inc., an investment company registered under Section 8 of
     the Investment  Company Act of 1940, which is advised by J. & W. Seligman &
     Co., Inc., is the beneficial owner of 2,800,000 shares of Common Stock.

(7)  Includes  739,375 shares  issuable upon exercise of options.  Also includes
     278,344  shares held of record by Steve Sanghi and Maria T. Sanghi as joint
     tenants, 129,396 held individually by Steve Sanghi, and 217,946 shares held
     of record by Steve Sanghi and Maria T. Sanghi as Trustees of Declaration of
     Trust.

(8)  Includes  11,264 shares  issuable  upon exercise of options.  Also includes
     17,754 shares held by George P. Rigg and Jane H. Rigg as joint tenants, and
     79,921 held individually by George P. Rigg.

(9)  Includes  43,510 shares  issuable  upon exercise of options.  Also includes
     3,038  shares  held of by C. Philip  Chapman and Donna R.  Chapman as joint
     tenants.

(10) Includes 45,557 shares issuable upon exercise of options.

(11) Includes 26,182 shares issuable upon exercise of options.

(12) Includes 21,167 shares issuable upon exercise of options.

(13) Includes 16,111 shares issuable upon exercise of options.

(14) Includes 4,689 shares issuable upon exercise of options

(15) Mr. Meyercord was elected to the Board of Directors on June 16, 1999.

(16) Includes 907,855 shares issuable upon exercise of options.


             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a) of the Exchange Act requires  the  Company's  directors  and
executive officers and persons who own more than 10% of a class of the Company's
equity  securities  registered  under  the  Exchange  Act  to  file  reports  of
securities ownership and changes in ownership with the SEC. Officers,  directors
and greater than 10%  stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file

     Based solely on the Company's  review of the copies of such forms  received
by it during the fiscal year ended March 31, 1999,  and written  representations
that no other reports were required,  the Company believes that each person who,
at any time during fiscal 1999, was a director,  officer or beneficial  owner of
more than 10% of the  Common  Stock,  complied  with all  Section  16(a)  filing
requirements.


          PROPOSAL TO AMEND THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN

PROPOSED PURCHASE PLAN AMENDMENT

     The Board of Directors has approved an amendment to the Company's  Employee
Stock Purchase Plan (the "Purchase Plan"),  subject to approval by the Company's
stockholders,  to  increase  by  400,000  the  number of shares of Common  Stock
reserved for issuance  thereunder (the "Amendment").  Since the initial adoption
of the  Purchase  Plan,  a total of  3,306,000  shares of Common Stock have been
reserved over time for issuance  under the Purchase  Plan. Of this amount and as
of the  Record  Date,  3,204,290  shares of Common  Stock have  previously  been
issued,  and a total of  101,910  shares  are  presently  available  for  future
issuance, without giving effect to the proposed Amendment.

                                       13
<PAGE>
REASON FOR THE AMENDMENT

     The Purchase Plan is intended to promote the best  interests of the Company
by providing all eligible employees,  including officers, who participate in the
Purchase  Plan with the  opportunity  to become  stockholders  of the Company by
purchasing  the Company's  Common Stock at  discounted  prices  through  payroll
deductions.  The  Board  of  Directors  believes  that the  Purchase  Plan is an
incentive  to  employees  to remain in the  Company's  employ,  and  aligns  the
collective interests of employees with those of the stockholders. As of March 1,
1999,  approximately  997 employees were eligible to participate in the Purchase
Plan, of whom 819 were participants.

BOARD OF DIRECTORS RECOMMENDATION

     At the  Meeting,  the  stockholders  are being  requested  to  approve  the
proposed Amendment to the Purchase Plan.

     THE BOARD OF DIRECTORS  RECOMMENDS  A VOTE "FOR" THE PROPOSED  AMENDMENT TO
THE PURCHASE PLAN.

DESCRIPTION OF THE PURCHASE PLAN

     The  Purchase  Plan was  initially  adopted  by the Board of  Directors  in
January 1993 and approved by the  stockholders in March 1993. Since the Purchase
Plan's initial inception,  and without giving effect to the proposed  Amendment,
3,306,000 shares of Common Stock have been reserved over time for issuance under
the Purchase Plan.

     The  Purchase  Plan,  and the  rights  of  participants  to make  purchases
thereunder, is intended to qualify under the provisions of Code Sections 421 and
423.  See the  discussion  below  under  "Federal  Income Tax  Consequences  For
Purchase of Common Stock Under the Purchase  Plan," for a summary of the general
rules  regarding  the federal  income tax  treatment of the purchase and sale of
Common  Stock  under  the  Purchase   Plan.   The  Purchase  Plan  is  currently
administered  by the  Board  of  Directors.  The  Board  of  Directors  has full
authority to administer the Purchase Plan,  including the authority to interpret
and  construe any  provision  of the  Purchase  Plan and to adopt such rules and
regulations it deems necessary for administration of the Purchase Plan.

     Any person who has been  employed  by the Company for more than 30 days and
who is  customarily  employed  for more than 20 hours per week and at least five
months per calendar year by the Company is eligible to  participate in offerings
under the Purchase Plan.  Eligible employees become participants in the Purchase
Plan  by  delivering  to  the  Company's  stock   administration   department  a
subscription agreement authorizing payroll deductions at least 24 hours prior to
the beginning of the applicable offering period, as described below. An employee
who becomes  eligible to participate in the Purchase Plan after  commencement of
an  offering  period may not  participate  in the  Purchase  Plan until the next
semi-annual  entry  date.  There are a maximum of four  semi-annual  entry dates
("entry date") within each offering period,  which are the first business day of
each March and September within an offering period.

     The  Purchase  Plan is  currently  implemented  in a series  of  successive
offering  periods,  each with a maximum  duration  of 24 months.  Each  two-year
offering  period  is  divided  into  four  semi-annual   participation  periods,
commencing  on the first  business  day of each March and  September  during the
offering  period.  Shares  are  purchased  on the  last  business  day  of  each
semi-annual  participation period (a "purchase date") during an offering period.
The purchase price per share for an eligible  employee who  participates  in the
Purchase  Plan is the  lower of (i) 85% of the fair  market  value of a share of
Common Stock on the employee's entry date into the then-current  offering period
under  the  Purchase  Plan or (ii)  85% of the fair  market  value of a share of
Common Stock on the semi-annual purchase date.

                                       14
<PAGE>
     The third  offering  period under the Purchase Plan began in March 1997 and
ended on February  28,  1999.  The fair market  value of the Common Stock on the
first entry date into the Purchase Plan for the third offering  period (March 1,
1997) was $36.937 per share;  and the fair market  value of the Common  Stock on
the last day of the third  two-year  offering  period  (February  26,  1999) was
$27.75 per share.  This resulted in a weighted  average purchase price of $21.21
for the third two-year offering period.

     The fourth and current  offering  period under the  Purchase  Plan began in
March 1999 and will end on  February  28,  2001.  The fair  market  value of the
Common Stock on March 1, 1999 was $28.75 per share.

     The purchase price of shares is accumulated by payroll  deductions over the
semi-annual  participation  period.  The  deductions  may  not  exceed  10% of a
participant's  earnings for the semi-annual  participation period. A participant
may discontinue his or her  participation in the Purchase Plan at any time prior
to five business  days before a purchase date during an offering  period and may
decrease  the  rate of  payroll  deductions  at any time  during  a  semi-annual
participation  period;  provided,  however,  that the participant may not effect
more  than  one  such   reduction   during  the  same   semi-annual   period  of
participation.  A  participant  may not  increase  his or her  rate  of  payroll
deductions  following  his or her entry date into the Purchase  Plan unless such
increase is made prior to the commencement of the next two-year offering period.
No participant may purchase more than $25,000 in Common Stock annually (based on
the fair market value of a share of the Common Stock on the participant's  entry
date into the Purchase  Plan) or 13,500  shares of Common Stock per  semi-annual
participation period.

     A participant's  purchase right terminates  automatically in the event that
the  participant  ceases  to be an  employee  of the  Company,  and any  payroll
deductions collected from such individual during the semi-annual period in which
such  termination  occurs  will  be  refunded.  However,  in  the  event  of the
participant's  disability or death, such payroll deduction may be applied to the
purchase of the Common Stock on the next semi-annual purchase date.

     If the  Company is  acquired by merger,  consolidation  or asset sale,  all
outstanding purchase rights will automatically be exercised immediately prior to
the effective date of such  acquisition at a price per share equal to 85% of the
lower of (i) the fair  market  value of the  Common  Stock on the  participant's
entry date into the offering  period or (ii) the fair market value of the Common
Stock immediately prior to such acquisition.

     The Board of  Directors  may at any time amend,  suspend or  terminate  the
Purchase Plan following the close of any semi-annual purchase period.  Following
termination  or  suspension of the Purchase  Plan all  outstanding  options will
automatically  terminate.   Amendments  to  the  Purchase  Plan  or  to  options
thereunder  that would adversely  affect the rights of any participant  under an
option  theretofore  granted  shall only be  effective as to such options if the
participant's consent is obtained. No amendment may be made to the Purchase Plan
without approval of the  stockholders of the Company if stockholder  approval of
such  amendment  is necessary  and  desirable to comply with Code Section 423 or
with Rule 16b-3 of the Exchange Act, or any successor rule.

PURCHASE PLAN PARTICIPATION

     Participation  in the Purchase  Plan is voluntary  and is dependent on each
eligible   employee's   election  to  participate  and  his  or  her  respective
determination  as to  the  level  of  payroll  deductions.  Accordingly,  future
purchases under the Purchase Plan are not determinable. The following table sets
forth,  as to  each of the  Named  Executive  Officers,  all  current  executive
officers as a group and all other  employees  who  participated  in the Purchase
Plan: (i) the number of shares of Common Stock purchased under the Purchase Plan
during the fiscal year ended March 31,  1999;  and (ii) 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 Purchase Plan:

                                       15
<PAGE>
                              AMENDED PLAN BENEFITS
                          EMPLOYEE STOCK PURCHASE PLAN


      NAME OF INDIVIDUAL OR
      IDENTITY OF GROUP AND                   NUMBER OF SHARES         DOLLAR
            POSITION                            PURCHASED(#)        VALUE ($)(1)
      ---------------------                   ----------------      ------------
Steve Sanghi, Director,
 Chairman, President and
 Chief Executive Officer ..................           676                2,765
Timothy B. Billington,
 Vice President,
 Manufacturing and Technology Group  ......           829                3,186
George P. Rigg, Vice President,
 Advanced Microcontroller and
 Systems Group  ...........................           975                3,204
C. Philip Chapman,
 Vice President, Chief Financial
 Officer and Secretary   ..................           953                3,137
Mitchell R. Little,
 Vice President,
 Americas Sales ...........................         1,086                3,697
All current executive officers
 as a group (5 people)   ..................         4,519               15,989
All other employees as a group ............       206,539              674,140

- ----------
(1)  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 Purchase Plan.

FEDERAL INCOME TAX  CONSEQUENCES FOR PURCHASE OF COMMON STOCK UNDER THE PURCHASE
PLAN

     The  Purchase  Plan,  and the  right  of  participants  to  make  purchases
thereunder, is intended to qualify under the provisions of Code Sections 421 and
423. Under these  provisions,  no income will be taxable to a participant at the
time of grant of the option or  purchase  of  shares.  Upon  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  have been held by the  participant  for more than two years
after  the date of option  grant  and for more  than one year  after the date of
purchase, the lesser of (a) the excess of the fair market value of the shares at
the  time of such  disposition  over the  purchase  price or (b) 15% of the fair
market value of the shares at the date of commencement  of the offering  period,
will be treated as ordinary income. If the shares are sold and the sale price is
less than the purchase  price,  there is no ordinary  income and the participant
has a capital loss for the difference.  If the shares are disposed of before the
expiration of these holding periods,  the excess of the fair market value of the
shares on the purchase date over the purchase  price will be treated as ordinary
income,  and any further gain or loss on such  disposition  will be long-term or
short-term capital gain or loss, depending on the holding period.

     Different rules may apply with respect to  participants  subject to Section
16 of the Exchange Act.

     The Company is not  entitled to a deduction  for amounts  taxed as ordinary
income or capital gain to a participant  except to the extent of ordinary income
recognized by participants  upon  dispositions of shares prior to the expiration
of the holding periods described above.

     The  foregoing  is only a brief  summary of the  effect of  federal  income
taxation  upon the  participant  and the  Company  with  respect  to the  shares
purchased under the Purchase Plan, does not purport to be complete, and does not
discuss the tax consequences of a participant's  death or the income tax laws of
any municipality, state or foreign country in which a participant may reside.

               RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

     The  Board  of  Directors  has  appointed  KPMG LLP  ("KPMG"),  independent
certified public accountants,  to audit the consolidated financial statements of
the  Company for the fiscal year  ending  March 31,  2000.  KPMG has audited the
Company's  financial  statements  since  fiscal  1993.  The  Board of  Directors
recommends  that  stockholders  vote  in  favor  of  the  ratification  of  such
appointment. In the event of a negative vote on such ratification,  the Board of
Directors will reconsider its selection. The Board of Directors anticipates that
representatives  of  KPMG  will  be  present  at  the  Meeting,  will  have  the
opportunity to make a statement if they desire, and will be available to respond
to appropriate questions.

                                       16
<PAGE>
          DEADLINE FOR RECEIPT OF STOCKHOLDERS PROPOSALS; DISCRETIONARY
                   AUTHORITY TO VOTE ON STOCKHOLDER PROPOSALS

     Pursuant to Rule 14a-5(e) of Regulation 14A promulgated  under the Exchange
Act,   stockholder   proposals  that  are  intended  to  be  presented  by  such
stockholders at the annual meeting of stockholders of the Company for the fiscal
year  ending  March 31, 2000 must be received by the Company no later than March
6, 2000 in order to be considered for possible  inclusion in the proxy statement
and form of proxy relating to such meeting.

     For  business  to  be  properly  brought  before  an  annual  meeting  by a
stockholder,  the Company's  By-Laws  require that the Company's  secretary must
have received  notice in writing from the  stockholder not less than 30 days nor
more  than 60 days  prior to the  meeting  (the  "By-Law  Deadline");  provided,
however,  that  if less  than  35  days'  notice  of the  meeting  is  given  to
stockholders,  such notice must be received by the  secretary not later than the
close of business on the  seventh day  following  the day on which the notice of
meeting was mailed.  The written notice to the secretary  shall set forth, as to
each matter the stockholder  proposes to bring before the annual meeting:  (i) a
brief description of the business,  (ii) the name and address, as they appear on
the Company's  books,  of the  stockholder  proposing such  business,  (iii) the
number of shares of Common Stock  beneficially  owned by such  stockholder,  and
(iv) any material interest of such stockholder in such business.

     If a  stockholder  wishes to present a  proposal  at the  Company's  annual
meeting in the year 2000 and the  proposal is not intended to be included in the
Company's proxy statement  relating to that meeting,  the stockholder  must give
advance  notice to the Company  prior to the By-Law  Deadline  for such  meeting
determined in accordance with the By-Laws,  as described above. If a stockholder
gives notice of such a proposal after the By-Law Deadline,  the stockholder will
not be permitted to present the proposal to the  stockholders  for a vote at the
meeting.

     SEC rules also establish a different deadline for submission of stockholder
proposals that are not intended to be included in the Company's  proxy statement
with respect to discretionary  voting (the "Discretionary  Vote Deadline").  The
Discretionary  Vote Deadline under the SEC rule for the year 2000 annual meeting
is May 30, 2000.  If a  stockholder  gives  notice of such a proposal  after the
Discretionary Vote Deadline,  the Company's proxy holders will be allowed to use
their  discretionary  voting authority to vote against the stockholder  proposal
when and if the proposal is raised at the  Company's  year 2000 annual  meeting.
Because the By-Law Deadline is not capable of being determined until the Company
publicly announces the date for its next annual meeting, it is possible that the
By-Law Deadline may occur after the Discretionary Vote Deadline. In such a case,
a proposal received after the Discretionary  Vote Deadline but before the By-Law
Deadline would be eligible to be presented at next year's annual meeting and the
Company   believes   that  its  proxy  holders  would  be  allowed  to  use  the
discretionary  authority  granted by the proxy card to vote against the proposal
at the meeting  without  including  any  disclosure of the proposal in the proxy
statement relating to such meeting.

     The Company has not been notified by any  stockholder  of his or her intent
to present a stockholder  proposal  from the floor at the Meeting.  The enclosed
proxy  card  grants the proxy  holders  discretionary  authority  to vote on any
matter properly brought before the Meeting,  including any stockholder proposals
received  between the date of this proxy  statement and the By-Law  Deadline for
the Meeting, which is July 21, 1999.


Dated: July 14, 1999

                                       17
<PAGE>
PROXY                                                                      PROXY


MICROCHIP TECHNOLOGY INCORPORATED
2355 WEST CHANDLER BLVD
CHANDLER, AZ  85224

                     THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[MICROCHIP LOGO]                             1999 ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------

The undersigned  stockholder of MICROCHIP  TECHNOLOGY  INCORPORATED,  a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement of the Company,  each dated July 14,
1999 and hereby appoints Steve Sanghi and C. Philip  Chapman,  and each of them,
proxies  and  attorneys-in-fact,  with full  power to each of  substitution,  on
behalf and in the name of the  undersigned,  to represent the undersigned at the
1999 Annual  Meeting of  Stockholders  of the Company,  to be held on August 20,
1999, at 9:00 a.m.,  local time,  at the  Company's  facility at 1200 South 52nd
Street,  Tempe,  Arizona, and at any adjournment or adjournments thereof, and to
vote all shares of Common Stock which the undersigned  would be entitled to vote
if then and there personally present, in the matters set forth below:

A majority of such attorneys or substitutes as shall be present and shall act at
said meeting or any adjournment or adjournments thereof (or if only one shall be
present and act, then that one) shall have and may exercise all of the powers of
said attorneys-in-fact hereunder.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY  DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS;  FOR THE AMENDMENT TO THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN; FOR THE  RATIFICATION  OF THE  APPOINTMENT OF KPMG
LLP AS THE  INDEPENDENT  AUDITORS  OF THE  COMPANY;  AND AS  SAID  PROXIES  DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.

                             YOUR VOTE IS IMPORTANT!

           PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
                          USING THE ENCLOSED ENVELOPE.
<PAGE>
         THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3.

1. Election of directors:                [ ] Vote FOR      [ ] Vote WITHELD
                                             all nominees      from all nominees
   01 Steve Sanghi
   02 Albert J. Hugo-Martinez
   03 L. B. Day
   04 Matthew W. Chapman
   05 Wade F. Meyercord

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDICATED NOMINEE, WRITE THE
NUMBER(S) OF THE NOMINEE(S) IN THE BOX
PROVIDED TO THE RIGHT.)                      -----------------------------------

2. Proposal to Amend the Company's Employee
   Stock Purchase Plan to increase by
   400,000 the number of shares of Common
   Stock reserved for issuance thereunder;   [ ] For   [ ] Against   [ ] Abstain

3. Proposal to ratify the appointment of
   KPMG LLP as the independent auditors of
   the Company                               [ ] For   [ ] Against   [ ] Abstain

Address Change? Mark Box [ ]
Indicate changes below:
                                             Date
                                                  ----------------

                                             -----------------------------------
                                             Signature(s) in Box

                                             (This Proxy should be dated, signed
                                             by the stockholder(s) exactly as
                                             his or her name appears hereon, and
                                             returned promptly in the enclosed
                                             envelope. Persons signing in a
                                             fiduciary capacity should so
                                             indicate. If shares are held by
                                             joint tenants or as community
                                             property, both stockholders should
                                             sign.)


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