KLA Corporation Conference Call Summary Company Overview - **Company**: KLA Corporation (NasdaqGS: KLAC) - **Date of Conference**: December 03, 2025 - **Speaker**: Brian Higgins, CFO Key Industry Insights Equipment Market Trends - The wafer fabrication equipment (WFE) market is expected to see modest growth in the first half of 2026, with an acceleration in the second half driven by high-performance computing and advanced packaging [6][12] - KLA has experienced mid-teens revenue growth and high 20% EPS growth in 2025, indicating strong market positioning and execution [6][12] - The company anticipates a WFE market size between $105 billion and $110 billion for 2025, with advanced packaging contributing an additional $11 billion [14] Drivers of Growth - Investment in leading-edge technology nodes, particularly the two-nanometer node, is expected to drive growth, with high-bandwidth memory and advanced packaging being significant contributors [9][10] - The design environment has improved since the seven-nanometer node, leading to increased process control intensity and efficiency [7][8] - KLA's share of the WFE market has increased, with expectations of further share gains due to broadening investments in leading-edge technology [15][16] Regional Market Dynamics - The Chinese market is projected to be modestly down, with KLA's share of the market declining from 40% in 2024 to mid-20s in 2026 due to export controls and market access issues [22][24][25] - The impact of the BIS rule change is estimated to have cost KLA approximately $300 million in expected revenue [25] Financial Performance Revenue and Margins - Advanced packaging revenue reached approximately $925 million in 2025, up 70% year-over-year, indicating strong demand in the logic segment [35][36] - Gross margin is guided at 62% for the quarter, with expectations of maintaining this level in the coming year despite tariff headwinds [44][47] Service Business Growth - KLA's service business is growing at a rate of 12%-14%, driven by high customer reliance on process control systems and increased contract pricing [48][52] - The average life of KLA systems has increased, contributing to a growing installed base and service revenue [51][52] Competitive Landscape - KLA faces limited competition in the advanced process control market, particularly in China, where domestic alternatives are not yet formidable [30][31] - The company is optimistic about engaging with new customers and expanding its market presence as the foundry market broadens [32][34] Conclusion - KLA Corporation is well-positioned for growth in the semiconductor equipment market, driven by advancements in technology nodes, strong demand for process control, and a robust service business. The company is navigating challenges in the Chinese market while capitalizing on opportunities in advanced packaging and high-performance computing.

Group 1 - The article highlights significant announcements in the stock market, including "suspension and resumption of trading, shareholding changes, investment wins, acquisitions, performance reports, unlocks, and high transfers" [1] - Important announcements are marked in red to assist investors in identifying investment hotspots and preventing various black swan events [1] - The article emphasizes the importance of timely information for investors to discern and find suitable listed companies [1] Group 2 - A company is noted for its technological reserves in the 6G field, possessing self-developed aerospace-grade chips that have been successfully applied [1] - Another company is recognized for its products related to storage chips and PCB, with a self-developed liquid cooling solution already supplied to Alibaba [1] - A company associated with Huawei has achieved mass supply of its electronic skin products [1]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $177.6 million, with GAAP earnings per share of $0.12 and non-GAAP earnings per share of $0.28, reflecting a focus on operational efficiency [7][14] - Gross margins were reported at 45.7%, with total operating expenses at $80.3 million on a GAAP basis and just below $70 million on a non-GAAP basis [14] - For the upcoming December quarter, revenue is expected to increase by approximately 7% sequentially to $190 million, with gross margins projected at 47% [15] Business Line Data and Key Metrics Changes - General semiconductor revenue increased by 24% sequentially, driven by technology and capacity needs, with utilization rates over 80% [8] - Memory-related revenue increased by nearly 60% sequentially to $24.4 million, primarily due to NAND-related capacity additions [8] - Advanced packaging solutions (APS) increased by 17% sequentially, indicating improved production activity across the high-volume install base [9] Market Data and Key Metrics Changes - Utilization rates for general semiconductor and memory applications are improving, with memory utilization rates reported at 82-83% [34] - The automotive and industrial markets are showing early signs of improvement, with expectations for sequential growth in Q1 2026 [9][52] - China’s utilization rates are close to 90%, indicating strong demand in the region [34] Company Strategy and Development Direction - The company is focused on expanding its market presence in advanced packaging, advanced dispense, and power semiconductor opportunities [13][16] - There is a commitment to innovation and customer engagement, with preparations for higher production levels in response to improving end market dynamics [6][9] - The company anticipates that half of its incremental growth in fiscal 2026 will stem from technology transitions and share gains in new markets [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in end markets, particularly in general semiconductor and memory, while acknowledging ongoing challenges in automotive and industrial sectors [9][52] - The company is preparing for a production ramp through fiscal 2026, particularly in advanced heterogeneous logic applications [10] - Management remains cautiously optimistic about the outlook, citing ongoing improvements in utilization rates and customer engagement [13][16] Other Important Information - The company has initiated a share repurchase program, deploying $16.7 million to repurchase 464,000 shares during the September quarter [15] - Organizational changes were announced, with Lester Wong taking over as Interim CEO following Fusen Chen's retirement [4][5] Q&A Session Summary Question: Guidance on segment growth for general semi, memory, and auto-industrial - Management indicated strong growth in general semi and memory, with expectations for sequential growth in auto-industrial as well [20][21] Question: Status of FTC plasma solution and competition - Management confirmed they remain competitive in the foundry space with their FTC solution, which offers customers more options [22][23] Question: Details on HBM system shipment - The first HBM system is being shipped to a customer in the U.S. for qualification, targeting the 4E generation [27][29] Question: Insights into NAND market strength - High utilization rates in memory, particularly in China, are driving improvements in the NAND market [34] Question: Dynamics in the memory market and recovery trajectory - Management noted high memory utilization and sales, indicating a ramp in memory that is expected to continue into FY2026 [50][51] Question: Outlook for automotive and industrial markets - Management expressed optimism for sequential growth in auto-industrial revenue, driven by technology transitions in power semiconductors [52]

Core Insights - Onto Innovation Inc. reported Q3 2025 earnings of $0.92 per share, exceeding the Zacks Consensus Estimate by 5.8%, but down from $1.34 in the prior year [1][9] - The company experienced a 13.5% year-over-year decline in revenues, totaling $218.2 million, which was slightly below the consensus mark but above the midpoint of its guidance [2][9] Revenue Breakdown - Specialty devices and advanced packaging revenues accounted for 52% of total revenues, amounting to $113 million, with expectations to rebound to approximately $150 million in Q4 [3] - Revenues from advanced nodes were $54 million, representing 25% of total revenues, with a forecast to double to about $300 million in 2025 from $148.5 million in 2024 [3] - Software and services revenues were $51 million, making up 23% of total revenues [3] Technology Highlights - Onto's Dragonfly 3Di technology was qualified by two major high-bandwidth memory customers, securing orders for 2.5D logic applications essential for AI accelerators and advanced GPUs [4] - Initial shipments of Atlas G6 OCD systems were made to leading logic and memory customers, with more shipments planned for Q4, indicating strong ongoing demand [4] Q4 Outlook - The company anticipates about 18% revenue growth in Q4, primarily driven by strong demand for 2.5D packaging, with revenues expected to range between $250 million and $265 million [5][11] - Gross margin is projected to improve by about 50 basis points sequentially, with a forecasted range of 53.5% to 55% [12] Margin and Expenses - Non-GAAP gross margin was reported at 54%, slightly down from 54.5% in the previous year, impacted by tariff effects [6] - Non-GAAP operating income decreased to $46.1 million from $70 million year-over-year, with operating expenses rising to $71.9 million [6][7] Liquidity Position - As of September 27, the company had $983.9 million in cash and cash equivalents, with total current liabilities of $162.9 million [8] - The company generated a record $83.4 million in cash from operations, representing a cash conversion of 185% of non-GAAP net income [10] Acquisition Plans - Onto Innovation plans to acquire Semilab for $432.3 million in cash and 641,771 shares, valuing the deal at approximately $495 million, which is about $50 million lower than the original terms [10]

Financial Data and Key Metrics Changes - The company achieved record quarterly revenue of $57.1 million, which is 10% higher than the previous quarter and 23% higher year-over-year [12][15] - Bookings for the quarter totaled over $100 million, with a backlog of $292 million, representing a 25% increase from the previous quarter and a 22% increase year-over-year [11][12] - Gross margin was reported at 76%, slightly ahead of the previous quarter and down 1% year-over-year, with a long-term target of 75% [13][15] - Earnings per share (EPS) for the quarter was $0.25, with a year-to-date EPS of $0.64, which is $0.06 ahead of the comparable period last year [15] Business Line Data and Key Metrics Changes - Analytics revenue reached $54.7 million, a 12% increase from the prior quarter and a 22% increase year-over-year, driven by business from leading-edge customers and equipment software [12][13] - Integrated yield ramp revenue accounted for 4% of total revenue in Q3, showing a slight decrease compared to the prior quarter but an increase year-over-year [13] Market Data and Key Metrics Changes - The company has expanded its customer base from approximately 150 customers in 2020 to over 370 customers today, including most of the equipment industry and multiple cloud providers [8] - The company noted significant investments in 3D manufacturing and geographic diversification of manufacturing locations, which may increase production costs and slow innovation [6][7] Company Strategy and Development Direction - The integration of Tiber AI Studio with Exensio, branded as Exensio Studio AI, is aimed at enhancing AI model management and deployment capabilities [4][5] - The company is focusing on AI-driven collaboration to enable cost-effective manufacturing processes in new locations [7] - The company aims to become a comprehensive analytics platform for the semiconductor supply chain, leveraging acquisitions and investments in technology [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong business activity and growth in backlog, reaffirming guidance for 21%-23% annual revenue growth for the year [16] - The management highlighted a positive outlook for 2026, driven by strong bookings and customer opportunities [36] Other Important Information - The company invested $6.3 million in capital expenditures during the quarter, lower than previous quarters, as it prepares for future demand [15][16] - The company is preparing for an analyst day and user conference on December 3rd, where it will share long-term growth targets [17] Q&A Session Summary Question: When does the revenue from the leased machines start? - Revenue generation from the leased machines is expected to begin within the next quarter or the quarter after, depending on the qualification and customer acceptance [21] Question: How does the pipeline of opportunities look for DFI? - The pipeline for DFI is strong, with ongoing discussions with several potential customers [23] Question: How is the go-to-market strategy for SecurWise developing? - The company is expanding SecurWise's market reach beyond equipment vendors to include fab companies, enhancing collaboration across the supply chain [25][28] Question: What is the customer concentration mix? - The company has a diverse customer base, with fabs representing 40%-50% of business, fabless and system companies around 35%-45%, and equipment vendors about 15% [33] Question: What is the outlook for 2026? - While specific guidance for 2026 has not been provided, management anticipates a strong year based on current backlog and opportunities [36] Question: What are the findings from SEMICON West regarding end markets? - There is a more broad-based enthusiasm among customers compared to previous months, particularly in advanced packaging and differentiated products [59][60]

Financial Data and Key Metrics Changes - SkyWater reported record Q3 revenues of nearly $151 million, exceeding expectations by more than $9 million [5][24] - The gross margin for Q3 was reported at 24.6%, with significant revenue upside flowing directly to gross profit [25] - Adjusted EBITDA for Q3 was $25.8 million, well above the expected range of $10-$12 million [26] Business Line Data and Key Metrics Changes - The ATS business saw a revenue pull-in of approximately $4 million from Q4 due to program execution timing, with expected Q4 ATS revenues around $50 million [8][22] - Texas wafer services revenue reached nearly $87 million, exceeding expectations by $9 million, primarily due to higher work-in-process wafers post-acquisition [15][24] - Quantum computing-related revenue is expected to exceed 30% growth in fiscal 2025, with four new customer engagements signed since Q2 [6][12] Market Data and Key Metrics Changes - The quantum computing market is experiencing significant investment, with several players announcing large funding rounds, validating the commercial potential of the sector [9][10] - The advanced packaging market is projected to reach nearly $80 billion by 2030, driven by demand in automotive, IoT, 5G, AI, and edge computing [17] Company Strategy and Development Direction - SkyWater aims to restore domestic semiconductor manufacturing capabilities and secure trusted production, positioning itself as a key player in the U.S. innovation infrastructure [18][19] - The acquisition of FAB25 has strengthened SkyWater's competitive position, expanding its scale and diversifying its customer and technology mix [16][15] - The company is focused on leveraging its technology-as-a-service model to support various quantum architectures and drive growth [12][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exceeding initial revenue and EBITDA expectations for 2026, with a baseline expectation of at least $600 million in revenue and $60 million in adjusted EBITDA [23][40] - The ongoing government budget dynamics are expected to impact A&D-related ATS revenues, but overall growth in quantum and advanced packaging is anticipated [22][50] - Management highlighted the importance of U.S. leadership in quantum computing and the need for domestic manufacturing capabilities [20][21] Other Important Information - The company plans to hold its first Investor and Analyst Day on March 24 in New York City [4] - Total debt at the end of Q3 was $184 million, reflecting borrowings for the FAB25 acquisition and working capital [29] Q&A Session Summary Question: Can you elaborate on the gross margin expectations for Q4? - Management indicated that Q4 non-GAAP gross margin is expected to be 17%-20%, with a 200 basis point impact from tools revenue [34][37] Question: What are the dynamics behind the revised revenue guidance for next year? - Management noted that higher-than-expected WIP in the fab and strong performance in Q3 and Q4 contribute to confidence in the $600 million revenue target [40][41] Question: How does SkyWater view the current aerospace and defense environment? - Management stated that while funding dynamics remain uncertain, investments in facilities are geared towards the A&D community, positioning SkyWater well for future growth [50][51]

Financial Data and Key Metrics Changes - FormFactor's Q3 2025 revenue was $202.7 million, with non-GAAP gross margins at 41%, up 250 basis points from 38.5% in Q2 2025 [20][22] - GAAP gross margins for Q3 were 39.8%, compared to 37.3% in Q2 [23] - Non-GAAP EPS for Q3 was $0.33, exceeding the high end of the outlook range of $0.21 to $0.29 [20][24] - Free cash flow in Q3 was $19.7 million, a significant improvement from negative $47.1 million in Q2 [24][25] Business Line Data and Key Metrics Changes - The Probecard segment saw a 254 basis point increase in gross margins, while the systems segment increased by 260 basis points to 40.8% and 42%, respectively [22] - DRAM Probecards achieved double-digit sequential growth in Q3, primarily driven by HBM, with HBM revenue around $40 million [9][49] - The systems segment is expected to continue its growth trajectory into Q4, supported by seasonal demand and advancements in co-packaged optics [13][14] Market Data and Key Metrics Changes - The foundry and logic probecard market experienced weaker demand in Q3, with expectations of similar levels in Q4 [11][12] - Despite a broader PC recovery, significant growth in probecards for CPU applications has not been observed, as demand is being met by existing legacy designs [11][12] - The company is focused on diversifying its customer base in the foundry and logic markets, with ongoing qualifications for major GPU applications [13][40] Company Strategy and Development Direction - The company aims to achieve a target model gross margin of 47%, with a focus on both short-term and long-term initiatives to improve profitability [6][15] - Key strategies include optimizing operational effectiveness, reducing manufacturing costs, and expanding capacity through the new Farmers Branch facility [17][25] - The company is committed to developing differentiated products to increase market share and pricing power, particularly in advanced packaging and high-performance compute [7][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving sequentially higher revenue and gross margins in Q4, driven by improved demand and cost reduction initiatives [5][26] - The transition to HBM4 is expected to increase test intensity and complexity, providing a competitive advantage for FormFactor [10][31] - Management acknowledged ongoing challenges from tariffs but is actively taking steps to mitigate their impact on gross margins [26][27] Other Important Information - The company plans to invest between $140 million and $170 million in the Farmers Branch facility over 2026, which is expected to enhance gross margins in the long term [25][66] - The share repurchase program aims to offset dilution from stock-based compensation, with $70.9 million remaining for future purchases [25] Q&A Session Summary Question: Insights on HBM growth and Probecard intensity - Management noted that HBM4 is expected to drive increased test intensity and complexity, leading to growth in Probecard demand as the technology evolves [31][32] Question: Contribution of tactical versus structural improvements to gross margin - Management indicated that both tactical and structural improvements are essential, with ongoing actions expected to yield benefits in the coming quarters [34] Question: Factors contributing to gross margin targets - Management clarified that improvements in manufacturing cycle time and yield are independent of product mix, contributing to the path towards target gross margins [38] Question: Impact of CPU and GPU customer ramps on foundry and logic - Management highlighted the significant addressable markets associated with CPU and GPU opportunities, though quantifying the impact remains challenging [40] Question: Revenue growth drivers in Q4 - Management confirmed that revenue growth in Q4 is expected to be driven by non-HBM DRAM applications, with ongoing improvements in gross margins [42][43] Question: Timing of capacity increase from Farmers Branch - Initial capacity from the Farmers Branch facility is expected to come online late in 2026, with the majority in 2027 [44] Question: HBM revenue specifics for Q3 - Management disclosed that HBM revenue for Q3 was approximately $40 million, with expectations for continued growth into Q4 [49] Question: Revenue from top CPU customer - Management acknowledged that a major CPU customer did not contribute significantly in Q3 but emphasized the importance of the long-term partnership [51][52] Question: ASIC projects engagement updates - Management noted ongoing engagements with major hyperscalers in the custom ASIC space, with expectations for future growth as specifications align with GPU requirements [53][54] Question: Gross margin improvement contributions - Management indicated that mix, volume, and cost improvement actions all contributed to the improved gross margins, with cost improvements being a significant factor [58]

Core Insights - BE Semiconductor Industries N.V. (Besi) reported a significant increase in orders for Q3-25, with bookings rising by 36.5% compared to Q2-25, indicating early signs of recovery in the assembly equipment market for the semiconductor industry [6][8][11] - Despite the increase in orders, revenue for Q3-25 decreased by 10.4% from Q2-25 and 15.3% from Q3-24, primarily due to ongoing weakness in mainstream assembly markets, particularly in mobile and automotive applications [6][8][9] - The company initiated a new €60 million share repurchase program, following the completion of a previous €100 million program, aimed at capital reduction and offsetting dilution from convertible notes and employee stock plans [10][14] Q3-25 Highlights - Revenue for Q3-25 was €132.7 million, down from €148.1 million in Q2-25 and €156.6 million in Q3-24 [5][8] - Orders totaled €174.7 million, reflecting a 36.5% increase from Q2-25 and a 15.1% increase from Q3-24 [5][8] - Gross margin was 62.2%, a decrease of 1.1 percentage points from Q2-25 and 2.5 percentage points from Q3-24, mainly due to adverse foreign exchange effects [5][8] - Net income for Q3-25 was €25.3 million, down 21.2% from Q2-25 and 45.9% from Q3-24 [5][8] Year-to-Date (YTD) 2025 Highlights - YTD revenue reached €425.0 million, a decrease of 6.4% compared to the same period in 2024 [9][10] - Total orders for YTD-25 were €434.6 million, down 6.5% from YTD-24, primarily due to lower bookings in hybrid bonding and mobile applications [9][10] - YTD net income was €88.8 million, a decline of 27.6% from the previous year, attributed to lower revenue and gross margins, as well as higher interest expenses [9][10] Q4-25 Outlook - Revenue is expected to increase by 15-25% compared to Q3-25, driven by improved order levels [11][12] - Gross margin is anticipated to range between 61-63%, while operating expenses are projected to rise by 5-10% due to increased R&D expenditures [11][12] Share Repurchase Activity - During Q3-25, the company repurchased approximately 192,000 shares for €23.1 million at an average price of €119.94 per share [12][14] - The new €60 million share repurchase program is set to be completed by October 2026, with the aim of reducing capital and offsetting dilution [10][14]

Summary of Key Points from the Conference Call Industry Overview - The conference focused on the **Global Semiconductor Capital Equipment** industry, particularly insights gathered from meetings at **SEMICON West** [1][2]. Core Insights - **Overall Market Sentiment**: The tone from industry management teams was generally constructive, with expectations for **Wafer Fabrication Equipment (WFE)** growth in the upcoming year [1]. - **Investor Sentiment**: Investors have become more optimistic, particularly regarding a potential recovery in the memory sector, especially in **DRAM** [2]. - **Memory Market Dynamics**: Evidence of recovery is more apparent in **DRAM**, while **NAND** capacity orders remain uncertain, although upgrade spending continues [2]. Company-Specific Insights Lam Research (LRCX) - **Outlook**: Rated **Outperform** with a price target of **$105**. Management indicated strong revenues from China in the upcoming quarter and sees a **$40 billion** NAND upgrade opportunity over several years [9]. - **Market Position**: Lam is well-positioned in NAND and DRAM, with expectations of benefiting from memory upgrades and HBM investments [9]. - **Geopolitical Impact**: The company believes that U.S. tariff impacts are manageable and that local competition in China is growing but still prioritizes tool quality [9]. Applied Materials (AMAT) - **Outlook**: Rated **Outperform** with a price target of **$195**. Management acknowledged a misjudgment in customer ramp plans but remains confident in future growth [10]. - **Market Dynamics**: DRAM wafer starts are expected to increase, while NAND upgrades are anticipated to drive growth without new fabs [10]. Tokyo Electron (8035 JP) - **Outlook**: Rated **Outperform** with a price target of **¥31,100**. Management sees potential upside in DRAM revenues but remains cautious about NAND investments [11][12]. Soitec SA - **Outlook**: Rated **Outperform** with a price target of **€74**. The company is undergoing a leadership transition and expects inventory corrections in RF SOI to stabilize by the end of 2026 [19][20]. - **Market Position**: Soitec anticipates a **5-10%** growth trajectory for RF SOI post-correction, driven by 5G and new use cases [21]. Entegris (ENTG) - **Overview**: Entegris provides specialized electronic materials and solutions, with a business mix of **70% Logic** and **30% Memory** [29]. - **Market Outlook**: Management expects average performance this year due to market asynchronicity but sees growth opportunities in Logic, DRAM, and NAND [29]. Onto Innovation Inc - **Overview**: Focused on process control and metrology tools, with advanced packaging being a significant revenue driver [32]. - **Market Dynamics**: The company is working to regain market share lost to KLA and is diversifying its manufacturing footprint to mitigate geopolitical risks [32]. Nova Limited (NVMI) - **Overview**: A leading provider of metrology equipment, with a focus on increasing metrology intensity in semiconductor manufacturing [36]. - **Market Position**: Management sees significant growth opportunities in advanced packaging and gate-all-around technologies [36]. Form Factor (FORM) - **Overview**: Specializes in probe cards and measurement equipment, with a focus on HBM growth driven by engagements with major customers [40]. - **Market Dynamics**: The company is undergoing operational changes to improve gross margins and has seen a significant drop in revenues from China due to export controls [40]. Advanced Energy Industries Inc (AEIS) - **Overview**: A key supplier of precision power equipment for the semiconductor industry, with half of its revenue derived from this market [42]. - **Market Outlook**: Management sees strong long-term growth potential across various end markets, including semiconductors and data centers [43]. Additional Important Insights - **Geopolitical Risks**: Companies are navigating challenges posed by local competition in China and U.S. export controls, which have impacted revenues and market strategies [9][32][40]. - **Technological Innovations**: There is a focus on advanced packaging and new materials, which are expected to drive future growth across various segments of the semiconductor industry [36][40]. This summary encapsulates the key points discussed during the conference call, highlighting the overall market sentiment, company-specific insights, and additional important factors influencing the semiconductor capital equipment industry.

Summary of KLA's Conference Call Company Overview - **Company**: KLA Corporation - **Industry**: Semiconductor Equipment and Technology Key Points and Arguments Business Performance and Outlook - The June quarter was strong, with raised guidance for the September quarter, indicating a positive business outlook for 2025 [5][6] - KLA's revenue from advanced packaging has shown significant growth, with expectations to reach approximately $925 million this year, up from over $500 million last year [7][8] - The service business is performing well despite challenges from U.S. export controls, maintaining double-digit growth [7][8] Market Trends and Opportunities - The advanced packaging market has grown from a few billion dollars to approximately $10 to $11 billion, driven by increased complexity and investment in high bandwidth memory [6][7] - KLA aims to achieve a process control share of wafer fab equipment (WFE) of 7.25% by 2026, currently trending closer to 8% [11][12] - The increase in die sizes and complexity in both logic and DRAM manufacturing is driving higher process control intensity, which benefits KLA [12][16] Financial Performance - KLA's gross margins are at 62.5%, with operating margins exceeding long-term targets of 40% to 50% [8][10] - The company has a long-term growth target of 12% to 14% for its service business, which correlates more closely with semiconductor revenue growth than WFE growth [47][48] Strategic Focus - KLA is shifting its portfolio towards packaging, reflecting the growing importance of this segment [42][45] - The company is leveraging its existing relationships and capabilities to enhance its service offerings and product development [24][49] - R&D spending is expected to remain around 12% to 13% of revenue, focusing on solving customer problems and maintaining competitive differentiation [51][52] Market Dynamics - The semiconductor industry is experiencing a proliferation of designs at the leading edge, benefiting KLA due to the complexity of managing high mix in fabs [18][19] - The N2 node is expected to be a significant driver of design activity, with many customers engaged in this area [20][33] - KLA anticipates growth in the NAND market, albeit from low levels, and expects the overall WFE market to grow in the mid-single digits [30][32] M&A and Capital Allocation - KLA is focused on internal growth and enhancing its existing portfolio rather than pursuing large-scale M&A, although it remains open to smaller, strategic acquisitions [58][59] - The company has a history of consistent dividend growth, with a recent increase to $1.90 per share per quarter, reflecting confidence in its long-term financial health [54][56] Additional Important Insights - The transition from traditional PCB to more integrated packaging solutions is driving the need for advanced process control tools [27][28] - KLA's service model is evolving to focus on performance and availability rather than just parts and repairs, which is crucial in high-performance computing environments [48][49] - The company is adapting to changes in the market, including the shift towards hybrid bonding technologies in HBM integration [38][41]