Onto Innovation (ONTO) 2025 Conference Transcript

Summary of Onto Innovation (ONTO) 2025 Conference Call Company Overview - Company: Onto Innovation Inc. (ONTO) - Industry: Semiconductor Equipment Market Outlook - 2026 Growth: Company is in discussions with customers regarding their expansion plans for 2026, indicating a focus on underlying growth waves rather than overall market trends [4][6] - AI Demand: Continuous growth in AI technology is noted, with no signs of slowing down [4] - New Product Opportunities: New products in 3D metrology and critical films are progressing well, with a significant market for critical films estimated at $500 million [5] Performance Insights - Advanced Nodes Growth: Company reported nearly 100% growth in advanced nodes, significantly outperforming peers [8][10] - Revenue Drivers: Growth attributed to expanding product offerings beyond traditional markets, including films and integrated metrology [9][10] Competitive Landscape - Pricing Power: Company is experiencing opportunities to increase prices due to advanced inspection requirements, contrary to typical pricing pressures [12][13] - Market Share: Company maintains strong market share across multiple HBM customers, with no significant share loss reported despite increased competition [27][28] Product Development - Dragonfly G5 Tool: The new Dragonfly G5 tool is expected to enhance market share in 2.5D packaging, with strong customer interest and impressive performance feedback [15][16][17] - Hybrid Bonding: The tool will address concerns over voids in hybrid bonding, presenting new opportunities for high-resolution inspections [19][20] Strategic Initiatives - Semilab Acquisition: Acquisition aims to enhance capabilities in surface charge metrology and materials characterization, with potential synergies expected [35][36] - Market Growth in Materials Characterization: Growing interest in materials characterization as advanced packaging and exotic materials become more prevalent [38][41] Financial Performance - Gross Margin: Current gross margin is below the long-term target of 56%-57%, with plans to improve through supply chain efficiencies and new product introductions [44][45] - Capital Allocation: Company prioritizes M&A as a key strategy for capital allocation, focusing on synergies and core competencies [53][55] Future Outlook - Technology Transitions: Company is focused on expanding its footprint across various markets rather than fixating on specific technology transitions [48][49] - Packaging Investments: Significant investments in packaging are anticipated, with a strong position in the market due to advancements in heterogeneous die and panel technology [50][51] Conclusion - Investor Sentiment: Company believes there has been an overreaction to competitive pressures, asserting confidence in its ability to maintain market position and drive growth through new product adoption [57]