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| So I think that's one of the biggest drivers for us, is you've got good competitive dynamics, you've got technology transition and you got end market adoption |
| And so it gives us pretty good visibility into what's coming |
| And so that's been a nice driver of incremental growth that's fueled the process control intensity that we've seen that increase |
| So I think we're very well positioned in terms of our ability to ramp the business to the plan we talked about earlier |
| And so that consistency and predictability, even upturn and downturns allow this business to grow over time |
| And allows us to set up that contract structure that gives us good visibility |
| So we have inspection and metrology, which has been a driver, which is not related to the Orbotech acquisition, but generally, the inspection capability that we've sold, particularly around GPU heterogeneous integration and like CoWoS process and so on that we've been able to do pretty well there |
| KLA's position in process control is a very strong position, and we believe that the markets that will inflect over time, as we continue to see robust adoption of leading-edge design rules, will drive certain parts of the market to grow faster, where we already have a very strong position |
| So a very, very strong growth profile, driven by the adoption of EUV and ultimately, more and more scaling of devices |
| Utilizations will improve, and so that should be good for over the course of this year for more Service revenue |
| We'll see pricing improve, customers' profitability, cash flow will get better, and I think we'll start to see them invest, as we move through the second half of this year and into next year |
| So yes, it's a very good constructive setup for process control, where we're -- I don't want to say agnostic, in some ways agnostic to how it plays out in the overall market as long as those dynamics are happening |
| Yes, and really good end market interest in the nodes, right? 3-nanometer has strong interest |
| I think we're very well positioned without a lot of incremental investment to deliver on those commitments |
| That we're in a pretty good position to see it continue to grow a little bit more over time as we go forward |
| So I think we're in pretty good position with that product |
| It's one of the reasons why we've been able to do what we've been able to do with capital structure and capital allocation over the last decade or 1.5 decades is that, that visibility provides a pretty clear cash flow stream that supports dividends and debt service |
| Obviously, AI is growing faster, and that's driving stronger data center, much more semiconductor-intensive compute requirements |
| Our position in process control has continued to grow |
| I think pretty good profitability relative to the overall |
| And in 2024, I would expect Service to grow even faster as the tools we shipped in '21 and '22 come off of warranty |
| And it also has some deconfigured capability that we can take backward to support automotive as an example, or where we're able to get more revenue and even some of the legacy nodes, we're able to get more revenue at those design rules, then we were able to get back when that was the leading edge.. |
| So we feel pretty good that where we are today in that sort of high 7s that we'll be able to increment that over time, given some of the growth drivers, we think are out there in terms of incremental scaling, changes in architecture, power distribution and some of these things that we think will drive interesting challenges from a process point of view and then, of course, maybe stronger competitive dynamics moving forward in terms of the drivers of leading edge |
| That would seem to be a really good construct for you |
| But I think we're in a good position to see some come on this year |
| So I think it's a good setup as we move beyond mobile as the principal driver |
| And so customers were able to be very efficient with their capacity, in terms of trying to reuse it from node to node, that all kind of broke down at 7-nanometer with the proliferation of design, which we've seen continue as we move here through 5-nanometer and 3-nanometer and expectations for 2-nanometer here moving forward |
| I think it's a testament to the demand for the Gen 4 product line, which is our shortest product, both in terms of it being the production workhorse, where it balances the wavelengths and the sensitivity that it has as a broadband tool with cost of ownership for customers |
| So we've seen a nice, steady increase in capital intensity |
| We think our position in certain markets like optical inspection will inflect and that will drive more share opportunity, as well in terms of just the relative growth rate of that part of the market versus the rest of it |
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| So it was a challenge |
| But has some challenges with reticle field and costs potentially and certain steps to our customer will try to leverage double battery |
| And if they're not supported by us, it's very, very difficult for our customers to get value out of them |
| So how do you think about the role of geopolitics in China? And I know you've talked about revenue declining from not very high levels in the back half of last year |
| It puts pressure on yields, as you're trying to ramp that fab |
| So you've got advanced die, you've got this reliability challenge |
| 2022 and 2023 are a little noisy because of some of the challenges that a lot of our peer companies had, in terms of the timing of WFE, given some of the supply chain challenges |
| Incremental scaling was fairly limited |
| And if you've got a desire to move from very old design rules, even as you move through the legacy parts of the node, it's new to you, there are challenges, unique aspects of certain products that require you to continue to invest, if you're going to try to get a customer to make a commitment and be committed to a road map over time |
| And I think that I would expect this year to be lower than what that customer spent last year |
| I mean you have much more of a Semiconductor intensive bill of materials than your competitors do? How do you manage through that so well? Bren Higgins Yes, it is we certainly didn't do what our customers asked us to do, right? We still had our challenges |
| Bren Higgins I think you're still seeing some of the shrink focus, right? I think you're going to see continued pressure on trying to drive layer counts higher, opportunities for us in terms of wafer flatness |
| In my mind, I think it's always been tough to make a value case for trailing edge memory |
| And that -- there's a fair amount of inefficiency in some of that |
| EUV is being delayed |
| We have a target of 63%, drop-through in terms of operating margin of 40%, 50% incremental operating margin |
| Overlays becoming more of a challenge there in terms of overlay registration, as you do double stacks and so on |
| I think as you move into a High NA environment, you're not going to see that |
| But over time that you would expect some normalization there, although the activity does create a little bit of inefficiency |
| China DRAM, I think everybody had talked to, there was a pretty high second half of last year because customers came off of an export control, and so there was a little bit of an inflation |
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