KLA Corp at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joseph Moore - Morgan Stanley - Analyst : Yes. No, that was a great overview. I mean, I think we were a little positively surprised on the WFE forecast given that you did have '24 close stronger probably than most people thought. So we ended up in that $99 billion range. And you did have these incremental headwinds in China. So maybe just kind of talk about what that looks like. It is, as you said, a pretty big inflection. We go from kind of geopolitically oriented investing in legacy nodes. Now we're investing quite a bit in areas like gate-all-around and advanced packaging. It doesn't seem like we're addressing that much in like 3, 5, 7 nanometer, it's really much more kind of at that very cutting edge. So it seems like that should play to KLA's advantages over the course of this year.

Question: Joseph Moore - Morgan Stanley - Analyst : That's a great point, though, on N3 driving these massive die sizes and suddenly defect density matters a lot more because you just do a metric with die sites. So that's a --

Question: Joseph Moore - Morgan Stanley - Analyst : That's a great point. Maybe if we look at some of the markets, starting with DRAM. I think that's the biggest difference you guys have, I think, double-digit growth in DRAM WFE this year and were down not because of any kind of market issue, but just the numbers got really high last year. So maybe put into context, what's driving the optimism there around that market?

Question: Joseph Moore - Morgan Stanley - Analyst : Maybe if we could double-click on that, the HBM intensity for process control. You mentioned that TSV and the layers and the base die within the DRAM die itself, though, there's also a difference in process control intensity.

Question: Joseph Moore - Morgan Stanley - Analyst : And it seems like the pace of technology, I mean going from HBM 3 to 3E to HBM 4 on the scale that we are, it seems like an important driver as well.

Question: Joseph Moore - Morgan Stanley - Analyst : Interesting. KLA versus DRAM. Your DRAM number, by our numbers at least, outgrew the industry 2022, 2023, (inaudible) a little 2024. It seems like with what you're characterizing, you should have pretty strong growth, I guess, granted other process control has a lot of growth around HBM 2, but -- sorry, process chambers and things have a lot (inaudible) around HBM also. But can you just talk to the prospects for you to outperform that DRAM WFE in the next couple of years?

Question: Joseph Moore - Morgan Stanley - Analyst : Okay. Maybe shifting to NAND. You mentioned getting a little bit better from a low level. Kind of interesting that companies are lowering utilization and increasing spending at the same time. But we've actually dug into it, there's a fair amount of inability to do QLC and legacy wafers and we haven't invested in two years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 6:00PM, KLAC.OQ - KLA Corp at Morgan Stanley Technology, Media & Telecom Conference So it seems like there's quite a bit of technology-oriented investment that has to happen even in a tougher economic scenario. So can you talk about -- you said you're seeing some of that? And then can you talk about the prospects for process control intensity in NAND to go up as well?

Question: Joseph Moore - Morgan Stanley - Analyst : Great. And then back to foundry/logic, N2 node you talked about being strong for you. You've talked about picking up share of spend. I feel like it's a little tricky for us because everybody is kind of saying they're increasing share of spend into. But obviously, there's a lot of -- with new (inaudible) is restructured, there should be a lot of need for process control intensity. So just talk about your confidence in that? And then does it matter if we have one, two, or three customers that are doing kind of gate-all-around backside power?

Question: Joseph Moore - Morgan Stanley - Analyst : But feel free to not answer this if it's not comfortable, but it seems to me that the projection is that one customer is driving the lion's share of it and the other two maybe upside if they come back and start investing? Is that kind of the right?

Question: Joseph Moore - Morgan Stanley - Analyst : Great. And then looking at into -- from your main customers' perspective, really interesting that compared to the last couple of nodes, where one or two big customers were the pipe cleaner for that. There's a whole bunch of people that are using into relatively quickly. So there should be more design starts, more diversity of product that runs through there. Seems like that should also be good for you guys from a process control standpoint?

Question: Joseph Moore - Morgan Stanley - Analyst : That's helpful. Can you talk a little bit about Rapidus? It seems like there's pilot lines ramping up there, pretty high potential spending plans. Can you talk about your relationship with them? Does Rapidus being the Japanese-sponsored project?

Question: Joseph Moore - Morgan Stanley - Analyst : You mentioned China restrictions. Can you talk to the restrictions that you've put in place around the government decisions next year -- or last year, I should say. And then moving forward, I'm not going to ask you to prognosticate exactly what happens, but how do you navigate the potential uncertainty of new rules, new tariffs, things like that?

Question: Joseph Moore - Morgan Stanley - Analyst : Helpful. Your RPO declined last quarter quite a bit. And the RPO for beyond 12 months declined. Can you just talk to what's going on there?

Question: Joseph Moore - Morgan Stanley - Analyst : Yes, just on the longer-term RPO.

Question: Joseph Moore - Morgan Stanley - Analyst : And does your lead time commensurate with that? Or have you seen lead times -- you've been able to bring lead times in as these supply chain issues have gotten more (inaudible) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 6:00PM, KLAC.OQ - KLA Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Joseph Moore - Morgan Stanley - Analyst : Okay. And then can you give us an update on the services business? You mentioned there was a China impact there, but otherwise, pretty consistent growth.

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Let me open it up to the audience for questions. I have more questions if we don't have any. One in the back. Unidentified Participant I have a softball question, which is -- so we hear a lot about how pretty much everything is good for more process control spending. You go to new nodes, you add new innovations, you want more EUV, it's good for process control. Is there anything that's in the road map that is neutral to process control spending? Or it's just sort of not affecting the outcome for you guys or even a little negative? . REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 6:00PM, KLAC.OQ - KLA Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Joseph Moore - Morgan Stanley - Analyst : Any other questions? Maybe if you could talk to the question of competition in optical? It comes up from time to time. Some of your competitors talk about growth in optical from small levels. Anything to note there? Obviously, KLA remains quite dominant in these markets.

Question: Joseph Moore - Morgan Stanley - Analyst : And we were talking in the hall about entity list customers that cannot buy US tools moving to Chinese tools where applicable. Is there anything they can do in the inspection roam?

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Well, that brings us to the end of our time. Thank you so much. Appreciate it. .