KLA's Positive Outlook for 2023: Technology Transitions and Market Growth
2023-08-01
Technical difficulties did not deter the company from holding a call meeting to discuss financial earnings and address investor and analyst questions. Despite the challenges, the participants provided valuable insights and analysis.
One of the most interesting topics discussed during the meeting was the potential outperformance of KLA in 2023. Both the CEO and CFO shed light on the factors that could contribute to the company's growth. The CEO emphasized the impact of technology transitions, such as gate all around, on the demand for metrology. This suggests that KLA's focus on technology advancement and development will play a crucial role in driving its success. Additionally, the CEO mentioned that a part of the business is tied to capacity, indicating that market growth and deferred revenue also contribute to KLA's performance. The CFO stated that their outlook for the year remains largely unchanged, except for some capex reductions announced by customers. Overall, the discussion highlighted the importance of metrology and technology transitions in driving KLA's growth and the company's positive outlook for 2023.
The market outlook for the company is positive, with strong growth expected in 2022. The adoption of EUV and Deep UV systems is driving this growth, as indicated by ASML's results. The CEO believes that technology transitions, such as gate all around, will further drive growth in metrology. However, the business is also tied to capacity, which can fluctuate. The overall view of the wafer fab equipment market has not changed significantly, with a projected decline of 20%. The company had a strong Q4 but experienced marginal weakness in the March quarter. Despite some news of capex reductions, the market outlook remains consistent with previous expectations.
The key drivers of the business discussed in the meeting are growth, consistent operational excellence, differentiation across diverse product and services offering, sustained technology leadership, consistent industry-leading financial performance, and growing capital returns to shareholders.
In terms of product and service plans, the company acknowledged the declining overall market for some product lines but expects them to continue performing relatively well for some time. They also plan to invest in more advanced nodes for their products and anticipate a decrease in wafer starts if demand for their seven-nanometer capacity falls off. In terms of services, they expect mid- to high single-digit growth overall, with a focus on running the installed base to support existing equipment.
The competitive landscape in the industry is evolving in several ways. One aspect is the strong growth in patterning, particularly driven by the adoption of EUV and Deep UV systems. ASML is experiencing strong results in this area. Technology transitions, such as gate all around, are also driving the demand for metrology solutions. Companies like KLA are expected to perform well in terms of metrology and overlay-related advancements. However, the metrology business is tied to capacity, which introduces some variability. Overall, it is anticipated that KLA will continue to be competitive.
The company's outlook for the quarter and year is positive. They experienced strength in the previous quarter and resolved supply chain issues. They aim to meet customer requirements and reduce operating expenses. By the end of the year, they expect a quarterly run rate of around $530 million to $535 million. The company is taking actions to address challenges in the factories and will assess the appropriateness of their current level based on future performance.
The call meeting included participants such as Kevin Kessel, Vice President of Investor Relations and Market Analytics, Rick Wallace, Chief Executive Officer, Bren Higgins, Chief Financial Officer, and several analysts from prominent financial institutions. Despite the technical difficulties, the diverse group of participants provided valuable insights and analysis, contributing to a fruitful discussion on the company's earnings.