KLA (KLAC) Wells Fargo 8th Annual TMT Summit summary

China export controls and business impact

• New U.S. export controls for China are expected to reduce 2025 revenue by about $500 million, with a 70/30 split between systems and services.

• Overall China business is projected to decline in the low 20% range year-over-year, with revenue mix shifting from around 40% to the high 20s percentile.

• Licensing inefficiencies and supply constraints could affect the final impact, but guidance for the December quarter remains unchanged.

• Pull-ins from 2026 and more efficient licensing could mitigate some of the negative effects.

• Further updates will be provided at the next earnings call.

Industry trends and growth drivers

• Leading-edge investments, especially the N2 node and high bandwidth memory, are driving significant business growth into 2025.

• Advanced packaging revenue is expected to grow from $300 million in 2023 to over $750 million in 2025.

• Long-term industry growth is seen as end-market driven, with semiconductor revenue growth projected above 7%.

• Capital intensity is rising, favoring process control, especially in logic and foundry segments.

• Process control markets where the company is strong are growing faster than the overall market.

Technology and product positioning

• The shift to two-nanometer (N2) gate-all-around architecture increases process control intensity and market share.

• More design starts at N2 compared to previous nodes, driven by high-performance computing and power efficiency.

• High bandwidth memory and advanced packaging require higher sampling rates and more complex inspection, boosting demand.

• Reticle inspection demand is stable but expected to grow faster than the overall market due to increased design activity.

• Less reuse in process control at N2, with expectations for N2 to be the largest node in design starts.