At the 2021q4 performance briefing, KLA showed that the company achieved record financial performance, profitability and free cash flow growth in December quarter and calendar year 2021, and set a record of revenue growth for the sixth consecutive year. We see extensive and strong demand in the field of optical detection products. Among them, the growth rate of wafer measurement system sales revenue in calendar year 2021 far exceeds that of WFE, becoming one of the fastest growing fields of WFE. The WFE market is expected to grow by 15% – 20% to US $100 billion in 2022.
Core content of the meeting
The business performance of 2021 calendar year is beautiful, and there are abundant orders on hand. Kla2021’s annual revenue increased by 34% to US $8.2 billion, which is the sixth consecutive year of revenue growth. Strong revenue growth includes 46% sales revenue growth of semiconductor process control system and 14% related service revenue (including more than 75% recurring contract revenue); The EPC inspection business increased by 20%, including the special process semiconductor process control branch increased by 11%, and the PCB, display and Component Inspection Branch increased by 17%. Over the calendar year 2021, operating profit and EPS increased by 54% and 61% respectively, and free cash flow increased by 43%, reaching a record $2.5 billion. KLA said that the orders on hand are extremely strong, and the industry demand is expected to continue to grow driven by the trend of economic digitization.
WFE is expected to grow strongly again by 15% – 20% to US $100 billion in calendar year 2022, and the quarterly revenue in March will be at a low level in the year due to the impact of supply shortage. KLA said that digital transformation is becoming a long-term demand driver of the industry, and the demand for advanced memory and logic devices, new processes and increasingly complex advanced packaging and PCB technologies is increasing. It is expected that the industry growth momentum of all terminal markets will promote the growth of WFE in 2022, of which the strongest growth comes from foundry / logic customers, and the memory investment will be led by 3dnand, However, it is still limited by the shortage of parts supply. The company expects that the shortage of parts has spread from key parts to a wider range. The delayed delivery of multiple parts will reduce the revenue in March quarter by 8% – 10%, and the revenue in March 2022 is expected to be the lowest in the whole year.
The demand for optical inspection product portfolio is strong, and the process evolution will bring more demand for wafer measurement system. The sales revenue of wafer measurement system in kla2021 calendar year increased by 54%, far exceeding the 40% growth rate estimated by WFE market, and it is one of the fastest growing fields. The company shows that the demand for wafer detection systems including wide spectrum plasma pattern wafer defect detection, patterned wafer detection, bare wafer detection, macro inspection and electron beam wafer defect detection is growing strongly. It is believed that in the future, GAA, EUV, high aspect ratio and other technologies will greatly improve the difficulty of measurement and the maintenance of measurement control intensity, Will usher in a higher level of measurement demand.
Order visibility sees 2023. At present, the company’s equipment supply is slowing down, but the project order delivery recently discussed by the company’s customers will mainly fall into 2023 and beyond. The major projects that have been announced are those in calendar year 2023. The company does have a good visibility from the end of calendar year 2022 to the first half of calendar year 2023, and the demand will continue to support the company’s business. The company has plenty of orders in hand, and the company is booking the parts required by 2023 for customers in advance.
GAA measurement faces new challenges of new materials and engraving alignment technology. GAA uses many different materials, so it will produce different contrast challenges; The other is exposure alignment technology, which faces new challenges in every device technology.
Investment advice
Recommended semiconductor equipment sector, recommended combination: shengmei Shanghai, Wuhan Jingce Electronic Group Co.Ltd(300567) , Advanced Micro-Fabrication Equipment Inc.China(688012) , Naura Technology Group Co.Ltd(002371) , Shanghai Wanye Enterprises Co.Ltd(600641) , Kingsemi Co.Ltd(688037) , Hangzhou Chang Chuan Technology Co.Ltd(300604) , Beijing Huafeng Test & Control Technology Co.Ltd(688200) , Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) ;
Recommended semiconductor parts and components, recommended combination: Shanghai Wanye Enterprises Co.Ltd(600641) , Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) ; Suggestions: Kunshan Kinglai Hygienic Materials Co.Ltd(300260) , Thinkon Semiconductor Jinzhou Corp(688233) , Konfoong Materials International Co.Ltd(300666)
Main risks of rating
The uncertainty of geopolitical friction; Uncertainty of parts supply chain security.
