All right, let's go ahead and get started. So I'm Joe Quatrochi , the SemiCap analyst here for Wells Fargo. Excited to have KLA here this morning, CFO Bren Higgins, as well as Brian Lorig, the EVP of Global Support and Services, to discuss KLA's services business, which is something that we think is, you know, an underappreciated part of SemiCap and as well as KLA's business. So maybe first, let's pick on Bren for a little bit, ask a few questions and then we'll kind of move the discussion to Brian and talk more broadly about the services business.
You know, Bren, let's start. You know, you guys just reported earnings a few weeks ago, but you know, 2024 outlook, kind of, you know, maybe help us understand the demand visibility looking into next year, and talk about just the different drivers of demand, you know, how you're thinking about recovery and leading-edge foundry logic, stability of domestic China, memory, et cetera.
Mm-hmm. Okay. So thank you for having us, and really happy to have Brian with us today. I've been getting a lot more investor interest in the service business of KLA. I believe it's pretty differentiating relative to the other peers in the industry for very specific reasons, and so hopefully we'll get into some of that and shed some more information and light on what's a really compelling part of KLA. As far as the overall market, we talked about a demand environment that was more or less stabilizing here, and we've been saying that for a couple of quarters. We've been at slightly higher levels.
You know, when we first started, you know, in the June quarter, we were roughly $2.25 billion when we came out with that commentary, and we just guided $2.45 billion. So it's been a little bit higher, but generally, across the industry, you know, we've seen, you know, different mixes of different customers and different customer types, but generally operating about this level of business. And our commentary was more that, you know, we don't really see things changing all that much in the first half of 2024. So while it doesn't seem like it's, you know, getting any worse, it's not clear where we would expect to see a meaningful resumption and sustainable demand growth.
2023 has been an interesting year in that it's been a little bit of a confusing one in terms of some of the supply chain challenges in 2022 and how that affected 2022 performance for a lot of companies, but also, the 2023 WFE, where there was some recognition of some of the revenue that probably shipped, or at least portions of it shipped last year that shows up this year. So aligning on what that number is for this year is less clear. We talked about 80-ish, $80 billion so . It could be $85 billion when all shakes out, based on the most recent views of performance and guidance. If you look at—you go back to the beginning of the year, what did we think?
We thought that, you know, memory would be weak, and it has been weak. We had a little bit of upside that we saw in China, related to some clarifications around technology thresholds for DRAM there. So that was a factor that was positive, but in general, it's been weaker than we expected earlier in the year. We thought there might be slightly higher than where we ended up, and then we had this other benefit. I think the Leading Edge has been worse. We've seen project timelines generally hold, but capacity adjustments. So, you know, customers are continuing to do roadmaps and do tech development work, but in terms of the capacity plans have been moderated, and so that's been a downside factor this year.
The legacy parts of the market have been stronger, both China and non-China. I'm sure we'll talk a little bit more about China. Some of the business and legacy overall is really that, that the slots have now become available in 2021 and 2022. Our largest customers, most strategic customers, consumed most of the supply that we had. Demand was very strong, and so while we had orders, we were prioritizing in a way to support, you know, our best customers, to support the industry, because it was important to support those customers that were providing semiconductor to us and to our peers, 'cause ultimately, if they can't get other tools, they're not going to take ours. And so we were, we were prioritizing those ways.
So this year, as we've seen some of those adjustments, we've seen some of that business now pull forward, and we've shipped against it. So normally, KLA is, you know, 75% of our business tends to be in logic foundry, tends to be Leading Edge, and this year it's been meaningfully less than that. Which is interesting that how it's affected our relative performance, because normally you would think with that carryover effect, which didn't really affect us this year, but also less investment to Leading Edge, the fact that we think we're gonna be at least in line with the industry, maybe better, I think is a testament to some of the changing requirements and demand that's happening in the legacy nodes.
So we've seen that improve, both, like I said, in China and non-China. And then finally, we benefited from... and I don't know if this was fully known by investors, but we do participate in what we call the infrastructure part of the market, where customers are doing silicon wafers, and we're a meaningful part of the CapEx for silicon wafers, but also for reticles. And so both in China but outside of China, there's been investment supporting those parts of the industry, and we have a very strong position and we're a meaningful part of the CapEx, and so that's been a nice upside factor for us in 2023 as well.
So, I think as we look forward into 2024, we're, I think, encouraged by what we're hearing from customers, in terms of improvements in their business. On the logic foundry side, the Leading Edge, we've seen utilizations improve. Memory, not so much, so we'll see how that, how that plays out over time, but expect to see those improve as we go through 2024. And, you know, I think there's some of those adjustments that happened on the Leading Edge in 2023, hopefully we'll start to see that show up in, in 2024 as well. But at least through the first half, based on, on what we see today, I think it looks pretty, pretty consistent with where we're currently operating.
Yeah. So, well, and I think, you know, one of the things I've been continuing to be surprised, or just kind of trying to maybe reconcile, you know, your, your lead times still for optical inspection tools are very long, right? And so, I mean, how do you, when you think about the second half, I'm not asking you to guide the second half of 2024, but, like, when you think about looking in the second half of 2024, but given those lead times, you know, and where your RPO or backlog is today, like, do you need to see, like, a very material kind of re-acceleration of bookings to, to think about growth in that second half or for the full year of 2024? I guess, how do you think about lead times kind of factoring into that and the backlog?
Well, so if you look at the backlog, it's at an elevated level, but you have to segment it a bit. I mean, there's a lot of backlog that's tied to some of these projects, these legacy projects in China, and you've got a lot of new customers, and these new customers have to, you know, give us orders that tie to greenfield project schedules for new factories. But also have to, you know, perform as new customers to get, you know, commitments from us in terms of resource allocation slots and so on. So, they give us orders, they give us deposits and that. So that's a portion of it.
Then there are portions of the backlog that are tied to things like optical inspection, where we have a fundamental, particularly around our Gen 4 product, imbalance between what the market demands and our ability to supply. And the ability to add certain kind of optics components to add that capacity, it takes a very long time. There's equipment that's required, there's facilities, there's automation, there's a lot of training. In this case, there's one supplier in the world that does this effectively. And so, it is something that will just take some time. I would expect. I would clearly have shipped more this year and if I had the supply, and I do have more coming on next year, so I do have some confidence in growth in that business next year.
I still look at, you know, how much backlog we have and how much capacity, and I think there's another increment that's ultimately going to be required as we move out over the next couple of years or so. I expect that to continue to be strong. There's been a lot of demand for products that support the legacy markets. Some of our, you know, call it our N minus one or N minus two products. And so, we've seen some shortages there, and so we've taken supply chain from, you know, a very low level for a while and then ramping them up. It's hard to restart, and so we've got some supply and balance there.
And then finally, the reticle and wafer industries, again, as those have ramped and what those are driving in terms of the product types, that has also put some pressure. So there, there's the classic capacity parts of the backlog, where we got capacity orders. Those have some fluidity to them. Customers can push that and move those around. Those are tied to, you know, process tool schedules, film measurement tools. If you've got to take the films tools-
Yeah, yep.
You don't need the films tools, you don't really need the measurement tools. So they behave like capacity products in some ways. So those areas are a little softer, but in some of these other areas, firmer and decent visibility. Orders tend to be lumpy, and, you know, I think it's an indicator in some ways, over time, over multiple quarters, of kind of the current view of the market and the urgency in the market. So I think, you know, as I look forward and start to see some of that, you know, maybe that'll be more of an indicator of confidence of some improvement as we get into the second half and so on.
But right now, we've been consuming about $500 million or so of backlog per quarter for the last year or so. I think that trend probably continues. But, you know, we got some big energies too, so orders can be lumpy because you don't have that many customers, but also when you have tools with ASPs that approach $20 million, then depending on those schedules, it can skew those numbers a bit.
Yeah, that's helpful. Maybe just kind of one last question, and we'll, then we'll shift to services. You know, maybe a year ago, roughly, a little over a year ago, you had an Analyst Day, talk about, you know, 2026 target model. If WFE is flat in '2024, you know, obviously we're down this year, how do you think about, like, just the trajectory to hit that target model and your confidence level?
Yeah, my confidence level is pretty good, and I took our board through this about a month ago at our board meeting. And then if you look at just historically, you go back and say, "Okay, where were down years of WFE and how much growth had to happen between the down year plus three years," right? And if you look at to enable the WFE number, we think that makes that target model possible, $14 billion ± $500 million in revenue, it would require the industry to grow about 15%. Well, 2019-2022, the industry grew over 20%. So I think we're in position, given the investments we made over the last few years in supply chain to scale the business, I think we're in position.
I'm not worried about being able to scale at those kind of growth rates. So, we've adjusted the WFE number. There are two kind of key assumptions. If you back up and look at the broader assumptions, is that semiconductor revenue grows 6%-7% online, with this trajectory to $1 trillion by 2030. The capital intensity will rise and grow a little bit faster than overall semiconductor revenue. That because of the mix of business being more logic foundry-centric, that would drive process control to probably grow a little bit faster, because process control intensity is higher in logic foundry versus memory. And then, if you look at where we expect the markets to inflect around things like optical inspection and our relative position in those markets, that creates an opportunity for KLA to grow a little faster than that.
Service will grow 12%-14%. Brian will talk about that. And our EPC business will grow somewhere in the high single digits or so. We took a little bit of a haircut on the WFE number because of some of the export control dynamics that have materialized over the last 18 months, but our share of WFE is also higher. I think we're ahead of our plans in terms of expectations about our share of market. And if you look at some of the drivers, AI-like drivers, that will materialize over the next few years as it becomes a bigger component of capacity, that those tend to play to KLA's strengths in terms of larger die, more complexity at the Leading Edge, more value in those die, higher defect densities, which affect the yield, with larger chips.
All those are, I think, positive factors that drive higher levels of sampling and play to more process control, and particularly process control around some of KLA's key products.
Perfect. Maybe let's shift gears a little bit to the services. You know, Brian, just let's frame the discussion. You know, maybe can you first just give us some key metrics, statistics, or just kind of an overview of the services business and just kind of what, what is made up of, you know, that organization?
Yeah. Yeah, thanks, Joe, and thanks for having me today. So yeah, our services business is first off a customer-focused organization. You know, we're an integral part of our customers' fab operations, so we get an opportunity to earn a lot of business. We make up about 23% of KLA's overall revenue, and it's a very predictable, durable revenue stream. Part of the reason is because more than 75% of that revenue comes from subscription-like service contracts. Those service contracts, the average duration is greater than three years, and we have about a 95% renewal rate. So it's a very sticky business, and one that, you know, provides a lot of value for our customers and one that's a great business for KLA.
Perfect. You know, I think at a kind of broad level, right, people think about services as kind of, you know, maintenance or break- fix, replacement of spare parts. But can you help us kind of understand... Your tools are a little bit different than, say, like a chamber-based tool from Applied or, or Lam, you know, the services that you provide for, for your customers and just kind of how that's different than maybe the kind of traditional break- fix.
Yeah, absolutely. I think the best way to think about it is through our Install Base, the makeup of our Install Base. We've got more than 48,000 tools, and we're a little different than some of our process peers in that we're a high mix, high complexity, relatively low volume or lower redundancy, and long-lived Install Base. So if we kind of double-click on that, from a high mix perspective, if you were to go into one of our customer fabs, you'd see all our peer tools, and many of those would be the same chambers, and you'd see many, many KLA tools, you know, white panels with purple stripes that all look the same. But if you look up at the product name, you'd see, you know, more than a dozen different product lines.
And if you look inside of those product lines, we have more than a dozen products inside every one of those product lines. So it's a very, very high mix, which creates, you know, a challenge when you think about idling some of that equipment in a lower utilization environment. And that's where you get to this lower relative volume or lower redundancy. You get thousands of chambers, utilization goes down. I can idle some of that equipment when my wafer starts to reduce. When you're talking about inspection and metrology equipment, you don't have that many of any given product inside the fab, and so the ability to actually idle that equipment, even when wafer starts to decrease, is very challenging.
One, because your yield is always, has an ROI, and so even in down markets, you're still trying to improve your yield. You may increase your sampling rate to utilize that tool. But then again, the other part is, again, I don't have redundancy. There isn't another tool to you know, move some of that production to. So this mix and lower redundancy is a big component. The complexity piece, you know, as our customers continue to push technology, our tools are getting more and more complex. That means the need for more and more specialized labor to support those tools, as well as all the subassemblies, hardware required to keep the tools running, and those are, again, very specialized subassemblies that we supply.
So the complexity piece, and then this long-lived piece, you know, we have tools that are in the install base that have been out there for more than 30 years. And so, and our tools, they continue to provide a long, long value for our customers. And so this creates another characteristic of our install base. And so you push all those together, and it's, it's a very different model than, than some of our peer companies, where it's a little more volume-based. And that's why we're able to, to maintain, you know, growth in a, in a down, down year like this.
In fact, we've only had one down year since the, as far as I went back, was KLA-Tencor merger in the late 1990s.
Yeah.
That was in 2009, and even in that year, it was only down a little over 10%. So it tends to be resilient in downturns because customers, even though they'll lower their utilizations, they tend to keep utilizations higher for the reasons Brian talked about. And when capital is tight, the best thing they can do is drive higher yields. They don't want to start any more wafers. They don't want to commit any more capital to inventory than they need to, to meet their customer requirements. So sampling tends to pick up, and the demands on our tools are pretty high. They don't have many. They have high uptime expectations. They have to keep the tools up 90% more of the time.
They have to match performance across the different tools in terms of what we're identifying on the wafer, whether it's measurements or defects. So, really hard for the customer to manage all that on their own and do self-service. We don't really sell consumables. And so, and then there's all the complexity in the parts and the ability to procure those parts that we have a pretty tight grip around. And so I think for all those reasons, it tends to drive some resiliency in the model, and customers tend to buy the contract. "I don't want to deal with it, you guys take it," and we have to perform against, you know, against whatever entitlement that gets established, which we can then customize.
So it's an important aspect of KLA, and it carries a nice profit stream as well. It has a predictability to it. It certainly has been a factor over time, that has influenced how we think about the capital structure of the company, how we think about capital allocation, to have this very solid, predictable business, 75%, that's subscription-based, that we can then optimize cost structure underneath, and deliver a profit stream in a pretty predictable way.
Yeah. I mean, Bren, I assume that you obviously don't just disclose the profitability, but fair to assume that that profitability of that business is fairly mapped with, like, your dividend?
Yeah. Yes.
Yeah.
With dividend and debt service, more or less.
Yeah. Yeah. Yeah, I mean, you know, next year, you guys have talked about the re-acceleration of growth, you know, back towards the long-term growth of the 12%-14% range. Can you just kind of maybe, like, list or talk about the different drivers of... Like, what, what's driving that re-acceleration of revenue growth looking at next year?
Yeah, so, you know, we're going to finish up 2023 with high single digits growth on the business, which again, you know, is we think pretty good performance given the down WFE year. And that's primarily because our service business really isn't a WFE business, much more of a tied to revenue, semi-revenue, and OpEx budgets. So high single digits this year, we think we return to the 12%-14% in 2024 and beyond. And really three big components. One is, of course, install base growth. Our service business does grow faster than our install base. We had the huge years in 2021 and 2022, and even this year, healthy install base growth.
So we see, you know, continued opportunities to service our new tools, which, again, with the increased complexity, is increased service intensity. Then we have this long-lived aspect that I talked about, about the existing install base and the fact that many of our tools don't retire. So you don't see a falloff. While you're adding new, you don't see a falloff of the existing. And that's partly driven by the continued demand and legacy. So we have tools out there, as I said, 30 years, many 10 or 20 years old. Our customers have long depreciated those assets, and so they're, it's really good ROI for them. We have dedicated engineering teams that work on engineering obsolescence solutions and/or performance improvements on some of that older equipment.
So there's definitely a value creation there that we share with our customers. So that's a growth driver for us. And then last is sort of just value services. And there are lots of aspects to the value services. Bren mentioned, you know, our mission and goal alignment with customers is to help maximize the value of their asset. They spend millions, millions, and millions of dollars on our tools. The only way that it works is if it's available predictably, and if it is at performance levels. And so if you think about those, you know, on two axes, you know, there's lots of different potential combinations of different availability levels and different performance levels, depending on our customer's use case.
And so we can tailor offerings for each one of those, in order to meet our customers' needs, and ultimately drive, again, you know, increased value.
That's perfect. Kind of along that line, I mean, you know, the analyst community, you know, investors are obviously very focused on the increased capital intensity of just equipment right across WFE. What about the services intensity? You know, talk about... Can you talk about just the rising cost and the increasing importance of inspection, of just how your customers are approaching that relative to maybe 10 years ago?
Yeah, I think there are a couple of drivers specifically for service intensity. One is just the complexity. And so with that complexity increase, both on the customer's operations as well as on our tool, that means they're going to lean more heavily on our service to ensure that those tools are available. So that means shipping the tools on time, getting them installed on time, qualifying them, getting them into production, and maintaining them in production. And then you also have this other driver around this geographic expansion. And, you know, when you start to build fabs in new locations, it puts a lot of pressure on our customers' operations, where they don't have that ecosystem inside of their home country.
They're now depending on us in a much larger way to ensure that we bring up those that factory initially and then maintain it as they continue to add wafer starts. I think all that creates an opportunity for us to continue to increase service intensity as we look forward.
Yeah, there's definitely a new value vector on this regionalization dynamic as customers are building fabs in different parts of the world, is that for scaled players and the ability to have the infrastructure to support at the same levels, no matter where you are. I think it's a competitive advantage. Also, with the team spread out, I think there's an opportunity for them to rely on us more to help, and that's a service statement, but it's also an application statement. We have about 1,300, you know, engineers, in some cases have PhDs, that are out working with customers in fabs every day to drive and deliver value out of the tools, recipe optimization, and so on.
So that, coupled with service, provides that infrastructure that should be a benefit to us moving forward in the form of, you know, more value opportunities within service, but also potentially share overall. So we're encouraged by. Look, I think there's a lot of. In the. At the end of the day, supply-demand over time generally gets balanced, but there's probably some inefficiency that goes with the broader footprint and trying to manage across it.
You know, we deal with our own versions of that within the company, but then also, there's opportunities in this area as well that we haven't even really. We're probably investing in a little bit today to get ready for it, and having to make those calls and when to make them, given training lead times and so on, is a challenge, but I think that's still to come in terms of an opportunity out there for us.
I mean, in that vein, maybe, like, how do you think about... I think one of the things I'm—when I think about the regionalization of, you know, chip production capacity, the battle for talent, right? Of, you know, there's only so many potential, you know, STEM workers, right? That—how do you think about, you know, that competition for just getting more service engineers?
Yeah, certainly a challenge, especially when we go into some of these new regions. I mean, fortunately for KLA, once we acquire the talent, we have a very, very high retention rate, because it is a little more of a—you're more of a system engineer servicing our equipment than you are just tactical replacement of maybe repetitive tasks, consumable parts, and so on. So we don't necessarily create holes for ourselves. And then, just trying to, again, market the fact that we do have this, you know, it's a little bit of a different service model, and you get to work on more challenging problems, and this high-mix, high-complexity component can create some attraction. But it's certainly a challenge for us, and one that we work on.
We go early, so when our customers announce, and that requires a lot of investment, we look at all this geographic expansion, we have to invest early, like, about the same time that our customers are placing POs for new equipment. We have to be thinking about: How do we set up the depot? How do we ensure that we've got the supply chain? How do we make sure that we've hired and trained people? And so, you know, being early on also helps ensuring that we acquire the appropriate talent to support the customers.
You even move people to... from the home country to seed the team and both from a capability culture point of view, and that provides some comfort to the customer as well, that, you know, familiar faces in, in terms of, you know, how we're ramping it. But it's a, it's, it's a fundamental aspect of the operating model of KLA, and Brian and I, every six weeks, we, we review headcount plans and where fabs are and where capacity plans are, and contract rates and utilization by individuals and tools, and we, we try to make these decisions and, and get the recs out so we can, you know, have as much lead time as we can. Training lead times are, are, are at least a year in some cases, and, and, and a lot of cases longer. Our engineers tend to support one type of tool.
They don't service all K- I'm a KLA engineer, service all the metrology. Nope. It's, you know, it's the overlay tools or it's the film measurement tools. So, the requirements are higher, which, you know, is interesting to certain people, but it also makes it more challenging because there aren't as many of them out there, to your point.
Well, we've got a few minutes left, and I don't think you thought you were going to get out of here without at least one question on China. Maybe, you know, everyone, right, the investor question that I constantly am getting is the sustainability looking into next year. Obviously, like, we're, you know, spending a lot of money there now, adding capacity. How do you think about the sustainability of that investment, the real actual value that's being added there in terms of, you know, building out that semiconductor industry? And just how do you think about that opportunity looking into next year and even beyond?
Yeah, it's not a question. I haven't been getting it in my meetings. But you know, when you look at it, like I said earlier, when we were talking about, you know, backlog and deposits and so on, is that, you know, there's a lot of this business that's been in the queue for some period of time, and we're shipping it now. When you break it down, there's a portion of it that's memory, and there's a portion of it that I'll call established legacy provider, that's... But the China providers aren't much different than the non-China providers in that realm. There's the infrastructure investment that I mentioned.
And in China, that's been an important. It's been a real bottleneck and choke point to be able to get wafers through the growth period of 2020 through 2022. A lot of long-term contracts from the wafer providers with other customers. And so in terms of self-sufficiency and to be vertically integrated wafer was a challenging area, and so there's been investments there, for the domestic requirements, but also to support the export economy for electronics. Reticle in the same realm.
Most of our customers, you know, larger customers, have captive mask shops where they make their reticles, and if these customers would have to buy from the merchants, and the merchants were, you know, haven't invested a lot over the years, so I think there were some shortages there from the merchant mask providers in Japan and the U.S. provider as well. So, a desire to kind of control your own destiny a bit, and so that investment's been happening, and we're a meaningful part of that CapEx. And it's for legacy designs, but every design has multiple reticle sets, and there's, you know, a lot of 30+ reticles in every set, and so it is a demand area that needs to be addressed.
Then you have a number of projects that are a lot of new customers spread around the world, where you have, and some of them are silicon carbide, some are silicon, where you have customers that have funding and different arrangements, either central or regional, and are developing R&D and some amount of production, trying to prove out a process, develop, start somewhere, capability, demonstrate credibility with customers, and slowly sort of, you know, engage and start to move forward to be able to provide supply. Not providing a lot of supply today, but are starting that process. And that it takes time, and R&D always continues, and there's a desire to keep moving forward, so I would expect that to continue.
So when you back up, and you look at the demand that we have in terms of the backlog, you look at the deposits. I feel like when I look at 2024, and, and this may be a little bit more specific to KLA, is I see the numbers generally being sort of flattish overall. And maybe the infrastructure piece is something that gives me a little more confidence than maybe some of my peers, because I've heard some different numbers from others.
Yeah.
Now, over time, I would expect, you know, there's always rationalization. Supply, demand generally aligns. Things will be milestone based. The next rounds of fundings will be based on milestones and return expectations, even if return expectations are lower. So I think we'll see over time, we'll see how this plays out, but at least as I see it into next year, I don't see it falling off all that much. They're all greenfield, so they tend to buy a lot of process control, because even if you're running very limited production, you tend to manage the process very tightly. You need the whole suite of products, even if you only have a few of certain process tools, because you're not really doing a lot of production.
So we tend to participate, like we do everywhere, more in R&D and volume ramps and in mature production, a little less so, although that's changing as more and more designs kind of are in production, more process flows, and so on. So that could be a factor as well. That's sort of KLA unique. But I don't, you know, at least as far as next year, I just don't see it changing all that much. Construction schedules notwithstanding, right?
Yeah.
Anyone who's built a home or something like that knows that construction schedules can move around. I mean, that could be a factor because there are a lot of greenfield projects, but generally, as a general case, I feel like it looks pretty flat as a baseline to me.
You know, is the risk more fab readiness? Something that was brought up in a few meetings yesterday was more also consolidation of, we kind of have, you know, almost a VC approach, right, of a lot of guys trying to do the same thing, that eventually maybe they get kind of rolled up into a larger organization. Is that... How do you think about, like?
I mean, typically, that's kind of what you've seen. You've either seen that or ambitious plans that over time are moderated and adjusted based on performance and achievement and so... But I think it will take a while because there's a lot of this that's just starting up and will take some time before, you know, you can determine what success really looks like, right?
Yeah. Yeah. Brian, any sort of difference in the services, you know, attach rate or, or just intensity in China relative to the broader? I know obviously, over 75% are long-term contracts, so maybe not that much different, but how do you think about that?
Yeah, on all the key metrics, it's a little higher in China, simply because it's, you know, they're still very much in the learning phase. Generally, you know, sort of, we talked about that geographic expansion, that's what's happening in China. It's a new location every time, and so they're trying to ramp up, and so they certainly rely on us even more heavily. So it's a little better in each one of those metrics in China.
Perfect. Maybe in the minute we've got left, you know, Brian, when you take a step back, and you look at the KLA story, what do you think investors maybe don't appreciate enough? Obviously, we talked about services, but what do you think investors are missing from the story that we should be thinking about more that we don't?
Well, look, I think we've talked a lot about some of the opportunities moving forward, and we think we're encouraged by the demand drivers, the broad-based demand across semiconductor revenue. The investment that's happening and the competitive dynamics at the Leading Edge, which tends to drive our business. Dynamics around, you know, mix of Leading Edge, both, you know, from, you know, mobile that drives it, but you also, we believe, will have more of the AI drivers that will ultimately come in, and that will drive, you know, need for over time, more Leading Edge capacity sooner, which creates a, you know, an opportunity. There's unique attributes of those kinds of chips that are valuable to KLA. Services and the value that we add, I think we've got a proven business model, best in the industry.
We think we're in a position to scale it. We're excited about the opportunities we talked about earlier. We have a service business that's resilient. We think we finance the business in the right way. We put every dollar to work in terms of the capital we generate, and, you know, we think we're in a period of time with structural growth and leverage moving forward that's meaningfully different than it, you know, has been over the longer-term history of the company. So excited about all of it.
Perfect. Thanks for joining us.
Thank you for having us.