We're going get started. Thank you very much. I'm Tim Arcuri. I'm the semiconductor and semi equipment analyst and also cover Apple here at UBS.
Very pleased to have KLA here with us. KLA is one of my top ideas in semis. It's my top idea in semi cap sector. We made the case when we launched on KLA a year ago to differently and look at this stock as more of an industrial. And the cyclicality in the core semiconductor industry I think is going down.
I think as a company, you look at this, Orbotech deal, I think makes, KLA look a lot more like an industrial. So I'm very happy to have Rick Wallace here to talk about that. Rick is the Chairman and CEO, CEO and President of KLA. And Rick is going go through a slide deck and maybe have time for a question at the end. So thank you, Rick.
Thanks, Tim. Good morning, everyone. If somebody had told me when I started at KLA that one day I'd be presenting at an industrials conference, I'm not sure. I would have believed them nor thought it was a good idea. But now I do think it's a good idea, and I want to tell you why.
I'm obviously, I'm going to make some forward statements here covered by safe harbor. But I want to walk through a story about why you ought to think about KLA differently and why it's a great investment when you think of overall economic trends and the ability to generate cash and returns to shareholders. You're all familiar with this. And when I joined the semiconductor industry, it was really I hate to say it was kind of at the front of this chart, but what Silicon Valley was about then was one big idea and one theme. And what's happened over time is the semiconductor industry has turned into a fundamental industry driving technology and driving industry in general across the world.
And we're now we know in the data era, and I'm going to make the case today that fundamental to that is the work that we do at KLA. If you look at every industry that's going through transition now, we know about mobile and the ability for people to carry around all the information, also the data center and the ability to store and analyze that data. Automotive is going through a secular shift in terms of a technological change toward electrification. And I'm not even talking about autonomous vehicles, I'm talking about the semiconductor content and KLA's role in the automobile industry as that industry continues to evolve. And I'll make the case that the auto industry, as an example, isn't really growing, the semiconductor content and KLA's role in that continues to grow, and it's very good business.
Industry four point zero is something that will disrupt a lot of industries, and it's KLA is enabling that disruption. That's part of our role in that. Talking about artificial intelligence, we're both a consumer of and an enabler of artificial intelligence. And for KLA, it doesn't matter which architecture wins. We support the infrastructure of any of the players, and that's true across the board for all of these.
And lastly, five gs, think of fiber optics over the air. And again, we don't at KLA, it doesn't matter which provider wins, it just matters that, that trend continue. Every one of these industry trends is being enabled by semiconductors, whether it's the consumer electronics generating data or the Internet of Things. And those are all part of the ecosystem that we support. Storing of that data, whether it's in mechanical hard disk or it's in DRAM or NAND, so different kind of storage, again, enabled by KLA.
The data analytics and the artificial intelligence I touched on and then lastly, the wired and wireless infrastructure, all things that semiconductors are key to and we're part of that. Let me talk a little bit about KLA. We're over 40 years old. We started as a high-tech startup and have evolved to a company of about 5,000,000,000 in revenue, 10,000 employees worldwide. We do focus on the semiconductor process control and what that is, is the ability of our customers, the people that manufacture worldwide to get value to reduce the scrap rate out of manufacturing of semiconductors.
Semiconductors is the one industry in the world where people will build a facility and not necessarily get good product out of it right away. And what KLA does is enable people to do that. We also have a very strong services business. One of the things that wasn't envisioned when the company started was how long our systems would be deployed, how long. We have tools that we built thirty five years ago that are still in use, and we're gaining revenue off of those tools for servicing those because the longevity of these tools extends, which means we have a service business that's like an annuity.
It creates strong revenue. It's over $1,000,000,000 now, and it creates accretive cash flow to us. And in fact, it was this service business that a few years ago we looked at and said, if that were a business on its own, what would one do? You would put debt on it and you would pay a dividend from it based on the performance and the attributes of that business. The other thing I'll show is the geography.
80% of our business is outside The U. S. Or 90% is outside The U. S, 88%. 80% is in Asia.
And it doesn't really matter to us where in Asia that business happens because we have market share similar market share in every geography. And that's been true for twenty five years. KLA has been a net exporter for years. We know how to do that. One thing that we've, as an industry and as a company, learned how to do is compete globally and at high level of profitability and efficiency.
So if you look at our profitability or efficiency in every geo, it looks similar. The other thing that this says is The U. S, we're not very reliant, which means from a taxation standpoint, we get beneficial treatment on the tax code because of our export business. And that translates into cash and returning of cash. I'll talk about our market position with our customers.
It's not an accident. We invest heavily in innovation. As Tim said, the industry through diversification and maturation has turned far less cyclical. And so as a result, our revenues are more stable. We do have a culture that attracts high-tech talent, and we do that worldwide, and we have to do that worldwide because that's where the talent pool is today.
We have this focus on productivity and also driving success through continuing to reinvest. And then lastly, and very importantly, a return of cash to shareholders. And years ago, I was in my first Board meeting, I've been CEO for about fourteen, fifteen years, and one of our directors said, you guys seem to apologize about making generating cash. Don't apologize. Run this thing for cash and return that cash to shareholders.
And it was an interesting perspective because at that time in Silicon Valley, and this is mid-2000s, everybody was focused on growth and the next new thing. And this is where directors add value. He said, you guys generate a ton of cash, run this thing efficiently, don't chase growth, generate cash and return it to shareholders. And you'll get rewarded for that over the long period. And as you know, there are many companies that chase growth but don't get profitable.
And I'll show you some of the statistics we have. The reason I'm showing this is, as I'm not going to get into the specifics of what we do, but we inspect things, we measure things and we analyze that data. And this is KLA before our recent acquisition. The size of those is the market size, 3,500,000,000.0, 2,300,000,000.0 and so on. And this is a total of 6,500,000,000.0 of available served available market for KLA.
We have a large part of that. Every one of those boxes indicates that we're a market leader. So our philosophy in every segment is we want market leadership. We actually look for 2x the nearest rival. And in most of our segments, that's what we have.
And that's what we generate that drives our ability to generate R and D dollars to a virtuous cycle of differentiated performance, and that's why our operating margins are where they are. And those of you who don't know, this last year, our operating margins were in the upper 30s. And that's net of everything. We include share based comp in that. And we drive that performance because we have differentiated products in critical markets for our customers and we don't have to pick winners or losers in terms of who provides that capability.
So those are the three. And the thing to notice is if you go up and down, you get technology synergies. That's why we're in those different inspection businesses. And if you go left to right, you get go to market synergies. So those are the businesses that we leverage.
And I broke this into advanced semiconductor, specialty semiconductor and IT components. Advanced semiconductor, think Intel, the people that make the most challenging chips in the world. But that's only part of that market. So we that's where we started, and that's where a large part of our market. But the specialty semiconductor market is one that's of great interest to us.
That's the market that's supporting Internet of Things. That's the market that's supporting the automotive industry. That's a much more stable market in terms of the investment, and that's a growing market. It's not as big, but for us, it's a very important market, and it's part of where we see additional growth coming from in the future. This IC component, after you've made a circuit, you put it into a package and then you put it into a device.
That's also as of last year, that was a $200,000,000 opportunity for KLA. Part of the expansion with Orbotech that we did, as Tim mentioned, was to expand our footprint. And we did that both in the x axis and the y axis here, driving technology synergies and go to market synergies. So if you look across the top, nothing changes there. But in specialty semiconductor, we found inside of Orbitech, the market leader in providing the process capability for specialty semiconductors.
And that's a differentiated market where we have now with the acquisition high leverage in that market to support and I'll give you an example. We don't have to bet who wins the autonomous vehicle race or the electrification race. We provide in that market to all of them. So that's a growth market that drives a high degree of cash flow and profitability. We expanded our footprint in the integrated circuit taking those chips and then putting them across all these different industries with Orbotech.
And lastly, we added the display market. You can see green boxes around every one of those, which what how we analyze M and A is do they have a leading defensible position. And there's only one segment that we don't have a leading defensible position. So I'll tell you, we'll either get to a leading defensible position or we'll exit. That's what we do and that's what we've historically done.
We only want to compete in markets where we have market leadership. Of course, we're a global company. 31% of our footprint is in The U. S. When I started in this job, it was probably 70%.
So we've globalized as a company. We've spread out to be where customers are, but also to do development around the world. So let's talk about our performance. This is the system. So we sell hardware.
We sell hardware, which has a lot of software content in it. And this is what the systems business on which we drive service has done over the last several years. And you can see with the addition of Orbotech, we continued that growth rate in calendar twenty nineteen. So you've seen some stability back in the 2014, 2015 driven by growth and now additional growth through M and A. Equally impressive is the service business.
The CAGR, the long term growth of service, since February, our service business has averaged about 10%, and we've had one year one down year. Every year since then, since February, has been a growth year that's driving incremental. And the operating margins in our service business are similar to the overall operating margins. So when we originally talked about the dividend and talked about debt, it was based on our service business that we thought about. That's a business that's a recurring revenue.
I'd just like to get a SaaS multiple on that business because that is a subscription business that we have a differentiated performance and position in. And because of the nature of our tools, it is very hard for anybody to take that business. So once you bought that asset from us, because we make the spare parts for it, because we have the labor, because we have the knowledge, we own that business. And we can own it for thirty to forty years. We're getting automotive customers today asking us for guarantees of thirty years in terms of the equipment we're selling.
They want to have our ability. And I do the math and I say, okay, I'll service it in thirty years. We have done M and A. We've done a lot of M and A over the years. Most of the M and A has been tuck in and filling out our product portfolio.
Sometimes in market segments that the investment was risky, we let the M and A market leverage against that risk for us. So we let others develop it. And once it made sense, we'll acquire the asset and put it inside the company. There are two that I want to point out that are different. One, KLA Tencor in 1997, which was the biggest at that time, which combined this inspection row and measurement row.
That was that investment that we made in 1997. The most recent one is Orbotech, which expands us, as I showed before, into new markets. Every one of the businesses that we're in and we divisionalize our businesses to drive focus and excellence, But we look at the same thing. We look at enabling market success and we measure that on market share. Almost every one of our businesses, as I said, has 2x share of the nearest rival.
And we do that by driving this innovation to differentiate. So we have a machine, if you will, of driving innovation, new capability, new technology, heavy R and D investment to drive that competitive moat. Beyond that, we have to have the best talent in the world. And usually, when we engage, we can hire the best people because for the work that we do because we're market leaders. And we do that not just in California, but we've expanded that footprint worldwide, and I'll talk a little bit about that.
And we're constantly driving productivity, driving performance because ours is a deflationary market, which means we have to constantly get better and drive innovation, drive productivity for our customers. So I talk about market share dynamic. On in aggregate, we're ForEx, our nearest competitor over all regions. And this has been now I just showed this last ten years, but you could go back further. So in that has been disruptions, disruptions, geographical disruptions, customer disruptions and our market share has remained there, in spite of major efforts by competitors to break into this market.
We don't think this is an accident. We think it's because of our investment, because of our core level of knowledge of understanding and because our ability to continually drive innovation into the market. So we feel very good about our competitive positioning. And in any market that we are in, we do these same things. We drive this collaboration with customers to understand the problem that is coming, not the problem that they're solving today.
We look at how do you innovate to create new capabilities that they don't have and no one else can produce. And if it's not differentiated, we won't do it. If it's not something we can defend technically, we're a lot of engineers, and we don't want to win just on our customer relationships. We win because we have the best products that solve the problem. And then lastly, we execute.
We're a product development machine. And part of our thesis in acquisitions is we can take these disciplines and expand them through acquisition into new companies and drive them to better levels of performance, and we've now demonstrated that over the years. In terms of this R and D as a percentage, it's relatively high, but I'll show you our capital intensity is very low. And so our key is our talent and our innovation driving this R and D. We look to be two generations ahead of our competitors.
And the way we do that is I'll give you an example. We develop optical systems for these machines. Most people, when they have optical systems, go into an optics provider and get them to provide them an optics. I'll go and get a lens from someone. KLA has a design team, which designs the lenses.
We do that so that we can go to multiple providers and get the best performance at the lowest cost. And we do that because we have scale. None of our competitors have that kind of scale. So as a result, we have a built in advantage of our ability to differentiate because not only can we get the best design because we own the design, but we can also get the lowest cost and we can leverage multiple suppliers. There's one example where we went to a design shop, we had the original spec and then we drove it was $100,000 for an objective.
And at the end, we got it for 10,000 because we redesigned it, we went to a different supplier, we changed the materials that were in that to drive that differentiation. So we have a better product at a very low cost. And so for our competitors, that's very hard to compete with. So when you see our gross margin and our operating margins, we have a very defensible moat. Now you can see R and D over time comes down as revenue increases, but we're still committed to that heavy level of differentiation based on our R and D.
Now we drive efficiencies in R and D. Part of the way we do that is where we do the R and D. So for example, we are looking right now, it's the last line there. But Silicon Valley is an expensive place to do things. Our footprint is way down.
We bought a campus. We're developing. We have very close relationships at University of Michigan, and we are doing development there and we started hiring there. Coincidentally, that's where I went
to school.
And the access to the talent pool there if you think about the automotive industry and a lot of the subsystems that the automotive industry does, especially today, look a lot like some of the work that we do. Lasers, looking at mechanics, looking at robotics and now looking at plasma edge. So we, I believe, have an unfair advantage in our ability to attract talent at 30% less than what that talent costs elsewhere. Same talent, more productive. We do this in Wales.
It's another place we do development for our specialty semiconductor. That's probably 50% of the cost of the talent, and that's for our specialty semiconductor, very productive, low cost. So we spend a lot of time looking at getting the best talent, but also where we get that talent and then investing heavily in our ability to do that. I show our turnover rate here because people and I'm on other I'm familiar with other companies in Silicon Valley that have high turnover rates. We don't.
Our attrition rate is 4.5%. And in some disciplines, it's lower than that. And the reason is we do important work, people are intrigued when they get to work on ours, and we provide them road maps. We also promote from within. Our objective when I became CEO was 80% of our Vice President promotions would be from within.
It's about 85%. But occasionally, we go outside. We just hired a CISO, for example, so we took somebody that had experience in cybersecurity from other industry and brought her in because we wanted to expand our capabilities. I know there's a big push. We've been focused on corporate social responsibility for years.
And really, for kind of three reasons, it's shown we talked about sustainable environment. Look, we're in the business of making our customers more productive. And so if you can reduce the number of fabs you build, that's helping the overall economy. But we do drive initiatives across this. We also think it's really important to focus in the communities where we live.
And if you want no other reason to do that, you do it for engagement for employees and the ability to attract new employees today because that matters for employees is their sense of commitment to that the company is committed. We drive governance. And the thing I'll point out here is management alignment with shareholders, compensation and management's aligned. So the executive team has performance equity. It's based on cash flow percentage over time against a relative peer set.
So we are driven like a laser on focused like laser on cash flow generation. Also, is about we give it to about 1% of our population. We don't have a broad maybe 1.5% of our population. Silicon Valley historically has done a large swath originally. In the good old days, everybody got equity.
What we realized is as we move to this new world, you don't need that. You need to be able to reward people, but you don't need to dilute the equity base by giving everyone equity. So years ago, we switched to cash, long term cash incentives, which as our CFO will point out, we've done share based comp included in our non GAAP forever for at least over ten years because it's a real cost. We know it's a cost. We know for investors it's a cost.
So I preach often to my fellow CEOs sometimes without much success on that topic. We focus on free cash flow. And if you could see this, the conversion rate of our cash flow is very high. I go back to that original meeting I had where our Director said, focus on cash generation. And I said, we can do that.
We're good at that. And part of how we're good at that is we do invest heavily, we drive for differentiation, we look at margin, we look at cash flow. Our people have a lot of pride in our operating margin and our cash generation. That takes a certain kind of person that excited about that, but that's those are the people we have. And then we return it to shareholders.
70% of free cash flow is returned share and mainly and I'll show you, we did a big dividend, but most of that is through dividends and some share repurchases to offset things like some dilution, but also this acquisition where we use some stock to do the deal. So if you look at our performance and you look at the revenue growth over the last few years, adjusted operating income, there's a lot of leverage in our business. So our belief is when you drive the top line, you ought to drive the bottom line 150% of what you drive the top line leverage in the business. And we look at that and it's shown up in terms of our adjusted. You do an acquisition like Orbotech, which those of you who know the details know that's a lower profitability business, but our intent and our goal is to drive that leverage in that business the same that we have driven the leverage in ours.
I don't think driving leverage is necessarily a natural thought for a lot of companies that come out of tech. It is for us. We look heavily at how do you drive leverage. So when you think about capital allocation, here's a good example from the last five plus years. Of the money that we've generated and invested, you can see the R and D at 2,900,000 We think that's critical, and we have the working capital.
But this acquisition of Orbotech is included in there. Dividends at $4,600,000,000 Included in that was a onetime special we did a few years ago. But the ongoing run rate of dividend increase is shown on the right here. And the history of increases is based on our belief that our dividend should grow with our cash flow. And so we started, as I said, back in 02/2007, we were the first company to start a dividend in our space.
Others have followed. But we're committed to that. We're committed to the annual increases and to grow it with free cash flow. And you can see the history of that. And as I said, we have a modest dilution, so we don't have to buy back a lot of stock to offset a large amount of dilution.
In terms of our TSR, we feel pretty good about the history over time, but of course, this is what we're driving. This is what we're incented on. We actually have a strong incentive now on the executive team to drive TSR over the next five years, specifically TSR based on our belief that as we moved in this acquisition, we can drive performance in both the top line and bottom line of the company. So Tim did something like this for a year ago, and we've repeated this exercise. We took four unnamed companies that get valued as industrials and compared how we look against them.
And we look really good except for when it gets to the multiple. So we in terms of our growth rate, we don't believe this is a upper mid double digit growth rate. We think the 5% to 7%, and I'll show that historically, we think we can accelerate that to 7% to 9%, but we drive that bottom line at a higher rate. If you look at our seven year dividends repurchase over free cash flow, you can see we compare very favorably. We're very efficient.
Our CapEx is low relative to most companies that are in the industrial sector. We have good EBIT growth and the dividend yield, as we show here, is average about 3.2% and ROIC very good. So these are metrics that, again, we drive inside, we think about heavily and we think are important. Getting to our long term model. In 2015, we had a model of 5% to 7% growth.
We've upped that based on our view of the service business that we have and the acquisition that we've done and the new products that we're developing. So when we look at 2019 with Orbotech, we see a 7% to 9%. We think our industry will grow at 4%. We think we can gain share as we continue our investment in the industry, especially in some of the new spaces that we're in, we'll drive share. And then on top of that, our service business grows faster than that.
And the service business is a great driver long term as it gets bigger. And Orbotech has businesses that do service, we think we can help grow those businesses. And then the upside to that is even higher if the industry actually grows higher than that, which some people forecast over time. And we take a long term cross cycle view of this. We think we can have 7% to 9% and then drive efficiencies in the bottom line.
So the takeaway, I don't think it's an accident and it's not that we have a leading position with our customer success. We focus on innovation. We drive that every day. We have a structure that drives it. We have a process that monitors it and we execute on that.
We have a great culture for attracting talent. I think once we get in front of customer or employees potential employees, they learn about what we do, we can get the best and the brightest to work on our work. We can also retain them. And now a little bit with this move to Michigan, we're going where they are because it is more challenging to get people to move to California. We recognize that.
So we're going to maintain our footprint there, but we're going to expand outside of California. This return to shareholders, we take seriously. We think it's a part of our mission, and that's how we're incented. We know that the diversification that we've created creates long term stability that we didn't have ten or fifteen years ago in the industry. And the reason for that is we're across so many players, so many industries and we're agnostic to who wins individual battles.
And then we continue to drive this productivity focus. I really appreciate you all listening to our story, and I'd be happy to take any questions. I also have our CFO here in case you try to stump me.
Yes.
I think it's running right 22%, 23%. Bren, you want to jump in? Yes. So
right. So it's running 20 about 23%, 24% right now, and it's growing faster. So our core semi service growth rate is about 9% to 11%. And to Rick's point, historically, it's been very consistent because the installed base grows every year, utilization of that installed base is inflecting today. So it will grow as a percentage.
Don't have to do the math there, but we'll see it grow. The other important aspect of it is 75% of contract. So customers buy service contracts on these tools pretty consistently. So it's a very predictable stream, nonvolatile stream. So we'll see it grow over time.
Has an effect, as Rick mentioned, lower gross margins but operating margins that are accretive. So over time, it contributes to operating margin growth of the company, has some pressure on gross margins, but still a very good place for us to be. Yes, it should. Yes.
Economy has been doing pretty well for quite some time. So if you looked at an economy that wasn't doing as well, could you talk about the cyclicality that your business might have in that type of a period? I know you have the 7% to 9% revenue growth, but if it were an environment where we had a recession in the middle of that long term, not a big recession, but just a a small how much impact do you think that would have on your targets?
So it's somewhat dependent on you're talking about worldwide recession or geographic just overall worldwide slowdown? Of course, we'd be impacted. But I think that given the nature of our business now, we have both investment in new technology development by our customers as well as capacity. What gets most impacted in recessions tends to be the capacity investment. Often our customers continue to invest for future generations during downturn because they believe they can gain share.
So yes, for sure, you would see a slowing of investment And what we talk about in the 7% to 9% is the aggregate run rate. But there are periods of there where, of course, that would be lower. In terms of the actual systems business this year, we are seeing a correction as customers absorb some of the capacity that they've had, but we see that continuing to grow going forward. Brian, you want to take any other cut at that?
So I mean this year, after three years of mid double digit growth, we're seeing a contraction in the industry this year. So the front end spend of semiconductor manufacturing is down 15% to 20%. Given some of the dynamics Rick talked about, we see our business down somewhere in the high single digits. And of course, now we have Orbotech on top of that. The service business is very resilient.
So to Rick's point, had one down year. So we continue to see that drop through customers, whether they're investing or not, still run their existing tools. And so that tends to be an anchor in those periods. And we have probably 120,000,000 or so of variable comp built into the sort of comp structure that we have some flexibility with without affecting any of the core R and D decisions we make. So we have some flexibility in our model to react.
One of the exercises we do when we look at our dividend payout is we do Monte Carlo simulations model of what could happen. And the question is can we sustain and continue to increase our dividend. And everything that we've modeled, we base our decisions to increase it based on that analysis that we can continue to return cash to shareholders. Because even in those periods, given our high percent of cash flow, we'll still generate significant amount of cash even if we see contraction overall.
I might just add to that. I mean, I'm just the analyst. One thing that's really powerful in the industry to that point is that when you go to a position where you're not adding wafer capacity anymore, so if you get a recession, typically what you cut first is that. And the industry size, when you're not adding any wafer capacity, about five years ago used to be 25,000,000,000 roughly, wafer fab equipment. Today, it's more like 35,000,000,000 to $37,000,000,000 So that's grown almost 40% in the last five years in a zero wafer capacity add environment.
So very, very powerful trends. Maybe I'll just ask a question. So Rick, you put up a slide that showed sort of pro form a revenue and pro form a op margin. And I get asked a lot, so revenue is up, but op margin is down. And so again, why do the merger now?
What was the impetus to buy Orbotech now? I get asked that question a lot.
Yes, sure. So Orbotech's operating margin, you mean percentage or absolute? Percentage. Yes. Percentage.
When we looked at Orbotech was can we grow earnings dollars over time, not necessarily is it accretive to our model, but can we grow earnings dollars over time? And is it a better use of that cash than buying back our stock? That's the analysis that we did. And what we said is we believe we can drive higher performance levels out of Orbotech based on opportunities that we have so that over the long term, it's higher returns to us as investors than the alternative use of that cash. So we could have bought back more stock or done that.
And again, it's a long term play. We believe that the trends for Arbitrack are good and we can drive enhanced performance. Bren, you want to talk about well, we'll get to the longer term model, I guess, where we'll take that.
So we're coming off of 2018, as I mentioned, a strong year. And so there's some contraction this year. And so we're seeing some effect in the margin on utilization rates of given that we're coming off of a pretty high level, down eight or 9%, as I mentioned. We're adding Orbotech in the mix at lower margins. But also, Rick talked a lot about our focus on R and D and our competitive mode and how we invest to stay ahead of our competitors.
And we are spending actually more in our core business this year than last year. We have a number of programs in the company to support significant transitions for the industry moving forward, transitions in the memory space, transitions in lithography that will be some probably the most significant transition in the industry. And so history. And so we are investing for programs that products to deliver when that rolls into production, and that's affecting how we're looking at the model. And we believe, the financial performance of the company, inclusive of Orbotech and the low 30% operating margin levels, that we given our expectations for where we think this is going, we think we're in a pretty good place to be able to spend through given our multiyear view of what's in front of us.
Yes. Question in the back.
So for those that don't know the industry in detail, this is a technology question about a specific segment of our business and whether or not it will transition to electron beam from optical, which is the question. What often happens is because I go back to that chart where I showed market share in each we cover every conceivable technology space. Most of our competitors have one particular point where they enter. And so they do a good job of creating a lot of noise in the business about why that particular segment is going to disrupt the rest of what we do. There was this talk a few years ago, it hasn't manifested itself.
I think the ability for our customers to trade off technologies is somewhat limited based on the capabilities of our technology. So we haven't really seen that shift. But for purposes here, I'd say we invest in every outcome. And I go back to that market share, I'm pretty confident in our ability to retain that share in spite of claims that people make about disrupting what we do. E beam, in particular, is a technology that has some capability at a significant reduction in throughput and productivity.
Yes?
Yes. Bram, why don't you start on that Yes. Longer
It's a
tough question because usually they will buy to do technology migration to whatever they're moving to, but then they try to utilize that capability as they start to ramp it. The way our customers buy our products is they're always developing the next node, and so there's a development engagement. Then once they prove a process, then they go to ramp that process, and that drives a certain investment where they monitor the process very closely. They get to production. They tend to got a proven process.
That's when they back off, and they focus on ramping the facility. So you see that investment. I would say that probably 4030%, 40% of our revenue comes from, I'll call, sort of the technology buy, but it gets kind of blurry. It's how our business reacts is much more around that cycle that I described.
Yes. So on this particular chart, if you go to the top of advanced semiconductors, 8% of that is much more related to capacity. But a fair amount of that is to Tim's point earlier, this maintenance CapEx just for people to stay in the game, they kept to invest. But then the other part of that is associated with technology transitions. So in our Analyst Day in September, we'll break that out more about how much we're reliant.
But as a company, we've been directionally going toward less exposure to the very leading edge trends because I think that we'll participate in those, but we're looking for a more stable and that was part of the acquisition to have offsetting cycles, but also broader exposure across multiple markets. So I think we're less exposed to the cyclicality that historically some players in our space were focused on.
Yes. As capital intensity of the industry has increased, our customers are looking at different ways of achieving cost or capability improvements. They're doing front end process node shrinks, which is the Moore's Law driver, and they've been doing that for years. And of course, we're very exposed to that. But they're also doing things in PCB boards.
They're doing things in advanced packaging. They're we call this the more than more parts of the space. And so they're trying to enable their innovation, their cost in these different ways. And parts of our business, but also parts of the Orbotech business as part of this acquisition was conceived to give us more exposure to the broader sort of set of opportunities related to how customers are innovating today.
One last question.
We do. I mean we so there are candidate technologies for what will happen in five years, and we don't necessarily know which way they'll go. But as a company, we tend to cover all the bets. And so GATOR All Around, for example, is a semiconductor technology that's coming. We have capability for that.
We anticipated and we work and engage in R and D because of our position with our customers, we get early access to a lot of that. So we engage in development programs. We also engage in programs that are independent of what the actual end situation looks like. So core investments that we know will be relevant no matter which way technology goes. So we do that and those have multiyear horizons.
Back to my competitive differentiation and competitive moat, that's what we do to establish those.
Well, I think we're out of time. Thank you. Thanks, Rick. Thanks, Rick. It.
Thank you.