Good morning. Good afternoon, everyone. Welcome to the final day of Citi twenty twenty one Virtual Global Technology Conference. My name is Atif Malik. I cover US semiconductors and semiconductor equipment stocks at Citi.
It's my pleasure to welcome Rick Wallace, CEO and Brent Higgins, CFO from KLA. The format of our discussion is fireside chat. I will go with my questions first. And then if you have any questions for the KLA team, feel free to text them in the in the box on your screen, and I'll take those questions towards the end. Welcome, Rick and Brent.
Thank you, Atif. Atif, thanks for having us. Appreciate it.
Always. Rick, as I was preparing for the fireside questions, I could not help notice the transformation in the company over the last two to three years. While you've always been strong on wafer and reticle inspection areas for chips, your exposure to advanced packaging, PCBs, displays, exposes you to exciting markets like five g and auto. You're expecting SPC sales led by optical pattern wafer and rental inspection to grow 40% output outpacing WFE this year. This came as a surprise to many investors and talking to other equipment makers, like ASML, Nova.
It sounds like some switch got turned on in seven nanometer in respect to a PDC equipment. What's driving the strength in optical pattern to 1,000,000,000 this year? And how can SPC outgrow WFE again next year?
Yeah. Great questions. I think there's a it's a combination of a number of factors that, all are kind of happening at the same time. But probably the biggest is that there's the need and then there's us having So the need is has been there in advanced technology transitions historically.
But this
is a big transition as people are going through advanced design roles. And it's, especially as you think about seven nanometer, five nanometer and what's coming. Because the number of process changes is so significant, the costs of those nodes are so high. And so the opportunity space for us to operate is pretty large. And that coupled with the fact that we have two product generations of optical wafer inspection, the Gen four and Gen five, both finding and enabling our customers to achieve their objectives as they deal with all the challenges of these advanced processes.
So as a result, Gen four, which we introduced quite a while ago, it's on several iterations, but that refers to the wavelength technology, is actually on pace for a record year in addition to the ongoing growth that we're seeing from Gen five, driven heavily by the fact that more and more of our customers are adopting these systems at more steps in the process, inspecting more layers. All of those factors together mean that we're seeing advanced growth. And Brent can talk about the demand on our capacity, but it extends at this point well into calendar twenty twenty two in terms of the needs that our customers have. And so we're working with our supply chain to make sure that we can continue to support that. In addition, though, your question about process control, it's really across the board, whether it's optical metrology, which is another business for us that continues to to grow quite a bit.
Radical inspection for KLA is gonna have a record year in 2021, again, by the advanced nodes, the advanced designs at advanced nodes plus EUV. And so all those factors together are contributing to really an outstanding forecast for the rest of the year.
Yeah. So Atif, I'll just add that the proliferation of designs at once we got to seven nanometer and even beyond has been a big driver of our customers' investments because they have to manage more process flows, they have to manage more designs and how those test design rules in different ways. So there's more investment in process control to monitor and control that environment. And of course, then they have to deliver to a pretty robust demand environment in terms of the semiconductor revenue part of it where those designs are going into. That is also when you take that and couple it with the introduction of EUV and some of the changes in technology requirements has in some ways forced our customers to keep a lot of capacity in place at those nodes and they haven't been able to necessarily migrate some of that capacity to the next generations.
And we had a period of time there where there what we call the reuse component of our business was higher because EUV was delaying and there weren't that many designs at the leading edge besides the large volume guys. And so as the large volume players started to move to the next node, that follow on demand wasn't materializing. And without a technical driver, without a demand driver, customers were able to move some of that capacity. Today, they don't have the ability to do that. So the investments are for each node are happening and in some cases simultaneously as we've seen over the last couple of years.
Great. Brandon, if I go back to twenty nineteen Investor Day, it seems like a long time ago. As you guys flagged some new products on top of Gen five, you talked about e beam as well as X-ray. So the question is on e beam, is e beam complementary or cannibalizing the optical market? You have about 10 tools in the field now and you're targeting 20% share exiting this year.
How is the customer response to your optical e beam combo approach so far?
Well, e beam and optical have always been complementary. And if you go back over a long period of time, if you think about overall pattern inspection, 15% to 20% of the market has been served by EV capability and it tends to be in the front end of engineering analysis and defect discovery applications. And then the 80% has been optical solutions just because of the cost of ownership, really driven by the speed of the technology, ability to inspect full wafers and all those kinds of things that drive customers to utilize optical for production environments. And so that drives the bulk of the spend there. We've seen in one of the, I think, the competitive advantages of KLA is to be able to offer portfolio solutions to our customers.
And Rick talked about Gen four and Gen four extendability. Part of the reason why we've been able to extend Gen four is is that we've been able to utilize more AI machine learning capability to drive that that product line. But we've we've also been able to utilize that with with E beam systems to be able to increase the relevancy of the overall optical solutions. You can use that to train and point your inspectors in a smarter way. And so that's been a driver for that part of the business as well.
We didn't look at the market has a number of players for e beam directly. So it wasn't so much for us of looking at a market we have multiple players and saying, okay, given some of the dynamics I talked about earlier, does it need a supplier, another supplier? Could we differentiate in a unique way? More challenging, but when you take it and couple it with the optical solutions, it does create an opportunity for the collective approach to drive our overall market share in the broader pattern inspection part of the market. So we're pretty pleased with where we're at.
I think the road map on the platform is encouraging in terms of the ability to scale it and drive more capabilities similar to what I described.
Great. The next topic is fairly topical government spending. Equipment makers like Kaylee are clear beneficiaries of US Chips Act and government sponsored foundry spending initiatives in Europe and Japan. Given your outsized foundry logic sales exposure, some investors feel that equipment makers who have pushed the idea of consolidation in the semiconductor market and the associated lower CapEx volatility as a favorable shift for the group. The emergence of the new foundry and IBM two point zero models could reverse all that.
How do foundries sustain suspending? They sustain the spending and don't cause an oversupply down the road?
It's a good question. I think that the it is a matter of scale, though. I think if you look at the amount that's being proposed in the chips acts and the others, I think they're incentives, but there's still going to have to be economic justification for these companies to build the fabs. As you know, amount of money that it takes to build the fab is significant. And even if The US spends 50,000,000,000, it's going to be to a number of players to support infrastructure and so on.
So I think what that money will do is bridge the gap between, should I build another fab in Asia or should I build it in The US Or should I build it in Europe? So it's really kind of a transition cost management as opposed to introducing a bunch of volatility into the market. It will be less efficient. I mean, there's no question that it'll be an industry that's slightly less efficient if you have multiple sites that are for a company as opposed to consolidating. But I don't think it's a huge inefficiency, and that's really what the government funding is going to allow them to do is to to take on a project in a new area.
It's also been true for years that there have been incentives even in places that, you know, whether they're heavily populated by semiconductor fabs now, the countries there have incentivized those players. So some
of this is just trying
to create a playing field that's that's more equal for The US and Europe. So I don't think it'll create a big amount of inefficiency, but I do think it'll create, you know, some new sites. I thought years ago, there's a chance there'd be very little future fab investment in The U. S. And I think we're seeing obviously now that that's both coming from government funding, but also other factors are driving more investment in The U.
S.
Pat, given the scale and maturity of these customers, I think that they've done a pretty good job over time of managing supply and demand dynamics. To Rick's point, the industry squeezed a lot of efficiency over the last few years and last number of years, decades actually. But but that that anytime you you you're spread across multiple sites, it does introduce some inefficiency in the system. We we think that, you know, it does whenever you're starting to expand like that, it does create an opportunity for us as as the resources and and talent gets spread across multiple locations. It's an opportunity for us to help those customers, help those customers ramp up those new operations.
And so from a share point of view, we think when you have the scale of the KLA can provide and an intimacy with sort of process and design and working very closely, collaborating with our customers, that it does create an opportunity for us to play a bigger role in helping ramp those new sites. So we're of course, we have to execute, but at the same time, it does create an opportunity for us.
And then when are you expecting equipment contribution from some of these fabs? Is it already in your backlog or is it still to come?
We haven't seen anything really in our backlog. I think it's still to come. You've got to build up facilities before you'll see the WFE investment. Certainly, there are conversations that are happening in those areas, and we're starting to plan for resources. We're hiring people because of the, a, we've got to find the people and it's a very tight labor market out there, but also the training that's required to make sure that our support personnel is prepared to support it.
So we're investing in it now, and we'll start to see, I think, the business start to show up, maybe towards the end I I don't think we'll see anything before that.
Right. I think that's right. I think it's a late twenty two, twenty three phenomenon. And if you think about how long it takes once you've got approvals to build the fab and then start outfitting it, it it's that's about the time scale even if they're committed as of today. And then there's some projects, as you know, that are in the formative stages right now that are gonna take that's probably later '23 depending on how quickly they act.
Great. And then some of the major foundries have talked about $100,000,000,000 CapEx plans over the next three years. And they're asking for pricing discounts from equipment and material makers to lower CapEx burden and gross margin headwinds for them. I understand these customers have always been large for you guys and they always get some kind of volume discount. Is there a risk to equipment gross margins from rising wafer prices or it just gets passed down to your suppliers?
Well, I I don't think there's risk. I think our model kind of outlays, you know, how we think about our model going forward. I think we're managing our conversations. I think, you know, sometimes things get misinterpreted a little bit. I think what we hear from our customers is not so much about price reduction.
It's about productivity improvement. And and so we get a lot of lot of targets, which we have for our own teams, but also for our supply chain about having productivity to remain relevant and competitive. That's frankly not a new phenomenon. That's what we've had for, for a number of years. But certainly, there's increased focus on it.
And in many ways, you know, we're often the solution, not really the problem, because we're helping our customers get more usage and capability out of the rest of their investment. A lot of the process tools that they can get yields up faster or if they can maintain higher yields. So we actually, I think, in a slightly different position in this relative to the process players.
I think the only thing I'd add to that is sometimes, you know, cost reduction and improvement in cost of ownership are different things. And so to Rick's point is if we can enhance productivity and do things with our systems that can, you know, speed them up and and and provide, you know, more more sort of faster time to results, if you will, that that those are opportunities for us to improve cost of ownership. And so our pricing has always been based on a value equation. And I think that over time, we're always looking to offer our customers more value at lower cost of ownership. So that's been frankly part of our model and what drives sort of the pricing model over time.
Yes, that's a good point, Brent. Brent, next topic is recurring sales services sales. You and your peers have been doing a much better job in helping investors understand the nature of your services business. Your services sales are approaching one fourth of the total sales. I was positively surprised to hear 75% of your semiconductor process control tool services sales are recurring and 90% of PCB services sales are recurring.
What actions are you taking to further drive increased services for system sales? And how should we look at this business longer term?
Well, we've talked about a long term model of 9% to 11% growth in that business. And one thing about service has been that it's been fairly predictable over time despite what might happen in the industry in terms of CapEx investment. Customers have always invested in running their install base and continuing to deliver on their demand that way. Our business is a little bit unique. When we report service, it is true sort of service business.
It doesn't include upgrades and things like that. And I I think it's unique partly because our customers and how they buy process control is is that they don't buy a lot of excess capacity. They buy what they need, and then they run it very hard because the results, the information they get is so important to them. The systems are very complex. They don't have a lot of volume.
It's very hard for our customers to train their own people to service these tools. Even at KLA, we have service engineers that support individual products. They're not you can't use them across multiple product lines, just to give you a sense of the complexity of the systems. So there's a little bit more of a dependency on us, I think, to provide that service and to keep these tools up and running for our customers and matching performance. And so I think that's been a driver of the contract structure that we have, both in terms of tool contracts, but also FAP wide contracts as a fab matures.
So we've seen more interest from customers given the strength of demand in a service contract structure. Obviously, that allows us to ensure that we've got the right resources to support them in terms of the commitments we're making. We've got the inventory in place. And so there are economic benefits for the customer, obviously, to be able to make us more responsive, but also allows us to optimize our cost structure underneath. So it really is a win win situation overall.
So we've seen that the trend move. If you would have asked me a year ago, I would
have said or two years ago, I
would have said, you know, 70%. Now we're talking about 75%. I think that there's potential for a higher attach rate moving forward. And then the customers are using their install base for longer periods of time. One of the great things about the cycles, we've seen demand so much more broadly across different design nodes.
And and as a result of that, you're seeing more interest and more focus on running the installed base out there, and that's extending the life of a lot of KLA tools. And so that's been a driver for the service business as well. I think that given the strength of demand we've seen in the WFE environment, just new capacity that's going in, plus this dynamic around the installed base, that there's certainly, I think, a tailwind in terms of our expectations of the through cycle or the longer term growth rate in this business as we move forward.
Great. And let's talk about the EPC business and starting with auto. And auto end market has been strong this year, and you are uniquely positioned among front end peers in auto. Auto software and system sales are growing 40% to 50% this year, 5% to 10% of full year sales. Are the r and d requirements for auto products similar to or different from SBC products?
They're they're different, but I would say they're not as expensive ultimately, intensive in terms of overall spend because it's maybe more on the complete solution around some modeling as well as data management because people are really looking for zero defects. But as you know, most of the semiconductors for automotive are not leading edge semiconductors, although there are an increasing number of leading edge that are going into cars, but or more advanced nodes not leading edge. So they don't tend to be, but the overall investment in terms of us bringing those solutions, the acquisition of Orbotech gave us a bigger footprint with those players because we now have process equipment as well as process control equipment to support them with. So I would say that that is that's given us a better presence at those companies. And obviously, as you know, there are challenges supporting the auto industry due to a number of factors with all the shortages that are showing up because of all the players, they're the ones that hit the brakes the hardest at the beginning of the pandemic.
And I think that playing catch up has proven to be incredibly challenging. We're actually trying to help in that because we help drive yields up, which, you know, alleviates a little bit of the pressure. But, obviously, there's there's a lot there. So automotive is very good. I think that we're seeing not just more opportunity with the semiconductor guys, but the people upstream of them are wanting to get our advice and guidance on how to have a strategy around their procurement in terms of both yield management and how they think about supply.
And Bren, PCB has been benefiting from five gs within EPC. You highlighted IQOS on advanced packaging on the last earnings call. And how sustainable is the high teens growth that you're seeing this year into next year?
Yeah. On the systems side, if you look at just overall EPC, it's it's above 20%. It's you know, when you add in the service part of that business, then you end up in in the high teens. But but systems has been a you know, it's nicely. The growth within PCB has been very five g centric, and so that's been a nice driver this year.
I would expect that business to continue to grow historic or as we move into 2022. So if you look at just the overall mobility cycle and how it's impacted both SPTS, our specialty semiconductor business, which is also impacted by, you
know, we talked about automotive, but
the power semiconductor part of of automotive has been a driver for that business as well. But whether it's, you know, RF chips, which have been which they have a a unique position in that market in terms of how it supports not just handsets, but also infrastructure. And then what we've seen in in in PCB and then in IQOS where you have volume coming from a lot of mobility drivers and and driving finished component inspection, but also you're starting to see more higher value components related to data center that's been a driver for that business as well. So I've made this comment before that given the strength of semi process control, we spent a lot of time talking about that, but this part of our business is also growing greater than 20%. It shows you the strength of the semi piece when you're looking at this part of the business at 20%, it's diluting the growth rate overall of the company.
But a lot of interesting drivers, and I think it's multiyear drivers given the five gs rollout both from an infrastructure point of view, but also the handset point of view.
Great. Let's talk about the end markets. Changes in DRAM spending plans given your customers' customer inventories are a bit elevated and prices are peaking?
Not seeing any changes in our plans. As we look at DRAM this year, DRAM, we would expect if you think about the overall market at 35% plus for WFE, DRAM is faster than the overall market in terms of our modeling. And flash is, you know, is slower than the overall market if you think about memory in in the aggregate. I see strength in DRAM investment continuing through the end of the first half of the year. I've talked about sustainability of our business as we move into the 2022 and comments about the first half being at least as strong as what we're seeing in the 2021.
And certainly, some incremental DRAM investment in the first half of next year is in our plan. So we feel pretty comfortable about that. A lot of times, how we engage with our customers in this part of the market doesn't move as, you know, short you know, in a in a short term fashion relative to pricing. Certainly, how much customers invest over time is influenced by that as that drives their profitability. But in terms of how they engage with KLA, particularly particularly from from a a technology point of view and with the introduction of EUV being a driver of technology within the DRAM space is a driver for investment in KLA.
Then Bren, the domestic China first half has been very strong. Have you seen any impact from credit issues from certain customers or U. S.-China restrictions looking to second half?
The market's been fairly stable. I mean, those issues are out there, but we've seen an acceleration of demand in China. System, we've seen acceleration demand across all segments and all customers for the most part. But we have seen the demand strengthen as we move through this year. And I think it's spread across a number of different projects.
As I look at '22, how much does that continue to grow? Not completely clear to me yet, but I see a level of sustainable investment that's happening there. And I would say that what we've seen this year is probably in excess of what the overall market is is expected to grow year to year. So a little bit faster growth in in in China, particularly around the indigenous projects than the overall market.
Rick, I have a question for you. The transition to three d logic devices is beginning in earnest with the shift in architecture from FinFET to gate all around. How is KLA positioned to benefit on the metrology products from this transition?
We're in good shape. I think we have been working on it for years. It's not, as you know, it's maybe a little later than some had hoped. This transition was scheduled earlier in time, and so, therefore, it gave us more time to work on our solutions. So we feel like we're well positioned.
If, you know, if you back up a little, what happens when there's a new architecture is we have a team that will model that and we'll model what the impact is on the different systems that we offer, whether they're metrology or an inspection, to make sure that we're designing the optimal capability with the optimal configuration and and working with advanced customers on that. So we've been at this for quite some time. It is an interesting area where Gen four, for example, happens to be ideally, suited for inspection of gate all around because of some of the contrast issues So another extension of that product family. And Gen five will be used, but in concert with that, not necessarily for the same things.
Metrology wise, we have solutions that we've been working on for quite some time. So we feel really good about where we are. And these inflections always drive, at least increases during transition of process control intensity. But often that is sustained because these these are just more finicky transitions. And over time, that's part of what drives the overall process control intensity.
Great. And on the financial model, Bren, you're closing you will close 2021 ahead of the 2023 model and have done well with Orbotech. Are the OpEx and gross margin synergies fully realized now with Orbotech and 60% to 65% incremental gross margin level sustainable?
Yes, it's a great question on Orbotech. And certainly, some of the growth drivers has helped drive the incremental margins in that part of the business and the overall business as well. We're still not completely there. We certainly have line of sight to synergy expectations that are roughly double what we expected going into the transaction. We still have some integration activities, particularly around systems that could drive some some further synergy opportunities.
And, of course, facility footprints are also something that takes a little bit of time to work your way through. But but we feel very comfortable about where we are today. And, you know, if you fast forward another, you know, twelve to eighteen months or so, we should be have realized the full the full extent of those synergies, which, as I said, is, you know, almost double what we expected going in. So I think it's worked out pretty well overall. I mean, look, there's some cost pressure in the system.
I talked about it at at earnings that when you look at incremental freight costs and some of the component costs that we're dealing with. And our materials teams have done a great job of managing our suppliers through not just the demand, but also the subcomponent demand and making sure that we can source that. I talked about roughly 50 basis point kind of headwind related to that in our overall gross margin model as we move into next year between freight, components and so on. It's embedded in the guidance I provided as we move into 2022 based on top line expectations we have today, somewhere in that 63 ish percent range, plus or minus, and the plus or minus quarter to quarter is really a factor of the mix of our business. So I think it's contemplated in the guidance levels that we provided.
But there is pressure out there, and we're trying to manage our way through it. So I think the incremental margin model, gross margin of 60%, 65% in that range, percent to 65% makes sense. I don't see any reason why it would look any differently from here. On the OpEx side, there is pressure around labor. Markets are tight.
Labor costs are higher. It feels like in some ways cost of everything is increasing, so why not labor as well? And so we do have some pressure in the system around labor costs, which we're trying to manage our way through. But we've been pretty clear with the model of driving in a normalized revenue environment, we should be able to deliver 40% to 50% incremental operating margins on our business. Obviously, over the last couple of years, we've exceeded that long term target.
So in a normalized revenue environment, I would expect that we'll continue to operate in that range. Obviously, over the last couple of years since it's been higher, potentially, we could be to the lower end of the range as some of the costs catch up to the business. But but I don't see you know, I think that the long term sort of sustainability of of the operating model is is pretty consistent with the way we guided and modeled. And, you know, the mix of business will be the biggest driver of any variability in it across the overall, whether it's Service EPC or semi process control.
Great. And the next one on capital allocation. You announced a new $2,000,000,000 share repurchase and 17% dividend hike last quarter. How should we think about capital allocation plans from here, especially M and A appetite in faster and exciting back end packaging markets? So you're satisfied with your portfolio as it stands?
Well, the M and A front, I think we'll be consistent and prudent about how we look at it. We always look at, okay, how can we add unique value and how can we drive a return on the investment exceeds the alternatives. The alternative being putting the capital work and buying back our stock. And so we have a pretty shareholder value centric approach to how we think about that. Certainly, there could be some opportunities for some tuck ins out there, and we'll continue to evaluate those.
We look at a lot, but at the end of the day, it's got to fit this construct that it makes sense for us in terms of delivering either new capability or new ways that KLA can take a market leading position and through deployment of our operating model drive higher operating leverage out of the business over time. We're big believers and have been for a long time and that capital gets valued when it gets deployed well. And we need to be explicit about how we're modeling that and how we think about that. And certainly, dividend, we're trying to drive the dividend, growth of the dividend payout over time consistent with the growth rate of free cash flow of the company. So we can maintain a consistent cadence around it.
And as we look at the opportunities that are out there, in terms of the level of leverage we have, the cash reserves, we ought to be able to maintain on a through cycle basis a total return in a balanced way of at least 70% of the cash flow that the company is generating over time this year. And I provided some color that I expected to be in excess of 85%. But through cycle over time, I think 70% is sort of a minimum level of returns that we would drive. So I think the actions that we took and the announcements we made at earnings in July are just consistent with that strategy, and there's been, I think, no changes to the overall approach the company has here.
Great. Let's go to audience questions. The first one, could you ask the team to just talk generally on the differences in use of process and inspection in memory versus logic, especially given DRAM complexity going up? Curious if adoption there will start to look more like logic.
Great question. There is a significant difference in terms of the amount of money people spend on process control making memory devices versus making foundry logic. And and there are a couple reasons for that. But the biggest, I think, single reason I would say is the repeating nature of a memory device and the fact that there's repair. In other words, if you have defects on memory, in a post processing of that device, you can fix and make up for that defectivity and repair it.
And virtually every memory device is repaired. So that's different than logic where a defect will kill the die and and cost you a lot of money. So inherently, there's a difference there. There's also the design rule differences, which is what this question really speaks to where, of course, logicfoundry pushes the most advanced design rules. There are aspects of memory that are pushing different aspects of design rules which drive process control intensity up.
One is design rule is getting tighter on Deepgram. Process complexity is increasing on three d NAND as they add more layers. There there are different kind of process control steps that have to be included to do to deal with that, whether it's overlay registration from layer to layer or just looking at the three d dimensionality of the device. So process control intensity for memory will likely grow. It will also grow from foundry.
So I think the gap will probably still be on the same order of what it is today. But we do see drivers that will drive memory's process control higher than it's been historically, but not to the same levels as advanced foundry and logic.
Okay. The next one, what are the key drivers for market share gains by end market in calendar twenty one and '22?
By end market. I think the market share gains that that we, you know, that we anticipate have to do with increased adoption of some of our leading product areas. So by virtue of the overall process control budget, you know, our Gen five optical wafer inspection is a good example. There's really no alternative that is another somebody else doesn't make a broadband, optical wafer inspection system. So it's really that gaining share of the overall process control budget.
And that tends to be mostly used on advanced designs, which are, you could argue, have to do with AI devices driving a lot of that, high performance computing driving the foundry. So I think you could, by extension, say that those were the end markets that are driving more of the optical wafer inspection market gains, than others. In some areas, on the lower end optical inspection, it's probably share gains are happening in automotive semiconductors because that's where we're selling those systems and we have a very large share. And it's not nearly as big as the front end, but the rate of change is significant in terms of how much it's growing. So really, I I you can kind of go through the main drivers, and those are the ones.
But if you already talked about the question about PCB being tied to five g, and there we have products that are tied to. So in many ways, we're really tied to all the end drivers, but I would say the biggest one would be associated with high performance computing AI as it pertains to advanced logic. Brandon, any Yeah. On on
the optical side, look. I I've been saying for most of the quarter that if you just take a look at the growth of optical inspection over the last couple of years, arguably the fastest one of the fastest, if not the fastest growing market in all of WFE. And so the inflection there, both with leading edge foundry logic and Rick talked about the end market design flow that's driving that, but also you have competitive dynamics that are also participating with that. And then a technical driver like EUV that we're seeing really strong adoption in that market and that's a very strong market for KLA. On the reticle and with the introduction of EUV, there's multiple products we're selling to support reticle quality and fidelity, both in the Mashtop and the Fab.
And as Rick said earlier, we think that, that market will be it'll have a record year this year and likely grow faster than the overall market. And then in film metrology, it's market, and I've made this joke lately that it's the largest market within KLA that nobody asked me about. But over the last couple of years, we've seen share gain there. It's a business that behaves like a process business in a lot of ways. If you're adding process tools, you have to be able to have incremental film measurement capability.
And so we've seen that business grow faster than the market as well. So I think there are specific drivers, as Rick was talking about, that are driving certain parts of the portfolio. Having the portfolio approach allows us, I think, to have the right solutions for our customers as the roadmaps change and the markets change, and we're able to meet our customers' technical requirements, but also their economic requirements, which is also very important to them as they're managing these pretty large scale fab ramps.
Great. We're almost out of time. Rick and Brent, thank you for your time and insights.
Thank you, absolutely. For having us. Take care.