So joining me here today is Photronics, and I'm thrilled to have Ted Moreau, IR, here on the stage. Ted, thank you for joining me today. So let's start with the presentation, and then we can move to some Q&A afterwards.
Sounds great, thank you. I want to apologize real quickly. Our CFO had a family situation, so I could not attend the conference today. But everything's fine. It was just a family situation. So Photronics, I'm going to give a little bit of, you know, we have our presentation deck from our earnings call, and then give a little bit of an overview. In case you're not familiar with Photronics, the company makes photomasks for the semiconductor industry. And you can see on the screen there that is a photomask for the semiconductor design. We also make photomasks for flat panel display. And those photomasks are like three feet wide by two feet tall kind of sizes. The photomask you see on the screen there is for, given that's for the integrated circuits, that's more like six inches by six inches.
The company was founded in 1969, so it's been around for 55 years, has grown fairly significantly through that time through consolidating the industry, primarily in the 1980s and 1990s. More recently, the growth rate over the last several years has come through a very significant investment into China, and you will see kind of down the bottom left-hand side, China is now at 27% of total revenue. In 2019, China represented 3% of total revenue, so you can see a very significant ramp-up of revenue coming out of China, and this is revenue produced out of our facilities in each respective region, so you can see 27% of revenue comes from our facilities in China. 33% of our revenue comes from our facilities produced in Taiwan. As far as our total exposure to China, 100% of the revenue produced out of China stays within the China market.
A significant portion of the business of our revenue that's produced out of Taiwan does ship into China as well. And then a portion of Korea and a small portion of the U.S. actually ships into China as well. So the actual exposure to China is more in the area that starts with a four, right, as far as total exposure. And then our business is broken up between, as I said, integrated circuits, that's about three quarters of the business. And then flat panel display is about one quarter of the business. Integrated circuits, we break that up into the revenue into high-end, which is 14 nanometers, 22 nanometers, 28 nanometers geometries. Mainstream being older geometries from there, right? And of that mix, integrated circuits is probably a third high-end and then two thirds more mainstream.
And the reason for that is within the semiconductor industry, the captives really focus on the leading edge geometries. And so as you think about artificial intelligence and all the fascinating developments and the growth rates that's occurring there, a lot of the photomask market there is actually captive. Two thirds of the photomask market is captive. So we are the biggest player in the merchant market today. And then you can see on the bottom right side, that's where all of our facilities are. We have 11 clean room facilities. Three of them are here in the United States. One is at our headquarters in Danbury, Connecticut. And we have a high-end facility in Boise, Idaho. And we have another facility down in Allen, Texas. And then you can see we have six facilities off in Asia, across Korea, China, and Taiwan.
And then we have two facilities in Europe, one in Germany and one in the U.K. And so on this graph, you can see essentially the growth trajectory of the business was really tied in the 1980s to the consolidation, being a consolidator in the industry. But since then, in the last 20 years, the growth rate is industry growth and then the expansion into China. And on the industry growth side, our revenue is tied to semiconductor designs. And so as you think about the market, is the semiconductor market flourishing or is it struggling? Is somewhat relevant, but not entirely the indicator of how our business is going. So from that perspective, we are a little countercyclical because it's all about the number of designs that integrated circuit companies, developers, ship to the fabs. And then the fabs give those designs to us to make photomasks.
Let me step back and kind of communicate a little bit about what a photomask is and why it is important to the semiconductor process. A photomask is a piece of glass. We take designs that we receive from the fab houses. Our top customers are UMC of Taiwan, Samsung, Semiconductor Manufacturing International Corporation, or SMIC. Those are some of the top customers for us. They give us the design from their customers. We take the design. Our engineers transfer that into a software that we input into tools in the clean room. Then ultimately we etch and write. We write and etch the semiconductor chip design onto the photomask. We then ship the photomask off to the fabs. The fabs insert the photomasks into a lithography tool.
The lithography tool shines light through the glass plate, the photomask glass plate with the design on it. It projects the image of the semiconductor design onto the wafer. It's the beginning of the semiconductor manufacturing process. The time to market for this industry is incredibly important. We have lead times that are anywhere from one to three weeks. Responsiveness to the customer demand and the customer shipment schedule is incredibly important. Business has been won and/or lost based off of very short turnaround times where we either beat our competitors to time to delivery or in other instances because of capacity reasons or priorities, maybe we trailed our competitors. That's a huge factor into what drives demand from a customer. The second factor is quality. Obviously, quality is important in an industry.
It's absolutely paramount in the semiconductor world because if we ship a mask that has a piece of dust on it or there was a slight scratch in the mask, then that, as the light shines through the lithography tool onto the wafer, that scratch or that piece of dust could shine through onto the wafer. And thus you have a bad batch of wafers, right? And so in the semiconductor, if that were to occur, the fab might have to shut down the semiconductor line, which would be very time-consuming and therefore they would lose revenue, right? And so it's hugely important to have very high-quality photomasks that we ship to our customers. So that's the second factor. And then obviously you want to drive significant yield through your own clean rooms. So the utilization of your clean room capacity helps drive your margin profile, right?
And so in 2021, our margin profile was actually 21%-22%. We expanded that in the 2022-2023 timeframe. And now in 2024, we were at 37% gross margins in Q4 of 2024. The reason for that was obviously increased scale and the utilization of our clean rooms offsetting a fixed cost infrastructure. But also we were able to raise prices in the 2022 timeframe and 2023 timeframe, which coming out of COVID, supply chains were very disrupted, right? Demand was accelerating. And so much of the industry raised prices and we raised prices as well. Those prices have held steady. We also implemented a temporary premium pricing or maybe we'll call it surge pricing strategy that lasted throughout 2022-2023, but did work its way out of our business in 2024.
And so in 2024, you would see a little bit of revenue decline of about 3%, which was a factor of the premium pricing that we had implemented had completely come out of the business by the second half of 2024. So that contributed to the revenue decline in addition to a slightly sluggish semiconductor market and some foreign currency headwinds. So those were the factors. And so as we think about the big picture, we do believe that our business is growing in line-ish with, we believe that we can grow in line with the photomask market. How fast is that growing? The semiconductor industry believes it's going to grow to about $1 trillion in total size in 2030. The photomask market is approximately 1.5% of the total semiconductor market.
And so therefore you would see the photomask industry is growing along with the semiconductor market. Now with that said, the high-end, the leading edge photomask designs, a lot of that is done in-house. Two thirds of the photomask market, as I was saying earlier, is captive. One third is merchant market, right? And so the growth rate is a little bit more favorable at the leading edge where AI chips are being developed and a little bit more sluggish, more on the mainstream side. That's not to say that mainstream is struggling. Big picture, we are investing over the next several years in the mainstream area of the market, particularly here in the United States as we see mainstream opportunities arise because our customers are expanding their mainstream business here in the United States. So it's a very interesting opportunity that we see. And it's driven by regionalization.
One of the other factors that came out of the disruption from COVID was the increased reliance on the Asian region for semiconductor production, right? And so as the industry realized it needed to diversify geographically, increased production here in the United States. We've also seen the CHIPS Act here in the United States, right? And so as that had occurred, the regionalization concepts have occurred. That has influenced us to expand our capacity here in the United States. On our most recent earnings call, we announced that or disclosed that in 2024, we spent $131 million on CapEx. And that in 2025, we were going to expand that to $200 million. The incremental spend largely is focused here in the United States. And that's due to the regionalization trend that I was just speaking to.
And then what are some of the demand drivers that we see in the flat panel display? Again, flat panel display is about a quarter of the total business. Much of it is at the high end. And really the drivers there are anything with a screen, right? Whether it's a TV, a PC, smartphone, tablet, smartwatch, even automobile, right? And so as we've seen, so that market is growing modestly is kind of what we see. It could be catalyzed by a PC potential PC refresh cycle tied to Windows 11. So we'll see how that shakes out. But the differentiating, one of the differentiating features or aspects to that industry is as you go to newer technologies on the glasses, it becomes more difficult to produce. And so it's difficult for competitors to come in and participate at the very high end of the market.
So on flat panel display, you would see that about 85% of our revenue is at the high end. And high-end business, generally speaking, drives a greater number of, it drives greater revenue volumes, right? Because in the mainstream, you tend to have, especially like on IC and whatnot. And it's a little bit different on IC versus FPD, but not entirely. So on IC, you tend to have anywhere from 15 to 25 photomasks per chip design, right? At the high end, you could have 50, 60, 70, upwards of 100 photomasks per chip design or per photomask set. So obviously that increased revenue due to the number of photomasks is going to allow you to offset your fixed cost infrastructure driving up your gross margin profile. In the flat panel display, it's somewhat similar, but it's as you go to, it's more on screen size.
As you go to larger and larger screen sizes, obviously your ASP is going to go up. And so that's going to help with your margin profile, right? As I was saying earlier, supply chain regionalization is driving investment globally. And you can see on the page where we have our facilities, as I was outlining earlier. Time to market is incredibly important in our industry. And so that's why we have facilities throughout the world. And as I was kind of explaining earlier, a lot more of the same. I think I want to touch on the balance sheet. We have $641 million of cash on the balance sheet today. Over the last several years, our cash flow has really expanded aggressively due to the margin expansion that we ultimately view as being sustainable. And I think we've demonstrated that over the last several quarters.
Even as the premium pricing has come out of the business, we've been able to maintain our margin profile, and part of that is due to increased sales volumes that have gone through our facilities, but then also due to, as we've gone to higher sales of a higher percentage of sales coming from our high-end business on both the flat panel display and integrated circuit side, and so that's enabled us to generate very strong cash flow over the last several quarters, which we see as continuing, and so then how do we think about capital allocation strategy, and first and foremost, we think of reinvesting in our business, CapEx, obviously through CapEx. As I said before, we're going to, 2025 is an investment year. Historically, CapEx has been about 15% of total revenue. Obviously, that's going to be a higher percentage in 2025.
But after this investment cycle is through, which will last throughout 2025 and might trickle into 2026 for a little bit, then we intend to revert back to the 15% as a percentage of total revenue. Our second aspect to our capital allocation strategy is potential business development initiatives. We're constantly presented with opportunities to acquire other companies. Don't really have anything imminent out there, but we could potentially see something that could help drive revenue growth or be complementary to our existing business, perhaps something that would expand the number of clean rooms we have in a particular geographic region or something of that sort. And then finally, in August we increased the share repurchase authorization from $31 million at that point in time up to $100 million. Here, I would say we're going to be very opportunistic.
And that is because we want to ensure that we have plenty of cash available for any business development initiatives that were to arise. If the stock, which currently has a pretty attractive value at this point in time, I think if the stock were to improve, then conceivably you could say that the company were to utilize the stock for any business development initiatives. And therefore, that would potentially change how we view the share repurchase authorization. But at this point in time, we're going to be quite opportunistic with it. And so, yeah, I think that's all the prepared remarks that I had. Let me know if you have any questions. I can start with one. So I know you mentioned SMIC as a customer. Have you seen any impact in the entity list additions that were added in December?
I can start with one. So I know you mentioned SMIC as a customer. Have you seen any impact in the entity list additions that were added in December?
Yeah. So I'm assuming you're not on mic anymore, right? So I'll just kind of repeat. Have there been any impact from the entity list that had announced back in December? We did a thorough review at that point in time, and that entity list was disclosed or announced right before we had reported our fiscal Q4 earnings, and we determined that there wasn't a significant impact for our business, and so we feel pretty confident about where things stand there today, and I mean, really, if you think about the U.S.-China relationship and what's happening there, the dynamics that are at play, obviously in the United States, there's the increased focus of investing in the semiconductor industry geographically into the United States due to the factors I had mentioned about coming out of COVID and trying to expand geographically and reduce reliance on certain parts of the world.
But also as we think about the changing administration in the White House and the thought process around increasing manufacturing, broadly speaking, in the United States, that concept is supportive of the regionalization trends that we were thinking about.
Great. Thank you.
Yes?
I think you mentioned the importance of timeliness.
Yes.
You could kind of bank on the fact that you could beat on the price quality, etc., when you're dealing with that required.
Yeah, so the question is, what are the competitive differentiators and how do you compete, whether it's on quality, price? I think obviously it's kind of a one A and one B between quality and then time to market and responsiveness time are hugely important, and it's why the company has facilities close to customers. Turnaround time is incredibly important. Delivery time is incredibly important. We're not going to supply photomasks to the United States market from Taiwan simply because the time to ship is, even though it's not tremendously long, it's long enough to determine whether or not you've won or lost business, right, and so being very responsive to customers is hugely important and on the quality as well, right?
And so that's why in the Asia market, even though there's some new entrants that have cropped up over the last couple of years in the China market, our ability to compete versus those players is due to a perfected process that has been perfected over the last 55 years that we've been in business. And so we're able to produce photomasks more timely and at a higher quality than some of the newer entrants that haven't perfected their processes by now. Okay. Any others?
I can ask one more. I'm a little curious about the surge pricing you had mentioned, the 3% revenue impact. Why was the surge pricing removed?
So the question was on the premium pricing being temporary. What was the justification for it just being temporary? And it was always a you had just implemented an increase of prices in the coming out of 2021 to be implemented into 2022. On top of it, we had also implemented the premium pricing. And it was partially to ensure to some customers continuity of supply. And so we always viewed that as being a temporary situation given the demand trajectory had accelerated so aggressively coming out of the disruption that had occurred in the industry. And so that was really why it was a temporary situation.
Fortunately, as I said earlier, we've been able to maintain our margin profile due to not only the increased prices that have held contractually, but also due to moving up the product mix and the revenue mix to higher nodes or I'm sorry, to more higher-end business. And so that's been, so we've been very pleased with our ability to maintain our margin profile because of that.
How does first is the competitive share in the merchant market? If you're number one, how many competitors are there? Is there another one or two companies that are close to your share?
The question was, yeah, competitive intensity in the industry, in the merchant mask business, and it depends on the geographic region. If I think about the United States, it's very limited competitively, limited number of competitors, largely dominated by ourselves and another player. If I think about the Asia market, there are new entrants that have come into play over the last several years, particularly in the China region. The market share is split more evenly, I would say on average, I would say about four main players, and then you have some new entrants that have popped in there over the last several years, and then again, we differentiate based off of the factors that I had described earlier.
Then as we think about our business, particularly in the Asia region with the new entrants, if there was a scenario where the new entrants were going to become a little bit more aggressive, you would probably see us move our business even more so towards the higher end where we feel as though we have a differentiating, where we're differentiated versus those competitors. Another factor that's at play with some of those new entrants is given one of the questions earlier about the U.S.-China trade situation. Some of those players are not able to capture tools capable of producing photomasks at higher-end parts of the market. So that's another factor as to why we feel as though if competitive pressures were to intensify in those regions, we would probably end up pursuing even more focus on the higher.