Good morning, everyone. Welcome to 26th Needham Annual Growth Conference. Glad to see everybody for the first in-person day of this conference. My name is Charles Shi. I'm a semicap analyst at Needham. Here with me is Veeco, and on the stage, we have Bill Miller, CEO, John Kiernan, the CFO, from Veeco. Bill and John, first off, I really wanna thank you guys for joining me today. Here's what we're gonna do this session. We're gonna start with management presenting a few slides, then we transition into fireside chat. If time allows, we're gonna do a few questions from the audience. Bill and John, stage is yours. You may start your presentation. Thanks.
Thank you, Charles. Good morning, everyone. Really excited to be here with everybody today. Wanna share with you some exciting activity going on at Veeco. Before I get into this, obviously, I want everyone to carefully review our safe harbor statement. I'd like to spend a few minutes for those of you that may not be familiar with the Veeco story, giving a brief overview of the company. I'd like to then spend a few minutes talking about the specific served available market, specifically the growth drivers for the company over the mid and long term in semi and compound semi. And then John Kiernan will spend a few minutes looking at our financials and our outlook for 2024. So at a glance, Veeco is a semiconductor capital equipment company.
We have been known to solve very significant materials challenges, collaborating with our customers. We have about 1,200 employees worldwide, and we have an updated 2023 guidance view forecast of $658 million-$668 million for 2023. Who is Veeco? In the 1990s, Veeco was really known for our core ion beam technology, and it is used to fabricate every thin film magnetic head used in the hard disk drive industry. And so we are the primary deposition and etch suppliers using ion beam technology. In the kind of 2010 era, the company was really known for having substantial growth and being a big part of the broad adoption of LEDs into backlit TVs and then into general lighting.
When I became CEO in 2018, it was very apparent that that market had become commoditized, and we decided very quickly to exit that market, did a lot of strategic work, and we really positioned the company to align our core technologies in the semiconductor space. We've been on this strategy for coming up on five years, and we're really quite proud of the progress that we've made, primarily in growing in semiconductor and secondarily in compound semiconductor. When I look at the company's served available market today, it's a little bit over $2 billion, and by 2027, we see that growing to about $4 billion.
The vast majority of that growth we see coming from the semiconductor space, driven by the success we've had with our laser annealing product, kind of winning a number of applications and a number of new customers at leading edge, which I'll go into in a little more detail. Our next generation product that we're just launching as well. So a lot of progress in semi. We've also taken our core ion beam technology I spoke about for data storage, and we've repositioned that into semi as well, which I'll go into some more detail about. In compound semi, we've repositioned our product line and are putting evaluations out to continue to grow our market position in compound semi. Looking specifically at the semiconductor SAM, as I said, we've had a lot of success in laser annealing.
We've been able to win back customers at the 7-nm node in logic. We've actually been able to win a first customer at 7, a second customer at 5 nm, and during 2023, we actually won the third major logic customer, which we're quite proud of. Also, during 2023, we were able to take our laser annealing product for the first time into DRAM memory, and have actually become the high-volume manufacturer for one DRAM maker for high-bandwidth memory applications, as well as expanding into their broader memory applications at their leading space. So we're really quite proud of that.
But really, the new and exciting piece is our next-generation annealing product for nanosecond annealing, which we think we know is an opportunity to grow our served available market in that specific segment from nothing today to about $300 million in the coming years. Similarly, in ion beam deposition, we've had a position, a very strong position in ion beam deposition for EUV mask blank development. 100% of the EUV mask blanks today are produced with our equipment. We see a tremendous opportunity to take ion beam and become the fourth deposition technology in front-end semi. And we've made a lot of progress in that area in low resistance metals, and that is a new opportunity for us, where today it's zero, and we see it-...
Conservatively, an opportunity to grow that served market by $250 million in the coming years. Digging a little deeper into this new nanosecond annealing opportunity, if you look at the chart on the left, you can see kind of traditional lamp-based technology heats a wafer up for a long period of time. When I say long, milliseconds. Today's the laser annealing product we're winning on, kind of in the middle there, is much shorter dwell time and much shorter total thermal budget.
The future, we see nanosecond annealing taking the temperatures higher for even a shorter amount of time, and that has the fundamental advantage that if you look at the picture down below, under nanosecond annealing, we can anneal at the very top of a device, the first tens to hundreds of nanometers, and then down further into the device and into the silicon is unaware that it was actually heated at that top surface up to 1,000 degrees Celsius. So that has a lot of incremental advantage and a lot of incremental applications that our customers are quite excited about. So not only is it for low thermal budgets, but it's also for material modifications in larger stacks.
What we've done during the fourth quarter, we're quite proud of the fact that we've placed two evaluation systems at two leading-edge logic customers with our nanosecond annealing tool, and right now they are under installation, and we're starting our evaluation program there. In ion beam deposition, we're really excited about this because today, all of the low resistance metal films are put down with traditional PVD films. You can see on the picture on the left, you have a very small grain size randomly oriented, and then when we show our customers what we can do with ion beam deposition, we can actually preferentially deposit very low resistivity grains and very large grains, which directly leads to lower resistance. We've demonstrated the ability with tungsten, ruthenium, and other materials, to deposit 20% lower resistance films than the competition.
This has really piqued the interest of the industry, and I'm also quite proud to say that during the fourth quarter of 2023, we did place two evaluation systems at two leading-edge memory customers. So, with the progress we've made in the fourth quarter with nanosecond annealing and evals, two evals in ion beam deposition, we see exciting opportunities in the long run. Looking at the opportunities we have in artificial intelligence, on the left, you can see that we really play today with our today's laser annealing for the most advanced GPUs and CPUs, as well as for those AI chips using EUV, the mask blanks that we provide the deposition for those.
In the high-bandwidth memory, today, we actually have one high-bandwidth memory customer, as I mentioned, and we are excited that we've also been able to not only expand from beyond high bandwidth, but to broader applications as well. In the future, we see opportunities for our nanosecond annealing, particularly in these high-bandwidth memory stacks, to introduce nanosecond annealing, as well as ion beam deposition for low resistivity metals. So we do see opportunities to expand our position in AI. Moving on to compound semi, we see this market growing from about $1 billion to $1.8 billion during 2027, and we really see this growth coming from three specific areas.
We have two opportunities in power electronics, one in silicon carbide, where today that market's about $300 million, doubling to about $600 million by 2027. And the second one is GaN-on-Si, where the industry is looking at transitioning to not only 8-inch, but also skipping to 12 inches. And so we see that opportunity growing from about $50 million to about $200 million from now through 2027. And then finally, the third application is in micro-LED. There's been a lot of delays. There's been a lot of investment in this. We think we're well-positioned in traditional micro-LED, placing an evaluation system at the end of 2024, as well as in disruptive approaches using GaN-on-Si. We see opportunities there as well. At this point, let me turn it over to our CFO, John Kiernan, for an update on our financials and our guidance.
Okay. Thank you, Bill, and thank you, Charles and Needham for hosting us today. As Bill just mentioned, I'm gonna give an update on our 2023 guidance and initial outlook for 2024, and talk a little bit more about our revenue, by market.
Oh, the green button. Sorry about that.
Okay. So before the conference this morning, we put out a press release giving an updated guide for Q4 of 2023 and the full year 2023. So we've updated our guide to top line $165 million-$175 million from our prior guide of $155 million-$175 million, and a corresponding tightening of the non-GAAP EPS to $0.40-$0.45 for the quarter, compared to $0.35-$0.45, that was our prior guide. And that results in the full year revenue coming in in the range of $658 million-$668 million, and result of non-GAAP EPS of $1.58-$1.65.
We're also providing initial outlook at this time for 2024, where we're guiding our revenue next year $680 million-$740 million, and non-GAAP EPS $1.60-$1.90. So at the midpoint of the revenue guide, it points to about 7% year-on-year revenue growth. So what I wanna highlight on this slide and pick up as a follow-up to Bill's earlier comments, you know, we have been growing the revenue for the company since the 2020 timeframe, in each one of the years through 2023. And we're really the focus has been on semi, the semiconductor and the semiconductor products.
We've taken our semiconductor business, which was less than a $200 million business in 2020, to over a $400 million business in 2023. So that's about a 35% compound annual growth rate, clearly exceeding WFE growth during that same time period. I would point out in 2023, for our semiconductor business, it's gonna be up about 10% this year, again outperforming WFE. When we look at our initial guide for 2024, we see another year of growth in semiconductor business, and largely being driven by our laser annealing business there. But we also do show growth in the compound semi market, data storage, and we're calling our scientific and other flat compared to 2023.
So we're pretty proud about the execution in 2023. We accomplished a lot this year, and we believe we're well-positioned for continued long-term growth. So if we look at 2023 in the rearview mirror here, our semiconductor business grew about 10%, despite the decline in WFE. We've been successful in expanding our laser annealing technology to new markets and applications in both logic and our first penetration into the memory market. And we met two really important milestones for future growth in the fourth quarter of this year, where we shipped out our first two nanosecond annealing evaluation tools to leading-edge DRAM memory, excuse me, to leading-edge logic and two ion beam deposition systems for leading-edge DRAM memory.
As we look out into the future, our semiconductor business, we're well-positioned to outperform WFE growth, and that would be our target, driven by the new applications in NSA and IBD-300, as well as our existing Laser Spike Annealing product line. We do see opportunities in the compound semi space in power electronics with our silicon carbide and gallium nitride, as well as future opportunities in the micro-LED space. That's the end of our prepared remarks.
Thanks, John. All right, here we're going to the fireside chat portion of the session. Maybe I wanna start the discussion a little bit more on the pre-announcement you guys made this morning that the Q4 revenue numbers, EPS numbers, seems to be a little bit above what you were originally expecting. Can you kind of provide a little bit color where the upside came from?
Yeah. So we provided a tighter range here on the numbers for 2023 with both revenue and non-GAAP EPS. I would say on the revenue side, you know, the upside there was driven in the semi piece of the business, and now we're calling, you know, semi up about 10% for the full year.
The every other segments kind of perform in line with the, the regional expectation upside...
Yeah, within the ranges of our expectations and-
Okay. Okay, great, great, great. So now let's maybe dive into the dynamics of the individual business segments and products. You gave some color on the initial outlook for 2024, of course. I know there are lots of moving pieces, right, that in your business, but I won't be able to cover all of them, but I'll try my best, given the time limit here. Let's start with the compound semi. I actually want to start over there, 'cause I believe most of your MOCVD business, the MOCVD revenue still flow through, mostly flow through this segment, right? The segment did not necessarily have a good year in 2023.
And so, looks like you're kinda expecting, if I look at a bar chart, kinda expecting something flattish. But I can't be very specific by just looking at the bar charts. But what's your view so far about this segment going into 2024? Is recovering side, is it possible the weakness may continue for a while? So, provide us some general thoughts about compound semi, please.
Charles, I'll give my thoughts, and John, feel free to chime in. Our current forecast for compound semi for 2024 is up about 5%-10% for the year, and a lot of that is driven by broad opportunities, I'd say, in photonics for our business. I would say 2024 is an exciting year, specifically for our MOCVD business. Our plans are to place a number of evaluation systems in MOCVD, specifically in silicon carbide. We made an acquisition nearly a year ago of some key technology. We've been making some great progress in our lab, getting some great results.
We just recently met with some Tier One customers who were excited about the results and about the architecture that we have, that will really allow us to allow our customers to focus on the total cost of ownership in terms of uptime, availability, ease of maintenance, et cetera. And so, our expectation is to be shipping 2 eval systems during 2024 to the silicon carbide market. We are hearing from our customers that that market is remaining robust and is a long-term cycle, secular growth driver for us. The second area is in power, in GaN-on-Silicon, where we have an evaluation system we're hoping to wrap up here at 200 millimeter for GaN-on-Silicon. But also, some customers are looking at making a leap to 300 millimeter GaN-on-Silicon.
In particular, we're developing a 300 millimeter GaN-on-Silicon single wafer system for evaluation in the first half of 2024 with a key customer. So we're really quite excited about that opportunity and the opportunity for long-term growth there. Then finally, in micro-LED, I think everybody understands that market continues to be delayed, but it could be—it will be a substantial market when it happens. Our plan is to put an evaluation system out in the second half of 2024 there. So we're in a position to have some key new technologies out in the hands of our customers here in 2024.
Great. Great, thanks, Bill. So maybe I wanna double-click a little bit on the silicon carbide. I mean, there has been quite some not the very positive news flow, right, recently on silicon carbide. But it sounds like you're seeing that market remains robust. I don't know if it's a long-term comment or that's anything indicative of what your view about 2024 in this particular part of the market. Can you kinda clarify a little bit with us?
I would say, if I look at all of the customers, there are some customers that, you know, share is moving around maybe a little bit, and I don't wanna really comment any more than that. But I would say, in general, broadly, the market does seem robust and positive for 2024, and clearly for the longer term.
Thanks. So wanna ask you still about storage. So storage has been a bit of a cyclical business, right, for Veeco, and 2021 was a great year. In 2022, the business was down. 2023 actually ended up being a decent year. Despite that, 2023 probably was still the storage downturn. So now, if I look at the consensus estimates of Seagate, Western Digital, I don't cover those names, but when I look at the consensus estimates, it does appear that 2024, 2025 should be very good years for the storage industry. And but, I mean, from your vantage point, do you agree with where the direction of the storage industry is going?
Should we be expecting 2024 or 2025 to be a growth year for the storage business? Once again, I know you showed something in your PowerPoint, but mind if you provide a little bit of color on storage.
Yeah, I think Bill and I will share the response here. So for 2024, we're seeing in the guide that we gave here, revenue to the data storage of hard disk drive customers to be flat to up 10%. So typically, we have visibility for about a year on systems. That's, and that's still the environment that we're operating in, and you know, in that guided figure for our system deliveries, they're in backlog for the year at this point.
If we were to move more towards the high end of the, you know, the guide range there, it would be more of a recovery in, as Charles, as you mentioned, as the customers take up their utilization and production levels, that we could drive more spare parts and services business that was well off in 2023. In terms of direction of the market, I'll turn it over to Bill. Bill has probably some ideas about where the market is going and how Veeco participates.
Yeah, thanks, John. I would just echo the point that, you know, we have a fair amount of exposure from a service standpoint, and our service business was down in 2023. And as John said, we would not be surprised if that improves as customer utilization improves. Obviously, longer term, the industry is looking at technologies like heat-assisted magnetic recording, which has the advantage that it significantly increases the complexity of the head. More deposition and etch steps are fundamentally good for Veeco.
I will say, though, that if I step back, this core ion beam technology that we have, this legacy business in data storage, is a very nice business for us. But really, our ion beam product development focus is really on semi. So we're really focused there, and we really like ion beam because we think it has direct applicability into semi, and that's really where we expect a lot of the incremental growth, if I look at ion beam technology, will come from semi, probably much more significantly than from data storage. And that's why, you know, we love the data storage industry, but long-term growth and profitability will come from semi with ion beam.
Thanks, Bill. I think maybe let's transition a little bit more to the more exciting areas in Veeco's business. I just really wanted to make sure we covered those more cyclical part of the business first. So let's talk about semi, the semiconductor segment. First off, EUV mask blank, I mean, ion beam deposition for that application. You've said that there's a reasonable correlation between EUV litho tool shipment and your ion beam deposition shipment to mask blank manufacturers in the past. It appears ASML EUV unit looks like it's probably flattened down in 2024, given the early indications so far we hear. Shall we be expecting that ion beam deposition business could see some headwinds this year, or you think there are some other factors you may end up doing better than what the ASML potential EUV shipment figures would imply?
We typically provide a view for every 10-15 ASML scanner shipments, one of our ion beam deposition systems is needed in the industry. That's a pretty broad range, obviously. And so we size that at about 3-5 systems per year. The fact that ASML scanner shipments may be down a few scanners, we're still sizing the market at 3-5 for this year. And given our backlog, we expect 2024 revenue in EUV mask blank to be about flat with 2023, given our current view and backlog.
That, yeah, great. Thanks for the color. And then maybe about a little bit more about laser anneal. I, I know laser anneal is, is a product widely adopted for 28 nanometer, right? But, but then, then it skipped a few nodes and got adopted again at 7, 5, and the, the, the more advanced nodes. Well, the 28 and advanced nodes, luckily, they have been the node that we, we, we're likely to see more of the capacity investments, this year and forward, and those probably good news for Veeco. I think you look at your numbers, you have been growing that laser anneal revenue pretty significantly, right, since 2020.
But from this point forward, right, I think you talk about some of the new products, but what do you think should drive the continued growth of the laser anneal, I mean, both from product and market standpoint? Is it only going to be tied to, I mean, more of the advanced node capacity, 28 nanometer node capacity addition that's driving the growth? Or can we see more of the growth in terms of the number of applications, number of layers, where the laser anneal is inserted by your customers into their process flow?
Charles, I'd say that's a pretty, pretty in-depth question. Let me try to pull that apart a little bit. We acquired this technology from Ultratech, where they had success at 28 nanometers and then lost successive rounds at 14 and maybe 10. That was obviously a huge focus for our company 5+ years ago, and we've demonstrated success in terms of supporting our customers for the long term. We've been able to win one customer at 7, a second customer at 5. And those customers, we continue to be the process of record for 5, 4, or 3, talking to them about 2 and what's beyond 2 nanometers for their annealing needs. And so we feel very confident there.
As I said, I think, in my prepared remarks, you know, we won the third leading logic customer in 2023, by continuing to support them the same way we have the other two customers. We did win one memory customer, the first memory customer ever at Veeco. I would say a year ago, Veeco had practically zero market share in semiconductor memory. Today, we actually have one customer, and we're shipping high volume to them for not only high bandwidth, but also for their most advanced memory nodes as well. And so, we're seeing follow-on business there. With our regular standard laser annealing product line, we do see opportunities to expand applications, well, customers in terms of there are two leading memory customers that we do not have a footprint in today.
We're obviously working closely with them, going through a number of demos and trying to understand their needs, and there's a fair amount of pull for that. So that's certainly an opportunity to expand and expand our customer base. Also, as you mentioned, we see opportunities to win one application at a customer, but then they're going to look at what other applications can I either improve my yield, but more importantly, improve the performance of my device or reduce the power consumption of my device by transitioning to laser annealing? And we're continuing to support a broad range of evaluations with today's laser annealing product line.
On top of that, we have our next-generation nanosecond annealing product I talked about, that we think can open up for us an incremental $300 million of served available market, largely with new applications with our existing customers, both in logic and in memory. And so if you flash forward, you can see, we could see a lot of growth in memory with today's laser annealing, as well as nanosecond annealing, as well as in logic. And so we think there's a lot of room to run, at the leading-edge node. You also spoke about 28 nanometer and some trailing node activity.
We have seen a fair amount of business in 2023 in trailing node, and although we were qualified at 28 nanometers, we are seeing customers having interest at 40 nanometers and back qualifying annealing for some advantages there. So I don't think we're limited to 28 and below. Actually, some customers are looking at taking it into older nodes as well, which would be incremental opportunity for us. So we do think laser annealing, combined with nanosecond annealing on the product roadmap, does give us a fair amount of legs to continue to grow our semiconductor business.
Thanks, Bill. That's a lot of interesting color. Lastly, I wanna ask you about the lithography business. I know this is a line of your business that didn't really have a good year in 2023, given the downturn, right? And you didn't really talk about it much over the last year, but any reason that we can get a little bit more bullish about it this year or maybe 2025? Any thoughts here?
I would say, Charles, our advanced packaging business or lithography business is really largely tied to mobility and handsets. I think as we all know, handsets have been down. That business remains soft for us. I would say, though, in the advanced packaging space, the one area of bright light for us is in artificial intelligence. What we're seeing is we have opportunities to win wet processing steps in artificial intelligence stacking. You know, as we've kind of gone through the second half of 2023, we've continued to see activity increase, and we are seeing some real early shoots of green for 2024 in our wet processing advanced packaging for AI chips. So that's a bright spot for us going into 2024.
Great. Thanks. I've run through all my questions, but I really think there are five more minutes, and I wanna give the opportunity to folks in the audience to raise a question to management. Any questions? Okay, maybe I'll ask a question about, since you talked about a little bit more about the laser anneal opportunity there. Nanosecond anneal, I think you might have addressed this in the past, but, but, could it be, could it, cannibalize your existing position in laser anneal? How should people think about that?
We think the nanosecond annealing product allows us to heat only the very top surface, the few tens, hundreds of nanometers into a device, is really a new regime, fundamentally, and enables applications like backside power distribution or material modification of a surface layer without impacting temperature-sensitive regions just below it. We think that will be an incremental opportunity. So if I kind of look out farther in the future, I see, you know, whether it's 2027 or 2028, I would see laser annealing still being a $600 million business for us, and nanosecond annealing being an incremental $300 million business for us.
There may be one, maybe two applications where both laser annealing and nanosecond annealing can compete, and kind of unclear how that share will break out, but largely, I would say the nanosecond annealing opportunity is incremental, and largely, 90%+ will not cannibalize today's laser annealing business.
Thanks. All right, any questions? All right, I think that's a wrap.