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KLA-Tencor Set To Substantially Underperform Competition In 2018

May 07, 2018 3:10 PM ETKLA Corporation (KLAC)AMAT, LRCX, NVMI, RTEC, HICTF, ONTO9 Comments


  • KLA-Tencor recently reported its quarterly earnings, and its QoQ revenue growth was the lowest among a group of four competitors.
  • With lackluster quarterly revenues, its YoY revenue growth was also the lowest among the group of four competitors.
  • While KLA-Tencor should retain its #1 position in the semiconductor metrology/inspection market, it will lose market share to these competitors in 2018.

KLA-Tencor (NASDAQ:KLAC) has had a long history of dominating the semiconductor metrology/inspection market. According to The Information Network’s report "Metrology, Inspection, and Process Control in VLSI Manufacturing," KLAC’s share of the market has increased from the mid-40%'s in 2004 to nearly 55% in 2017, as shown in Chart 1.

Chart 1

On April 26, the company reported FY Q3 revenues of $1.02 billion. But in its earnings call, there are several points that came out that raises concern that although the company’s dominance in the sector is solid, it stands to lose appreciable market share in CY 2018. I present a closer analysis.

CY Q1 Revenue Growth Comparison

I noted in a February 28, 2017, Seeking Alpha article entitled “The Semiconductor Metrology/Inspection Market Dominated By Just 5 Companies,” that:

  • Five companies dominate the $6 billion Semiconductor Metrology/Inspection market - KLA-Tencor, Applied Materials (AMAT), Hitachi High Tech (OTC:HICTF), Nanometrics (NANO), and Rudolph Technologies (RTEC).
  • These companies had a combined share of 87.0% in 2017, up from 75.3% in 2002, as the market has consolidated from 37 companies to 20.

Chart 2 shows QoQ for five top companies in the metrology/inspection sector for the recent quarter. I have added Nova Measuring Instruments (NVMI), and excluded AMAT because it hasn’t reported yet.

However, as I reported in a May 2, 2018, Seeking Alpha article entitled “Revenue Pull By Japanese Competitors Could Distort Market Sentiment For Applied Materials,” I projected AMAT’s QoQ semiconductor equipment revenue growth of only 1.4%. And since the company’s metrology/inspection revenues represent less than 7% of its total semiconductor equipment revenue, I will defer the complex revenue breakout until the end of the year.

Chart 2

According to Chart 2, KLAC’s QoQ revenues grew only 4.6%, compared to HICTF’s 55.6%. NANO’s revenues were similar to KLAC’s, but RTEC’s revenue growth rose a substantial 21.6%.

This article was written by

Robert Castellano profile picture
Providing a deep knowledgebase for better semiconductor stock investments

Dr. Robert N. Castellano, is president of The Information Network www.theinformationnet.com. Most of the data, as well as tables and charts I use in my articles, come from my market research reports. If you need additional information about any article, please go to my website.

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I received a Ph.D. degree in chemistry from Oxford University (England) under Dr. John Goodenough, inventor of the lithium ion battery and 2019 Nobel Prize winner in Chemistry. I've had ten years experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University.

I have been Editor-in-Chief of the peer-reviewed Journal of Active and Passive Electronic Devices since 2000. I authored the book "Technology Trends in VLSI Manufacturing" (Gordon and Breach), "Solar Panel Processing" (Old City Publishing), "Alternative Energy Technology" (Old City Publishing). Also in the solar area, I am CEO of SolarPA, which uses a proprietary nanomaterial to coat solar cells, increasing the efficiency by up to 10%. I recently published a fictional novel Blessed, available on Amazon and other sites.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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