Advanced Node Demand
Q: How is customer outlook for advanced technology in 2025 shaping up?
A: Management notes that they are having different discussions with leading-edge logic and memory customers, who are preparing for ramps and increasing demand. Customers are focused on tool availability and resource scheduling to avoid delays. While stability with rising demand is seen through the year, the real build-out is expected in '25 and beyond, with positive indicators like design starts and advanced node discussions.

Advanced Packaging Growth
Q: What is the growth outlook for advanced packaging revenue?
A: Advanced packaging revenue is expected to exceed $400 million in calendar '24, representing growth greater than 25% over the previous year. This growth is driven by accelerated customer efforts in packaging, especially for leading-edge technologies tied to AI applications. Management believes this segment will outgrow WFE and has potential to go well beyond, depending on technology adoption.

China Revenue Expectations
Q: How is China revenue expected to perform for the rest of the year?
A: China revenue is expected to be flattish over the course of the year, with the second half similar to the first half. The mix is changing in terms of end-market, but as a percentage of total revenue, China is expected to come down due to most growth coming from non-China customers.

Memory Market Outlook
Q: What is the outlook for the memory market into 2025?
A: While profitability and cash flow in the memory sector are starting to improve, significant investments are not expected through the rest of the year. Management anticipates potential improvement in non-China memory in 2025, driven by the leading edge of DRAM and high-bandwidth memory demand, as customers' businesses improve. ** , **

Services Business Growth
Q: Has the outlook for services growth improved since last call?
A: Services business continues to show strong momentum with improving utilization rates. A record number of tools are coming off warranty, with a 95% conversion rate into service contracts. Customers are extending system lifespans, supporting long-term service growth. Management feels confident about being closer to the upper end of the 12% to 14% target growth range.

Gross Margin Outlook
Q: What factors are impacting gross margins going forward?
A: Gross margin decline is mainly due to product mix across the portfolio, not specifically tied to China. Service growth, which is dilutive to gross margin but accretive to operating margin, also affects margins. The guidance range remains appropriate, and margins can fluctuate based on product mix and revenue timing.

N2 (2nm) Ramp Timing
Q: When will N2 node ramp impact your business?
A: Customers are accelerating discussions around 2-nanometer technology, with significant activity expected in '25 and beyond. KLAC is already seeing increased engagement, with orders anticipated toward the end of '24 as customers prepare for ramps driven by AI demand and power efficiency needs. ** , **

U.S. Greenfield Projects
Q: How do U.S. chips announcements affect your outlook?
A: While numerous U.S. greenfield projects have been announced, their timing is quite a ways out. Customers build capacity based on market demand, so these projects don't significantly affect near-term capacity investments. The business environment remains relatively independent of investment locations.

Product Mix Shift
Q: What drives the shift from memory to logic in mix?
A: The shift is due to a focus on logic/foundry, expected to remain around 70% of the business mix, similar to 2023. China memory is more first-half heavy, with no significant investments expected in the second half. Slight uptick may occur in non-China memory, but overall mix remains consistent.

Revenue Growth Drivers
Q: Main drivers for revenue acceleration in second half?
A: Drivers include early investment in 2nm, 3nm build-outs, and investments in Arizona, benefiting the logic/foundry segment. Second half revenue is expected to be high single digits higher than the first half. Improvements are expected in the EPC segment and continued growth in services.

RPO Levels
Q: What are current Remaining Performance Obligations?
A: RPO stands at approximately $9.9 billion, down about $750 million quarter-over-quarter. Deposits are about $677 million.

Lead Times for Key Products
Q: Have lead times for Gen4/Gen5 products changed?
A: Lead times for Gen4 products remain in the 18- to 24-month range due to strong demand. For Gen5 products, lead times are in the 7 to 9 months range, consistent with previous quarters.