2025 Growth Outlook
Q: Will Onto outpace WFE growth in 2025?
A: Michael expressed high confidence that Onto will outperform WFE growth in 2025 if WFE is in the 5% to 10% range, driven by increased process control intensity in gate all around, DRAM capacity expansions, and AI packaging. ( )

AI Packaging and HBM Demand
Q: How will AI packaging and HBM expansions affect Onto's business?
A: Onto sees a doubling in capacity from the 2.5D logic side, expected to drive increased demand for HBM. While HBM expansions are currently muted, Onto anticipates capacity will need to grow to match logic expansion. ( , )

Volume Purchase Agreements (VPAs)
Q: What's the status of the $120 million VPA for gate all around nodes?
A: Onto continues to work off the VPA, with quite a bit left for 2025. Despite some customer movements, their position remains strong, and backlog continues to strengthen across both customers. ( , )

Revenue Improvement into Next Year
Q: Are you confident revenues will improve into the first half of next year?
A: Management is highly confident that revenues will grow as they move into the first half of next year, driven by gate all around and DRAM capacity expansions, supporting both enterprise servers and HBM growth. ( , )

$10 Million Lithography Delay
Q: What's the reason behind the $10 million lithography delay?
A: The delay was customer-driven based on their needs; the tools are ready, but rescheduling is still being discussed. ( )

Manufacturing Capacity
Q: Can Onto increase output if customer demand rises?
A: Yes, Onto can significantly increase capacity; they're not even running full second shifts and have room to grow through cycle time reductions and supply chain partnerships. ( )

Customer Tool Placement
Q: Are customer bottlenecks in placing tools easing?
A: Bottlenecks are loosening up with new capacity coming online, but timelines to transfer, qualify, and bring in tools mean the impact isn't immediate. Onto sees this as part of breaking current COOs capacity bottlenecks. ( )

Impact of Customer CapEx Pressures
Q: Is customer CapEx pressure affecting Onto's business?
A: Michael attributes any pushouts more to cyclical factors rather than structural issues, noting that markets softened in enterprise high-performance compute, but excess capacity is being picked up. ( , )

China Sales Expectations
Q: What are your expectations for China sales next year?
A: Onto expects China sales to remain in the 10% to 15% range of overall sales in 2025, similar to current levels. ( )

Power Semiconductor Opportunity
Q: How significant is the power semiconductor revenue opportunity?
A: The power semiconductor market is becoming one of Onto's top markets behind AI packaging, driven by customers focusing on yield improvements due to wafer transitions and lower current yields. ( )

NAND Market Participation
Q: How will Onto participate in the NAND market upgrade cycle?
A: Onto sees NAND growing in 2025; while it's off a small base, the percentage growth would look impressive, driven by high-stack NAND to support AI devices and data centers. ( )

Process Control Intensity
Q: Do you expect to outgrow WFE due to process control intensity?
A: Yes, due to increased process control intensity, especially in 2.5D logic and AI packaging, Onto is confident in outperforming WFE growth. ( )

Lead Times for HBM Tools
Q: What are the lead times for HBM inspection tools?
A: Lead times are about three months, and Onto has the capacity to meet customer orders, with flexibility to adjust through increased shifts and supply chain partnerships. ( )

SG&A and OpEx Expectations
Q: Is the current SG&A run rate expected to continue?
A: The goal is to hold total OpEx in line or better than Q3, aiming to stay at those levels or improve in Q4 by optimizing R&D to minimize costs of recent acquisitions. ( )

3D Inspection with Dragonfly
Q: Is 3D inspection with Dragonfly tools picking up?
A: The localized 3D capability is powerful and used for high-precision metrology. Onto shipped evaluation tools and expects to ship more in Q4; it's still in early stages. ( )

AI Packaging Growth Rate
Q: Is second half AI packaging down 10% from first half as expected?
A: The decline is now about half of what was originally projected; instead of a 10% decline, it's about a 5% decline compared to the first half. ( )

Capacity Expansion at OSATs
Q: Do you benefit from capacity expansions at OSATs like in Arizona?
A: Onto is seeing engagement and receiving orders from OSATs; while not yet at the same level as TSMC, they expect to benefit as these customers ramp up. ( , )

HBM Capacity Additions
Q: What is your visibility into HBM capacity additions for next year?
A: Currently, HBM expansion is muted, but with expected increases in 2.5D logic capacity, Onto anticipates HBM capacity will need to expand to support logic growth, though timing is uncertain. ( , )

Packaging Pickup in Q4
Q: Is the packaging pickup in Q4 due to complexity or volume?
A: Complexity increases are due to new processes and efforts to improve yields. Both complexity and volume contribute to the pickup in Q4. ( )

Strong Inspection Revenues
Q: Why do inspection revenues remain strong despite auto downturn?
A: Customers are focusing on yield improvements in power semiconductors amid wafer transitions and lower yields, driving demand for process control solutions. ( )

Substrate Market Conditions
Q: How are substrate market conditions impacting Onto?
A: After aggressive expansion through 2022, markets softened in enterprise high-performance compute. Excess capacity is now being picked up, with some increase in demand but from a low base. ( )

Repeating Prepared Remarks
Q: Could you repeat the prepared remarks that were missed?
A: Demand for process control in AI packaging, gate all around, and power semiconductors remains strong. AI packaging improvements offset the $10 million lithography delay. A doubling of 2.5D logic capacity is expected next year, with potential for HBM orders to improve. Growth in HBM has taken capacity from standard DRAM, contributing to expansions in advanced DRAM, which Onto expects to benefit from in 1H 2025. ( , )