Onto Innovation (ONTO) Stifel 2024 Cross Sector Insight Conference summary

Market trends and business environment

• Strong exposure to secular trends like advanced nodes, Gate-All-Around, DDR5, HBM, and advanced packaging, with established tools in these markets.

• HBM and CoWoS packaging are driving significant growth, with all major HBM manufacturers adopting inspection and metrology tools.

• AI-related revenue is experiencing a digestion phase due to rapid capacity additions, but overall market outlook is increasingly positive.

• Growth in NAND, driven by solid-state drive demand for AI processors, is providing upside.

• Capacity additions in HBM and advanced packaging are expected to continue, with timing influenced by supplier qualifications and new entrants.

Technology and product innovation

• Dragonfly system offers unique 2D and 3D inspection capabilities, including ClearFind for interconnect reliability and subsurface defect detection.

• Customers are moving toward 100% inspection for critical defects, with new tools enabling full-wafer subsurface crack detection.

• Process control intensity is rising, especially in advanced packaging, with increasing demand for higher resolution and repeatability.

• Innovation in optics and software algorithms is being driven by the need to detect smaller defects and variations.

Market size, growth, and outlook

• Addressable market for advanced packaging equipment is estimated at $600M–$700M, with rapid growth driven by AI, chiplets, CoWoS, and HBM.

• Packaging capital intensity is much higher than traditional OSATs, fueling strong high-end growth.

• Capacity growth in advanced packaging is expected to outpace simple linear models, with additional revenue opportunities from yield improvements and new applications.

• Panel-level fan-out and IC substrate packaging are key areas, with strong market share and advanced capabilities for future transitions like glass substrates.