KLA Corporation

As a provider of process control and yield management solutions for the semiconductor industry, KLA is a major player in the global semiconductor ecosystem. Its market leadership, high barriers to entry and strong customer relationships help it achieve impressive profit and cashflow margins.

With a focus on innovation, expanding into areas like advanced packaging (the complex 3D design of chip architecture and not the shipping of finished chips!), defect review and metrology, KLA benefits directly from increased spending by microchip manufacturers. Its disciplined cost structure and spread of end-markets gives it some protection against cyclical downturns.

KLA has multiple opportunities for growth, including developments in artificial intelligence (AI) and mobile telecoms, Mergers & Acquisitions and developing more services for their chip-manufacturing customers. Services revenues are especially attractive because of the high profit margins they enjoy.

The world semiconductor industry is benefiting from increasing digitisation of economies, driving broad-based growth. At present, semiconductors represent a small part of global GDP but, as their use grows, businesses like KLA are well-placed to benefit. 

Key environmental concerns include high energy use, greenhouse gas emissions, waste generation and high water use in the manufacturing process.

The company uses minerals such as tin, tungsten, tantalum, and gold, which have limited substitutes and are often sourced from regions with geopolitical instability. This raises concerns around responsible sourcing and supply chain transparency.

Worker health and safety is a concern due to potential exposure to hazardous chemicals and high-risk machinery in manufacturing environments.

Supply chain transparency is also challenging from a social perspective, as KLA relies on third-party suppliers globally, some of which may operate in countries with weak labour protections.