VAT Group AG (VACN) Earnings Call Transcript & Summary

Okay. Ladies and gentlemen, grüezi mitenand. Oh, my apologies, these are the notes that Urs will be using when he's on stage. So also from my side, welcome again here to our new Innovation Center in Haag for the Capital Markets Day 2025. I understand it has been an eventful morning with factory tours, service center tours, Innovation Center, apprenticeship center. All the tours took a bit longer than we anticipated. I hope you still got a glimpse of what we are doing here. And of course, if you feel that some of the sessions were short of your expectations, feel free to contact either Chris or myself after this, and we can always arrange a second tour, at least for those who are relatively nearby. For those who come from a bit further away, whenever you're in the region, you're always invited to visit us here, and we can go a little bit more into details. So today, this afternoon, we will go through a couple of presentations. It will not be extensively long. It will be on the strategy of VAT, how we see we will drive our growth in the 5-year period from 2025 to 2029. You'll have seen the media release. Some of you, I see, have already the presentation in front of you. Also a little bit of chaos here. We have used a local printer because we are also kind of like looking for the people around us, not only as employer but also as -- kind of like as a customer. There was a little hiccup, but there will be enough presentation printed out also for you over the course of the day. I see there are still some left on the tables there on the back. So -- and for those who then don't have presentations at the moment, as soon as they will arrive, the remaining one, we will distribute those to you as well if you want to take notes. But today, you probably take the notes on your tablets and PCs on the PDF directly. So a quick -- so let's say, for the security, we are not planning to have a training exercise with an alarm or anything this afternoon. So if or should there be an alarm ringing, you can assume that really something happens. And we then ask you to follow the exit signs, which are like in the airplane on the right and on the left of you, and then down the stairs. There is then a point, a gathering point for those of you -- now we have the blinds down, but it's here on this side of the building. It's a green sign. And we ask you to gather there. We will then, of course, also have our security personnel on the ground to help you. So if there is an alarm, please leave the building in orderly fashion along the exit signs and down the stairs. Don't use the elevator. We will also -- and there will be a slide, but we will not read that, you know that, the forward-looking statement. So anything we say today, we use terms like estimates, expect and so on. You can read that in your leisure time. It's there in the presentation as well. So with that -- and then when we are done at 4:00, the bus will take you back to the airport for those who came in with the bus. We hope that the bus this time will stop at the right location here in front and not at the old headquarter address, but we made sure of that. So 4:00, for you guys who go back to the airport or back towards Zurich, is the shuttle bus departing. And that's all from my side. I wish you good afternoon. Learn a lot. We have really a high level of speakers with the CEO, CFO and our Executive Vice President of the Semiconductor Solutions Group. What we also intend is to make deeper dives into the service and the Advanced Industrials business, maybe for 1 hour, 1.5 hours, a webcast in the second half of the year, on the first half of next year and then maybe the next Capital Markets Day in 2 years' time. So with that, I will now hand over to Urs. No, hold on a second, Urs. I was mistaken. We first have a video. And after the video, you're on. [Presentation]

Ladies and gentlemen, grüezi mitenand. Welcome also from my side to our 2025 Capital Markets Day. Here in the Forum Horizon, now the shades are down, but maybe you could see why it's called Horizon in our new Innovation Center in Switzerland. We officially opened this building, our new home, on May 1. So you are among the first guests we host in this building. Also, a very warm welcome to all the attendees online. I'm excited to be here today together with my colleagues and update you on our very promising growth story. I will go short introduction, and then you -- I will elaborate on our market drivers, give you a few insights about our tool kit, why we are so successful in the market? Then Finn Felsberg will elaborate on our growth strategy and give you some exciting cases. And finally, Fabian Chiozza will close with the financial outlook. You will learn today that VAT will outgrow wafer fab equipment up to 2x. This is based on the technology shift and our share of wallet expansions. Semiconductor market will grow beyond USD 1 trillion by 2030. The emerging AI, artificial intelligence, application fuel the demand for computing, memory and advanced packaging technologies. This technology transition requires more vacuum-related wafer fab equipment. And the more and more complex chip manufacturing processes need more leading-edge wafer fab equipment. You might recall our reported spec win since the IPO. Spec win is our forward-looking KPI to ensure growth. The technology transition I just mentioned will boost our latest-generation valves and adjacent products into the market. I hope by the end of the day, you will have all the information you need to share my positive outlook. But before we start the deep dive, let's pause a moment and get a taste of 60 years VAT, 60 years of vacuum valve history. [Presentation]

We are ready for tomorrow. 3 weeks ago, VAT celebrated its 60th-year anniversary in the big top of Circus Knie. It was a special honor to welcome, among many others, the employee #1 who manufactured and assembled the very first valve under the guidance of the founder, Siegfried Schertler. In the conversation with this gentleman, it became obvious where VAT's DNA is coming from. From the beginning, our founder has focused on the uniqueness and quality of the technical solutions to surprise the customers and add value. The strategy paper from the early days is a clear evidence of this. But now let's start into the markets, the market drivers. In today's Capital Market Day, we will focus mainly on our main market, semiconductor, but we will give you a glimpse on the growth story in our service segment and the Advanced Industrial business. In the course of the next quarter, as Michel pointed out, we are planning to provide other short updates on these interesting fields. However and as reported in the full year results, 2/3 of our revenue is allocated to semi and related. And additionally, the majority of the 18% service business comes from semiconductor OEMs or the fabs. VAT is an integral part of the electronic supply chain, providing critical components and system to the wafer fab equipment OEMs. These are the companies providing the machines to the chipmakers. The chip makers or fabs are therefore the effective user of our products. Collaboration with OEMs and fab but also critical material suppliers in the downstream is crucial to be at the forefront of the technology. I'm sure you are familiar with these exemplary company names. It's just to recap where VAT is in the food chain. In the following slides, I want to guide you through some facts, which will help you to understand the VAT growth story. The underlying drivers are the progression of digitalization with AI fueling the demand for computing, memory and packaging technologies. Assuming a wafer fab equipment intensity of 15%, the total wafer fab equipment market will grow with a CAGR of 8% to USD 150 billion in the time that the semiconductor market surpasses the USD 1 trillion mark. When we are talking about outgrowing the wafer fab equipment market, there are 3 main factors to be considered. First, we are at the inflection point of a technology transition. The last 12 years, FinFET technology architecture was dominating the technology road map. In 2025, gate all around will be launched. Second, the manufacturing complexity is increasing. More precision processes such as ALD and more process steps require vacuum such as lithography and more and advanced packaging. And the third and the most important in my point of view is our share of wallet on these leading-edge tools is typically up to 2x higher based on spec wins in the past. So the total wafer fab equipment forecast shows a CAGR of 8%. In general, wafer fab equipment is a reliable indicator for VAT. Market consensus for 2025 indicates a temporary plateau at record level but still at a record level. Nevertheless, we expect to grow in 2025 based on investments in logic. In memory, high-bandwidth memory expansions and more layers in NAND will also add to the wafer fab equipment demand. It is important to notice that there is a shift in the application split. In the past years, mature etch for China and non-vacuum lithography were dominant. This will change to more leading-edge vacuum systems. China, China will continue to invest and grow the self-sufficiency rate with domestic OEMs, although this is another growth pillar for VAT. So wafer fab equipment is a great proxy for our growth. But what is even more exciting and promising is that vacuum-related wafer fab equipment is growing with a CAGR of 12% compared to the 8% for the total WFE. And to top that, leading-edge tools where our share of wallet is highest is growing with an even higher CAGR of 15%. And again, the drivers behind are node size progression, the launch of gate-all-around technology, the increasing number of process steps and, with that, more vacuum processes. Now I was mentioning quite often the gate-all-around technology and transition. Moving to smaller design rules is seen as one of the most important technology milestones in semiconductor manufacturing. It is less about the computing power but the power consumption of the chips, particularly for AI applications. We need chips that consume much less energy. Since 2012, the progression of design rules has been based on the FinFET technology. So in 2025, there is a new era starting. It is expected that first consumer products will be equipped in this technology in 2026. The investment in fabs is happening this year, and the volume will grow over the next years. And of course, although this is only a start, gate-all-around architecture will be further developed and even smaller node sizes will penetrate the market. This technology transition impacts both the number of process steps, which will increase in about 25%, and the design of the wafer fab equipment tools. More process steps mean longer processing times for wafers. Therefore, more chambers will be required, and the precision of the manufacturing steps must increase to ensure the yield. Just consider a fake number that a fab has 95% of a yield. And now they are adding 25% of process step. If the precision of each step is not getting better, the yield will drop. In the end, cost. So this means that more precise and more ALD, epitaxy, advanced etch and EUV tool become more prominent in the manufacturing chain, all highly sophisticated processes that require high precision machines. Here, VAT technology with advanced valves and adjacent products play an integral part. Sometimes you also have to step back a bit and think, is there something out there that would make vacuum obsolete? The end market in consumer electronics asks for higher performance with no price increase and longer battery life, for example. This is driving the microchip architecture and manufacturing road map. As mentioned, new architecture is coming in, first, gate-all-around, and in 5 to 10 years or next generation will be CFET. These processes need extreme precision, and vacuum helps to manage it. So vacuum eliminates impurities and ensure a stable repeatable process environment. It enables precise control, which is critical to maintaining process integrity. Chamber-to-chamber matching is essential to achieve required yield with low defect rates and the overall fab efficiency. So for VAT, we say, vacuum is not just supportive. It's essential to meet the industry's scaling and performance goals. We are playing in a fantastic market, and our niche is even outgrowing this fantastic market. I mentioned the way to the $1 trillion semiconductor. Wafer fab spend will continue to grow with higher share of leading-edge and more vacuum-related machines. VAT will benefit from a technology transition. The wafer fab equipment mix is also in our favor going to more leading-edge tools. So this will turn into higher growth for VAT. So market dynamics are playing in our favor, but success in this industry is not automatic. The question now is, why is VAT outperforming? What gives us the edge to grow faster than the wafer fab equipment market and deliver differentiated value? In this next chapter, I will walk you through the core elements of our so-called tool kits, the unique combination of technologies, capabilities and way of working that position us to win. First of all, I want to show you the testament that our tool kit has worked since the IPO. Our focus on valves and vacuum technology paid off in huge market share wins. In semi, we reached a record high of 77% in 2024. And in the semi and related markets, we won 25 percentage points since 2015. So what is the magic behind this outstanding achievement? And I was struggling if I should continue now or stop because it's our secret, right? But I will share it with you. As mentioned at the very beginning, already our founder was focusing on technology leadership and value for our customers. For us today, customer focus is not just a word. For us, it's an obligation. We are pure play focused on the semi market and delivering solutions for all key applications and all key players in the market. We must be there where our customers need our expertise. And we have to develop the next-generation products by anticipating what will be required in the next technology node. Being the clear #1 in the market, we must be ready for all our customers to ramp when the market is ramping up. At the same time, we must be very agile and flexible with our operating model. So our skills and know-how are not limited to our vacuum engineering and manufacturing competencies but also to how to manage these cycles. Let me guide through these 4 elements of our tool kit. Our customer focus started, as mentioned before, in the early beginnings. CERN in Geneva was, after the university in Zurich, our second customer. Until today, hundreds or thousands of valves support the fundamental research, providing groundbreaking insights into the basic building blocks of the universe. So researchers all over the world rely their experiments on our equipment. And as also shown in the movie, in the '80s, VAT started to customize products for early semiconductor tools. With that, the functionality shifted from extreme high vacuum isolation to pressure control and high-purity solutions. This slide highlights how customer centricity is embedded across all areas of VAT, from R&D to manufacturing and from our global presence to the way we operate as a focused, pure-play company. This integrated approach ensures that every part of VAT is aligned around delivering value to the customer, not just with great products, this is, of course, the main reason why customers come to us, but also with reliability, responsiveness and long-term partnerships. Our pure play in vacuum technology and our ability to customize products is at the core of the customer experience. VAT has built decades of trust with customers, positioning us as a preferred partner. This trust is rooted in a deep understanding of the applications enabling these tailored solutions. Customization is one of the key strengths in our engineering teams, and strict firewalls between the different customers is a must. When I look back to my early interaction with customers 20 years ago, we approached the clients with specification sheets, and then we started with design. In today's complex environment, the collaboration is different. Our customers expect from us that we invent ahead and guide them what they need for their application. In this way, we can reduce the customers' complexity, and the customer can focus on their core. Sustainability is also not an isolated topic in VAT, but it is done in close collaboration with our customers and suppliers. We are committed to contributing to the sustainability goals of the industry and our customers. Also here, a close correlation to the customer. We see it as an obligation for our planet and society but also as another opportunity to differentiate and add value. Now let's move to the second element in the tool kit, technology. Our R&D spend is increasing year-over-year and is focusing on the requirements for the semi customers. Also here, we are living the pure-play approach. Our total spend in R&D is more than the valve sales of our competition. Our research activities focus on the high-value industry challenges, such as fast and precise motion control, advancements in sealing technology from metal seals to PFAS-free elastomers. We explore physical behavior of particles in vacuum. We define ultraclean requirements along the entire value chain from the raw material to the installation of the product. And at the very core, we expand our offerings from vacuum valves into integrated systems with additional functionality. All these activities turn into customer benefits, and we measure our success in our spec wins. These spec wins will secure our business and add big times to our growth. I'm happy to show you 2 examples of VAT's superior performance in our products. In our core technologies, we are constantly improving performance. And with that, we do enable the progress in semiconductor manufacturing technology. On the left side, we see the development of actuation speed for one of our control valves technology mainly used for deposition chambers. At the time when 200-millimeters wafer were used in the 1990s, speed was around 2 seconds. With the introduction of 300-millimeter wafers, it was improved to 300 milliseconds, which is roughly the speed of the blink of the eye. For the latest generation, for example, ALD processes, we are on track to be 10x faster than this blink of the eye. The animation shows old versus new technology in slow motion. On the right-hand side, the improvement in purity is displayed. In 2012, when FinFET technology was launched -- actually, that's the technology we are using -- still using today, our valves were shading one nanoparticle per closing cycle. VAT's expertise in advanced machining, cleaning and material science improved particle performance by a factor of 1,000 since then. So our valves today generate less than 1 particle every 1,000 cycles. These are the technologies and features that bring huge value to our customers' machines and act as the main barrier against our competitors. I pause a bit here and let you enjoy an animation showing an illustration of a vacuum system with many different VAT valves and adjacent products. So there is no sound. So I do not sing, but I can maybe comment a little bit. So you have seen the modules, modules with a lot of transfer valves included. We have adjacent components as well. Here, the typical transfer valves, so transfer meaning the wafer is going into the system. It's like a door, closing the door. And then it's in the chamber. It will be pumped down. And then there are transfer valves going into the process chambers. Typical isolation valve to isolate the pump, very small ones sometimes. Also angle valves to bypass the flow. Sometimes they are integrated systems as well, so control the pressure and isolation in one valve. It's a typical adjacent product as well that we're also delivering, heating and cooling plates, so heating up and cooling down the wafers. The wafer needs movement, so the motion component touching the wafer and moving it. Symmetrical flow valve to control a very precise pressure in the chambers, upstream valves here to isolate very aggressive plasma, and another type of isolation valve, our famous 65 developed in the '90s and made it in the kind of the standard in the industry. The third element in our tool kit is extremely important for VAT since it provides the resilience we need in our volatile market environment. Our proven flexible operating model has demonstrated that our profitability remains very attractive even in semi market downturns. Cost discipline, our DarWin program, strict protocols in market downs and a high degree of automation built the foundation. We manage it through a flexible workforce with up to 25% temps in a peak, enlarging the best-cost country sourcing and focus on IP critical parts for in-house manufacturing while 75% is outsourced. This all results with 67% in a very high level of variable costs. For our customers, I mentioned that it is essential that we can ramp when they need us. So as the preferred partner in the industry, we have to be ready, and we have to invest ahead of the cycle. 2025, this year, is kind of a completion year of our big investments in operations in Malaysia and Romania. Just next month, VAT will officially open a new plant in Romania. With all the expansions, it is worth to mention that VAT is also committed to keeping Switzerland as a key location, not just for R&D and engineering but also for production. Thanks to a high level of automation and a highly skilled workforce, we are well positioned to bring new cutting-edge solution to market that meet the evolving needs of the high-tech industry. Today's infrastructure will allow VAT to grow beyond CHF 2 billion. We are ready for the growth with top-class manufacturing facilities. In a highly specialized industry like ours, technical expertise isn't just a support function. It's a strategic asset. We maintain an internal core competency program where our employees can learn and impact the technology road map in their field of expertise. There are 2 dimensions in this program, the technology dimension and the people dimension. In the technology dimension, the lead experts align competency and strategy annually with the management. The core teams drive the road maps on how to expand our competitive advantage, market leadership and innovation. In the people dimension, the lead experts and our calibration board shape and influence VAT through community leadership. It ensures both transparency and consistent development opportunities for our experts to reach their potential. The Swiss apprenticeship model also acts as a differentiator for VAT. And we are participating since 50 years to this program. We train key roles we need to differentiate in the market and meanwhile even rolled out the program to our colleagues in Malaysia. So in-house retention and development of skills is a crucial asset and acts at the same time as a barrier to entry into VAT's core markets. In summary, our pure-play focus, a close end-to-end partnership with our customers, the demonstrated technology advantages and the highly flexibility -- the high flexibility with proven downturn resilience are the key elements in our successful tool kit. VAT differentiates through deep customer engagement, being present where and when needed, backed by 60 years of specialized expertise in vacuum technology. Continuous innovation and R&D investment enable advanced vacuum applications, increased spec wins and support expansion into adjacent fields. VAT maintains agility with a 30% ramp-up capacity and robust cost control measures, ensuring resilience during market fluctuations. A strong internal competency network and apprenticeship program ensures skilled workforce and support long-term innovation. That's as a summary of our tool kit. So I have covered now the market drivers and the secret of our tool kit. And now I want to hand over to Finn Felsberg. He is our Head of Semiconductor Solutions Group, and he has the pleasure of presenting the growth strategy peppered with a few amazing success stories. So please, Finn.

Okay. So let's come to our growth strategy. So we have a clear profitable growth path ahead of us. And the foundation for our growth is our undisputed leadership in core -- in our core business with vacuum valves for the semiconductor industry as well as our advanced industrial markets. We will grow beyond that with profitable growth with products and services which are adjacent to our core valve business. And this is not only limited to service and products. We also look here into adjacent markets like, for instance, advanced packaging where today, we have a very good foothold in already. And those areas, our core and our adjacencies, are the foundation for our growth in the short, mid and long term. However, we are already working on what's coming beyond that. So we look into complementing our portfolio with advanced products with vacuum solutions in order to generate growth beyond the time frame of 2030. I will not go into this in today's presentation since much of that is still very confidential. I'll tell you, while today, we focus on the core and the adjacencies, there's much more to come beyond for the growth beyond 2030. Okay. Let's go through the details of each area. So let's start with our core valve business. Our core vacuum valve business makes up more than 50% of VAT's group revenue today, and this will remain the same throughout the next years throughout 2029. And when we talk about our core, we talk about control valves, we talk about transfer valves, and we talk about isolation valves. And these are areas where we have a very strong differentiating position. And Urs talked about that intensively before. So we deliver best customer value add over the entire product life cycle when we talk about total cost of ownership and performance. And this has led or materialized to our dominating market position. And especially when you look into the leading edge, here, our market share is above 90%. And this is because our customers rely on us as their innovation partner, developing their next-generation wafer fab equipment going to 2-nanometer, developing gate-all-around processes, entering the angstrom era going down to an atomic level. As Urs showed before, so our core valve business benefits from the big growth in the semi industry and the wafer fab equipment growth. We also benefit from the increasing share of vacuum content. Our business also sees growth based on the increasing number of steps in deposition and etch, which requires more chambers. But on top of that, we see that we have the potential to outgrow the market, and we are very confident to do that based on these spec wins, which we have achieved and which we have in the pipeline ahead of us, to achieve a CAGR of about 15% plus over the next years. And again, so in 2029, our core valve business will also be more than half of the VAT's group sale. So overall, we are very well on track with the spec wins here. And when we talk about differentiation of spec wins, let me share with you an example, which is a success story which we achieved last year. And this is also a very good example, by the way, for our technology leadership, for our customer focus but also for our global team's skills and capabilities. So the display market is shifting from LCD to OLED. And what you see here is an example of those huge manufacturing lines. And this is the evaporation manufacturing part of that. This line is about 350 meters long. So this is really big. It uses more than 40 vacuum valves, more than 100 transfer valves, more than 300 pendulum valves. And here, we use the same technology as we use for our semiconductor valves but, as you can imagine, at much larger dimensions. So now as the OLED display technology for tablets and mobiles goes to the next generation, we also see, of course, increasing requirements on this evaporator manufacturing processes. And we work very intensively with the market leader who is producing these manufacturing equipment. We work very closely with them, codevelop with them their next-generation manufacturing line, really stretching the capabilities to the edge on a very high time pressure, and we made it a success with them together. And that was a great success story for us last year. And as a very common pattern also, such a spec win is also the foundation for further spec wins to come because with the same customer, more business follows and other following customers also follow and we generate spec wins with them. So the OLED segment is a nice driver for us in the display. So we see that we have the growth here of more than 20% CAGR over the next couple of years so that in the overall display business for LCD and OLED for our vacuum valves, we see the potential to have a market share of more than 70%. So let me give you an overview of our adjacent growth plan. And this has, of course, a target, as Urs said before, to increase our share of wallet in the semi wafer fab equipment. And the adjacencies fall into 3 categories of highly spec-ed products. And this is, first of all, the advanced modules. So here, we talk about bundling our core and adjacent products in subsystem solutions like transfer modules or load locks, which we deliver to our customers, not only to increase more value but also to help them to outsource complexity as they need to focus on their core. Second, motion components. Here, we talk about pin lifters and shutters. This is an area where today, the market is supplied with suppliers who don't have the semi focus. Also, to a large extent, still, the OEMs do developments themselves. So here, we are in a position with our clear focus on semiconductor to develop very dedicated optimized solutions, which help to optimize performance, which help to optimize cost performance at the customer and at the same time also help them to outsource complexity. So the third product family I'll talk about here is a big highlight. It's our ALD inlet valves because it's our first product family going into precision delivery. This works very well in the market. So we have shipped the first productive units and quite a number last year to a leading ALD customer. And there's more to come in terms of spec win with this customer and also others as we go wider here. So we look at the growth perspective for our adjacent business. Of course, coming from a much smaller basis, we see a strong growth potential over the next years with a 25% CAGR so that we see the potential that with our adjacencies, you could come up to almost 20% of our group sales. So very nice development here. And as we talk about increasing our share of wallet with adjacencies, I would like to share with you the next video. [Presentation]

Okay. So let's move on. Let's talk about our service business. The revenue for our service business mainly comes from gates and consumables and upgrades and retrofits and to a smaller part from repairs. And here, we have the advantage, which we can leverage, and this is a huge and growing installed base of VAT vacuum valves out there in the field. So we talk about 1.7 million VAT vacuum valves as the basis to leverage our service business. And here, our customers also rely on VAT because we have the quality standards, which we deliver to them very close to their sites through our service centers, which are globally distributed close to our customer sites. Now the leverage for growth, which we see here, is upgrades and retrofits. And I will talk about that a bit more on the next page. However, we see also here that we gained market share, more than 30% compound growth, and here also potential to grow our sales for services to keep it on the 18% to 18% (sic) [ 20% ] of the VAT Group sales. So what is important for our service business, and this is important for us for our business as an important pillar, is that its end-to-end value chain offering to our customers. So we talked about the increasing base, the growing market. And here, of course, this is what we use to leverage the core, spare parts, repairs, gates, consumables and upgrades. Of course, when we talk about service business in the semi industry, it's, of course, a volatile business since demand here correlates with the utilization of the wafer fabs. That is part of the nature of the business. What is attractive for us in that field as well is doing retrofits and upgrades because this gives a chance to really create value in the later product life cycle, also replacing competitors. And now with the increasing requirements on sustainability, we help our customers to fulfill their sustainability targets also with dedicated retrofits and upgrades to reduce emission, resource consumptions and reduce the usage of elastomers. So that is for sure also leveraged. And again, there's a huge base of installed chambers out there in the market which will benefit from the sustainability trend. Okay. As the last part, I would like to talk about the advanced industrial markets, which is a nice growth field for us, a very profitable one. And here, we make use of existing semiconductor products and technologies, which we use to address very attractive market segments in this industrial market. And with this also, VAT remains at the front-footed position to make sure that we also capture the next big thing, like semiconductor was 40 years ago. And it's also important for us because it helps us to keep out competitors, which come up from the side. So here, with this very focused strategy -- and we focus on large accounts directly, and we leverage the broad customer base out there to go wide via distributors. So with this focused strategy, we are confident to also outgrow the market with 12% CAGR. And let me give you a bit more details about the advanced industrials markets. So we see 5 segments. So first, research, which is attractive for us because it gives us early access to innovation and emerging technologies. Scientific instruments, which is the solid baseline with repeating orders as a business, so less on the project side. Coating, so here, we have strong differentiation where we talk specifically about optical coating, which we can then very nicely cross-sell into the wider part of the portfolio. And when we talk about target industries, for sure, currently, silicon carbide is a big topic, but here, it goes into various general industries. And the last one, power generation as an attractive long-term growth field, of course, we talk about solar, fusion and nuclear enrichment. Yes, to conclude, so our profitable growth story continues. In the core, again, this will remain a big part for us, more than 50% of our group sales today and tomorrow. And with our strong technology leadership position, with our market leadership position, we are confident that we are going to grow with 15% CAGR and outgrow the market. We're going to expand our share of wallet with adjacencies in semiconductors. Also here, leveraging our technology and market access to more evolve into the vacuum systems sphere, going more into the system area. And here, again, there, we see the biggest growth with more than 25% CAGR. And then finally, the further growth with global services and advanced industrials services, leveraging the large installed base, which is out there, doing retrofits and upgrades, also leveraging the need for higher sustainability targets. This gives us here a growth potential of 14% and 12% for Advanced Industrials where we target profitable attractive non-semi market segments. Okay. Thank you very much, so much all about the growth strategy. And now Fabian will take over with the financial outlook.

So good afternoon, and welcome again to all of you here at our new Innovation Center, and also a warm welcome to the ones on the webcast. I have the good fortune of working with the VAT team for more than 4 years now. The past 2.5 years since our last Capital Market Day have been very exciting as we have further transformed the company to harness our exciting growth story ahead. Earlier, you heard Urs outlining the strategy and differentiation points, and Finn discussed our leadership position in semi and some highlights of our service and Advanced Industrials business. During our time together, I would like to review our track record of financial performance, our growth-focused approach to capital allocation and finally the cornerstones of my agenda. Let's begin with a recap of our business units' growth ambitions. Our semiconductors business is set to grow more than 15% on core valves. We are intending to increase our market share to about 85% by 2029. Our adjacencies business is growing by more than 25% towards a 20% overall share on SKU to leading-edge chips and spec win rate of last years. Our Global Service business is constantly increasing its installed base, driving growth in consumables, upgrades and retrofits. With a CAGR of more than 14% over the 5-year period, we are expecting to increase our market share in services beyond 60%. This comes at a very accretive margin profile where we expect to leverage about 3 to 5x the revenue of the individual valve sale. Last but not least, our Advanced Industrials business is operating in a fragmented high-vacuum niche market and is leveraging existing semi products and technology, providing also accretive margins 2 to 3x market growth and, last but not least, also some resilience through the cycle. Over the past 3 years, VAT has significantly increased its capital expenditure to create search capacity customers expect from a single-source supplier like VAT. In Switzerland, our flagship factory can add another CHF 500 million in capacity, which will be required for low-volume, high-mix semi manufacturing, our ADV specialization, prototypes, new advanced products but also service. Our 2 sites in Malaysia have a combined capacity for more than CHF 1.2 billion in sales. I would like to take a moment to thank our talented local and empowered people for all their efforts and achievement over the course of the last years in adapting our footprint. Let's jump to our capital allocation principles. The good news is priorities are unchanged until 2029. In 2024, we spent a significant amount for front-loaded growth CapEx in Switzerland, Malaysia, Romania but also here to establish this magnificent Innovation Center. Our R&D spend also reached record levels of CHF 61 million or 6.5% over sales, securing our competitive edge. Last but not least, we continue to return excess cash to shareholders up to 100% free cash flow to equity. Managing uncertainty and the unpredictability of our business environment is at the core of our financial steering claim. Last autumn, our ERP transition gained some attention post the Switzerland go-live. I'm happy to report that the patient is out of the emergency room and has also left the rehab and the full focus of the team is now on the rollout in the sales and service entities, which we will conclude in 2026. As I have highlighted various times, our new ERP serves as the foundation for our digital transformation road map, which will bring further scalability, productivity and ultimately also profitable growth. Our corporate transformation program, also known as VAT2B, is at the core of our efforts, providing people, structure and processes to scale the company towards and beyond CHF 2 billion. In our rather volatile industry, disciplined cost and capacity management is key, combining customer build plans and our flexible operating model. Over the years, we have established proven protocols to maximize our resilience through the cycle. These include our temp ratio, the variable-to-fixed cost ratio, our in-outsourcing ratio, our DarWin program, but last but not least, also our move into best-cost country. More than ever, our global footprint and our best-cost country footprint are key to master the current and most probably enduring Swiss franc strength. On the other hand, our exposure. In parallel, we continue to apply our proven financial hedging strategy. We also maintain our very solid balance sheet and target a net cash position by the end of 2026. Our attractive gross profit development evidences our relentless focus on operational excellence. Our continuous improvement program, also known as DarWin, has been reinforced since 2021, and this is providing about 2% to 3% annual gross savings. This helps us to lower our COGS and standard cost baseline continuously and to cope with persistent inflationary pressure and other negative effects. More recently, we have been able to lift our gross profit margin by 400 basis points from '22 -- sorry, '23 to '24 on the back of these continuous improvement programs, a favorable mix but also some inventory changes. Ultimately, this focus on gross profit and the achieved level is a key enabler for the operating leverage. The anticipated double-digit top line growth is providing the foundation for our EBITDA expansion. If you look at the chart, you observe how VAT benefited historically from the operational leverage, and we do expect that this will also bode well into the future. At the same time, VAT will continue to consciously invest ahead of the curve, keeping higher R&D investment to secure our competitive edge. Amidst challenging FX development and ongoing volatility in our space, application of our flexible operating model will secure our downside resilience through the cycle. The EBITDA target band has been expanded to reflect potential downside risks. Some moments ago, we discussed VAT's investments into capacity and R&D. While the latter will continue, our growth CapEx investments will normalize in the coming years. At the same time, we will benefit from efforts in ERP and our digital transformation to bring our trade working capital into the target corridor of 22% to 26% over sales. In combination with solid EBITDA development, we introduced a new free cash flow conversion range, lifting the upper end by 5% from 65% and to 70%. Aggregating the building blocks of our business unit strategies, core semi will contribute about 50% of the midterm growth, whereas adjacencies will contribute about 50% of the remaining growth. Factoring in current FX and WFE environment, our 2027 milestone sits at CHF 1.5 billion to CHF 1.7 billion. With a 5-year CAGR of low to mid-teens, we are confident to outgrow WFE up to 2x. Ladies and gentlemen, I would like to conclude my remarks by consolidating our business vectors into our attractive value proposition, which is based on 3 pillars: growth, profitability and capital allocation. As we introduced earlier on, the $1 trillion semi market, our exposure to vacuum and leading-edge WFE as well as the ongoing technology shifts into Gate-All-Around, ALD, the AI proliferation, but also new themes that are moving into the vacuum space, such as advanced packaging, metrology inspection will allow us to grow over the next 5 years in the low to mid-teens. Our relentless focus on operating excellence, the cycle management with our flexible proven operating model as well as our push into our best cost country footprint will help to mitigate our Swiss franc exposure. Bottom line, we introduced an EBITDA margin band over the course of the next 5 years of 30% to 37% of sales and also a free cash flow conversion rate of 60% to 70%. Last but not least, we continue to invest ahead of the curve into leading-edge innovation, harnessing the opportunities that we have at our fingertips. We will also invest ahead of the curve as we see demand unfolding, remember that we have sufficient capacity available for about CHF 2.4 billion of sales. And lastly, we will continue our strong dividend policy. Key metrics here, we're talking about around the 5% R&D spend of our total group sales. You have seen before that the semi spend is about 6% to 8%. Our CapEx rates will also hover around 5% of sales over the course of the next 5 years. And we will continue with our dividend payout of about -- up to 100% of free cash flow to equity. We are confident that our business is well positioned to achieve those mid-term targets, creating long-term value for our shareholders. I'm now inviting Urs and Finn back to stage to kick start our Q&A session. Thank you very much.

Thank you, Fabian. So we now come to the Q&A. Most of you, you know the procedure. We first take questions here from the room, where I ask you to please wait for my colleague, Daniel, to come by with another microphone because otherwise, people on the phone or on the webcast wouldn't hear what you like to ask. [Operator Instructions] We have lots of time. Like I said, the bus is only leaving at 4:00 O'clock, so we have lots of time for all the questions. If you then have follow-up questions, we will certainly award those to you, but to give everybody a fighting chance to ask a question, please limit yourself to 2 questions. I will start here in the room. We will then potentially go to questions that we have over the phone or over the webcast. Chris will give me a sign if there's a question there. So with that, I would open the floor for questions here in the room. And we have Michael in the first row. Please state also your name and company workflow, please.

Yes. Thank you, Michael Foeth, Vontobel. Two questions. The first one is on the development of the capital intensity of the semi industry. You mentioned 15% as your assumption. I think that's the level where we are now. And you assume that the capital intensity remains at that level by 2029, 2030? Any reasons why that could deviate either up or down. So I think that's going to be a significant driver of growth or change for you? That would be the first question. And the second one would be the opportunities that you see in advanced packaging for VAT more specifically, if you could give some indications of what applications for VAT might be interesting in advanced packaging.

Yes. Thank you Michael. Maybe I'll start with the intensity and then hand over to you for the advanced packaging question. It's a very good question, yes. So that's, of course, if you look historically how this wafer fabric intensely moved, I think many years back, it was around 12%, and lately, it was more at the 18%, but this was also driven then on some of very expensive tool coming to the market, not mentioning which one from the lithography, but I think that will be kind of leveled out as well. And I think now it's a good consensus in the market that it will be in 15%, some say 12% to 18%, and we, in our model, we're just using now the average of 15%. I think there is -- there was -- I tried to highlight that a little bit, especially in the last 2 years, quite a shift in wafer fab equipment in the split, a lot of Western OEMs could sell into China. So there was a strong appetite in China to buy the tools and especially lithography tools as well, non-vacuum lithography, the traditional one. And this kind of the split was a little bit, yes, out of balance, I would say, for few years. I assume that this will go back to the normal level. And that's why in our model, we say this 15% is a reasonable number. Advanced Packaging, of course, an interesting technology. You want to add some flavor on that, Finn?

Yes, definitely. So you have vacuum processes there as well, definitely. And this is more an evolutionary migration of the semi processes which you have. So therefore, naturally, we are part in those processes with vacuum valves, transfer valves, control valves, isolation valves. But the interesting question is how is the application going to evolve, right? And so we are in there today, and we monitor it very closely, also engaging with the customer to see what are trends as this is going to pick up, just to quote others, advanced packaging might become the new lithography, right? You have this call out there. So therefore, there is quite some momentum in. And this is why we observe the development of this application very closely to see how we can help to optimize the processing to improve cost performance than as it starts to ramp up further.

For us, it's another great opportunity, right? Packaging was not a vacuum process. And now with advanced packaging, some of the process move into vacuum. This is what I mentioned before, that's so exciting, that more and more of these process steps go into vacuum, that's kind of part of our growth story as well. And in the end, there are always the same big guys in the market who will win, and that's why we have to be close to all the customers and then we just follow them. Sometimes we call the name, we are kind of agnostic to the industry. If this is ramping, we are happy. If the others are ramping, we are also happy.

Exactly because they are the big ones, but they're also small dedicated focus players we're dealing with. So we are on that market.

Okay. There's a question back there.

It's Janardan Menon from Jefferies. First question is on the spec win number. So you've put 132 spec wins. Can you just confirm what market share that represents? Is that the 85% which you've given us your targeted sort of market share in the chart in 2029? Or what is that running right now? And what percentage of that spec win is from adjacencies? And if you can also say what percentage will be from China, that will be great. I'm sorry, I'm adding more questions into my one question. But -- and the second question is just on your gross margin. You've got a 62% to 66% range for 2029, you were at 66% last year. So what kind of -- are you expecting any headwind over the next 3 or 4 years? Or if you're already at that level, why not sort of gave a range which could even exceed that a little bit given your ongoing cost reduction program.

Let me start with the spec wins. Of course, you understand that we cannot disclose who are the big drivers behind that, but in general, it's the whole market. If you see that the Gate-All-Around technology is going into the market, all the big players, they have to come with new equipment, new process, chambers. And there, of course, every time they have to qualify new products. And this is what we say, design in, we have spec wins. And yes, of course, China is booming at the moment. They want to achieve the self-sufficiency rate. And of course, also there, it's a great opportunity also for us to have a certain spec wins. In the leading edge, we certainly -- I think we displayed that sometimes that leading core, we can say, valve technologies versus adjacencies. Still -- we are still the strongest in core, but also here, adjacencies are picking up as well. And with adjacencies, we also have a very focused -- again, a very focused approach as we are always very focused that we always play with the big players in the market.

Maybe to add to that, of course, those spec wins geographically come in waves, right? It's not a uniform pattern. However, the good thing is there, well, we are very strong on the leading edge. In China, we had a lot of spares over the last few years, which are more on the lagging edge of the equipment. So that also make sure that we are -- have a wide coverage of the market here.

On your question referenced the gross profit margin. Remember, the building blocks that I introduced that were at the foundation of this 400 bps increase from '23 to '24. I think we have some that are recurring, others that are nonrecurring. Our DarWin program, the continuous improvement will yield this 2% to 3% on an annual basis is a given. On a net basis, the impact of this for the expansion last year, was about 1/3 of the 400 basis points. Then we had another 1/3 in a favorable mix both in the customer portfolio, but also in the composition of our businesses, remarkably also in the service business. And last but not least, we have the inventory changes that also play into our gross profit margin. And as we had increasing inventory levels in 2024, you had about 1/3 or about 1.3, 1.4 percentage points allocated or contributed from that factor which totally depends on how our inventories develop. So on a normalized basis, the gross profit margin of last year would have been somewhere north of 64%. And from that level, we still believe that we can increase up to 66%. But obviously, also have to monitor the developments in our specific businesses, especially then how the share -- how the customer split develops. Plus, we also have headwinds such as our FX exposure.

Meihan Yang from Goldman Sachs. I have 2 questions. So first of all, on the margin target, as you've said, the WFE market should be less cyclical from here going forward. And also your global footprint should help you with less CHF appreciation so less headwind from the FX. What are the factors that makes you expand the margin target on the downside?

I think in life, you always have to learn. And as such, we also had to acknowledge the fact that in '23 and 2024, we had so many opportunities that we could harness that any, let's say, interruption of our R&D investment plans would just not have been mindful. And as such, we want to generate the space that we can also continue these investment programs as we go through the cyclical development of our industry. So that is definitely one side of the coin. The other side of the coin comes back also to the uncertainties that we have in the market to the extent that VAT still has quite a significant exposure to the Swiss franc. And then as our contributions from best cost country will increase as we will also increase our sourcing activities in these areas as we will then also lift the natural hedge that should provide some resilience, but we will certainly still be confronted with that challenge going forward.

And just a quick follow-up. So on the service potential opportunity, used to say it's about 5x of the valve value for the whole life cycle. And it seems like there's a bit more cautious on the 3x to 5x. Is it because you're seeing more service that OEMs want to in-source or some competition? Any thoughts would be helpful.

Well, I think I can take that one. So I think we keep giving here a range, right? So valve applications are so many fold out there. So we have thousands of different applications. And not valve is in a highly corrosive environment. And there, the cycles are much faster. So you go much faster in a repair or an upgrade. And some -- we even today get valves back, they are 40 years old and the customer wants them back because, yes, our founder had a good technology and they want it back, and they don't want to have any change. And that's why the average, we say it's a typical 3 to 5 in a high volume now in semiconductor. This is what we expect will happen. It's a model behind to show what's our growth will evolve. It's also important to notice that our service business is always kind of lagging from the OEM business. It always takes some time first until the service comes into the play, sometimes because, yes, it first has to run. And second, also, our customers, the OEM, they maintained their tools until maybe 5 to 7 years and then they hand over to the open market.

Okay. Thank you,. We have one question from the phone here. So operator, please?

First question comes from George Brown from Deutsche Bank.

I have 2, if I may. I can take them one at a time. Just firstly, on NAND, where you're well exposed. Can you maybe share some more details on the drivers here for you going forward? Whether that's rising lay accounts and also the use of more cryogenic etching in 3D NAND. What does that mean for VAT specifically?

I can start that one. Yes. So NAND, certainly, we will see growth in NAND or our customers. First of all, they will see the growth in the NAND technology. As I mentioned before, we are qualified on all the different technologies. This year, I think it's more or less upgrades what's happening in NAND and expansions will follow in the years to come. There will be more layers. That's certainly something that will happen more and more layers means more chambers as well. And as you also pointed out, yes, if you see these layers counting up, they always have also do their vertical drilling down again, and this is this special edge that comes into play, so more process step as well that need the leading-edge technology behind. And here, of course, the more leading edge, as we pointed out, the better for VAT.

And then just a second question, maybe a longer-term question. Just in the field of adjacencies, I know you launched a MEMS pressure sensor not too long ago for the most advanced applications. Do you have any plans to push further into advanced sensors by 2029 or maybe a little bit beyond. And if so, would you be competing with the likes of MKS or [ Intercon ] here? Any comments there would be helpful.

I think this was the portion that also Finn pointed out in his presentation, more the 5 to 10 years horizon. For us, as I mentioned, we are a pure play in vacuum technology and our bread and butter is actually our pendulum control valve, so controlling the pressure in a chamber. And there are many parameters, many elements playing into that, that we have the optimal pressure control. It's algorithm, it's faster actuators. It's also knowing what's coming into the chamber. So that's why we have these upstream initiatives as well. And yes, there is also sensing around. But the sensing is for us, not the primary focus can add on, but it's not our primary focus. So it's not that we will become a sensor company. Now we are a vacuum valve company, an integrated system and components like sensors, but also heating and cooling. And lifters play all into that system as well.

Now I hand the mic over to Chris who has 2 questions from the webcast.

Thanks, Michel. The questions come from Nabeel Aziz at Redburn. The 2 of them, and I'll just read them in turn. Number one, could you discuss the dynamics in China? And how you expect your China business to grow relative to the group over the medium term? That's question one. Question two is, could you discuss some of the assumptions in relation to your 2027 guidance of CHF 1.5 billion to CHF 1.7 billion, what would be some of the puts and takes to cause this to hit the low end of the range? And what would cause this to trend to the higher end?

So I can start with the first one, and then Fabian can think about the second one, right? China. China is really into a very interesting field for us. And I think we are here in a little bit different position than our customers are. So our customers last year had a lot of sales into China, and you could read it everywhere up to 40%, 50% of their machines went into China. And this is now, of course, expected to reduce over the next years. We were never focusing on that business going through our OEMs into China. When we are displaying numbers, it's always our direct business with Chinese OEMs as well. And yes, they want to increase their self-sufficiency rate. They are roughly at 20% today, and they certainly have a plan to grow that to the 60%, 70% or even more. And this already shows to increase the self-sufficiency rate that's a great business for us as well in our direct interaction with China. The portion as displayed will be roughly at 30%. And I would say year-over-year, this will be hover around this 30%, maybe 35% going forward.

And then on the milestone 2027 at CHF 1.6 billion midpoint. If you do the math, you have 2 years of sequential 20%-ish growth. The number is where consensus is also for 2025, and we have commented earlier on that we feel still comfortable with that number. And I think the 2026 story heavily depends on the NAND push. So ultimately, we need consumer also corporate spend in smartphones, in PCs to come back up. On the acceleration options, I think we have to go back to what we discussed earlier on, which is certainly at the forefront, the technology shifts. So we are increasing at tremendous speeds. There's a leading-edge chip starts. And you have seen on the chart, there's a CAGR of around 200%. Now these fabs are all busy building expanding. And I think ultimately that the pace of the industrialization, again depends on the pull from the consumer. So if there is going to be this ultimate need to drive performance and even probably becoming more and more important, power consumption, right? Remember what we also told you from a 5-nanometer chip to a 3 to 2-nanometer chip, you have about 30% to 40% lower power consumption. And I think with the current discussions on renewable energy transitions, we will run into a threat of not having enough power. So that might really be another driver for that. Besides the transitions that we have discussed in all areas in logic, in NAND, but also in DRAM. So that more to the upside of it and for the base case, I think we will really see this unfolding based on this NAND pickup in a combination also with the spec wins that we have accomplished, we will see a rejuvenation of our service business, which has definitely been hampered by the low utilization levels, which didn't bring us in a window of opportunity, both on the OpEx and the CapEx side, where we expect this to come back and momentum is good at that front. And last but not least, also our Advanced Industrials business has had quite a disappointing year on very weak solar business. And also on that front, over the course of the next 2 years, we do expect quite some favorable contribution to the top line.

Another question from the webcast, and we'll come back to you shortly. This is from Sandeep Deshpande at JPMorgan. First, VAT talked about higher growth from the leading edge that is below 7-nanometer market, which is more vacuum intensive. However, VAT has grown significantly at Chinese suppliers in the last few years but they are not in the leading edge, i.e., below 7 nanometers. So would that exposure not slow VAT growth? And the second question is in terms of U.S. restrictions on SPE companies, VAT has not seen any impact. Has the company had any conversations with the U.S. on this as they have been more restrictive on what they want to be supplied to China. And is there a risk that VAT gets impacted by trends seen by other equipment suppliers?

Well, I think in the China story, the OEMs in China, and they are now designing all possible applications, all possible applications in sourcing from the Western world. So there is so much additional business at the moment going an additional drive to do innovation in China. And I think that's kind of part of -- even of our growth story as well. They are -- as pointed out, yes, they are not yet at below 7-nanometer, but still, they have to catch up what the Western world has done in the last 10 to 15 years, and they do it in a completely different speed that we are used to in the Western world. So they are much faster than we are. Not only the trains are faster there, but also their speed in innovation is much faster. And they will also -- of course, they also will have challenges. They will go through the same challenges we had, as I mentioned, with particles, speed, yield. All these challenges will come, but they will manage that. And I think here, we can be a partner as well still with the strict firewalls. We can, of course, not use technology we have for other customers. But with our know-how and our IP, we still can support these customers as well. No, we don't have -- we don't talk politics here. We are a Swiss company, pretty neutral on this planet, try to stay that as long as we can. We are following all the rules we have. We are compliant. That's very important. We have to also here earn the trust from all the customer every day. And -- but going forward, we still see opportunities also to bring in technologies. They are not that critical and not under rather of sanctions to the Chinese customers.

Jorn, you have a question. Thank you

Jorn from UBS.

We had lunch together, right?

That's right.

You had questions.

But I have to limit to 2, as always. The first one would be pleased to give a little more details on your 2029 outlook. You can come from different angles, but the semi wafer equipment CapEx, you are looking for the $150 billion is a 10% CAGR roughly versus 2025. You're also saying your wealth business, your service business, your industrial business is growing 12%, 13%. So this alone would fill up already the low to mid-teens. And then the adjacencies should come on top. So why is it not, for example, 15% to 20%? Or the other way around, when you are saying of the mid-teens growth, 50% is coming from adjacencies, 50% from underlying. This would mean your underlying is growing below semi wafer equipment CapEx. So the question is at the end of the day, sorry to make this long, is there also that you have a lithography step up, for example, seeing in '28, '29 again, which is not so beneficial for you, but is it just these are rough numbers? Or is it just these are rough numbers and it's a little more detailed how I look at it.

I think ultimately, you are the essence of the different building blocks here. And one also needs to -- remember, I pointed that out before that our industry remains cyclical, right? I want to say that here very, very prominently. And most probably up -- or in the 5-year period, we will also see a certain correction which, to a certain extent, we have also factored into that guidance of low to mid-teens. I think the individual building blocks have been thoroughly forecasted, but I would say, with a balanced approach then towards the overall number that we are set to achieve.

And the second question, if I may. The adjacencies, the CHF 350 million, you're roughly targeting plus/minus by 2029. Can you split this a little bit for us? What is upstream valves, what is the modules and what will be the pin lifters?

We could, yes. But I think that goes into too much detail of our product portfolio. And sometimes, it's always very, very close then to some customers. And I have to be here is the firewall to our customers. I hope you can understand that. Of course, it's -- you can see it in a way, we started first with modules, right? So modules is something we have done since many years. So we have, of course, over the time, a lot of modules business and spec wins already. So we are, let's say, ahead of that and also modules in size is also more value, right? If you see a small pin lifter, of course, the volume is not that high or even sometimes the pin lifter is in the module. So you can kind of factor out and when we come in now the first time with a new adjacent product that we just had last year, the first spec wins and then you can kind of imagine that maybe that is not yet the big portion of the adjacent products without giving any numbers, but this is kind of the ranking of the volume behind

Okay. So let me quickly look here to the left side of the room. It has been rather quiet so far. And I think they chose to remain quiet. We have another question here in the middle.

[ Gavin Ger ] from Morgan Stanley. Just coming back to China, if you don't mind. If I look at your sales from major Chinese OEMs like NAURA, Piotech, [ AMAK ] in 2024, which is probably in the region of around CHF 220 million, given your 30% revenue share from China. And I look at consensus estimates for those 3 companies, COGS in 2025, it suggests your sell-in is about 4%. And I'm wondering, do you expect that to continue indefinitely? Or do you see that normalizing around 1% or 2%?

Certainly, as I mentioned, the customer will gain more share in China itself. They will have to develop more processes. So they are not yet -- they cannot fully cover all the process steps required for the chip manufacturing. And so there is a growth potential and new ecosystem coming up, right? And yes, of course, we hope that we can even outgrow or have even higher sales there. But also from the experience in China, they are not yet that mature in building up that industry. Everybody is now ramping. And it's also the risk that there will be kind of a pause, right, in the next year. So we have to be flexible also there, be very close to the customer. That's why always the most important KPI is the spec win because this is kind of what we can drive together with the customer to have the design into the tool. And then market is not in our hands anymore, but we are ready and expecting when the market is ramping. So China, it's certainly an ever higher potential on the other side, but also a risk, right? So you never know what's happening on this planet with the politics behind

My first one is on ALD valves. So you're involved with a leading player at the moment. But in the in the road map, going from 71% market share in semiconductor sales to 85% market share, is there an anticipation to win all customers for ALD? Or is it coming -- let's say, is it an upside on this market share target?

It is important to mention that the market share is on our core valves, on a vacuum valve. So it's isolation valves, control valves and transfer valves. And the ALD is part of our adjacency. So we are not yet there that we have market share numbers on our adjacent products only on the valves. So what you have seen today, the 77% of semi market share is in valves.

Okay. That's clear. And maybe in adjacencies, if we go back to the 2022 Capital Market Day, adjacencies were supposed to be 15%, around 15% of sales in 2027, now it's 10% to 15%. So maybe what is different now versus 2 to 3 years ago. Why -- maybe it has not ramped up as fast as you previously expected?

Yes. We are still very close, right? And it's a forecast. In the end, it's a split. It's all about the wafer fab equipment split there that play -- there is where the play -- the music plays. So if more lithography is coming in and in the last year, it was quite high with lithography there, of course, valve content is pretty small. Even it's a vacuum system, but the valve content on the bill of material is really minor. It's almost a screw for that machine. I think this is playing in as well. So we know more how the split is evolving. And this is a quite a big portion. From the spec wins and what we want to achieve on the share of wallet, I think we did not talk a lot on share of wallet. Market share is kind of what is our -- if you just focus on core on our valves, what is our market share, but for me, even more important actually is with the account teams in Finn's team and then with sales, I want to understand the machine. There is a machine and I want to see -- we want to have all the valves and then what's more. So what's our share on that machine. And this is how we drive the business. This is how we drive priorities and how we drive our spec wins.

Hello. We have another one back here.

Oliver Wang, Bank of America. My first question is regarding your market share. Could you share a bit more about China versus non-China for that current 71% and future projected around 85%. And then my second question is what would you -- how would you characterize the biggest differences in what you've seen in the market from your last CMD in 2022 versus now in terms of kind of the future projected growth.

I think in market share, we don't go in the details. Again, here, that's kind of confidentiality of our customers as well because it's just a few out there. So we can disclose that. But certainly, it's also if you see the pure sales number, it must be pretty high there as well. And the second one was, can you repeat that?

Just I was wondering if you could talk a little bit about -- compared to your last CMD in 2022, what are the biggest differences in the dynamics in the marketplace or in your future growth trends, just in your words.

Yes, probably I did not actually watch it back too much. We are also looking ahead, but I think AI was not yet at the big high at that time, it was kind of the Internet of Things theme at that time. Today, nobody is talking about the Internet of Thing anymore. It's just here. We are connected. I think this was kind of the driver. But underlying probably it was the same story that semiconductors will grow an already there, the $1 trillion was kind of a goal and mission that the industry will go there. And with all the wafer fab equipment, probably at the same level. I think this did not change a lot. What changed now over the last 3 years is kind of the environment was changing. Suddenly, we have a decoupling, we have bands with [ restrictions ], we have tariffs. We have, I don't know what's coming next. But overall, and that's the positive of this industry. It's going to this $1 trillion. It will always outgrow GDP not only in the next 5 years, but in the next decade. So that's why we are so positive and optimistic that we are in the right market. And that's why we are investing also ahead of the cycle because this is a growing market, whatever happens around us.

Yes, Nate?

[ Nate ] from [ Octavian ]. Maybe on the first question, we haven't spoken about it yet much, but maybe on the tariffs. I mean there were some other companies in the sector. I mean, for example, INFICO that mentioned that maybe they're going to have up to 200 basis points impact on the margin. Is that also for you guys? I mean you have a different exposure, but can you maybe comment could there be some negative effect in the coming quarters.

Well, in general, we are working with our customers to overcome and find solutions on that. That's the most important. Also here, in such situation, you can prove to our customer that you are a partner and find solutions. And there will be also changes and nobody knows what kind of changes will come. There's a lot of discussion ongoing, what kind of tariffs. Today, we have tariffs on aluminum and steel mainly. Some say maybe semiconductor will get an exemption. Some say the aluminum will stay, but different way will be rated or -- so that's why I don't want to go now to guess what will happen. I think we should -- we have to follow up on what we are doing, all the options and be very close to the customers and fine with the customer alignment and that both will benefit out of that and get out of the district. The big customers anyway, they are global. So our biggest customer, U.S. customers, they are global. And you know them, we mentioned that there are sometimes even our neighbors in Malaysia and this is also not affected. So there is a way around, not completely, of course, but it's also not that dramatic at the moment that we immediately have to react. We can be patient, calm and come once we know what's really happening, come is the right solution for us and to our customers.

And so building blocks, we have to take into consideration when trying to model this impact is the exposure to the U.S. in terms of sales, which in our group is around 20%. Then we need to factor in the incoterms. So who is importer of record and this, for a large part of the business, also plays in our hands. And last but not least, as Urs just mentioned, we also have a global footprint. So we are working on solutions with our customers in order to minimize the burden. But bottom line is also a reference to your example here. At this point of time, the impact that we see is not at all material.

And then maybe on my second question, you mentioned you have a 30% ramp capability quarter-over-quarter. I mean is this something you've had for the past 5, 10 years? Or is it more that due to the volatility seen in 2021, you now just are going to go forward with maybe a bit more heightened capacity, and this explains maybe why some of -- the margin improvement wasn't maybe as high as some would assume.

We have seen that we invested quite a lot now in infrastructure. I mentioned that we have now a capacity of more than CHF 2 billion. At the moment, we don't need everything of the full capacity yet. And we -- it's not everything installed, of course, as well. So we still have to install more machines and upgrade also clean rooms but the installation is there that we can act very fast. If we see there is some -- our customer needs more, and I think here is the most important thing that we are very close again with our customers aligning with them their build plans. So what they need in the next quarters to come. So we are very flexible and fast now to adjust. That's why I'm confident that Thomas Berden, who is in the back there with the team, they will be capable to ramp it up. But it's not only us, right? As you have seen, we have 25% is internal. We also have to work with our supply chain where we have 75% of the parts also they have to be capable to ramp up that fast. And I think that's one of the big topics as well from the supply chain team to make that happen for the footprint here in Europe, but also for our footprint in Asia.

As a single source supplier, this [indiscernible] that you have to search capacity available. And as such, we have had this, we still have it. So the impact on the margin is not there.

Okay. We have the first -- one Michael, then we have -- yes. We are here in the room still.

It's Michael from ZKB. Also obviously 2 questions. The first one would be on M&A. M&A is not or also hasn't been, I guess, in the last presentation, a big part of your presentation. Obviously, you don't need to actually do it. I mean, with all the organic growth possibilities that you have. But you did something in the pressure sensor market a couple of years ago. We've touched on it. But do you have actually an M&A strategy? I mean, do you have people that are actually screening the market, looking for maybe new developments or new technologies in all the areas you're present, that would be something that I'm interested in. And the other question is probably a little bit more philosophical. But when we look at the semiconductor market, I mean, a company with 85% market share in a key component. At what point is it actually a risk for your clients that there is almost only one company delivering certain kinds of vacuum valves. And don't you think that -- isn't there risk in a couple of years someone can grow maybe not to that size, but to become a relevant competitor, maybe in China.

Yes, I would say with today, it's already 77%. I would say the risk would be there already, right? So I think we are already over that threshold. But what we say if our customer needs a second source, we want to be their second source. That's why we say we can produce the valve here in Europe and Switzerland, but we can also produce it in Malaysia. So they have the security. They have the same product from 2 sites. This gives them the business continued planning. They don't even have to qualify that in theory because they get the same product out of one hand, but 2 sites. I think that's already happening in the industry. And the industry anyway is consolidating, right? And we were part of this consolidation from semiconductor. If you look back in the '90s, there were many, many dozens of chip manufacturers, today leading edge is one, right? Then maybe 2, 3 are following, but it's clear consolidation happened. And we are part of this consolidation in a very niche product as well. And that's why we always say, well, it's also an obligation now to serve the industry when they need it. That's why we invest ahead of the cycle. We do all these investments in R&D. We have to anticipate what they need in the future because they have to rely on us as partners as well. I think that's -- we are already in there, I would say, and that's why this close collaboration with the customer is so important. To the M&A questions, maybe I can start and feel free then also to add Fabian and Finn. Actually, we are open, and we have appetite for M&A, right, but it must be in line to our strategy. Just not -- it's not that we just want to do an M&A to be a bigger company or because it's fancy to do M&A. Now it must be a clear fit into our strategy. And I always ask then myself what's in for our customers as well, if you do something like that. So what's in for us, what's in for our customer and of course, what's in for our shareholders as well. So I think these are the elements we discussed already. And yes, we have done a very small M&A. We spent a lot of money at that time, right, for this very small start-up. Of course, it's also a learning for us, but the appetite is here. But most important is to be still this pure-play focus, our strengths. We don't want to lose our DNA and our strength. And you also mentioned we still have so many opportunities to organically grow. Sometimes that's not the fastest, but in the end, it's quite a profitable way as well to grow.

Nothing to add.

Yes, the huge spend that Urs was mentioning was about CHF 1.5 million. You can see that in the 2021 or 2022, I think, cash flow statement.

I have questions for Fabian. Your balance sheet will soon go from very good to outstanding. Would it make sense to look at more active buybacks maybe in -- towards the end of '26 as you get to outstanding?

Yes, it's always a consideration that we also looking into it. I think for now, we have been quite, quite happy and so are our investors. So whenever I talk to you, that's the feedback that I get mainly from the Swiss investors. Now as we go forward, you're absolutely right. We might see also potential jumps in our dividend. And what I would actually like to stick to is that we have a gradually increasing dividend over the cycle. As I said before, I believe that the business will remain cyclical. So what I don't want to do is give you a dividend here. And then the other year, we go back again. So I want to have this continuation that we have seen in the past, now there are certain elements that you can then also chime in, which is a special dividend, where we have actually set the foundation in the last AGM adoption of the Articles of Association and/or share buyback, whereas actually we also inserted the provision in the Articles of Association already last year. So I think the instrument is definitely in the realm of our thinking. And as we then get there, we will then choose wisely what we're going to apply and to what extent.

Okay. And now back to Michael, where we started. And maybe there will be some more questions after that.

Just two follow-ups, one for Fabian. Cash conversion, obviously, is an important value driver. And if you could just help us understand what triggered the decision to increase that target and whether that's a trend, whether we can expect more going forward. And a different question would be you're talking about a lot of growth. Do you actually have the talent or the skills available out there in the market to support that growth, be it in Switzerland or in other countries?

On the cash conversion, maybe first, and I also start on the talent and then give it over to Urs. Look, what we have seen is a front-loaded growth driven free cash flow profile over the last years. Now I expect that our maintenance and growth CapEx will be more balanced going forward. And also the overall CapEx over sales will gradually come down. So that is also already providing us some additional upside on the free cash flow. Secondly, much more importantly also from an internal steering is our trade working capital, which those of you who are familiar with the numbers, has seen quite some increases since the IPO, especially from the inventory development, where we have seen increases in the first massive wave following the '18/'19 downturn, then we had all the supply chain disruption followed by our ERP transition in Malaysia, in Switzerland, where we then, again, had to built some safety stocks in order to secure supply to our customers. And now is the moment when everything is in place where we can also drive this down, again, significantly, which will then allow us to return back into this trade working capital target range of 22% to 26% always being mindful about the position that we have. Michael, you mentioned about the criticality of being a single-source supply. There's certainly something in that as well. So we have our 2 flagship factories in Malaysia in Switzerland with their individual supply chains. And for critical products, I think this is what everybody learned back in '22 is that we also have some safety stocks for components, which we can stock with which have a long shelf life, and therefore, this is also considered in that. But overall, the drive to increase the free cash flow conversion rate is coming from reduced CapEx and this improvement of the trade working capital. Now to the capabilities before then Urs can talk a little bit about our approach and the workforce planning. I introduced VAT to be as our corporate transformation program. And in that, basically, we are building the foundation to scale the company. I talked about processes that circles mostly around the implementation of our harmonized global ERP. We also talked about now how we create the structures to grow, i.e. the footprint. Last but not least is also the people. And on the people side now, I'll have Urs to elaborate how we're going to accomplish that target.

I can take that also. So Urs talked about our foundation, which got us here over the last decade, which is the apprenticeship program and all the, I think, excellent education, which we find here. And I think we continue with that because when you see and the teams and the engineering teams today who do design, but also in operations, we have great people, capable, skilled people who groom this way. So I think that's a very important foundation for us. However, that's not sufficient for sure. So this is why -- and then we're building up new competencies going beyond pure mechanical engineering, going into electronics, engineering, going into software development and so on and so forth. And this is why we also build up new sites like in Mendrisio, where we have a software development team where we benefit from the proximity of the Northern Italian universities. Second, we have an incubator team where we also benefit from the talents to the universities there. So we see that, of course, we have to go beyond what we have done, and I think this works quite well.

Maybe add on here just because talent is really close to my heart as well. All right, all perfect, just to add some more passions and emotions. You all have been here today, and you have seen our operations team, right? And you have seen innovation and people guiding you through. They just do that on the site on their normal job as well, and that's normal they do. They also have the opportunity to go out into the world. So they don't have to stay here in [ hard ]. The best engineers I want to have in front of the customer. And we have many, many good examples that they went out to California, they can go to Tokyo or Seoul and stay there for a while, learn and come back. That's a win for the company as well. It's a win for the customer, and it's also a lot of IP protection for us. So the best engineers are out there working with the customer and coming back. I think that's how we are living it as well. And I want to keep driving that as well. So if you go with one floor down, you will all meet all these people, and they are just enthusiastic. Even some would say, well, yes, sometimes it would be better to live in maybe in a city, if I'm a young fellow, but I think most of them, they also appreciate. We always say we are living here where other do vacations, and that's also a good argument.

Okay. Any more questions? I know we don't have any on the webcast or on the phone. Maybe not. Hi, there is one again.

Just going back to the NAND flash point. Are you getting any indication from your customers that there is a likelihood of a pickup towards the end of the year or into next year? What's the current conversations there like? And then when I look at the midpoint of your 2017 guidance, it's about, give or take, 20% growth year-on-year through '25, '26, '27. Your 20% growth in '25, I think, has some element of an inventory correction improvement. So on an underlying basis, are you already assuming some improvement into '26, '27 in your guidance at the midpoint?

I can take the first one with the NAND flash. Yes, there is certainly customers out there, the official statements that they see a pickup, but it's more kind of upgrading current tools today. And that's certainly what I think that's the market consensus. So it's also preparing for the next technology before there will be expansion. I think that's -- we see first certainly logic is more interesting to us today and DRAM. And in the third will be the NAND.

And on the inventories, I think what we observe, we also read as you do and what we get from engagement with our customers is that inventories have been largely consumed or digested by now, we are operating at normalized levels. And based on what I mentioned to you before with these underlying growth drivers from the technology transition, but also in the service space, in the ADV space. And then hopefully, at some point, we also see the inflection from a more confident consumer spend, which will then ultimately also boost this transition. And I think last but not least, we should not forget that at the IDM front, we have -- currently, we have basically one player who is paving the way and 2 others, they are occupied with internal issues. So I think also there, we need these players to come back at full strength and then really drive these road maps forward.

Good. Thank you. Before handing back to you guys, I would like to ambush 2 people at least here in the room. You haven't seen in the last Capital Markets Day because they haven't been in the function. It will be our Head of ADV Loic. Loic maybe you still quickly stand up. He will certainly give you a deep dive on the ADV business maybe in the second half of this year or beginning of next year because we want to do more events like I elaborated at the beginning. But Loic is certainly here today. And if you have a very urgent question to him, I'm sure that he's more than happy to answer that. The second person you might not have seen is Mark. He's our Head of the Global Service business as well. He will have his dedicated session on his business because we were kind of like just skimming off the top. So that's here. And the one gentleman that you have seen in the previous Capital Markets Day or the one before, he's still here as well. It's our dear Thomas, who is responsible for operations. He's Chief Operating Officer, and he makes sure that whatever we told you now about having enough capacity and run this smoothly, so he's the man. Thank you, guys. So with that, I would hand back to you guys for the outro. The bus, by the way, will leave around 4:00 O'clock. He is at the right address, so you don't have to walk back to the place where he threw your out without further instructions. So back to you, guys.

Thank you, Michel, and thank you, Chris as well for organization. You see we have some [ Thailands ] young man, don't mention anymore. Okay. I think as a summary, maybe Fabian, you want to kind of recap the numbers.

Yes. I think we alluded to our key guidance parameters now during the course of the presentation, but also to the Q&A. So I will not focus on this one, but probably more on the additional guidance elements that I have not introduced so far. Return on invested capital, also for us, a very key metric, especially when we evaluate, assess business cases, when we look at the payback periods, hurdle rates, it all needs to pay into that. So here, we also would like to stay above 45% over the cycle. Trade working capital, I have mentioned to you on the leverage. I want to maintain the very solid balance sheet also slightly increased the equity ratio as a consequence of our profitable growth. And with the balance sheet also support our growth targets, be they organic or inorganic. And last but not least, the dividend policy will stay as it is.

Yes. And I was hoping at the very beginning that after closing the day that you have all the information you need to believe our growth story and that you are also convinced as convinced as we are that we will outgrow the wafer fab equipment market by 2x. Of course, this is kind of an ambitious we have. But underlying, you see Gate-All-Around, the technology shift will happen all driven by the AI and the digitalization and the new consumer electronics that will come into the market to manufacture them you learn today that a lot of wafer fab equipment you need it, and there are more than 100 fabs under construction today. So the shelf will be there. And for this wafer fab equipment, more and more leading edge will be required and more vacuum processes. So this will grow much more than just the wafer fab equipment. And we will benefit from the work we have done in the last years with our spec wins. So our share of wallet on these tools will be higher. And this altogether will turn into our sales number, which we presented today. So thanks a lot for coming out here, spending the day with us. I hope you had some good impression in the operations on our tour in the innovation center and in our new restaurants, first time you have a restaurant, we call it Siegfried, named to our founder Siegfried Schertler. So thanks a lot for coming, and we stay in touch, and thank you. Safe travels.