Richard Wallace: Yes. But having met with a number of memory customers recently, there’s a marked difference in their tone, right now. And so when we talked to them last year, there’s a lot of downcast looks about it because they had been ready for a much bigger, much bigger consumption of memory. And now I think they’re starting to turn the corner on that. We do see conversion technology, but utilization is — hasn’t really changed much. Service continues to be higher than historically, we — our utilization rates on our equipment are higher than historically, but because I think customers, even those that have the ability to flex down, the utilization on our systems have chosen not to. And so that’s been a real strength for us.
And why services for KLA did so well in ’23, and we expect that growth to resume to the numbers we targeted a couple of years ago for ’24 and beyond. So I’d say the posture is different, and we’re going to — and we expect to see that continue to strengthen throughout the year.
Bren Higgins: The customers don’t have the same level of redundancy with what they buy from KLA versus a lot of process equipment. And when you’re focused on trying to be as efficient with your capital as you can, you’ll tend to really focus on trying to drive yield. So the way they buy process control, they don’t buy a lot of extra. So if they take capacity offline for a process. They tend to run process control much more consistently. The customers that cut more in terms of utilization earlier have come back more. I think overall, to Rick’s statement, it’s been fairly flat overall. I think DRAM has tightened a bit because of some of the AI drivers for that. But on the flash side, I think it’s been fairly stable. And like I said, some improvement from folks who cut more aggressively early on.
Joe Moore: Okay. Thank you very much.
Operator: Our next question will come from Atif Malik with Citi.
Atif Malik: Hi. Thank you for taking my questions. Bren, you talked about strategic alternatives for the display business. Can you help us out how big the display business was last year? And then in general, on the EPC business, there are kind of, also it’s starting to [indiscernible] to mobility is getting better. Can you just talk about how you’re looking at the EPC business, excluding display?
Bren Higgins: You’re breaking up a little bit there, Atif. So in regards to the comments on display, it’s about 1.5% of the revenue of the company. And there are parts of display that are more commodity based and there’s aspects of that industry structurally where profitability is more challenged. And then there’s some interesting parts of it, too, in terms of some of the future road map opportunities and where some of the higher end customers, customers are moving. So we will have more to say about that as we assess the alternatives we’re considering. The rest of EPC is kind of the tale of two businesses overall. The specialty semiconductor business has done exceptionally well as we talked about in the shareholder letter. Really outperforming WFE overall.
I think it’s a combination of customer engagement, more applications, new products. So we’re really pleased with where we’re performing there and the ability to differentiate. And I would expect that to be roughly flat and with some mix shift. It has some diversity in terms of end markets between automotive and mobile and advanced packaging. So you could see a shift where automotive weakens, we’ll see more investment on the advanced packaging side. So we’re pretty positive on that. IQOS, we’re already starting to see some improvement there, which tends to be a little bit of a leading indicator in terms of finished components. And so we’re more optimistic about how that will translate back into the other parts of our business, given that that’s a short lead time, more capacity centric business.
So again, back to our views of some improvement as we move into the second half. PCB has been more mobile centric in terms of more consumer markets, more capacity centric. So that business has been weaker, but I would expect it to be a little bit better this year as well. And there are some product offerings that we have coming that start to take advantage of opportunities at high end PCB and substrates as those integrate into heterogenous packages. So we expect the APC business overall to be up, we’ll call it, maybe high-single digits, a little less lead time over there. So a little harder to forecast off of the year we had in 2023.
Atif Malik: Great. And then as my follow-up, Rick, you talked about uncertainty in leading edge with some push out. If your foundry customers decide to focus more in putting these investments of fabs in Japan versus U.S. Is there an impact to your business?
Richard Wallace: Well, the work that they’re doing in Japan is not at the leading edge, but it is part of their overall investment with the exception of the Japanese company that’s investing there. So I would say, yes, of course, that’s a different kind of business for us. It’s important. But the leading edge business that’s being done in the foundries isn’t being done there right now with the exception of one. So we’re talking about the — what we’re seeing and hearing is the development is going on for the leading-edge work. The question is, at what point will they be in a position to ramp that. So we — the reason we’re confident of the growth that’s coming is because of the engagements we’ve had, the design starts that we see and the plans that we know that they’ve been discussing. So we feel pretty good about the setup as we go towards the end of the year and into next year.
Atif Malik: Thank you.
Operator: Our next question will come from Charles Shi with Needham.
Charles Shi: Hi. Thanks. First off, I really just want to ask for some clarification about the service business expectation for calendar 2024. I think that you talked about higher forecasted growth in service. Is it higher than what you thought at the 12% to 14% this year or if you’re just talking about higher growth than compared with your systems business? Just a quick clarification. Thanks.
