Entegris at Bernstein Conference: Strategic Growth and Resilience

On Wednesday, 28 May 2025, Entegris (NASDAQ:ENTG) participated in the Bernstein 41st Annual Strategic Decisions Conference 2025. The company shared insights into its strategic direction, highlighting both opportunities and challenges. Entegris’s leadership emphasized its strong market position and plans for future growth while acknowledging the complexities of the semiconductor industry.

Key Takeaways

• Entegris aims to outperform the semiconductor industry by 3-6 percentage points.
• The acquisition of CMC Materials has enhanced Entegris’s capabilities but increased its debt.
• The company is mitigating geopolitical risks by expanding its manufacturing footprint in Asia.
• Entegris is focused on innovation and customer engagement to drive long-term growth.
• Bertrand Loy will step down as CEO, with Dave succeeding him.

Financial Results

Entegris has consistently outperformed the semiconductor industry by 4-5 percentage points in revenue growth. The company expects its Advanced Purity Solutions (APS) segment to grow 3-6 points above the industry rate, while the Materials Solutions segment is projected to exceed the industry average by 4-6 points.

China contributes approximately 20% to Entegris’s total revenue, with a significant portion coming from domestic customers. Despite a slight reduction in Q2 gross margins due to tariffs, Entegris anticipates minimal overall margin impact.

Following the acquisition of CMC Materials, Entegris has committed to reducing its debt, having already paid down 2 billion dollars through cash flow and asset divestitures. The company’s debt is fully hedged with no maturities until 2028.

Operational Updates

Entegris is enhancing its content per wafer by introducing new materials and expanding into new applications. About 45% of its manufacturing is in the U.S., with 55% in Asia, ensuring redundancy to prevent disruptions. By the end of Q4, 90% of its China business will be served from Asian sites.

Innovation is customer-driven, with road map discussions guiding development alongside semiconductor fab customers and equipment partners.

Future Outlook

Entegris sees the semiconductor industry’s growth potential as twice the GDP rate, with plans to outperform by 3-6 points. AI-related applications, especially in TSMC and HBM, are expected to drive future growth. The company remains open to future M&A opportunities and continues investing in capacity to prepare for industry upturns.

Q&A Highlights

• Tariffs: Entegris offsets tariff impacts by negotiating price increases with customers.
• Competition from China: The company leverages technology differentiation and Asian manufacturing to compete.
• Capital Allocation: Focus on short-term debt reduction, with potential M&A opportunities on the horizon.

In conclusion, Entegris remains optimistic about its future, driven by strategic innovation and operational efficiency. For more detailed insights, please refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Stacy Rasgon, Senior Analyst, Bernstein: Morning. Thank you so much for coming, today. I’m Stacy Rasgon. I’m Bernstein’s senior analyst. I cover The US semiconductor and semi cap space.

And and I can’t express what an honor it is to have our guest here today, Lula, the president and CEO of Entegris. Our chat today is gonna last about fifty minutes. Bertrand is gonna give just a few opening remarks to start us off, then we will move into the q and a. If you have questions, you can submit them via the Pigeonhole portal, which hopefully you I think it’s on the, I think it’s on the QR code. But you can submit questions there.

We’ll we’ll have time to get to those at the end. Before we start also, this may be a a little bit bittersweet here. Bertrand’s been coming to SCC for many, many years. It’s looking like this may be his last time here. He’s gonna be retiring as Entegris’ CEO in August after thirteen years on but I am looking forward to to one more.

With that, it’s my great pleasure to welcome Bertrand. So thank you so much.

Bertrand Loy, President and CEO, Entegris: Thank you, Stacy. Good morning. Good morning, everyone. Thank you for the opportunity to I think it it may very well be my last investor conference. I appreciate the the opportunity here.

As I said, it’s bittersweet, but I’m leaving with actually a lot of optimism. When you look back at what this company has become over the last many years, is just something that we’re all very, very proud of. But we also know that we can do a lot more. So let me give you maybe a few facts and a little bit more context for the company. And then I know I’ve seen your list of questions, Stacy, so I know you could probably keep us busy for more than fifty minutes.

Entegris was created about sixty years ago, in the very 06/00, in the very early days of the semiconductor industry. And ever since that point of time, we’ve been focusing on the semiconductor technology roadmaps, contributing very unique solutions to enable the advancement of the semiconductor roadmap. Over time, the platform has evolved and today we have essentially two major product solutions or platforms. One would be a series of enabling material solutions, which are critical to the enablement of the very complex device architectures that many customers are talking about. And then the other side of the house would be a series of enabling technologies to advance process purity in the semiconductor manufacturing process.

They can be advanced filters, purifiers, and high purity fluid handling solutions. All of that enabling the miniaturization that the semiconductor industry has been striving for. And the compounding complexity of miniaturization and device complexity is really the source of significant opportunities for integrase, opportunities that have enabled us to increase the integrase content per wafer, generation of chips after generation of chips, and that has been the foundation of our outperformance. And outperformance, if you look back over the last ten years or so, we’ve been on average outperforming the industry by about four to five points. And our commitment, and that’s why we’re saying Is that in terms of, like, revenue growth?

Or In terms of revenue growth. Yes. And and the reason why I’m leaving with a lot of optimism is when I look ahead at the semiconductor road map, the complexity I was describing, complexity coming from the device complexity as well as the desire for further miniaturization is still intact. And we see incremental opportunities for us to increase our content per wafer, which will be the catalyst for that outperformance. So that’s the thesis when it comes to organic growth.

That’s how we’ve been able to sustain that top line outperformance. The other thing I want double click on is the fact that when you hear a company talk about being a supplier to semiconductor industry, I’m sure that what first jumps to mind would be large equipment makers. We are not an equipment company. Most of what we do is unit driven. We supply materials, chemistries, filters that are used in the daily production cycles of the semiconductor manufacturers.

And that profile is very unique. There are very, very few publicly traded electronics materials platform, and we are certainly one of the largest. And I think many of you are generalist investors, and I think that’s what is probably attractive to all of you is that while the semiconductor industry remains a volatile industry and what we’re going through right now is probably a proof point to that, you can actually look that Entegris’ business model is fairly resilient on a cross cycle basis. And that comes from the consumable nature of our products. So that’s one thing I wanted to touch on.

And the second point is, again, comparing the Entegris platform with the equipment makers. Equipment makers are much larger companies. If you look at the material space in the semiconductor industry, it’s a much more fragmented part of the ecosystem. And that’s a source of opportunity for us. We have positioned Entegris as the consolidator of choice, And M and A has been a big part of our growth story, a big part of our value compounder model.

And I’m very proud of the way we’ve been able to deploy capital and create value for shareholders over the last multiple decades. And again, as I look forward, I can tell you that there are many more opportunities for Entegris to be a consolidator and many more opportunities for us to create value through capital deployment going forward, even though granted you know, my successor obviously will be the one doing it.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. There’s there’s a lot there to keep us busy. I think I’d like to start around the the content per wafer, argument that that you’ve made. And maybe, like, could you talk a little bit about how that content is actually growing? I mean, talked about outperforming the industry by four or 500, but, I mean, a lot of the in fact, all the growth in the industry over last five years has been price.

I think units in ’24 were effectively flat to pre COVID to 2019 levels. I guess how and and so unit growth was was zero. How is your revenue growth, I I guess, like, compared to that? And I guess how do you think about the drivers of content, Pruyf? Or what what is that?

I mean I mean, is it is it new materials? Is it more layers? Is it more complexity? And and where where is Entegris actually, like, helping to drive those road maps?

Bertrand Loy, President and CEO, Entegris: So it’s sort of your your your comment when you say a lot of the growth in semiconductors came from price. You’re talking about semiconductor devices. I agree. Agree that when you look at volumes of productions, if you look at wafer starts, it’s been essentially flat and arguably down.

Stacy Rasgon, Senior Analyst, Bernstein: By the way, average ASPs in the industry today are 50% higher than they were in 2019, just blended across the board. It’s pretty amazing.

Bertrand Loy, President and CEO, Entegris: So if you look at our pricing, I mean, pricing has been essentially flat for us over the last several years. So a lot of our growth really comes from volumes. And to your question about that content increase, where is it coming from? It’s coming from new materials being used. Those materials are usually better performing materials but also more expensive materials.

So for pound per pound, not that we use pounds in semiconductor manufacturing, but pound per pound is actually more expensive. And then you have actually more volumes, more layers driving greater consumptions, more volumes of consumptions of chemistries and materials. So those are the two the two drivers on a on a per wafer. The other thing for us is that, you know, we try to get exposure to new applications, applications that maybe we were not serving in the previous generations of chips. And the reason we are able to expand our SAM that way is that our reputation precedes us.

And increasingly, customers seek us out on new challenges and give us an opportunity to develop solutions in applications that historically we have not served. So examples of that would be the dry resist chemistry that Lam Research and ASML have been developing in the context of iNA, Innovi. So again, if you think about how we’ve been able to outperform the industry, it’s a combination of more expensive materials, greater volumes of materials, access to new applications, and then finally, it’s share gains. Continue to execute really well. We continue to drive innovation, and that translates into share gains as well.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. I don’t wanna get too technical. Be honest, I’ll I’ll get buried in it. Like, I could I could dig into that forever. But, I mean, you mentioned, like, dry resist is one, you know, driver of this.

Are are there what are the types of technology transitions, I guess, that you are most excited about as you look for Entegris? What are the types of material changes or structure changes or anything that are that Entegris has really benefited you? Excited about? So

Bertrand Loy, President and CEO, Entegris: if you if you think right now, there’s a really a a big inflection point in in memory with the introduction of molybdenum in three d NAND architectures as a replacement to tungsten. And the reason that actually it’s a very important inflection point for the industry is this is the first time that a solid precursor would be adopted in high volume manufacturing. And the reason It’s almost like a gas phase. Or or liquid precursor. So so the problem, plural problems, that our customers were trying to solve was they wanted actually a better performing material in thin film deposition, so that would replace tungsten with the right resistivity performance.

So tungsten does that molybdenum does that. The problem was that molybdenum is a very expensive material and we also needed to find a solution to the higher cost of molybdenum. Integris were uniquely positioned to do that. We developed a dispense system that would sublimate the solids into a gas. Molybdenum is a highly corrosive gas, so we needed to develop some proprietary coating on the inside of that sublimation column.

We developed some gas purification systems for that as well. And now we were able to have a system solution providing the industry best film, so that’s the MODY material itself. But we have also developed the lowest cost of dispensing that material onto the wafer. And that is really what is enabling the adoption of molybdenum in high volume manufacturing. So this is actually a really good example of what Entegris can do uniquely and better than our competitors.

Stacy Rasgon, Senior Analyst, Bernstein: I guess given all of that, like, guess, is there a way to think about your, like like, forward growth formula? Is it some multiple of GDP? Like, what’s the the fall through? Like, how do we how do investors think about that?

Bertrand Loy, President and CEO, Entegris: Yeah. So so we we sell a lot of products. A large product platform for us is a product generating about $50,000,000 of of revenue per year, and that’s $55.00. And that’s why we don’t really tell our story on on a product basis because it gets really complicated very quickly. So I’m saying that right after having called out Molly.

But again, we’re calling out Molly because of the significance to the industry, not so much to us. And then so again, we, I’m sorry, Stacy. The question, I I went on a on a Oh,

Stacy Rasgon, Senior Analyst, Bernstein: I I was just asking about the the the growth formula.

Bertrand Loy, President and CEO, Entegris: Yeah. Yeah. So so we so instead of talking about products, we we’ve tried to simplify the growth formula and recognizing that this industry is cyclical and we don’t control the industry. But our view is that the industry secular growth potential is probably twice the rate of GDP.

Stacy Rasgon, Senior Analyst, Bernstein: For materials or for semiconductors?

Bertrand Loy, President and CEO, Entegris: For for for for that’s the the wafer starts. Okay. So it’s volumes of productions of semiconductors. And then we believe that given the incremental content opportunity that we have and the fact that more wafers are produced at the advanced nodes, we should be able to outperform the industry by about three to six points. So the formula is twice the rate of GDP plus three to six points of outperformance.

And if you look back, as I said, you will see that over the last ten years, we’ve been able to deliver a growth rate organic growth rate of about four to five points of outperformance. Got it. Maybe to touch on

Stacy Rasgon, Senior Analyst, Bernstein: that cyclicality argument. I mean, clearly, some people used to say that they were no longer cyclical. Never believed that. It certainly is not. They are they are cyclical.

Since you’re so you are unit driven, is would you say the cyclicality of the materials industry and and and Entegris is sort of equivalent to semis? Are you more

Bertrand Loy, President and CEO, Entegris: or less?

Stacy Rasgon, Senior Analyst, Bernstein: Are there buffers? Like, how do we think about that in the context of of industry cyclicality?

Bertrand Loy, President and CEO, Entegris: Well, I I I think that the reason why it’s I believe that our our business is less less cyclical is that, you know, we don’t have the amplified magnitude of the the pricing Mhmm. Cycles. Right? So if you look at our our business even in a in a trough, I think the amplitude of the cycle is is probably way less than than semiconductors would experience.

Stacy Rasgon, Senior Analyst, Bernstein: Did you guys not take price during COVID? I mean, the like I said, the rest of the industry was was pretty made. We’ve never seen anything quite like that before.

Bertrand Loy, President and CEO, Entegris: Yeah. We we did take some, but but not to the same extent. No. And and and and commensurately, we’re not bringing price down during downturns. And and I think that’s a little bit of the qui pro quo that we’ve had with with our customers.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. You know, you talked about the industry being very fragmented. Like, where where do you see competition? Like, who are you competing with?

Bertrand Loy, President and CEO, Entegris: So we have many different product platforms. Each of the product platforms have their own set of competitors, so nobody really competes with us across across the board. So instead of giving you names, which probably would be foreign to to to most of you, I would say we we compete with two different archetypes. There would be small local local competitors, in China, but in Korea as well, in Japan, here in The US, or we compete with divisions of of of large industrial platforms. And the reason we win is that we actually have a metric, and we are fast.

And that is actually you know, we have an intense application focus, credible scientist, very fast, and that allows us to win against the large industrial platforms. On the other side of the spectrum, we compete with small local competitors with great customer intimacy but lack of global footprint. And increasingly, our competitors really want to have a global scale. They want to build their fabs pretty much everywhere in the world, and they wanna rely on well capitalized suppliers that can really provide them the same level of support no matter where they choose to operate. So we are this intriguing hybrid from a size and capability standpoint.

The other thing that makes us very unique is, again, the breadth of capabilities. And don’t take that as I know sometimes investors would say, oh, you’re a hardware store. No. We are everything but a hardware store. We have a very strong focus on enabling the right level of purity.

So again, those solutions can take different shapes and forms for sure. But the value proposition is really enabling the purity levels that can be enabling the yields of our customers when they choose to make everything smaller in their fabs. By the way, one point of yield for an advanced fab can mean about half a billion dollar to the bottom line. Half a billion dollar is about one point of yield in advanced logic. So very significant value that we can contribute as a result of using our advanced purity solutions.

So that’s on the one hand. On the other hand would be the new materials that are enabling those novel architectures. You hear about three d NAND, you hear about gate all around, you hear about all of those new device architectures that will require those solutions. And the reason we are unique is that we can develop those new materials and those new chemistries. And at the same time, as we develop those material solutions, we can develop the best known methods of filtration and purification for those chemistries.

And by doing that, we compress the time to solution. In other words, we can go to our customers with a material that performs at the desired levels but have also the right purity, which will translate into better yields. And having that faster time to solution is really, really key in this semiconductor industry. Because if you think about what all of the semiconductor manufacturers are trying to do, they’re trying to be first to the next generation of chips. Being first to, you know, two nanometer or ATNA or whatever you wanna call it is the source of competitive advantage, is a source of pricing power.

So Entegris is uniquely enabling our competitors to win that race.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. Maybe I’d like to follow-up there, Lynne, to start to drill into the segments a little bit. So you mentioned two segments. You used to have three segments. I guess you there was a little bit You used to have four.

There were there were four segments. Okay. I think I think last year, it was three. But maybe you you gave a little bit of the characteristic of, I guess, the material solutions and then the the the purity. Maybe to give a little more color on what’s in those and and actually the differing economics.

Like, I I think the margins, like, in in the purity business are higher than in materials, for example. So, what can you tell us, I guess, about the specifics of those businesses, the economics, and how they work?

Bertrand Loy, President and CEO, Entegris: So two segments. I think I introduced them to you earlier. So one is advanced purity solutions, then the other one is material solutions. So advanced purity solutions, we believe that the potential there is to grow about three to six points in excess of the industry. And then we have Materials Solutions.

We expect that part of the business to grow four to six points. So roughly the same potential for for both business. The margin is is a bit different. APS or advanced security solutions, operating margin potential is in the high twenties. Where is it today?

It’s in the the the the mid mid mid twenties. And then matured solutions is in the low twenties. And the reason the difference is that we have in the last few years, we have invested extensively in a fairly complete global manufacturing footprint. The Materials Solutions manufacturing processes are more capital intensive. And of course, we’ve been in this very slow industry environment.

So as a result, we are not getting the full leverage quite yet on some of those investments. I think if you fast forward long enough, I think that MS or the Material Solution Platform’s potential is probably in the mid-20s and we’ll be, you know, at some point approaching APS margin potential. It’s just a

Stacy Rasgon, Senior Analyst, Bernstein: matter of, like, utilization scale. Okay. Okay. That makes that that makes sense. I wanna get to that to the you’ve you’ve talked about a global footprint a few times.

And I wanna get to that actually particularly in the context of everything else that’s going on, right now. So first of just just to describe the footprint. I mean, like like, I guess, I I don’t know what the right way to add. How many plants are there? Like, where are they?

Like, are they close to every customer that you have? Like, what what’s the how is it think about your manufacturing footprint, like like, by geography? Like, how does it out?

Bertrand Loy, President and CEO, Entegris: So so, yes, we we have we have actually manufacturing capabilities in all of the major semiconductor markets close to the customers. At high level, 45% of our manufacturing is still U. S.-based, so 55% Asia based. We have I’m assuming it’s not like uniformly spread. You’re not making everything.

No. You would not like margin, if we were to do that. But every time we have enough volumes for a given product line, we’re certainly making sure that there is some redundancy in our manufacturing footprint. So if disaster strikes, we can actually activate the other site. And we always try to do that in such a fashion that one of those sites would be in The U.

S, the other site would be in Asia. So in Asia, we have manufacturing in Japan, manufacturing in Korea, Taiwan, Malaysia. We have just a little bit of filtration production in China, but that’s really the result of an acquisition that we made five or six years ago, and that’s really not for semiconductor applications.

Stacy Rasgon, Senior Analyst, Bernstein: How much of the business today is driven by, like, indigenous Chinese semiconductor manufacturers?

Bertrand Loy, President and CEO, Entegris: So so China overall is is about 20% of our revenue. Of that, 80% would be domestic Chinese, customers, so give or take 16%.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. And I I I mean, I guess to to get to some of the near term stuff on the back, I mean, like, the the current geopolitical situation, the tariffs, and what what impact is that actually having on Entegris? Have you seen any impact? I mean, and I guess there’s revenue impacts. There’s also cost impacts because, I mean, again, depending on where your parts are being made and or where your materials are being made use.

So have have you guys quantified any impact? Like, what are you seeing? And, I guess, how do we think about, to the extent that we can, what’s coming down the pipe as to to be fair, like, I I don’t I don’t what the policy is gonna be tomorrow versus, you know, end of the year. But, I mean, like, how you

Bertrand Loy, President and CEO, Entegris: guys think about that answer for me. Look. I mean, I I yes. I mean, it it’s we operate in a in a in a complicated world, for sure. I think when it comes to to China about or tariffs in general, let me say that if you look at manufacturing footprint that we have in The US, we don’t really procure a lot of raw materials from China at this point.

And when we do, we have actually been able to offset the tariff impact by driving some price increases with our customers. And those are adders that we call out specifically, and we can be tracking precisely with with our customers. So the margin impact, is not gonna be

Stacy Rasgon, Senior Analyst, Bernstein: Which of the BOM of every customer’s BOM is actually made up by your I don’t I don’t even know.

Bertrand Loy, President and CEO, Entegris: It’s very small. It’s very, very small.

Stacy Rasgon, Senior Analyst, Bernstein: So there’s there’s headroom if you need to take pricing up to us? Well, yes, within within reason. In reason.

Bertrand Loy, President and CEO, Entegris: And and then so the bigger the bigger issue for us, early April when the U. S. Administration introduced punitive tariffs on Chinese imports was the Chinese government retaliating with commensurate tariff increases. And that was actually a big negative for us since onethree of our China business is sourced from our U. S.

Site. So what we are actively doing right now is we are working with our China customers and really asking them to qualify our alternative Asian manufacturing sites. So the good news for you as investors is that you should know that those Asian sites and investments have been made. But we need the customers to qualify the sites and start placing orders on those sites. So I would expect that some of that will be taking place in Q2, more of that will be happening in Q3.

And by the end of Q4, I would expect that 90% of our China business will be served from our Asian side. That’s the goal. And by the way, that was always the desired end state. That’s why we invested so much in Asia. It was really to have a local for local strategy.

And as a final maybe data point, I would say that every time we have a strong manufacturing capability in a given country, we localize the supply chains as well. So if you think about Japan, Ninety plus percent of our suppliers are Japanese. If you look at our large Taiwan manufacturing site, over 90% are regional, not just Taiwanese but regional suppliers. The same would be true in in Korea as well. And, of course, this is true here in The US as well.

And that’s why, you know, back to where I started my answer, so why there’s not really a a huge tariff impact.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. Got it. Where would it show up over the next couple of quarters? Just just little bit of gross margin headwind until it’s qualified? Or

Bertrand Loy, President and CEO, Entegris: Yes. I think we we guided our gross margin down modestly going into into q two. I think we should be able to to to to do all of this without without any significant impact on margin.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. Got it. Let me ask a broader question. Maybe it’s not fair to put it on you, but I’m I’m gonna ask. Just I mean, you sell, like, to everybody.

Sell do you have, like, a broad state of the industry that you might wanna share to the extent you have any visibility at all? I mean

Bertrand Loy, President and CEO, Entegris: No. I mean, I I wish I I had that that crystal ball. I I don’t. But, yeah. Look.

I mean, I think this industry is notoriously, difficult to predict, and we’ve been in this cycle now for some time. So sorry to disappoint, but I don’t have that crystal ball. I think like you, we’ve been frustrated with the lack of recovery. This is arguably the longest down cycle that I have experienced, and I’ve been in this industry for twenty five years.

Stacy Rasgon, Senior Analyst, Bernstein: We we never quite saw an up cycle like the one we had in front of it, So

Bertrand Loy, President and CEO, Entegris: That’s right. And we but we never see these up cycles when they come. We always get surprised. So as an operator in this environment, what we’re doing is we’re focused on what we control. And what we control is engagement with the customers, continuing to develop those very specialized solutions that I was mentioning, making sure that we continue to grow the content opportunity per wafer so that we are really positioned ideally for when the industry turns, and it will turn.

Likewise, we have continued to make investments in capacity because we believe in the long term potential of the industry. We believe in the long term potential of the integrated platform, and we want to be ready when the industry snaps back. And, you know, from my experience, I mean, the longer you stretch that rubber band, you know, the sharper the recovery. And and those recoveries are I mean, obviously, you print much better numbers, which is something that I know you will appreciate, but those ramps are really, really hard to manage. So you wanna be you wanna be ready for those ramps.

Mhmm. And that’s what we’re trying to do. It’s really striking the balance between navigating a a lukewarm industry environment right now while getting ready for for for a potential upturn.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. Is it lukewarm everywhere, though, or are there pockets? Or I know I know, you know, industrial’s been, oh, on a ten quarter downturn, maybe more. So there’s been some, at least among among the semi guys, some talk about cyclical bottoms recovery, although I I personally don’t know if that’s a real cyclical recovery or if it’s, like, pull forward in front of all the tariff stuff. Automotive, you know, has been, in general, weaker, but more recently, and and we definitely have seen some pull forward there.

I personally think we’re seeing a good amount of pull forward in the PC space. I don’t know if there’s are you just seeing this sort of just, like, universally across everything? Or

Bertrand Loy, President and CEO, Entegris: I think you’re right that we are hearing a lot of pull forwards, which usually means that there will be an implication in the second half outlook for many of those companies. I think the bright spot remains AI related applications, right? I mean we certainly benefited from that last year. Our largest customer is TSMC. TSMC historically was a 12% customer for Entegris.

Last year, that number spiked up to 16%. Oh, wow. So very significant growth at TSMC. Again, that’s just validating, what I was mentioning to you earlier, increasing the content per wafer opportunity and then capitalizing on, you know, the increase in in wafer production. We have not seen that anywhere else.

Yeah. I mean, memory mainstream has been flat to down now for many, many quarters. Yeah. Yeah.

Stacy Rasgon, Senior Analyst, Bernstein: Yeah. I mean, where where else do you benefit on AI? I mean, clearly, there’s there’s the wafer content. Do you benefit, like, on on the packaging, on the HBM?

Bertrand Loy, President and CEO, Entegris: We we are benefiting on the on the HBM in terms of materials. Uh-huh. And, you know, we have pretty significant opportunities, slurries in particular in in HBM that’s you know, that has benefited our material solutions platform. HBM historically you know, HBM and HBM chip is really essentially a DRAM chip for IOs. But so the the DRAM process typically doesn’t really require advanced filters.

They can really laser repair the chips. So they didn’t really need to have a lot of proactive, you know, engagement in terms of open vents filtration. But this is changing. I mean, HBM are chips that you cannot repair. There are larger chips that cannot cannot be repaired.

And then the yield penalty as they stock up those chips on the package is very, very costly. So we are seeing actually it is very, very recent. It’s literally, six months old. We’re seeing all of the HBM manufacturers coming to us looking for more advanced filtration and purification solutions. So I think that the answer to your question will change if you ask it again in in a year from now, which is actually very promising.

Okay. And that goes back to the the high level theme I was mentioning to you earlier. You know, the the reason we are excited at Entegris and the reason we believe we can continue to outperform the industry is really the result of that compounding complexity that comes from miniaturization and then the the introduction of new materials. Got it. That makes sense.

Stacy Rasgon, Senior Analyst, Bernstein: You talked about slurries. Right? I wanna talk maybe maybe it’s a good time to talk broadly about your M and A strategy. So slurries would have been about CMC, which does chemical mechanical polishing, but you’ve also what you buy at AMI and SAES and SINMAT and GLOBAL. Maybe could you talk, first, just a a little more broadly about how you guys think about m and a and some of the capabilities that you’ve picked up over the years inorganically?

And then I’d I’d like to dig a little bit more, specifically into CMC given that was the most recent one. Sure.

Bertrand Loy, President and CEO, Entegris: So so there there were there were I mean, if you again, I’m gonna try to provide some historical perspective without doing going too deep into the details. But so to compete effectively in this market, we we knew years ago, decades ago, that we needed to have enough scale to invest locally in Taiwan, in Korea and Japan. And I’m not just talking about manufacturing capabilities, I’m talking about development capabilities and have tech centers. You cannot do that. And you go back fifteen years ago, the company was $300,000,000 in size.

Today, we are exceeding $3,000,000,000 But you need scale to afford those investments in tech centers and manufacturing and get the returns that you’re all expecting. So M and A was important for us in that context. Now, doing M and A just because you want to get bigger, that’s not a strategy. So what we’re trying to do is to also just choose certain elements of value proposition that we wanted to bulk up. And so originally, it was about purity.

It was enabling the purity with the filters and then preserving the purity during transportation with high purity packaging. So that led us to the merger between Entegris and the spin off from Millipore Corporation, which brought the filtration platform to Entegris. That’s that’s actually how I got to Entegris. I came from that filtration background. And then as the industry road map became more complex, we were realizing that it was really harder, getting harder for us to innovate fast enough on the filtration side.

And we concluded that we didn’t have enough material science within the company, and we didn’t really have enough understanding of the chemical interactions between separation of our membrane and the diverse chemistries we were expected to filter out. And that led us to the acquisition of ATMI. As we increased the materials knowledge through that acquisition, we were able to increase our market share in filtration significantly. We were, in the past, the leader with about 40% market share. After the ATMI acquisition in probably the four or five years after that acquisition, we’re able to increase our market share on average to about 60% to 70%.

And in more advanced applications, that market share is even higher than that. And we’ve done that actually across multiple product lines. With ATMI came again that chemical platform. And then the question became and that chemical platform usually enjoys about 30% market share. We are number one or number two in the applications we serve with about a 30% share.

So the question then became what would need to be true for us to create a catalyst to get from a market share of 30% to something greater? So to do what we did on the Advanced Purity Solution platform. And the conclusion was we we thought that the best way to differentiate ourselves was to really have the full suite of capabilities from deposition materials to the recessed chemistries, be it etching, polishing, then at the end of all of that, you have a cleaning step. So if you look at the many acquisitions that we’ve done over the last five years, it’s really to complete that set of capabilities so now we can engage with the customers and really tell them that not only can we develop the best material, but we can actually develop that suite of solutions, which ultimately de risk the adoption of the new deposition material. And back to a point I was making earlier in a different context, compresses the time to solution, which is very important for our customers.

So that’s the context for the acquisitions that we did. And again, all of them have been great contributors to our outperformance algorithm.

Stacy Rasgon, Senior Analyst, Bernstein: And maybe to dig into the latest one, C and C. So that was one of the bigger ones you’ve done, and put on some leverage to to do it. I guess, what what what is that? What did that actually bring to the table?

Bertrand Loy, President and CEO, Entegris: So before that, we had deposition materials. We had etching chemistries. We had cleaning chemistries. We didn’t have polishing. We needed polishing to be that that full solution provider that we aspired to being.

So CMC Materials was bringing the slurries and the pads used in the CMP, the the chemical mechanical planarization process, which is a highly sensitive process. Essentially, it’s putting sand on the wafer and you scrub it. And you’re supposed to do that at atomic level. So it’s a very inefficient process and yet it’s been used for decades and requires an extraordinary amount of precision. CMC actually brought us that.

So back to your question about what has worked well, and I would say that the two companies were very, very synergistic from a technology standpoint, as you understand. The cultures were very closed. We executed on the integration very rapidly, which is a guiding principle of mine, which is when you do those transformational deals, you really want to get the synergies and savings as quickly as we can, get the people impacted by those integration programs out of the organization quickly so that we can really turn to the positive or engage with the customers and then really get everybody’s mind on the task. We did just that. Within a year, we converted everyone to the same systems, generated about 125,000,000 of savings.

And now we’ve been obviously now for several years, we’ve been working on the innovation strategy, on the commercial strategies. And those various products have been doing extremely well, growing very fast last year in spite of a fairly muted industry environment, doing very well again the first quarter. The challenges that we faced was that there were I mean, we took on some debt. That was the only way for us to structure that deal in a way that would be acceptable for the sellers. We made a commitment to bring down the debt to below 4x gross leverage, and we have not been able to achieve that quite yet, simply because our original assumptions were counting on an industry environment that would be a little bit stronger than what it has been.

Having said that, and I’m not looking for excuses, would say that we’ve done everything within our control to pay down as much debt as possible. We have paid down $2,000,000,000 already as a result of applying every excess cash to debt paydown and also divesting nonstrategic parts of the portfolio. So some work to do still, but very, very happy with the way the integration has proceeded and the value we have been able to get you know, from a technology standpoint and customer engagement standpoint.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. And I guess on the further deleveraging front from here, it’s just does the cash flow just go down to to pay the debt until the leverage is where it needs to be? Yes. Exactly. Got it.

And I guess beyond that, though, what what are your broader, like, thoughts on capital allocation across clearly, and a is still gonna be part of longer term strategy going forward. But how do think about use of cash going?

Bertrand Loy, President and CEO, Entegris: Yeah. So short term debt pay down, I mean, we I mean, again, the the the debt structure is rock solid. There’s no maturity until 2028. It’s fully hedged, but we committed to paying it down, and it’s a matter of credibility, and that’s what we’re gonna do. Going forward, yes, we believe that we have been a a very capable acquirer.

We believe that the material space remain very fragmented and will be the source of many more opportunities for us to act. And we’ve been engaging with a lot of investors in terms of what do they believe Mhmm. An acceptable level of debt is, and then, you know, we’re gonna continue to have those discussions, and that will inform us in terms of, you know, how we finance the next the next transactions.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. Got about five minutes left. Should we go to the lightning round? By the way, if you do have other questions, you can feel free to submit them. We will get to them if we have we have time.

First, can you talk a bit more about what sort of competition or disruption you’re seeing coming from China? How do you compete with them, and are they moving out of China?

Bertrand Loy, President and CEO, Entegris: Yeah. So so we we’ve been competing with Chinese competitors for many years. They are making progress, but so are we. And, again, I think the the base of competition in this industry is technology differentiation. And as long as you can actually create a device performance benefit for your customers, as long as you can provide them a yield benefit, you win and they come back to you.

And it’s true in China, it’s true in Korea, Japan and anywhere else. And that’s really our strategy, coupled with offering our Chinese customers the ability to procure the Entegris products from our Asian manufacturing sites. So a question about do we see domestic competitors outside of China? Yes. I mean, they they they are trying to get outside of China.

They’ve been trying to, and the same rule of competition applies outside of China as they do in China. Got it. How much of your m and a and r and

Stacy Rasgon, Senior Analyst, Bernstein: d is customer driven versus where you think the market is going?

Bertrand Loy, President and CEO, Entegris: Well, I mean, yeah, mean, yeah. Yeah. I mean, look. Our interactions with the customers inform us on where we think the market is going. So I think it’s a little bit of a, you know, chicken and the egg question.

But but, yes, I mean, our innovation is very much customer driven. We have very regular road map discussions with our semiconductor fab customers, with our equipment partners, And that’s that’s really, again, how we continue to advance our offering, how we maintain the differentiation, in in everything we do. Got it. Why has prices been flat? Can you discuss competition and commoditization?

Yeah. So, I mean, for for for us and you could argue maybe there is a better model, but the model that we’ve been operating under is, we have an opportunity to set the price when we introduce a new product. And usually, we introduce a new product when a new node is is introduced by our customers. And then with that, and at that time, we usually discuss a a price curve over time that ties to to volumes. And usually, again, you know, you your price trend downwards as as volume increase.

So the the real question for us is really the shape of that curve. So the two points is really pricing it right, which usually is a function of really understanding the value you create for your customers. And I think we have become much better at that. We used to, you know, to to, you know, to to have a a cost plus approach to pricing. That’s no longer the case.

It’s really a value based pricing. And then I think we have become also a lot smarter around managing price over the the life cycle of a product.

Stacy Rasgon, Senior Analyst, Bernstein: One more here. I’m I’m gonna ask it anyways. Why step down now? And any comments on how David might lead the business going forward?

Bertrand Loy, President and CEO, Entegris: Look. I mean, I I I believe in in in in in in refreshment. I’ve had a discussion with my teams all the time, and, you know, we are in the business of absolutating ourselves and and changing and embracing change. So when I announced me stepping down, actually, I linked that decision to so many other discussions we’ve had and saying, look. It applies to me the same way it applies to everything else we do.

And that decision is is hard at one level because I love this company. I love what I do. But it’s also easy because I think Dave is a great guy, and I think, you know, he’s gonna do a phenomenal job. And what makes him great is that he is he is someone with extensive experience in the semiconductor industry, twenty years, worked in the fab, knows our products, used our products, understand the applications we serve. So a great operator.

I like his demeanor. I like what I’ve seen in the boardroom and the way he has been interacting with my team today, which will become his team. So the culture is right. And then for all of you, another important consideration is I think he’s a really great allocator of capital. I mean he knows what shareholder value is.

I mean, he has been a CEO, has been a CFO. And I think this is a rare blend to have someone who is an operator, likes to be with the customers, but is also actually great capital allocator. So I’m sure you will will you will like him very much.

Stacy Rasgon, Senior Analyst, Bernstein: Got it. I can’t wait to meet him. With that, I think we’re out of time. I think we will close out here. Thank you so much.

Bertrand Loy, President and CEO, Entegris: Great. Thank you.

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