What changed in this filing

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Item 1. Business

2023-02-24 compared with 2022-02-28 · 47 added, 40 removed, 240 unchanged (27% of the section changed)

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The following table details our fiscal periods included elsewhere in this report.

All references to 2021, 2020, and 2019, including the quarters thereto, relate to our fiscal period as so detailed.

All references to 2022, 2021, and 2020, including the quarters thereto, relate to our fiscal periods as so detailed.

Fiscal Period

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First Quarter

March 26, 2021

April 1, 2022

Second Quarter

June 25, 2021

Third Quarter

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We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment.

Our product offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices.

Our primary product offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices.

Our gas delivery subsystems deliver, monitor, and control precise quantities of the specialized gases used in semiconductor manufacturing processes such as etch and deposition.

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The broad technical expertise of our engineering team, coupled with our early customer engagement approach, enables us to offer innovative and reliable solutions to complex fluid delivery challenges.

With two decades of experience developing complex fluid delivery subsystems and meeting the constantly changing production requirements of leading semiconductor OEMs, we have developed expertise in fluid delivery that we offer to our OEM customers.

With over two decades of experience developing complex fluid delivery subsystems and meeting the constantly changing production requirements of leading semiconductor OEMs, we have developed expertise in fluid delivery that we offer to our OEM customers.

In addition, our capital efficient model provides us the flexibility to fulfill increased demand and meet changing customer requirements with relatively low levels of capital expenditures.

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We generated revenue of $1,280.1 million, $1,096.9 million, and $914.2 million in 2022, 2021, and 2020, respectively.

We generated net income of $70.9 million, $33.3 million, and $10.7 million on a GAAP basis in 2021, 2020, and 2019, respectively, and $97.7 million, $59.0 million, and $28.3 million on a non-GAAP basis, respectively.

See Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP Results for a discussion of non-GAAP net income, an accompanying presentation of the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States, net income, and a reconciliation of the differences between non-GAAP net income and net income.

We generated net income of $72.8 million, $70.9 million, and $33.3 million, calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in 2022, 2021, and 2020, respectively, and $104.9 million, $97.7 million, and $59.0 million on a non-GAAP basis, respectively.

See Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP Results for a discussion of non-GAAP net income, an accompanying presentation of the most directly comparable financial measure, GAAP net income, and a reconciliation of the differences between non-GAAP net income and GAAP net income.

Our Competitive Strengths

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Long History and Strong Relationships with Top Tier Customers

We have established deep relationships with top tier OEMs such as Lam Research, Applied Materials, and ASML, which were our three largest customers by sales in 2021.

We have established deep relationships with top tier OEMs, including Lam Research, Applied Materials, and ASML.

Our customers are global leaders by sales in the semiconductor capital equipment industry.

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Operational Excellence with Scale to Support the Largest Customers

Over our 20‑plus year experience in designing and building fluid delivery systems, we have developed deep capabilities in operations.

With over 20 years of experience in designing and building fluid delivery systems, we have developed deep capabilities in operations.

We have strategically located our manufacturing facilities near our customers’ locations in order to provide fast and efficient responses to new product introductions and accommodate configuration or design changes late in the manufacturing process.

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Capital Efficient and Scalable Business Model

In general, our business is not capital intensive and we are able to grow sales with a low investment in property, plant, and equipment.

In 2021, 2020, and 2019, our total capital expenditures were$20.8 million, $10.3 million, and $12.3 million, respectively, representing only 1.9%, 1.1%, and 2.0%, of sales, respectively.

Our business requires modest levels of capital investments to support production capacity and new product development and can fluctuate over time depending on the business outlook and new product strategy and timing of introduction.

In 2022, 2021, and 2020, our total capital expenditures were $29.4 million, $20.8 million, and $10.3 million, respectively, representing 2.3%, 1.9%, and 1.1%, of sales, respectively.

In 2022, we significantly increased our precision machining manufacturing capacity, representing approximately 80% of 2022 capital expenditures.

The semiconductor capital equipment market has historically been cyclical.

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We believe that our early collaborative approach with customers positions us to deliver innovative and dynamic solutions, offer timely deployment and meet competitive cost targets, further increasing our market share.

Through our acquisition of IMG Companies, LLC and its subsidiaries (“IMG”), a precision machining and specialty component manufacturing company, in November 2021, our acquisition of a precision machining operation in December 2020, an intellectual property (“IP”) purchase of developed flow controller technology in 2019, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our product offerings within our served customer base, including entering the market for chemical delivery subsystems for wet process tools where we had only limited engagement in the past.

Through our acquisition of IMG Companies, LLC, a precision machining and specialty component manufacturing company (together with its subsidiaries, “IMG”), in November 2021, our acquisition of a precision machining operation in December 2020, an intellectual property purchase of developed flow controller technology in 2019, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our product offerings within our served customer base, including entering the market for chemical delivery subsystems for wet process tools where we had only limited engagement in the past.

Using this and our existing engineering capability, we developed a liquid delivery module for use on a wet process equipment system that met the specifications of, and was qualified by, one of our largest customers and a market leader in this space.

Grow Our Total Available Market and Share of the Market with Expanded Product Offerings

We continue to work with our existing core customers on additional opportunities, including chemical delivery, one of our important potential growth areas.

We believe that wet processes, including clean and electrochemical deposition (“ECD”), that require precise chemical delivery are currently an underpenetrated market opportunity for us.

By leveraging our existing customer relationships and strong reputation in fluid mechanics, we intend to increase our chemical delivery module market share and introduce additional related products.

Through our acquisition of a precision machining operation in December 2020, our IP purchase of developed flow controller technology in 2019, our acquisition of a Korean gas panel supplier in 2018, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our served customer base with expanded product offerings.

We continue to work with our existing core customers on additional opportunities, including machined components, chemical delivery, and proprietary products as a few of our important potential growth areas.

We believe that the industries we serve have a growing need for the unique expertise we offer in precision machining, fluid mechanics, controls, and the component needed for next generation processes.

For example, as semiconductor devices become more complex, atomic layer deposition (“ALD”), etch, and chemical vaper deposition (“CVD”) require more precise gas control, with faster response times, tighter repeatability, and cleaner, more corrosion-resistant systems.

By leveraging our existing customer relationships and strong history of solving these challenges, we believe this will grow market share.

Through our acquisition of a precision machining operation in December 2020, our intellectual property purchase of developed flow controller technology in 2019, our acquisition of a Korean gas panel supplier in 2018, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our served customer base with expanded product offerings.

The acquisitions allow us to manufacture and assemble the complex plastic and metal products and precision machined components for the semiconductor equipment, including our existing customer base, as well as medical device, and general-industrial industries, while providing us exposure to and growth opportunities in the Korean and Japanese semiconductor capital equipment market.

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Expand Our Total Customer Base within Fluid Delivery Market

We have expanded our customer base and are currently a supplier of gas delivery systems for a leading lithography system manufacturer, a leading atomic layer deposition (“ALD”) system manufacturer, and Korean process tool OEMs.

Our acquisition of IMG further expands our total customer base with new customers in medical, aerospace, and defense.

We have expanded our customer base and are currently a supplier of gas delivery systems for a leading lithography system manufacturer, a leading ALD system manufacturer, and Korean process tool OEMs.

Our acquisition of IMG further expands our total customer base with new customers in medical, aerospace, and defense sectors.

We continue to actively engage with new customers that are considering outsourcing their gas and chemical delivery needs as well as expanding our components business.

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Our business of designing and manufacturing critical systems for semiconductor capital equipment manufacturers operated as a standalone business until 2009 when Celerity sold the business to a private equity fund.

Francisco Partners (“FP”) acquired the business in December 2011 and formed Ichor Holdings, Ltd., an exempt company incorporated in the Cayman Islands, in March 2012 to serve as the parent company as part of a restructuring to accommodate the expansion of our business in Singapore and Malaysia.

Francisco Partners acquired the business in December 2011 and formed Ichor Holdings, Ltd., an exempt company incorporated in the Cayman Islands, in March 2012 to serve as the parent company as part of a restructuring to accommodate the expansion of our business in Singapore and Malaysia.

We completed the initial public offering of our ordinary shares in December 2016.

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In April 2016, we purchased Ajax-United Patterns & Molds, Inc.

(“Ajax”) for $17.6 million to add chemical delivery subsystem capabilities with existing customers.

for $17.6 million to add chemical delivery subsystem capabilities with existing customers.

In July 2017 we acquired Cal‑Weld, Inc.

(“Cal‑Weld”) for $56.2 million to add to our gas delivery subsystem and weldment capabilities.

In December 2017 we acquired Talon Innovations Corporation (“Talon”) for $137.8 million to add to our gas delivery subsystem, precision machining, and component manufacturing capabilities.

for $56.2 million to add to our gas delivery subsystem and weldment capabilities.

In December 2017 we acquired Talon Innovations Corporation for $137.8 million to add to our gas delivery subsystem, precision machining, and component manufacturing capabilities.

In April 2018, we acquired IAN Engineering Co., Ltd.

(“IAN”) for $6.5 million to provide us exposure to and growth opportunities in the Korean semiconductor capital equipment market.

for $6.5 million to provide us exposure to and growth opportunities in the Korean semiconductor capital equipment market.

In December 2020, we acquired certain operating assets and assumed the operations of a business in Nogales, Mexico for $5.0 million to increase our precision machined component manufacturing capacity.

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We are dependent upon a small number of customers, as the semiconductor equipment manufacturer market is highly concentrated with five companies accounting for over 70% of all process tool revenues.

For 2021, our two largest customers were Lam Research and Applied Materials, which accounted for 53% and 32% of sales, respectively.

For 2022, our two largest customers were Lam Research and Applied Materials, which accounted for a combined 79% of sales, respectively.

We do not have long-term contracts that require customers to place orders with us in fixed or minimum volumes, and we generally operate on a purchase order basis with customers.

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Supply Chain Management

We use a wide range of components and materials in the production of our gas and chemical delivery systems, including filters, mass flow controllers, regulators, pressure transducers, and valves.

We use a wide range of components and materials in the production of our gas and chemical delivery systems, including filters, mass flow controllers, regulators, pressure transducers, substrates, and valves.

We obtain components and materials from a large number or sources, including single source and sole source suppliers.

We use consignment material and just-in-time stocking programs to better manage our component inventories and better respond to changing customer requirements.

These approaches enable us to significantly reduce our inventory levels and maintain flexibility in responding to changes in product demand.

We use supplier-consigned material and just-in-time stocking programs for a portion of our inventories to better manage our component inventories and better respond to changing customer requirements.

These approaches enable us to reduce our inventory levels and maintain flexibility in responding to changes in product demand.

A key part of our strategy is to identify multiple suppliers with a strong global reach that are located within close proximity to our manufacturing locations.

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While many OEMs have outsourced the design and manufacturing of their gas and chemical delivery systems, we would face additional competition if in the future these OEMs elected to develop and build these systems internally.

The fluid delivery subsystem market is concentrated , and we face competition primarily from Ultra Clean Technology, with additional competition from regional suppliers.

The fluid delivery subsystem market is concentrated , and we face competition , for example, from Ultra Clean Technology, with additional competition from other regional suppliers.

The chemical delivery subsystem, weldments, and precision machining industries are fragmented , and we face competition from numerous smaller suppliers.

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We have historically focused our patent protection efforts in the United States.

As of December 31, 2021, we had 58 granted patents and 31 pending patent applications, of which 27 and 21 are U.S.

As of December 30, 2022, we had 59 granted patents and 67 pending patent applications, of which 26 and 24 were U.S.

patents, respectively.

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Human Capital Resources

As a globally successful company, we believe that we must be a good corporate citizen, socially responsible, and provide a safe and thriving environment for our employees, who we consider our most important asset.

As a globally successful company, we believe that we must be a good corporate citizen and socially responsible, while providing a safe and rewarding environment for our employees, who are our greatest strength.

All employees of Ichor are committed to a set of core values that define company culture, represent what we believe, and guide our actions.

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Our employees are not unionized, and we have no participation in works councils.

We have not experienced any material work stoppages at any of our facilities, with the exception of temporary shutdowns at our Malaysia facility in June and July 2021 due to the COVID‑19 pandemic.

We have not experienced any material work stoppages at any of our facilities in 2022.

We believe our relationship with our employees to be good.

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We offer a combination of fixed and variable pay, which can vary by business and function.

For our leadership and key talent, we provide equity based long-term compensation to create retention and incentive towards the company’s strategies and objectives.

For our leadership and key talent, we provide equity based long-term compensation to create retention and incentive towards our strategic goals and objectives.

We provide benefits that are locally competitive, including retirement and savings plans with company contributions, health and welfare plans aimed to provide protection for employees, and in some instances, protection for employees’ families, and we provide a discounted employee stock purchase plan.

We invest in wellness programs to promote physical, emotional, and financial well-being.

In 2021, we continued our employee cash spot bonus program, which recognizes employee contributions to our business.

In 2022, we continued our employee cash spot bonus and continuous improvement programs, which recognize employee contributions to our business.

Learning and Development

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We also believe that maintaining an effective employee review and appraisal process, with regular managerial feedback and coaching, is critical to cultivating a learning organization.

We adopted two employee resource groups in 2022, Ichor Women and Ichor Pride , creating increased employee engagement to grow and foster diverse talent.

Health and Safety

We are committed to monitoring and maintaining a healthy and safe environment for our employees.

We facilitate “skip level” sessions, periodically survey employees, and use other communication forums to allow employees to express their opinions and concerns to management.

We maintain a professional Human Resources department and provide a "whistle blower" hotline available to all employees for communicating concerns, including those involving health and safety.

During the COVID‑19 pandemic, we took necessary steps to ensure the health and safety of our employees and extended communities by following and often exceeding CDC and other government health organization guidelines from around the world.

We adopted a policy to support remote and hybrid working options for office staff and made a significant investment in our IT infrastructure to enable uninterrupted virtual communication.

For factory workers, we maintain strict guidelines to uphold safety of our workforce and business continuity, including health screenings, social distancing protocols, the use of personal protective equipment, and in certain regions testing protocols.

We facilitate “skip level” sessions, periodically survey employees, and use other communication forums to allow employees to express their opinions, concerns, and suggestions to management.

We maintain a professional human resources department and provide a whistleblower hotline available to all employees for communicating concerns, including those involving health and safety.

We take necessary steps to ensure the health and safety of our employees and extended communities by following, and often exceeding, regulatory guidelines from around the world.

We promote having our workforce physically co-located at our facilities to support collaboration, which is a company core value.

When necessary, we support remote and hybrid working options for certain office staff.

For all of our facilities, we maintain strict guidelines to uphold the safety of our workforce and business continuity, including health screenings, social distancing protocols, the use of personal protective equipment, and, in certain regions, onsite testing protocols.

We held onsite flu vaccine clinics during 2022 to support employee preventive health and create ease of access.

Community Involvement

We continued our charitable contributions this past year to include educational scholarships specifically earmarked for under-represented minority groups attending college.

We invest in local community colleges in the regions where we live and work to support the education and development opportunities supporting the advancement of manufacturing skill sets, such as machinists and welding.

We support local foodbanks and other local charities in the communities in which we operate.

We invest in selected local community colleges in the regions where we live and work to support the education and development opportunities supporting the advancement of manufacturing skill sets, such as machinists and welding.

We support local foodbanks, sponsor blood drives, and other local charities in communities in which we operate.

Our environmental, social, and governance (“ESG”) efforts in 2022 were advanced by establishing an ESG council to assist in supporting a sustainable environment for generations to come, cultivating a diverse, equitable, and inclusive employment environment, contributing to the communities where we operate, and upholding the highest code of business ethics and standards.

The council embarked on a five-year roadmap in 2022, with 2022 serving as the year for defining data baselines and communicating policies.

We are a proud member of the Responsible Business Alliance, and we work with our customers and suppliers to support their ESG goals.

Environmental, Health, and Safety Regulations

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business