What changed in this filing

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Item 1. Business

2023-11-16 compared with 2022-11-17 · 138 added, 97 removed, 169 unchanged (58% of the section changed)

Kulicke and Soffa Industries, Inc.

( “ we ” , the “ Company ” or “ K&S ” ) designs, manufactures and sells capital equipment and tools used to assemble semiconductor devices, including integrated circuits ( “ ICs ” ), high and low powered discrete devices, light-emitting diodes ( “ LEDs ” ), and power modules.

In addition, we have a portfolio of equipment that is used to assemble components onto electronic circuit boards.

We also service, maintain, repair and upgrade our equipment, and sell consumable aftermarket tools for our and our peer companies’ equipment.

Our customers primarily consist of semiconductor device manufacturers, integrated device manufacturers ( “ IDMs ” ), outsourced semiconductor assembly and test providers ( “ OSATs ” ), other electronics manufacturers and automotive electronics suppliers.

Founded in 1951, Kulicke and Soffa Industries, Inc.

(“K&S,” “we,” “us,” “our,” or the “Company”) specializes in developing cutting-edge semiconductor and electronics assembly solutions enabling a smarter and more sustainable future.

Our ever-growing range of products and services supports growth and facilitates technology transitions across large-scale markets, such as advanced display, automotive, communications, compute, consumer, data storage, energy storage and industrial.

We design, develop, manufacture and sell capital equipment and consumables and provide services used to assemble semiconductor and electronic devices, such as integrated circuits, power discretes, light-emitting diode (“LEDs”), advanced displays and sensors.

We also service, maintain, repair and upgrade our equipment and sell consumable aftermarket solutions and services for our and our peer companies’ equipment.

Our customers primarily consist of integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), foundry service providers, and other electronics manufacturers and automotive electronics suppliers.

Our goal is to be the technology leader and the most competitive supplier in terms of cost and performance in each of our major product lines.

Accordingly, we invest in research and engineering projects intended to expand our market access and enhance our leadership position in semiconductor, electronics and display assembly.

We also remain focused on enhancing our value to customers through higher productivity systems, more autonomous capabilities and continuous improvement and optimization of our operational costs.

Delivering new levels of value to our customers is a critically important goal.

K&S was incorporated in Pennsylvania in 1956.

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Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are also available on the SEC's website at www.sec.gov .

Our year end for each of fiscal 2022, 2021 and 2020 was October 1, 2022, October 2, 2021, and October 3, 2020, respectively.

Our year end for each of fiscal 2023, 2022 and 2021 was September 30, 2023, October 1, 2022, and October 2, 2021, respectively.

Current Events

Israel - Hamas War

On October 7, 2023, an escalated armed conflict between Israel and the Hamas terrorist organization commenced, leading to a series of extended hostilities along Israel’s border with the Gaza Strip.

Additionally, since October 8, 2023, the Hezbollah militant group has increased its hostilities against Israel over its northern region, including Haifa.

Our Company has a manufacturing facility and a business office in Haifa, and our capillaries are manufactured at our facilities in Israel and China.

As of the date of this report, our business and manufacturing operations in Israel have not been impacted and no material damage or utilities interruption have been noted at our Israeli facility.

Trade routes remain open, and our suppliers and business partners in Israel remain operational.

Furthermore, save for a handful of employees who have been mobilized as members of the Israeli military reserves to active duty, disruption to our workforce has been minimal.

We employ around 70 employees in Israel.

The safety and well-being of our employees and their families remain our top priority.

Our Company is actively providing support to employees and their families who have been impacted by these events, and employees in our Israeli facilities have the option of working from home to facilitate care-giving needs.

Given that the intensity, duration and outcome of the ongoing war is uncertain, any further escalation or other hostilities may result in government-mandated lockdowns and disrupt our business operations.

We continue to monitor the situation and remain ready to activate our Business Continuity Plan (“BCP”) if necessary.

Key Events in Fiscal 2023

Signing of definitive agreement for the acquisition of Advanced Jet Automation Co., Ltd.

On September 8, 2022, the Company announced that one of its subsidiaries signed a definitive agreement for the acquisition of Advanced Jet Automation Co., Ltd.

(“AJA”), a technology company headquartered in Taiwan.

Upon the consummation of the transaction, we will acquire the designated dispensing assets and the dispensing business of AJAs affiliate, Samurai Spirit Inc., a leading developer and manufacturer of high-precision micro dispensing equipment and solutions in Taiwan.

The acquisition is expected to close in fiscal 2023, subject to customary closing conditions, including applicable regulatory approvals.

COVID-19 Pandemic

The COVID-19 pandemic and the resulting containment measures have significantly impacted the global economy, disrupted global supply chains, created volatility in equity market valuations, created significant volatility and disruption in financial markets, and affected unemployment levels.

The global COVID-19 response remains dynamic and some countries continue to impose quarantines, containment measures or travel restrictions.

In certain jurisdictions there has been a resurgence of illnesses or the threat of emerging new variants of the virus, which has led to more severe restrictions.

In response to the COVID-19 pandemic, we previously had to temporarily close certain offices in the United States, Europe and Asia as well as execute our Business Continuity Plan (“BCP”), which measures have disrupted our business operations.

Our manufacturing locations have returned to normal operations and, as most countries have relaxed the containment measures over the past few months, we have recalibrated our BCP and restarted other activities in conformance with local guidelines.

Our BCP has not included significant headcount reductions or changes in our overall liquidity position.

Acquisition of Advanced Jet Automation Co., Ltd.

As part of our corporate strategy, we continually evaluate our portfolio of businesses and may from time to time decide to buy or sell businesses or enter into joint ventures or other strategic alliances.

On February 22, 2023, we completed the acquisition of Advanced Jet Automation Co., Ltd.

(“AJA”), including the material business and assets formerly owned by its affiliate, Samurai Spirit Inc., a leading developer and manufacturer of high-precision micro-dispensing equipment and solutions in Taiwan.

The purchase price consisted of $38.1 million in cash paid at closing, of which $4.0 million from the purchase price is being held by us in escrow for a period of 24 months from the closing date.

This acquisition provides new access to adjacent process steps throughout the existing semiconductor, electronic assembly and advanced display portfolio, increasing market access to several exciting growth areas such as emerging advanced backlighting and direct-emissive display technologies utilizing mini and micro-LEDs, as well as advanced packaging opportunities which are demanding finer-pitch assembly capabilities.

As of February 22, 2023, AJA became our wholly-owned subsidiary and on March 30, 2023, AJA was renamed Kulicke and Soffa Hi-Tech Co., Ltd.

(“K&S Hi-Tech”).

The newly acquired business of K&S Hi-Tech is deemed a separate operating segment (advanced dispensing solutions) under the “All Others” category.

Please refer to Note 3―Business Combination for additional information related to our acquisition of AJA.

Macroeconomic Headwinds

We continue to be impacted by the global shortage in electronic components and our supply chain is strained in some cases as the availability of materials, logistics and freight options are challenging in many jurisdictions, especially to, from and within China.

In addition, the costs of logistics have increased as a result of macroeconomic conditions and general inflationary pressures, and labor shortages have further contributed to rising costs across the supply chain, further exacerbating the impact the pandemic has had on the supply chain.

We believe that the semiconductor industry macroeconomics have not changed and we anticipate that the industry’s long-term growth projections will normalize, but the sector is seeing short-term volatility and disruptions due to general inflationary pressures, falling consumer sentiment, or economic downturn caused, directly or indirectly, by various macroeconomic factors, including the prolonged Ukraine/Russia conflict.

Supply chain disruptions and global shortages in electronic components are generally abating in many jurisdictions.

However, the cost of logistics remains high as a result of macroeconomic conditions, and labor shortages persist across layers of the supply chain.

Additionally, the Company’s management continues to monitor the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict, especially in light of the impact it may have on the availability and cost of raw materials that are produced in the Middle East and Europe in general.

Management is also monitoring for signs of any expansion of economic or supply chain disruptions or broader supply chain inflationary costs resulting either directly or indirectly from the tensions in the Middle East and between Ukraine and Russia.

During fiscal years 2021 and 2022, semiconductor suppliers rapidly increased production output in response to increases in end-consumer demand.

Concerns surrounding supply availability have spurred defensive inventory purchases, which led to a heightened demand for our products.

The current macroeconomic conditions and declining consumer sentiment have resulted in significant inventory buildup in the semiconductor industry.

Many of our consumers who accumulated our products in the past three years are reducing their order rates as a result of inventory adjustment and shorter lead times.

The general reduction in demand within the semiconductor industry may also result in the instability of our key suppliers, as they struggle with oversupply and the rising cost of business.

Due to general inflationary pressures, declining consumer sentiment, and an economic downturn caused, directly or indirectly, by various macroeconomic factors, including the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict, the sector is seeing short-term volatility and disruption.

However, we believe that the semiconductor industry macroeconomics have not changed and we anticipate that the industry’s long-term growth projections will normalize.

The prolonged Ukraine/Russia conflict did not materially impact our financial condition and operating results in fiscal 2023.

We believe that our existing cash, cash equivalents, short-term investments, existing Facility Agreements, and anticipated cash flows from operations will be sufficient to meet our liquidity and capital requirements, notwithstanding the prolonged Ukraine/Russia conflict or other macroeconomic factors, for at least the next twelve months from the date of filing of this Annual Report on Form 10-K.

We believe that our existing cash, cash equivalents, short-term investments, existing Facility Agreements, and anticipated cash flows from operations will be sufficient to meet our liquidity and capital requirements, notwithstanding the ongoing Israel-Hamas war and the prolonged Ukraine/Russia conflict and other macroeconomic factors, for at least the next twelve months from the date of filing.

However, this is a highly dynamic situation.

As the macroeconomic situation remains highly volatile and the geopolitical situation remains uncertain, there is uncertainty surrounding the operations of our manufacturing locations, our business, our expectations regarding future demand or supply conditions and our near- and long-term liquidity, our financial condition and, consequentially, our operating results could deteriorate.

The effects of the COVID-19 pandemic and general macroeconomic conditions could adversely affect our business, results of operations, and financial condition.

For other information, please see Part I Item 1A.

Risk Factors.

As the macroeconomic situation remains highly volatile and the geopolitical situation remains uncertain, there is uncertainty surrounding the operations of our manufacturing locations, our business, our expectations regarding future demand or supply conditions, our near- and long-term liquidity and our financial condition.

Consequently, our operating results could deteriorate.

For other information, please see “Part I, Item 1A — Risk Factors”.

Share Repurchase Program

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On March 3, 2022, the Board of Directors increased the share repurchase authorization under the Program by an additional $400 million to $800 million, and extended its duration through August 1, 2025.

The Company has entered into a written trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program.

On May 7, 2022, the Company entered into a written trading plan under Rule 10b5-1 of the Exchange Act to facilitate repurchases under the Program.

This trading plan was most recently modified on May 29, 2023.

The Program may be suspended or discontinued at any time and is funded using the Company’s available cash, cash equivalents and short-term investments.

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The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations.

During the fiscal year ended October 1, 2022, the Company repurchased a total of approximately 2,782.1 thousand shares of common stock at a cost of approximately $132.8 million.

During the fiscal year ended September 30, 2023, the Company repurchased a total of approximately 1,515.0 thousand shares of common stock at a cost of approximately $ 68.1 million.

The stock repurchases were recorded in the periods they were delivered and accounted for as treasury stock in the Company’s Consolidated Balance Sheets.

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If the Company reissues treasury stock at an amount below its acquisition cost and additional paid-in capital associated with prior treasury stock transactions is insufficient to cover the difference between acquisition cost and the reissue price, this difference is recorded against retained earnings.

Accelerated Share Repurchase (“ASR”)

In addition to the 2,782.1 thousand shares of common stock repurchased under the Program during the fiscal year ended October 1, 2022, on March 9, 2022, the Company entered into an ASR agreement (the “March 2022 ASR Agreement”) with an investment bank counterparty (“Dealer”) to repurchase $150 million of the Company's common stock.

The March 2022 ASR Agreement was entered into pursuant to the Company's current $800 million share repurchase authorization.

Under the March 2022 ASR Agreement, the Company made an up-front payment of $150 million to the Dealer and received an initial delivery of 2,449.9 thousand shares of common stock at a cost of approximately $120 million on March 10, 2022.

The final number of shares to be repurchased will be based on the volume-weighted average price of the Company’s common stock during the term of the transaction, less a discount and subject to adjustments pursuant to the terms and conditions of the March 2022 ASR Agreement.

For accounting purposes, the March 2022 ASR Agreement is evaluated as an unsettled forward contract indexed to the Company’s own stock, with $30 million being classified within common stock.

At settlement, the Dealer may be required to deliver additional shares of common stock to the Company, or, under certain circumstances, the Company may be required to deliver shares of its common stock or may elect to make a cash payment to the Dealer.

The March 2022 ASR Agreement was settled between the Company and the Dealer on April 22, 2022 and the Company received an additional 344.5 thousand shares of common stock from the Dealer.

In total, an aggregate of 2,794.4 thousand shares of common stock were delivered by the Dealer under the March 2022 ASR Agreement at an average price of $53.68 per share, which was then reclassified as treasury stock from common stock in shareholder’s equity.

As of October 1, 2022, our remaining stock repurchase authorization under the Program was approximately $249.2 million.

On August 30, 2022, June 8, 2022, March 3, 2022 and October 18, 2021, the Board of Directors declared a quarterly dividend of $0.17 per share of common stock.

During the fiscal year ended October 1, 2022, the Company declared dividends of $0.68 per share of common stock.

As of September 30, 2023, our remaining stock repurchase authorization under the Program was approximately $ 181.0 million.

On August 23, 2023, June 8, 2023, March 2, 2023 and November 16, 2022, the Board of Directors declared a quarterly dividend of $0.19 per share of common stock.

During the fiscal year ended September 30, 2023, the Company declared dividends of $ 0.76 per share of common stock.

The declaration of any future cash dividend is at the discretion of the Board of Directors, subject to applicable laws, and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company’s shareholders.

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The semiconductor business environment is highly volatile and is driven by internal dynamics, both cyclical and seasonal, in addition to macroeconomic forces.

Over the long term, semiconductor consumption has historically grown, and is forecast to continue to grow.

Over the long term, semiconductor consumption has historically grown, and is forecasted to continue to grow.

This growth is driven, in part, by regular advances in device performance and by price declines that result from improvements in manufacturing technology.

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There can be no assurances regarding levels of demand for our products and we believe historic industry-wide volatility will persist.

In the Asia/Pacific region, our customer base has also become more geographically concentrated as a result of economic and industry conditions.

From time to time, our customers may request that we deliver our products to countries where they own or operate production facilities or to countries where they utilize third-party subcontractors or warehouses as part of their supply chain.

For example, customers headquartered in the U.S.

may require us to deliver our products to their back-end production facilities in China.

Our customer base in the Asia/Pacific region has become more geographically concentrated over time as a result of general economic and industry conditions and trends.

Approximately 91.2% and 94.4% of our net revenue for fiscal 2023 and 2022, respectively, was for shipments to customer locations outside of the U.S., primarily in the Asia/Pacific region.

Approximately 56.9% and 55.6% of our net revenue for fiscal 2022 and 2021, re spectively, was for shipments to customers located in China, which is subject to risks and uncertainties related to the respective policies of the governments of China and the U.S.

Furthermore, there is a potential risk of conflict and instability in the relationship between Taiwan and China which could disrupt the operations of our customers and/or suppliers in both Taiwan and China, our manufacturing operations in China, and our future plans in the region.

and several other countries have levied tariffs on certain goods, and have introduced other trade restrictions, which, together with the impact of the COVID-19 pandemic discussed above, has resulted in substantial uncertainties in the semiconductor, LED, memory and automotive markets.

Our Capital Equipment segment is primarily affected by the industry’s internal cyclical and seasonal dynamics in addition to broader macroeconomic factors that can positively or negatively affect our financial performance.

Approximately 38.6% and 45.8% of our net revenue for fiscal 2023 and 2022, respectively, was for shipments to customers headquartered in China.

While our customers have generally been impacted by the current global macroeconomic conditions, those with operations in China, an important manufacturing and supply chain hub, have witnessed a faster decline in demand and, accordingly, a faster decline in product shipments, compared to the rest of the world.

The shipments to customers headquartered in China are subject to heightened risks and uncertainties related to the respective policies of the governments of China and the U.S.

Furthermore, there is a potential risk of conflict and instability in the relationship between Taiwan and China that could disrupt the operations of our customers and/or suppliers in both Taiwan and China and our manufacturing operations in Taiwan and China.

and several other countries have levied tariffs on certain goods and have introduced other trade restrictions resulting in substantial uncertainties in the semiconductor, LED, memory and automotive markets.

Our Ball Bonding Equipment, Wedge Bonding Equipment and Advanced Solutions reportable segments, as well as the remaining operating segments in the “All Others” category, are primarily affected by the industry’s internal cyclical and seasonal dynamics in addition to broader macroeconomic factors that can positively or negatively affect our financial performance.

The sales mix of IDM and OSAT customers in any period also impacts financial performance, as changes in this mix can affect our products’ average selling prices and gross margins due to differences in volume purchases and machine configurations required by each customer type.

Our Aftermarket Products and Services (“APS”) segment has historically been less volatile than our Capital Equipment segment.

The APS sales are more directly tied to semiconductor unit consumption rather than capacity requirements and production capability improvements.

Our Aftermarket Products and Services (“APS”) segment has historically been less volatile than the other reportable segments.

APS sales are more directly tied to semiconductor unit consumption rather than capacity requirements and production capability improvements.

We continue to position our business to leverage our research and development leadership and innovation and to focus our efforts on mitigating volatility, improving profitability and ensuring longer-term growth.

We remain focused on operational excellence, expanding our product offerings and managing our business efficiently throughout the business cycles.

We remain focused on operational excellence, expanding our product offerings through continuous research and development or acquisitions and managing our business efficiently throughout the business cycles.

Our visibility into future demand is generally limited, forecasting is difficult, and we generally experience typical industry seasonality.

To limit potential adverse cyclical, seasonal and macroeconomic effects on our financial position, we have continued our efforts to maintain a strong balance sheet.

As of October 1, 2022, our total cash, cash equivalents and short-term investments were $775.5 million, a $35.7 million increase from the prior fiscal year end.

We believe our strong cash position will allow us to continue to invest in product development and pursue non-organic growth opportunities.

For example, as described in “Item 1.

- Business - Key events in Fiscal 2022”, the Company announced that one of its subsidiaries signed a definitive agreement for the acquisition of AJA.

As of September 30, 2023, our total cash, cash equivalents and short-term investments were $759.4 million, a $16.1 million decrease from the prior fiscal year end.

Despite the slight decrease from the prior fiscal year end, we believe our strong cash position will allow us to continue to invest in product development, pursue non-organic growth opportunities and return capital to investors through our share repurchase and dividend programs Please see “Part II, Item 7.

– Management Discussion and Analysis of Financial Condition - Liquidity and Capital Resources” for more information.

Technology Leadership

We compete largely by offering our customers advanced equipment and tools available for interconnect processes.

We believe our technology leadership contributes to the strong market positions of our ball bonder, wedge bonder, mini LED placement, and tools products.

To maintain our competitive advantage, we invest in product development activities designed to produce improvements to existing products and to deliver next-generation products.

These investments often focus as much on improvements in the semiconductor assembly process as on specific pieces of assembly equipment or tools.

In order to generate these improvements, we typically work in close collaboration with customers, end users, and other industry members.

We compete in the General Semiconductor, LED, Automotive & Industrial and Memory end markets by offering our customers advanced capital equipment, tools and solutions primarily addressing their semiconductor interconnect and device assembly needs.

Our technology leadership directly contributes to the strong market positions of our ball bonder, wedge bonder, advanced solutions, and other leading tools, services and solutions.

To maintain our competitive advantage, we invest in product development activities designed to enhance existing products and to deliver next-generation solutions.

These investments often focus on progressing the broader assembly process in addition to advancing specific hardware and software features within our broadening capital equipment and aftermarket solutions portfolios.

In support of this development effort, we typically work in close collaboration with customers, end users, and other industry members.

In addition to producing technical advances, these collaborative development efforts strengthen customer relationships and enhance our reputation as a technology leader and solutions provider.

In addition to gold, silver alloy wire and aluminum wire, our leadership in the industry’s use of copper wire for the bonding process is an example of the benefits of our collaborative efforts.

By working with customers, material suppliers, and other equipment suppliers, we have developed a series of robust, high-yielding production processes, which have made copper wire widely accepted and significantly reduced the cost of assembling an integrated circuit.

By working with customers, material suppliers, and other equipment suppliers, we have developed a series of robust, high-yielding production processes, which have made the use of copper wire for the bonding process widely accepted and significantly reduced the cost of assembling an integrated circuit.

Our leadership also has allowed us to maintain a competitive position in the latest generations of ball bonders.

RAPID™ is the first product in the smart bonder series to address the Industry 4.0 requirements.

The key features of this series include real-time process and performance monitoring, real-time equipment health monitoring, advanced data analytics and traceability, predictive maintenance monitoring and analysis, and detection and enhanced post-bond inspection.

Building on the success of RAPID™, which is the first product in the smart bonder series to address the Industry 4.0 requirements, our RAPID™ Pro introduces additional functionality including the latest response-based processes.

The RAPID™ series continues to excel in providing real-time process and performance monitoring, real-time equipment health monitoring, advanced data analytics and traceability, predictive maintenance monitoring and analysis, and detection and enhanced post-bond inspection.

We optimize our bonder platforms to deliver variants of our products to serve emerging high-growth markets.

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In all cases, we are making a concerted effort to develop commonality of subsystems and design practices, in order to improve performance and design efficiencies.

We believe this will benefit us as it will increase synergies between the various engineering product groups.

We believe this will benefit us as it will increase synergies between our various product engineering groups.

Furthermore, we continually research adjacent market segments where our technologies could be used.

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Typical applications include complementary metal-oxide semiconductor (“CMOS”) image sensors, surface acoustical wave (“SAW”) filters and high brightness LEDs.

These applications are commonly used in most, if not all, smartphones available today in the market.

These applications are commonly used in most, if not all, of the smartphones available today in the market.

We also have expanded the use of AT Premier PLUS for wafer level wire bonding for micro-electro-mechanical systems (“MEMS”) and other sensors.

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This forms the foundation for our advanced packaging equipment development.

We are also developing and manufacturing advanced packaging bonders for the emerging 2.5-dimensional integrated circuit (“2.5D IC”) and 3-dimensional integrated circuit (“3D IC”) markets.

We are also developing and manufacturing advanced packaging solutions for the emerging 2.5-dimensional integrated circuit (“2.5D IC”) and 3-dimensional integrated circuit (“3D IC”) markets.

By reducing the interconnect dimensions, 2.5D ICs and 3D ICs are expected to provide form factor, performance and power efficiency enhancements over traditional flip-chip packages in production today.

High-performance processing and memory applications, in addition to mobile devices such as smartphones and tablets, are anticipated to be earlier adopters of this new packaging technology.

High-performance processing and memory applications, in addition to mobile devices such as smartphones and tablets, are earlier adopters of this new packaging technology.

Chiplets are emerging as an alternative methodology for developing advanced system-level designs.

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This methodology of developing advanced system-level designs is increasing the complexity of packages.

Our leadership in system-in-package (“SiP”), multi-chip module (“MCM”) and heterogeneous integration are well positioned to address the requirements in this emerging and growing trend.

In advancing our leadership in ultra-fine-pitch advanced packaging solution, we are offering fluxless bonding capability in selected advanced packaging equipment.

We have also broadened our advanced packaging solutions for mass reflow to include high accuracy flip chip and fan-out wafer level packaging (“FOWLP”) with the Katalyst TM .

Our leadership in system-in-package (“SiP”), multi-chip module (“MCM”) and heterogeneous integration are well positioned to address the requirements of this emerging and growing trend.

Our latest fluxless capable bonding technology allows ultra-fine-pitch interconnects necessary for next-generation chiplet-based advanced packages.

We have also expanded our long-term advanced packaging partnership with the UCLA Center for Heterogeneous Integration and Performance Scaling (“CHIPS”) and Penn State Center for Heterogeneous Integration of Micro Electronic Systems (“CHIMES”).

In addition to our growing heterogeneous opportunities, we have also broadened our mass reflow advanced packaging solutions to include high-accuracy flip chip and fan-out wafer level packaging (“FOWLP”) with Katalyst TM .

Our electronics assembly solutions are also capable of advanced package-on-package, wafer level packaging (“WLP”), embedded die, and active and passive die placement for SiP, enabling us to diversify our business while further expanding market reach into the automotive, LED lighting, medical and industrial segments.

During fiscal 2019, we entered into a new market, miniLED for display backlighting and direct emitting display, with the launch of PIXALUX TM .

The PIXALUX TM is a high-speed die placement equipment, and one of the most mass production ready solutions for miniLED placement in the market.

MiniLEDs are used in TV, IT display, large display, signage display, consumer display and automotive markets.

The usage of miniLEDs is expected to grow significantly over the next few years, followed by microLED adoption.

During fiscal 2019, we entered into the emerging mini-LED market supporting display backlighting and direct emissive displays, with the launch of PIXALUX TM .

The PIXALUX TM is a high-speed die placement equipment, and one of the most mass production ready solutions for mini-LED placement in the market.

Mini-LEDs are used in TV, IT display, large display, signage display, consumer display and automotive markets.

The usage of mini-LEDs is expected to grow significantly over the next few years, followed by micro-LED adoption.

We intend to leverage the momentum we already have with PIXALUX TM to continue to innovate and provide solutions to the industry to meet the challenges of packaging and assembling the next-generation of electronic devices.

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LUMINEX TM combines laser technology, state-of-the-art optical systems, material engineering and high precision motion control to deliver industry leading throughput and placement accuracy.

As announced on August 8, 2023, we have commenced a collaboration on LUMINEX TM with Taiwan Surface Mounting Technology Corp, a worldwide leading LCD Surface Mount Technology (“SMT”) solutions provider, to advance mini-LED backlight and direct-emissive displays for high-volume adoption.

We bring the same technology focus to our tools business, driving tool design and manufacturing technology to optimize the performance and process capability of the equipment in which our tools are used.

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We believe our unique ability to simultaneously develop both equipment and tools is a core strength supporting our products' technological differentiation.

Our major customers include IDMs, OSATs, industrial manufacturers and automotive electronics suppliers.

Our major customers include IDMs, OSATs, foundry service providers, and other electronic manufacturers and automotive electronics suppliers.

Revenue from our customers may vary significantly from year-to-year based on their respective capital investments, operating expense budgets, and overall industry trends.

For other information regarding our concentrations and customers, see “Part II - Item 8.

Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 17:

For other information regarding our concentrations and customers, please see “Part II, Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements - Note 17:

Commitments, Contingencies and Concentrations”.

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Because of the volatility of customer demand, possibility of customer changes in delivery schedules or cancellations and potential delays in product shipments, our backlog as of any particular date may not be indicative of net revenue for any succeeding period.

The following table reflects our backlog as of October 1, 2022 and October 2, 2021:

(in thousands) October 1, 2022 October 2, 2021

The following table reflects our backlog as of September 30, 2023 and October 1, 2022:

(in thousands) September 30, 2023 October 1, 2022

Backlog $ 423,824 $ 510,145

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however, many outsourced parts and components are only available from a single or limited number of sources.

Our ball bonder, wedge bonder, AT Premier, APAMA and Katalyst TM bonder manufacturing and assembly is done at our facility in Singapore.

Our ball bonder, wedge bonder, AT Premier, APAMA TM and Katalyst TM bonder manufacturing and assembly is done at our facility in Singapore.

Our Hybrid and Electronic Assembly solutions manufacturing and assembly is done at our facility in the Netherlands.

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We manufacture dicing blades, capillaries and a portion of our bonding wedge inventory at our facility in China.

The capillaries are made using blanks produced at our facilities in China and Israel.

The capillaries are produced at our facilities in China and Israel.

We both produce and outsource the production of our bonding wedges.

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Significant competitive factors in the semiconductor equipment market include price, speed/throughput, production yield, process control, delivery time, innovation, quality and customer support, each of which contribute to lower the overall cost per package being manufactured.

Our major equipment competitors are ASM Pacific Technology, BE Semiconductor Industries N.V., Hanwha Precision Machinery Co., Ltd.

and Shinkawa Ltd.

Our major equipment competitors are ASM Pacific Technology, Hesse GmbH, Han's Laser Technology Co., Ltd., BE Semiconductor Industries N.V., Hanwha Precision Machinery Co., Ltd., Panasonic Holdings Corporation, Shinkawa Ltd.

and Nordson Corporation.

Significant competitive factors in the semiconductor packaging materials industry include performance, price, delivery, product life, and quality.

Our significant tools competitors are Precision Engineering Company, Disco Corporation, Small Precision Tools Co.

Our significant consumables competitors are PECO Co., Ltd.

, Disco Corporation, Small Precision Tools Co., Ltd.

and Chaozhou Three-Circle (Group) Co., Ltd.

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Our business is subject to various other regulations typical of businesses of our type in the jurisdictions in which we operate.

We maintain an export compliance program designed to meet the requirements of the U.S.

Department of Commerce and the U.S.

Department of State.

Business Continuity Management Plan

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The BCP provides a structured framework for safeguarding our employees and property, making a financial and operational assessment, protecting our books and records, perpetuating critical business functions, and enabling the continuation of customer transactions.

We review and update our BCP on a periodic basis to reflect any changes in our Company’s structure, operations or environment that may affect its continuity.

Environmental, Social and Governance (“ESG”)

We continue to proactively manage and address the ESG topics that are of concern to us and our stakeholders.

The sustainability governance structure at K&S continues to evolve and mature.

In fiscal 2022, we embedded our four corporate social responsibility pillars into a wider ESG framework now covering the full spectrum of ESG-related efforts and initiatives, and further integrated these ESG-related considerations, efforts and initiatives into many of our business and operational practices.

We also established an ESG council to oversee our ESG efforts.

The ESG council comprises sub-components overseen by organizational leads, with each lead providing regular updates on status and planned initiatives to defined ESG council work streams.

The ESG council provides quarterly updates to our executive leadership, with the Nominating and Governance Committee (“NGC”) of the Board of Directors receiving summary reports on a semi-annual basis.

The NGC maintains ultimate oversight of all ESG activities and is responsible for reviewing and overseeing our ESG strategy, policies, and performance.

Through this structure, the Board of Directors has oversight of the impacts the organization has on its stakeholders and the environment.

For more information on our ESG efforts, please refer to our Sustainability Report 2022, which can be found on our website at https://www.kns.com/ESG.

This website reference is provided for convenience only and the content on the referenced website is expressly not incorporated by reference into this Annual Report on Form 10-K.

Human Capital

1 unchanged sentence

Our talented employees are critical to our ability to achieve the Company’s vision to be the leading technology and service provider of innovative interconnect solutions enabling a smart future.

As of October 1, 2022, we had 2,944 full-time employees and 223 temporary workers worldwide.

As of September 30, 2023, we had 2,877 full-time employees and 148 temporary workers worldwide.

Diversity & Inclusion

3 unchanged sentences

We value different backgrounds, celebrate unique perspectives, and believe that diversity and inclusion are essential to creating an environment where we can achieve our best innovation essential to the success of the Company.

In fiscal 2022, the Company incorporated its Diversity & Inclusion (“D&I”) program into its Environmental, Social and Governance (“ESG”) structure.

The D&I program's vision is to enhance and improve the experience of everyone who works at the Company;

encourage and recognize their contributions and successes, in an inclusive, cohesive, and collegial environment;

and celebrate the diverse voices of our employees.

In furtherance of that vision, in fiscal 2022, the Company conducted an organization equity assessment, hosted global trainings and diversity events which educated employees more about D&I in the workplace, and adopted an 18-month strategic plan.

In fiscal 2022, the Company incorporated its Diversity & Inclusion (“D&I”) program into its ESG structure.

The vision of the D&I program is to enrich the experience of all Company employees, irrespective of their seniority or role.

It aims to foster an environment that acknowledges and celebrates their contributions and achievements in a unified and supportive setting.

Building upon the effective worldwide implementation of the Company’s equity assessment, extensive training sessions, and diversity events during fiscal year 2023, the next phase of the strategic plan involves a learning and development series titled “Inclusive Leader Mindset Change Training”.

This program is designed to equip all people managers with valuable perspectives and tools to cultivate inclusive leadership.

Safe Workplace

1 unchanged sentence

The health and safety of our employees is of paramount importance to the Company, and forms an integral part of our organizational culture.

We have Environment, Health and Safety (“EHS”) practices, objectives and performance targets at each of our key manufacturing and R&D sites, which are overseen by an EHS Committee, led by an EHS Manager or a Safety Representative from each key operations function.

In fiscal 2022, we established an Executive Safety Committee (the “Safety Committee”) to provide overall leadership and policy in discharging the Company’s safety responsibilities while promoting a culture of safety within the Company.

The Safety Committee, together with key site and operations leadership responsible for the Company’s workplace safety and health, works together to establish and communicate a vision for the Company’s workplace safety.

Each of our key manufacturing and R&D sites have also established its Environment, Health and Safety (“EHS”) practices, objectives and performance targets, which are overseen by an EHS Committee, led by an EHS Manager or a Safety Representative from each key operations function.

To ensure that all employees are familiar with our safety standards and actions, we conduct regular health and safety-related trainings including an online based Corporate Safety Training module, as well as hands-on preparedness training comprising periodic fire drill evacuations, first-aid, fire-fighting and hazardous chemical spillage response drills.

This training is included in our new hire on-boarding programs with employee-wide refresher trainings conducted every two years.

Additionally, as part of our business continuity measures and in response to the COVID-19 pandemic, we have assembled a management-led COVID-19 Committee comprising directors and managers of various key departments to provide global oversight and guidance in implementing site-specific business continuity and risk mitigation plans across our key sites.

We regularly communicate with country management teams and tailor our policies according to the latest developments and guidelines provided by global authorities such as World Health Organization (“WHO”) and the local authorities at each site with the goal of ensuring the safety of all our team members while minimizing disruption to operations and providing support to our local communities.

As part of our business continuity measures and in response to the COVID-19 pandemic, we assembled a management-led COVID-19 Committee comprising directors and managers of various key departments to provide global oversight and guidance in implementing site-specific business continuity and risk mitigation plans across our key sites.

While we have ceased regular meetings of the COVID-19 Committee in light of the current global COVID-19 situation, we remain vigilant and continue to monitor the latest developments and guidelines provided by global authorities such as the World Health Organization (“WHO”), and remain ready to reactivate our resources, including the COVID-19 Committee or a similar committee, to deal with other global health situations if it becomes necessary to do so in the future.

Human Resource (“HR”) Practices

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We continually review these policies and benchmark them against market peers to help ensure that we implement leading practices on recruitment, onboarding and employee development.

Our HR function also includes centers of excellence in Talent Management, Talent Acquisition, HR Management Information System, and Global Compensation and Benefits, ensuring best practices in these important areas.

Our HR function also includes centers of excellence in Talent Management, Talent Acquisition, HR Shared Services, and Global Compensation and Benefits, ensuring best practices in these important areas.

Employee Development

3 unchanged sentences

We encourage our employees to not only participate actively in technical and soft skill training programs, but also to learn through peer coaching and mentoring, and to develop professionally through various stretch assignments and projects.

In fiscal 2023, we launched a number of global leadership development programs designed to accelerate the development of our key leaders and prepare high potential talents to take on broader leadership roles.

Following employee feedback in the last employee engagement survey, we introduced a formalized career progression framework and associated tools to provide clarity and guidance to both managers and employees.

The framework provides clarity and tools for employees in the Professional and Management Career tracks on the requisite competencies for advancement to the next career level within the Company.

Employees are encouraged to enroll in the various training courses intended to support their development in the required competency stages as they chart their career progression with the Company.

Compensation & Benefits

6 unchanged sentences

Survey results are reviewed by management teams to identify improvement opportunity areas.

Following employee feedback in the last survey, the Company has introduced a formalized career progression framework and associated tools to provide clarity and guidance to both managers and employees.

The framework provides clarity and tools for employees in the Professional and Management Career tracks on the requisite competencies for advancement to the next career level within the Company.

Employees are encouraged to enroll in the various training courses intended to support their development in the required competency stages as they chart their career progression with the Company.

In the most recent survey conducted in December 2022, 95% of our employees provided their feedback and we achieved an overall engagement score of 89%, an improvement of 11% from our last survey in 2019.

The engagement score is calculated based on responses to three questions that are designed to gauge an employee’s willingness to help the Company achieve its goals, pride in working at the Company and intentions to continue growing his or her career within the Company.

Work flexibility, which had been critical to our success throughout the COVID-19 pandemic, has now become part of our culture.

We have provided tools and infrastructure to enable employees the choice and flexibility of a range of flexible work arrangement options that best meet their needs while allowing them to continue to fulfill business objectives.

Open Door Policy

1 unchanged sentence

Employees may report any grievances to their immediate supervisor, local HR representatives or the Global Vice President of HR.

Employees may also raise any concerns of legal violation, violation of the Company ’ s codes and policies, improper or unethical business practices, or concealment of any wrong-doing through the whistleblower hotline or website.

Employees may also confidentially and anonymously raise any concerns of legal violation, violation of the Company ’ s codes and policies, improper or unethical business practices, or concealment of any wrong-doing through the whistleblower hotline or website.

We take every raised complaint seriously and prohibit any form of retaliation against any employee for lodging a complaint in good faith.

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