What changed in this filing

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Item 1. Business

2024-02-16 compared with 2023-02-22 · 59 added, 80 removed, 177 unchanged (44% of the section changed)

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We are a manufacturer of advanced semiconductor process equipment that solves an array of challenging materials engineering problems for our customers.

Our comprehensive collection of ion beam, laser annealing, metal organic chemical vapor deposition (“MOCVD”), advanced packaging lithography, single wafer wet processing, molecular beam epitaxy (“MBE”), and atomic layer deposition (“ALD”) technologies play an integral role in the fabrication of key devices that are enabling the 4th industrial revolution of all things connected.

Such devices include leading advanced node application processors for mobile devices, thin film magnetic heads for hard disk drives in data storage, photonics devices for 3D sensing, advanced displays and high-speed data communications, and radio frequency (“RF”) filters and power amplifiers for fifth generation (“5G”) networks and mobile electronics.

Our comprehensive collection of ion beam, laser annealing, metal organic chemical vapor deposition (“MOCVD”), chemical vapor deposition (“CVD”), advanced packaging lithography, single wafer wet processing, molecular beam epitaxy (“MBE”), and atomic layer deposition (“ALD”) technologies play an integral role in the fabrication of key devices that are enabling the 4th industrial revolution of all things connected.

Such devices include leading advanced node application processors for AI chips, mobile devices, high-speed data communications, and radio frequency (“RF”) filters and power amplifiers for fifth generation (“5G”) networks and mobile electronics, photonics devices for 3D sensing, advanced displays, and thin film magnetic heads for hard disk drives in data storage.

In close partnership with our customers, we combine decades of applications and materials know-how with leading-edge systems engineering to deliver high-volume manufacturing solutions with competitive cost of ownership.

Serving a global and highly interconnected customer base, we have comprehensive sales and service operations across the Asia-Pacific, Europe, and North America regions to ensure real-time close collaboration and responsiveness.

Our 2023 priorities are:

Safety is one of Veeco’s core values.

We have taken steps to keep employees safe throughout the COVID-19 pandemic and we continue to maintain focus on traditional workplace health and safety matters.

We understand that the culture of the Company can have a direct impact on our performance.

We made significant improvements to our culture as measured by an initial culture survey performed in 2019, a follow-up in 2021 and a planned survey in 2023, and we remain committed to working with employees to continue to strengthen our culture;

We believe that our success depends on our ability to successfully execute in challenging environments, recognizing that our customers have high expectations.

The Veeco United team worked through material shortages, lead time increases, and labor shortages in our factories as well as those of our suppliers in 2022.

We are focused on continued execution throughout our entire supply chain, including our internal manufacturing activities, in order to meet customer demand.

Additionally, we are focused on multiple customer satisfaction initiatives, including on-time deliveries and improving customer service performance metrics;

We plan to continue our efforts in product innovation.

We have exciting new solutions in our semiconductor and compound semiconductor product development pipeline, which we believe will solve our customers’ difficult materials challenges and enable sustainable growth in the long term.

In 2022, we heavily invested in our manufacturing capabilities through our San Jose expansion, and made significant investments in our service capabilities to meet the requirements of our tier one semiconductor customers, and had a successful year of evaluation acceptances with our customers.

Additionally, we acquired Epiluvac AB, a privately held Swedish company, in January 2023, accelerating our penetration into the emerging, high-growth Silicon Carbide (“SiC”) epitaxy equipment market.

In 2023 we plan to maintain our emphasis on placing strategic evaluation systems with customers in the semiconductor and compound semiconductor markets, consistent with our growth plans.

These systems are provided to customers after significant time spent demonstrating their capabilities in our factory and represent one of the final stages in our customers’ selection process.

We are focused on successful outcomes for these evaluations and in continuing the elevated level of evaluation system activity with existing and potential customers;

● Growth and Profitability:

We are focused on maintaining profitability through near-term macroeconomic challenges and growing in our Data Storage market, as well as in our Semiconductor market despite an expected decline in wafer fab equipment (“WFE”) spending.

We are in a mixed demand environment, with strong recent order activity in the Semiconductor and Data Storage markets, offset by near term weakness in the Compound Semiconductor market.

However, we are investing for and expect long-term growth in the Semiconductor and Compound Semiconductor markets.

We are focused on executing our backlog, and also winning additional business to drive meaningful long-term growth.

We are also focused on responsible management of our cost structure, including an emphasis on gross margins.

Our products are purchased by customers in the following four end-markets:

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Semiconductor

The Semiconductor market refers to early process steps in logic and memory applications where silicon wafers are processed.

There are many different process steps in forming patterned wafers, such as depositioning, etching, masking, and doping, where the microchips are created but remain on the silicon wafer.

The Semiconductor market refers to process steps in logic and memory applications where silicon wafers are processed.

There are many different wafer level process steps in forming patterned wafers, such as deposition, etching, masking, and doping.

As device architectures continue to shrink with advanced nodes, more precise process control is paramount to achieving high yields and competitive cost.

One such process step is called Laser Annealing, which uses a very precise method to activate dopants, reduce contact resistance and modify material grain structure.

The Veeco laser annealing technology enables our customers to have a lower thermal budget by annealing at higher temperatures over a shorter period of time.

This market also includes mask blank production for extreme ultraviolet (“EUV”) lithography with Veeco’s Ion Beam Deposition technology.

This market also includes Advanced Packaging which refers to a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors.

Demand for higher performance, smaller form factors, and lower power consumption in applications such as artificial intelligence,

One such process step is called Laser Annealing,

Laser Annealing

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Advanced Packaging Lithography

mobile devices, consumer electronics, and high-performance computing is driving the adoption of advanced packaging technologies.

which uses a very precise method to activate dopants, reduce contact resistance and modify material grain structure.

The Veeco laser annealing technology enables our customers to have a lower thermal budget by annealing at higher temperatures over a shorter period of time.

This market also includes mask blank production for extreme ultraviolet (“EUV”) lithography, where Veeco’s Ion Beam Deposition technology is used for deposition of the multi-layer EUV reflective coating.

Veeco’s Ion Beam technology is also under evaluation for deposition of low resistivity metals for 300mm front end applications.

Veeco’s Advanced Packaging technologies include a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors.

Demand for higher performance, smaller form factors, and lower power consumption in applications such as artificial intelligence, mobile devices, consumer electronics, and high-performance computing is driving the adoption of advanced packaging technologies.

Veeco serves the advanced packaging market with lithography as well as wet processing equipment.

Compound Semiconductor

The Compound Semiconductor market includes Photonics, Power Electronics, RF Filters and Amplifiers, and Solar applications.

The Compound Semiconductor market includes Power Electronics, Photonics, RF Filters and Amplifiers, and Solar power applications.

Power Electronics refers to semiconductor devices used in the control and conversion of electric power in growing applications such as wireless charging of consumer electronics and automotive applications.

The power electronics market has historically been dominated by silicon devices.

However, demand has been rapidly growing for applications in automotive driven by adoption of electric vehicles (“EV”), energy and industrial end-markets which require compound semiconductor devices such as those made from gallium nitride and silicon carbide to address higher voltages and higher power requirements.

Photonics refers to light source technologies and laser-based solutions for 3D sensing, datacom and telecom applications.

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Micro-LEDs may be used for next generation advanced displays.

A micro-LED display is a new approach which uses an array of red, blue, and green micro-LEDs to directly display an image without motion blur or image retention, and with improved brightness, darker blacks, and wider viewing angles.

Power Electronics refers to semiconductor devices such as rectifiers, inverters and converters for the control and conversion of electric power in growing applications such as fast or wireless charging of consumer electronics and automotive applications.

The power electronics market has historically been dominated by silicon devices.

However, demand has been rapidly growing for applications in automotive, energy and industrial end-markets which require compound semiconductor devices such as those made from gallium nitride and silicon carbide to address higher voltages and higher power requirements.

A micro-LED display is a self-emissive display that offers improved resolution, contrast, and brightness versus conventional technologies.

Micro-LEDs will be used in a number of applications from televisions, smartwatches, to augmented reality headsets.

RF power amplifiers and filters (including surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”) filters) are used in 5G communications infrastructure, smartphones, tablets, and mobile devices.

They make use of radio waves for wireless broadcasting and/or communications.

Solar refers to power obtained by harnessing the energy of the sun through the use of compound semiconductor devices such as photovoltaics.

Solar power or photovoltaic technology refers to power obtained by harnessing the energy of the sun through the use of compound semiconductor devices such as photovoltaics.

Gallium Nitride (“GaN”) MOCVD

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SiC Chemical Vapor Deposition (“CVD”)

Data Storage refers to the HDD market which provides significant value for mass storage and is an important part of large capacity storage applications.

Data Storage refers to the Hard Disk Drives (“HDD”) market which provides significant value for mass storage and is an important part of large capacity storage applications such as Data Centers.

Our systems enable customers to manufacture the magnetic heads for hard disk drives.

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Scientific & Other

Scientific & Other refers to advanced materials research and a range of manufacturing applications including optical coatings (laser mirrors, optical filters, and anti-reflective coatings).

Scientific & Other refers to advanced materials and device research such as quantum computing, and a range of manufacturing applications including optical devices (lasers, mirrors, optical filters, and anti-reflective coatings).

Ion Beam Sputtering for optical coatings

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Laser Annealing Systems

Our laser annealing systems meet the industry demand for ultra-short time-scale annealing, heating the wafer up to temperatures just below the silicon melting point over a range of timeframes (hundreds of microseconds), enabling thermal annealing solutions at the most advanced semiconductor process nodes.

Our laser annealing systems meet the industry demand for ultra-short time-scale “millisecond” annealing, heating the wafer up to temperatures just below the silicon melting point, enabling thermal annealing solutions at the most advanced semiconductor process nodes.

This unique annealing technology provides a solution to the difficult challenge of fabricating ultra-shallow junctions and highly activated source/drain contacts at advanced logic nodes.

In addition, our proprietary hardware design enables outstanding temperature uniformity across the wafer and die, by minimizing the pattern-density effect, thus reducing absorption variations.

We are also continuing to develop next generation melt anneal technology targeted for memory devices and annealing advanced logic devices at advanced nodes.

Our next generation nanosecond annealing technology targets annealing advanced logic devices and memory devices at advanced nodes.

As devices scale, achieving performance targets has become a challenge.

To continue the roadmap, the industry is looking at new materials and the use of thermal processes that require nanosecond time-scale thermal annealing with temperatures exceeding the melting point.

It is believed that nanosecond annealing will be required to meet the device targets at future nodes.

We believe that our nanosecond annealing will be required to meet the device targets at future nodes and complements our millisecond annealing solutions.

Ion Beam Deposition and Etch Systems

Our NEXUS ® Ion Beam systems are used to deposit and etch thin film layers for multiple end applications in the Semiconductor, Data Storage, RF and other various emerging markets.

These systems utilize Veeco’s proven gridded ion source technology which delivers a charged ion beam directed at a substrate for the etch application and at a sputter target for the deposition application.

Our NEXUS ® Ion Beam systems and IBD300 systems are used to deposit and etch thin film layers for multiple end applications in the Semiconductor, Data Storage, RF and other various emerging markets.

Our NEXUS ® IBD system has a leading position in multiple markets including EUV mask blank manufacturing in which it enables our customers to deposit multilayers with high precision and ultra-low defects which is essential for EUV lithography.

Our ion sources and grid technology are incorporated into etch systems used to pattern magnetic materials for the 300mm Semiconductor STT-MRAM market.

Our IBD300 system is being evaluated for 300mm front end semiconductor applications where low resistivity metals like tungsten, ruthenium and molybdenum are critical.

The IBD systems are also critical in the manufacture of hard disk drive magnetic heads where they are used to deposit various magnetic and oxide layers and deliver best-in-class film properties.

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The NEXUS ® systems may be included on our cluster system platform to allow either parallel or sequential deposition/etch processes.

Our Lancer TM IBE system is used for etching of SAW and BAW devices in the RF filter market and various waveguide patterning steps for AR/VR markets where their best-in-class film uniformity is a key advantage.

Our SPECTOR ® Ion Beam Sputtering system was developed for high precision optical coatings and offers manufacturers state of the art optical thickness monitoring, improved productivity, and target material utilization, for cutting-edge optical interference coating applications.

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Advanced Packaging Lithography

We have a leading position in the Advanced Packaging lithography equipment market for applications such as FOWLP, Flip Chip (including Copper Pillar), Fan In Wafer Lever Packaging, 3D stacking, interposers and embedded die.

Our lithography equipment is used in the Advanced Packaging market for applications such as FOWLP, Flip Chip (including Copper Pillar), Fan In Wafer Lever Packaging, 3D stacking, interposers and embedded die.

The Advanced Packaging market is driven by the need for improved performance, reduced power consumption, and the ability to image smaller geometries for mobile and automotive applications.

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Single Wafer Wet Processing

We offer single wafer wet processing, and surface preparation systems which target growth opportunities in RF filters and amplifiers in the Compound Semiconductor market, as well as advanced packaging applications in the Semiconductor market.

We offer single wafer wet processing, and surface preparation systems which target growth opportunities in advanced packaging applications in the Semiconductor market as well as RF filters and amplifiers in the Compound Semiconductor market.

The WaferStorm ® platform is based on our unique ImmJET™ technology, which provides improved performance at a lower cost of ownership than conventional wet bench-only or spray-only approaches.

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In addition, we have developed a state-of-the-art solution with the WaferEtch ® platform to address the requirements of wafer thinning.

Metal Organic Chemical Vapor Deposition Systems

Metal Organic Chemical Vapor Deposition Systems and Chemical Vapor Deposition Systems

MOCVD production systems are used to make GaN and As/P-based devices for applications including power electronics, RF devices, specialty LED, display, and many other photonics applications.

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The Propel ® system offers 200mm and fully-automated 300mm technology and incorporates single-wafer reactor technology for outstanding film uniformity, yield, and device performance.

Our SiC CVD system has a base single wafer reactor concept based on a time-tested industry validated architecture and is used for SiC power electronics applications primarily driven by adoption of electric vehicles.

Molecular Beam Epitaxy Systems

MBE is the process of precisely depositing epitaxially-aligned atomically-thin crystalline layers, or epilayers, of elemental materials onto a substrate in an ultra-high vacuum environment.

MBE is the process of precisely depositing atomically-thin epitaxial crystalline layers, or epilayers, of elemental materials onto a substrate in an ultra-high vacuum environment.

We are a leading supplier of MBE systems worldwide.

Our MBE systems, sources, and components are used to develop and manufacture compound semiconductor devices in a wide variety of applications such as high-power fiber lasers, infrared detectors, mobile phones, radar systems, high efficiency solar cells, and basic materials science research.

The GENxplor ® MBE system creates high quality epitaxial layers and is ideal for cutting-edge research on a wide variety of materials including GaAs, antimonides, nitrides, and oxides on 3” diameter substrates.

Our MBE systems, sources, and components are used to develop and manufacture compound semiconductor devices in a wide variety of applications such as quantum computing, high-power fiber lasers, infrared detectors, mobile phones, radar systems, high efficiency solar cells, and advanced materials science research in academic, governmental, and industrial organizations.

The GENxplor ® MBE system creates high quality epitaxial layers and is ideal for cutting-edge research on a wide variety of materials including III-V GaAs, nitride, and oxide, materials on substrates up to 3” diameter.

Atomic Layer Deposition Systems

ALD is a thin-film deposition method in which a film is deposited on a substrate uniformly with precise control down to the atomic scale.

Veeco offers a full suite of ALD systems for non-semiconductor front-end production applications across a wide range of markets and applications such as energy, optical, electronics, micro-electro mechanical systems (“MEMS”), nanostructures, and biomedical.

We have recently developed the Firebird ® ALD system, a fully automated tool capable of managing fragile wafers in a continuous operational sequence.

Veeco offers a full suite of ALD systems for non-semiconductor front-end production applications across a wide range of markets and applications such as Quantum Computing, optical, electronics, micro-electro mechanical systems (“MEMS”), nanostructures, and biomedical.

Other Systems

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Finally, we have Gas-mixing systems primarily sold to the semiconductor market.

We also continue to focus on penetrating adjacent markets with organically developed and acquired technology, including Ion Beam Deposition for low resistance metals and SiC CVD systems for power electronics applications.

We also continue to focus on penetrating adjacent markets with organically developed and acquired technology.

Sales and Service

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We rely on certain principal customers for a significant portion of our sales.

Sales to Western Digital and TDK Headway each separately accounted for more than 10% of our total net sales in 2021;

and sales to Seagate Technology accounted for more than 10% of our total net sales in 2020.

No customer accounted for more than 10% of our total net sales in 2022.

If any principal customer discontinues its relationship with us or suffers economic difficulties, our business prospects, financial condition, and operating results could be materially and adversely affected.

If these principal customers discontinue their relationships with us or suffer economic difficulties, our business prospects, financial condition, and operating results could be materially and adversely affected.

Research and Development

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Paul, Minnesota;

and Waltham, Massachusetts.

Waltham, Massachusetts;

and Solvegatan, Sweden.

We outsource certain functions to third parties, including the manufacture of several of our systems.

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Our backlog consists of orders for which we received a firm purchase order, a customer-confirmed shipment date generally within twelve months, and a deposit, when required.

Our backlog increased to $499.9 million at December 31, 2022 from $440.2 million at December 31, 2021.

Our backlog was $490.7 million and $499.9 million at December 31, 2023 and 2022, respectively.

In each of the markets that we serve, we face competition from established competitors, some of which have greater financial, engineering, and marketing resources than we do, as well as from smaller competitors.

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Approximately 25% of our employees are involved in research and development;

55% are involved in operations, manufacturing, service, and quality assurance;

and 20% are involved in sales, order administration, marketing, finance, information technology, general management, and other administrative functions.

56% in operations, manufacturing, service, and quality assurance;

and 19% in sales, order administration, marketing, finance, information technology, general management, and other administrative functions.

Our success depends on our ability to attract, retain, and motivate employees.

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We advertise job openings and source candidates broadly to attract a diverse candidate pool.

As a leader in our industry, we are able to attract a strong candidate pool and have been successful in filling vacancies.

In fiscal 2022, we hired 254 employees, 197 of whom were within the United States, 49 of whom were in the Asia-Pacific region, and 8 of whom were in the EMEA region.

As a leader in our industry, we can attract a strong candidate pool and have successfully filled vacancies.

In fiscal 2023, we hired 106 employees, 74 within the United States, 13 in the Asia-Pacific region, and 19 in the EMEA region.

We track and report key talent metrics, including workforce demographics, talent pipeline and diversity.

We invest in professional development programs to provide opportunities for individuals to advance their careers in either technical/individual contributor or leadership tracks.

Many of our training and development programs are offered on-line for the benefit of employees located around the world.

Additional focus is placed on the development of future leaders and we utilize a talent review process through which high-potential and high-performing employees are assessed for future leadership roles as part of our succession management process.

We monitor turnover statistics carefully, since turnover is an important indicator of employee satisfaction.

Our 12-month rolling average for voluntary turnover at December 31, 2022 was approximately 9.4%.

We offer many of our training and development programs virtually to benefit employees worldwide.

We emphasize the development of future leaders and utilize a talent review process to assess high-potential and high-performing employees for future leadership roles as part of our succession management process.

We monitor turnover statistics carefully since turnover is an essential indicator of employee satisfaction.

Our 12-month rolling average for voluntary turnover on December 31, 2023 was approximately 7.2%.

Our employee average tenure is more than 8 years.

Employee Engagement

The engagement and satisfaction of the Veeco United Team is critical to our culture and our success.

The engagement and satisfaction of the Veeco United Team are critical to our culture and our success.

In 2019, we conducted a formal employee survey designed to assess global employee engagement, leadership, work environment and culture.

Over 90% of our employees participated in the survey, itself an indicator of a high level of employee engagement.

Over 90% of our employees participated in the survey, itself an indicator of high employee engagement.

Participants provided over 2,000 responses to open-ended questions.

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Approximately 90% of employees again participated in the survey and, again, nearly 2,000 responses were provided to open-ended questions.

We saw significant improvements across all survey areas, and we remain committed to working with employees to strengthen the Company’s culture.

We saw significant improvements across all survey areas.

In 2023, we conducted our third formal employee survey using the same survey instrument.

Even with a much larger employee population, we maintained a high participation rate of 90% and over 2,000 responses to open-ended questions.

Overall survey results were similar to 2021 results.

We remain committed to working with employees to strengthen the Company’s culture.

Our executives conduct regular meetings with our global workforce, providing employees with opportunities to engage with senior leaders and ask questions in open Q&A sessions.

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We utilize independent surveys to ensure that our total compensation packages are competitive.

We help employees share in the success of the Company through various programs including profit sharing and bonus plans, equity awards, and an Employee Stock Purchase Plan (“ESPP”).

We help employees share in the Company’s success through various programs, including profit sharing and bonus plans, equity awards, and an Employee Stock Purchase Plan (“ESPP”).

In addition to providing our employees with competitive compensation packages, we offer benefits designed to meet the needs of employees and their families, including paid time off, medical, dental and vision coverage, disability income protection, life insurance, retirement savings contributions, and more.

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The Council, composed of Veeco colleagues from many different parts of the Company, represents Veeco’s ongoing commitment to inclusion of all genders, sexual orientations, races, ethnic origins, religions, and diversity of thought.

The team has recently established

Veeco’s Diversity and Inclusion Mission Statement and Charter.

The team recently established Veeco’s Diversity and Inclusion Mission Statement and Charter.

The charter affirms our commitment to building awareness, enhancing community partnerships, addressing diversity in our recruiting and hiring practices, empowering employees to promote D&I initiatives, and identifying opportunities to have meaningful engagements with peers and the leadership team.

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Our facilities remained operational as an “essential business” throughout the pandemic.

However, we implemented rigorous health and safety protocols at our manufacturing facilities, including extensively and frequently disinfecting our facilities, limiting access to our facilities, checking temperatures of individuals entering our facilities, staggering shifts to minimize employee overlap in gowning areas, and providing protective equipment in order to minimize the risks to our employees.

To keep our teams safe and the Company strong, we implemented rigorous health and safety protocols at our manufacturing facilities, including extensively and frequently disinfecting our facilities, limiting access to our facilities, checking temperatures of individuals entering our facilities, staggering shifts to minimize employee overlap in gowning areas, and providing protective equipment to minimize the risks to our employees.

In addition, we required many of our employees to work from home wherever possible.

We protected employees, customers, and stakeholders by providing remote meetings, demos, and service, whenever possible.

Our Veeco United team was committed to remaining flexible and responsive throughout the pandemic.

We carefully monitored and responded to local, state, and federal guidance related to the pandemic.

We developed our COVID-19 Pledge to describe all the measures we implemented in our facilities to keep employees working on-site safe throughout the pandemic.

While the COVID-19 public health emergency has ended, our Veeco United Team remains flexible and responsive to potential health risks and has developed robust response capability through this experience.

We continue to carefully monitor and respond to local, state, and federal public health guidance.

We continue to use our COVID-19 Pledge to describe all the measures we implemented in our facilities to keep employees working on-site safe throughout the pandemic and beyond.

Available Information

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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