KLACKLA Corporation

KLA sells the equipment that finds defects on wafers: the finer the process, the costlier a mistake and the more inspection is needed.

The company holds a dominant position in inspection and metrology — the stage that checks whether particles or deviations have appeared on the wafer. As process nodes shrink, defect rates rise faster than lithography costs, so inspection takes a growing share of a fab's budget.

As with other equipment suppliers, revenue is driven not by chip demand but by fabs' decisions to build and re-equip. The cycle is sharper here: the year capacity comes online looks very different from the next. Service and spares on the installed base smooth those swings, and their share is rising.

The dominant external factor is US export control on advanced equipment to China, historically a large buyer. KLA pays a dividend and buys back stock actively, unusual for cyclical equipment and explained by consistently high margins.