Bhavesh Lodaya: And then there seems to be growing noise around U.S. sanctions on Chinese chip makers. Also, the Chinese government is talking about phasing out, say, Intel, AMD chips from their operations. Has this changed your view on the sales impact for your company? And are there any offsets where you lose some sales in one area, but you probably make up for the sales as the domestic Chinese players grow in size?
Bertrand Loy: I’m sorry, Bhavesh, I didn’t hear your question really well. Could you — would you mind repeating it?
Bhavesh Lodaya: Absolutely. Yes, this is just around the sanctions that the U.S. government probably is increasing, I would say, in intensity. And even the Chinese government, they’re talking about phasing out Intel and AMD chips from their operations. How does that impact your business? And does your exposure in the Chinese domestic players actually help offset some of this?
Bertrand Loy: Yes. Well, look, I think that we’re not going to speculate on potential new restrictions or escalation between U.S. and China. I think that — the current export restrictions are well understood. We have invested in a solid and capable team to comply with those restrictions. We have quantified that impact, which is about a $20 million loss in revenue on a quarterly basis. We saw that impact reflected in our Q4 2022 numbers and some of it in Q1 2023. But the business has been actually relatively steady. And we continue to do really well with the customers that we can still serve. We saw some steady fab construction activity in China that benefited our AMH business. And then many of those new mainstream fabs have started production.
And we saw the benefits of that in our MS and MC divisions as well. So if you look at our China business, which is again mostly mainstream and international fabs, I mean, it’s been doing pretty well. And again, I won’t speculate on what comes next, and we will update you if there’s something to talk about.
Operator: Our next question comes from Aleksey with KeyBanc Capital Markets.
Aleksey Yefremov: Bertrand, could you describe new node or RAMs at your memory customers, the outlook for 2024 and 2025?
Bertrand Loy: Yes, Aleksey. So we are obviously paying close attention to node transitions in 3D NAND and in advanced logic and foundry. As you know, we have incremental wafer content opportunities at those new architectures. So this is something that we’re watching closely. And we are pleased, first of all, that all of those transitions still appear to be on time. When it comes to 3D NAND in particular, we have a number of different material solutions that are becoming increasingly critical to those high-layer account architectures. I mean we’ve been talking about selective etch for a number of years. But what is really exciting going forward is the adoption of molybdenum in high-volume production. And Entegris has developed a very unique suite of capabilities, leveraging competencies across a number of different business units to develop an industry-leading pro-evap canister to sublimate those solid precursors into gases.
Those gases are highly corrosive. So we have developed some proprietary protective claims for the lines, and of course, gas filtration and gas delivery cabinets. So we are very focused on this transition. Those transitions don’t happen very often. And we think that we have a unique opportunity to ease the industry migration to molybdenum. So this is something, obviously, that we’re going to continue to watch very carefully for the balance of the year.
Aleksey Yefremov: And just a follow-up on this. I guess, does this — is it logical that ’25 could be maybe a more productive, faster growth year from a content and transition perspective from them for you than ’24?
Bertrand Loy: I think, implied — I mean we’re not going to give you a precise guidance on 2025. But you’re right, I think that a lot of those node transitions, be it in memory or in logic, will be taking place late in 2024. And so, of course, the bulk of the opportunity from a top line standpoint will be — I mean we’ve seen — we will see a little bit of that, and we expect to see a little bit of that. It’s taken into account in our annual guidance for 2024, but the bulk of the positive impact will be felt in 2025.
Operator: Our next question comes from Tim Arcuri with UBS.
Tim Arcuri: I had a different question, Bertrand, on China. And the question really is, it seems like if you read the tea leaves that the update this fall is going to be a lot more in the supply chain and more on the material side. And there was already some news that came out of some bans on the material side. So I mean, I know you’re in close contact with the commerce. So I’m kind of wondering whether you think this presents risk for you this fall when this update comes out.
Bertrand Loy: Look, Tim, I don’t read tea leaves really well. I’m a coffee drinker myself. But as I said, I’m not going to speculate. We are obviously working closely with the government. But again, as I said, I’m not going to speculate on potentially upcoming new rules. Do you have any other question, Tim?
Tim Arcuri: I do. I do, Bertrand, yes. So I’m just wondering, to get to the up 4% market number that you’re suggesting, I mean, you’re guiding your business up 9% and you’re saying that the TAM is up 4%. What is the TAM up 4% based on? Because Gartner has MSI up 11% this year. And if you listen to the equipment companies, WFE is up high single digits. I mean I’m up more like 10%. But if you listen to them, it’s up high singles. So if WFE is up high singles and if Gartner MSI is up 11%, how is the TAM up only 4%. I’m just kind of curious how you’re getting to that number.
Bertrand Loy: Yes. I mean, as you know, a lot of those research firms actually will go through multiple revisions of their guidance and forecast for the year. I mean you could say that our assumptions may be conservative, but I think that most market research firms have actually slowly brought their numbers down when it comes to MSI in particular. So I think that having a wafer start assumption at about 5 is probably a good place to be at this point. And if it is better, then we will, of course, benefit from that. When it comes to CapEx, remember that our CapEx number is really a full industry CapEx. It’s not just WFE. And we believe that the industry CapEx is essentially flat, maybe modestly up but essentially flat, right? So I think that’s really the basis for that 4% number. And we will update you.
Tim Arcuri: Okay. Yes, I guess…
Bertrand Loy: Go ahead.
