KLA Corporation (KLAC) Stock Analysis

KLA’s principal competitive advantage is its dominant position in semiconductor process control, where it holds over 56% global market share—more than four times that of its nearest competitor (Applied Materials, ASML, Hitachi High-Tech, Onto Innovation). This leadership is especially pronounced in optical and unpatterned wafer inspection, where KLA’s share exceeds 85%. The company’s scale enables it to outspend rivals on R&D (historically ~13% of revenue), supporting a rapid cadence of differentiated product launches and deep integration with customer technology roadmaps.

KLA’s installed base and proprietary technology create high switching costs. Its tools are deeply embedded in customers’ manufacturing processes, and service contracts now capture 100% of a tool’s average selling price over its lifetime, up from 40–50% a decade ago. This results in a recurring, less-cyclical service revenue stream (22% of total revenue in FY25), which is less vulnerable to industry downturns than equipment sales.

Customer concentration is a risk—Taiwan Semiconductor Manufacturing Co. (TSMC) alone accounted for 19% of FY25 revenue—but KLA’s solutions are considered mission-critical, particularly as chip complexity and defect sensitivity rise with advanced nodes and packaging. While export controls and tariffs pose threats, KLA’s global diversification and entrenched customer relationships provide resilience. In sum, KLA’s technological lead, scale, and customer lock-in underpin a durable competitive edge.