Onto Innovation, a leading provider of metrology and lithography solutions for the semiconductor industry, recently released its Q1 2024 earnings transcript. While the spotlight is on AI and the remarkable growth of Dragonfly inspection systems, a more subtle, yet potentially more impactful trend is emerging: the quiet resurgence of NAND.

NAND, the memory segment that has been underperforming in terms of WFE (Wafer Front End) spending, is showing signs of recovery. Onto Innovation isn't just predicting this; they're already seeing it in their order books. CEO Mike Plisinski revealed on the earnings call that this new wave of NAND demand is not stemming from an overall capacity expansion. Instead, it's being driven by the demand for enterprise-grade SSDs (Solid State Drives) capable of handling the enormous data requirements of AI servers. These are not your average SSDs; they're equipped with NAND stacks of over 200 layers, a level of complexity that pushes existing metrology solutions to their limits.

This is where Onto Innovation's Aspect metrology system comes into play. Originally designed to handle the intricate channel holes in 3D NAND, Aspect is now finding a new application in the realm of high-density SSDs for AI. Plisinski emphasized the difficulty of measuring these 200+ layer NAND stacks, noting that Aspect is one of the few tools capable of accurately measuring critical parameters in these complex structures.

The importance of this cannot be overstated. Yield is paramount in the semiconductor industry, and the ability to precisely measure these deep, high-aspect ratio features is vital for achieving acceptable yields. Without accurate metrology, producing these complex NAND stacks would be a risky financial endeavor, one that most manufacturers would be reluctant to undertake.

Hypothesis: Onto Innovation's Aspect is Enabling the NAND Resurgence

The evidence suggests that Onto Innovation's Aspect metrology system is playing a key role in the production of high-layer NAND stacks for AI-driven SSDs. This, in turn, is fueling technology transitions within existing NAND fabs, contributing to the early indicators of a NAND recovery that Onto Innovation is witnessing.

Projecting Aspect's Revenue Growth

Although the Q1 transcript doesn't provide specific revenue figures for Aspect systems, Plisinski's comments about the tool's unique capabilities and adoption by NAND manufacturers indicate it's playing a significant role in the expected sequential growth of advanced nodes revenue. For this analysis, we make the following assumptions:

- Aspect systems contribute to 25% of Onto Innovation's advanced node revenue in Q1.

- The advanced nodes segment is projected to grow by 5% quarter-over-quarter.

Based on these assumptions, Aspect systems could see a revenue increase of $1.69 million in Q2. While this might seem like a small figure, it represents a pivotal turning point, a sign that the demand for high-layer NAND stacks is genuine, and that Onto Innovation is well-positioned to capitalize on this emerging trend.

Revenue Projection for Aspect Systems

The ripple effects of this trend could be substantial. As AI continues to become more prevalent in technology, the demand for high-performance SSDs will likely intensify. This could lead to a more widespread capacity expansion in the NAND market, further bolstering demand for Onto Innovation's Aspect systems and other advanced metrology solutions. The implications extend beyond Onto Innovation. This shift towards AI-driven SSDs could be the catalyst for the long-anticipated NAND recovery, stimulating increased investment and innovation across the memory sector.

It seems Wall Street, preoccupied with the rapid growth of AI packaging, may be overlooking this crucial development. However, for those with a broader perspective, the Onto Innovation riddle offers the key to understanding the true driving force behind the semiconductor growth expected in 2025.

"Fun Fact: Onto Innovation's history dates back to 1940. Originally known as Perkin-Elmer, the company played a crucial role in developing groundbreaking technologies, including the first commercial infrared spectrophotometer. This legacy of innovation positions Onto Innovation to once again reshape the semiconductor industry, this time by quietly enabling the resurgence of NAND."

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