2017 SEMICON WEST SAN FRANCISCO, CALIFORNIA JULY 11-13, 2017
SAFE HARBOR STATEMENT In addition to historical statements, this press release contains statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and include, but are not limited to, statements that relate to our future revenue, sustained, increasing, continuing or strengthening demand for our products, replacement demand, our research and development efforts, our ability to control costs, and our ability to identify and realize new growth opportunities within segments, such as automotive and industrial as well as surrounding technology adoption such as system in package and advanced packaging techniques. While these forward-looking statements represent our judgments and future expectations concerning our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: the risk that customer orders already received may be postponed or canceled, generally without charges; the risk that anticipated customer orders may not materialize; the risk that our suppliers may not be able to meet our demands on a timely basis; the volatility in the demand for semiconductors and our products and services; the risk that identified market opportunities may not grow or developed as we anticipated; volatile global economic conditions, which could result in, among other things, sharply lower demand for products containing semiconductors and for the Company s products, and disruption of capital and credit markets; the risk of failure to successfully manage our operations; the possibility that we may need to impair the carrying value of goodwill and/or intangibles established in connection with one or more of our prior acquisitions; acts of terrorism and violence; risks, such as changes in trade regulations, currency fluctuations, political instability and war, which may be associated with a substantial non-u.s. customer and supplier base and substantial non-u.s. manufacturing operations; and the factors listed or discussed in Kulicke and Soffa Industries, Inc. 2016 Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. Kulicke and Soffa Industries, Inc. is under no obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. 2
PRESENTATION AGENDA TRENDS & OPPORTUNITIES Fundamental Industry Evolution Specific Highlights & Opportunities Served Available Market Expansion SERVED AVAILABLE MARKET Core Market Electronics Assembly Advanced Packaging FINANCIALS & USES OF CASH Through-Cycle Performance Financial Model Cash Flow Generation & Uses of Cash Summary 3
POSITIONED FOR ONGOING VALUE CREATION LONG-TERM LEADERSHIP IN GROWING MARKETS POSITIONED FOR NEW GROWTH GOOD STEWARDS OF CAPITAL LARGE INSTALL BASE STRONG SALES & DISTRIBUTION NETWORK SIGNIFICANT INDUSTRY RELATIONSHIPS FUNDAMENTAL SHIFTS IN VALUE CHAIN SERVED MARKET TO GROW BY OVER $900M THROUGH 2021 PRUDENT M&A RETURNS TO SHAREHOLDERS 4
GROWING OPPORTUNITIES CALENDAR 2016-2021 SERVED MARKET EXPANSION $2.0B to $2.9B CORE BACK-END 2016 SAM: $980M 2021 SAM: $1.05B ADVANCED PACKAGING (AP) 2016 SAM: $545M 2021 SAM: $930M ELECTRONIC ASSEMBLY (EA) 2016 SAM: $560M 2021 SAM: $910M 5 Source(s): K&S Internal Forecast
TRENDS & OPPORTUNITIES
VALUE CHAIN SHIFTING TO ADVANCED PACKAGING (AP) $4.50 $4.00 $USD per 100M Gates $3.50 Moore s Law - the number of transistors per square inch on integrated circuits doubles every 18-24 months. $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 90nm 65nm 45/40nm 28nm 20nm 16/14nm 10/7nm WHILE NODE SHRINK IS STILL BEING DRIVEN INDUSTRY IS PURSUING NEW WAYS TO DRIVE DENSITY PER FUNCTION MORE THAN MOORE Cost benefits have largely disappeared Leading Node adoption limited to performance applications Advanced Packaging (AP) System-in-Package (SiP) Wafer-Level-Package (WLP) Embedded Die Package-on-Package (PoP) Fan-Out-WLP (FOWLP) Thermo-Compression-Bond (TCB) Electronics Assembly Shift towards higher-accuracy applications 7 Source(s): International Business Strategies, Inc.
APAMA Assembléon LITEQ KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC WELL POSITIONED TO CAPTURE AP GROWTH $1,000 $900 K&S AP SOLUTION PORTFOLIO SERVED AVAILABLE MARKET ($M USD) $800 $700 $600 $500 $400 $300 $200 $100 $0 Initiates Development of APAMA C2S & C2W Acquires Assembléon Acquires Liteq 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Forecast AP-Lithography High-Accuracy Flip Chip, Active & Passive Die Placement Thermo- Compression- Bonding C2W, C2S 8 Source(s): VLSI Research, Jan. 2017; K&S Internal Estimates
NEW K&S DEDICATED AP LITHOGRAPHY SOLUTION Investment Highlights Highly competitive tool, ready for Customer Evaluation Kulicke & Soffa s 5 th Advanced Packaging Platform Proximity to Existing Netherlands Facility Partnership with Industry Leader Unique AP Lithograph Solution Dedicated i-line step-and-repeat tool focused on RDL for traditional and AP applications Laser source vs Mercury Vapor, reduces COGS and Drives High Throughput Modular Solution Serving Wide Range of Packaging and Customer Processes Market Expectations Served Available Market anticipated to grow from $186M to $296M, Calendar 16-21 9
SEMICONDUCTOR UNIT GROWTH Packaging Technology GLOBAL SEMICONDUCTOR INTERCONNECTIONS BY BONDING PROCESS Advanced 12% Traditional 6% 2016-20 Interconnect CAGR Expanding Served Market Advanced Packaging (AP) SiP, PoP, WLP, FOWLP, Embedded Die, TCB Flip Chip (Mass Reflow) Advanced Electronics Assembly (EA) Downstream Electronics Assembly 1995 3 Trillion 2014 16T 2020 23T Sizable Core Market Wire Bonding Ball Bonding Wedge Bonding Consumable Tools Ongoing semiconductor unit demand 9% CAGR through 2020 supports future interconnect growth Greater complexity & chip integration requires comprehensive Advanced Packaging solutions Customer alignment & leadership positions within sizeable core markets strengthens competitive advantage 10 Source(s): VLSI Research, Oct 2016; Gartner, 1Q17 Update
GROWTH & DIVERSITY
WE COVER ALL MAJOR INTERCONNECT OPPORTUNITIES WEARABLES UTILITY SMARTPHONES INTERNET-OF- THINGS (IOT) SOLID-STATE- LIGHTING 20% Device Unit 2016-20 CAGR 11% Semi Unit 2016-20 CAGR 30B IoT Units by 2020 36% LED Unit 2016-20 CAGR SERVERS CLOUD COMPUTING AUTONOMOUS VEHICLE FEATURES HYBRID/EV SOLID-STATE DRIVES 12% Semi Unit 2016-20 CAGR 21% Semi Unit 2016-20 CAGR 14% Semi Unit 2016-20 CAGR 15% Semi Unit 2016-20 CAGR 9% Overall Semi Unit CAGR through 2020 Technology Replacement Enabling Additional Advanced Packaging Opportunities 12 Source(s): Gartner, 1Q17 Update; IDC, Jun 2016
FLASH MEMORY COST & PERFORMANCE DRIVING ADOPTION 2016 NAND FLASH UNIT DEMAND 2021 NAND FLASH UNIT DEMAND > 128 GB 128 GB 2021 3.5X 2016 Solid State Drives displacing Hard Disk Drives NAND cost/bit reducing at 20-30% per year Recent K&S NAND demand ~2X historic average K&S Technologies: Core 13 Source(s): EEtimes, Sep 2016 ; Gartner, May 2017
AUTOMOTIVE ANNUAL ELECTRIC VEHICLES (EV) DEMAND (UNIT FORECAST) ANNUAL AUTOMOTIVE SENSORS/CAMERA DEMAND (UNIT FORECAST) 362M Electric vehicles on the road in 2016 Electric vehicles forecast on the road in 2021 22% CAGR 145M 2016 2021 21% CAGR EV to outpace traditional Auto Driving new power management applications EV growth to trigger infrastructure build-outs Increasing High Reliability Increasing Infotainment Higher-bandwidth processing required K&S Technologies: Core, Electronics Assembly, Advanced Packaging 14 Source(s): Gartner, May 2017; Yole Développement, 2016
SERVED AVAILABLE MARKETS
CORE MARKET: WIRE BOND EQUIPMENT & CONSUMABLE TOOLS TECHNOLOGY & MARKET ALIGNMENT ~80% of Semiconductor Packages are Wire Bonded 145,000 Global Industry Installed Base Consistent Leadership - 60% Market Share Lowest cost & most flexible interconnect solution Front-loading of traditional replacement cycle in FY2011 required a few years of capacity digestion HOW WE WIN Long established history, deep institutional knowledge, leading technology Flexible manufacturing, supply chain strength Relentless focus on new development BUSINESS FOCUS Dominating new growth in complex applications Copper, Memory, Power Storage, SIP Increased focus on cost-sensitive applications such as discrete and LED devices Leverage our 90,000+ installed base to drive recurring revenues from 20% to 30% of sales 16 Source(s): K&S Internal Forecast
ELECTRONICS ASSEMBLY (EA) TECHNOLOGY & MARKET ALIGNMENT New Opportunity from 2015 Acquisition Changing Market Dynamics Increasing Complexity is Driving New Opportunities High throughput, high accuracy pick and place Strong loyalty base of European automotive and industrial customers HOW WE WIN Unique architecture and ability to handle active and passive components Complementary customer overlap with Core and Adv. Packaging solutions Strong and close post sales engagement BUSINESS FOCUS Prioritizing feature development over cost down initiatives Increasing engagement with Asia-centric targets Leveraging sales synergies through cross-selling opportunities 17
ADVANCED PACKAGING (AP) TECHNOLOGY & MARKET ALIGNMENT Shifts in technology are presenting meaningful entry points in sizeable high growth areas HOW WE WIN ~20% of Semiconductor Unit s use an AP Process Tech Inflection Drives High-Growth Opportunity AP Enables Significant SAM Expansion Five platforms addressing several Flip-Chip, TCB, WLP, SiP, FOWLP, PoP and Embedded Die processes Complementary customer overlap with Core and Adv. Packaging solutions Aggressive development and customer engagement BUSINESS FOCUS Aggressive roadmap focused on capturing and expanding market opportunities Aggressive engagement with global sales team through evaluation programs as well as sampling labs in Singapore, Korea, China, Taiwan and US Fundamental architecture differences provide comprehensive set of advanced packaging solutions 18 Source(s): K&S Internal Forecast
Market Sizes in Billions of USD KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC POSITIONED TO EXCEED TAM GROWTH EXCLUDES FUTURE M&A OPPORTUNITIES $4.0 $3.5 $3.0 K&S Served Available Market $2.0B to $2.9B in 2021 AP TAM $2.5 $2.0 EA TAM $1.5 $1.0 $0.5 $0.0 Core TAM 2016 2017 2018 2019 2020 2021 19 Source(s): K&S Internal Forecast
FINANCIALS & USES OF CASH
Net Cash Millions of USD (bar) TTM Free Cash Flow Millions of USD (line) KULICKE & SOFFA INDUSTRIES, INC. NASDAQ: KLIC STRONG CASH FLOW & BALANCE SHEET 600 360 500 300 400 240 300 180 200 120 100 60 0 0-100 1Q 2Q 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 K&S Fiscal Year -60 Macro softness related to global recession drove challenging 2008 & 2009 Pent-up demand & the copper conversion cycle front-loaded the traditional replacement cycle Copper capacity digestion combined with below normal industry growth drove softer FCF generation 21 * Free Cash Flow defined as: Operating Cash Flow less Capital Expenditures
AN EFFICIENT OPERATING MODEL PREVIOUS CURRENT FUTURE Served Accessible Market Size $1B $1.9B $2.5B Variable Operating Expense (% of Revenue) 6-8% 4-6% 4-6% Fixed Quarterly Operating Expense* $50M $48M < $48M Effective Tax Rate Target 15% 18% 18% Implied Breakeven Level $135M $125M < $125M SAM Growth + Relatively Fixed OpEx Drive Meaningful Cash-Flow Generation 22 * Fixed Quarterly Operating Expense includes SG&A, R&D, Depreciation & Amortization; excludes prototyping expenses
KEY USES OF CASH 2012 ORGANIC DEVELOPMENT INITIATIVE Re-allocated & expanded development capacity Targeted new & high growth areas Adv Pack 2014 SHAREHOLDER RETURNS Initiated first repurchase program in Company s history Reduced shares outstanding by 10% through open market transactions 2015 ACQUISITION OF ASSEMBLÉON B.V. Strategic acquisition expands AP portfolio solutions Expanded K&S SAM by more than $700M 2017 ACQUISITION OF LITEQ B.V. Broadens and diversifies K&S AP solution portfolio into higher-growth lithography market segment Highly competitive solution dedicated for AP market GUIDING PRINCIPLES OF CASH DEPLOYMENT 1. Long-Term 2. Sustainable 3. Value-Creative 23
SUMMARY: FOCUSED ON LONG-TERM VALUE CREATION MARKET LEADERS IN SIZEABLE MARKETS ALIGNED WITH HIGH GROWTH TECH TRENDS SUSTAINABLE LONG-TERM VALUE STRONG CASH FLOW GOOD STEWARDS OF CAPITAL 24