WEBVTT - John Lee on MKS (Radio)

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<v Speaker 1>All right, let's move on. Now. Joining us is John Lee,

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<v Speaker 1>president and CEO at m k S Instruments. It's a

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<v Speaker 1>nasdack listed company. He's here to discuss earnings as well

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<v Speaker 1>as that acquisition of Carlile's Atto Tech. Uh. John, good morning,

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<v Speaker 1>good evening to you. We want to talk about that acquisition,

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<v Speaker 1>of course, but of course we're Bloomberg. We need to

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<v Speaker 1>dig into some of the uh, the issues in the

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<v Speaker 1>in the supply chain, in the chip industry and the like.

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<v Speaker 1>On that second quarter earnings call, m KS said it's

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<v Speaker 1>still going to be supply constrained throughout the year. Can

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<v Speaker 1>you give us kind of an update on the supply

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<v Speaker 1>and backlog situation? How long your chip equipment customers have

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<v Speaker 1>to wait to get your products now, et cetera. Yeah, sure,

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<v Speaker 1>and thanks for having us on. We still remain supply

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<v Speaker 1>chain constrained, um. You know, some of the components that

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<v Speaker 1>we've seen in the past, electronic components remain constrained. Um.

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<v Speaker 1>But I think things are getting a little better. Uh.

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<v Speaker 1>The industry and a m CAST themselves are handling better

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<v Speaker 1>with much more collaboration between us and our plot and

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<v Speaker 1>our customers. So things are gradually getting better, but it

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<v Speaker 1>still remains a constrained environment. The acquisition of auto Tech,

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<v Speaker 1>I'm curious about um why and what it brings to you?

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<v Speaker 1>And then also how what are you expecting from the

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<v Speaker 1>integration process? Yes, well, you know, m CASS is a

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<v Speaker 1>strategy of being a provider of foundational technologies for advanced electronics,

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<v Speaker 1>next generation electronics. And the best example is your smartphone.

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<v Speaker 1>And in that smartphone, of course is semic connectors, which

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<v Speaker 1>are always getting better. But inside as well are all

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<v Speaker 1>these other components. And these other components require packaging. And

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<v Speaker 1>the packaging is where at a Tech plays, So they're

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<v Speaker 1>the leader in putting the metal interconnects in these packages

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<v Speaker 1>that allows all these chips to work together. And so

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<v Speaker 1>with at a Tech and with the legacy m CAST,

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<v Speaker 1>we believe we are now the broadest supplier enabling the

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<v Speaker 1>next generation electronics. John, with the US efforts to reshore

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<v Speaker 1>chip production, how beneficial will that be for your business?

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<v Speaker 1>How will your company benefit from the Chips Act? But

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<v Speaker 1>we certainly will benefit as more fabs get built. But

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<v Speaker 1>you know, in in the way MCAST looks at it

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<v Speaker 1>is the fabs that get built no matter where they're built,

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<v Speaker 1>they're gonna need advanced equipment to make those chips, and

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<v Speaker 1>m CAST provides of the various components that go into

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<v Speaker 1>that equipment. So we're really looking at really overall demand

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<v Speaker 1>of the semi country industry and the fabs that get built.

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<v Speaker 1>Certainly having it built in the United States is beneficial,

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<v Speaker 1>but we really look at where the total number of

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<v Speaker 1>fabs are being built, regardless of where the geography is.

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<v Speaker 1>One positive note, I know you spoke to this a

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<v Speaker 1>little bit, but I wanted to get to this note

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<v Speaker 1>from Susquehanna Financial Group that chip delivery time so shrank

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<v Speaker 1>again in August and that that could be a sign

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<v Speaker 1>that the global shortage of semiconductors is easing further. Can

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<v Speaker 1>you shed any light on that, Yeah, that's certainly. You know,

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<v Speaker 1>we read the same things and we've seen some some

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<v Speaker 1>of that in our own supply chain. Um, you know,

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<v Speaker 1>in the semi country industry does go through cycles. Uh

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<v Speaker 1>In many companys have looked at d RAM being the

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<v Speaker 1>next area of memory being the next area that might

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<v Speaker 1>go through kind of a dip. But you know, we've

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<v Speaker 1>been through this many times in our sixty year history

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<v Speaker 1>and semic connectors we have a playbook. We know how

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<v Speaker 1>to react to it. And actually downturns are great, great

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<v Speaker 1>times to continue investing in R and D and come

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<v Speaker 1>out even stronger. A John, your your major customer. Land

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<v Speaker 1>Research mentioned in its latest learnings called that the US

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<v Speaker 1>is now forbidding American equipment suppliers to ship equipment that

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<v Speaker 1>can make fourteen or more advanced chips to China. Do

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<v Speaker 1>you do you see a big impact from the new

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<v Speaker 1>US restrictions? Yeah, it's hard to tell. Uh, Certainly, we're

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<v Speaker 1>going to be abiding by any kind of laws that

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<v Speaker 1>the United States puts there. But as I said before,

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<v Speaker 1>you know, if the equipment doesn't go to China to

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<v Speaker 1>have the chips built in China, they'll go somewhere else.

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<v Speaker 1>And as I said, we are going to be the

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<v Speaker 1>provider for some of that critical technology no matter where

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<v Speaker 1>that that chip is built. And I'd like to hear

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<v Speaker 1>a comment just about overall demand. A lot of people

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<v Speaker 1>are worried about because of what we've seen from semiconductors

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<v Speaker 1>that it's a kind of a leading indicator on perhaps

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<v Speaker 1>the economy turning lower. Do you do you see that?

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<v Speaker 1>How is your business? Our business remains really strong, actually,

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<v Speaker 1>and you know, the bookings and the backlob remain very strong.

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<v Speaker 1>As I said earlier, we're still supply chain constrained. Um,

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<v Speaker 1>you know, things can change. We read the same things

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<v Speaker 1>where you know chip demand could be going down. But

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<v Speaker 1>as I said, we really look at chip demand in

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<v Speaker 1>the long term and long term semicunter chip demand, I

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<v Speaker 1>think we could all agree it's a great place to be.

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<v Speaker 1>It's it's ubiquitous in all of our lives, and so

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<v Speaker 1>we're really bullish about the long term transfer semic counter demand. Well,

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<v Speaker 1>in the next six months or so, we're gonna likely

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<v Speaker 1>have even higher interest rates and a possible recession. How

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<v Speaker 1>are you factoring those in? Well, certainly. Uh, you know,

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<v Speaker 1>we have a playbook if if things do turn down

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<v Speaker 1>a little bit. We have a variable cost structure. We've

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<v Speaker 1>done this many times. We watch costs, we uh, we

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<v Speaker 1>watch our bookings and very quickly react to that. And

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<v Speaker 1>so we've done that pretty well over the last sixty years.

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<v Speaker 1>So the biggest challenge at the moment, then, our biggest

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<v Speaker 1>challenge is getting parts so we can ship. As I said, yeah,

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<v Speaker 1>we still supply and constraint all right, John, thanks very

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<v Speaker 1>much for being with this best of Luck, John Lee,

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<v Speaker 1>President and CEO at m k S Instruments, discussing m

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<v Speaker 1>KS earnings and also the acquisition of out of Tech