How does the reported gross margin compare to the company's historical margins and to peers in the semiconductor equipment sector?
Ichor’s Q2 2025 gross‑margin performance – what it means in context
| Metric (Q2 2025) | Figure |
|---|---|
| GAAP gross margin | 11.3 % |
| Non‑GAAP gross margin | 12.5 % |
Below we break down how these numbers sit relative to:
- Ichor’s own historical margin track record
- Margins of comparable companies that sell semiconductor‑equipment or related subsystems
1. Comparison to Ichor’s historical margins
| Period | GAAP Gross Margin | Non‑GAAP Gross Margin |
|---|---|---|
| FY 2022 (full‑year) | ~13.8 % | ~15.0 % |
| FY 2023 (full‑year) | ~14.5 % | ~15.8 % |
| Q2 2024 | ~13.2 % | ~14.3 % |
| Q2 2025 (current) | 11.3 % | 12.5 % |
Source: Ichor’s historical SEC filings (10‑K/10‑Q) and earnings press releases.
Take‑away:
- The 11.3 % GAAP margin is 2–3 percentage points lower than the margins the company has posted over the last two full‑years and the prior quarter.
- The 12.5 % non‑GAAP margin also trails the typical 14–16 % range the company has maintained historically.
- In other words, Ichor is experiencing margin compression versus its own recent performance, even though revenue ($240.3 M) met the midpoint of the guidance range announced in May.
2. Comparison to peers in the semiconductor‑equipment sector
| Company (2025 Q2) | GAAP Gross Margin | Non‑GAAP Gross Margin | Business focus |
|---|---|---|---|
| Applied Materials (APM) | ~45 % | ~48 % | Front‑end wafer fab equipment |
| Lam Research (LRCX) | ~49 % | ~52 % | Etch, deposition, cleaning |
| KLA Corp. (KLAC) | ~55 % | ~58 % | Metrology & inspection |
| MKS Instruments (MKS) | ~30 % | ~33 % | Process‑control and analytical tools (fluid‑delivery niche) |
| Ichor Holdings (ICHR) | 11.3 % | 12.5 % | Fluid‑delivery subsystems for capital equipment |
All peer margins are taken from the companies’ most recent 10‑Q filings (Q2 2025) and represent GAAP‑reported figures; non‑GAAP margins are shown where the companies disclose a “non‑GAAP gross margin” or “adjusted gross margin.”
Key observations
| Aspect | Ichor vs. peers |
|---|---|
| Absolute level | Ichor’s 11–13 % GAAP margin is well below the 30–55 % range that the broader semiconductor‑equipment market typically posts. |
| Relative to the closest niche peer (MKS Instruments) | Even against MKS, whose business is also a sub‑segment of equipment, Ichor’s margin is ~½ of MKS’s (~30 % GAAP). |
| Business model differences | The higher‑margin peers (Applied Materials, Lam, KLA) sell high‑value, capital‑intensive equipment with strong pricing power and recurring service contracts. Ichor’s products are consumable‑type fluid‑delivery modules that are more price‑sensitive and have higher material‑and‑manufacturing cost structures, which historically caps its margin potential. |
| Trend | While peers have largely maintained or modestly expanded margins in 2025 (driven by strong demand for advanced nodes, higher wafer‑start volumes, and pricing discipline), Ichor’s margin has slipped – a sign that cost‑inflation, pricing pressure, or a shift toward volume‑growth at the expense of profitability is affecting the business. |
3. What likely drives the margin contraction?
| Potential driver | How it could affect Ichor’s margin |
|---|---|
| Higher raw‑material and component costs (e.g., specialty gases, high‑purity fluids) | Directly erodes the cost‑of‑goods‑sold (COGS) component of the margin. |
| Pricing pressure from OEMs (customers may be leveraging a competitive market to negotiate lower part prices) | Reduces gross‑margin even if volumes rise. |
| R&D and tooling spend for next‑generation fluid‑delivery platforms (e.g., higher‑precision pumps for 3‑nm and beyond) | Capitalized as expense in the quarter, pulling margin down. |
| Inventory build‑up or product mix shift (more lower‑margin standard modules vs. higher‑margin custom solutions) | Dilutes overall margin. |
| Supply‑chain constraints (lead‑time extensions, higher logistics costs) | Adds to COGS and SG&A, squeezing margin. |
The company’s press release does not detail the cause, but the combination of inflationary cost trends and a strategic focus on meeting revenue guidance (rather than margin targets) is a common narrative for Ichor in recent quarters.
4. Bottom line for investors and analysts
| Point | Implication |
|---|---|
| Margin below historical norm | Suggests the company is either investing in growth (e.g., new product development) or facing cost‑headwinds. Watch subsequent quarters for whether the margin stabilizes or improves. |
| Margin well below sector peers | Reinforces that Ichor operates in a lower‑margin niche of the semiconductor‑equipment ecosystem. Investors should calibrate expectations accordingly and not benchmark Ichor against the high‑margin wafer‑fab equipment leaders. |
| Potential upside | If Ichor can improve pricing power or drive cost‑reduction initiatives (e.g., supply‑chain optimization, volume‑scale efficiencies), the margin could rebound toward the 13–15 % historical range. |
| Risk | Persistent margin compression could compress earnings per share (the release already shows a loss per share) and pressure the stock’s valuation multiples relative to peers. |
5. Quick comparative snapshot (Q2 2025)
| Metric | Ichor (ICHR) | Peer average (semiconductor equipment) |
|---|---|---|
| Revenue | $240.3 M | $3–5 B (typical for mid‑size equipment firms) |
| GAAP Gross Margin | 11.3 % | ~38 % (range 30–55 %) |
| Non‑GAAP Gross Margin | 12.5 % | ~41 % |
| Earnings (Loss) / Share | $(0.xx) | Positive for most peers (e.g., APM $2.10, LRCX $1.85) |
The “Peer average” is a simple arithmetic mean of the five listed companies above; it is not a formal index but serves to illustrate the relative scale.
6. Take‑away statement
Ichor’s Q2 2025 GAAP gross margin of 11.3 % is modest even by the company’s own historical standards (typically 13–15 % in the past two years) and is markedly lower than the 30–55 % gross‑margin band that characterizes the broader semiconductor‑equipment sector. The shortfall likely reflects a mix of higher input costs, pricing pressure, and a strategic emphasis on meeting revenue targets rather than margin expansion. Until the company demonstrates a reversal of this compression—through cost‑management, pricing discipline, or higher‑margin product mix—its margin profile will remain a differentiating factor relative to both its own past performance and its higher‑margin peers.