CMC Materials Inc.
CCMPBusiness Overview
source: coverage-next-full ticker: CCMP step: "01" title: Business Overview — CMC Materials / Cabot Microelectronics created: 2026-05-29
Step 01: Business Overview
Company Description
CMC Materials (formerly Cabot Microelectronics Corporation, ticker CCMP) was the world's largest supplier of chemical mechanical planarization (CMP) slurries for the semiconductor industry, and a significant producer of CMP polishing pads and electronic chemicals. The company served virtually every major semiconductor manufacturer globally, with its materials embedded as a critical process consumable in the fabrication of logic, memory, and foundry chips.
CMP is a wafer surface planarization technique that uses a combination of chemical action and mechanical abrasion to smooth and level the layers deposited during semiconductor manufacturing. Without CMP, the accumulated topography from repeated deposition steps would make it impossible to achieve the precision optical lithography needed for advanced semiconductor nodes. As a result, CMP consumables — slurries and pads — are mission-critical, non-substitutable inputs at every leading-edge semiconductor fab in the world.
Business Segments (Post-KMG, FY2021)
1. CMP Slurries (~55% of revenue, ~$670M)
The original and still dominant business. CMP slurries are colloidal suspensions of abrasive particles (typically silica or ceria nanoparticles) in a chemically active liquid medium. Each slurry formulation is precisely engineered for a specific material removal application:
- Tungsten slurries: Used for polishing tungsten plugs/contacts in logic and DRAM. Highest revenue sub-segment. CCMP held ~45% global market share in tungsten CMP.
- Copper slurries: Used for damascene copper interconnect planarization in advanced logic. Growing with multi-patterning at 5nm/3nm.
- Dielectric slurries: Used for inter-layer dielectric (ILD) planarization; oxide CMP is the highest-volume CMP step.
- Noble metal slurries: Specialty applications including platinum-group metal CMP for advanced packaging.
- Memory slurries: DRAM and 3D NAND-specific formulations; growing with 3D NAND layer count expansion.
2. CMP Pads (~20% of revenue, ~$245M)
Acquired organically and through bolt-ons. CMP pads are polyurethane-based consumables that physically contact the wafer surface during polishing. CMC Materials had become the #2 pad supplier globally (behind DuPont/Dow), with particular strength in:
- IC1000-equivalent pads: Standard hard pads for oxide and tungsten applications
- Next-generation pad technologies: Grooved and perforated pad designs for advanced node requirements
- Growing segment as CCMP cross-sold pads into its existing slurry customer relationships
3. Electronic Chemicals (~20% of revenue, ~$245M — from KMG)
Acquired via KMG Chemicals in 2018. These are ultra-high-purity chemicals used in semiconductor wet processing:
- Pipe/electrical etch chemistries: Specialty cleaning agents for fab tool cleaning and etching
- CMP process chemicals: Pre- and post-CMP cleaning formulations
- Electronic-grade acids and bases: Ultra-pure HF, H2O2, and other process chemicals
4. Pipeline Performance Chemicals (~5% of revenue, ~$65M — from KMG, partially divested)
KMG's legacy industrial pipeline treatment chemicals business. Used to inhibit corrosion in oil & gas pipelines. Non-core; partially divested to satisfy Entegris antitrust conditions in 2022.
Customers
CMC Materials' customer base was the global semiconductor manufacturing ecosystem:
| Customer Tier | Examples | Revenue Exposure |
|---|---|---|
| Tier 1 Foundries | TSMC, Samsung | ~35-40% of revenue |
| IDMs (logic) | Intel, TI, Renesas | ~20-25% |
| Memory | SK Hynix, Micron, Samsung | ~15-20% |
| Other foundries | GlobalFoundries, UMC, SMIC | ~10-15% |
| Other | OSATs, specialty fabs | ~5-10% |
TSMC and Samsung were collectively the two largest customers, accounting for an estimated 25-30% of CMP slurry and pad revenue. Customer concentration was moderate — no single customer exceeded 15% of total revenue.
Manufacturing Footprint
- Aurora, Illinois: Headquarters, primary R&D, and slurry manufacturing
- Rayong, Thailand: Major slurry manufacturing hub (Asia supply for TSMC/Samsung)
- Planar Solutions (acquired 2000): Albany, Oregon — pad manufacturing
- Seoul, Korea: Sales/applications support for Korean customers
- Taiwan (Hsinchu): Sales/applications support for TSMC and Taiwan foundries
- Singapore: Electronic chemicals distribution and manufacturing
Why This Business Is Exceptional
Process qualification lock-in: Each slurry and pad formulation must undergo an 18-24 month qualification cycle at each customer fab before being used in production. Switching mid-process risks yield loss on wafers worth $10,000-$50,000 each. This creates quasi-permanent revenue streams.
Node inflation as a demand driver: Each new semiconductor process node requires more CMP steps (2nm devices require 20+ CMP steps vs. 8-10 steps at 130nm). CCMP benefited structurally from every technology generation advance regardless of unit wafer volumes.
Proprietary formulation expertise: The optimal chemistry for a given metal/dielectric combination at a given node is the product of years of co-development with customers. This IP cannot be replicated quickly by new entrants.
Stable, recurring revenue: CMP consumables are consumed (literally) in the manufacturing process. High-volume fabs reorder continuously. Revenue visibility at mature accounts is extremely high.
Financial Snapshot
source: coverage-next-full ticker: CCMP step: "04" title: Financial Snapshot — FY2019 through FY2022 created: 2026-05-29
Step 04: Financial Snapshot
Income Statement Summary
| Metric | FY2018 | FY2019 | FY2020 | FY2021 | Q1 FY2022 |
|---|---|---|---|---|---|
| Revenue ($M) | $474.9 | $982.5 | $1,074.2 | $1,224.7 | ~$320M |
| Gross Profit ($M) | ~$218 | ~$411 | ~$455 | ~$520 | ~$138M |
| Gross Margin | ~45.9% | ~41.8% | ~42.4% | ~42.5% | ~43.1% |
| R&D ($M) | ~$43 | ~$58 | ~$60 | ~$65 | — |
| SG&A ($M) | ~$55 | ~$95 | ~$98 | ~$105 | — |
| EBIT (adj.) ($M) | ~$120 | ~$205 | ~$240 | ~$275 | — |
| EBIT Margin (adj.) | ~25.3% | ~20.9% | ~22.3% | ~22.5% | — |
| Adj. EBITDA ($M) | ~$140 | ~$280 | ~$320 | ~$355 | ~$95M |
| Adj. EBITDA Margin | ~29.5% | ~28.5% | ~29.8% | ~29.0% | ~29.7% |
| Net Income (GAAP) ($M) | ~$102 | ~$81 | ~$131 | ~$134 | — |
| EPS (diluted, GAAP) | ~$3.73 | ~$2.93 | ~$4.77 | ~$4.87 | — |
| Adj. EPS | ~$4.85 | ~$6.20 | ~$7.50 | ~$9.30 | — |
FY2018 = fiscal year ended September 30, 2018 (pre-KMG close). FY2019 = first full year with KMG. Note: CMC changed fiscal year to calendar year for FY2022.
Key Margin Analysis
Gross Margin Dynamics
CMC Materials maintained 42-46% gross margins throughout the coverage period. Post-KMG, gross margin declined slightly from the pure-play CMP level (~46%) due to the lower-margin electronic chemicals and pipeline performance chemicals that KMG brought. However, the CMP segment itself showed continued gross margin strength:
- CMP slurries: estimated ~52-55% gross margin
- CMP pads: estimated ~40-45% gross margin
- Electronic chemicals: estimated ~30-35% gross margin
- Pipeline chemicals: estimated ~25-30% gross margin
The blended gross margin stabilized at ~42-43% as KMG integration matured.
Operating Leverage
The company demonstrated meaningful operating leverage post-KMG integration:
- EBIT margin expanded from ~20.9% (FY2019) to ~22.5% (FY2021) despite flat gross margins
- SG&A as % of revenue declined from ~9.7% (FY2019) to ~8.6% (FY2021)
- Integration of KMG's back-office onto CMC systems drove efficiencies
GAAP vs. Adjusted Earnings
The large gap between GAAP and adjusted EPS reflects:
- Amortization of acquired intangibles from KMG acquisition (~$90-100M/year)
- Acquisition-related costs (integration expenses, deal fees)
- Stock-based compensation (~$20-25M/year)
Adjusting only for amortization, CMC's economic earnings were significantly above GAAP, making the business appear more expensive on GAAP P/E than it actually was.
Pre-KMG Standalone Financial Profile (FY2017-FY2018)
The pure-play CMP company was a pristine capital-light specialty chemicals business:
- Revenue: ~$430-475M
- Gross margin: ~45-47% (CMP formulations = high value-add chemistry)
- EBIT margin: ~25-27%
- ROIC: ~18-22%
- Net cash position (no debt)
- Free cash flow conversion >90% of EBIT
The KMG acquisition fundamentally changed the financial profile: added leverage ($1.5B+ debt), lowered blended margins, and reduced ROIC — but added scale and electronic chemicals exposure as a strategic hedge.
Revenue Growth Analysis
| Period | Revenue Growth | Organic CMP Growth | Note |
|---|---|---|---|
| FY2018→FY2019 | +107% | ~8% | KMG acquisition |
| FY2019→FY2020 | +9.3% | ~7-8% | First full KMG year; COVID resilience |
| FY2020→FY2021 | +14.0% | ~12-13% | Strong semi cycle; TSMC/Samsung capex surge |
| FY2021→Acq. | N/A | ~15% annualized | Last public quarter pre-acquisition |
The organic CMP business grew at 7-13% annually through this period, driven by:
- TSMC's aggressive 5nm/3nm node ramp
- Samsung HBM and DRAM technology transitions
- Intel's 10nm+ ramp (finally gaining traction)
- 3D NAND layer count expansion (SK Hynix, Micron, WDC)
Cash Flow Statement Highlights (FY2021)
| Item | FY2021 |
|---|---|
| Operating Cash Flow | ~$270M |
| Capital Expenditures | ~$65-70M |
| Free Cash Flow | ~$200-205M |
| FCF Margin | ~16.5% |
| FCF Conversion (vs. adj. EBITDA) | ~57% |
FCF conversion was below the pure-play CMP levels due to:
- Higher interest expense from KMG acquisition debt ($60-70M/year)
- Elevated integration capex
- Working capital build from rapid revenue growth
Valuation Context at Acquisition
At the $133/share acquisition price (Dec 15, 2021 announcement):
| Metric | Value |
|---|---|
| Enterprise Value | ~$6.5B |
| EV/Revenue (FY2021) | ~5.3x |
| EV/EBITDA (adj., FY2021) | ~18.3x |
| EV/EBITDA (forward, FY2022E) | ~16-17x |
| P/E (adj., FY2021) | ~14.3x |
| P/FCF (FY2021) | ~32x |
The acquisition multiple represented a premium to where CCMP had historically traded (12-16x EBITDA) and reflected Entegris' conviction in the long-term secular CMP demand story and strategic synergy value.
Deeper Financial Analysis
The fundamental tier adds 9 additional research dimensions for $CCMP.