Rick Wallace
President and Chief Executive Officer at KLA
Thanks, Kevin. Before summarizing KLA's results for calendar year 2021 and for the December quarter, I'd like to first acknowledge and thank the global KLA team, the dedication and hard work of our teams never wavered, despite challenging conditions, delivering for customers and managing around a complex global supply chain during a period of unprecedented industry shortages. It was the day-to-day drive to be better that drove KLA's market leadership, resulting in record growth and financial performance across the board for the company in the December quarter and for 2021.
KLA also delivered record returns to shareholders in 2021 through our dividend and share repurchase programs, with returns to shareholders totaling over $2 billion. KLA's strong results demonstrate our track record of relative strength and revenue growth and superior financial performance, compared with semiconductor industry peers in a dynamic and growing wafer fab equipment industry, as well as the long-term value created by employee and consistently refining our KLA operating model. Since our founding in 1976, KLA's mission has been focused on using our expertise and innovative thinking to overcome monumental technological challenges.
KLA is advancing humanity with technologies and ideas that inspire action. Our results in the December quarter and for 2021, demonstrate ongoing success of these strategies. So thank you to all our teams for contributing to KLA's enduring success. 2021 was another year of record growth, profitability and free cash flow for KLA as we successfully navigated unprecedented challenges in the marketplace, responding to record demand across the vast majority of our markets, while adapting to the evolving operational complexities associated with the global pandemic.
Through it all, we remain focused on delivering to our customers' requirements and driving strong returns to shareholders in a rapidly growing industry demand environment. In 2021, revenue grew 34% to $8.2 billion, marking the sixth consecutive year of revenue growth. KLA's strong revenue growth in 2021 was driven by 46% growth in the semiconductor process control systems. Revenue from the services business grew 14% in the year, with over 75% of the revenue generated from recurring subscription like contracts, reflecting the growing value of added process control systems and services in our product portfolio.
KLA also demonstrated strong operating leverage on our revenue growth in 2021 with non-GAAP operating profit and non-GAAP earnings per share growing 54% and 61%, respectively. Incremental operating margin on the revenue growth in 2021 was 57%, consistently above our target operating leverage model of 40% to 50% for the second year in a row. Free cash flow also grew a healthy 43% in 2021 to a record $2.5 billion, consistent with our long-term strategic objectives, KLA delivered on our ongoing commitment to return value to shareholders, including our 12th consecutive dividend increase announced in July 2021, along with an additional $2 billion share repurchase program.
Total returns to shareholders in 2021, including dividend and share repurchases, topped just over $2 billion or approximately 79% of free cash flow. This growth demonstrates success in strengthening our market leadership across our business that we can continue to build upon to drive adoption of KLA solutions in the critical markets we serve. Within the Electronics, Packaging and Component inspection or EPC Group, the Specialty Semiconductor Process segment grew 11% in 2021, and the printed circuit board Display and Component inspection grew 17% in the year. The strong relative performance for KLA reflects our market leadership and diversification and was driven by secular industry growth trends across multiple end markets.
We ended 2021 with an exceptionally strong backlog and began what we anticipate being a seventh consecutive year of growth for KLA. We entered 2022 executing at a high level and operating from a position of strength in our marketplace despite persistent supply chain challenges. This momentum sets the stage for KLA to continue outperform the market while demonstrating superior financial performance and maintaining our capital returns. Turning now to focus on the December quarter results where we saw diversified strength across our business. Today, demand environment continues to demonstrate accelerated adoption of a broad spectrum of semiconductor and electronic industry growth trends.
Technology is transforming how we live and work and the data-driven economy is fundamentally changing how businesses operate and deliver value. This digital transformation is enabling secular demand drivers such as high-performance computing, artificial intelligence, growth in new automotive electronics and strong growth in data centers and 5G communication markets. Each of these secular trends are driving investment and innovation and advanced memory and logic semiconductor devices, as well as new and increasingly more complex advanced packaging and PCB technologies.
With our market leadership in process control, and growth and expansion in new markets like Specialty Semiconductor Process equipment, PCB and finished die inspection in our EPC group, KLA is essential to enabling our increasing digital world. To make this happen, KLA continues to prioritize and invest in R&D, which totaled $1 billion in calendar 2021, double the level of five years ago and growing at a 15% compound annual growth rate. With this favorable backdrop and our demonstrated track record of investing heavily in R&D to drive product differentiation and consistently meeting or exceeding our commitments to customers and shareholders, our performance enabled KLA to outperform the 2023 long-term financial model targets that we set two years ago, two years ahead of expectations.
Moving along to the top highlights from the December 2021 quarter. First, we saw continued strength and consistency in foundry logic customer revenue for both leading edge and legacy technologies in the December quarter. As expected, memory demand also grew in the period. Calendar 2022 is setting up to be another year of strong growth for WFE. We see demand momentum throughout 2022 across our major end markets. The strength and the demand we're seeing reflects KLA's essential role in supporting our customers' drive to innovate and continue to invest in future technology nodes. In foundry and logic, simultaneous investments across multiple nodes and rising capital intensity continues to be a tailwind. In memory, demand remains broad-based across multiple customers, and we expect another year of double-digit growth in 2022 with NAND growing faster than DRAM; second, KLA is seeing strong demand across the breadth of our industry-leading optical inspection portfolio as we have maintained our momentum in one of the fastest-growing markets in WFE.
Wafer inspection systems revenues grew 54% in 2021, far outpacing the WFE market, which is estimated to have grown 40%. We're experiencing strong growth across our wafer inspection portfolio from broadband plasma, laser scanning, unpatterned, their wafer inspection, macro inspection and e-beam products. This quarter, we highlight macro inspection, which is growing at a pace of 1.5x WFE, driven by growth in automotive and other specialty markets, where KLA has defensible market leadership with a platform uniquely positioned to address growing technical complexity and tighter design rules; third, success in KLA's strategic growth and market diversification strategies are being demonstrated by growth in EPC. Systems revenue from KLA's Electronics, Packaging and Components, or EPC group, grew 20% in 2021. With EPC, KLA is diversifying our market leadership with a portfolio of solutions addressing fast-growing new markets in the electronics value chain, including RF, specialty semiconductors, automotive, PCB, advanced packaging and display; fourth, service revenue grew 14% in 2021 to $1.8 billion and continues to sustain a growth rate above its long-term target of 9% to 11%.
For the quarter, services revenue was $457 million or 19% of total revenue. Annual services revenue is quickly approaching $2 billion and has grown 81% in the past three years. This growth has been driven by the rising installed base and increasing adoption of subscription-like contracts. Over 75% of service revenue in the Semiconductor Process Control segment, and over 90% of services in the printed circuit board business come from recurring subscription-like contracts. Finally, the December quarter was another exceptional one from a free cash flow perspective, capping a year in which KLA generated over $2.5 billion in free cash flow and returned over $2 billion to shareholders. In the December quarter, we generated strong quarterly free cash flow of $746 million, which helped drive 43% growth in free cash flow in 2021. We've also maintained focus on returning capital to shareholders via our dividend and share repurchase program, which rose 63% year-over-year on a combined basis.
Before Bren gets into greater detail on our financial highlights and guidance, let me briefly summarize. Despite the persistent disruption and continued challenges associated with the pandemic, particularly around the supply chain and component availability, KLA is consistently delivering strong revenue growth, financial results and returns to shareholders. KLA is well positioned at the forefront of technological innovation with a comprehensive portfolio of products targeting the most demanding inspection and measurement challenges in the marketplace. I also want to provide a quick update on our ESG activities. On December 16, KLA announced setting a goal to use 100% renewable electricity across our global operations by 2030. Managing the impacts of our business in terms of ESG stewardship is an integral part of KLA's mission to advance humanity. This includes contributing to creating a more sustainable future.
With that, I'll pass the call over to Bren to cover our financial highlights, outlook and guidance. Bren?