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    Lam Research Corp (LRCX)

    Lam Research Corporation is a global supplier of wafer fabrication equipment and services to the semiconductor industry. The company operates in the manufacturing and servicing of semiconductor processing equipment used in the fabrication of integrated circuits . Their offerings include systems revenue from sales of new leading-edge equipment in deposition, etch, and clean markets, as well as customer support-related revenue from services, spares, upgrades, and non-leading-edge equipment from the Reliant product line .

    1. Customer Support Business Group (CSBG) - Provides essential services including spare parts, service, equipment upgrades, and the Reliant product line, which focuses on mature equipment. The spare parts business is a crucial component for maintaining equipment productivity and yield .

      • Spare Parts - Supplies necessary components to maintain equipment productivity and yield.
      • Service - Offers maintenance and support services for semiconductor processing equipment.
      • Equipment Upgrades - Provides enhancements to existing equipment to improve performance.
      • Reliant Product Line - Focuses on mature, non-leading-edge equipment for semiconductor processing.
    2. Systems Revenue - Encompasses sales of new leading-edge equipment in deposition, etch, and clean markets, supporting the fabrication of integrated circuits .

    Initial Price$106.51June 28, 2024
    Final Price$82.71September 28, 2024
    Price Change$-23.80
    % Change-22.35%

    What went wrong

    • Anticipated decline in China WFE spending in the second half could impact revenues, given China's significant contribution of approximately 30% to Lam's sales ( , ).
    • Uncertainty around NAND spending recovery poses risks; prolonged downturns or delays in technology conversions could adversely affect Lam's growth projections in the NAND segment ( ).
    • Dependence on adoption of new technology inflections for growth involves risks; delays or increased competition in areas like gate all-around and advanced packaging could impact Lam's ability to outperform overall WFE growth ( , ).

    Q&A Summary

    1. China Sales Outlook
      Q: How will China revenue impact results going forward?
      A: China revenue is trending down but remains important. We expect China's contribution to our total revenue to be lower next year as other markets strengthen. Despite the decline, China is not going away.

    2. WFE Growth and Guidance
      Q: What is the outlook for WFE spending in 2025?
      A: We believe year-on-year WFE overall will be up next year, driven by strength in leading-edge foundry and logic, DRAM, and advanced packaging. Although China WFE is expected to be lower, growth in other regions due to technology inflections will support overall growth.

    3. NAND Market Recovery
      Q: How confident are you about NAND WFE growth next year?
      A: We anticipate the NAND market will recover, driven by the need for higher quality bits for AI and enterprise applications. Technology upgrades, such as shifting to advanced nodes with molybdenum transitions, play to our strengths and position us well for growth.

    4. Gross Margins Impact
      Q: Can gross margins remain stable despite China mix decline?
      A: While the reduction in China mix is a headwind, we're implementing operational efficiencies—like relocating closer to customer fabs, lowering costs, and shortening supply chains—which we believe will offset mix impacts and improve gross margins.

    5. Advanced Packaging Growth
      Q: How is advanced packaging contributing to growth?
      A: Our advanced packaging business, driven by AI demand, exceeded expectations, achieving over $1 billion this year. This area continues to strengthen beyond our original forecasts, and we don't expect it to slow down anytime soon.

    6. DRAM Market Trends
      Q: What are your views on the DRAM market?
      A: Our DRAM outlook remains positive. The transition to DDR5 and the growth in high-bandwidth memory require incremental equipment. We believe DRAM WFE will grow again next year.

    7. Technology Inflections Impact
      Q: How are technology inflections impacting your business?
      A: Transitions like gate-all-around, backside power distribution, and dry photoresist are increasing etch and deposition intensity, benefiting us. These inflections allow us to gain share and expand our market, positioning us to outperform WFE growth.

    8. CSBG and Reliant Business
      Q: How is China slowdown affecting CSBG and Reliant?
      A: A reduction in China WFE could be a headwind for our Reliant business. However, other components like spares, services, and upgrades are driven globally. We see opportunities in equipment intelligence and automation, which will continue to drive CSBG growth.

    9. Operating Expenses and Leverage
      Q: Will operating leverage improve next year?
      A: We've funded necessary growth projects and achieved over a full percentage point of operating margin leverage in our December guide. As revenue grows, we hope to continue delivering leverage into next year.

    10. Export Controls Impact
      Q: How do export controls influence your China outlook?
      A: Our view incorporates our best understanding of potential restrictions. While it's difficult to predict exact outcomes, we base our estimates on the best information available and factor in possible impacts on our China business.

    11. Adoption of Molybdenum in NAND
      Q: How does molybdenum adoption affect your growth?
      A: Even though we're already strong in tungsten, molybdenum adoption represents a net gain for us. It resolves wordline resistance issues for customers and drives technology upgrades, leading to additional business.

    12. Dry Resist Adoption
      Q: Has dry resist adoption timeline changed?
      A: Dry resist adoption isn't necessarily tied to high NA EUV. Customers recognize benefits like shortened exposure times and improved defectivity, leading to earlier adoption across different nodes, including DRAM.

    13. Inventory Management
      Q: How are you managing inventory ahead of recovery?
      A: Inventory levels are managed based on business mix. Much of our inventory is geared towards NAND, which will be utilized as that market picks up. We're balancing this with components needed for strengthening segments.

    14. Revenue Growth Ex-China
      Q: Are you expecting double-digit growth outside China?
      A: We follow the same rigorous process in forecasting, considering customer expectations and orders globally. While China may decline, other regions show growth, contributing to our overall revenue guidance.

    15. Peers' China Outlook
      Q: How does peers’ China outlook affect your view?
      A: It's hard to compare our outlook with peers due to differences in product types and shipment timings. Our exposure and growth in China may differ significantly from others, so our projections are based on our specific circumstances.

    NamePositionStart DateShort Bio
    Timothy M. ArcherPresident and Chief Executive OfficerDec 2018Timothy M. Archer has been the President and CEO of Lam Research since December 5, 2018. He joined Lam Research in June 2012 as Executive Vice President and COO and was promoted to President and COO in January 2018. Previously, he spent 18 years at Novellus Systems, Inc. .
    Douglas R. BettingerExecutive Vice President and Chief Financial Officer2013Douglas R. Bettinger is responsible for Finance, Tax, Treasury, Investor Relations, and Corporate Analytics at Lam Research. Before joining in 2013, he was the CFO of Avago Technologies and held finance positions at Xilinx, Inc. and Intel Corporation .
    Patrick J. LordExecutive Vice President and Chief Operating OfficerMar 2023Patrick J. Lord oversees Global Operations, Customer Support, Global Quality, and other functions. He joined Lam Research through the acquisition of Novellus in June 2012 and has held various leadership roles since .
    Neil J. FernandesSenior Vice President of Global Customer OperationsMar 2023Neil J. Fernandes joined Lam Research in 2012 through the acquisition of Novellus, where he was Vice President of Sales Operations. He has held various management positions in product marketing and process engineering .
    Ava A. HarterSenior Vice President, Chief Legal Officer, and SecretaryJul 2024Ava A. Harter is responsible for global legal matters, ethics and compliance, global trade, and government affairs. She joined Lam Research in July 2024, having previously served as EVP and Chief Legal Officer at Whirlpool Corporation .
    Vahid VahediSenior Vice President and Chief Technology and Sustainability OfficerMar 2024Vahid Vahedi has been with Lam Research since 1995 and has held various leadership positions, including Senior Vice President and General Manager of the Etch business unit. He became the Chief Technology and Sustainability Officer in March 2024 .
    Seshasayee (Sesha) VaradarajanSenior Vice President of the Global Products GroupMar 2023Sesha Varadarajan joined Lam Research through its acquisition of Novellus in June 2012. He has held various roles, including Senior Vice President and General Manager of the Deposition Business Unit .
    Ita M. BrennanDirector, Member of the Audit CommitteeAug 2024Ita M. Brennan was appointed as a director effective August 30, 2024, and joined the Audit Committee on November 5, 2024. She has significant financial management expertise from her previous roles, including CFO positions at Arista Networks, QuantumScape Corporation, and Infinera Corporation .
    Mark FieldsDirector, Member of the Compensation and Human Resources Committee2024Mark Fields has been a Director at Lam Research since 2024. He has extensive experience in executive management, having served as President and CEO of Ford Motor Company. He has also served on the boards of several public companies .
    1. Given that the NAND spending recovery in 2025 is expected to be driven primarily by technology upgrades rather than capacity additions, how will this shift impact Lam's overall revenue growth and market share in the NAND segment?
    2. With China's revenue share expected to normalize to 30% in the December quarter amid ongoing geopolitical and regulatory challenges, how do you anticipate the evolving China landscape will affect Lam's business in the near term, and what strategies are you implementing to mitigate potential risks?
    3. You mentioned production wins for the molybdenum transition in NAND scaling in 2025; can you elaborate on the competitive dynamics in this area and how Lam plans to capitalize on this materials migration to drive incremental revenue growth?
    4. Considering the early adoption of Dry Resist technology in DRAM before the introduction of High NA EUV, could you provide more details on the adoption curve and whether it's progressing as originally anticipated, and what implications does this have for Lam's market position in DRAM?
    5. Some of your peers have adjusted their outlook for leading-edge foundry logic due to competitive dynamics among customers; how do you assess the potential impact of these dynamics on Lam's business, and what measures are you taking to maintain or grow your market share in this segment?
    Program DetailsProgram 1
    Approval DateMay 2024
    End Date/DurationNo termination date
    Total additional amount$10.0 billion
    Remaining authorization amount$9,821,006,000
    DetailsThe program may be suspended or discontinued at any time.

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: Q4 2024 (December 2024 quarter)
    • Guidance:
      • Revenue: $4.3 billion, plus or minus $300 million .
      • Gross Margin: 47%, plus or minus 1 percentage point .
      • Operating Margins: 30%, plus or minus 1 percentage point .
      • Earnings Per Share (EPS): $0.87, plus or minus $0.10, based on a share count of approximately 1.29 billion shares .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: Q3 2024 (September 2024 quarter)
    • Guidance:
      • Revenue: $4.05 billion, plus or minus $300 million .
      • Gross Margin: 47%, plus or minus 1 percentage point .
      • Operating Margin: 29.5%, plus or minus 1 percentage point .
      • Earnings Per Share (EPS): $8, plus or minus $0.75, based on a share count of approximately 131 million shares .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q2 2024 (June 2024 quarter)
    • Guidance:
      • Revenue: $3.8 billion, plus or minus $300 million .
      • Gross Margin: 47.5%, plus or minus 1 percentage point .
      • Operating Margins: 29.5%, plus or minus 1 percentage point .
      • Earnings Per Share (EPS): $7.50, plus or minus $0.75, based on a share count of approximately 131 million shares .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q1 2024 (March 2024 quarter)
    • Guidance:
      • Revenue: $3.7 billion, plus or minus $300 million .
      • Gross Margin: 48%, plus or minus 1 percentage point .
      • Operating Margins: 29.5%, plus or minus 1 percentage point .
      • Earnings Per Share (EPS): $7.25, plus or minus $0.75, based on a share count of approximately 132 million shares .
      • Additional note: The March 2024 quarter will have higher spending due to it being a 14-week quarter, and there will be growth in R&D spending .

    Competitors mentioned in the company's latest 10K filing.

    • Applied Materials, Inc. - Primary competitor in the dielectric and metals deposition market and the etch market .
    • ASM International - Competitor in the ALD and PECVD markets .
    • Wonik IPS - Competitor in the ALD and PECVD markets .
    • Hitachi, Ltd. - Competitor in the etch market .
    • Tokyo Electron, Ltd. - Competitor in the etch market and the wet clean market .
    • Screen Holding Co., Ltd. - Competitor in the wet clean market .
    • Semes Co., Ltd. - Competitor in the wet clean market .