Q3 2021 Lam Research Corp Earnings Call

April 21, 2021

'twenty, one quarter financial conference call at.

At this time I would like to turn the conference over to Tina.

Corporate Vice President of Investor Relations and corporate Finance. Please go ahead.

Thank you and good afternoon, everyone and welcome to the Lam Research quarterly earnings Conference call with me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer.

During today and todays call, we will share our overview on the business environment and we will review our financial results for the March 2021 quarter.

And out of the June 2021 quarter.

The press release detailing our financial results was distributed a little after one o'clock P. M Pacific time this afternoon.

Please can also go on the Investor Relations section of the company's website.

Along with the presentation slides that accompany today's call.

Today's presentation and Q&A line includes forward looking statements that are subject to risks and uncertainties reflected and the risk factors disclosed in our SEC public filings.

And you see accompanying slides in the presentation for additional information today's discussion of our financial results will be presented on a non-GAAP financial basis, unless otherwise specified a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings press release.

This call is scheduled to last until three o'clock P M Pacific time.

A replay of this call will be made available later this afternoon on our website.

And with that I'll call over to Tim.

Great. Thank you Tina and thank you to everyone joining the call today.

<unk> posted excellent results and the March quarter with record revenues for both systems and install businesses as well as record cash flow from operations and record earnings per share.

Our performance reflects solid execution by Lam employees, and our partners worldwide. Despite ongoing COVID-19 related impacts.

The investments, we are making and manufacturing and supply chain resiliency are enabling us to support our customers' needs amid a broad based strengthening and semiconductor demand.

We are very optimistic on our positioning and see continued strong growth for Lam and the future.

Let me first begin by updating our expectations for wafer fabrication equipment spending since our last earnings call. We have seen <unk> spending plans increase for the calendar year.

Our outlook for 2021, <unk> is trending above $75 billion and we now believe that <unk> spending and the second half of the calendar year will be higher than the first half across all device segments.

Several factors are at play and driving this robust Wi Fi growth.

First secular tailwind such as AI and Iot continue to strengthen and over the past year COVID-19 related impacts like work and learn from home has accelerated adoption of these technologies.

Second.

The complexity of manufacturing advanced semiconductor devices continues to increase at a rapid rate leading to a rise and equivalent cappelletti across all segments.

Third innovative consumer products are incorporating more semiconductor enabled functionality driving faster growth and semiconductor content per unit.

On our last call, we talked about new gaming consoles as an incremental driver for semiconductor demand and WMC.

A similar example is D C and Wearables.

And these devices are utilizing and increasing number of sophisticated sensors manufactured using mature technology nodes to deliver added functionality such as body temperature measurement heart rate monitoring and blood oxygen sensing wearables are integrating these sensors with advanced node semiconductors that deliver lower <unk>.

<unk> and lower latency. In addition to the computation capability required to support new AI and machine learning enabled applications.

This is having a marked effect on semiconductor content and these products and today's wearables contained nearly double the amount of DRAM and four times the amount of NAND versus five years ago.

Semiconductors are also capturing a greater share of the value within the electronics supply chain and we see 2021 semiconductor revenues and of electronics revenues breaking out of the historic averages over the last 15 years and finally, the growing importance of semi.

Conductors to global industries has led governments and the U S Europe and Asia to call for actions to mitigate supply chain risk.

Which will likely include increased investment and regional semiconductor manufacturing capacity.

When combined these for factors has accelerated technology adoption.

Growing complexity, increasing semiconductor content and <unk> investment support a compelling case for a strong multiyear WC spending environment, one and which Lam is executing extremely well.

In 2020, we gained share across both etch and deposition, including significant gains in conductor etch.

We expect to deliver overall share growth again in 2021.

Our positive positive momentum demonstrates how we are successfully positioning lam as the partner of choice for our customers at a time when technology complexities increasingly <unk> scaling of device and packaging architectures will be a primary focus of the industry for the remainder of this decade.

And lunch and Lam approaches this challenge with unique experience.

We were the leader and enabling the transition to <unk> devices through our early engagement and the matching.

And as a result, we built enduring leadership positions in the most critical etch and deposition applications.

And as the <unk> NAND roadmap is evolving to multi stack scaling for higher layer counts our technical contribution continues to grow.

To and integrate multiple stacks to build taller devices innovative solutions are required for stress management and selectivity and defect control.

The increase in complexity and multi stack scaling is creating new product opportunities for Lam and this quarter. We recorded a key deposition win for a multi stack, enabling film and a leading memory customer.

Through our leadership and the <unk> NAND market Lam has developed a portfolio of products and acquired the expertise and high volume manufacturing to help customers highly complex <unk> scaling challenges across other device segments in foundry logic.

The adoption of <unk> like gate, all around our nano sheet type structures introduces unique processing requirements and the last earnings call I highlighted the momentum of our latest conductor etch system <unk>.

Which utilizes an innovative plasma pulsing capability to deliver superior high aspect ratio etch results for nano sheets structures.

In order and we saw additional application wins with key go at multiple foundry logic customers.

We are also seeing share gains with our new suite of selective etch products designed for ultra high selectivity removal processes previously performed using systems.

Growth related to the challenge for the back end of line scaling and we are taking new approaches to deposit lower K materials and deliver better interface control.

New material duration schemes enabled us to win multiple five nanometer backend of line applications and in the March quarter, we extended our wins to more advanced nodes as well.

In addition to device scaling we remain equally focused on our customers' objectives to improve cost and operating efficiency and their fabs.

You will recall and we announced our new van <unk> dielectric etch process module on the <unk> platform.

<unk> delivers best in class Etch technology and brings to market unique and innovative solutions to lower overall cost of ownership.

The sensor platform architecture increases.

Wafer output per square meter of fab space.

New RF power designs consume less energy to support cost and ESG, Roadmaps and advanced equipment intelligence and self maintenance capabilities minimize required onsite human intervention.

With semiconductor demand and unprecedented levels.

These factors have become critical differentiators as customers look to cost effectively and sustained ramp capacity on advanced nodes.

And as a result, we continue to make solid progress on the <unk> adoption and leading customers.

Our focus on helping customers solve productivity and manufacturing challenges is also reflected in the excellent performance of our installed base business, where we are seeing and in growth for <unk>.

<unk> revenue eclipsed one 3 billion and the March quarter, yet another record, we are executing very well and this business and as we sit here today. We are tracking ahead of the growth model that we shared with you at last year's investors day.

All product lines within <unk> and record revenues and the quarter.

Our upgrades business is expected to roughly double over the two year period ending in 2021.

By enhancing productivity and extending installed base capability for multiple generations. Our upgrades business plays an important part and our customers cost reduction Roadmaps and.

And reliant, we see specialty technologies, continuing to grow and areas like Cif.

And our and RF devices and spares, we successfully closed with a key customer the single largest annual contract and the company's history, which includes commitments for critical leading edge parts.

And lastly, we are seeing great progress and services.

Big data and equipment intelligence are playing an increasingly critical role and the operation of advanced semiconductor Fabs.

This quarter, we closed a multi region data services license contract with a major memory manufacturer to provide enhanced tool data to enable their smart manufacturing roadmap.

Additionally, our services team completed the first year of a comprehensive multi year equipment intelligence services contract at another major memory producer.

System performance under this contract exceeded objectives, leading to a significant return on investment for the customer.

So to conclude we are.

And in an environment, where industry fundamentals continue to strengthen.

And the strategic relevance of semiconductors is reaching new heights, and semiconductor capital equipment is well positioned to benefit.

Amid strong WC spending Lam is delivering great results, and making foundational investments and new products and infrastructure to drive continued outperformance.

Thanks, again for joining today and now here's Doug.

Great great.

Thanks, Tim Good afternoon, everyone and thank you for joining us today during what I know is a busy earnings season.

I Hope you and your families safe and healthy since we last spoke with you.

Lam delivered outstanding results for the March quarter.

With record quarterly revenue and strong profitability metrics.

For the quarter, our revenue and gross margin and above the midpoint of our guidance and both operating income and earnings per share were above the guidance range.

We've continued our excellence and execution, not only and delivering impressive financial results, but also and being our customer's most trusted partner.

We delivered revenue for the March quarter of $3 85 billion.

At the high end of our guidance range, which was an increase of 11% from the quarter.

Our solid revenue performance was mainly due to an increase and foundry related systems as well as record performance and our customer support business group for CSP June where we had increases in all parts of that business. Our customers Fabs are running at high utilization levels, which drives the need for consumptions for.

Parts and services.

First lets focus on our systems revenue, where we saw.

<unk> strength and the memory segment, which represented 62% of systems revenue and the March quarter.

For NAND segment was 48% of our systems revenue compared with 51% and the prior quarter.

Customers investing and higher <unk> device layer count and added capacity to address the overall broad demand for storage pits.

The March quarter, NAND systems revenue amount reached a record level again, demonstrating lamps leadership position and the manage segment.

Customers were primarily investing in equipment for 96, and $1 48 layer class devices.

And DRAM, we had 14% of our March quarter systems revenue and this segment compared with 17% and the prior quarter.

DRAM investments consisted of both conversion and capacity additions.

With concentration and the one why onesie and one alpha nodes.

We expect to continue to see healthy and prudent levels of investment and the overall memory segment and calendar year 2021.

We've had our highest quarterly revenue level and the March quarter for the foundry segment and it came in at 31% of our systems revenue compared with 26% and the quarter.

For pursuing leading edge investments focused on five nanometer.

And as well as spending related to mature technology nodes required to meet higher demand for specialty for consumer oriented integrated circuits.

And finally logic and other contributed the remaining 7% of systems revenue and the March quarter up slightly from the prior quarter level at 6%.

Let me now shift to the regional profile of our revenue the China. The China region came in at 32% of our total revenues down slightly from 35% December quarter.

The majority of the China spending this quarter.

It was from domestic Chinese customers.

The Korea region was also strong for us and the March quarter represented 31% of revenues, which is up 10 points from the prior quarter.

And as Tim mentioned, we achieved another record quarter of revenue for our customer support business group coming in at one 3 billion, which is an increase from 13% from December and.

And up over 50% versus the same quarter in 2020.

The growth, we're seeing and each of the sub segments of this business is a testament to the value, we're providing for our customers for technology and productivity enhancements.

As well as the strength of this market supported by our reliant product line.

We're also supporting customers request for increasing spare parts purchases to support both higher equipment utilization.

And some level of inventory stocking.

We expect continued strength and <unk> through the remainder of the year.

Let me now shift to profitability.

Gross margin was 46, 3% generally in line with our expectations.

And I'll remind you as I always do gross margin fluctuates quarter to quarter due to overall business levels, along with customer and product mix.

We do continue to incur higher freight and logistics cost because of the Covid environment and we expect these costs will remain until we see a normal list of airfreight volumes.

Operating expenses for the March quarter were $567 million slightly higher than the prior quarter.

Reflecting our commitment to manage expense levels.

And we invest to grow the company.

We've prioritized.

And we prioritized our spending towards R&D, which represents over two thirds of our operating expenses, enabling us to build on our deposition and etch leadership positions.

Operating income exceeded $1 2 billion and the March quarter with operating margin coming in over the guidance range at 31, 6%.

Our non-GAAP tax rate for the quarter was seven 8%.

<unk> came in lower than we expected due to incremental deductions from equity compensation for annually investing that occurred during the quarter.

As we've discussed in the past and will have fluctuations from the tax rate from quarter to quarter and you should continue to expect the ongoing tax rate to be and the low teens level for the 'twenty two calendar year.

I would mentioned we continue to monitor potential tax changes that could come from the new administration and the United States.

Other income and expense was approximately $42 million and expense, which is lower than the prior quarter and lower than the typical run rate, primarily due to market and items like foreign exchange and interest rates.

And as a reminder, beginning in the March quarter of last year, the benefits and costs of our employee deferred compensation plan are no longer mismatched and our non-GAAP results.

Mismatch was $8 million for March 'twenty, one quarter.

And you can see the details of this and the GAAP reconciliation table of our earnings release.

We paid $187 million and dividends and allocated over $900 million towards share repurchases.

Tracking nicely with our committed capital return plans.

Part of the buyback and the quarter went to a structured repurchase program, which was supplemented with open market repurchases.

Diluted earnings per share came in at $7 49.

Above the guidance range.

This was the result of the higher revenue and gross margin as well as for ability and as I mentioned and the tax rate.

Our diluted share balance was down from the December quarter level coming in and 145 million shares as we expected.

The share count includes a dilutive impact of approximately 500000 shares from the 2041 convertible notes.

And Additionally mentioned is that late in the March quarter, we issued a redemption notice for the 2041 convertible notes.

As a Martin as of March quarter, and we had approximately $17 million remaining on these notes.

And this redemption would retire the last of the convertible notes and our capital there.

Let me shift and balance sheet cash and short term investments, including restricted cash decreased slightly to $6 billion from $6 3 billion and the prior.

The decrease was attributed to the capital and return activity offset by the strong performance, we had and the March quarter cash flows from operations, which came in at a record level of $2 billion.

Day sales outstanding decreased to 66 days and the March quarter from 76 that we saw in December.

This improvement was driven by strong cash generation with the higher level of business.

And as I alluded to last quarter, the timing of collections across the December and March quarters.

Inventory, our inventory turns were flat with the prior quarter coming in at three two times.

Given the overall demand strength, we're seeing is relative to our focus to mitigate potential supply chain disruptions.

Inventory turns will likely remain at these current levels for the foreseeable future.

Non cash expenses included approximately $56 million for equity compensation and $61 million for depreciation and $18 million for amortization.

Capital expenditures for the March quarter were down slightly versus the December level coming in at $90 million.

As I noted in our last earnings call for investing to support the expanding operations at our new Malaysia factory.

Our manufacturing facility and Ohio, that's focused on critical spare parts and.

And the upcoming Korea Technology Center.

We expect to see somewhat higher levels of capital expenditures in 2021, as we support these critical growth initiatives.

The head count level ending the March quarter was approximately 13100 regular full time employees.

Resources have been added from our factories to meet the increased output levels and this robust business environment.

Within this we Opportunistically bought out our Asian joint venture manufacturing facility that is focused on our reliance product line.

And just add and half of the growth and headcount that you saw in the quarter.

And Additionally, we've added field service and R&D personnel with a focus on delivering best in class technology services and solutions to our customers.

Now looking ahead I'd like to provide you our non-GAAP guidance for the June 2021 quarter.

And we're expecting revenue of $4 billion, plus or minus $250 million.

Gross margin and a 46, 5% plus or minus 1%.

Operating margin margins of 32% plus and minus one percentage point and finally earnings per share of $7 50.

Plus or minus 50 based on a share of approximately 144 million shares.

So in summary.

Quite pleased with our operational execution, which is reflected and the strong financial performance for the company.

We now see greater strength and <unk> as we go through calendar 2021, with the second half looking stronger than the first half.

We are guiding to continuing record financial performance for the company and we are well on the path to achievement of our growth objectives that we spoke to you about at R&D day in March of last year.

Personally never been so excited for the things for semiconductor industry is enabling and I'm proud of the results Lam has continued to deliver enabling this industry.

That concludes my prepared remarks.

Operator, please open up the call for questions.

Thank you.

And you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure. Your mute function is to allow your signal and to reach our equipment again press star one to ask a question for Paul.

For just a moment to allow everyone an opportunity to signal for questions.

We'll take our first question from Harlan sur with J P. Morgan.

Good afternoon, and congratulations and the strong results and execution and I assume that given the strong demand trends across leading edge and lagging edge debt the team and see an extended beta tools.

And if you can quantify the team already starting to book into the second half of this year and if I'm a customer that places an order to day for one of your tools. When will this total FCB producing wafers is at nine months from now 12 months from now would appreciate any insights.

Yes, Harlan thanks for the question.

And obviously for a lot of reasons, we're not going to divulge our our lead times on this call, but we will say that clearly with what's Ed is unprecedented demand and combining that with COVID-19 impacts capacity is tight and it has extended our lead times, we would say our visibility into our few.

<unk> is quite good at this point.

But but we don't want to go into exactly how long it takes for a customer to order tool and get it and qualify it at this point for for competitive reasons ours and and our customers.

And I appreciate that.

If I think about the fundamental environment and right. If I look at your memory business and I look at your customers for both NAND and DRAM pricing fundamentals continued to move higher and combination of strong demand relatively disciplined and supply spending and in fact relatively.

Disciplined and supply spending.

The last peak in 2018, most of your customers and are anticipating that DRAM and NAND bit demand will exceed.

Supply growth here in 2021, I know you guys do a pretty good job on the analytic side around supply and demand and I'm. Just wondering how you see the supply demand balance and memory, especially as we move through the back half of this year and factoring and incrementally better wf fee outlook that you outlined today.

Yeah I'll go ahead and make a couple of comments and then and then let them chime in with some of the specifics on on debt.

That supply.

Clearly, we've said and even even entering this year, we felt it was going to be a very good year for memory for a couple of reasons one.

DRAM had gone through a couple of years of very conservative spending and and so there was there was some pent up demand therefore for spending both on technology and some capacity.

From a.

And perspective, we talked a lot about the increasing spend related to layer transition that we're going to be occurring this year and so we have seen that playing out I think you combine that with again growing demand across many many different end market segments.

And also.

The need to add capacity bolt and a greenfield perspective, as well as conversions and Thats led to.

And ongoing stronger outlook, we do model, obviously, the supply and demand and I'll, let Doug talk a little bit about what we're seeing there.

Carl and thanks for the question.

Yes, we can through 19, where spending was held pretty closely and checked and even through a good chunk of 2000, and maybe all the way through 'twenty for for.

For DRAM.

And when you look at the two years of investment they're exiting last year and you look at supply growth. It was below where longer term demand growth was and both NAND and DRAM and I think you saw that.

And are still seeing and and pricing.

And as a result, our customers respond we see them responding.

Carefully prudently as well.

And I would like to describe it consistent with where they see demand growth.

And the investments, we're starting to see increased somewhat and in both NAND and DRAM are result of that we continue to believe long term and demand to be and mid high 30% and.

Supply and not caught up with that yet and that's why our investment is up.

Similarly in DRAM.

Longer term demand assume high teens, maybe approaching 20% and.

And as a result, the supply growth.

And is being invested in to try to get caught up with that.

And that's really what we see go on us.

Thank you for the insight.

Thanks, Harlan and thanks, everyone.

Thank you we'll take our next question from John Pitzer with Credit Suisse.

Yes. Good afternoon, guys. Congratulations for strong results, Tim and David I wanted to talk a little bit about kind of market him and your prepared comments you talked about your expectation for this being in other market share gaining year for you and at the analyst day, a year ago I think to your 2023 model you guys had sort of embedded storage sort of 4% to 8% points of share in etch and dep.

I'm just kind of curious to what extent was that sort of time sensitive versus volume sensitive and SWF fee kind of gets ratcheted up here at a faster rate do you expect share gain to happen more quickly and while you're on the topic of share. The perception on wall Street is that you guys are extremely well positioned and the NAND market, but <unk>.

I think perhaps people are underestimating your positioning and kind of logic foundry and kind of curious if you can talk about the theory is outside of NAND, where you feel most comfortable about share growth this year and going forward.

Yes, sure John I'll start this one I think it's a great question and I would I would actually say this breaking it in this way of time versus volume.

Okay.

And where we already put us in a very strong leadership position like <unk> NAND increased <unk> volume helps a share gain and immediately but it's.

It's not just a volume story, because volume progresses and transitions occur to greater numbers of layers, we actually see both more equipment meeting the repurchase to deposit and ex those those thicker stacks, but also new applications that get created debt again expand our Sam and with time even build.

A really strong NAND position, so there's kind of an element to both volume and time and they're on foundry logic, a little bit of the same although I think most people know that we have and we've laid out a story of how some of the technical inflections really do create new opportunities for Lam to introduce new products gained share and build a strong position.

And foundry logic I would say there definitely is a time element and that we need technology transitions to occur and need to go from seven to five and five to three and ultimately three to two because we're focused on catching the new applications that are being created by the the most difficult technical challenges and so in my prepared remarks, I talked about things like <unk>.

Nano sheets gate all around the <unk> like inflections that are occurring and those there is and time element. They have to date those those nodes have to ramp and they are not ramping just yet.

You talked about <unk>, and our new dry resist process again and great opportunity for Lam to enter into a space. That's in foundry logic that we just haven't been in up to this point.

Those are future nodes looking opportunities for Lam over the next several years and so again I think thats why what you hear from US is confidence that we benefit from the strong environment. We're in now.

We're laying the foundation for an even stronger <unk>.

Sure.

And as time evolves.

Okay.

That's helpful. Thank you.

Thanks, Sean and Chuck.

Thank you we'll take our next question from Stacy <unk> with <unk>.

Arnstein research.

Hi, guys. Thanks for taking my question I wanted to talk about the customer service business a little debt can you give us some idea of how much of the strength and the quarter was coming from the reliance from mature node.

And our toolset.

I get the idea that there is more mature node capacity and maybe right now do you feel like that is a long term trend is that is that sustainable.

And maybe if you could give us some.

Any further color on the amount of the CSP and group, it's actually coming from upgrades and I guess the same question are there is there more like a one time element to that or do you think kind of the run rate of what we're seeing right now and sort of a sustainable driver for that business going forward.

Yes, Stacy Thanks for question and maybe I'll take us and let Tim add on afterwards.

I think both Jim and I.

And our script all components and PGM business delivered record performance last quarter Youre right about the reliant product line are very much focused on maybe trailing edge 28 nanometer and above nodes and other record I think we're printing double digit number of quarters, where we've delivered records there because.

As you are referencing are referring to upgrades were very strong which is always.

A high ROI for the customers to get increased capability from the installed base spares were very strong.

Think of that is being driven by utilization and the industry broadly speaking utilizations are very high.

Share of customers trying to build a little bit of inventory and spares similar to what we're doing with our own inventory.

Does have concerns about different supply chain disruptions.

So and that service service also.

Correlates with utilization and the industry. So obviously when you think about what's going on and the totality of the <unk>, one 3 billion up 50% from a year ago is hitting on all four cylinders that I've, just mentioned and each of them have their own unique tailwind that are driving the business.

Yes, I think maybe just.

Oh, sorry go ahead and order please.

Please go ahead.

No I was just going to add on I think I think to your point about the sustainability of upgrades I think.

The one key point is that we've said the installed base grows every year and.

And so really that that is our opportunity. So we naturally by by Lam.

Shipping like and a year like this so many new new systems out into the field.

Our Sam expands for for upgrades every single year, and so we really do think that through innovation and coming up with ideas for how the customers extending the capability of the tools and improve productivity. It's in our hands to continue to deliver a greater revenue capture from every one of those tools and solid and net installed base.

And so.

I think thats quite sustainable and then to your point of the lagging edge clearly there is a very strong demand at this point and kind of for the first first question about capacity constraints and lead times that problem doesn't get solved probably and a very short order of time and.

And when we think about sustainability there. It goes to this point I've made and Mike talk about it's about semiconductor content and everything enabling new functionality and many of those items are making great use of mature technology. So we've seen that business grow quarter after quarter after quarter expanding with the.

The overall market. So I think both have a strong sustainability component to their debt revenues.

And it would be possible to give us some rough split of how the customer service business some quite tough right now between those four categories.

And when we hit those and services.

Well, we haven't quantified and and im not going through now I think for.

Color, we have given is the spare parts piece of it.

And the largest component, but we haven't quantified it got it. Thank you very much guys.

Thank you.

Thank you and we'll take our next question from Timothy Arcuri with UBS.

Thanks, a lot actually I had two I guess the first one Doug.

<unk> is running like roughly 15% above your 2023, and you gave that a little bit over a year ago. So I guess, the first question and sort of what did you under appreciate and that model a year ago, I know that Wi Fi and your systems business is really just taken off and.

And maybe that's the answer that you are still growing double the installed base and that that's just taken off more than we thought and then I had a.

Second question as well.

Yes, Ken alluded to chamber count and clearly it's been a very strong year and so remember.

Remember Colin is higher than our clinics over the thought.

A year ago industry utilization will be stronger than I would've expected a year ago as well and.

Upgrades and has probably benefited from that also Tim so.

And there's probably an aspect of it in each of the segments and.

Yes, we are certainly ahead of the model that we gave you a year ago Im not ready to update the model, but clearly we're ahead of where that model ones.

Yeah. Okay. Thanks, and then also I keep getting a lot of questions on NAND and your business and you guys do a great job mapping and W. A feedback to debt.

And my math says, we're running close to $5 billion, a quarter and NAND W. A few right now and and it sounds like you think that goes up into the back half of the year. So if that's right and then I tie it back to your comments that you go back to kind of $15 billion a year to drive mid thirties bit growth and then I think you said $350 million for each 100 basis points beyond that that would sort of scale up till.

45% debt growth, maybe as high as 50% just sound like a run rate basis. So.

I keep getting pinged on that from people asking about that so can you sort of tie those numbers back. Thanks.

I don't know if I can go all the math that you just us on the call Tim I mean.

Investment ebbs and flows it ebbs and flows and each of the end markets.

And then.

We did say, we expect the second half to be stronger investments and all aspects of the market, including NAND.

Yes. It is.

This year from where it was last year and it's getting caught up with kind of the under investment and we saw 19.

For a certain extent youre still seeing very strong pricing and.

And as a result people are investing.

Trying to get caught up with where demand is honestly and it'll ebb and flow and won't go up every single quarter.

We see a very strong investment this year and I think it's going to continue in the long term to be very strong.

And do all the math that you just asked sitting here on the call and be happy to follow up offline.

That's a cool thing.

Thanks, Tim.

Thank you we'll take our next question from Chris <unk> with Cowen and company.

And thanks for taking my question and congrats on the very strong growth of up to one of the shop for them and what is the long term question. The short term question for Doug.

And is there anything you can quantify obviously can have zone is it going to trend for the first of all do you think CSD revenues outperformed system revenues in calendar 'twenty, one and then I had a follow up for Tim.

Chris did you say second half earnings I didn't quite catch.

Second half revenues with first half revenue and wood <unk> and system revenue growth machine.

Yes, Chris We guide one quarter at a time and then we can give you color about what we see for the year.

And I'll remind you what we tried to say.

We see Wi Fi and the second hunger.

Which is good for the trajectory of our business. So you can read into that what you think for for our revenues for Wi Fi stronger is can be a good thing for us.

We just got to June up to $4 billion. So that's as much and I'm going to give you on the revenue side.

So it feels like a pretty strong year, and we see the second half spend and stronger than the first half across all of <unk>.

Okay.

Chris what I said on <unk> I expect it to be a strong year for <unk> and continued strong and give you a hard number on it but.

All the tailwind that I've described look like there and there continue.

Fair enough. Thanks, Doug and then just as a follow up with him and longer term question. When you look at like from other upcoming technologies that gate all around.

It looks like selective and mortgage rates would be.

And in addition to Pepe from kind of curious how is lam position for gate, all around and miserably you can quantify the dollar revenue opportunity from that.

No I don't think I don't think there is a way we can do that but we've said as debt.

Lam Sam expands at every technology node and clearly gate all around us and the net.

Well, we tried to point out is again, what's what is sort of the embodiment of our product and technology and strategies to identify new.

New applications, new requirements that emerge when device technology changes for win architectures change and ensure that Lam is positioned early for those.

And with products and with our customers so that when the change happens where and a great position to windows. We've given you a few examples.

And not all of the examples but I think that that's that's again, it's it's just to give you a sense that when these inflections occur.

We have a track record of doing quite well. It's also why we keep pointing back to the same strategy, we executed through the <unk> NAND inflection and ultimately over time, it's built for us.

And incredible business and so.

I think gate all around is coming.

As an opportunity for us and that way, we pointed out <unk> and the ultimate changes and the wave.

Patterning is done and what we see anyway for the opportunity for driver assistance, another while not gate all around.

Focused it's kind of at the same technology nodes, where those those changes occur so.

And we see promise and foundry logic for our future.

Thanks, Tim tanker.

Thanks, Chris.

Thank you we'll take our next question from C J Muse with Evercore.

Yes, Thank you for taking the question.

I guess first question you talked about second half.

<unk> higher than first half curious what magnitude of upside could support versus simply just being sold out and pushing demand into the first off for 'twenty two and.

And as part of that can you speak to the timing of ramping capacity in Malaysia and.

Bringing bringing more resources on for you guys.

Okay.

Okay C. J, let me let me let me go to go on this one.

Clearly what we've said is that capacity is tight and so.

For the very first question I, probably could have even additive for customer to order a tool today.

And when they get it I won't divulge, but and clearly it will not be adding to qualified capacity. This year I mean that sort of gives you some sense of where where lead times and such are but.

We do have a couple of events coming and the second half of the year that are meaningful for us and that is expansion of our Asia manufacturing facilities, Doug talked about the buyout of our JV and Taiwan is an opportunity for us too.

Take a little bit more control of that entity and continue ramping.

And Malaysia is a second half 2021 story for us in terms of its ramp and so.

We are confident and long term capacity needs for the company and.

We want to be able to support and return lead times back towards more historical levels for the company and as I said they are extended now part of this capacity expansion is to return those more to normal for us we get towards the end of the year.

Very helpful and as a quick follow up.

And for domestic China revenues with GAAP, primarily manned and and as part of debt were you able to.

Obtained a license for SMIC yet.

So James demand and local China, local China customer base, broadbased trailing edge foundry little bit of DRAM and little bit demand.

Due to license for our large foundry customer in China No update.

We're still waiting to hear back from from the government.

Great. Thank you.

Thanks for you Jay.

Thank you and we'll take our next question from Toshi Hari with Goldman Sachs.

Hi, guys. Thanks for taking my question and congrats on the strong results.

Doug I wanted to follow up on.

On China, I guess I had been a little bit surprised how how long your China business has been over the past quarter or two despite.

Some of the restrictions placed on placed on SMIC, what's been the offset to the upside and your China business. You just talked about broad based demand, but did anything stand out over the past quarter or two and how are you thinking about calendar 'twenty, one local China Wi Fi on a year over year basis, and then I've got a quick follow up.

Yes, sure I'll take a crack at it.

And it's broad based first thing I'll remind you that.

And when you see our regional revenue, it's a shift to fab location. So it's there's a balance between local China and <unk>.

Global multinationals taken equipment at their and their Fabs in China.

I did say debt the majority more than half last quarter, where the local Chinese customers for quarter before and the December quarter. It was the other way around it was more MMC oriented so it's pretty broad.

And it's.

And then relative to the local China component of it it's a broad set of customers. Some you probably know, but I would tell you. There is a long tail of smaller customers that maybe you are just getting to know where maybe maybe you don't know yet so it's a broad set of people investing.

And thinking about wip from local China this year.

From last year, it's growing.

Across lagging edge.

<unk> nodes.

And and memory.

Got it got it.

And as a quick follow up on <unk>.

Doug you mentioned the long term growth outlook. There is now better to what you presented last year at your analyst day is that simply a function of the 2021 base being higher or has something changed structurally or fundamentally and and Csp's you talked about the <unk>.

And for account, obviously being higher and utilization rates being higher but.

Anything kind of structural that has changed over the past 12 months.

No I wouldn't point and tenant make structural it's we're shipping more chamber. So that's a bigger opportunity from I guess, I think of and available market standpoint and.

And then it's.

And pieces of all for components and CSP James.

Thank you.

Yep.

Thank you we'll take our next question from Joe Moore with Morgan Stanley.

Great. Thank you I'll follow up on that last question.

Doug you've made the comment that you can't see the services business, you would be very surprised to see and not grow each year.

And obviously the chamber count growing at a nice kind of.

Lead indicator, but when you talk about a lot of the drivers of higher utilization.

And people building inventory of spares and things like that that are sort of a function of this very tight supply environment that we're in.

You see those things turning into headwinds next year and.

It still seems like youre likely to grow given the growth and chamber count.

The outperformance versus chamber count can that continue beyond this kind of very strong near term environment.

Yes, I don't have any different view of the business, Joe I have a hard time seeing it not growing every year. It doesn't mean, it's going to grow every single quarter.

But we're shipping a lot of chambers this year, which is the momentum of the business going into next year and beyond.

Not every component of it may grow every year.

But we're feeling really good about where it's going and like I said the chamber count is an important metric to think about future business opportunity and Joe.

If.

If you remember at our Investor Day, we showed an objective we had about revenue capture per chamber as well and so I pointed out and my comments a couple of places where we're making progress. It is about trying to develop some of these data and equipment intelligence services offerings also productivity upgrades clearly clearly customers are.

Our.

Focused on trying to get as much output out of existing install base and they can and those types of services and upgrades and help them do that and and and that way as chamber Count Rose. We're also expanding Sam for those so that that's another reason why we believe year on year, we can continue to grow.

Net installed base business.

Great. Thank you.

Thanks Chuck.

Thank you and we'll take our next question from Vivek Arya with Bank of America Securities.

Alright, Thanks for taking my question I have two first on the non side I was hoping you could give us a sense for how much of the market right now Scott and versus Greenfield deployments and how does that compare to what it was last year and does this ratio impact the benefit you can derive from the market.

And spending and density change right.

Depending on whether there is more conversion versus greenfield.

Yes, I think I'll take that one first and let Doug comment but.

Fundamentally there is and I said this on our last call. Our view for this year is bit more greenfield investment this year than last year. There's also more conversion investments as well. So the overall market is up but there is there is an important difference in terms of the capital intensity per bit.

And the Greenfield, which is higher.

Conversions and more efficient for what's unique for Lam as those conversions our share our capture of the Wi Fi is much higher in the conversions and.

So while we really do sell at the same things in both.

Instances.

In the conversion it's mostly.

And in depth.

Etch and deposition equipment, that's required to continue to build those taller stacks and so we do very well there. So this year, it's it's a blend of both.

And I think that again, it's one of the reasons why as we look going forward every tool gets installed for a greenfield ultimately.

Customers transitioned to higher layer counts those tools will ultimately need to be upgraded and move forward to that next layer count net visa.

Our opportunity for the installed base business just continues to grow.

And the more the more fabs ultimately they get built for NIM.

Very helpful for them and for my second question.

Taking a longer term view of Wi Fi, what DSC and is that historically the growth for two at most three and then go kind of consolidate there for a few years.

And then we'll take another big step up and then I look at the Ws the outlook for this year. This will be the second day had a very strong growth.

Would you think about Wi Fi and density from these levels and when do you think we should start to bake in any incremental benefits from the regionalization and increased domestic manufacturing headlines accuracy and USA and Europe.

Yeah.

And it's a great question and we were.

And Theres no doubt Theres no doubt when you have strong here as people start wondering when when Youll get a year the strong.

We haven't talked about whether 2022 is up for or but we have said we feel we are in a strong multiyear environment. We think it's too early to really know how all these factors and they talked about play out in any given year, but over the longer term.

We see these new technologies and increasing content, we definitely know increasing complexity youre hearing that from all of our customers increasing complexity is increasing equipment capital intensity and then your regional comment.

Another a bit of a wildcard, but definitely positive given everything that is going on.

And that Youre, seeing and chip shortages and all the discussions there so.

I think those items.

And they will play out over over a multiyear period.

Recent where kind of aligned with recent things, we've read and the media to say chip shortages don't get solved for 2021 regional capacity investment.

Ambitions don't get solved and just a couple of year period. These are multi year trends that we think are tailwind for semiconductor capital equipment.

Thank you Dan.

And sprint.

Thank you and we'll take our next question from Blayne Curtis with Barclays.

Hey, guys. Thanks for squeezing me, and just specifically and Alex as DRAM market and and under supply you.

And you Havent seen kind of any company and really see a big uptick effectiveness and what's going on there and if you.

Danny.

I think if you look and the back half the second year and then just for Doug just when you laid out your long term target, obviously and $75 billion wip is higher than that.

And with higher shipping costs.

Perspective on I don't know when you're going to be able accomplish shipping costs and perspective on and that margin back into the 33% to 30 for target that you laid out.

Yes. So if you really if you go to questions or blood and what's going on and DRAM and then what's going on with the target model I'll take a cut of Bolton and what Tim.

Tim coming on.

And yes, we see DRAM investment when I look at it and some pretty consolidated set of customers and I, just view them prudently managing capacity and prudently managing where they see pricing.

Prudently managing other bring capacity online and.

You're paying attention and profitability is really what I see going on and so that's why when we look at this year.

The first half DRAM still is fairly muted in terms of level of investment and you see it picking up a little bit and the second half as the industry.

And tries to bring supply closer to where demand is.

And a pretty healthy place.

And so I see it and.

Yes, that's all that's why we got there relative to the long term model a couple of things to think about.

First on the logistics cost.

We're going to be dealing with elevated logistics costs and total global airfreight gets back to a more normalized level.

And I don't know, one and thats going to happen I think it is going to require some level of consumer travel again, because a lot of stuff around and the belly of commercial aircraft.

And so I'm optimistic it gets progressively better, but we're still seeing headwinds for the foreseeable future.

And then relative to the financial model of getting it.

Slightly higher profitability first I feel great about where we just guided rate 32%.

Operating income at the midpoint that would be the second highest level of profitability and the companys generated and its 40 plus year history. So I'm feeling good about what's going on there.

There is a time component to it and the profitability as well.

Each has to do with some other things that we talked about on the call today ramping a factory and in Asia, and the Asia regions, where our cost structure is a little bit better.

Dealing with those freight and logistics costs I still feel really good about.

Gaining net financial model and.

And I think actually you're seeing demonstration of this year from us already.

And I don't know Tim do you want add and income yes, no I think the only thing I would add is is clearly to echo doug's comment.

We're extremely happy with the <unk>.

And 32%.

Right.

And.

In the same day, we're investing a lot for our future we have Doug mentioned, the Malaysia factory, which will help nukes.

<unk> Technology center, coming up and put us closer to our customers accelerate solutions bolster our opportunities for share gains across both memory and foundry logic.

New products that are coming out.

And I can't remember a time when Lam has had more new products coming out really focused on key technology inflections across all device segments and.

And so we're very happy we are delivering these financial results and making these investments that we think make us much stronger going forward.

Okay.

Thanks, guys.

Thanks, Mike excuse me operator, we have time for one more question. Please.

Thank you, we'll take our last question from Weston Twigg with Keybanc capital markets.

Hi, Thanks for taking my question first I just wanted to ask a follow up on C. J's question around.

And your revenue capacity capability and the back half of the year it sounds likely maxed out in terms of your system revenue heading into the June quarter, and it loosened up a little bit but can you give us a feel for for what that peak could be as it is at $2 8 billion as of $3 billion.

Just from sort of boundary in terms of what Youre limited by from a revenue perspective.

Yes, I'm not going to quantify for you, but we're making investments across all other factory network, we've talked about taking ownership of and Taiwan factory, we talked about ramping a new factory in Malaysia, we're trying to squeeze incremental capacity out of the other existing locations to try and get those lead times back from a more.

<unk> level, but.

Tim was referencing and so as we do those things our capability will get bigger I am not going to quantify for you, but we're working on all of that stuff.

Okay. So it sounds like as long as we think about gradual improvement over time, we should be and don't get too crazy and it should be.

And the ballpark.

And the other question I have existed in terms of revenue growth drivers and wonder if you could just give us a feel for the rate of growth for your systems revenue that is driven by 10 nanometer and below and logic versus some of the older nodes, where youre also seeing pretty good growth as the rate similar or are you seeing still seeing quite a bit faster growth at the leading edge, which is what we would typically.

And on the majority of the spending and from hunting and logging and logic is that those leading edge nodes, even though there is a broad based set of investment occurring.

Yes.

Because the capital intensity at the leading edge and that's usually what drives a lot of what's going on.

Okay, that's what I would expect perfect. That's helpful. Thank you.

Perfect. Thanks Wes.

Thank you I'll turn it back to management for closing remarks.

Thank you operator, and thank you all for joining our call today, we appreciate your time.

This concludes today's call. Thank you for your participation you may now disconnect.

[music].

And.

[music].

Yeah.

[music].

Good day and welcome to the Lam Research Corporation's March 'twenty, 'twenty, one quarter financial conference call.

At this time I would like to turn the conference over to Tina Corporate Vice President of Investor Relations and corporate Finance. Please go ahead.

Okay.

Thank you and good afternoon, everyone welcome to the Lam Research quarterly earnings Conference call with me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer.

During today and todays call, we will share I will go beyond the business environment.

And we will review our financial results for the March 2021 quarter.

And there are other the June 2021 quarter.

The press release detailing our financial results was distributed a little after one o'clock P. M Pacific time this afternoon.

The release can also go on the Investor Relations section of the company's website.

Along with the presentation slides that accompany today's call.

Okay.

Today's presentation and <unk>.

Q&A may include forward looking statements that are subject to risks and uncertainties reflected and the risk factors disclosed in our SEC public filings. Please see accompanying slides in the presentation for additional information today's discussion of our financial results will be presented on a non.

Non-GAAP financial basis, unless otherwise specified a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings press release.

This call is scheduled to last until three o'clock P M Pacific time.

A replay of this call will be made available later this afternoon on our website and with that are all over it for Tim.

Great. Thank you Tina and thank you to everyone joining the call today.

<unk> posted excellent results and the March quarter with record revenues for both systems and installs Mrs as well as record cash flow from operations and record earnings per share. Our performance reflects solid execution by Lam employees and our partners worldwide. Despite ongoing COVID-19 related impacts.

And the investments, we're making and manufacturing and supply chain resiliency are enabling us to support our customers' needs amid a broad based strengthening and semiconductor demand.

We are very optimistic on our positioning and see continued strong growth for Lam and the future.

Let me first begin by updating our expectations for wafer fabrication equipment spending since our last earnings call. We have seen <unk> spending plans increase for the calendar year.

And our outlook for 2021, WSI is trending above $75 billion and we now believe the <unk> spending and the second half of the calendar year will be higher than the first half across all device segments.

Several factors are at play and driving this robust Wi Fi growth.

First secular tailwind such as AI five G and iron tenure to strengthen and over the past year COVID-19 related impacts like work and learn from home has accelerated adoption of these technologies.

Second.

And the complexity of manufacturing advanced semiconductor devices continues to increase at a rapid rate leading to a rise and equipment carefully across all segments.

Third innovative consumer products are incorporating more semiconductor enabled functionality driving faster growth and semiconductor content per day.

On our last call, we talked about new gaming consoles as an incremental driver for semiconductor demand and WMC.

A similar example, and three C and Wearables.

These devices are utilizing and increasing number of sophisticated sensors manufactured using mature technology nodes to deliver added functionality such as body temperature measurement heart rate monitoring and blood oxygen sensing wearables are integrating these sensors with advanced node semiconductors that deliver lower power.

And lower latency. In addition to the computation capability required to support new AI and machine learning enabled applications.

This is having a marked effect on semiconductor content and these products and today's wearables contained nearly double the amount of DRAM and four times the amount of NAND versus five years ago.

Semiconductors are also capturing a greater share of the value within the electronics supply chain and we see 2021 semiconductor revenues and sort of electronics revenues breaking out of the historic averages over the last 15 years and finally, the growing importance of semicon.

Inductors to global Industries has led governments and the U S Europe and Asia to call for actions to mitigate supply chain risk.

Which will likely include increased investment and regional semiconductor manufacturing capacity.

When combined these four factors has accelerated technology adoption go.

Growing complexity, increasing semiconductor content and <unk> investment support a compelling case for a strong multiyear Wi Fi spending environment, one and which Lam is executing extremely well in 2020, we gained share across both etch and deposition.

<unk>, including significant gains in conductor etch.

We expect to deliver overall share growth again in 2021.

Our positive positive momentum demonstrates how we are successfully positioning lam as the partner of choice for our customers at a time when technology complexity is increasingly <unk> scaling of device and packaging architectures will be a primary focus of the industry for the remainder of this decade.

And <unk> and Lam approaches this challenge with unique experience.

We were the leader and enabling the transition to <unk> devices through our early engagement and the mention.

And as a result, we built enduring leadership positions in the most critical etch and deposition applications.

And as the <unk> NAND roadmap is evolving to multi stack scaling for higher layer counts are technical contribution continues to grow.

To and integrate multiple stacks to build taller devices innovative solutions are required for stress management, and selectivity and deep and control.

The increase and complexity of multi stack scaling is creating new product opportunities for Lam and this quarter. We recorded a key deposition win for a multi stack, enabling film and a leading memory customer.

In foundry logic, the adoption of <unk> like gate, all around our nano sheet type structures introduces unique processing requirements.

And the last earnings call I highlighted the momentum of our latest conductor etch system <unk>.

Which utilizes an innovative plasma pulsing capability to deliver superior high aspect ratio etch results for nano sheet structures.

And mortar we saw additional application wins with key go at multiple foundry logic customers.

We are also seeing share gains with our new suite of selective etch products designed for ultra high selectivity removal processes previously performed using systems.

Growth related to the challenge for the back end of line and scaling we're taking new approaches to deposit lower cane materials and deliver better interface control.

New material duration schemes enabled us to win multiple five nanometer backend of line applications and in the March quarter, we extended our wins to more advanced nodes as well.

In addition to device scaling and we remain equally focused on our customers' objectives to improve cost and operating efficiency and their fabs.

You will recall and we announced our new van <unk> dielectric etch process module on the centralized platform.

And <unk> delivers best in class Etch technology and brings to market unique and innovative solutions to lower overall cost of ownership.

The sensor platform architecture increases wafer output per square meter of fab space.

New RF power designs consume less energy to support cost and ESG, Roadmaps and advanced equipment intelligence and self maintenance capabilities minimize required onsite human intervention.

With semiconductor demand and unprecedented levels. These factors have become critical differentiators as customers look to cost effectively and sustained ramp capacity on advanced nodes.

As a result, we continue to make solid progress on <unk> adoption and leading customers.

Our focus on helping customers solve productivity and manufacturing challenges is also reflected in the excellent performance of our installed base business, where we are seeing and and growth.

<unk> revenue eclipsed one 3 billion and the March quarter, yet another record.

We are executing very well and this business and as we sit here today. We are tracking ahead of the growth model that we shared with you at last year's investors day and all.

All product lines within CSB G and record revenues and the quarter.

Our upgrades business is expected to roughly double over the two year period ending in 2021.

By enhancing productivity and extending installed base capability for multiple generations. Our upgrades business plays an important part and our customers cost reduction roadmaps and reliant we see specialty technologies, continuing to grow and areas like Cif power and RF devices and.

And spares, we successfully closed with a key customer the single largest annual contract and the Companys history.

Which includes commitments for critical leading edge parts.

And lastly, we are seeing great progress and services.

Big data and equipment intelligence are playing an increasingly critical role and the operation of advanced semiconductor Fabs.

This quarter, we closed a multi region data services license contract with a major memory manufacturer to provide enhanced tool data to enable their smart manufacturing roadmap.

Additionally, our services team completed the first year of a comprehensive multi year equipment intelligence services contract at another major memory producer.

System performance under this contract exceeded objectives, leading to a significant return on investment for the customer.

So to conclude we are.

And in an environment, where industry fundamentals continue to strengthen.

And the strategic relevance of semiconductors is reaching new heights, and semiconductor capital equipment is well positioned to benefit.

Amidst strong WSI spending Lam is delivering great results, and making foundational investments and new products and infrastructure to drive continued outperformance.

Thanks, again for joining today and now here's Doug.

Great great.

Thanks, Tim and good afternoon, everyone and thank you for joining us today during what I know there is a busy earnings season.

I Hope you and your families safe and healthy since we last spoke with you.

Lam delivered outstanding results for the March quarter.

With record quarterly revenue and strong profitability metrics.

For the quarter, our revenue and gross margin and above the midpoint of our guidance and.

Both operating income and earnings per share were above the guidance range.

We've continued our excellence and execution, not only and delivering impressive financial results, but also and being our customer's most trusted partner.

We delivered revenue for the March quarter of $3 $85 billion.

At the high end of our guidance range, which was an increase of 11% from the day quarter.

Our solid revenue performance was mainly due to an increase and foundry related systems as well as record performance and our customer support business group for CSP G, where we had increases in all parts of that business. Our customers Fabs are running at high utilization levels for <unk>.

<unk> and the need for consumption and spare parts and services.

First lets focus on our systems revenue, where we saw.

Continued strength and the memory segment, which represented 62% of systems revenue and the March quarter.

The non segment was 48% of our systems revenue compared with 51% and the prior quarter with customers investing and higher <unk> device layer count and added capacity to address the overall broad demand for storage bids.

The March quarter, NAND systems revenue amount reached a record level again, demonstrating lamps leadership position and the net segment.

Customers were primarily investing in equipment for 96, and $1 28 layer class devices.

And DRAM, we had 14% of our March quarter systems revenue and this segment compared with 17% from the prior quarter.

DRAM investments consisted of both conversion and capacity additions.

And with concentration and the one why onesie and one alpha notes.

We expect to continue to see healthy and prudent levels of investment and the overall memory segment and calendar year 2021.

We go.

And our highest quarterly revenue level and the March quarter for the foundry segment and.

And it came in at 31% of our systems revenue compared with 26% and third quarter.

We're seeing leading edge investments focused on five nanometer.

As well as spending related to mature technology nodes required to meet higher demand for specialty for consumer oriented integrated circuits.

And finally logic and other contributed the remaining 7% of systems revenue and the March quarter.

Slightly from the prior quarter level at 6%.

Let me now shift to the regional profile of our revenue the China. The China region came in at 32% of our total revenues down slightly from 35% December quarter. The majority of the China spending this quarter.

And it was from domestic Chinese customers.

The Korea region was also strong for us and the March quarter represented 31% of revenues, which is up 10 points from the prior quarter.

And as Tim mentioned, we achieved another record quarter of revenue for our customer support business group coming in at one 3 billion, which is an increase from 13% from December.

And up over 50% versus the same quarter in 2020.

The growth, we've seen and each of the sub segments of this business is a testament to the value, we're providing to our customers for technology and productivity enhancements.

And as well as the strength of this market supported by our reliance product line.

We're also supporting customers request for increasing spare parts purchases to support both higher equipment utilization.

And some level of inventory stocking.

We expect continued strength and <unk> through the remainder of the year.

Let me now shift to profitability.

Gross margin was 46, 3% generally in line with our expectations.

And I'll remind you as I always do gross margin fluctuates quarter to quarter due to overall business levels, along with customer and product mix.

We do continue to incur higher freight and logistics cost because of the Covid environment and we expect these costs will remain until we see a normal list of airfreight volumes.

Operating expenses for the March quarter were $567 million.

Slightly higher than the prior quarter.

Reflecting our commitment from.

<unk> expense levels.

We invest to grow the company.

We've prioritized.

Excuse me, we prioritized our spending towards R&D, which represents over two thirds of our operating expenses, enabling us to build on our deposition and etch leadership positions.

Operating income exceeded $1 2 billion and the March quarter with operating margin coming in over the guidance range at 31, 6%.

Our non-GAAP tax rate for the quarter was seven 8%.

Which came in lower than we expected due to incremental deductions from equity compensation for annually investing that occurred during the quarter.

As we've discussed in the past, we will have fluctuations from the tax rate from quarter to quarter and you should continue to expect the ongoing tax rate to be and the low teens level for the 'twenty two calendar year.

I would mentioned we continue to monitor potential tax changes that could come from the new administration and the United States.

And as a reminder, beginning in the March quarter of last year, the benefits and costs of our employee deferred compensation plan are no longer mismatched and our non-GAAP results.

Mismatch was $8 million for March 'twenty, one quarter and you can see the details of this and the GAAP reconciliation table of our earnings release.

We paid $187 million and dividends and allocated over $900 million towards share repurchases.

Tracking nicely with our capital return plans.

Part of the buyback and the quarter went to a structured repurchase program, which was supplemented with open market repurchases.

Diluted earnings per share came in at $7 49.

Above the guidance range.

This was the result of the higher revenue and gross margin as well and per ability and as I mentioned and the tax rate.

Our diluted share balance was down from the December quarter level coming in and 145 million shares as we expected.

The share count includes a dilutive impact of approximately 500000 shares from the 2041 convertible notes.

And Additionally mentioned is that late in the March quarter, we issued a redemption notice for the 2041 convertible notes.

As of March March quarter, and we had approximately $17 million remaining on these notes.

This redemption will retire the last of the convertible notes and our capital there.

Let me shift and balance sheet cash and short term investments, including restricted cash decreased slightly to $6 billion from $6 3 billion and the prior.

The decrease was attributed to the capital return activity offset by the strong performance, we had and the March quarter cash flows from operations, which came in at a record level of $1 2 billion.

And.

Day sales outstanding decreased to 66 days and the March quarter from 76 that we saw in December.

This improvement was driven by strong cash generation with the higher level of business and as I alluded to last quarter, the timing of collections across the December and March quarters.

Inventory, our inventory turns were flat with the prior quarter coming in at three two times.

Given the overall demand strength, we're seeing is relative to our focus to mitigate potential supply chain disruptions.

Inventory turns will likely remain at these current levels for the foreseeable future.

Non cash expenses included approximately $56 million for equity compensation and $61 million for depreciation and $18 million for amortization.

Capital expenditures for the March quarter were down slightly versus the December level coming in at $90 million.

As I noted in our last earnings call for investing to support the expanding operations at our new Malaysia factory.

Our manufacturing facility and Ohio, that's focused on critical spare parts and.

And the upcoming Korea Technology Center.

We expect to see somewhat higher levels of capital expenditures and 2021 as we support these critical growth initiatives.

The headcount level ending the March quarter was approximately 13100 regular full time employees.

Resources have been added from our factories to meet the increased output levels and this robust business environment.

Within this we Opportunistically bought out our Asian joint venture manufacturing facility that is focused on our reliant product line.

And half of the growth and headcount that you saw in the quarter.

And Additionally, we've added field service and R&D personnel with a focus on delivering best in class technology services and solutions to our customers.

Now looking ahead I'd like to provide you our non-GAAP guidance for the June 2021 quarter.

We're expecting revenue of $4 billion, plus or minus $250 million.

Gross margin and a 46, 5% plus or minus 1%.

Operating margin margins of 32% plus and minus one percentage point and finally earnings per share of $7 50, plus.

Plus or minus 50 based on a share of approximately 144 million shares.

So in summary.

And quite pleased with our operational execution, which is reflected and the strong financial performance for the company.

We now see greater strength and wip as we go through calendar 2021, with the second half looking stronger than the first half.

We are guiding to continuing record financial performance for the company and.

And we are well on the path to achievement of our growth objectives that we spoke to you about at R&D day in March of last year I personally never been so excited for the things for semiconductor industry is enabling and I'm proud of the results Lam has continued to deliver enabling this industry.

That concludes my prepared remarks.

Operator, please open up the call for questions.

Thank you.

If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure. Your mute function is to allow your signal and to reach our equipment again press star one to ask a question for <unk>.

Pause for just a moment to allow everyone an opportunity to signal for questions.

We will take our first question from Harlan sur with J P. Morgan.

Good afternoon, and congratulations on the strong results and execution and I assume that given the strong demand trends across leading edge and lagging edge debt the team and see an extended beta tools.

Wondering if you can quantify the team already starting to book into the second half of this year and if I'm a customer that places an order to day for one of your tools when will this pool FCB producing wafers is it nine months from now 12 months from now and would appreciate any insights.

Yes, Harlan thanks for the question.

Yes, obviously for a lot of reasons, we're not going to divulge our our lead times on this call, but we will say that clearly with what's Ed is unprecedented demand and combining that with Covid index capacity is tight and it has extended our lead times, we would say our visibility into our few.

<unk> is quite good at this point.

But but we don't want to go into exactly how long it takes for a customer to order tool and get it and qualify it at this point for for competitive reasons ours and and our customers.

And I appreciate that.

If I think about the fundamental environment and right. If I look at your memory business and look at your customers for both NAND and DRAM pricing fundamentals continued to move higher and combination of strong demand and relatively disciplined and supply spending in fact relatively.

Discipline and supply spending.

The last peak in 2018, most of your customers are anticipating that DRAM and NAND bit demand will exceed.

Incrementally better WMC outlook that you outlined today.

Yeah I'll go ahead and make a couple of comments and then and then let them chime in with some other specifics on that.

And that supply.

And clearly, we've said and even even entering this year. We felt it was going to be a very good year for memory for a couple of reasons one.

DRAM had gone through a couple of years of very conservative spending and and.

So there was there was some pent up demand therefore for spending bolt on technology and some capacity.

And from a man's perspective, we talked a lot about the increasing spend related to layer transitions that we're going to be occurring this year and so we have seen that playing out I think you combine that with again growing demand across many many different end market segments.

And also.

The need to add capacity bolt and a greenfield perspective, as well as conversions and Thats led to and.

Ongoing stronger outlook, we do model obviously.

Clay and demand and I'll, let Doug talked a little bit about what we're seeing there.

Carl and thanks for the question.

Yes, we can through 19, where spending was held pretty closely and check and even through a good chunk of 'twenty and maybe all the way through 2000 and for for.

DRAM.

And are still seeing and and pricing.

And as a result, our customers respond we see them responding.

Carefully prudently is the way I would like to describe it consistent with where they see demand growth.

And the investments, we're starting to see increased somewhat and both NAND and DRAM are a result of that we continue to believe long term and demand to be in the mid to high 30% and big supply and not caught up with that yet and that's why our investment is up.

Similarly in DRAM.

Longer term demand and assumed high teens, maybe approaching 20% and.

And as a result, the supply growth.

And just being invested in to try to get caught up with that.

And that's really what we see go on us.

Thank you for the insight.

Thanks, Karl and thanks, everyone.

Thank you we'll take our next question from John Pitzer with Credit Suisse.

Yes. Good afternoon, guys. Congratulations for strong results, Tim Dugan, I wanted to talk a little bit about kind of market him and your prepared comments you talked about your expectation for this being another market share gaining year for you and at the analyst day, a year ago I think to your 2023 model you guys had sort of embedded for total of 4% to 8% points of share in etch and dep.

Yes, sure John I'll start this one I think it's a great question and I would I would actually say this breaking it in this way of timing versus volume.

Okay.

And where we have already put us in a very strong leadership position like <unk> NAND increased <unk> volume helps for share gain immediately but debt.

It's not just a volume story, because I'm progresses, and transitions occur to greater numbers of layers, we actually see both more equipment meeting the repurchase to deposit and ex those those thicker stacks, but also new applications that get created debt again expand our Sam and with time even build.

Really strong land position, so there's kind of an element to both volume and time and they're on foundry logic, a little bit of the same although I think most people know that we have and we've laid out a story of how some of the technical inflections really do create new opportunities for Lam to introduce new products gained share and build a strong position.

And foundry logic I would say there definitely is a time element and that we need technology transitions to occur and need to go from 7% to five and five to three and ultimately <unk> two because we're focused on catching the new applications that are being created by the the most difficult technical challenges and so in my prepared remarks, I talked about things like <unk>.

Adam sheets gate, all around the <unk> like inflections that are occurring and those theres and time element. They have to date those those nodes have to ramp and they are not ramping just yet.

You talked about <unk>, and our new dry resist process again and great opportunity for Lam to enter into a space. That's in foundry logic that we just haven't been in up to this point.

Those are future node looking opportunities for Lam over the next several years and so again I think thats why what you hear from US is confidence that we benefit from the strong environment. We're in now.

We're laying the foundation for an even stronger future.

And as time evolves.

Okay.

That's helpful. Thank you.

Thanks, Sean Thanks Charles.

Thank you we'll take our next question from Stacy <unk> with <unk>.

Bernstein research.

Hi, guys. Thanks for taking my question I wanted to talk about the customer service business for all debt can you give us some idea of how much of the strength and the quarter was coming from the reliance from mature node.

And our toolset.

I get the idea that there is more mature node capacity moving right now do you feel like debt as a long term trend is that is that sustainable and maybe if you can give us.

Any further color on the amount of this fall the CSD and <unk> group, it's actually coming from upgrades and I guess the same question are there is there more like a onetime elements and add or do you think kind of the run rate of what we're seeing right now and sort of a sustainable driver for that business going forward.

Yes, thanks, and thanks for the question and maybe I'll take this and let Tim add on afterwards.

I think both Jim and I.

And our script, all components and PG business delivered record performance last quarter and Youre right about the reliant product line are very much focused on maybe trailing edge 28 nanometer and above nodes and other record I think we're printing double digit number of quarters, where we've delivered records there because of the thing.

And as you're referencing are for.

Upgrades were very strong which is always.

A high ROI for the customers to get increased capability from the installed base spares were very strong.

Think of that is being driven by utilization and the industry broadly speak and Utilizations are very high.

I see our customers trying to build a little bit of inventory and spares similar to what we're doing with our own inventory.

Does have concerns about different supply chain disruptions.

So and then service service also.

Correlates with utilization and the industry. So obviously when you think about what's going on and the totality of <unk>, One 3 billion up 50% from a year ago is hitting on all four cylinders that I've, just mentioned and each of them have their own unique tailwind that are driving the business.

Yes, I think Tom maybe just Steve.

Sorry go ahead and order please.

Please go ahead.

No I was just going to add on I think I think to your point about the sustainability of upgrades I think.

The one key point is that we've said the installed base grows every year and.

And so really that that is our opportunity. So we naturally by by Lam.

Shipping like and a year like this so many new new systems out into the field.

Our Sam expands for for upgrades every single year, and so we really do think that through innovation and coming up with ideas for how the customers extending the capability of the tools and improved productivity. It's in our hands to continue to deliver greater revenue capture from every one of those tools and solid and net installed base.

And so.

And when we think about sustainability there. It goes to this point I've made and Mike talk about it's about semiconductor content and everything enabling new functionality and.

Many of those items are making great use of mature technology. So we've seen that business grow quarter after quarter after quarter expanding with the.

The overall market. So I think both have strong sustainability component to their debt revenues.

It would be possible to give us some rough split of how the customer service business some quite tough right now between those four categories.

Great.

And services.

Well, we haven't quantified and and I'm not going to know I can't go.

The color we have given is the spare parts piece of it is the largest component, but we haven't quantified it got it. Thank you very much growth.

Thank you.

Thank you and we'll take our next question from Timothy Arcuri with UBS.

Thanks, a lot actually I had two I guess the first one Doug.

<unk> is running like roughly 15% above.

For 2023, and you gave that a little bit over a year ago. So I guess the first question is sort of what did you under I appreciate and that model a year ago, I know that Wi Fi and your systems business is really just taken off and maybe that's the answer that you are still growing double the installed base and Thats just taken off more than you thought and then I had a second question as well.

Yes, Tim alluded to chamber count and clearly it's been a very strong year and so remember Colin is higher than I would've thought.

A year ago industry utilization and stronger than I would've expected a year ago as well.

And upgrades and has probably benefited from net also Tim so.

Theres, probably an aspect of it and each of the segments.

And yes, we are certainly ahead of the model that we gave you a year ago I'm not ready to update the model, but clearly we're ahead of where that model was.

Yeah. Okay. Thanks, and then also I keep getting a lot of questions on NAND and your business and you guys do a great job and mapping NAND W. A feedback to bitch.

And my math says, we're running close to $5 billion, a quarter and NAND W. A few right now and it sounds like you think that goes up into the back half of the year. So if that's right and then I tie it back to your comments that you go back to kind of $15 billion a year to drive mid thirties bit growth and then I think you said $350 million for each 100 basis points beyond that that would sort of scale up to like.

45% debt growth, maybe as high as 50% just like a run rate basis. So.

And I keep getting pinged on that from people asking about that so can you sort of tie those numbers back. Thanks.

And I don't know if I can go all the math that you just us on the call Tim I mean.

Investment ebbs and flows it ebbs and flows and each of the end markets.

And then.

And we did say, we expect the second half to be stronger investments and all aspects of the market, including NAND.

Yes.

This year from where it was last year and it's getting caught up with kind of the under investment and we saw 19.

For a certain extent youre still seeing very strong pricing and.

And as a result people are investing.

Trying to get caught up with where demand is honestly and it'll ebb and flow and won't go up every single quarter.

We see a very strong investment this year and I think it's going to continue in the long term to be very strong, but I can't do all the math that you just asked sitting here on the call I'd be happy to follow up offline.

Thanks, Doug.

Yes, Thanks, Tim.

Thank you we'll take our next question from Chris <unk> with Cowen and company.

And thanks for taking my question and congrats on the very strong list of assets to one of the short term and what is the long term question.

A question for Doug.

And is there any way you can quantify obvious tick and have learnings are going to trend for the first of all do you think CSD revenues outperformed system revenues in calendar 'twenty, one and then I had a follow up for Tim.

Chris did you say second half earnings I didn't quite catch.

Second half revenues versus first half revenue and would see as BTB granted and system revenue growth machine.

Yes, Chris We guide one quarter and time and then we give you color about what we see for the year.

I'll remind you what we tried to say.

We see Wi Fi and the second hunger.

Which is good for the trajectory of our business. So you can read into that what you think for for our revenues, but it does go through stronger is going to be a good thing for us.

We just got to June up to $4 billion. So that's as much and I'm going to give you on the revenue side.

It's been like a pretty strong year, and we see the second half spending stronger than the first half across all of <unk>.

Okay.

Chris what I said on sales P. J as I expected to be a strong year for SPG and continued strong and give you a hard number on it but.

All the <unk> that I've described it looked like there and there continue.

Fair enough. Thanks, Doug and then just as a follow up with him and longer term question. When you look at like from other upcoming technologies that gate all around.

It looks like and selective and mortgage rates with the <unk>.

And in addition to Pepe from kind of curious how is lam position for <unk> alone and is there anything you can quantify the dollar total revenue opportunity from that.

No I don't think I don't think there is a way we can do that but we have said is that.

Lam Sam expands at every technology node and clearly gate all around the net.

Well, we tried to point out is again, what's what is sort of the embodiment of our product and technology and strategies to identify new.

New applications, new requirements that emerge when device technology changes for win.

Architectures change and ensure that Lam is positioned early for those.

And with products and with our customers so that when the change happens where and a great position to windows. We've given you a few examples.

Not all of the examples but I think that that's that's again, it's just to give you a sense that when these inflections occur.

We have a track record of doing quite well. It's also why we keep pointing back the same strategy, we executed through the <unk> NAND inflection and ultimately over time, it's built for us.

And incredible business and so.

I think it all around is coming.

And as an opportunity for us and that way, we pointed out <unk> and the ultimate changes and the.

Patterning is done and what we see anyway for the opportunity for driver assistance, another while not gate all around.

Focused it's kind of at the same technology nodes, where those those changes occur so we.

We see promise and foundry logic for our future.

Thanks, Tim Thanks, Doug.

Thanks, Chris.

Thank you we'll take our next question from C J Muse with Evercore.

Yes, Thank you for taking the question.

First question you talked about second half.

<unk> be higher than first half curious what magnitude of upside could support versus simply just being sold out and pushing demand into the first off for 'twenty two and.

And as part of that can you speak to the timing of ramping capacity in Malaysia and.

Bringing bringing more resources on for you guys.

Okay.

Okay. So Jay let me let me let me go to go on this one.

Clearly what we've said is that capacity is tight and so.

For the very first question I, probably could have even added if a customer to order a tool today.

And when they get it I won't divulge, but I mean, clearly it will not be adding to qualified capacity. This year I mean that sort of gives you some sense of where where lead times and such are but.

Take a little bit more controlling for that entity and continue ramping.

And Malaysia is a second half 2021 story for us in terms of its ramp and so.

We are confident and long term capacity needs for the company and.

We want to be able to support and return lead times back towards more historical levels for the company and as I said for extended now part of this capacity expansion is to return those more to normal as we get towards the end of the year.

Very helpful and as a quick follow up.

And for domestic China revenues, we get primarily NAND and and as part of debt were you able to.

To obtain a license for SMIC yet.

C J and good demand and local China, local China customer base broadbased trailing edge foundry is a little bit of DRAM and little bit of NAND.

Due to license for our large foundry customer in China No update.

We're still waiting to hear back from them on and off from a government.

Great. Thank you.

Thanks P J.

Thank you and we'll take our next question from <unk> Hari with Goldman Sachs.

Hi, guys. Thanks for taking my question and congrats on the strong results.

Doug I wanted to follow up on.

On China, I guess I had been a little bit surprised how how long your China business has been over the past quarter or two despite.

Yes, sure I'll take a crack at it.

And it's broad based first thing I'll remind you that.

And when you see our regional revenue, it's a shift to fab location. So it's there's a balance between local China and <unk>.

Global multinationals taken equipment at their and their Fabs in China.

I did say debt the majority more than half last quarter.

And the local Chinese customers for quarter before and the December quarter. It was the other way around it once more MMC oriented so it's pretty broad.

And.

And thinking about wip from local China this year.

And from last year, it's growing.

Across lagging edge.

<unk> nodes.

And and memory.

Got it got it and then.

And as a quick follow up on <unk>.

And for account, obviously being higher and utilization rates being higher but and.

Anything kind of structural that has changed over the past 12 months. Thank you.

No I wouldn't point to anything structural it's we're shipping more chamber. So that's a bigger opportunity from I guess, I think of and available market standpoint and.

And then it's.

And pieces of all for components and CSP James.

Thank you.

Yep.

Thank you we'll take our next question from Joe Moore with Morgan Stanley.

Great. Thank you I'll follow up on that last question.

Doug you've made the comment that you can't see the services business, you would be very surprised to see and not grow each year.

And obviously the chamber count growing at a nice kind of.

Lead indicator, but when you talk about a lot of the drivers of higher utilization.

And people building inventory of spares and things like that that are sort of a function of this very tight supply environment that we're in.

You see those things turning into headwinds next year and.

It still seems like youre likely to grow given the growth and chamber count, but the outperformance versus chamber count can that continue.

And just kind of very strong near term environment.

Yes, I don't have any different view of the business, Joe I have a hard time seeing it not growing every year. It doesn't mean, it's going to grow every single quarter.

But we're shipping a lot of chambers this year, which is the momentum of the business going into next year and beyond.

Not every component of it may grow every year, but we're feeling really good about where it's going and like I said the chamber count is an important metric to think about future business opportunity and Joe.

And if you remember at our Investor Day, we showed an objective we had about revenue capture per chamber as well and so I pointed out and my comments a couple of places where we're making progress. It is about trying to develop some of these data and equipment intelligence services offerings.

And also productivity upgrades clearly clearly customers are.

Focused on trying to get as much output out of existing installed base and they can and those types of services and upgrades and help them do that and.

And in that way as chamber Count Rose. We're also expanding sales for those so that's another reason why we believe year on year, we can continue to grow net installed base business.

Great. Thank you.

Thanks Chuck.

Thank you and we'll take our next question from Vivek Arya with Bank of America Securities.

Alright, Thanks for taking my question and I have two as well first on the non side I was hoping you could give us a sense for how much of the market right now.

And for versus Greenfield deployments, and how does that compare to what it was last year and does this ratio impact the benefit you can derive from the market like this the spending.

Spending and density change.

Depending on whether there is more conversion versus greenfield.

Yes.

I'll take that one first and let Doug comment but.

Fundamentally there is and I said this on our last call. Our view for this year is a bit more greenfield investment this year than last year.

And more conversion investments as well so the overall market is up but there is there is an important difference in terms of the capital intensity.

Per bit and the Greenfield, which is higher.

Conversions and more efficient for what's unique for Lam as those conversions our share our capture of the Wi Fi is much higher in the conversions and.

So while we really do sell at the same things in both.

Instances.

And the conversion it's mostly.

And in depth.

Etch and deposition equipment, that's required to continue to build those taller stacks and so we do very well there. So this year, it's it's a blend of both.

And I think that again, it's one of the reasons why as we look going forward every tool gets installed for a greenfield ultimately.

Customers transitioned to higher layer counts those tools will ultimately need to be upgraded and move forward to that next layer count net <unk>.

And our opportunity for the installed base business just continues to grow.

And more to morph apps ultimately to get built for NAND.

Okay. Thanks, very helpful and for my second question.

Taking a longer term view of Wi Fi, what BSC and is that historically at our growth for two at most three and then go kind of consolidate there for a few years.

And then it will take another big step up and when I look at the Ws the outlook for this year. This will be the second day had a very strong growth. How would you think about Wi Fi and density from these levels and.

And when do you think we should start to bake in any incremental benefits from the regionalization and increased domestic manufacturing headlines accuracy and USA and Europe.

Yeah.

And it's a great question and we were there is no doubt there is no doubt when you have strong here as people start wondering when where and when you'll get a year the strong.

We haven't talked about whether 2022 is up for or but we have said we feel we are in a strong multiyear environment. We think it's too early to really know how all these factors and I talked about play out in any given year, but over the longer term, we see these new technologies and increasing content we definitely.

No increase and complexity youre hearing that from all of our customers increasing complexity is increasing equipment capital intensity and then your regional comment.

Another a bit of a wildcard potentially positive given everything that is going on that youre seeing and chip shortages and all of the discussions there. So.

I think those items they.

And they will play out over over a multiyear period.

Recent where kind of align with recent things, we read and the media to say chip shortages don't get solved and 2021 regional capacity investment.

Ambitions don't get solved and just a couple of year period. These are multi year trends that we think are tailwind for.

Semiconductor capital equipment.

Thank you Dan.

And sprint.

Yeah.

Thank you and we'll take our next question from Blayne Curtis with Barclays.

Hey, guys. Thanks for squeezing me in just wanted to ask specifically and the outlook for DRAM market spend and under supply.

You Havent seen kind of any company and really see a big uptick active as what's going on there and if you.

See any uptick if you look and the back half the second year and then just for Doug just when you laid out your long term target, obviously and $75 billion wip is higher than that.

And with higher shipping costs.

Perspective on I don't know when you're going to be able to pump the shipping costs and perspective on and that margin back into the 33% to 30 for target that you laid out.

Yes, So you really got two questions for blood and what's going on and DRAM and then whats going off the target model I'll take a cut of Bolton and what Tim comment on yes, we see DRAM investment when I look at it and some pretty consolidated set of customers and I just view them prudently managing capacity.

And prudently managing where they see pricing.

Prudently managing other bring capacity online and.

And paying attention and profitability is really what I see going up and so that's why when we looked at this year.

The first half given and I'm still is fairly muted in terms of level of investment and you see it ticking up a little bit and the second half as the industry.

And tries to bring supply closer to where demand is.

Just and a pretty healthy plus and so.

And I see it and.

Yes, that's all that's why we got there relative to the long term model a couple of things to think about.

First on the logistics costs.

We're going to be dealing with elevated logistics costs and total global airfreight gets back to a more normalized level.

And I don't know, one and thats going to happen I think it is going to require some level of consumer travel again, because a lot of stepwise around and the belly of commercial aircraft.

And so I'm optimistic it gets progressively better, but we're still seeing headwinds for the foreseeable future.

And then relative to the financial model of getting it.

Slightly higher profitability first I feel great about where we just guided rate 32%.

Operating income at the midpoint that would be the second highest level of profitability. The companys generated and its 40 plus year history. So I'm feeling good about what's going on there.

There is a time component to it and the profitability as well.

Each has to do with some other things that we talked about on the call today are ramping a factor in and.

Asia, and the Asia regions, where our cost structure is a little bit better.

Dealing with those freight and logistics costs I still feel really good about.

Gaining net financial model and.

And I think actually you're seeing demonstration of this year from us already.

And I don't know Tim do you want add an income yes, no I think the only thing I would add is as clearly to echo doug's comments.

We're extremely happy with the <unk>.

And 32%.

Right.

And in.

And the same day, and we're investing a lot for our future. We go Doug mentioned, Malaysia factory, which will help.

New Korea Technology center, coming up and put us closer to our customers accelerate solutions bolster our opportunities for share gains across both memory and foundry and logic.

New products that are coming out.

I can't remember a time when Lam has had more new products coming out really focused on key technology inflections across all device segments and so we're very happy we are delivering these financial results and making these investments that we think make us much stronger going forward.

Okay.

Thanks, guys.

Thanks, Brian excuse me operator, we have time for one more question. Please.

Thank you, we'll take our last question from Weston Twigg with Keybanc capital markets.

Hi, Thanks for taking my question first I just wanted to ask a.

A follow up on C. J's question around.

And your revenue capacity capability and the back half of the year it sounds likely maxed out in terms of your system revenue heading into the June quarter, and it loosens up a little bit but can you give us a feel for for what that peak could be as it is at $2 8 billion and a $3 billion.

And from sort of boundary in terms of what Youre limited by from a revenue perspective.

Yes, I'm not going to quantify for you, but we're making investments across all other factory network, we talked about taking ownership of and Taiwan factory, we talked about ramping a new factory in Malaysia, we're trying to squeeze incremental capacity out of book the other existing locations to try and get those lead times back from a more normal.

This level debt.

Tim was referencing and so as we do those things our capability will get bigger I am not going to quantify it for you, but we're working on all of that stuff.

Okay. So it sounds like as long as we think about gradual improvement over time, we should be and don't get too crazy and it should be and.

And the ballpark.

And the other question I have is just in terms of revenue growth drivers and wonder if you could just give us a feel for the rate of growth for your systems revenue that is driven by 10 nanometer and below and logic versus some of the older nodes, where you're also seeing pretty good growth as the rate similar or are you, saying, you're still seeing quite a bit faster growth at the leading edge, which is what we would typically.

And on the majority of the spending and from humming.

Wondering and logging and logic is that those leading edge nodes, even though there is a broad based set of investment occurring Wes.

The capital intensity at the leading edge and that's usually what drives a lot of what's going on.

Okay, that's what I would expect perfect thats helpful. Thank you.

Perfect. Thanks, a lot.

Thank you I'll turn it back to management for closing remarks.

Thank you operator, and thank you all for joining our call today, we appreciate your time.

This concludes today's call. Thank you for your participation you may now disconnect.

Q3 2021 Lam Research Corp Earnings Call

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