Q3 2024 Lam Research Corp Earnings Call
Unknown Executive: Thank you for your patience for additional information. Today's discussion of 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 the accompanying slides in the presentation.
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 the accompanying slides in the presentation.
Unknown Executive: This call is scheduled to last until 3 p.m. Pacific time. A replay of this call will be made available later this afternoon. We're having some technical difficulties posting our earnings call slides externally. We will try to post them as the call is going on. If not, we will post them on our website after this call. And with that, I'll hand the call over to Tim.
This call is scheduled to last until three PM Pacific time.
<unk> of this call will be.
Available later this afternoon.
Having some technical difficulties posting our earnings call slides externally.
We will try to posted as the call is going on if not we will posted on our website. After this call and with that I'll hand, the call over to Tim.
Tim: Thanks, Ram, and thank you to everyone joining us today. Lam is off to a strong start in calendar 2024, with revenues, profitability, and earnings per share for the March quarter all exceeding the midpoint of our guidance. These results, as well as our outlook for the June quarter, point to LAM's solid execution in an industry environment that is progressing much as we predicted in our January call. Today, we see industry WFE spending for calendar 2024 in the low to mid $90 billion range, with a modest increase from our prior view driven mainly by additional lithography shipments into China. We see no meaningful change to our outlook for LAM's overall 2024 revenue profile.
Tim: Thanks, Robyn Thank you to everyone joining us today Lam is off to a strong start in calendar 2024 with revenues profit ability in earnings per share for the March quarter, all exceeding the midpoint of our guidance. These results as well as our outlook for the June quarter point to Lam solid execution in an industry environment that is progressing.
Tim: Much as we predicted in our January call.
Tim: Today, we see industry <unk> spending for calendar 2024 in the low to mid $90 billion reach with the modest increase from our prior view driven mainly by additional lithography shipments into China.
Tim: We've seen no meaningful change to our outlook for lambs overall 2024 revenue profile.
Tim: From an industry perspective, DRAM remains strong, with WFP spending driven by growing demand for high bandwidth memory and sustained investment in domestic China. In FoundryLogic, growth in leading-edge spending this year is being partially offset by a decline in mature note spending outside of Domestic Time.
Tim: From an industry perspective, DRAM remains strong with WMC spending driven by growing demand for high bandwidth memory and sustained investment in domestic China.
Tim: In foundry logic growth and leading edge spending this year is being partially offset by a decline in mature node spending.
Tim: Outside of domestic China domestic China.
Tim: Domestic Chinese spending is running higher than we had previously expected, however, we still see it being first half-weighted, with Lam's revenue contribution from China declining as the year progresses. In NAND, we continue to expect year-on-year growth in WFP spending in calendar 2024. Encouragingly, we've seen an uptick in fab utilization, and in the March quarter, this translated into double-digit percent growth quarter-over-quarter in our spares revenue. As supply and demand continue to normalize for the remainder of the year, we see a strong setup developing for 2025 NAM spending.
Tim: Spending is running higher than we had previously expected. However, we still see it being first half weighted with lambs revenue contribution from China declining as the year progresses.
Tim: NAND, we continue to expect year on year growth in <unk> spending in calendar 2024.
Tim: Encouragingly, we have seen an uptick in fab utilization and in the March quarter. This translated into double digit percent growth quarter over quarter in our spares revenues at.
Tim: The supply and demand continues to normalize to the remainder of the year, we see a strong set of developing for 2025 NAND spending.
Tim: As we move toward a broader WFP recovery, LAM stands to benefit from powerful secular drivers of semiconductor growth and innovation. Generative AI and other emerging smart applications are built on a foundation of semiconductor technology and are expected to deliver trillions of dollars of economic benefit at a global level over the next decade. AI's transformative use cases, foreseen in both consumer and enterprise markets, are only in the early stages of realization, and we believe that significant investment in semiconductor manufacturing capacity will be required to satisfy the coming demand for advanced compute, memory, and storage.
Tim: As we move toward a broader wip recovery Lamb stands to benefit from powerful secular drivers of semiconductor growth and innovation.
Tim: <unk> AI and other emerging smart applications are built on a foundation of semiconductor technology and are expected to deliver trillions of dollars of economic benefit at a global level over the next decade.
Tim: AI is transformative use cases foreseen in both consumer and enterprise markets are only in the early stages of realization and we believe that significant investment in semiconductor manufacturing capacity will be required to satisfy the coming demand for advanced compute memory and storage.
Tim: In this environment, the winners will be the equipment companies that can accelerate the pace of technological advancement while at the same time deliver innovations that disrupt the rising cost and complexity of semiconductor fabrication. To this end, Lam is investing in two differentiated approaches. First, we are putting more capabilities and resources close to our customers to strengthen collaboration.
Tim: In this environment the winners will be the equipment companies that can accelerate the pace of technology advancement, while at the same time deliver innovations that disrupt the rising cost and complexity of semiconductor fabrication.
Tim: To this end Lam is investing in two differentiated approaches.
Tim: First we are putting more capabilities and resources close to our customers to strengthen collaboration and second we are leveraging lambs proprietary semi versus solutions digital twin capabilities to reduce the time and cost of technology development.
Tim: And second, we are leveraging LAM's proprietary Semi-Verse Solutions digital twin capabilities to reduce the time and cost of technology development. And already, we are seeing LAM's distributed R&D footprint having a positive effect. In the past quarter, we've used our customer-centric lab investments in Korea, Taiwan, and the U.S. to accelerate cycles of learning on new applications, resulting in important wins for LAM in both DRAM and FoundryLogic advanced packages. With respect to SEMIVERSE solutions, we leverage a portfolio of digital twins created at the scale of the device, the process, and the reactor to model complex interactions that influence tool performance and productivity.
Tim: Already we are seeing lambs distributed R&D footprint, having a positive effect.
Tim: In the past quarter, we've used our customer centric lab investments in Korea, Taiwan, and the U S to accelerate cycles of learning on new applications, resulting in important wins for Lam in both DRAM and foundry logic advanced packaging.
Tim: With respect to semi versus solutions, we leverage a portfolio of digital twins created at the scale of the device the process and the reactor the model complex interactions that influence tool performance and productivity.
Tim: LAMS engineers now regularly use these capabilities to optimize multidimensional etching deposition process recipes faster and with less on-tool wafer experimentation. Turning to demand related to AI, the early impact has been most prominent in DRAM and soundry logic. We believe, however, that AI's impact on storage is still ahead and represents a key vector of long-term growth for our NAND business. More advanced AI applications need faster, more power-efficient, and higher-density NAND storage. NAND-based enterprise solid-state drives, or ESSDs, are 50 times faster in read-write capability, 2 to 5 times more power-efficient, and use 50% less space at the system level compared to HDDs.
Tim: <unk> engineers now regularly use these capabilities to optimize multi dimensional etch and deposition process recipes faster and with less onto wafer experimentation.
Tim: Turning to demand related to AI.
Tim: The early impact has been most prominent in DRAM and foundry logic.
Tim: However that ai's impact on storage is still ahead and represents a key vector of long term growth for our NAND business.
Tim: More advanced AI applications. These faster more power efficient and higher density NAND storage NAND based enterprise solid state drives or Ssds are 50 times faster and rewrite capability three to five times more power efficient and use 50% less space at the system level compared to hard disk drives or <unk>.
Tim: <unk>.
Tim: Today, over 80% of enterprise data is stored on HDDs, and we expect this mix to shift in favor of SSDs as NAND capability and cost continue to improve. This is where Lam is playing a key role by enabling technologies that are critical for both performance and cost scaling. In deposition, for example, Lam is leading the transition from tungsten to molybdenum in the word line to improve device access time and reduce stack height per storage.
Over 80% of enterprise data is stored on hdds do we expect this mix to shift in favor of ssds as NAND capability and cost continues to improve.
Tim: This is where Lam is playing a key role by enabling technologies, which are critical for both performance and cost scaling in.
Tim: In deposition for example, Lamb is leading the transition from tungsten to molybdenum and the word line to improve device access time and reduce stack height per storage sale.
Tim: In etch, Lam is using high aspect ratio cryogenic etch to enhance the productivity of memory hole formation. Today, we are approaching 1,000 cryo-etched chambers in our high-volume manufacturing installed base. In partnership with our customers, we're using the tremendous amount of data coming from this installed base to rapidly improve technology and cost at each successive layer, transition, and man. Recently, we combined the learning from the installed base with the capabilities of our SEMIVERSE solution simulation tools to further strengthen our differentiation.
Tim: In etch Lam is using high aspect ratio cryogenic edge to enhanced productivity of memory hold formation.
Tim: Today, we are approaching 1000 cryo chambers in our high volume manufacturing installed base in.
Tim: In partnership with our customers, we are using the tremendous amount of data coming from this installed base to rapidly improved technology and cost at each successive layer transition in NAND recent.
Tim: Recently, we combined the learning from the installed base with the capabilities of our semi versus solutions simulation tools to further strengthen our differentiation.
Tim: As a result of our accelerated innovation, we have defended every manned high-aspect ratio memory hole etch production decision made so far by customers. With respect to DRAM, AI servers use high bandwidth memory, or HVM, to increase read-write speed and reduce server power consumption. HBM stacks multiple DRAM dies using TSVs, enabling 15 times more data throughput than standard DRAM. However, HBM also requires an approximately three-fold increase in wafers per bit compared to conventional memory.
As a result of our accelerated innovation innovation, we have defended every NAND high aspect ratio of memory hole etch production decision made so far by customers.
Tim: With respect to DRAM.
Tim: Servers use high bandwidth memory or HBM to increase read write speed and reduce server power consumption.
Tim: <unk> stacks multiple DRAM dies in TSV, enabling 15 times more data throughput and standard DRAM.
Tim: However, HBM also requires an approximately three fold increase in wafers per bit compared to conventional memory.
Tim: With this in mind, it's important that our Sabre 3D and Cyndian tools not only provide best-in-class plating and etch capabilities but also deliver industry-leading throughput and productivity to keep overall costs low for our customers. We are the leading player in PSB applications for HBM and expect our HBM-related shipments to grow more than three times in calendar year 2024. Finally, on the FoundryLogix side, LAM tools, including Selective Etch and ALV, are well positioned to help enable the move from FinFET to GATE All-Around, a key transition needed to improve transistor performance per watt by 15 to 20 percent.
Tim: With this in mind, it's important that our sabre three D and symbion tools not only provide best in class plating and edge capabilities, but also deliver industry, leading throughput and productivity to keep overall costs low for our customers.
Tim: We are the leading player in TSV applications for HBM and expect our HBM related shipments to grow more than three times in calendar year 2024.
Tim: Finally on the foundry logic side.
Tim: M tools, including selective etch and <unk> are well positioned to help enable the move from Finfet gate all around our key.
Tim: <unk> needed to improve transistor performance per watt by 15% to 20%.
Tim: We see our shipments for Gate All Around nodes in calendar year 2024 exceeding $1 billion. Lam tools are also enabling foundry logic innovations such as backside power delivery, molybdenum interconnects, and dry-fold resist processes for EUV patterning. Our traction with customers is strong on these inflections, and together, they represent a multi-billion dollar growth opportunity for LAM, as AI drives a greater need for faster, more power-efficient devices. To conclude, the proliferation of AI, the global push for localized chip manufacturing capacity, and the ubiquity of semiconductors in new consumer and commercial products represent powerful secular drivers for LAM and the rest of the semiconductor equipment industry in the years ahead We are pleased with the company's execution and our results in the March quarter and remain focused on our opportunity to outperform through this next leg of industry growth. Thank you, and I'll now turn it over to you.
Tim: We see our shipments for gate all around nodes in calendar year 2024 exceeding $1 billion.
Tim: Lam tools are also enabling foundry logic inflections, such as backside power delivery molybdenum interconnects and dry powders as processes for EBIT patterning.
Tim: Our traction with customers is strong on these inflections and together they represent a multibillion dollar growth opportunity for Lam is AI drives a greater need for faster more power efficient devices.
Tim: To conclude the proliferation of AI, the global push for localized chip manufacturing capacity and the ubiquity of semiconductors in new consumer and commercial products represent powerful secular drivers for Lam and the rest of the semiconductor equipment industry in the years ahead.
Tim: We're pleased with the Companys execution and our results in the March quarter and remain focused on our opportunity to outperform through this next leg of industry growth. Thank.
Tim: Thank you and I'll now turn it over to Doug.
Jim: Great. Thanks, Jim.
Tim: Great.
Unknown Executive: Good afternoon, everyone, and thank you all for joining our call today during what I know is a busy earnings season. We delivered solid results in the March 2024 quarter. Our March quarter results came in over the midpoint of our guidance ranges for all financial metrics. I'm pleased with the company's continued robust execution. We achieved the highest gross margin percentage since the merging of WAM with Novellas.
Doug: Thanks, Tim.
Doug: Good afternoon, everyone and thank you all for joining our call today during what I know is a busy earnings season.
Doug: We delivered solid results in the March 2024 quarter, our March quarter results came in over the midpoint of our guidance ranges for all financial metrics.
Speaker Change: Im pleased with the company's continued robust execution.
We achieved the highest gross margin percentage since the merging of Lam with novellus.
Unknown Executive: We also continue to generate very strong free cash flow of $1.3 billion for 34% of revenue. Now, let's dive into the details of our March quarter results. Revenue for the March quarter was $3.79 billion, which was roughly flat with the prior quarter. Our deferred revenue balance at the end of the quarter was $1.75 billion, which was a decrease of $182 million from the December quarter related to revenue recognized that was tied to those customer advanced payments.
Speaker Change: We also continued to generate very strong free cash flow of $1 $3 billion or 34% of revenue.
Speaker Change: Let's dive into the details of our March quarter results.
Speaker Change: Revenue for the March quarter was $3 $79 billion.
Speaker Change: Which was roughly flat with the prior quarter.
Speaker Change: Our deferred revenue balance at the end of the quarter was $1 $75 billion, which was a decrease of $182 million from the December quarter related to revenue recognized that was tied to those customer advanced payments.
Unknown Executive: I believe deferred revenue will continue to trend downwards as we continue throughout the year. From a segment perspective, March quarter systems revenue and memory was 44%, which is a decrease from the prior quarter level of 48%. The decline in the memory segment was attributable to DRAM, coming in at 23% of systems revenue versus the 31% that we saw in the December quarter. ERM spending was focused on the 1Y, 1Alpha, and 1Beta nodes.
Speaker Change: I believe deferred revenue will continue to trend downwards as we continue throughout the year.
Speaker Change: From a segment perspective March quarter systems revenue and memory was 44%.
Speaker Change: The decrease from the prior quarter level of 48%.
The decline in the memory segment was attributable to DRAM coming in the third or excuse me, 23% of systems revenue.
Speaker Change: A 31% that we saw in the December quarter.
Speaker Change: DRAM spending was focused on the <unk>, one alpha and one beta nodes.
Unknown Executive: Spending was largely driven by DDR5 and high bandwidth memory enablement. As we noted in the last quarter, non-volatile memory WFE is increasing in 2024, but it remained at a sub-due level on a mixed basis for the March quarter. This segment represented 21% of our system's revenue, up from 17% in the prior quarter.
Speaker Change: Spending largely driven by DDR, five and high bandwidth memory and enablement.
Speaker Change: As we noted in our last quarter non volatile memory <unk> is increasing in 2024, but remained at a sub do level on a mixed basis for the March quarter.
This segment represented 21% of our systems revenue up from 17% in the prior quarter.
Speaker Change: I do just want to mention one thing.
Unknown Executive: We are characterizing one customer's investment in specialty DRAM as a non-volatile investment since it has a non-volatile component in the device. This might be different than what others in the industry are doing. NAND investment was driven by very modest spending and conversions to 2XX and 3XX layer devices. The Foundry segment represented 44% of our system's revenue, a slight increase from the percentage concentration in the December quarter of 38%. Growth was driven predominantly by domestic Chinese shipments. And finally, the Blochkin and other segments accounted for 12% of our systems revenue in the March quarter, down from the prior quarter level of 14%. The decline was driven by continued maturity of node software.
We are characterizing one customer's investment and specialty DRAM as a non volatile investment since it has and non volatile component to the device.
Speaker Change: This might be different than what others in the industry are doing.
NAND investment was driven by very modest spending and conversions to <unk> <unk> three X X later devices.
Speaker Change: The foundry segment represented 44% of our systems revenue.
Speaker Change: A slight increase from the percentage concentration in the December quarter, or 40 up 38%.
Speaker Change: Growth was driven predominantly by domestic China shipments.
Speaker Change: And finally, the logic and other segment were 12% of our systems revenue in the March quarter down from the prior quarter level of 14%.
Speaker Change: The decline was driven by continued mature node softness.
Unknown Executive: Now, I'll discuss the regional composition of our total revenue. The China region came in at 42%, up slightly from 40% in the prior quarter. Well, most of our China revenue continued to be from domestic Chinese customers. This was the largest quarter for multinational spending in China since mid-last year. We expect spending from this region to increase year over year in 2024. However, I believe it will, however, decline as we go through the year. Our next largest geographic concentration was Korea, at 24% of revenue in the March quarter versus 19% in the December quarter. Japan and Taiwan rounded out the remainder of the top four regions.
Speaker Change: Now I'll discuss the regional composition of our total revenue the China region came in at 42% up slightly from 40% in the prior quarter.
Speaker Change: While most of our China revenue continued to be from domestic Chinese customers. This was the largest quarter for multinational spending in China since mid last year.
Speaker Change: We expect spending from this region to increase year over year in 2024.
Speaker Change: I believe it will however decline as we go through the year.
Speaker Change: Our next largest geographic concentration was Korea at 24% of revenue in the March quarter versus 19% in the December quarter.
Speaker Change: Japan, and Taiwan rounded out the remainder of the top four regions.
Speaker Change: Yes.
Unknown Executive: Our customer support business group generated revenue in the March quarter totaling approximately $1.4 billion. This was down 4% from the December quarter and 13% lower than the March quarter of calendar year 2023. Reliant Systems revenue decreased in the March quarter due to continued weakness in mature node investments, partially offset by a higher level of spares. Reliant is at the lowest revenue level in the last two years, and Spares is at the highest revenue level since the end of 2022. The spares business is seeing very early signs of a positive impact from utilization increases from our customers.
Speaker Change: Our customer support business group generated revenue in the March quarter totaling approximately one 4 billion.
This was down 4% from the December quarter, and 13% lower than the March quarter and calendar year 2023.
Speaker Change: Our reliant systems revenue decreased in the March quarter due to continued weakness in mature node investments.
Speaker Change: Partially offset by a higher level of spares.
Speaker Change: Reliance is at the lowest revenue level in the last two years.
Speaker Change: And spares is that the highest revenue level since the end of 2022.
Speaker Change: The spares business is seeing very early signs of positive impact from utilization increases from our customers.
Unknown Executive: Turning to gross margin performance, the March quarter came in at 48.7%, above the midpoint of our guided range and above the December quarter level of 47.6%. The increase was primarily a result of favorable changes in product and customer mix, as well as improved factory efficiency. March quarter operating expenses were $698 million, up from the prior quarter amount of $662 million. This was due, in part, to expenses incurred for an extra week in the quarter.
Speaker Change: Turning to the gross margin performance the March quarter came in at 48, 7% above the midpoint of our guided range and above the December quarter level of 47, 6%.
Speaker Change: The increase was primarily as a result of favorable changes in product and customer mix as well as improved factory efficiencies.
Speaker Change: First quarter operating expenses were $698 million up from the prior quarter amount of $662 million.
Speaker Change: This was due in part to expenses incurred for an extra week in the quarter I'll remind you. It was a 14 week quarter as.
Unknown Executive: I'll remind you it was a 14-week quarter, as well as our conscious growth in R&D spending. As Tim mentioned, we remain laser-focused on investing in R&D to extend our product and competitive differentiation. R&D as a percentage of spending was at a high watermark, coming in at 71% of total spending.
Speaker Change: As well as our conscious growth in R&D spending.
Speaker Change: As Tim mentioned, we remain laser focused on investing in R&D to extend our product and competitive differentiation.
Speaker Change: R&D as a percentage of spending was at a high watermark coming in at 71% of total spending.
Speaker Change: Operating margin for the current quarter was 33%.
Unknown Executive: Operating margin for the current quarter was 30.3%, in line with the December quarter level of 30% and at the high end of our guidance range. This was primarily because of the strong gross margin performance, which was somewhat offset by the growth in R&D investment. Our non-GAAP tax rate for the quarter was 11.7%, consistent with our expectations. Looking further into calendar 2024, we continue to believe the tax rate will be in the low to mid teens, with some possible fluctuations quarter by quarter.
Speaker Change: In line with the December quarter level of 30% and at the high end of our guidance range.
Speaker Change: This was primarily because of the strong gross margin performance, which was somewhat offset by the growth in R&D investment.
Speaker Change: Our non-GAAP tax rate for the quarter was 11, 7% consistent with our expectations.
Speaker Change: Looking further into calendar 2024, we continue to believe the tax rate will be in the low to mid teens.
Speaker Change: With some possible fluctuations quarter by quarter.
Unknown Executive: Other income and expense for the March quarter came in at $10 million in income compared with $5 million in income in the December quarter. The increase in OI&E was due to higher cash balances and higher interest rates.
Speaker Change: Other income and expense for the March quarter came in at $10 million in income compared to $5 million of income in the December quarter.
The increase in <unk> was due to higher cash balances and higher interest rates.
Unknown Executive: OI&E will be subject to market-related fluctuations that could cause some level of volatility quarter by quarter. On the capital return side of things, we allocated approximately $860 million to share repurchases, and we paid $263 million in dividends in the March quarter. Our share repurchase activity included both open market repurchases, as well as an accelerated share repurchase arrangement. The ASRs continue to execute into the month of April.
Speaker Change: <unk> will be subject to market related fluctuations that could cause some level of volatility quarter by quarter.
Speaker Change: On the capital of a.
Speaker Change: Couple of return side of things, we allocated approximately $860 million to share repurchases.
Speaker Change: And we paid $263 million in dividends in the March quarter.
Our share repurchase activity included both open market repurchases.
Speaker Change: As well as an accelerated share repurchase arrangement.
Speaker Change: The ASR has continued to execute for the month of April.
And I would just mentioned we continue to track towards our long term capital return plans of returning 75% to 100% of our free cash flow.
Unknown Executive: And I would just mention that we continue to track towards our long-term capital return plans of returning 75 to 100% of our pre-caps. March quarter delivered earnings per share was $7.79, towards the higher end of our guided range. The diluted share count was 132 million shares, on track with expectations and down from the December quarter. We have $1.2 billion remaining on our board-authorized share repurchase.
Speaker Change: March quarter diluted earnings per share was $7 79 towards the higher end of our guided range.
Speaker Change: The diluted share count was 132 million shares on track with expectations and down from the December quarter.
Speaker Change: We have $1 2 billion.
Speaker Change: Remaining on our board authorized share repurchase plan.
Unknown Executive: Let me pivot to the balance sheet. Our cash and short-term investments at the end of the March quarter totaled $5.7 billion, up a little bit from $5.6 billion at the end of the December quarter. The increase was largely due to collections with an extra week in the March quarter, offset by cash allocated to share buyback, dividend payments, and capital expenditure. Total sales outstanding was 57 days in the March quarter, a decrease from 66 days in the December quarter. Inventory at the end of the March quarter totaled $4.3 billion, down $107 million from the December quarter level. Inventory terms, however, remain flat from the prior quarter level at 1.8 times.
Speaker Change: Let me pivot to the balance sheet, our cash and short term investments at the end of the March quarter totaled $5 7 billion.
Speaker Change: Up a little bit from $5 6 billion.
Speaker Change: And of the December quarter.
Speaker Change: The increase was largely due to collections with an extra week in the March quarter, offset by cash allocated to share buyback dividend payments and capital expenditures.
Speaker Change: Days sales outstanding was 57 days in the March quarter decreased from 66 days in the December quarter.
Speaker Change: Inventory at.
Speaker Change: At the end of the March quarter totaled $4 $3 billion down.
Down $107 million from the December quarter level.
Speaker Change: Inventory turns remained flat from the prior quarter level at one eight times we.
Unknown Executive: We are making progress in bringing inventory levels down, and we will continue to work on this throughout calendar 2024. Non-cash expenses for the March quarter included approximately $77 million in equity compensation, $75 million in appreciation, and $15 million in amortization. Capital expenditures in the March quarter were $104 million, down $12 million from the December quarter.
We are making progress in bringing inventory levels down.
Speaker Change: And we will continue to work on this throughout calendar 2024.
Speaker Change: Noncash expenses for the March quarter included approximately $77 million in equity compensation $75 million in appreciation and $15 million and amortization.
Speaker Change: Capital expenditures in the March quarter were $104 million down $12 million from December quarter.
Unknown Executive: Spending was primarily centered on lab expansions in the United States and Asia. Supporting our global strategy to be close to our customer's development locations, we ended the March quarter with approximately 17,200 regular full-time employees, which was flat with the prior quarter.
Speaker Change: Spending was primarily centered on lab expansions in the United States and Asia supporting our global strategy to be close to our customers development locations.
Speaker Change: We ended the March quarter with approximately 17200 regular full time employees, which was flat with the prior quarter.
Unknown Executive: Let's now turn to our non-GAAP guidance for the June 2024 quarter. We're expecting revenue of $3.8 billion, plus or minus $300 million, and a gross margin of 47.5%, plus or minus one percentage point. This gross margin decline from March is reflective of a quarter-to-quarter change in customers.
Speaker Change: Let's now turn to our non-GAAP guidance for the June 2024 quarter, we're expecting revenue of $3 8 billion plus or minus $300 million.
Speaker Change: Gross margin of 47, 5% plus or minus one percentage point.
This gross margin decline from March is reflective of a quarter to quarter change in customer mix.
Operating margins of 29, 5% plus or minus one percentage point.
Unknown Executive: Operating margins of 29.5% plus or minus 1 percentage point. This reflects our continued commitment to prioritize R&D spending. And finally, earnings per share of $7.50 plus or minus $0.75 based on a share count of approximately 131 million shares.
Speaker Change: This reflects our continued commitment to prioritize R&D spending and finally earnings per share of $7 50, plus or minus 75.
Speaker Change: Based on a share count of approximately 131 million shares.
Unknown Executive: So, let me wrap up. 2024 is a year of continued transformation for Lam Research. We're investing in our long-term strategy to expand our technology leadership and operational excellence while efficiently managing overall spending. We're encouraged that the long-term drivers of semiconductor growth, such as artificial intelligence, are seeing accelerated adoption, and we expect LAM to be a strong beneficiary of these trends. We're well positioned for the architectural and material changes coming, such as gate all around, advanced packaging, backside power delivery, and the move to drive photoresist. Operator, that concludes our prepared remarks. Tim and I would now like to open up the call to questions.
Speaker Change: So let me wrap up 2024 is a year of continued transformation for Lam research for.
Speaker Change: We're investing in our long term strategy to extend our technology leadership and operational excellence, while efficiently managing overall spending.
Speaker Change: We're encouraged that the long term drivers of semiconductor growth such as artificial intelligence are seeing accelerated adoption and we expect <unk> to be a strong beneficiary of these trends.
We're well positioned for the architectural and material change coming such as gate, all around advanced packaging backside power delivery and the move to drive photo resist.
Speaker Change: Operator that concludes our prepared remarks, Tim and I would now like to open up the call for questions.
Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and one on the touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the key. To withdraw your question, you may press star and two. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Krish Sankar of TD Cowen. Please go ahead with your question.
Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session.
Speaker Change: To ask a question you May press star and one using a touchtone telephone.
Speaker Change: Using a speaker phone, we do ask that you. Please pickup your handset before pressing the keys.
Speaker Change: So withdraw your question you May press Star two.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: Our first question today comes from Krish Shankar TD Cowen. Please go ahead with your question.
Krish Sankar: Yeah, hi, thanks for taking my question. I have two of them. First one for Tim.
Krish Sankar: Yes, hi, Thanks for taking my question I told them first one for Tim Tim My question on high aspect ratio etch for NAND plenty of a very high market share and you said in your prepared comments independent market share that.
Tim: Tim, a question on the high aspect ratio edge for NAND, very high market share, and you said in your prepared comments that you defended market share there. You know, your company, Tokyo Electron, introduced a Cryo-Edge product a year ago, but you also have one from three years ago. So I'm kind of curious, can you talk a little bit about the market share dynamics and the high aspect ratio edge and the fact that some of your customers are talking about using Cryo-Edge for like 430 layer NAND. So can you give us some color there on the high aspect ratio edge? And then a follow up from there.
Speaker Change: I know, you're a company that Tokyo electron introduce the <unk> product a year ago, but you also have one completed as ago. So I'm kind of curious can you talk a little bit with the market share dynamics in high aspect ratio rich and.
The fact that some of your customers are talking about using.
Speaker Change: Using client extra like photo delay of NAND.
Speaker Change: So can you give us some color there on high aspect ratio.
Speaker Change: And a follow up for Doug.
Tim: Sure, Krish. You know, on Cryo-Etch, I mean, I had a couple of data points in my prepared remarks, but one is that we have an installed base of Cryo-Etch tools used for NANDs that's now approaching a thousand chambers. So obviously, you know, we've been in high volume production with this application for quite some time. And, you know, my comment was that, you know, there are always customers exploring different options during the development phase.
Doug: Sure Krish.
Speaker Change: On Cryo EM EMEA I had a couple of data points in my prepared remarks, but one is we have.
Installed base of Cryo etch tools used for NAND is now approaching 1000 chambers. So obviously.
Doug: We have been in high volume production with this application for quite some time and my comment was that.
Doug: There always are.
Doug: Customers exploring different options during the development phase, but my comment is is these are very complex processes to put into high volume production and so on.
Tim: But, you know, as Mark mentioned, these are very complex processes to put into high-volume production. And so we continue to leverage the learning that we gain working with our customers to focus on technology extension and manufacturing readiness. And, you know, because of that focus, we've been able to defend the decisions once we come to that point where the customer really has to decide which tool to commit their next fabrication line to. So that's all we can say is we're working hard to make sure we have the best tool for the application. And so far, it's winning the day.
Doug: We continue to leverage the learning that we get working with our customers to focus on technology extension and manufacturing readiness.
Doug: And by that focus we've been able to defend the decisions once they come to that point of the customer really having two to decide which tool to commit their next fabrication line too. So thats. All we can say is we're working hard to make sure. We have the best tool for the application and so far it's winning the day.
Krish Sankar: Got it, got it. So good to hear that the share is still solid. And then a follow-up for Doug on margins. Doug, you kind of mentioned the growth margin, maybe moderation in the June quarter due to the customer mix. Is that mainly a function of China, and how should we think about growth margins in the second half? And maybe, if you can extend the question, how should we think about OPEX in the back half of the year?
Got it got it so good to hear that.
Doug: So solid and then a follow up for Doug on margin, Doug you kind of mentioned about the gross margin maybe moderation in the June quarter due to the customer mix is that mainly a function of China and how to think about gross margins in the second half and maybe if I can extend the question. How do you think about opex into the back half of <unk>.
Doug: Yeah, Krish, I guess I'd say a couple things. First, gross margin. Sometimes it's a little bit better when we're selling to smaller customers. And I'm not going to pin it to any one geographic region necessarily. But in China, there are some smaller customers, and they tend to, because we have volume purchase pricing, sometimes they pay a little bit more. And it's not because of the geographic regions because of the size of the customers.
Doug: Yes, Christian I guess I'd say.
Doug: A couple of things first gross margin, sometimes is a little bit better when we're selling to smaller customers and I'm not going to pin it to any one geographic region necessarily.
Doug: But in China, there are some smaller customers and they tend to because we have volume purchase.
Doug: Pricing sometimes.
Doug: Say, a little bit more and but it's not because of the geographic regions because of the size of the customer.
Doug: So, that's one thing to think about in my scripted remarks as well as what Tim said, we think that the Chinese region will moderate a little bit as we go through the year. So, that's part of what you need to think about, and I've been talking about this for a couple of quarters. So, anyway, have that in mind when you're updating your models.
Doug: So that's one thing to think about in my scripted remarks as well as with what Tim said is we think the China region, we'll modulate a little bit as we go through the year. So that's part of what you need to think about it.
Doug: <unk> been talking about this for a couple of quarters.
Doug: So if I have that in mind when you're updating your models second we've been talking I think for a couple of quarters now maybe actually three quarters about the need to grow R&D investment. This year because of these technology changes that we see around xa power advanced packaging and so forth dry photo resist.
Krish Sankar: Second, we've been talking, I think, for a couple of quarters now, maybe actually three quarters, about the need to grow R&D investment this year because of these technological changes. And we're absolutely planning on doing that. You saw that in the March quarter, R&D as a percent of total spending was the highest that I have seen here at 71%, and we intend to keep investing in R&D. So independent of whatever the top line is, we're going to grow R&D investment this year.
Doug: And we're absolutely planning on doing that you saw that in the March quarter R&D as a percent of total spending was the highest.
Doug: I have seen here at 71% and we intend to keep investing in R&D, So independent of whatever the topline is.
Doug: We're going to grow R&D investment this year.
Timothy Michael Arcuri: Thanks a lot, Tim. Thanks, Doug.
Speaker Change: Got it thanks, Tim Thanks.
Speaker Change: Thanks, Doug.
Timothy Michael Arcuri: Our next question comes from Timothy Arcuri from UBS. Please go ahead with your question.
Speaker Change: Thanks, Chris Thanks.
Speaker Change: Our next question comes from Timothy Arcuri from UBS. Please go ahead with your question.
Timothy Michael Arcuri: Um, I so I want to ask about China. So it's good to, you know, modulate through the year the mix, but it sounds like it's still going to be up year over year for domestic Chinese this year. I so I guess my question is, we've seen some headlines on a few entities being potentially added to the entity list. And and and I'm wondering if, if, these comments reflect the potential addition of these entities, or does it basically say, hey, if the status quo remains, this is, you know, this is what your assumption is, meaning that if there were entities added, that would be a downside to these
Timothy Michael Arcuri: Thanks, a lot.
Timothy Michael Arcuri: So I wanted to ask about China. So so it's going to modulate through the year the mix, but it sounds like it's still going to be up year over year for domestic China. This year.
Timothy Michael Arcuri: So I guess my question is we've seen some headlines on a few entities being potentially added to the entity list and I'm wondering if.
Timothy Michael Arcuri: These comments reflect the potential addition of these entities.
Timothy Michael Arcuri: Or does it basically say hey, if the status quo remains. This is this is what is your assumption that as meaning that if there were entities added that that would be downside to these comments.
Tim: Yeah, Tim, obviously, we can't forecast changes in U.S. trade policy with respect to China that we don't know about. And so, you know, we're basically giving our best view of what we think our China business will be through the rest of the year and recognizing that there could be changes that we don't foresee. I mean, what I will say is that we, you know, obviously, we've built up what we believe is a strong government affairs team; we're plugged into all the relevant discussions.
Speaker Change: Yes, Tim I mean, obviously we.
Speaker Change: We can't forecast changes in U S trade policy with respect to timing, we don't know about it so.
Speaker Change: We're basically giving you our best view of what we think our China business will be through the rest of the year and recognizing that there could be changes. So we don't foresee what I will say is we will obviously, we built up what we believe is a strong government affairs team with plugged into all of the relevant discussions and I think over the last couple of years, you've seen we have a pretty strong track record of <unk>.
Tim: And I think over the last couple of years, we've seen we have a pretty strong track record of working with the U.S. government and responding to export control policy. And that's just what we plan to do going forward.
Speaker Change: With U S government responding export control policy and is.
Speaker Change: Is that that's just what we're trying to do going on in the future.
Speaker Change: Sure. Thanks, Tim Thanks, Doug.
Timothy Michael Arcuri: Sure. Thanks, Tim. Thanks.
Doug: And Doug, I just wanted to ask about service a bit. So there's a much different dynamics happening in the spares and in the reliance business. Can you talk about that? Because certainly sounds like, I mean, this is kind of an odd situation that we'd have, you know, spares be so strong and reliant be so weak. So can you sort of give us any read throughs there? You know, like, what does that mean for the future of that business? Thanks.
Doug I just wanted to ask about service a bit so.
Speaker Change: It's much different dynamics happening in the spares and the reliant business.
Speaker Change: Can you talk about that because certainly sounds I mean, this is kind of an odd situation that that wed have spares to be so strong and reliably. So weak. So can you sort of give us any read throughs there like what does that mean for the future of that business. Thanks.
Doug: Yeah, listen, I think it's well understood right now that you have two dynamics going on relative to thinking about the different components of CSBG. First, you know, industry utilization is starting to get somewhat better, but I would definitely say it's early days for that.
Speaker Change: Yes, listen I think it's well understood right now that you've got two dynamics going on relative to thinking about the different components of <unk> first industry utilization is starting to get somewhat better I would definitely say, it's early days for that but the reason I, specifically talked about the spares level versus where it's been over the last couple of years is because of that.
Doug: But the reason I specifically talked about the spares level versus where it's been over the last couple of years is because of that. And that clearly is beginning to show up in our spares business. However, when you look at CSBG in total, we were down now because of the softness and reliance. I also think that's pretty well understood in the industry, right? Mature node investment outside of the Chinese region is certainly pretty soft right now.
Speaker Change: Clearly is beginning to show up in our spares business. However, when you look at <unk> in total we were down now.
Speaker Change: Because of the softness and rely on I also think that's pretty well understood in the industry Red mature node investment outside of the China regions, certainly is pretty soft right now and so you have those two competing dynamics going on.
Doug: And so you have those two competing dynamics going on that's showing up in the CSBG line. You know, if I was guessing, Tim, right now, CSBG is probably flattish this year from last year because of those two upsetting dynamics, if that helps you think.
Speaker Change: That's shown up in the <unk> line.
Speaker Change: If I was guessing Tim right now see SPG is probably flattish this year from last year because of those two offsetting dynamics if that helps you think about it.
Tim: Perfect, Doug. Yeah, and Tim, I think the only thing I would add there is, I mean, when you think about the CSBG business a little bit longer term, I mean, clearly, you know, we commented on utilization starting to pick up, but as we move into 2025, I think we also will see significant upgrade activity coming back in, especially in the NAM space. We've talked about the fact that there is a large portion of that installed base that has not yet been moved toward the technology nodes that are most useful for our customers. And so I think that will also flow through into the CSBG business in the future. Perhaps not so much this year, but clearly as we move into 2025 and beyond.
Tim: Perfect Doug Tonight.
Speaker Change: I think the only thing I would add there is I mean, when you think about the CPG business a little bit longer term.
Doug: Clearly we commented on utilization is starting to pick up but as we as we move into 2025.
Doug: We also will see significant upgrade activity coming back in especially in the NAND space. We've talked about the fact that there is a.
Doug: Large portion of that installed base that does not get yet been moved towards the technology nodes that are most useful for our customers and so I think that will also flow through into the <unk> business and the <unk>.
Doug: That's not not so much this year, but clearly as we move into 'twenty and beyond.
Speaker Change: Thank you much Tim thanks.
Tim: Thanks, Jeff.
Tim: Our next question comes from Harlan sur from Jpmorgan. Please go ahead with your question.
Harlan L. Sur: Our next question comes from Harlan Sur from J.P. Morgan. Please go ahead with your question.
Harlan L. Sur: Good afternoon. Thanks for taking my question. You know, with the accelerated compute and AI semiconductor segment of the market, there still seems to be a lot of constraints centered around high bandwidth memory and tightness and co-ops packaging. Obviously, you guys have a very strong position here, as you mentioned, Tim. You guys previously talked about this business, you know, this opportunity as being potentially like a billion dollar per year type of revenue opportunity.
Harlan: Good afternoon, and thanks for taking my question with an accelerated computing and AI semiconductor segments of the market there still seems to be a lot of constraints centered around high bandwidth memory.
Harlan: Tightness in co op packaging, obviously, you guys have a very strong position here as you mentioned, Tim you guys previously talked about this business this opportunity as being potentially like a 1 billion dollar per year type of revenue opportunity, but just given the strong demand pull on some of the expanding use cases I mean, it's a lab team already.
Harlan L. Sur: But just given the strong demand pull and some of the expanding use cases, is the Lam team already on track to drive a billion plus dollars in advanced packaging revenues this year? And now that the trends are in place, right, what's your new or maybe revised view on the revenue opportunity here for the Lam team over the next few years?
Harlan: Shocked to drive 1 billion plus dollars and advanced packaging revenues this year and now that the trends are in place like what's kind of your new or maybe revised view on the revenue opportunity here for the team over the next few years.
Tim: Yes, Harlan I think that Youre right. There is strong pull in I mean, obviously, we are we're responding as quickly as you Kansas demand our advanced packaging shipments this year will be over $1 billion.
Tim: Yeah, Harlan, you know, I think that you're right. There is a strong pulling.
Tim: I mean, obviously, we are responding as quickly as we can to the demand. Our advanced factory shipments this year will be over a billion dollars. And so that's kind of an important milestone for us. I don't know how to give you the next milestone.
Tim: And so that's.
Tim: That's kind of an important milestone for us I don't know how to give you like that next milestone obviously, we're seeing tremendous growth in demand in this area. Our positions are strong not only as you said in the foundry logic side of advanced packaging, but also.
Harlan L. Sur: Obviously, we're seeing tremendous growth and demand in this area. Our positions are strong, not only, as you said, in the Foundry Logic side of advanced packaging, but also, you know, as we talked specifically about our very strong positions in HBM-related, what we consider the packaging side of HBM. And so I think it's just an area where we'll see good long-term growth. We are investing again in this area. We've talked in the past about our work in the panel processing space, trying to look ahead to see where the packaging market is going to go to make sure that we are fully capable of taking advantage of what we see as a real long-term secular driver for semiconductors and the equipment industry.
Tim: As we talked specifically about our very strong positions in HBM.
Tim: Related.
Tim: The packaging side of HBM and so I think it's just an area, where we will see good long term growth.
Tim: We are investing again in this area we've talked in the past about our work in the panel processing space trying to look ahead to see where the packaging market is going to go to make sure that we are fully capable of taking advantage of what we see as a real long term secular driver for semiconductors in the equipment industry.
Harlan L. Sur: Yeah, no, congratulations on hitting that milestone. For my follow-up question, you know, with your customers and their spending outlooks looking more constructive, their cycle dynamics continue to improve. You've got strong tailwinds on manufacturing complexity trends, like the growth outlook appears quite solid, right, for the team. So if I look out beyond this year and the ramp-up of your new Malaysia manufacturing facility, I mean, not only is it a low-cost geo, like you guys have mentioned, but you've got a highly skilled workforce.
Speaker Change: Congratulations on hitting that milestone.
Speaker Change: For my follow up question.
Speaker Change: With their customers and their spending outlooks looking more constructive cycle that the analysts continue to improve and you got strong tailwind on manufacturing complexity trends like the growth outlook appears quite solid right for the team.
Speaker Change: I look out beyond this year and the ramp of your new Malaysia manufacturing facility I mean, not only is it low cost geos like you guys have mentioned, but you've got highly skilled workforce will also set up the supply chain support infrastructure locally as well so.
Harlan L. Sur: You also set up the supply chain support infrastructure locally as well. So... I don't know if it's for Tim or Doug, but is there any way to think about the incremental gross margin benefit on incremental revenues that flow out of the Malaysian factory as you start to load it?
Speaker Change: I don't know if its for Tim or Doug, but is there any way to think about the incremental gross margin benefit of.
Speaker Change: Incremental revenues that flow out of the Malaysia factory as you start to load it.
Speaker Change: But let me let me take the first part of it and then I'll, let Doug talk specifically about the gross margin comment I think it's one thing that debt.
Tim: Let me take the first part of it and then I'll let Doug talk specifically about the gross margin comment. I think, you know, it's one thing that we're feeling very comfortable with, which is your last question was, "Boy, there must be a lot of demand and you've got to be ramping up for that." You know, I think we, as we come into this next up cycle, we feel we're very well positioned relative to all the things you just talked about, the physical capacity, the trained workforce, the supply chain has been built up and made more resilient since the last big upturn in the industry, where we saw lots of constraints.
I think we're feeling very comfortable with which is the last question was boy there must be a lot of demand and you've got to be ramping up for that.
Speaker Change: We as we come into this next up cycle.
Doug: We feel we're very well positioned relative to all the things you just talked about the physical capacity the trained workforce the supply chain has been.
Doug: Built up and made more resilient since the last big upturn in the industry, where we saw lots of constraints and so I think from that standpoint, we feel really good that we have executed on the operation side of the house now, we just need to start seeing that.
Tim: And so, from that standpoint, we feel really good that we have executed on the operation side of the house. Now we just need to start seeing the kinds of new peak volumes that will demonstrate that externally.
Doug: The kinds of new peak volumes that will demonstrate that externally and I'll, let Debbie address here gross margin question, yes, how long I guess.
Doug: And I'll let Doug address that. Yeah, Harlan, I guess I just want to remind you what I've said in prior quarters, which is I don't want you to run ahead of that financial model we put out in 2020. That's still the right way to think about it. Now, obviously, right now, we've got quite a favorable customer mix. I don't expect that to continue.
Debbie: I'd just remind you what I've said in prior quarters, which is I don't want you to run ahead of that financial model, we put out in 2020 and Thats still the right way to think about it obviously right now and we've got quite favorable customer mix I don't expect that to continue.
Debbie: <unk>.
Speaker Change: Long I don't know, maybe I'm wrong about that.
The benefit from Malaysia. After we came to the inflationary stuff and whatnot was completely how we intend to get back the gross margin embedded in our financial model and then we can push a little higher certainly we're not going to stop staying focused on that the best way to think about it is.
Doug: Transcribed by https://otter.ai, And we're ready for that. Perfect, thank you. Thank you, Harlan.
Malaysia is still into the future it will show up when we ramp incremental volumes.
Speaker Change: And we're ready for that.
Speaker Change: Perfect. Thank you.
Srinivas Reddy Pajjuri: Our next question comes from Srinivas Pajjuri from Raymond James. Please go ahead with your question.
Speaker Change: Thank you.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Sweeny Gerry from Raymond James. Please go ahead with your question.
Srinivas Reddy Pajjuri: Thank you. Doug, I think on the China side, just one clarification: were you expecting China to moderate in this quarter? Did it come in better than you expected? And then, you know, just to go back to your comment about China moderation through the rest of the year, any particular segment within China?
Unknown Executive: Thank you Doug I think on the China side, just one clarification.
Unknown Executive: We're expecting China to moderate in this quarter or did it come in better than you expected and then.
Unknown Executive: Just to go back to your comment about China moderation.
Unknown Executive: Through the rest of the year or any particular segment within China is it.
Doug: I mean, you know, is it DRAM? Or is it logic? Or is it both?
Unknown Executive: DRAM is it logic or is it both if you can add some color to that that would be helpful.
Srinivas Reddy Pajjuri: If you can add some color to that, that'll be helpful.
Doug: Yeah, Srini, no, it came in pretty much as we expected. I suggested last quarter that it was gonna continue to remain pretty good in March. So, that was pretty much as we expected.
Yes, really it came in pretty much as we expected I suggested last quarter, though it was going to continue to.
Remain pretty pretty good in March.
Unknown Executive: So no that was.
Unknown Executive: Pretty much as we expected and I don't know like bias at a segment level that I've got any specific color for you relative to the China slowing a little bit in the second half there is such a broad set of customers they're better in every segment.
Srinivas Reddy Pajjuri: And I don't know, like, at a segment level if I've got any specific color for you relative to China slowing a little bit in the second half. There's such a broad set of customers there that are in every segment. It's in DRAM, it's in Foundry, it's in Logic, and it's a broad, broad set. So when we look at that in total, I do see it somewhat weighted here to the early part of the year, and it'll modulate somewhat, but there's nothing specific I have to share with you from a segment standpoint.
In DRAM, it's in foundry and logic, it's abroad broad set so.
Unknown Executive: When we looked at that in total I do see it somewhat weighted to the early part of the year and it will modulate somewhat but nothing specific I have to share with you from a segment standpoint.
Tim: Thanks, Doug. And then maybe for Tim, Tim, some of your large customers got, you know, a pretty good amount of subsidies from the government recently under the CHIPS Act and other stuff outside of the U.S. as well. So I'm just wondering what sort of impact we should expect in terms of your own business as, you know, I guess, that money comes in, and any, I guess, thoughts on the timing of potential orders from, you know, this incremental funding that they're getting. Thank you.
Thanks, Doug and then maybe for Tim Tim.
Unknown Executive: Some of your large customers got pretty good amount of subsidies from the government recently on the chip Sac and other stuff outside of the U S. As well. So I'm just wondering what sort of impact should we expect in terms of your own business and I guess that money comes in and any any I guess thoughts on that.
Unknown Executive: Timing of potential orders from this incremental funding that theyre getting thank you.
Srinivas Reddy Pajjuri: Yeah, I mean, obviously, you've seen quite a few announcements about the CHIPS Act grants in the U.S. I'll also note that, you know, there are similar CHIPS Act programs going on in places like Japan and, obviously, a little bit further out in the future, in Europe and elsewhere.
Speaker Change: Yes, I mean, obviously you have seen and just even the last few weeks quite a few announcements about the <unk> grants in the U S. I'll also note that.
There are similar chips act programs going on in places like Japan, and obviously, a little bit further out in the future in Europe and elsewhere and so we've always said these are more of a 'twenty five 'twenty six 'twenty seven timeframe.
Tim: And so, you know, we've always said these are more of a 25, 26, 27 timeframe from the equipment side, especially the shorter lead time tools like we provide. So, you see the fab coming up, a lot of construction activity, you see long lead time tools go in, and then, you know, we know that our time will come. I mean, and so I think it's still a 25, 26, 27, opportunity for us.
Speaker Change: From the equipment side, especially the shorter lead time tools like we provide so you see the fab coming up.
Speaker Change: A lot of construction connectivity Youll see long lead time tools go in and then.
Speaker Change: We know that.
At our time will come and so I think it's still a $25 $26 seven.
Speaker Change: Opportunity for us.
Tim: But you know, the important thing is, while that's a lot of extra money, maybe what's really exciting about it is that most of that is targeted towards truly leading edge nodes. And you know, one thing about Lam's story is that we have focused a lot of R&D investment to build our position in leading-edge boundary logic in the next generations of DRAM and high bandwidth memory, as well as, of course, continuing our strength in NAND.
Speaker Change: The important thing as well that's a lot of extra money.
Maybe what's really exciting bodies most of that is targeted towards truly the leading edge nodes.
Speaker Change: One thing about lens.
Speaker Change: <unk> story is that we have focused a lot of R&D investment to build our position in leading edge foundry logic in the next generations of DRAM in high bandwidth memory as well as of course, continuing our strength in NAND and so as we see these new fabs come up I mean, it's.
Tim: And so, you know, as we see these new fabs come up, it's not only additional spending, but they're at nodes where we believe that we will actually do better from a SAM and market share perspective. And so, you know, that's the kind of thing that we're really excited about. We're patiently waiting, but we know it's going to come. You can go visit the sites. The fab buildings are there, and they're feverishly working to get them ready for equipment.
Speaker Change: Not only additional spending but it's at nodes, where we believe that we will actually do better from a Sam and market share perspective, and so.
Speaker Change: We're patiently waiting.
Speaker Change: But we know it's going to come you can go visit the sites the fab buildings are there.
We're feverishly working to get them ready for equipment.
Vivek Arya: Thanks, Tim. Thanks, Rene.
Speaker Change: Thanks, Dan Thanks, Rick.
Speaker Change: Our next question comes from C. J Muse from Cantor Fitzgerald. Please go ahead with your question yes.
Vivek Arya: Our next question comes from CJ Muse from Cancer Fitzgerald. Please go ahead with your question.
Vivek Arya: Yeah, good afternoon. Thank you for taking the time to answer the question. I guess my first question is, I wanted to try to get a little bit more color on your updated WFP outlook. It looks like you're taking up by about $7 billion. You talked about that being really low impact, not impacting you. So I guess, should we infer from that that you're still expecting WFP to be up kind of low to mid-single digits? And as part of that, how are you thinking about those four large drivers, particularly, I guess, two or three of them, and the growth potential there and the relative outperformance that you expect to see?
Speaker Change: Yes. Good afternoon. Thank you for taking the question I guess first question I wanted to try to get a little bit more color on your updated <unk> outlook. It looks like you are taking it up by about $7 billion, you talked about that being really litho not impacting you. So I guess should we infer from that that you're still expecting kind of low to mid single digit.
Speaker Change: And as part of that.
Speaker Change: How are you thinking about those four large drivers, particularly I guess, two or three of them and the growth potential there and the relative outperformance that you expect to see.
Tim: Yeah, CJ, obviously, one of our peers in the industry reported last week. We took a look at it, and we just have a view that if we missed a little bit of what was shipping into China, that is the vast majority, if not all of the change in WFE from our point of view. You know, there's always some moving pieces and DRAMs, maybe a little stronger trailing-edge boundary logic, probably But at the end of the day, the biggest change that we saw was Letho. And, you know, we just missed a little bit because it's not part of our addressable market. I'm not sure I caught him.
Speaker Change: Yes C. J I mean, obviously one of our peers in the industry reported last week, we took a look at it and just have a view that it will.
Speaker Change: We missed a little bit of what we're shipping into China that is the vast majority if not all of the change in <unk> from our point of view, there's always some moving pieces in DRAM is maybe a little stronger trailing edge foundry logic is probably a little bit softer, but at the end of the day.
Speaker Change: The biggest change that we saw was left though.
Speaker Change: We just we missed a little bit because it's not part of our addressable market.
Speaker Change: I'm not sure I caught all of your the second part of your question C. J try it one more time.
C. J: Just as you think about the $1 billion plus opportunities, particularly around advanced packaging.
C. J: I guess inquiry on HBM within that and also gate all around.
C. J: Do you think youll share relative to WMC in 'twenty four.
C. J: Yes, I think given the mix we see in some of these technology transitions.
Vivek Arya: Oh, just as you think about those billion dollar plus opportunities, particularly around advanced packaging and, I guess, including HBM within that.
C. J: It shouldnt be incrementally better than it was last year for sure.
Speaker Change: And then just as a quick second question I guess third question I.
Vivek Arya: And then just as a quick second question, or I guess third question, I could sneak it in.
If I could sneak it in.
Speaker Change: You talked about normal normalization of China.
Speaker Change: Through the second half.
Vivek Arya: I guess, Vijay, you've got to just kind of look at where we've been, right? You're absolutely right, and thanks for mentioning the 46.
Speaker Change: Getting back to maybe a 46% ish type of normalized gross margin. It sounds like in your mind today is better. So I guess, what would that number be if that continues to be strong for you guys. Thank you.
Doug: That's sort of where gross margin was after we had done some of the Malaysia stuff and before China popped up with those smaller customers. And so the fact that we're above that level is largely due to customer mix. And so that's how you should be thinking about it. And, you know, if we have that mix wrong, then margin kind of – you've got a couple of data points from the last couple of quarters that you can kind of solve for to understand what it might look like. It'll be in that 46 to, you know, 48 plus percent range, depending on what the mix looks like.
Hey, guys <unk> you got to just kind of look at where we spend right you are.
Speaker Change: Absolutely right and thanks for mentioning the 46, that's sort of where gross margin was after we had done some of them are laser stuff and before China popped up with those smaller customers and so the fact that we're above.
Speaker Change: That level is largely customer mix and so that's how you should be thinking about it.
Speaker Change: If we have that mix wrong, then margin kind of you've got a couple of data points from the last couple of quarters.
Speaker Change: You can kind of solve for to understand what it might look like it'll be in that 46 to 48 plus percent range, depending on what the mix looks like.
Vivek Arya: Thanks, Vijay.
Speaker Change: Thanks, so much.
Atif Malik: Our next question comes from Atif Malik from Citi. Please go ahead with your question.
Speaker Change: Thanks JJ.
Speaker Change: Our next question comes from Latif Malik from Citigroup. Please go ahead with your question.
Atif Malik: Hi, thank you for taking my questions. The first one for Tim: Tim, it's good to see some green shoots in the NAND market. You talked about double-digit wave parts growth in the NAND, and you also talked about that the AI storage inflection for high-density SSDs is in front of us. But we do not have the 3x wafers per bit offset that you're seeing on the DRAM side. So can you kind of paint for us the trajectory of the NAND improvement that you're expecting into the second half of next year?
Atif Malik: Hi, Thank you for taking my question the first one for Tim Tim It good to see.
Atif Malik: Green shoots in the NAND market, you talked about double digit.
<unk> growth in the NAND and you also talked about.
Speaker Change: Hi, Stuart.
Atif Malik: Inflection for high density SSD that is in front of me.
Atif Malik: <unk>.
But we do not have the <unk> offset that youre seeing on the DRAM side, but can you kind of pain for us.
Stuart: Trajectory of demand improvement that you're expecting in the second half of next year.
Tim: We're not going to give you a 25 at 14.
Stuart: So we're not going to give you a 25% forecast quite yes, it's way too early for that it'll be better, though Brian I mean, it's improving and demo, but yes, well I guess I guess without giving you exact numbers I mean, clearly we all know that the NAND spending has been incredibly weak for the last question.
Atif Malik: They talk about the fact that maybe 90% of the bits they're shipping are at the leading edge. But when we look at the installed base of our systems, that's my comment. I believe that there's still going to be a large portion of the installed base that will move forward to the next technology nodes, and the most efficient way for our customers to do that is to upgrade what they already have.
Stuart: Up to 18 months and so.
Stuart: We're in the very early stages of starting to see that recover and I think if you look at what most of our we rely on our customer commentary they make publicly for a lot of this but.
They talk about the fact that nearly 90% of the bits, they're shipping are at the leading edge, but when we look at the.
The installed base of our systems that was my comment I believe that there is still going to be a large portion of the installed base that will move forward to the next technology nodes. It's the most efficient way for our customers to.
Tim: And I think you'll see that move forward and, therefore, NAM WFE move up in 25. But because it comes through to a large degree through upgrades, LAM's capture rate of every dollar of WFE spent will be much higher than for the greenfield capacity added. So, you know, when I think about LAM's opportunity to outperform in 2025 in NAND, I think it is obviously with high confidence because of the type of spending we would expect to be seeing in 2025.
Stuart: To do that is to upgrade what they already have and I think youll see that move forward and therefore, <unk> move up and 25, but because it comes through a large to a large degree through upgrades lambs capture rate on every dollar of WC spent will be much higher than <unk>.
Stuart: The Greenfield capacity added so.
Stuart: When I think about lambs opportunity to outperform in 2025 in NAND I think it is obviously yet.
Stuart: With high confidence because of the type of spending we would expect to be seen in 2025 and in the other market segments. It's also pretty high because of the as I mentioned the technology inflections that are occurring.
Tim: And in the other market segments, it's also pretty high because of the, as I mentioned, the technology inflections that are occurring. And, you know, it's gate all around where we, you know, this year we'll actually have over a billion dollars of shipments into the gate all around technology nodes. And obviously, as gate all around continues to proliferate, our tools like ALD and Selective Etch will do better. For backside power delivery, we already talked about advanced packaging.
Stuart: It's gate all around.
Stuart: This year, we'll actually have over $1 billion of shipments into the gate all around technology nodes and obviously as gate all around continues to proliferate.
Tools like <unk> and select da Vinci will do better in.
Stuart: In the backside power delivery, we already talked about advanced packaging and then.
Tim: And then, you know, we obviously have out there in front of us the work we're doing for dry folder resist processes for EUV. So, you know, I just feel like there are a number of growth drivers for the company besides the one that is the most obvious, which is manned recovery in 2025.
Stuart: We obviously have out there in front of US also the work we're doing for dry photoresist processes for EV. So I just feel like there are.
Stuart: A number of.
Stuart: Growth drivers for the company. Besides the one that is obviously the most obvious which is demand recovery in 2025.
Stuart: Great. Thank you and then one quarter, Doug within your China, 42% of sales.
Atif Malik: Great, thank you. And then one for Doug.
Doug: Doug, within your China, 42% of sales, you talked about multinationals picking up, which came as a positive surprise to me. Can you talk about what's driving that? Are those customers not worried about incremental restrictions? Or are they just trying to upgrade some of the older technology? I think it's just being responsive to the demand.
Stuart: You talked about Mike and national picking up.
Doug: The positive surprise to me can you talk about what's driving that are those customers knock worried about incrementally restrictions or are they just starting to upgrade.
Doug: The older technologies.
Atif Malik: I think it's just being responsive to the demand they see relative to the capacity that's there. And yeah, I said it was the highest level since mid-last year. Although I do understand, I don't want to overstate it, the vast majority of the spending in China continues to be from the indigenous Chinese customer base. But I just observed it as I was going through the numbers and knowing everybody was going to be asking about China, that was something I thought I'd just mention.
Doug: I think it's just being responsive to the demand they see relative with the capacity that's there and yes, I said, it's the highest level since mid last year, although I do understand I don't know over position that the vast majority of the spending in China continues to be the indigenous Chinese customer base.
Doug: But I just observed as I was going through the numbers and knowing everybody was going to be asking about China that was something I thought I'd just mention.
Thank you.
Speaker Change: Thanks, a lot.
Toshiya Hari: Our next question comes from... Toshiya Hari from Goldman Sachs. Please go ahead with your question.
Speaker Change: Our next question comes from.
Speaker Change: <unk> Hari from Goldman Sachs. Please go ahead with your question.
Toshiya Hari: Hi Guys, thank you so much for taking the question. I wanted to ask a question on NAND as well. Tim, in your prepared remarks, you talked about the transition from tungsten to molybdenum potentially happening in the market, I suppose, over the next couple of years. Can you speak to the significance of that in terms of debt intensity and how that could impact your business over the next couple of years? Thanks.
Hari: Hi, guys. Thank you so much for taking the question.
Hari: I wanted to ask a question on NAND as well.
Hari: Tim in your prepared remarks, you talked about the transition from from tungsten, Tim molybdenum potentially happening.
Speaker Change: The market.
Close over the next couple of years can you speak to the significance of that in terms of depth intensity and how that could impact your business over the next couple of years. Thanks.
Tim: Sure. Well, obviously, anytime there's a material change that requires a new system, it's an opportunity for LAM to, you know, provide that technology to the market. And so, you know, it's an important change. I mean, we call it MOLLE just because it's so hard to say it in Lib Dem, but the change to MOLLE has some significant device benefits. And also, you know, I mentioned the important thing in NAND is, I mean, it's important in every element of semiconductor devices, but it's cost and technology.
Tim: Sure well, obviously anytime there is a material change requires a new system, it's an opportunity for Lam to.
Tim: Provide that technology into the market and so.
Tim: It's an important change I mean, we call it Molly just because it's so hard to save molybdenum.
Tim: Turning to the change to Bali has some significant device benefits and also I mentioned the important thing in NAND is I mean, it's an important in every element of semiconductor devices, but it's the cost and technology and so one thing that sometimes lost as part of the transition to Mali is also about enabling stack.
Tim: And so, you know, one thing that's sometimes lost is that part of the transition to MOLLE is also about enabling stack height reduction. So you can go to more layers and limit the stack height in a way that allows you to then have more productive entries, more productive deposition, and other things, and so I think it's an important choice for the industry and an opportunity for LAM, and we're well positioned to, [inaud
Tim: That reduction so you can go to more layers.
Tim: And limit the stack hide in a way that allows you to then have more productive that's just more productive <unk> and other things so yes.
Tim: I think it's an important.
Tim: Inflection for the industry and an opportunity for Lam and we're well positioned.
Toshiya Hari: Got it. Thank you. And then as my follow up on HBM, you talked about your business growing more than 3x year over year, and I think that comment was consistent with what you had communicated last quarter. Based on, you know, sort of the input you have, the market intel you have, what kind of bit growth or market growth in HBM do you think that that increase in your business supports in 24 and, obviously, demand is very strong, but how are you thinking about supply- Thank you.
Tim: So when that inflection point.
Speaker Change: Got it. Thank you and then as my follow up on HBM.
Speaker Change: You talked about your business growing more than three X year over year, I think and I think that.
Speaker Change: That was consistent with what you had communicated last quarter.
Speaker Change: Based on sort of input you have the market until you have what kind of growth or market growth in <unk> do you think.
Speaker Change: That increase in your business supports and 24 in.
Speaker Change: Obviously demand is very strong, but how are you thinking about supply demand from your perspective exiting the year and into 'twenty five and HBO. Thank you.
Toshiya Hari: Toshiya, maybe I'll give it a try. I mean, when you look at overall bid demand, HBM is probably a point or two below it, although it's growing and adding to the broad market. But it's clearly requiring incremental investment in our Sabre 3D tool, our Deep Silicon Edge tool, and I think it's something you're going to hear us talking about for many years to come. This form factor is going to continue to be important relative to AI enablement and feeding the GPU the data that it needs. Small today, but growing quite rapidly.
Speaker Change: Sure maybe I'll give it a try I mean, when you look at overall good demand HBO is probably a point or two.
Speaker Change: Although it is growing and adding to the broad market.
Speaker Change: But it is clearly requiring incremental investment of our sabre to retool, our deep silicon etch tool.
Speaker Change: And I think it's something you didn't hear us talking about for many years to come.
Speaker Change: This form factor is going to continue to be important relative to AI enablement and feeding the GPU.
Speaker Change: The data that it needs.
Speaker Change: Small today, but growing quite rapidly.
Joseph Lawrence Moore: Our next question comes from Joe Moore from Morgan Stanley. Please go ahead with your question.
Speaker Change: Thanks, so much.
Speaker Change: Thanks to a shift in Easter shift.
Speaker Change: Okay.
Speaker Change: Our next question comes from Joe Moore from Morgan Stanley. Please go ahead with your question.
Joseph Lawrence Moore: Great, thank you. I wanted to follow up. You had mentioned that there was a customer that you're classifying as NAND, but others might be classifying as DRAM. I just wanted to double-click on that, if you could talk to them about what's going on there. Is that customer sort of doing both, and people just have different classifications? Should we be thinking that there's more NAND capacity coming on in China than I thought before? Can you just talk to that change?
Joseph Lawrence Moore: Great. Thank you I wanted to follow up you had mentioned that there was a customer that you are classifying as NAND.
Joseph Lawrence Moore: That others might be classifying as DRAM I just wanted to double check on that if you could talk to.
Joseph Lawrence Moore: What's going on there is that customer started doing both and people just have different classifications.
Joseph Lawrence Moore: Should we be thinking that there's more NAND capacity coming on in China than than I had thought before can you just talk to that change.
Doug: I guess all I'd say, Joe, is sometimes... There can be a little bit of confusion, and I felt that as I was talking to people over the last quarter. So the reason I said it was that it's actually a non-volatile device, or it's got non-volatile components early on, because of that, and we put everything into non-volatile memory. So non-volatile memory is more than NAND. This isn't an enormous number, but it's big enough that I wanted people to hear us tell you where it is, and you can go think about it. And you probably know who the customer is. I'm not going to disclose it here, but it is one customer and specialty dealer.
Joseph Lawrence Moore: I guess, all I would say Joe is sometimes.
Joseph Lawrence Moore: There can be a little bit of confusion and I felt that as I was talking to people over the last quarter. So the reason I said it was it's actually a non volatile divisor Scott non volatile components and early on because of that and we.
Joseph Lawrence Moore: We put everything into non volatile memory. So non volatile memory is more than NAND. This isn't an enormous number.
Joseph Lawrence Moore: But it's big enough that I wanted people to hear us.
Joseph Lawrence Moore: Tal you, where it is and you can think about it and you probably know who the customer is I'm not going to disclose it here, but it is one customer in specialty DRAM.
Joseph Lawrence Moore: Got it. Thank you for that. And then on the Reliant business, can you talk about changes in that business as we sort of move into a lower level of utilization in trailing edge nodes? Do you see that kind of returning to more of a refurbished tools business where there's stuff that you're able to actually refurbish, and any ramifications we should think about for profitability? Yeah, I guess I'll just comment on that.
Joseph Lawrence Moore: Yes.
Tal: Got it. Thank you for that and then on the reliant business could you talk about changes in that business as we sort of move into.
Tal: A lower level of utilization and trailing edge nodes do you see that kind of returning to more of a refurbished tools business, where there is stuff that you are able to actually refurbish and any ramifications, we should think about for for profitability there.
Doug: Yeah, I guess I'll just comment on refer, and we haven't, we haven't, I would be surprised if we move back towards a customer's divesting of equipment from fabs and us being able to refurbish those tools. I think you can see, obviously, the ebbs and flows with demand for how many new tools we ship, but I think, I think it still remains mostly as a new tool trailing edge node business.
Tal: Yes, I guess I'll just comment on refer and we Havent, we havent I would be surprised if we move back towards a customer's divesting of equipment from Fabs and us being able to refurbish those tools I think you could see obviously, the ebbs and flows with demand of how many new tools, we shipped but I think I think it still remains.
Tal: Mostly it's a.
Tal: New tool trailing edge node business for us.
Stacy Aaron Rasgon: Our next question comes from... Our next question comes from Stacy Rasgon from Bernstein Research. Please go ahead with your question.
Great. Thank you.
Speaker Change: Thanks, Joe.
Speaker Change: Yes.
Speaker Change: Our next question comes from.
Speaker Change: Our next question comes from Stacy <unk> from Bernstein Research. Please go ahead with your question.
Stacy Aaron Rasgon: Hi guys, thanks for taking my questions. Doug, I wanted to go back to something you just mentioned here about the relative capital intensity of upgrades. (inaudible)
Stacy: Hi, guys. Thanks for taking my questions. Doug I wanted to go back to something you just mentioned here around the relative capital intensity of upgrades.
Stacy: Versus greenfield investments for NAND, as we get into 'twenty five of them.
Tim: Transcribed by https://otter.ai Sure, Stacy, I'll take that. I was actually the one that said, "The need to comment," Yeah, no problem. Well, I just wanted to own it in case you disagree, but it's, you know, here. I think you're thinking about it exactly right. I mean, the reason upgrades are so attractive for customers is the total WFE spend is lower. That's why, that's why they upgrade the installed base.
Stacy: The idea that you should take a larger share of upgrades, but am I thinking about this wrong or what are the absolute amount of <unk> and in.
Stacy: Grade driven cycle would be a lot lower if it wasn't a greenfield cycle like how do I think about the puts and takes of those two variables in the context of <unk>.
Stacy: NAND growth into 2025.
Stacy: Sure Stacy I'll take that I was actually the one that this is Tim.
Tim: You said the covenant, Doug, Yes, no problem.
Tim: I just wanted to own it in case in case, you would disagree with that.
Stacy: I think youre thinking about it exactly right I mean, the reason upgrades are still attractive for customers is the total wip spend is lower that's why that's why they upgrade the installed base and and so for my comment was specifically about Lam outperformance relative to whatever <unk> is for the industry next year and so.
Tim: And so my comment was specifically about LAM's outperformance relative to whatever WFE is for the industry next year. And so in an upgrade-heavy cycle, which obviously we haven't had for the last two years, in that next cycle of manned upgrades, we're saying we would capture a higher percentage of whatever that WFE is. Now, we've said in the past that LAM's opportunity, actually, because of that much higher capture rate, is not so different.
Stacy: And an upgrade heavy.
Stacy: Cycle, which obviously, we haven't had for the last two years.
Stacy: In that next cycle of NAND upgrades, we're saying we would capture a higher percentage of whatever that Wi Fi is now we've said in the past that.
Lambs opportunity actually because of that much higher capture rate.
Is not so different.
Tim: In terms of revenue for every bit added to an upgrade versus a greenfield, W-Feed comes down, that's why it's attractive for customers. But for LAM, we capture almost the same amount of revenue because of the much higher capture rate. And so, you know, kind of...
Stacy: In terms of revenue for every bit added through an upgrade versus a greenfield.
Stacy: So WP comes down that's why it's attractive for customers, but for Lam, we capture almost the same amount of revenue because of the much higher capture rate and so.
Stacy Aaron Rasgon: You know, kind of, kind of both ways. So you're indifferent to, like, an upgrade cycle versus a greenfield.
Stacy: Kind of a year.
Stacy: So you are indifferent to like an upgrade cycle versus greenfield cycle.
Tim: Well, I would say, you know, the only thing I would say is that, because there's been lots of questions about whether, you know, LAM's market share and defense and others, we're not quite indifferent because the power of the installed base is that, again, when the customer's preferred path is to upgrade what they already have, means that the positions don't change. And so Lam's very strong position carries forward in that case So agnostic from a financial perspective, but obviously, our position in the industry continues to strengthen through each of those upgrade cycles.
Stacy: Well I would say the only thing I would say is that because there's lots been lots of questions about whether <unk> market share in defense and others, we're not quite indifferent because the power of the installed base has been again when the customers' preferred path is to upgrade what they already have.
Stacy: It means that the physicians don't change and so Lam is very strong position carries forward and that pace. So.
Stacy: Agnostic from a from a financial perspective, but obviously our position in the industry continues to strengthen through each of those upgrade cycles.
Stacy Aaron Rasgon: Got it, got it. That's helpful.
Speaker Change: Got it got it that's helpful.
Stacy Aaron Rasgon: Follow-up, again, I wanted to go back to the segment expectations in China, so I know this is what Doug said, you didn't have anything to tell us about segments, but if I look at your slide deck, on slide five, unless I'm reading it wrong, it does seem to suggest that, you see, it says sustained investment.
Speaker Change: Follow up again I wanted to go back to the segment expectations in China.
Speaker Change: I think what <unk> said, you didn't have anything to tell us on segments, but if I look at your slide deck.
Speaker Change: On slide five if im reading unless I'm reading it wrong. It does seem to suggest that you see.
Speaker Change: It's a sustained investment in domestic China for DRAM in calendar 'twenty, four and weakness in foundry logic. So is that actually what you are expecting the China degradation through the year in foundry logic and DRAM sustaining or is this slide by just reading the slide wrong.
Stacy Aaron Rasgon: Transcripts provided by Transcription Outsourcing, LLC.
Stacy Aaron Rasgon: This slide, I'm just reading the slides. Yeah, no, I... Stacy, you kind of have one customer in China for DRAM, so I got to be careful talking about that. China's going to fluctuate through the year, right? It's not going to stay at 42%, is the statement that I made. And it's going to modulate in every segment, I believe, in the Chinese region. Okay, the slide says to expect it led by human sustained investment.
Speaker Change: Yes no.
Speaker Change: Specially you kind of have one customer in China, DRAM. So I got to be careful talking about that China is going to modulate through the year, it's not going to stay at 42% as the statement that I made and it's going to modulate in every segment I believe in the China region.
Speaker Change: Okay. The slide says.
Speaker Change: <unk>.
Doug: led by HUM Sustained Investment in Jurassic China under DRAM. So that's it.
Speaker Change: Led by Asia, and sustained investment in China under DRAM.
Speaker Change: So that's not what's going to happen.
Stacy Aaron Rasgon: Unfortunately, I don't have the slides in front of me right now, Stacy. We're having some technical challenges. It's all going to modulate. Slide 5. Slide 5 when you pull it up.
Speaker Change: All right.
Speaker Change: Unfortunately, I don't have the slides in front of me right now since you were having some technical challenges, it's all going to module five slide five when you pull it up okay. Thank you guys.
Stacy Aaron Rasgon: Pull it up. Okay. Thank you, guys. Yeah.
Speaker Change: Yes, no problem. Thanks Stacy.
Stacy Aaron Rasgon: Yeah, no problems. Thanks, Stacy.
Vivek Arya: Our next question comes from Vivek Arya from Bank of America Securities. Please go ahead with your question.
Speaker Change: Okay.
Speaker Change: Our next question comes from Vivek Arya from Bank of America Securities. Please go ahead with your question.
Vivek Arya: Thanks for taking my question. I wanted to revisit your comment about SPARES doubling. How important is that data point? Like, what were you expecting instead versus the actual result? And how much does it increase your confidence about NAND recovery? Because you're not really increasing the WFE expectations for this year, right? So on the surface, this, you know, comment about SPARES doubling sounds, you know, like a very important data point, but I'm not sure how to quite put that in context of what it means for LAM this year.
Vivek Arya: Thanks for taking my question I wanted to revisit your comment about spares doubling.
Vivek Arya: How important is that the data behind that and what were you expecting instead.
Vivek Arya: The actual result, and how much does it increase your confidence about NAND company. Because you are not really increasing the wf fee expectations for for this year right. So on surface comment about doubling sounds like a very important.
Vivek Arya: Data point, but im not sure how to quite put that in context of what it means for land this year.
Tim: Okay, well, first of all, we didn't say spares would double; we said that it was double digit percent growth quarter on quarter in our spares revenue. So not double, but I think that, in general, the way we look at that and why we made that comment, obviously, it's positive for us to see SPARES move up. If you think about it, go back to our commentary about CSBG in the last few years. We've said SPARES revenue will grow year on year because the installed base itself grows. However, during this downturn, the cuts in fab utilization were so severe that we actually saw SPARES revenue come down, which surprised us a bit. So maybe it's your point of view.
Speaker Change: Okay, well first of all we do.
Speaker Change: Didn't say double we said that it was a double digit percent growth quarter on quarter in our spares revenue. So.
Speaker Change: Not doubling but.
Speaker Change: Think that in general I mean, the way, we look at that and why we why we made that comment obviously, a positive for us to see spares move up.
Do you think go back to our commentary previously about the SPG over last few years, we've said spares revenue will grow year on year, because the installed base itself grows however through this downturn Hudson fab utilization were so severe that we actually saw spares revenue come down which surprised us a bit so maybe to your point of expectations.
Vivek Arya: We knew that as soon as customers started to utilize the FABs and bring some of the tools back online, we would see spares increase. We said that would be the first sign that the end market was really starting to improve. And so the reason we called it out was that, obviously, it further confirms, I think, what you're hearing from our customers, which is that utilization is starting to improve. But it doesn't tie to WFP because utilization, what you have, is one issue.
Speaker Change: We knew that as soon as customers started to utilize the fabs and bring some of the tools back online we would see spares increase we said that would be the first sign.
Speaker Change: At the end of the market was really starting to improve and so the reason we called it out was.
Speaker Change: That that obviously, it's a it further confirms I think what youre hearing from our customers, which is that utilization is starting to improve it doesn't tie to AWP because utilization. What you have is one issue.
Vivek Arya: When you choose to spend more to either upgrade technology or add capacity is a second decision. We've said that that is likely still more of a 2025 event on the equipment spend side. But you have to get the first indication, which is utilization improvement and spares improvement, and then the rest will come.
When you choose to spend more to either upgrade technology or add capacity as the second decision. We said that that is likely still Moreover.
Speaker Change: 2025 event on the equipment.
Speaker Change: The equipment spend site.
Speaker Change: You have to get the first you have to get the first indication, which is utilization improvement spares, improving and then the rest will come.
Speaker Change: And then the other.
Doug: And then the other thing on the call, I believe Doug, you mentioned CSBG will be flat year or year. Did I not hear that properly, or did you mean it sequentially, or, you know, did you mean it for this calendar year? Because if it is for this calendar year, that, you know, implies pretty strong mid-teens growth in the second half. So, if you could clarify what you said about CSBG growth and whatever time frame you were referring to.
Speaker Change: Being on the call I believe Doug you mentioned <unk> will be flat year on year or did I not payback properly or did you mean sequentially or did you mean it for this.
Calendar year, because if it is for the calendar year that implies pretty strong kind of mid teens growth in the second half. So if you could clarify what you said about <unk> growth and what whatever.
Speaker Change: Whatever timeframe you were referring to.
Vivek Arya: Yeah, I said flat-ish, Vivek, you know, plus or minus flat. And by the way, that's not a new disclosure. We said that last quarter.
Speaker Change: So I said flat ish.
Speaker Change: Plus or minus flat.
Speaker Change: By the way that's not a new disclosure, we said that last quarter as well.
Doug: for this calendar year or for... Correct, for this calendar year, yes. 24 over 20 votes in the back. Okay, thank you.
Speaker Change: For this calendar year or four correct for this calendar year, yes.
$420 in the back half.
Speaker Change: Got it okay. Thank you.
Speaker Change: Thanks Vivek.
Christopher Caso: Our next question comes from Chris Caso from Wolf Research. Please go ahead with your question.
Speaker Change: Our next question comes from Chris Caso from Wolfe Research. Please go ahead with your question.
Yes. Thank you I guess the first question is on DRAM.
Christopher Caso: Yes, thank you. I guess the first question is on DRAM. Could you perhaps talk about some of the moving parts that are going on with that right now? And I think in a previous question, you talked about the Chinese part.
Christopher Caso: Could you perhaps talk about some of the moving parts that are going on with that right now and I think in previous question you talked about the China part of DRAM expecting that to moderate through the year.
Christopher Caso: of D-RAM, expecting that to moderate through the year. You know, obviously, the direct revenue from HBM sounds good, but, you know, there's
Christopher Caso: Obviously, the direct revenue from HBM.
Christopher Caso: Is good but there's a broader capacity question going on in DRAM.
Tim: Transcripts provided by Transcription Outsourcing, LLC, fungible with HBM. Could you talk about, you know, what your expectations are for that as the Yeah, let me start.
Fungible with HBM could you talk about.
Christopher Caso: What's your expectations are for that as the year progresses.
Speaker Change: Yeah, Let me let me let me start I think just to address this one point about the fungibility of capacity.
Christopher Caso: I think just to address this one point about the fungibility of capacity. You're correct. Obviously, if you're looking at DDR5, I think we've made a couple of comments in the past, though. One, we're talking specifically about the additional tools that are needed to enable HBM. And so that's why we talk about our electroplating and our Indian silicon etch tools, because those are added to whatever capacity you might have for DRAM. You need to add those tools to make HBM possible.
Speaker Change: You are correct, obviously, if youre looking at DDR five and I think we've made a couple of comments in the past, though one were talking specifically about the additional tools that are needed to enable HBM and so that's why we talked about our electroplating and our.
Indian Silicon etch tools, because those are added to whatever capacity you might have for DRAM you need to add those tools to make HBM possible and so that's what we're seeing rise by three <unk> this year.
Tim: And so that's what we're seeing rise by 3x this year. On the other hand, when you go from conventional DRAM to HBM, our customers have talked about, and the industry has talked about, the much larger die size because you have to create the real estate that's needed to add the TSVs. And so while you may be able to translate some of the same DRAM equipment over to produce the same number of bits, you'll need more of that equipment as well.
Speaker Change: On the second side.
Speaker Change: When you add when you go from <unk>.
Speaker Change: Conventional DRAM to HBM are customers have talked about in the industry has talked about the much larger die size, because <unk> had to create the real estate that's needed to add the TSV and so while you may be able to translate some of the same DRAM equipment over to produce the same number of bits youll need more of that equipment as well.
Speaker Change: So those are the key drivers that you are moving.
Christopher Caso: So those are the key drivers as you're moving for additional spending growth as you move into HBM. As a follow-up, you made in your prepared remarks a comment talking about a billion dollars in revenue from Gatol. We talk about that in the context of, you know, where the overall opportunity for Gator all around is. Is that billion represent, you know, what you would consider to be Gatol around capacity? Is that just, you know, getting the processes started? You know, kind of where we are with Gatol around?
Speaker Change: For additional spending growth as you move into HBM DRAM.
Speaker Change: Okay got it.
Speaker Change: As a follow up you made in your prepared remarks, a comment talking about $1 billion in revenue from gate all around this year could you talk about that in context of.
Speaker Change: The overall opportunity is for gate all around is this.
Speaker Change: Is that $1 billion represent what's.
Speaker Change: What's considered to be gate all around capacity is that just kidding getting the process has started.
Speaker Change: Where are we with that gate all around ramps.
Tim: Yeah, I mean, I think we're really just starting at Gate All-Around. You know, our goal was a billion dollars of shipments into the Gate All-Around node this year. And it's across all of our types of products that help enable Gate All-Around smaller technology nodes. And so, you know, what we've said is that for every technology node, etch-in-depth intensity grows, and our SAM opportunity expands. And so, you know, Gate All-Around being an important node where there's a need for new tools from LAM, like in our Selective Etch product portfolio or in our ALD product portfolio that might not have existed to the same degree in prior nodes. And so those are the areas where we're seeing growth as well as just growth in the rest of our advanced technology products today.
Speaker Change: Yes, I mean, I think it's we're really just starting at the gate all around.
Speaker Change: Our comment was $1 billion of shipments into the gate all around nodes this year.
Speaker Change: And it's across all of our types of products that help enable gate all around smaller technology nodes. So.
Speaker Change: What we've said is that every technology node etch and dep intensity grows and our Sam opportunity expands and so gate all around being an important node, where there is need for new tools from Lam linking our selective edge product portfolio or in our <unk> product portfolio that might not have existed to the same degree in.
Speaker Change: Prior notes and so that's those are the areas where we're seeing.
Speaker Change: Growth as well as just growth in the rest of our advanced technology products and etch and depth.
Operator: Thank you, Chris. Operator, we'll take one more question.
Speaker Change: Thank you Chris. Thank you operator, we'll take one more question.
Brian Edward Chin: Our next and final question comes from Brian Chin from Steele. Please go ahead with your question. All right.
Speaker Change: Our next and final question comes from Brian Chin from Stifel. Please go ahead with your question.
Brian Edward Chin: Hi there. Thanks for sneaking me in.
Brian Edward Chin: Thanks for sneaking me in.
Tim: So the company's previously discussed an incremental one to one and a half billion increase in WFC for every 1% AI server penetration. Last year, given the underutilization of capacity and the focus on conversion activity, maybe the math was lower last year, but now that utilization rates for advanced foundry and DRAM nodes have recovered, do you see AI growth? I guess driving spending levels more consistent with that one to one and a half billion. And you already see that maybe playing out to some degree in your order backlog.
Brian Edward Chin: The company has previously discussed an incremental one to one 5 billion.
Brian Edward Chin: The increase in WSI for every 1% AI server penetration last year, given the underutilization of capacity and the focus on conversion activity, maybe the math was lower last year, but now that utilization rates.
Brian Edward Chin: For advanced foundry and DRAM nodes have recover do you see AI growth.
I guess driving spending levels more consistent with that one to one 5 billion.
Brian Edward Chin: And do you already see that may be playing out to some degree in your order backlog.
Brian Edward Chin: Yeah, Brian, we're not gonna talk about order backlog. But the statements we made, and you've got it right, which were for every percent that is an AI server versus an enterprise class server, because of the eight times DRAM, much bigger logic die, the GPUs, and the three times NAND, it's a billion to a billion and a half WFE. And that's absolutely still how we see it. And you're right, like, if things are underutilized, you don't need to spend nearly as much. But that's a temporary situation. Eventually, things will get back to being utilized. Okay.
Speaker Change: Yes, Brian we're not going to talk about order backlog, but the statements we made and you've got it right.
Speaker Change: Was for every percent that is an AI server versus an enterprise class server because of the eight times DRAM much bigger logic. The gpus in the three times NAND bits of $1 billion to $1 billion incremental Wi Fi and that's absolutely still how we see it.
Speaker Change: And but you're right like if things are underutilized, you don't need to spend nearly as much.
Speaker Change: But that's a temporary situation eventually if things get back to being utilized.
Speaker Change: Okay.
Tim: Okay, that's helpful. And then maybe just kind of a follow-up on the last follow-up. But again, of that $1 billion kind of shipment for Gale around in 2020 for the calendar year, how much of that is second-half weighted? Is it more kind of pilot production, or how much is it pilot versus high-volume?
Speaker Change: And then maybe just kind of a follow up on <unk>.
Speaker Change: Last follow up but.
Speaker Change: Again that $1 billion kind of shipment for Gail around in 2020 for calendar year <unk>.
Speaker Change: How much of that is second half weighted is it more kind of pilot production or how much is it pilot versus high volume.
Brian Edward Chin: Yeah, we're not going to give you color on exactly when we're shipping just because we figure that's more for our customers to talk about in terms of their expansion on those notes.
Speaker Change: Yes, we're not going to give color on exactly when we're shipping just because we think that's more for our customers' scorecard in terms of their expansion on those notes.
Tim: Okay, fair enough. More second half bias. Thanks.
Okay fair enough, thanks, Brian Ferguson more second half biased.
Brian Edward Chin: Thanks. Thanks, Brian. Thank you.
Speaker Change: Thanks, Brian.
Speaker Change: Thank you operator.
Unknown Executive: That concludes our remarks, guys. Thanks for joining the call.
Speaker Change: That concludes our remarks guys. Thanks for joining the call.
Operator: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining us. You may now disconnect your lines.
Speaker Change: Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.