Q4 2024 Lam Research Corp Earnings Call
that accompany today's call.
Unknown Executive: and Q&A include forward-looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filing. Please see accompanying slides in the presentation 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. This call is scheduled to last until 3 p.m. Pacific time. A replay of this call will be made available later this afternoon on our website.
Replay of this call will be made available later this afternoon on our website and with that I'll hand, the call over to Tim.
Ram Ganesh: And with that, I will hand the call over to Tim. Thanks, Ram. And good afternoon, everyone.
Timothy M. Archer: In the June quarter, Lam delivered another set of solid results, with revenues, profitability, and earnings per share all coming in above the midpoint of our guidance. Our CSBG business posted strong growth, with revenues up 22% sequentially, led by Reliant and Spares. On the manufacturing side, we achieved a key milestone in the quarter, with our Malaysian factory shipping its 5,000th chamber. This is the fastest ramp-up of a new manufacturing facility in LAM's history, and we remain on track to achieve our long-term cost reduction goals through an expanded global manufacturing and supply chain footprint.
Tim: Rob and good afternoon, everyone in the June quarter Lam delivered another set of solid results with revenues profitability and earnings per share all coming in above the midpoint of our guidance, our <unk> business posted strong growth with revenues up 22% sequentially led by reliant and spares.
Tim: On the manufacturing side, we achieved a key milestone in the quarter with our Malaysia factory shipping its 5000th Chamber. This was the fastest ramp of a new manufacturing facility in <unk> history, and we remain on track to achieve our long term cost reduction goals through an expanded global manufacturing and supply chain footprint.
Timothy M. Archer: As previously communicated, 2024 is a year of strategic investment for LAMP, where we are prioritizing product development for key technology inflections, global R&D infrastructure close to our customers, and digital transformation for operational efficiency at scale. We believe these investments will put LAM in a position to outperform as the industry moves into a period of multi-year WFE spending expansion. Now turning to WFE, we expect this year's spending to be in the mid $90 billion range.
Tim: As previously communicated 2024 is a year of strategic investment for Lam.
Tim: Where we are prioritizing product development for key technology inflections.
Tim: Global R&D infrastructure close to our customers and digital transformation for operational efficiency at scale.
Tim: We believe these investments will put land and are positioned to outperform as the industry moves into a period of multi year there'll be a few spending expansion.
Speaker Change: Now turning to <unk>.
Speaker Change: We expect this year's spending to be in the mid $90 billion range our customer.
Timothy M. Archer: Our customer investment profile is generally unchanged from our prior view, apart from slightly stronger domestic Chinese spending and additional demand related to the ramp of high bandwidth memory or HBM capacity. We see FoundryLogic, DRAM, and NAND investments all up on a year-on-year basis. Global spending on mature node technologies is expected to be roughly flat year on year. Looking ahead to 2025, we see a positive environment for continued growth in WFP spending. The power of AI as a transformative business tool is still yet to be fully realized.
Tim: Our investment profile is generally unchanged from our prior view.
Tim: From slightly stronger domestic China spending and additional demand related to the ramp of high bandwidth memory or HBM capacity.
Tim: We see foundry and logic, DRAM and NAND investments all up on a year on year basis.
Tim: Global spending on mature node technologies is expected to be roughly flat year on year.
Tim: Looking ahead to 2025, we see a positive environment for continued growth in <unk> spending.
Speaker Change: The power of AI as a transformative business tool is still yet to be fully realized.
Timothy M. Archer: Today, the focus on AI model training is driving strong demand for GPUs and HBMs. However, as AI use cases expand, we believe inferencing at the edge will spur content growth of low-power DRAM and manned storage in enterprise PCs and smartphones. Investments for AI-enabled edge devices play particularly well to LAM's strength. We anticipate that memory customers looking to scale capacity and lower bid costs will bias WFP spending toward technology upgrades of the installed base.
Speaker Change: Today, the focus on AI model training is driving strong demand for Gpus and HBM. However.
Speaker Change: However, as AI use cases expand we believe inferencing at the edge will spur content growth of low power, DRAM, and NAND storage and enterprise Pcs and smartphones.
Speaker Change: Investments for AI enabled edge devices play, particularly well to Lam strengths.
Speaker Change: We anticipate that memory customers.
Speaker Change: Looking to scale capacity and lower bit cost will bias <unk> spending towards technology upgrades of the installed base.
Timothy M. Archer: For NAND, the etch and deposition intensity of upgrades is significantly higher than in a greenfield investment. When you consider LAM's sizable installed base and memory, including roughly 7,500 high aspect ratio dielectric etch chambers for NAND alone, we are positioned to outgrow overall WSE when customers upgrade existing memory production lines to next-generation nodes. Longer term, etching deposition is set to play an increasingly vital role in the industry's efforts to develop faster, more power efficient, and lower cost semiconductors to serve AI-related applications.
Speaker Change: For NAND, the etch and deposition intensity of upgrades is significantly higher than in a greenfield investment.
Speaker Change: When you consider Lam sizable installed base of memory, including roughly 7500 high aspect ratio dielectric etch chambers for NAND alone. We are positioned to outgrow overall WSI when customers upgrade existing memory production lines to next generation nodes.
Speaker Change: Longer term.
Speaker Change: <unk> deposition are set to play an increasingly vital role in the industry's efforts to develop faster more power efficient and lower cost semiconductors to serve AI related applications.
Timothy M. Archer: By delivering critical solutions for atomic-level device scaling, new materials innovation, and advanced packaging integration, we see tremendous opportunity for LAM to expand our served market and increase our share at each successive process technology node. To this end, our R&D focus is yielding exciting new products, including this year our first direct power coupled conductor edge tool with matchless power source and bias. Known as Direct Drive, this new power source uses solid-state drivers to stabilize the plasma in the etch chamber 500 times faster than current industry standards.
Speaker Change: By delivering critical solutions for atomic level device scaling.
Speaker Change: New materials innovation and advanced packaging integration, we see tremendous opportunity for Lam to expand our served market and increase our share at each successive process technology node.
Speaker Change: To this end our R&D focus is yielding exciting new products, including this year, our first direct power coupled conductor etch tool with Matchlist power source and bias.
Speaker Change: Known as direct drive this new power source use of solid state drivers to stabilize the plasma in the etch Chamber 500 times faster than current industry standards.
Timothy M. Archer: By combining direct power coupling with LAM's unique plasma pulsing capabilities, our latest ConductorEdge systems are delivering best-in-class performance for newly emerging 4F-squared DRAM applications. In 4F-squared devices, the nature of the bit line placement requires precise etching of ultra-small, high-aspect-ratio silicon structures to avoid device shorts or leaking. With direct power coupling and plasma pulsing, Lam connects vertically-oriented 4F-squared transistor architectures with unprecedented depth uniformity and profile control.
Speaker Change: By combining direct power coupling with lambs unique plasma pulsing capabilities. Our latest conductor etch systems are delivering best in class performance for newly emerging for F squared DRAM applications in.
Speaker Change: In Forest square devices, the nature of the deadline placement requires precise etching of ultra small high aspect ratio of silicon structures to avoid device shorts or leakage.
Speaker Change: With direct power coupling in plasma pulsing lamb connects to vertically oriented for F squared transistor architectures with unprecedented depth uniformity and profile control.
Timothy M. Archer: Similarly, Conductor Etch is becoming a critical enabler for EUV patterning for gate all-around and DRAM due to the need to reduce edge placement error for nodes below 2 nanometers. The requirement is for roughly 40% tighter control than at 5 nanometers. Our new Conductor Edge tool delivers a 30% reduction in feature roughness, which is one of the main contributors to edge placement errors. In addition, we can achieve one to two orders of magnitude improvement in defectivity for a given EUV dose, further helping customers reduce the overall cost and improve the capability of the EUV patterning process.
Speaker Change: Similarly, conductor etch is becoming a critical enabler for <unk> patterning for gate, all around and DRAM due to the need to reduce edge placement error.
Speaker Change: For nodes below two nanometers.
Speaker Change: The requirement is for roughly 40% tighter control and at five nanometers.
Speaker Change: Our new conductor etch tool delivers a 30% reduction in feature roughness, which is one of the main contributors to edge placement error.
Speaker Change: In addition, we can achieve one to two orders of magnitude improvement in deep activity for a given easy dose.
Speaker Change: Further helping customers reduce the overall cost and improve the capability of the <unk> patterning process.
Timothy M. Archer: Turning to NAMM, AI applications are driving demand for faster, higher-capacity enterprise SSDs. NAND makers are pursuing both vertical and lateral scaling of NAND arrays, as well as increasing bits stored per cell through the implementation of QLC and PLC technology. In support of these efforts, Lam is developing new dielectric etch and deposition capabilities. Earlier today, we announced Lam Cryo 3.0, Lam's third generation of cryogenic etch technology. Building on our learning from nearly 1,000 cryogenic etch chambers running in NAND fabs worldwide, this new patented cryogenic etch process delivers industry-leading control of the NAND memory channel hole profile.
Speaker Change: Turning demand AI.
Speaker Change: AI applications are driving demand for faster higher capacity enterprise Ssds.
Speaker Change: NAND makers are pursuing both vertical and lateral scaling of manned arrays as well as increasing bit stored personnel through implementation of TLC and plc technologies.
Speaker Change: In support of these efforts Lam is developing new dielectric etch and deposition capabilities.
Speaker Change: Earlier today, we announced Lam cryo three point of view.
Speaker Change: <unk> third generation of cryogenic etch technology.
Speaker Change: Building on our learnings from nearly 1000 cryogenic etch chambers running in NAND Fabs worldwide. This new patented cryogenic etch process delivers industry, leading control of the NAND memory channel whole profile.
Timothy M. Archer: When CRI-O 3.0 is deployed on our Vantech system, the etcher delivering the industry's highest available ion energy, we can create a 10 micron deep channel hole that has a top to bottom profile deviation of less than 10 nanometers, were less than 0.1% relative to its debt.
Speaker Change: When land prior three nodes deployed on our <unk> system.
Speaker Change: Edward delivering the industry's highest available ion energy, we can create a 10 micron deep channel hole that has a top to bottom profile deviation of less than 10 nanometers.
Speaker Change: We're less than 0.1% relative to its step.
Timothy M. Archer: Such tight profile control allows customers to increase bit density by packing more cells per layer while also having the flexibility to add more layers per tier. LAM Cryo 3.0 also addresses our industry's need for more sustainable solutions, delivering a 40% reduction in energy consumption per wafer and a 90% reduction in greenhouse gas emissions per wafer compared to non-cryogenic extracts. Deposition technology is also advancing quickly to support increased bit density and lower cost through a multi-tier stack.
Speaker Change: Such tight profile control allows customers to increase bit density by packing more cells per layer, while also having the flexibility to add more layers per tier lamb.
Speaker Change: <unk> three also addresses our industry's need for more sustainable solutions, delivering a 40% reduction in energy consumption per wafer.
Speaker Change: A 90% reduction in greenhouse gas emissions per wafer compared to non cryogenic answers.
Speaker Change: Deposition technology is also advancing quickly to support increased bit density and lower cost through multi tier stacking.
Timothy M. Archer: Polysilicon and tungsten gap fill materials have typically been used to enable tear stacking in high-layer count NAMs. Integration of these materials, however, has resulted in poor control of critical dimensions and overlay, negatively impacting yield and performance. Lam's innovative PE-CVD based pure carbon gap fill process provides an attractive alternative material.
Speaker Change: Polysilicon in tungsten gap fill materials have typically been used to enable tier stacking in high layer count NAND.
Speaker Change: The integration of these materials. However has resulted in poor control of critical dimensions, and overlay negatively impacting yield and performance.
Speaker Change: <unk> innovative <unk> based pure carbon gap fill process provides an attractive alternative material.
Timothy M. Archer: With a unique combination of high etch selectivity, superior mechanical properties, and simplified dry post process removability, It also reduces the number of process steps required in some cases by approximately 50% compared to traditional approaches. Overall, etch and deposition are becoming increasingly critical to addressing the complex semiconductor requirements of a growing AI environment. We are excited by the breadth of opportunities we see ahead for the company, especially those created by technological inflections to gate all around, backside power delivery, advanced packaging, and dry EUV-resist processing.
Speaker Change: With a unique combination of high etch selectivity superior mechanical properties and simplified dry post process remove ability.
Speaker Change: It also reduces the number of process steps required in some cases by approximately 50% compared with traditional approaches.
Speaker Change: Overall.
Speaker Change: Etch and deposition are becoming increasingly critical to addressing the complex semiconductor requirements of a growing AI environment.
Speaker Change: We are excited by the breadth of opportunities. We see ahead for the company, especially those created by technology inflections to gate, all around backside power delivery advanced packaging and drive <unk> resist processing.
Timothy M. Archer: All of these are etch and deposition intensive, and each represents a billion dollar or higher growth opportunity for LAM. We look forward to sharing our progress on these fronts, as well as our long-term financial model, at our next Investor Day, which we are planning to hold in February 2025. With that, I'll turn it over to Tim.
Speaker Change: All of these are etch and deposition intensive and each represents a $1 billion or higher growth opportunity for Lam.
Speaker Change: We look forward to sharing our progress on these fronts as well as our long term financial model at our next Investor Day, which we're planning to hold in February 2025.
Bill: With that I will turn it over to bill.
Bill: Thank you Tim.
Douglas R. Bettinger: Thank you, Tim. Good afternoon, everyone, and thank you for joining our call today. We executed well in the June 2024 quarter. Our June quarter results came in above the midpoint or exceeded our guidance ranges for all financial metrics. We were pleased with the company's strong execution.
Bill: Good afternoon, everyone and thank you for joining our call today.
Bill: We executed well in the June 2024 quarter.
Bill: Our June quarter results came in above the midpoint or exceeded our guidance ranges for all financial metrics.
Bill: We were pleased with the Companys strong execution.
Douglas R. Bettinger: For fiscal year 2024, we achieved the highest gross margin percentage since the merging of LAM with Novelis in 2013, coming in at 48.2%, and we generated quite a strong pre-tax flow of approximately $4.3 billion for 29% of revenue. Let's look at the details of our June quarter results. Revenue came in at $3.87 billion, which was an increase from the prior quarter and over the midpoint of guidance. Our deferred revenue balance at the end of the quarter was $1.55 billion, which is a decrease of $194 million from the March quarter.
Bill: For fiscal year 2024, we achieved the highest gross margin percentage since the merging of Lam with novellus in 2013 coming.
Bill: Coming in at 48, 2% and we generated quite strong free cash flow of approximately $4 3 billion for.
Bill: For 2009% of revenue.
Bill: Let's look at the details of our June quarter results.
Bill: Revenue came in at $3 $87 billion, which was an increase from the prior quarter and over the mid point of guidance.
Bill: Our deferred revenue balance at the end of the quarter was $5 excuse me $1 55 billion.
Bill: Which is a decrease of $194 million from the March quarter.
Bill: Related to revenue recognized that was tied to customer advance payments.
Bill: As we sit here today I believe deferred revenue remained stable at these levels for the foreseeable future.
Douglas R. Bettinger: Related to revenue recognized that was tied to customer advance payment. As we sit here today, I believe deferred revenue will remain stable at these levels for the foreseeable future. Let's turn to the revenue segment detail. June quarter systems revenue and memory revenue were 36%, which was a decrease from the prior quarter level of 44%. The decline in the memory segment was mainly attributable to DRAM.
Bill: Let's turn to the revenue segment details.
Bill: June quarter systems revenue and memory was 36%, which was a decrease from the prior quarter level of 44%.
Bill: The decline in the memory segment was mainly attributable to DRAM.
Douglas R. Bettinger: DRAM came in at 19% of systems revenue compared with 23% in the March quarter, as investments in mature nodes declined in the June quarter. DRAM revenue reached a new record in fiscal year 2024, with spending focused on DDR5 and HBM enablement, as well as on the one-line notes. Non-volatile memory came in at 17% of our system's revenue, which was down from the March quarter level of 21%.
Bill: DRAM came in at 19% of systems revenue compared with 23% of the March quarter.
Bill: As investments in mature nodes declined in the June quarter.
Bill: DRAM revenue reached a new record in fiscal year 2024, with spending focused on DDR five NH BM enablement.
Bill: As well as on the <unk> node.
Bill: Non volatile memory came out at 70% of our systems revenue, which was down from the March quarter level of 21%.
Douglas R. Bettinger: And just a reminder, 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. NAND revenue was at a low point for this year, and I expect NAND investment to gradually improve as utilization rates return to more normal levels. And our customers slowly increased spending on conversions to 2XX and 3XX layer devices into the next year. The foundry segment represented 43% of our system's revenue, which was roughly flat with the percentage concentration in the March quarter of 44%. Growth in shipments for gate all around nodes was offset by a decline in mature node spending.
Bill: And just a reminder, we are characterizing one customer's investment in specialty DRAM as a non box a little investment.
Bill: Since it has a non volatile component in the device.
Bill: Net revenue was at a low point for this year and I expect NAND investment to gradually improve as utilization rates return to more normal levels.
Bill: And our customer slowly increased spending in conversions to <unk> and three Xx layer devices into the next year.
Bill: The foundry segment represented 43% of our systems revenue, which was roughly flat with the percentage concentration in the March quarter a 44%.
Bill: Growth in shipments for data all around nodes was offset by a decline in mature node spending.
Douglas R. Bettinger: The Logic and Others segment accounted for 21% of systems revenue in the June quarter, up from the prior level of 12%. The increase was driven by strength in mature node spending in China. With respect to the regional composition of our total revenue, the China region came in at 39%, down slightly from the prior quarter level of 42% and a little bit higher than our expectation from the previous earnings call. This was driven by domestic Chinese spending. The next largest geographic concentration was Korea, at 18% of revenue in the June quarter versus 24% in the March quarter.
Bill: The logic and other segment were 21% of systems revenue in the June quarter up from the prior level of 12%.
Bill: The increase was driven by strength in mature node spending in China.
Bill: With respect to the regional composition of our total revenue in the China region came in at 39%.
Bill: One slightly from the prior quarter level of 42% and a little bit higher than our expectation from the previous earnings call.
Bill: This was driven by domestic China spending.
Bill: The next largest geographic concentration was Korea at 18% of revenue in the June quarter versus 24% in the March quarter.
Douglas R. Bettinger: Taiwan accounted for 15% of revenue in the June quarter, which was an increase from 9% in the March quarter. The customer support business group revenue in the June quarter totaled approximately $1.7 billion, an increase of 22% from the prior quarter level and 14% higher than the June quarter in calendar 2023. CSBG revenue represented 44% of our June quarter revenues and reached the highest point since the end of calendar 2022, driven primarily by an increase in reliant systems revenue, followed by growth in spares. Our Reliant Systems revenue benefited from strength in domestic China spending for specialty and maternal.
Bill: Taiwan was 15% of revenue in the June quarter, which was an increase from 9% in the March quarter.
Bill: The customer support business group revenue in the June quarter totaled approximately one 7 billion.
Bill: An increase of 22% from the prior quarter level, and 14% higher than the June quarter and calendar 2023.
Bill: She SPG revenue represented 44% of our June quarter revenues and reached the highest point since the end of calendar 2022, driven primarily by an increase in reliant systems followed by growth in spares.
Bill: Our reliant systems revenue benefited from strength in domestic China spending for specialty and mature nodes.
Bill: <unk> revenue increased largely due to continued improvement in utilization at our memory customers as well as a little bit of inventory stocking.
Douglas R. Bettinger: Spares revenue increased largely due to continued improvement in utilization at our memory customers, as well as a little bit of inventory stock. I do now think CSBG will grow modestly in calendar year 2020. Let's look at profitability. Our June quarter gross margin came in at 48.5%, at the top end of our guided range and slightly down from 48.7% in the March quarter. June quarter gross margins benefited from continued improvement in factory efficiencies, which largely offset the headwind we saw in customer mix that we talked about in the last earnings report. Operating expenses for the June quarter were $689 million, down marginally from the prior quarter amount of $698 million.
Bill: I do now think <unk> will grow modestly in calendar year 2024.
Bill: Let's look at profitability our June quarter gross margin came in at 48, 5% at the top end of our guided range and slightly down from 48, 7% in the March quarter.
Bill: June quarter gross margin benefited from continued improvement in factory efficiencies.
Bill: Which largely offset the headwind we saw in customer mix that we've talked about on the last earnings call.
Bill: Operating expenses for the June quarter were $689 million down marginally from the prior quarter amount of $698 million.
Douglas R. Bettinger: As Tim mentioned, we continue to prioritize spending on research and development to extend our technology differentiation as well as expand our product portfolio. I'd just point out that more than 70% of our total operating expenses were concentrated in research and development. The June quarter operating margin was 30.7% above the guidance range, mainly because of that strong gross margin performance. Our non-GAAP tax rate for the quarter was 11.5%.
Bill: As Tim mentioned, we continue to prioritize spending in research and development to extend our technology differentiation as well as expand our product portfolio.
Speaker Change: I would just point out that more than 70% of our total operating expenses were concentrated in research and development.
Tim: The June quarter operating margin was 37% above the guidance range, mainly because of that strong gross margin performance.
Speaker Change: Our non-GAAP tax rate for the quarter was 11, 5%.
Douglas R. Bettinger: We estimate the tax rate for the remainder of the calendar year 2024 to be in the low to mid-teens level, and this rate will fluctuate from quarter to quarter. Other income and expense for the June quarter was approximately $19 million, compared with $10 million in income in the March quarter. The increase in OI&E was primarily the result of fluctuations in the fair value of our venture investment. And, as we've talked about in the past, you will see variability in OI&E from quarter to quarter.
Speaker Change: We estimate the tax rate for the remainder of the calendar year 2024 to be in the low to mid teens level and this rate will fluctuate from quarter to quarter.
Speaker Change: Other income and expense for the June quarter was approximately $19 million in income compared with $10 million of income in the March quarter.
Speaker Change: The increase in R&D was primarily the result of fluctuations in the fair value of our venture investments.
Speaker Change: And as we've talked about in the past you will see variability in Oi on a quarter to quarter.
Douglas R. Bettinger: Let's pivot to capital return. We allocated approximately $382 million to share repurchases, and we paid $261 million in dividends in the June quarter. During the quarter, we announced that our board of directors approved a $10 billion share repurchase authorization.
Speaker Change: Let's start with the capital return, we allocated approximately $382 million to share repurchases and we paid $261 million in dividends in the June quarter.
Speaker Change: During the quarter, we announced that our board of directors approved a $10 billion share repurchase authorization.
Douglas R. Bettinger: We had $10.8 billion remaining in the plan at the end of the June quarter. For fiscal year 2024, we returned $3.7 billion, or 88% of pre-cash flow, which was in line with our long-term capital plans of returning 75% to 100% of free cash. June quarter diluted earnings per share were $8.14, close to the high end of our guidance range.
Speaker Change: We have 10 $8 billion remaining in the plan at the end of the June quarter.
Speaker Change: For fiscal year, 2024, we returned $3 $7 billion or 88% of free cash flow.
Speaker Change: Which was in line with our long term capital plan of returning 75% to 100% of free cash flow.
Speaker Change: Third quarter diluted earnings per share were $8 in 2014.
Speaker Change: Close to the high end of our guidance range.
Douglas R. Bettinger: The diluted share count was 131 million shares, on track with our expectations and down from the March quarter. Let's look at the balance sheet. Cash and cash equivalents totaled $5.9 billion at the end of the June quarter, up a little bit from $5.7 billion at the end of the March quarter.
Speaker Change: The diluted share count was 131 million shares on track with our expectations and down from the March quarter.
Speaker Change: First on the balance sheet cash and cash equivalents totaled $5 9 billion at the end of the June quarter up a little bit from $5 7 billion at the end of the March quarter.
Douglas R. Bettinger: Sales outstanding were 59 days in the June quarter, a slight increase from 57 days in March, to quarterly inventory terms of 1.9 times compared with 1.8 times in the prior quarter. We are making progress in bringing inventory levels down, and we'll continue to work on this throughout the rest of calendar year 2024. Our non-cash expenses for the June quarter included approximately $79 million for equity compensation, $74 million in depreciation, and $14 million in amortization. Capital expenditures were $101 million, flat with the March quarter level.
Speaker Change: Days sales outstanding were 59 days in the June quarter, a slight increase from 57 days in the March quarter.
Speaker Change: June quarter inventory turns of one nine times compared with one eight times in the prior quarter.
Speaker Change: We are making progress on bringing inventory levels down and we will continue to work on this throughout the rest of calendar year 2024.
Speaker Change: Our noncash expenses for the June quarter included approximately $79 million for equity compensation.
Speaker Change: $74 million in depreciation and $14 million in amortization.
Speaker Change: Capital expenditures were $101 million flat with the March quarter level spending mainly centered on lab investments in the United States and Asia.
Douglas R. Bettinger: Spending mainly centered on lab investments in the United States and Asia, as well as manufacturing facilities in Asia, supporting our global strategy to be close to our customers' development and manufacturing locations. We ended the June quarter with approximately 17,200 regular full-time employees, which was flat with the prior quarter.
Speaker Change: As well as manufacturing facilities in Asia, supporting our global strategy to be close to our customers' development and manufacturing locations.
Speaker Change: We ended the June quarter was approximately 17200 regular full time employees, which was flat with prior quarter.
Douglas R. Bettinger: Let's turn to our non-GAAP guidance for the September 2024 quarter. We're expecting revenue of $4.05 billion, plus or minus $300 million, and gross margin of 47% plus or minus one percentage. This gross margin decline is reflective primarily of an unfavorable quarter-to-quarter change in customer mix. I expect this change to continue to be a slight incremental headwind in the December quarter. Operating margins of 29.5% plus or minus 1% Gross margin and operating margin, including the impact from ongoing transformation costs related to projects to improve our systems and operations.
Speaker Change: Let's turn to our non-GAAP guidance for the September 2024 quarter, we're expecting revenue of $4 <unk> 5 billion.
Speaker Change: Plus or minus $300 million.
Speaker Change: Gross margin of 47% plus or minus one percentage point.
Speaker Change: This gross margin decline is reflective primarily of an unfavorable quarter to quarter change in customer mix.
Speaker Change: I expect this change to continue to be a slight incremental headwind in the December quarter.
Speaker Change: Operating margins of 29, 5% plus or minus one percentage point.
Speaker Change: Gross margin and operating margin, including impact from ongoing transformation costs related to projects to improve our systems and operations.
Douglas R. Bettinger: As we communicated at the beginning of the year, we're focused on reengineering our business processes and systems to drive operational efficiencies and implement AI at greater scale. And finally, we're forecasting earnings per share of $8 plus or minus $0.75 based on a share count of approximately 131 million shares.
Speaker Change: As we communicated at the beginning of the year, we're focused on reengineering, our business processes and systems to drive operational efficiencies and to implement AI at greater scale.
Speaker Change: And finally, we're forecasting earnings per share of $8, plus or minus 75 based on a share count of approximately 131 million shares.
Douglas R. Bettinger: So let me wrap up. As we finish the first half of calendar year 2024, I am pleased that we were able to achieve the objectives we shared at the beginning of the year. We prioritize investment to extend our technology differentiation while driving operational improvement. We're encouraged that the SPARES business recovery is beginning, and upgrade activity should improve as we exit the calendar year. Longer term, LAM is well positioned to capitalise on the increase in etch and deposition intensity by delivering new capabilities for multiple new manufacturing inflections that we see ahead.
Speaker Change: So let me wrap up as we finished the first half of calendar year 2024, I was pleased that we were able to execute to the objectives. We shared at the beginning of the year.
Speaker Change: We prioritize investment to extend our technology differentiation will driver while driving operational improvements.
Speaker Change: Encourage the spares business recovery is beginning and upgrade activity should improve as we exit the calendar year.
Speaker Change: Longer term Lam is well positioned to capitalize the increase in etch and deposition intensity by delivering new capabilities at multiple new manufacturing inflections that we see ahead.
Douglas R. Bettinger: We look forward to talking to you in February at our planned Investor Day about the long-term opportunities for LAM to continue our outstanding performance in the semiconductor industry. Operator, that concludes our prepared remarks. Tim and I would now like to open up the call for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on the touch-tone phone. If you are using a speakerphone, please pick up the handset before pressing the keys.
Speaker Change: We look forward to talking to you in February at our planned Investor day about the long term opportunities for Lam to continue our performance in the semiconductor industry.
Speaker Change: Operator that concludes our prepared remarks, Tim and I would now like to open up the call for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Chris: Last quick question, Chris talk with one of the tax change.
Speaker Change: Okay. Thank you sorry, please pick up the handset before pressing the case.
Speaker Change: So Joe your question, Please press star and <unk>.
Operator: To withdraw your questions, please press star then two. Your first question comes from Tim Arcuri with UBS. Please go ahead. Thanks a lot.
Speaker Change: The first question comes from Tim Arcuri with UBS.
Speaker Change: Please go ahead.
Timothy Michael Arcuri: Doug, I wanted to ask about the service system mix in the guidance. So you said that the service, I thought you said that you now think it's going to grow modestly this year. But if I flatline service in September and December, it's up 8% year over year. So can you just clarify what you're thinking for service in the guidance? Yeah, Tim, we don't decompose the individual components of the guide, you know
Timothy Michael Arcuri: Thanks, a lot Doug I wanted to ask about the service system mix and the guidance. So you said that the service I thought you said that you now think it's going to grow modestly this year, but if I flatline service in September and December it's up 8% year over year. So can you just clarify what youre thinking for service in the guidance. Thanks.
Speaker Change: Yeah, Tim we don't decompose the individual components of the guide.
Speaker Change: <unk>.
Douglas R. Bettinger: I was clarifying that we now expect CSBG to be up a little bit for the year. It was particularly strong in the June quarter. Whether it is up, down, or sideways from that as we go forward, I'm not going to give you individual components of the forecast, but I do think for the year it's going to grow a little bit. Okay, great, Doug.
Speaker Change: I was clarifying we now expect <unk> to be up a little bit for the year. It was particularly strong in the June quarter.
Speaker Change: Whether it is up down or sideways from that as we go forward I'm not going to give you individual components of the forecast, but I do think for the year, it's going to grow a little bit.
Timothy M. Archer: Thanks. And then, Can you can you talk a little bit about just in DRAM? I think there's generally more excitement, Tim, about DRAM WFE than NAND among most investors out there about where it could go during this next peak. Obviously, you do very well in NAND, but in DRAM, you talked about a lot of the investments that you're making. Can you just talk about, I know your leverage of the advanced packaging part of the HBM dollars being spent, but that's still a pretty small piece of it.
Speaker Change: Okay, great. Thanks, and then.
Speaker Change: And then can you can you talk a little bit about.
Speaker Change: About.
Tim: Just in DRAM I think I think there's generally more excitement Tim about.
Speaker Change: DRAM <unk> NAND WSI among most investors out there about where it could go during this next peak, obviously, you do very well and demand but in DRAM.
Speaker Change: You did talk about lot of the investments that you're making can.
Speaker Change: Can you just talk about I know you are levered to the advanced packaging part of the HBM dollars being spent but that's still a pretty small piece of it. So can you just maybe give give.
Timothy M. Archer: Can you just maybe give us a chance to distill some of the view that you're not very levered to DRAM and give us a sense of maybe where you're investing and where you think you can gain share in DRAM? Thanks, Tim.
Speaker Change: To give a chance to kind of dispel some of the view that you're not very levered to DRAM and give us a sense of maybe where youre investing and where.
Speaker Change: You think you can gain share in DRAM.
Timothy M. Archer: As you said, we do very well in NAND, and we still think NAND's day is coming, as I said. We've seen some of those commentaries around enterprise SSDs, etc. But on the DRAM side, the reason we highlighted the progress we're making, especially in this conductor, is actually one, it's a new tool we've introduced. It has new capabilities that are very exciting for the industry, and it's really targeted toward the types of ultra-small structures that are going to exist in future DRAM nodes going forward. You know, Lam is the global leader in Conductor Edge, and so we're applying all of that expertise and learning we have towards future DRAM challenges.
Dan: Sure. Thanks, Dan.
Speaker Change: As you said, we do very well in NAND and we still think that day is coming as I said.
Speaker Change: With us we have seen some of that those commentaries around enterprise Ssds etcetera.
Speaker Change: But on the DRAM side the reason we highlighted.
Speaker Change: The progress, we're making especially in this conductor actually one it's a neutral we've introduced it.
Speaker Change: It's new capabilities that are very exciting for the industry and really targeted towards the types of ultra small structures that are going to exist.
Speaker Change: In future DRAM nodes going forward land is the global leader in conductor etch and so we're applying all of that expertise and learning we have towards.
Speaker Change: Future DRAM challenges.
Speaker Change: I think there is tremendous opportunity for us on those applications as I pointed out.
Timothy M. Archer: And I think there's tremendous opportunity for us in those applications, as I pointed out. But on the other side of it, you know, a lot of the excitement around DRAM is related to HBM. And there, as you commented, we play extremely well with our strong position in both TSV etching as well as TSV electroplating. And I think that we won't see any change in that strong position going forward.
Speaker Change: Other side of it you know a lot of excitement around DRAM is related to HBM and there as you commented we play extremely well with our strong position in both TSV at Jamie as well as the TSV Electroplating and I think that we don't see any change in that strong position going forward. So we get the benefit both from the scale.
Timothy M. Archer: So we get the benefit both from the scaling and architectural changes that are occurring in DRAM going forward and from the advanced packaging and HBM-related expansion. And all of these, on both of those sides, are multiplied by the fact that you get fewer bits per wafer, and everybody recognizes that you're going to need a lot more DRAM wafers processed going forward. And ultimately, that translates into more equipment from Lam. Thank you, Tim.
Speaker Change: Linear and architectural changes that are occurring in DRAM going forward.
Speaker Change: And from the advanced packaging and HBM related expansion and all of these on both of those sides are multiplied by the fact that you.
Speaker Change: You get fewer bits per wafer and so everybody recognizes youre going to need a lot more DRAM wafers process going forward and ultimately that translates into more equipment from Lam.
Speaker Change: Thank you Tim.
Speaker Change: Thanks.
Speaker Change: The next question comes from Krish <unk> with Cowen <unk> Company. Please go ahead, yes.
Krish Sankar: Thanks, Tim. Today's question comes from Krish Sankar with Cowan & Company. Please go ahead. Yeah, hi, thanks for taking my question. My first one is for Doug.
Douglas R. Bettinger: I think Doug, you gave some color on China. I'm kind of curious how to think about China into the back half of this calendar year and into calendar 25. And along the same path, you kind of mentioned that December quarter could be a slight more gross margin headwind. Is there a way to quantify how much that how many basis points that headwind would be in December compared to the 47% in September?
Krish: Yes, hi, Thanks for taking my question. My first one is Doug I think Doug you gave some color on China kind of curious how to think about China and to the back half of this guidance.
Speaker Change: And into calendar 'twenty fives and.
Speaker Change: Along the same path you kind of mentioned that December quarter that could be a slight more gross margin headwind is there any way to quantify how much that how.
Speaker Change: How many basis points of headwind to be in December compared to 47% in September and then I had a follow up with it.
Krish Sankar: And then add a follow-up, Yeah, sure, Chris, I'll just remind you what we said last quarter; it hasn't really changed in this quarter. And what that statement was that for the year 2324, China is up. However, it is a somewhat first-half-weighted year this year, as opposed to last year; it was somewhat second-half-weighted. I'm not, you know, communicating. Hey, it's going away.
Speaker Change: Yes, sure Chris I'll, just remind you what we said last quarter. It Hasnt really changed this quarter and what that statement was for the year 'twenty three 'twenty four China's up.
Krish: However.
Speaker Change: Is there somewhat first half weighted year this year as opposed to last year. It was somewhat second half weighted.
Speaker Change: I'm not communicating hey, it's going away, it's not going away. It's just the spending because sometimes these customers are a little bit bigger than a bread box. It can be a little bit lumpy and thats very much what we're seeing in China I'm not ready to tell you exactly what next year looks like.
Douglas R. Bettinger: It's not going away. It's just the spending because, you know, sometimes these customers are a little bit bigger than a breadbox. They can be a little bit lumpy, and that's very much what we're seeing in China.
Douglas R. Bettinger: I'm not ready to tell you exactly what next year looks like from the Chinese region, but I do think it's going to be a pretty solid year, right? And then, Doug, any comment on the December quarter growth model? You know, I'm not going to give you a number, Krish, but I've been signaling for a while that because of customer mix, margin will have a little bit of a headwind going into the second half of the year. I just guided you to 47 in September and suggested that there might be a little bit of incremental headwind into December because of customer mix, as I said in the script. Got it, got it.
Krish: From the China region.
Krish: But I do think it is going to be a pretty solid year again, it's not going away. It's too soon for us to quantify things for next year, but 25 should be a pretty decent year in China Krish.
Krish: And then Doug I mean any color on the December quarter gross margin.
Speaker Change: Im not going to give you a number Chris but I've been signaling for a while because of customer mix.
Speaker Change: Margin will have a little bit of some headwind going into the second half of the year I just guided you to 47% in September and suggested that there might be a little bit of incremental headwind into December because of customer mix is what I said in the script.
Krish: Got it got it. Thank you for that Doug and then Tim just a quick follow up.
Krish Sankar: Thank you for that, Doug. And then, Tim, just a quick follow-up. You know, when I look at all the upcoming tech inflections, like gate all-around, backside power delivery, maybe down the road 3D DRAM, you spoke about within that, the transition to 4X squared DRAM from 6X squared. I'm kind of curious, is that really that material?
Speaker Change: At the upcoming Tech inflections like gate, all around bauxite power delivery, maybe down the road CEB that.
Speaker Change: You spoke with and that the transition to <unk> from <unk> I'm kind of curious is that really that material.
Timothy M. Archer: And if so, is there a way to size the opportunity for LAM at 4X squared? You spoke a little bit about conductive edge. I was kind of wondering if you could give some more color around how to quantify that number for the 4X squared architecture transition. Thank you.
Speaker Change: Is that a way to size the opportunity for lab headquarter.
Speaker Change: You spoke a little bit about funded to that just kind of wondering if you could give some more color around how to quantify that number for the <unk> architecture transition. Thank you.
Timothy M. Archer: Well, I don't think we're prepared to quantify it for you today, but I think that, you know, what my comment was, you know, we see each of these inflections, and 6S2 to 4S2 is a technological inflection that brings with it some important changes. I mean, one, the architectural layout of the device itself puts additional requirements on the edge, which I think we are very well suited to serve, and that's why we've been developing new conductor edge capabilities to target those new requirements.
Speaker Change: Sure well I don't think we're prepared to quantify it for you today, but I think that.
Speaker Change: My comment was we see each of these inflections and success squared before squared is a technology inflection that brings with it some important changes in the one.
Speaker Change: The architectural layout of the device itself puts additional.
Krish: Requirements on etch, which I think we're very well suited to serve.
Speaker Change: Why we have been developing a new conductor edge capabilities.
Speaker Change: So target dose set those new requirements. So there is some incremental opportunity there clearly the jumped to <unk> NAND is.
Timothy M. Archer: So, there is some incremental opportunity there. Clearly, the jump to 3D NAND is a much bigger step up in edge depth intensity, but, you know, our goal is to increase our SAM and grow our share at every technology node, so we look at whatever the new requirement is and how we can best address that. You also look at, as you look at DRAM going forward, another thing that's happening, whether it's 6S2 or 4S2, is the implementation of more EUV layers and how LAM plays in each. Again, anything where effectively pattern transfer etch is needed, the feature sizes are getting smaller, precision is required, these are the kinds of high-tech etching processes that LAM excels at.
Speaker Change: Much bigger step up in etch and dep intensity.
Speaker Change: Our goal is to increase our Sam and grow our share at every technology node. So we look at whatever whatever is the new requirement and how we can best address that you also look as you look at DRAM going forward. Another thing thats happening whether its success squares moved four square does the implementation of more EEV layers and how land play.
Krish: And.
Krish: Again anything where.
Krish: <unk>.
Krish: Pattern transfer etches. The feature sizes are getting smaller precision is required. These are the kinds of high tech etches that land excels at and so.
Timothy M. Archer: And so we look at participating in those. And then on the deposition side, of course, we talked about things like our dry EUV resist process and how that plays into EUV as DRAM and FoundryLogic transition from EUV to high-end AUV. And so we're just looking at every technology node as an opportunity for us to gain. Thanks, Chris. Your next question comes from Srinivas Pajjuri with Raymond James. Please go ahead.
Krish: We look at participating in those and then on the deposition side of course, we talked about things like our dry EEV resist process and how that plays into <unk> <unk>.
Krish: Graham and foundry logic transition from <unk> to high <unk> and so we're just looking at every technology node is an opportunity for us too.
Krish: <unk>.
Speaker Change: Thank you.
Craig: Thanks, Craig.
Krish: Okay.
Speaker Change: The next question comes from extremely high jewelry with Raymond James. Please go ahead.
Krish: Thank you Tim question on DRAM.
Srinivas Reddy Pajjuri: Thank you. Tim, I have a question about DRAM. Obviously, you know, the recovery has been ongoing, and HBM is a secular driver that you talked about, and you do have a very strong position in that market as well. Then I look at your revenue, I think it peaked around December 23, and it's been kind of declining on a sequential basis. I'm guessing some of that is maybe mature node DRAM. Just wondering if you're kind of at the bottom, and then given all the talk about HBM spending, I would think that it's gonna kind of, it should come back strongly at some point.
Krish: Obviously.
Krish: Sure.
Speaker Change: The recovery has been ongoing and HBM is a secular driver that you've talked about and you do have a very strong position in that market as well and I look at your revenue.
Speaker Change: I think it peaked around December of 'twenty, three and it's been kind of declining on a sequential basis I'm guessing some of that is maybe mature node DRAM.
Speaker Change: Just wondering if youre kind of at the bottom and then given all the talk about HBM spending.
Speaker Change: Think that it's kind of it's going to kind of show that at some point come back strongly so I just wanted to hear your thoughts on why it's been declining and how should we think about.
Srinivas Reddy Pajjuri: So I just wanna hear your thoughts on why it's been declining and what you should think about Inc., Srinivas Pajjuri, Christopher Moore, Srinivas Pajjuri, Douglas Bettinger, Christopher Muse, Srinivas Pajjuri, Christopher Caso, Vivek Arya, Harlan Sur, Ram Ganesh, Lam Research. Yeah, I think you generally have it pretty correct.
Speaker Change: In particular in DRAM revenue.
Speaker Change: Yes, I think you generally have a pretty correct. We had talked about the fact that some mature node DRAM spending was a little bit heavily concentrated in the second half of last year through early part of this year, even and that came off there was there was some of a resetting and what we can call it kind of traditional or conventional DRAM.
Timothy M. Archer: We had talked about the fact that some mature node DRAM spending was a little bit heavily concentrated in the second half of last year through the early part of this year even. And as that came off, there was some of a reset in what we would call kind of traditional or conventional DRAM. That is being picked up at some rate by the growth in HBM, but HBM itself is still in its ramping phase. And I think that as we look into 2025, it will become an even bigger driver of wafers in DRAM. And so I think that probably explains the profile.
Speaker Change: That is being picked up at some rate by the growth in HBM, but HBM itself is still in its ramping phase and I think that as we look into 2025 becomes an even bigger driver of.
Speaker Change: Wafers in DRAM, and so I think that that explains probably the profile and I think that as we look forward in the secular driver of HBM the impact on.
Srinivas Reddy Pajjuri: And I think that as we look forward to the secular drive of HBM, the impact on wafers, effectively how many wafers it requires to produce that number of bits due to the die size and due to the complexity of stacking these DRAMs means that we see DRAM demand for DRAM equipment continuing to grow through 2025 and probably well beyond. Okay. Thank you. And then on the CSBG business being up 20% sequentially and 22% overall.
Speaker Change: Wafer effectively how many wafers requires to produce that number a bit due to the die size.
Speaker Change: And due to the complexity of stacking. These these DRAM speeds that we see.
Speaker Change: DRAM demand for.
Speaker Change: For DRAM equipment continued to grow through 2025, and probably well beyond that.
Speaker Change: Okay got it. Thank you and then on the <unk> business being up 20% sequentially, 22%.
Srinivas Reddy Pajjuri: You know, I know you don't want to give us guidance going forward, at least for next quarter. I'm just curious about the sustainability of some of the trends that you're seeing, Tim. And then what does that mean for the overall WFE? Is this a prelude to something?
Speaker Change: I know you don't want to give us guidance going forward at least for next quarter I'm, just curious about the sustainability of some.
Timothy Michael Arcuri: Some of the trends that Youre seeing Tim.
Speaker Change: Tim.
Timothy Michael Arcuri: And then what does that mean for the overall <unk> is this a prelude to something.
Timothy M. Archer: And is this, you know, just utilization improving? And then, you know, does this usually follow, you know, in terms of, you know, WFE increasing or, you know, in terms of, you know, new tech migrations or, you know, capacity? So any color on that?
Timothy Michael Arcuri: If that utilization improving and then.
Speaker Change: Does this usually follow.
Speaker Change: In terms of.
Speaker Change: <unk> increasing.
Speaker Change: And in terms of new tech migrations or capacity additions so any color on that would be helpful.
Timothy M. Archer: Sure. It's a good question, and I guess, again, reminding people that the CSBG business includes our Reliant business, which sells into mature nodes, and it includes spares.
Speaker Change: Sure. It's a good question and I guess again reminding people that the.
Speaker Change: <unk> business includes our reliant business, which sells into mature nodes.
Timothy M. Archer: It includes upgrades and services. And so, you know, each of those components works somewhat differently. And we talked about this quarter particularly being strong as a result of Reliant and spares. And we are starting to pick up utilization in the memory fabs, as we've talked about. I talked a little bit about the fact that as we look forward, we think that upgrades will begin to become a much more prominent part of our customers' WFE spending if they look to upgrade memory fabs that really haven't been upgraded in quite some time because of the severe downturn that we've seen in those markets over the last few years.
Speaker Change: Fleet spares that includes upgrades.
Speaker Change: And.
Speaker Change: Services and so each of those components moved somewhat differently and we talked about this quarter, particularly being strong as a result of reliant and spares. We are starting to see a pickup in utilization in the memory Fabs as we've talked about.
Speaker Change: And I've talked a little bit about the fact that as we look forward we think that.
Speaker Change: Upgrades will begin to become a much more prominent part of our customers' wip spend meaningfully look to upgrade memory fabs that they really haven't been upgraded in quite some time because of the severe downturn that we've seen in that in those markets over the last few years and so I do think going forward you see a little bit more of a balance between those different segments of <unk>.
Timothy M. Archer: And so I do think going forward, you will see a little bit more of a balance between those different segments, upgrades coming stronger, and spares continuing to grow simply because our installed base itself continues to get bigger. You know, traditionally, we would have always said that we would expect the CSBG business to grow every single year, and that's simply a fact that every year we ship more tools, and those tools then require services and spares and basically present new opportunities for LAM to capture revenue from those systems. I think long term CSBG will be returning to that growth and, next year, probably much more biased towards the upgrades business as customers start to use memory fabrics. Thanks for tuning in.
Speaker Change: <unk> coming up stronger and spares continuing to grow simply because our installed base itself continues to get bigger.
Speaker Change: Traditionally we would have always said that we would expect the <unk> business to grow every single year and Thats simply effective every year, we ship more tools and those tools then require services and spares and basically present, new opportunities for Lam to capture revenue from those systems. So.
Speaker Change: Yes, I think long term <unk> will be returning back to the debt that growth and next year, probably much more biased towards the upgrades business as customers start to do.
Speaker Change: And we have upgrades.
Speaker Change: Okay.
Dan: Thanks, Dan.
Christopher James Muse: Thanks. Your next question comes from CJ Muse with Camden Fitzgerald. Please go ahead. Yeah, good afternoon.
Speaker Change: Your next question comes from C. J Muse with Cantor Fitzgerald. Please go ahead.
Douglas R. Bettinger: Thank you for taking the time to answer the question. I guess the first question I was hoping to focus on gross margins. You know, a couple quarters ago, Doug, you talked about kind of looking back to the June 23 quarter as normalized, but, you know, given the guide today, it sounds like that was conservative, and it's a higher number. So just, you know, as you think about calendar 25, when you get to kind of a normalized Chinese mix, and you normalize to reliance, what would be the kind of the base level we should be thinking about for gross margins?
Speaker Change: Yes. Good afternoon. Thank you for taking the question I guess first question was hoping to focus on gross margins.
Speaker Change: A couple of quarters ago, Doug you talked about kind of looking back to the June 23 quarter is normalized but given the guide today. It sounds like that was conservative and it's a higher number. So just as you think about calendar 'twenty five.
Speaker Change: As you get to kind of a normalized China mix and you normalize to reliant what would be kind of the base level, we should be thinking about for gross margins and then can you talk to what kind of accretion we should be thinking about related to Malaysia and or some of these higher margin upgrade.
Douglas R. Bettinger: And then can you talk to us about what kind of accretion we should be thinking about related to Malaysia and or some of these higher margin upgrade drivers? Yeah, CJ, I mean, you've alluded to some of the things that move gross margin. Obviously, yeah, I had previously anchored you and others back to that June quarter before the Chinese mix improved or strengthened, I guess, maybe not improved. As the baseline, you know, I guided it down a little bit in September, described customer mix softening a little bit relative to moving that, and I'm not suggesting, hey, a little bit more in December, potentially. It's all about customer mix. You know, too soon for me to guide you for next year.
Speaker Change: The drivers.
Speaker Change: Yes, Hey, Jeremy you've alluded to some of the things that move gross margin, obviously I had previously anchored.
Speaker Change: <unk> and other specs that June quarter, before the China mix improved or strengthened I guess, maybe not improved.
Speaker Change: As the baseline.
Speaker Change: <unk> guided it down a little bit in September describe customer mix softening a little bit relative to.
Speaker Change: Moving that and I'm, not suggesting a little bit more in December potentially it's all about customer mix.
Douglas R. Bettinger: But the thing you should be thinking about is what will that customer mix look like next year? I'm not sure yet, and I'm not ready to point you to numbers.
Speaker Change: Too soon for me to guide yet for next year, but the things you should be thinking about what does that customer mix look like next year Im not sure yet and I'm not ready to.
Christopher James Muse: But what will begin to show up in a more significant fashion is the accretion for the from those Asia factories as we ramp up output. That'll be a benefit to gross margins. So those are the moving pieces to be thinking about. The customer mix, I'm not entirely sure, but as we see a likely WFP environment next year that's somewhat stronger, increasingly, the incremental volume will be supported from those Asian factories, which should be beneficial to gross margins. Very helpful.
Speaker Change: Point, your two numbers, but what will begin to show up in a more significant fashion.
Speaker Change: Accretion for the from those Asia factories as we ramp.
Speaker Change: Output that'll be a benefit to gross margins. So those are the moving pieces to be thinking about the customer mix I'm not entirely sure.
Speaker Change: But as we see likely TWC environment next year, that's somewhat stronger increasingly the incremental volume will be supported from those Asia factories, which should be beneficial to gross margin feature.
Christopher James Muse: And then I guess as my follow-up, you spoke about the 7500 high aspect ratio etch chambers installed in the NAND industry. And just curious, as you see upgrades there, what kind of growth could that add to, you know, overall NAND, WFE, you know, specifically to you guys? Is there kind of a percentage we should think about? Any help there would be great.
Speaker Change: Very helpful and then I guess as my follow up.
Speaker Change: In your prepared remarks, you spoke to.
Speaker Change: 7500 highest spec ratio etch chambers installed in demand.
Speaker Change: Industry and just curious.
Speaker Change: As you see upgrades there.
Speaker Change #111: What kind of growth could that add to overall <unk> specific <unk>.
Speaker Change: Is there kind of a percentage we should think about any help there would be would be great.
Timothy M. Archer: We haven't talked about that, but the reason I included it was simply to point out that the installed base itself becomes a powerful driver of revenue during those upgrade cycles. And we do think that the next phase, we've seen higher memory fab utilization, particularly we talked about NAND beginning to improve last quarter, and that seems to be continuing as we move through the remainder of this year. You know, we get to next year, and the upgrades start in earnest.
Speaker Change: We haven't we haven't quantified that but the reason I included it was.
Speaker Change: Simply to point out the installed base itself becomes a.
Speaker Change: A powerful driver of revenue during those upgrade cycles and we do think that the next phase we've seen higher memory fab utilization, particularly when you're talking about the NAND beginning to improve last quarter and that seems to be continuing as we move through the remainder of this year, we get to next year and the upgrade starts.
Timothy M. Archer: Those tools represent opportunities for LAM to help our customers achieve, you know, both a technology upgrade and a bid cost reduction as they move forward, and that generates quite a lot of revenue for LAM relative to the amount of WFE spend. I'll remind people that the WFE capture rate of spending in an upgrade is significantly higher because etch and deposition represents so much of the upgrade. And so that was the reason we pointed out the slides for our install base. Thanks so much.
Ernest: Ernest those tools.
Ernest: And those stores represent opportunities for Lam to two.
Ernest: Help our customers achieve both.
Ernest: The technology upgrade and a.
Ernest: A bit cost reduction as they move forward and accrues quite a lot of revenue for Lam relative to the amount of <unk> spend.
Speaker Change: And people the WP lamb's capture rate of <unk>.
Speaker Change: Spending.
Speaker Change: In an upgrade is significantly higher because etch and deposition represents so much of the upgrade.
Speaker Change: So all of those reasons, we pointed out the size of our installed base.
Speaker Change: Thanks, so much.
Roger: Thanks Roger.
Stacy Aaron Rasgon: Thanks, CJ. This question comes from Stacy Rasgon with Bernstein Research. Please go ahead.
Speaker Change: Our next question comes from Stacy <unk> with Bernstein Research. Please go ahead.
Stacy Aaron Rasgon: Hi guys, thanks for taking my questions. First, I wanted to ask, like, if the NAN business next year is primarily driven by upgrades, what does that imply for growth? Like, would it be conceivable that NAND WFP could double year over year in calendar 25 that was purely upgrade driven, or would you need capacity additions to get there?
Stacy: Hey, guys. Thanks for taking my question.
Stacy: I wanted to ask if the NAND business next year is primarily driven by upgrades.
Speaker Change: What does that imply for growth like would it be conceivable that NAND DWP could double year over year in calendar 'twenty five it was purely upgrade driven or would you need capacity.
Speaker Change: The additions to get there and are you seeing any signs at all of capacity additions right now.
Speaker Change: It doesn't sound like it.
Timothy M. Archer: And are you seeing any signs at all of capacity additions? Doesn't sound like it. Well, Stacy, what I would say is that, obviously, we're not going to guide what NAMM WFE is next year. Frankly, I think it's still a developing story. But what we're trying to say is that, as customers move to upgrades, whatever WFE is spent, LAM will be the primary beneficiary of that WFE spend. And so that's a year in which, you know, my comment was that we would be confident that we would outgrow WFE in the NAN space if it was primarily upgrade spend. And, you know, upgrades represent a tremendously efficient way for customers to essentially advance their technology and lower their costs. And so we do think that will be the next phase of Mandon. Got it. I got it.
Speaker Change: Well Stacy what I would say is that obviously, we're not going to guide what NAND WP is next year frankly, I think it's still a developing story, but what we're trying to say is that.
Speaker Change: As customers move to.
Speaker Change: Upgrades.
Speaker Change: <unk> has spent land will be the primary beneficiary of that WP spin and so that's a year in which my comment was we would be confident that we would outgrow Wi Fi in the NAND space that was primarily upgrade spend.
Speaker Change: And upgrades represent a tremendous.
Speaker Change: Efficiently for customers to essentially advance our technology and lower debt costs and so we do think that will be the next phase of <unk> NAND investments based on our.
Speaker Change: Our thoughts.
Stacy Aaron Rasgon: I mean, maybe follow up on that just a little bit. If I looked at your current NAND outlook for this year, would you say that that outlook has gotten better or worse or stayed the same versus like 90 days ago? Probably hasn't changed much, Stacy.
Speaker Change #122: Got it got it I mean, maybe to <unk>.
Speaker Change: To follow up on that just a little bit.
Speaker Change: If you look at your current like NAND outlook for this year.
Speaker Change #110: Would you say that that outlook has gotten better or worse or stayed the same versus like 90 days ago.
Speaker Change: Probably hasnt changed much Stacy this is Todd.
Timothy M. Archer: This is maybe a little bit better. We're starting to see a little bit of an uptick in utilization, but I don't think it's meaningfully different, Stacy. Sorry guys, it's kind of in the background. Yeah, I can't hear the background noise.
Todd: Maybe a little bit better, we're starting to see a little bit of an uptick in utilization.
Stacy: But I don't think its meaningfully different spacing.
Stacy: So I got it so kind of in the noise.
Speaker Change: Yes kind of in the noise.
Stacy Aaron Rasgon: Okay, that's helpful. Thank you guys. Appreciate it. Thanks, Stacy. Your next question comes from Harlan Sur with J.P. Morgan. Please go ahead. Yeah, good afternoon. Thanks for taking my question. You know, given the strength of CSBG.
Stacy: Got it okay. That's helpful. Thank you guys appreciate it.
Speaker Change: Yes sure.
Speaker Change: Yes.
Harlan L. Sur: It looks like utilization by your customer base continues to rise. Did that also broaden out to start to include not just leading-edge logic, foundry, DRAM, and NAND but maybe also start to include mature and specialty fabs as well, or are at least mature and specialty utilizations at least stabilizing in line with some of the cyclical improvements that we're seeing in the semi-industry? Harlan, the Maturino stuff is still pretty soft, frankly.
Harlan L. Sur: The next question comes from Harlan sur with Jpmorgan. Please go ahead.
Harlan L. Sur: Yes. Good afternoon, thanks for taking my questions.
Harlan L. Sur: The strength.
Speaker Change #102: <unk> it looks like utilization by our customer base continues to rise.
Speaker Change #114: <unk> also broadened out to start to include not just leading edge logic.
Speaker Change: LNG DRAM and NAND, but maybe also start to include mature and specialty fabs as well or.
Speaker Change: At a minimum mature and specialty utilization at least stabilizing in line with some of the cyclical improvements that we're seeing in the semi industry.
Douglas R. Bettinger: And I think you understand what's going on. If you just listen to everybody else's earnings calls in the analog industrial automotive space, you know, there's still a lot of inventory out there. It's still relatively soft.
Speaker Change: I'll, let them mature enough stuff is still pretty soft frankly.
Speaker Change: And I think you understand what's going on just listen to everybody else's earnings calls in the analog industrial automotive space and Theres still a lot of inventory out there.
Harlan L. Sur: It's still relatively soft.
Speaker Change #100: The statements are mechanized utilizations have more to do with what we're seeing in the memory Fabs quite frankly.
Speaker Change: Well I appreciate that and then on HCM and advanced packaging I mean last night, we heard A&D talk about supply dynamics being tight on their AICPA supply next year co Los and HCM customers.
Douglas R. Bettinger: The statements we're making around utilization have more to do with what we're seeing in the memory fabs, quite frankly. I appreciate that. And then on HBM and advanced packaging, I mean, last night, you know, we heard AMD talk about supply dynamics being tight for their AI GPU supply next year, co-ops, and HBM. On the custom ASIC front, you know, we hear companies like Broadcom keep getting upside orders from their AI customers like Google. Last quarter, you talked about doing a billion dollars in advanced packaging and HBM revenues this year. That number moved higher. And is the team capacity constrained on advanced packaging systems?
Speaker Change: <unk> domestic funds, we hear companies like Broadcom keep getting upside orders from their AI customers like Google last quarter, you talked about doing $1 billion in advanced packaging and <unk> revenues. This year has that number moved higher and as the team capacity constrained on advanced packaging systems in these times.
Speaker Change #116: Sure for those total starting to stretch out.
Harlan L. Sur: And are your lead times here for those tools starting to stretch out? Well, it has moved higher, and we're not going to re-quantify it just yet, but it is, you know; we're seeing very strong demand in those areas. You know, I talked about the expansion of our global manufacturing supply chain footprint, and obviously, that's giving us more flexibility than we had during the last ramp. Our goal for all those investments was to be able to respond to this next few years of expansion better than we did in the expansion that we saw right around the time of COVID.
Speaker Change: While it has moved higher.
Speaker Change: We're not going to quantify it just yet but it is.
Speaker Change #103: Very strong demand in those areas I talked about the expansion of our global manufacturing supply chain footprint, and obviously, that's giving us more flexibility than we had during the last ramp our goal our goal through all of those investments was be able to respond.
Speaker Change: In this next.
Speaker Change: A few years of expansion better than we did in the the expansion that we saw right around the time of Covid. So.
Harlan L. Sur: And so, yeah, I think that that will position us. Sure, you're always a little bit short, and customers always drop in tools within your lead time, which keeps you busy. But I think that we're doing quite a nice job responding to the urgent requests from our customers. We actually like this.
Speaker Change: Yes, I think that that will position us.
Speaker Change #105: I'm sure you're always a little bit short and customers always drop in tools within your lead time, which keeps you busy but I think that we're doing quite a nice job responding to the urgent request from our customers. We actually like this I would say that generally from running the business. We like this environment, where all parts of our business.
Timothy M. Archer: You know, I would say that, generally, from running the business, we like this environment where all parts of our business are a little bit supply constrained. I mean, you hear a lot of our customers talking about being cautious about adding capacity. A more manageable long-term ramp of demand than sort of a short spike followed by periods of digestion that always create a little bit of chaos in the industry. Thank you, Tim. Thanks, Doug. Thanks, Harlan. Your next question comes from Atif Malik with Citi. Please go ahead.
Harlan L. Sur: A little bit supply constrained.
Speaker Change: Here are a lot of our customers talking about being cautious about adding capacity.
Speaker Change: All of our customers talking about having a little trouble getting tools I think that's a good place for us to be because it means that I think we're setting up for.
Speaker Change: A more manageable long term ramp of demand then.
Speaker Change: A short spike followed by again periods of digestion that always create a little bit of chaos in the in the industry.
Speaker Change: Thank you Kevin Thanks, Doug.
Ross: Thanks Ross.
Atif Malik: Your next question comes from <unk> Malik with Citi. Please go ahead.
Atif Malik: Hi, thank you for taking my question. Doug, if I look at the 2023 year-over-year China sales growth among the big five equipment makers, all of them are growing.
Malik: Hi, Thank you for taking my question, Doug If I look at.
Speaker Change #120: The 2023 year over year, China sales.
Speaker Change: Among the big five.
Lynn: Lynn makers.
Speaker Change: And all of them are up.
Speaker Change #182: Quite well many estimated that by 2050%.
Speaker Change: And in the U S and it appears that <unk>, the 20%, but you guys were down 11% total China sales in 2023.
Atif Malik: Transcribed by https://otter.ai, And the U.S. peers are up in the teens or 20%, but you guys were down 11%. Total Chinese Sales in 2023. And this year you're expecting China's sales to be up. So I'm just trying to understand the dynamics of last year. Were this just a function of maybe NAND spending and the NAND project not being active, or are there competing elements in China that are working against Atif? I'll remind you that perhaps our largest customer got restricted when the regulations came out, our NAN customer in China.
Speaker Change #106: And the city, you're expecting China sales to be up so I'm just trying to understand.
Speaker Change #166: The dynamics.
Speaker Change #130: Last year was this just a function of maybe.
Speaker Change #119: NAND spending and demand project not being active or are there competitive.
Speaker Change #113: <unk> elements.
Speaker Change #126: And China that are working against you.
Atif Malik: That customer was pretty strong in 22, went away in 23. So the year over year comparisons you're making, you've got to factor that in. And then the strength we're seeing, 23 to 24, is a different mix entirely. Really not any NAND in China to speak of, at least not domestic China.
Speaker Change #113: As if I'll remind you that perhaps our largest customer.
Speaker Change: Got restricted when.
Speaker Change: The regulations come out our NAND customer in China.
Speaker Change: That customer was pretty strong in 'twenty two.
Speaker Change #137: Went away in 'twenty three so the year over year comparisons Youre, making you got to factor that in.
Speaker Change: And then the strength, we're seeing in 'twenty three to 'twenty for us is a different a different mix and thoroughly.
Douglas R. Bettinger: I don't know if that helps you, but make sure you're thinking about that. Yeah, it's all mixed up. That's helpful. And then on the cryo improvement, Tim, that you mentioned. Are those improvements or not? Process Tool of Records is going to solidify your market share next year or the year after. Well, I think that all of these things, I mean, when you introduce something new, I mean, you know, I think what people are going to lose sight of is, you know, generally we're working several years ahead with our customers on R&D.
Speaker Change #129: Really not any NAND and China to speak of at least not domestic China I don't know if that helps you but.
Speaker Change: Make sure Youre thinking about that.
Speaker Change: Yes, it's all mix of that that's helpful and then.
Timothy Michael Arcuri: Crowley improvement Tim that you mentioned.
Speaker Change #107: Are those improvements are.
Timothy Michael Arcuri: Process tool of record is going to be.
Timothy Michael Arcuri: Solidify your market share next year or the year after.
Timothy Michael Arcuri: [laughter].
Speaker Change: Yes.
Speaker Change #168: Well I think that all of these things I mean, when you introduce something new I mean, I think what people can do.
Speaker Change: Lose sight of is generally we're working several years ahead with our customers on R&D I talked about the investments we're making we've made we're building labs close to our customers in.
Douglas R. Bettinger: You know, I talked about the investments we're making where we make; we're building labs close to our customers in different geographies. That's because, in many cases, we're engaging those customers a good five years ahead of production implementation.
Speaker Change: And different geographies, that's because in many cases, we're engaging those customers a good five years ahead of production implementation, that's not to say land cryo III it take five years to get into production, but.
Timothy M. Archer: Now, it's not to say LAM Cryo 3.0 is going to take five years to get into production, but it's not a technology that's ramping up, say, this year, but it really is looking at the needs of our customers one to two generations out and really solving their difficult edge challenges. So, sometimes when the benefits are so good, and I talked about the fact that we get about two and a half X the edge rate, tremendous profile control, customers will often pull that in sooner, but really, this is designed for kind of the 400 plus layer, which may ultimately end up being pulled in earlier than that, but that's... That's where you really start to see the needs for this kind of capability.
Speaker Change: It's not a it's not a technology that's ramping this year, but it really is looking out at the needs of our customers wanted two generations out and really solving their <unk>.
Speaker Change: Difficult challenges so.
Speaker Change #117: Sometimes when the benefits are so good and I talked about the fact that we get about two <unk> right.
Speaker Change #117: Tremendous profile control customers, often pull that in sooner, but really this was designed for kind of the 400 plus layer may ultimately end up being pulled in earlier than that but that's.
Speaker Change #117: That's where you really start to see the needs for for this kind of capability.
Timothy M. Archer: That's exactly what I was asking about, if it's 400 layers or 200 layers, so it sounds like... Yeah, and I think that what we you'll you'll see in our press release today, we talked a little bit about, you know, we're trying to chart the path across not only etch, but also our deposition films towards where the industry needs to go to get to 1000 layers, because we truly see over the next decade that that's where you want to get in terms of satisfying fit density and cost as NAND demand continues to expand with AI.
Speaker Change: Thanks.
Speaker Change: Dave was asking about if it's 400 layers of 200 million so it sounds like.
Speaker Change #108: Yes, and I think what youll.
Speaker Change: Youll see in our press release today, we talked a little bit about.
Speaker Change: We're trying to chart the path across not only etch, but also our physician films towards more of the industry needs to go to get to 1000 layers, because we truly see over the next decade.
Speaker Change: That's where you want to get in terms of satisfying.
Speaker Change: That density and cost is as NAND demand continues to expand with AI.
Speaker Change #118: Great. Thank you.
Speaker Change #136: Thank you.
Atif Malik: Great, thank you. Thank you. The next question comes from Toshiya Hari with Goldman Sachs. Please go ahead. Hi guys.
Speaker Change #132: The next question comes from Toshi Hari with Goldman Sachs. Please go ahead.
Speaker Change: Yes.
Toshiya Hari: Thank you so much for taking the question. I joined late, so I do apologize if these questions have already been addressed. Just on the third-generation cryo tool, Tim, that you spoke about, how is this technology or tool fundamentally different or better than your nearest competitor? I know you just spoke about some of the characteristics, but if you can clarify that for us to the extent you're comfortable, that would be really, really helpful.
Toshiya Hari: Hi, guys. Thank you so much for taking the question.
Speaker Change #127: So I do apologize.
Speaker Change #135: These questions have been addressed.
Speaker Change #128: On the third generation Cryo tool timber you spoke about.
Speaker Change #191: How is this technology or a tool fundamentally different or better than your nearest competitor I know you just spoke to some of the characteristics, but if you can clarify that for us.
Speaker Change #125: To the extent you're comfortable that would be really really helpful. And then my second question again on the <unk> side.
Toshiya Hari: And then my second question, again, on the CSBG side, probably one for Doug, and, again, you may have addressed this. For the full year, calendar year, I think you previously said flattish, plus or minus. Is that still the view, or given the strength you saw in June, should we be thinking about a higher growth rate for the full year? Thank you. That's what she said – maybe I'll take that one first, and then I'll let Tim come in on the 3.0 stuff. Yeah, you might have missed my scripted statements.
Speaker Change #125: One for Doug and again, you may have addressed this for the full year calendar year. I think you previously said flattish plus or minus is that still the view or given the strength you saw in June is that Patricia.
Timothy Michael Arcuri: So should we be thinking about a higher growth rate for the full year. Thank you Rajiv maybe I'll take that one first and then I'll, let Tim comment on the <unk> stuff you might've missed my scripted statements as we sit here today, we now expect that for 2024 <unk>. The word I used was modestly grow this year versus last year.
Douglas R. Bettinger: As we sit here today, we now expect that for 2024, CSBG – the word I used was modestly growing this year versus last year. And part of that is because we saw particular strength in the June quarter in Reliant. A little bit of improvement in SPARES, and as we think about the utilization trends that are likely occurring with our memory customers, I think SPARES continues to be decent, and we're optimistic that we'll start to see some of the upgrades spend that we've been talking about for a while.
Speaker Change #147: And part of that is we saw particularly strength particular strength in the June quarter and reliant.
Speaker Change #183: Little bit of improvement in spares and as we think about the utilization trends that are likely occurring with our memory customers I think spares continues to be decent.
Speaker Change #123: We're optimistic that we'll start to see some of the upgrade spend that we've been talking about for a while.
Speaker Change: Turn it over to Tim on the three that are sure to here.
Douglas R. Bettinger: I'll hand it over to Tim on the 3.0 stuff. Sure, Toshiya. I think, obviously, what I would just start with is the biggest difference between what we're delivering with LAM Cryo 3.0 and what our competitors do is in the results on the wafer, which we talked about pretty amazing 10 micron deep holes with less than a 10 nanometer taper from top to bottom and etch rates that are two and a half times conventional etching.
Timothy Michael Arcuri: I think obviously, what I would just start with is the biggest difference between what we're delivering planned cryo III <unk>.
Timothy Michael Arcuri: And what our competitors do is in the results on the wafer, which we've talked about.
Timothy Michael Arcuri: Pretty amazing 10, micron deep holes with less than a 10 nanometer taper from top to bottom.
Timothy Michael Arcuri: At rates that are two naphtha.
Speaker Change #133: Convention election so.
Douglas R. Bettinger: So, it's the results that are pretty amazing. We talked about the fact that this is based on some new surface chemistries that are enabled in our tool, and there's a whole combination of hardware issues, hardware configurations, and capabilities in our tool that I think allow us to achieve that result. And I can't go into all of those details today, but it is – I did allude to one of them, which is on our VANTEC system. The chamber design allows us to deliver a significantly higher ion energy than what is available from any other system available in the semiconductor industry, and that does play some role in etching these very, very deep holes with near perfect verticality.
Speaker Change #133: It's the results that are.
Speaker Change: Pretty pretty amazing you talked about the fact that the this is based on some new surface chemistries that are enabled in our tool and as a whole combination of hardware issue hardware.
Speaker Change: Configuration capabilities and actual but I think allow us to achieve that result, and I can't go into all of those details today, but it is.
Speaker Change #124: I did allude to one of them, which is on our <unk> system. The chamber design allows us to deliver a significantly higher ion energy than what is available from any other system available in the semiconductor industry and that that does play some role in entering these very very deep.
Speaker Change #124: They're with holes with near perfect criticality so.
Speaker Change #124: That's about all I can say today.
Timothy M. Archer: So, that's about all I can say. Thank you, appreciate that. Thanks for the chat. The next question comes from Jo Moore with Morgan Stanley. Please go ahead. Great, thank you. I wanted to ask you something, I mean, there's been a number of.
Speaker Change #121: Thank you I appreciate that.
Felicia: Thanks Felicia.
Felicia: The next question comes from Joe Moore with Morgan Stanley. Please go ahead.
Joseph Lawrence Moore: Great. Thank you.
Joseph Lawrence Moore: Wanted to ask you I mean, there's been a number of press.
Joseph Lawrence Moore: Transcripts provided by Transcription Outsourcing, LLC. Yeah, Joe. I think that, obviously, we don't know exactly what's going to happen either, just as you said, and so we can't really speculate on that. I mentioned in the last couple of calls that there are ongoing discussions all the time with the U.S. government and regulatory agencies. We're part of those discussions and will continue to be. I think in terms of a change in behavior by any of our customers, I don't think it's something that's noticeable, nor would it be something that we would be able to easily react to.
Joseph Lawrence Moore: <unk> concerns about export controls with talking about the foreign direct product rule, which doesn't seem like it would affect you, but also we're talking about entity list and I'm just wondering.
Speaker Change #141: Obviously, we don't know what would happen with any of that but are you seeing any different behavior from your China customers are you seeing them.
Joseph Lawrence Moore: Things in Apple things pushed things out because of any of those anxieties.
Joseph Lawrence Moore: Yes, Joe I think that.
Joseph Lawrence Moore: We we don't know exactly what's going to happen either just as you said and so we can't really speculate on that.
Speaker Change #140: I have mentioned in the last couple of calls that there are ongoing discussions all the time with the U S government and regulatory agencies were part of those discussions and we will continue to be.
Speaker Change #140: I think in terms of change in behavior by any of our customers I don't think its I don't think its something thats noticeable nor will it be something that we would be able to easily react too we've talked about how we deal with some of these new customers have emerged.
Joseph Lawrence Moore: We've talked about how we deal with some of these new customers that emerge with down payments and other things to make sure that we understand the... You know, those customers are viable customers, but beyond that, we service them like others at this point, as long as we can ship to them, and I would say lead times and responsiveness from our perspective are the same as we treat any customers at those times.
Joseph Lawrence Moore: With the down payments and other things too to make sure that we understand the.
Speaker Change: Those customers.
Speaker Change: Viable customers, but beyond that we serviced unlike others at this point as long as we can ship to them and I would say lead times and responsiveness from our perspectives statements.
Pete: Pete any customers at those sites.
Timothy M. Archer: Very helpful. Thank you. Thanks, Joe. Next question comes from Blaine Curtis with Jiffrey. Please go ahead. Hey, thanks, Shreera.
Speaker Change #115: Very helpful. Thank you.
Pete: Thanks Chuck.
Pete: The next question comes from Blayne Curtis with Jefferies. Please go ahead.
Blaine Curtis: Let me ask you a question. Actually, I know you had a couple on this, Doug, about the China business. I'm just kind of curious, you're, I think you qualified as a solid year next year, and I just didn't know what that meant. So, you know, I know you've been hesitant to kind of call China. I think you called it like flat, plus or minus, maybe up or down last time. Do you feel better about it, I guess, outside of, you know, this June?
Blayne Curtis: Hey, Thanks for letting me ask a question I actually I know you've got a couple on that Doug.
Speaker Change #143: On the China business.
Blayne Curtis: Curious I think you've qualified as a solid year next year I just didn't know what that meant so and I know you've been hesitant to kind of call. It China I think you called it like flat plus or minus maybe up or down last time or do you feel better about it I guess outside of this June at the other part of the question. Just if you can qualify a little bit I mean, you should have some idea of what youre going to ship it.
Blaine Curtis: That's the other kind of part of the question; you can qualify a little bit, I mean, you should have some idea of what you're going to ship at pay ahead. Transcribed by https://otter.ai. I don't know, Blaine, that I'm trying to communicate anything any different than we said on the last call, to be honest with you. We described this year as somewhat weighted towards the first half, really no chance of that.
Speaker Change #175: So assuming kind of a cleanup and it might be a little bit lumpy and or is China actually trending a bit better for you.
Speaker Change #180: I don't know when that I'm trying to communicate anything any different than we said on the last call to be honest with you.
Speaker Change #150: We described this year is somewhat first half weighted really no change to that.
Blaine Curtis: You know, the June quarter was maybe a little tiny bit stronger in China, but only a little tiny bit. It's too soon for me to for us to quantify 2025. But what I would tell you is I expect next year to be a solid year in terms of spending in China. I'm not going to give you a number yet because I'm not completely sure, but what I wouldn't want anybody to think is that it's going away, because it's not.
Speaker Change #143: The June quarter was maybe a little tiny bit stronger in China, but only a little tiny bit it's too soon for me to for us to quantify 2025, but what I would tell you is I expect next year to be a solid year in terms of spending in China, I'm not going to give you a number yet because I'm not completely sure.
Speaker Change #143: But what I wouldn't want anybody to think because it's going to work because it's not.
Blaine Curtis: Gotcha. And then I'm just kind of curious, you know, the broad strokes of growth for next year. I know you don't want to give a forecast. But in terms of the moving pieces there, I mean, it's pretty clear.
Speaker Change #143: Got you and then.
Speaker Change #145: I'm just kind of curious.
Pete: The broad strokes.
Speaker Change #162: Growth for next year, I know you don't want to give a forecast but in terms of the moving pieces. There I mean, it's pretty clear leading edge is strong DRAM spend strong I'm just kind of curious as you look into that forecast if you're willing to venture.
Blaine Curtis: Leading Edge is strong, DRAM's been strong. I'm just kind of curious, as you look into that forecast, if you're willing to venture a kind of view on the NAND. Yeah, I think man spending next year has to be [inaudible] Yeah, thanks, Blaine. The next question comes from Joe Quatrochi with Wells Fargo. Please go ahead. Yeah, thanks for taking the question. I wanted to try it on the man side again.
Speaker Change #176: Kind of a view on the NAND business.
Speaker Change #157: Yes, I think NAND spending next year has to be.
Speaker Change #161: Greater than it is this year, we're off two years of quite low spending in NAND.
Speaker Change #151: I don't know to what magnitude I expect next year, we expect next year youre going to see a lot of upgrades in men.
Speaker Change #151: But too soon for us to give you a number but I would be shocked if it's not stronger than it is this year in the past.
Doug: Thanks, Doug.
Brian: Yes, Thanks, Brian.
Jared <unk>: The next question comes from Jared <unk> with Wells Fargo. Please go ahead.
Joseph Michael Quatrochi: If we just think about, you know, your prior peak man revenue x, you know, customers that are obviously now restricted, can a capacity upgrade to just higher layer counts support your return to those levels, just given your higher share of etch and the higher etch and depth intensity for the transitions? Joe, you know, if it's just an upgrade, your spending will be lower than when capacity gets added. Obviously, our share of the wallet will be greater.
Jared: Yes, thanks for taking the question.
Jared <unk>: I wanted to try on the NAND side again.
Speaker Change #170: We just think about your prior peak NAND revenue ex <unk>.
Speaker Change #172: They are obviously not restricted king.
Speaker Change #142: It can capacity upgrades to this higher layer counts support your return to those levels just given your higher share of higher etch and dep intensity for the transitions.
Joseph Lawrence Moore: Hi, Joe.
Speaker Change #139: If it system upgrade your spending will be lower than when capacity gets added obviously our share of wallet will be greater.
Joseph Michael Quatrochi: You know, the fact that we lost a pretty large NAND customer in the China region, hard to replace that. I'm not ready to tell you what kind of next year is relative to previous peaks, but I know next year is going to be a stronger year than it is this year, for sure.
Speaker Change #139: Okay.
Speaker Change #153: The fact that we lost a pretty large NAND customer in the China region hard to replace that.
Speaker Change #179: Im not ready to tell you what kind of mixture is relative to previous peaks.
Speaker Change #153: But I know next year is going to be a stronger year than it is this year for sure yes, Joe I think that obviously, we're talking next year, it's very specific to the.
Douglas R. Bettinger: Yeah, and Joe, I think that, you know, obviously, if we're talking next year, it's very specific to, you know, the demand environment and the upgrade business in 2025. Longer term, I mean, I mean, we've laid out in our view that NAND spending rises. And so, you know, it's just a matter of the timeframe you're looking at. And from the standpoint of LAM's business, etch and depth components and the complexity of tier stacking, the precision that's required for the implementation of QLC and PLC technologies, all of these skew towards LAM's technical strengths and also SAM expansion opportunities.
Speaker Change #139: The demand environment in the upgrade business in 2025 longer term I mean, we've.
Speaker Change #139: We've laid out in our view is that NAND spending rises and so it's just a matter of a timeframe youre looking at and from the standpoint of lamps business.
Speaker Change #139: <unk> depth components and the complexity of tier stacking.
Speaker Change #139: The precision that's required for implementation of <unk> and plc technologies all of these skewed towards lambs technical strengths and also Sam expansion opportunities I talked about the PC DVD pure carbon gap fill process, which is a new addition to the portfolio for NAND scale.
Timothy M. Archer: And I talked about the PCVD pure carbon gap fill process, which is a new addition to the portfolio for NAND scaling technology going forward. And so, you know, if I go back and I look at where we were in the portfolio we had to sell, when people used to think of NAND as a very, very strong business for LAM, you know, we've expanded that portfolio quite substantially with the gap fill, the backside stress management, the AOV oxide gap fill process, plus the etch and stack depth that we've always had, as well as mineralization.
Speaker Change #139: <unk> technology going forward and so if I go back and I look at where we were in the portfolio. We had to sell when people used to think of.
Speaker Change #139: <unk> is a very very strong.
Speaker Change #139: Business for Lam.
Speaker Change #139: We've expanded that portfolio quite substantially with the gap fill backside stress management.
Speaker Change #139: Yes.
Pete: No.
Pete: Oxide gap fill process plus the engine and stack depth that we've always had as well as mineralization.
Pete: Amortization so it's.
Timothy M. Archer: So it's one of growth in NAND demand, but also growth in LAM's portfolio and served market as well as opportunities ahead. So I think that bodes well for us once the NAND business itself. Thanks for that helpful color. And just as a quick follow-up, you talked about global mature node spending being roughly flat this year. Can you help us understand just kind of how that breaks down? I mean, I think clearly, you know, the non-China pieces are pretty weak, but just any kind of color that you could help us parse that out. Yeah, you kind of answered your own question, Joe. You know, China's decent right now, but outside of China, it's pretty soft.
Pete: It's one of growth.
Pete: NAND demand, but also growth in lambs portfolio and served market as well opportunities ahead. So.
Pete: I think that bodes well for us once the NAND business itself starts to recover.
Speaker Change #152: Thanks for that that's helpful color and just as a quick follow up.
Speaker Change #187: You asked about global mature node spending being roughly flat. This year can you just help us understand just kind of how does that break down I mean, I think clearly the non China piece is pretty weak, but just any kind of color that you could help us parse that out.
Speaker Change #152: Yes.
Speaker Change #173: Third year on question Joe.
Speaker Change #148: Chinas decent right now outside of China, It's pretty soft and I think you understand what's going on there is inventory that's built up for those inventories still need to come down in the mature node analogue industrial automotive space.
Joseph Michael Quatrochi: And I think you understand what's going on. There is inventory that's built up, forward-based inventories still need to come down, and then mature node, analog, industrial, and automotive space won't meaningfully occur until that gets adjusted. So that's kind of what's going on. You sort of answered your own question.
Speaker Change #169: In investment won't meaningfully occur until that gets adjusted so that's kind of what's going on and you sort of answered your own question.
Joseph Michael Quatrochi: Fair enough. Thanks. Thanks, Joe. The next question is a follow-up question from Krish Sankar. Please go ahead.
Speaker Change #159: Fair enough. Thanks.
Joseph Lawrence Moore: Thanks, Joe.
Speaker Change #188: The next question is a follow up question from Krish Sanka. Please go ahead.
Krish Sankar: Hi, thanks for taking my follow-up. Doug, I just have a quick question on inventory. You spoke about bringing inventory terms down. I'm kind of curious, like how to think about inventory next year, especially if planning for a strong WFP year in 2025? Or do you think most of this inventory will be in a bin?
Krish Sankar: Yes, hi, Thanks for taking my follow up Doug I, just had a quick follow up question on inventory.
Krish Sankar: Look about branding and Lindsay Jonestown, well I'm kind of curious how to think about inventory next year, especially with <unk>.
Speaker Change #165: Planning for strong WMC, yet in 2025, how do you think most of this moment you'd be in a bin how do you think about we mentioned mix. Thank you.
Douglas R. Bettinger: How to think about, Yeah, listen, if you think back to when business declined for us last year, a big part of what fell off pretty rapidly was our NAND business. And so a lot of the inventory that we still have sitting on the balance sheet will support NAND. So assuming NAND is stronger next year, and it probably will be, we will consume that NAND inventory that's been sitting on the balance sheet for a while. What will offset that to a certain extent is growth elsewhere, where we'll need to procure new inventory.
Speaker Change #164: Yes listen.
Speaker Change #160: If you think back to when business declined for us last year, a big part of what's fell off pretty rapidly was our NAND business and so a lot of the inventory that we still have sitting on the balance sheet will support NAND so wouldn't.
Speaker Change #177: Assuming NAND is stronger next year than it will be we will consume that NAND inventory that's been sitting on the balance sheet for a while what will offset that to a certain extent as growth elsewhere.
Speaker Change #177: We will need to procure noon or so I'm not ready to give you an inventory forecast quite yet, but we're continuing to work as we go through the remainder of this year to kind of bring it down.
Douglas R. Bettinger: So I'm not ready to give you an inventory forecast quite yet, but we're continuing to work as we go through the remainder of this year to kind of bring it down. And then what we do with next year will depend largely on the timing of business, the mix of business, the geographic distribution of business. But we'd like to get turns back to where they historically have been, and they're not there yet.
Speaker Change #160: And then what we do with next year will depend largely on the timing of business the mix of business the geographic distribution of business.
Speaker Change #160: But we'd like to get turns back to where they historically have been in they are not there yet. So that's how you should be thinking about it Chris.
Krish Sankar: So that's how you should be thinking about it, Krish. Thank you very much. Very helpful. Thanks, guys. The next question is from Melissa Withers with Dirge Bank. Please go ahead.
Chris: Thank you very much very helpful. Thanks, Kevin.
Speaker Change #160: Thanks.
Speaker Change #174: The next question is from Melissa Windows with Deutsche Bank. Please go ahead.
Melissa Withers: Hi there, thank you for taking my question. I wanted to ask about the leading edge, and specifically Gate All-Around nodes. I don't think I heard an update to your $1 billion Gate All-Around revenue target in 2024. So is that still the case?
Melissa Windows: Hi, there. Thank you for taking my question I wanted to ask on the leading edge and specifically gate all around nodes I don't think I heard an update to your $1 billion gate all around revenues in 2024 target. So is that still the case and then as we think about those nodes ramping through next year like.
Melissa Withers: And then, as we think about those nodes ramping through next year, like, What's the trajectory of that ramp that we should be thinking about as you move from pilot lines into high volume manufacturing? Yeah, Melissa. I mean, we always make choices about what we do and don't include in the prepared remarks, and Gate All Around fell out this time, just no intended message. In fact, if I look at what happened in the quarter, you know, LAM, again, as we've talked on previous calls, is really positioned quite nicely with our forward-looking etch-in-depth portfolios.
Speaker Change #154: What's the trajectory of that ramp that we should be thinking about as you move from pilot lines into high volume manufacturing.
Melissa Windows: Yes, Thanks Melissa.
Speaker Change #189: We always we always make choices about what we do and don't included in the prepared remarks, and the gate all around the sell out this time just.
Speaker Change #156: No no no intended message in fact, if I look at what happened in the quarter Lam again, as we've talked on previous calls.
Speaker Change #156: Is really positioned quite nicely with our forward looking etch and depth portfolios.
Melissa Withers: You know, we really targeted those kinds of markets with new tools in Selective Etch, which is a market we hadn't been in before, and in fact, in the quarter, we had additional Selective Etch wins for Gate All Around at multiple customers. We targeted investment in ALD films that are specifically needed for things like spacers and Gate All Around, and we had additional wins in the quarter for those films. You know, often with Gate All Around, we think of those technologies – they're obviously different technologies but kind of occurring at the same node, the backside power delivery.
Speaker Change #156: We really target that those kind of markets with new tools and selective etch, which is market we hadn't been in before and in fact in the quarter. We had additional selective etch wins for data around at multiple customers.
Speaker Change #156: We targeted investment in ALG films that are specifically needed for things like spacers and gate all around and we had additional wins in the quarter for those films.
Speaker Change #156: Often with data all around we think of those technologies are obviously different technologies, but kind of occurring at the same node. The backside power delivery. That's an area that is really <unk>.
Timothy M. Archer: That's an area that is really right in our sweet spot in terms of deposition and etch, and in the quarter, we had wins in backside power and ALD oxide. And so, you know, I would say, net-net, given those wins and what you're hearing from the end markets about the need for high-power computing demand for AI, I think the $1 billion forecast we gave you, certainly as we move through next year, would be going higher. And so, again, that's a combination of rising demand but also a product portfolio that's both expanding and one in which we're winning share.
Speaker Change #156: Right in our sweet spot in terms of deposition and etch and in the quarter, we had wins in <unk> power and <unk> oxide.
Speaker Change #156: So I'd say net net I think given given those wins and what youre hearing from the end markets about the need for high power computing demand for AI.
Speaker Change #156: I think the $1 billion forecast, we gave you certainly as we move through next year would be would be going higher and so again thats a combination of rising demand, but also.
Krish Sankar: Product portfolios is both expanding and one in which we're winning share and so.
Timothy M. Archer: And so... There was no message about leaving it off, but thank you for asking the question so we could get that in right at the end. Yep, thank you. Great. Okay. Thank you. Awesome. Operator, I think that concludes our call. I want to thank everybody for joining us today. We'll look forward to seeing you at a variety of conferences and interactions as we go through the remainder of the quarter. I appreciate it. Conferences are concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change #178: There was no message about leaving it at that.
Speaker Change #181: Thank you for asking the question. So we can get that right it yet.
Pete: Okay.
Selman: Thank you Selman.
Speaker Change #167: My question Sir.
Speaker Change #167: Okay. Okay. Thank you.
Speaker Change #190: Awesome, operator, I think that concludes our call I want to thank everybody for joining US today, we look forward to seeing you at a variety of conferences in the interactions that we go through the remainder of the quarter.
Speaker Change #186: Got it.
Speaker Change #185: Thank you. This is now concluded. Thank you for attending today's presentation you may now disconnect.
Pete: [music].
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