Q1 2025 Lam Research Corp Earnings Call
Good day and welcome to the Lam Research September Q1 earnings Conference call.
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Speaker Change: Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Rob <unk>, Vice President of Investor Relations. Please go ahead Sir.
Speaker Change: Yeah.
Rob <unk>: Thank you and good afternoon, everyone.
Rob <unk>: Welcome to the Lam Research quarterly earnings Conference call with me today are Tim Archer, President and Chief Executive Officer and Doug.
Rob <unk>: Executive Vice President and Chief Financial Officer.
Rob <unk>: During today's call, we will chatter overview on the business environment and will review our financial results for the <unk>.
Rob <unk>: <unk> fourth quarter and our outlook for the December 2024 quarter.
Rob <unk>: The press release detailing our financial results.
Rob <unk>: It was distributed a little after one PM Pacific time.
The release can also be found on the Investor Relations section of the Companys website, along with the presentation slides that accompany today's call.
Rob <unk>: Today's presentation and Q&A include forward looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings.
Please see accompanying slides in the presentation for additional information.
Rob <unk>: Today's discussion of our financial results will be centered on a non-GAAP financial basis, unless otherwise specified.
Rob <unk>: A detailed reconciliation between GAAP and non-GAAP results can be found in the accompanying slides in the presentation.
Rob <unk>: This call is scheduled to last until three P M Pacific time.
Speaker Change: 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.
Tim Archer: Thank you Rami and good afternoon, everyone Lamb posted a strong September quarter with revenues and earnings per share higher than the mid point and profitability above the high end of the guided ranges.
Tim Archer: These results Mark the fifth consecutive quarter of revenue growth for the company.
Tim Archer: When combined with our solid outlook for the December quarter lands performance points to strong execution and industry environment, where NAND spending is yet to recover R.
Tim Archer: Our view on calendar year 2024, there'll be a fee remains mostly unchanged spin.
Tim Archer: Spending is expected to be in the mid $90 billion range. We continue to see AI driving strong investments in leading edge logic nodes as well as advanced packaging segments, including high bandwidth memory or HBM.
We expect domestic China W. D will be down in the second half relative to the first half with China's share of lambs overall revenue normalizing to the 30% range in the December quarter.
Tim Archer: Per our normal cadence, we will provide the full details of our 2025 WP outlook on our January earnings call. However, at this point our early view for next year is for Wip growth from the <unk> from 2020 fours mid $90 billion range more.
Tim Archer: More importantly, we see an outstanding opportunity for Lam to outperform overall wip growth in 2025.
Tim Archer: This is due to the critical role the etch and deposition play as fundamental enablers of higher performance more scalable semiconductor device architectures Lam is strongly positioned to benefit both from improvements in NAND spending.
Tim Archer: <unk> increased customer investments across multiple technology inflections.
Tim Archer: In NAND, we expect the spending recovery to be driven primarily by technology upgrades, which is a highly favorable dynamics for lam given our industry leading position in critical NAND processes in.
Tim Archer: In foundry logic and DRAM, we are set to benefit from growing investment in gate, all around backside power distribution advanced packaging and dry UV resist processing.
Tim Archer: Each of these advancements is more etch and deposition intensive and we've talked about our progress in these areas over the past several quarters, we expect to see increasing adoption across all four inflections in 2025.
Tim Archer: First on NAND. This segment has seen a prolonged cyclical downturn, but technology conversions to more advanced nodes will be critical to meeting the increased demand for high speed high capacity enterprise Ssds.
Tim Archer: As well as satisfying the need for low cost high capacity storage in client devices.
Tim Archer: Currently over two thirds of bids are still manufactured using older sub 200 layer technologies. We believe customers will continue converting this capacity to more advanced nodes in 2025.
Tim Archer: With the industry's largest installed base of <unk> NAND equipment Lamb should benefit disproportionately as these upgrades occur.
Furthermore, NAND manufacturers must also address the growing Challenge award line resistance. This sets up an important materials migration from tungsten to molybdenum are Molly which offers superior thin film resistivity simplifies the process of minimizing leakage and yields the lowest.
Resistance.
Tim Archer: Lam has more than a decade of learning embedded in our metal atomic layer deposition or <unk> applications with customer engagements on moly across NAND DRAM and foundry logic, we have production wins for the moly transition in NAND. It will scale in 2025 with foundry logic and DRAM ramp.
Tim Archer: To follow.
Tim Archer: Outside of NAND, we continue to build momentum and gate all around nodes with our selective etch tools, including recent wins in large foundry logic customer.
Tim Archer: In advanced <unk> patterning, our latest conductor etch tool with direct drive technology is gaining ground with broader adoption across key customers.
Tim Archer: In the evolution, the backside power distribution in foundry and logic, we see expansion of our served market and share in dielectric etch in copper plating in 2025 due to the introduction of additional via formation steps and new metal layers.
Tim Archer: Advanced packaging has been a highlight this year driven by the performance needs of advanced AI devices.
Tim Archer: Lam established early technological leadership in deposition for advanced packaging.
Tim Archer: Our unmatched experience and copper plating hardware design and process technology is enabling <unk> to deliver best in class co planarity uniformity and deep activity and high throughput.
Tim Archer: This has translated into significant market share gains in 2024 and strong momentum as we look ahead into 2025 or.
Tim Archer: Our sabre <unk> revenue has more than doubled this year as both the number of two five D and <unk> packages and the metal layer count per package has grown.
Tim Archer: As the complexity of advanced packaging continues to increase over time more stringent performance requirements should play to <unk> strengths.
Tim Archer: Finally.
Tim Archer: And our customer support business group or <unk>, we are seeing strong customer pull for productivity enhancement extend ability and reuse of lamps installed base of tools.
Tim Archer: In both DRAM and NAND there is intense focus on lowering <unk> cost through efficient reuse of the installed base.
Tim Archer: This has led to recent market share wins were upgrades of existing land installed base systems provided better value than the new build alternatives offered by competitors.
Tim Archer: Similarly, our customers focus on installed based productivity.
Tim Archer: Is driving greater adoption of lambs equipment intelligence services with an additional 500 process chambers.
Tim Archer: Subscribed in the past quarter.
Tim Archer: So to wrap up.
Tim Archer: As we look at the changes ahead for every leading edge device and every advanced package, we see more and more opportunity for Lam.
Tim Archer: AI era is here, we have transformed our business and expanded our product portfolio to prepare for this next generation of semiconductor industry growth.
Tim Archer: Our investments are in the early stages of paying off Im looking forward to sharing more about why we believe the best is yet to come for Lam at our Investor Day on February 19th in New York City.
Speaker Change: Now here is Doug.
Doug: Excellent. Thank you Tim good afternoon, everyone and thank you for joining our call today during what I know is busy earnings season.
Doug: Before I start I want to remind everyone that on May 21, 2024, we announced a 10 for one stock split.
Doug: Which was effective October 2nd of 2024.
Doug: All references made to share or per share amounts in my remarks have been adjusted to now reflect the stock split.
Doug: We delivered strong results in the September 2024 quarter, our revenue and earnings per share came in above the midpoint of our guided range.
Doug: <unk> gross margin and operating income percentage exceeded our guidance range.
Doug: I'm pleased with the company's continued strong revenue and profitability execution as well as our solid generation of free cash flows for the quarter, which came in at one $4 6 billion or 35% of revenue.
Doug: Let's look at the details of our September quarter financial results revenue for the September quarter was $4 $1 7 billion, which was an increase of 8% from the prior quarter.
Our deferred revenue balance at the end of the quarter was $2 $5 billion, an increase of $495 million from the June quarter.
Doug: This grew mainly due to customer advance payments.
Doug: I believe our deferred revenue balance will trend lower into calendar year 2025.
Doug: But you will likely continue to see fluctuation quarter to quarter.
Doug: Yeah.
From a segment perspective September quarter systems revenue and memory was 35%.
Doug: Roughly in line with the prior quarter level of 36%.
Doug: Within the memory segment, though DRAM increased coming in at 24% of systems revenue versus 19% in the June quarter.
Doug: DRAM spending was focused on technology upgrades to one alpha one beta and some initial ramp of one gamma node to enable DDR five and high bandwidth memory.
The non volatile memory segment represented 11% of our systems revenue, which was down from 17% in the prior quarter.
Doug: This decline is driven by the timing of one customers sequentially lower investment and specialty DRAM that we characterized as a non volatile investment because it has a non volatile component in the device.
Doug: Demand segment has experienced a prolonged down cycle compared to historical norms.
Doug: However, we anticipate that spending will increase in calendar 2025 as.
Doug: As utilization rates improved to more normal levels and our customers begin to invest in conversions.
Doug: <unk> 256, and 384 layer class devices.
Doug: The foundry segment represented 41% of systems revenue.
Doug: <unk> decreased from the percentage concentration in the June quarter of 43%.
In dollar terms spending was relatively unchanged quarter to quarter.
Doug: The logic and other segment was 24% of our systems revenue in the September quarter up from the prior quarter level of 21%.
Doug: The increase was driven by an uptick in both leading edge and specialty nodes logic devices.
Doug: Now I'll discuss our regional contribution of our total revenue.
Doug: The China region accounted for 37% down slightly from 39% in the prior quarter and a little bit stronger than we expected.
Doug: Most of our China revenue continued to come from domestic Chinese customers.
Speaker Change: And as Tim mentioned, we expect spending from this region will decline.
December quarter, I think perhaps to approximately 30% of december's revenue.
Our next largest geographic concentration was Korea at 18% of revenue in the September quarter, which was flat with the June quarter, and finally, Taiwan and the United States rounded out the remainder of the top four regions.
Speaker Change: Our customer support business group generated approximately $1 $8 billion in revenue for the September quarter.
Speaker Change: Up 4% from the June quarter, and 25% higher than the same period in 2023.
Speaker Change: The sequential dollar growth was split evenly between reliant systems and all other components of <unk>.
Speaker Change: The spare parts components <unk> continues to be the individual largest piece of this business unit's revenue.
Speaker Change: Let's turn to gross margin.
Speaker Change: The September quarter came in at 48, 2%, which exceeded our guided range.
Speaker Change: Gross margin decreased a little sequentially, however, reflecting a decline in customer mix as well as an increase in incentive compensation.
Speaker Change: These factors were partially offset by improved factory utilization as we continued to make progress on our operational initiatives.
Speaker Change: Operating expenses for September were $722 million up from the prior quarter amount of $699 million.
Speaker Change: The increase was partly due to growth in program spending as.
Speaker Change: As well as higher incentive compensation tied to the company's increased profitability outlook.
Speaker Change: R&D accounted for 67% of the total spending.
Operating margin for the current quarter was 39% slightly above the June quarter level of 37% and above the high end of our guidance range, primarily because of the higher revenue and continued strong gross margin performance.
Speaker Change: Our non-GAAP tax rate for the quarter was 13, 8%.
Speaker Change: Generally within range of our expectations.
Speaker Change: Our estimate is for the tax rate to continue to be in the low to mid teens range in the near term.
Speaker Change: Other income and expense for the September quarter came in at $13 million in income compared with $19 million of income in the June quarter.
The decrease in <unk> was primarily due to foreign exchange fluctuations.
Speaker Change: <unk> will continue to be susceptible to market related variations that could cause some level of volatility quarter to quarter.
Let me pivot to the capital return side of things.
Speaker Change: We allocated approximately $1 billion to open market share repurchases and we paid $261 million in dividends in the September quarter.
Speaker Change: I would just highlight that in August we announced a 15% growth in the dividend in line with our plan to deliver an annual growth in the dividend.
Speaker Change: And I just mentioned since paying our first dividend in 2014, we have now raised the dividend in 10 consecutive years.
Speaker Change: We have $9 8 billion remaining on our board authorized share repurchase plan.
Speaker Change: And we continue to track towards our long term capital return plans of returning 75% to 100% of our free cash flow.
Speaker Change: For the September quarter diluted earnings per share was <unk> 86.
Speaker Change: Above the midpoint of our guided range.
Speaker Change: The diluted share count was approximately $1 3 billion shares which was a reduction from the June quarter.
Speaker Change: On the balance sheet, our cash and cash equivalents totaled $6 1 billion at the end of the September quarter up from $5 9 billion at the end of the June quarter.
Speaker Change: The increase was largely due to cash from operating activities offset by cash allocated to share buyback dividend payments and capital expenditures.
Speaker Change: Days sales outstanding was 64 days in the September quarter, an increase from 59 days that we saw in the June quarter.
Speaker Change: Inventory at the end of the September quarter totaled $4 2 billion.
Speaker Change: Inventory turns improved to two one times from the prior quarter level of one nine.
We will continue to manage inventory levels to the best of our ability to align with customer demand.
Speaker Change: Our noncash expenses for the September quarter included approximately $80 million for equity compensation.
Speaker Change: $80 million in depreciation and $14 million in amortization.
Speaker Change: Capital expenditures for the September quarter were $111 million up $10 million from the June quarter.
Speaker Change: Capital spending was mainly centered on lab investments in the United States and Asia as well as manufacturing facility positions supporting our global strategy to be close to bulk customers development as well as manufacturing locations.
Speaker Change: We ended the September quarter with approximately 17700 regular full time employees, which is an increase of approximately 500 people from the prior quarter.
Headcount growth was predominantly in field and factory personnel to support increased tool installation as well as growing manufacturing activity levels.
Speaker Change: Let's now turn to our non-GAAP guidance for the December 2024 quarter.
Speaker Change: We're expecting revenue of $4 $3 billion, plus or minus $300 million.
Speaker Change: Gross margin of 47% plus or minus one percentage point.
Speaker Change: The gross margin guidance is reflective of a quarter to quarter headwind and customer mix.
Speaker Change: Operating margins of 30% plus or minus one percentage point.
This reflects our continued commitment to managing our expense level as we prioritize critical R&D investment areas.
Speaker Change: And finally earnings per share of <unk>, 87, plus or minus <unk> 10 based on a share count of approximately $1 two 9 billion shares.
Speaker Change: So let me wrap up we continue to execute well in 2024.
Speaker Change: I believe that's reflected in our September results as well as guidance for the December quarter.
Speaker Change: We're on track to achieve modest improvement in our operating leverage for the full calendar year.
Speaker Change: As we prioritize critical investments to extend our technology differentiation, while carefully managing our overall spending levels.
Speaker Change: The investments, we're making positions <unk> well to benefit from the architectural and materials inflections, we see ahead.
We believe that we will continue to gain traction and outperform the overall growth in Wi Fi in calendar year 2025.
Speaker Change: We continue to see 2025 as a growth year in both <unk> and more importantly lamps topline.
Speaker Change: Operator that concludes our prepared remarks, we would now like to open up the call for questions.
Speaker Change: Certainly.
Speaker Change: We'll now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: And our first question today comes from Tim Arcuri with UBS. Please go ahead.
Tim Arcuri: Thanks, a lot Tim Tim and Doug I know that you don't want to project 220, <unk> and I'm not asking you to give us a number but can you just talk about the puts and takes I guess, particularly around China.
Tim Arcuri: I mean, obviously theres going to be some additions to the entity list, but it seems like even a bigger factor might be the consolidation of some of this.
Tim Arcuri: Our legacy node stuff. It seems like there is a huge validation of a lot of these fabs that have been built that are ultimately connected to either Huawei are BYD. So can you just talk sort of conceptually about the puts and takes and particularly about China I mean, it's down about 10 points.
Speaker Change: Of your revenue.
Tim Archer: Sure Thanks, Tim and thanks for not pressing us on in early 2025 guide.
We are trying to we realize there's a lot of questions and we are trying to give some additional color where we can.
Tim Archer: We said that we believe year on year WC overall would be up next year, specifically our view for China WSI next year would be that it is lower.
Tim Archer: For all.
Tim Archer: You can pick all the variety of reasons that you may have just listed and debt as a percent of lambs total revenue China would represent a lower percentage next year.
Tim Archer: And this year.
Tim Archer: And so I think that's about all we can say right now obviously in January we'll give a lot more color on.
Tim Archer: The full market.
Speaker Change: Yes, just to add a little bit.
Speaker Change: Outside of China, though think about everything else going on leading edge foundry and logic continues to be quite the DRAM continues to be pretty robust with DDR five high bandwidth memory.
Speaker Change: What the trailing edge specialty nodes stuff does outside of China, I think as an industry work our way through the inventory positions. We're in so trends are actually pretty good.
Speaker Change: Most in most of the industries I'd, just remind you of that and I know that yeah, I think timna.
Maybe I think gets lost when we talk about percentages as we talked about a tremendous number of technology inflections and investments during my prepared remarks.
Speaker Change: None of which would actually be occurring in China. As a result of the either restrictions already in place of the technology nodes that they are at or the fact that.
I mean again NAND for instance.
Speaker Change: For us those upgrades would be generally occurring outside of domestic China.
Speaker Change: Nodes like gate, all around obviously are outside of domestic China and so when you think about percentages the stronger those trends are for Lam and for the industry. Then naturally that's why we see China continuing to trend lower as a percentage of our total revenue.
Speaker Change: Right. Thanks, and then just like Super Clicked up for you. So <unk> was up.
Speaker Change: It was better can you talk about that and I guess, maybe does that tie also into deferred being up a lot is that like reliant related things.
Speaker Change: Yeah, a little bit what you heard me say is the growth in <unk> was a combination of growth in reliant.
Speaker Change: Then everything else, so reliant was pretty strong.
Speaker Change: Again last quarter.
Speaker Change: So yes, that's part of it.
Speaker Change: Thank you.
Tim Arcuri: Yes, Thanks, Tim.
And our next question comes from Harlan sur with Jpmorgan. Please go ahead.
Harlan Sur: Hello, Good afternoon, Thanks for taking my question.
Harlan Sur: Last call you guys talked about NAND, utilizations, moving higher driving growth in spares.
Harlan Sur: Did you see that trend continue.
Harlan Sur: Into the September quarter, and you've talked about confidence on NWS unit growth outlook for next year.
Harlan Sur: The confidence level as saw on WSI spending growth outlook relative to that 490 days recall and are you starting to get some order and forecast visibility to support that.
Speaker Change: Yes, Harlan I think that.
Speaker Change: What I'd like to point out on NAND is it's a combination of things.
Speaker Change: We continue to see utilization being strong for the capacity that's in place, but what I was talking about in my prepared remarks was this need for what we would consider to be higher quality bps.
Speaker Change: Higher performance to meet the needs of of enterprise Ssds and.
Speaker Change: <unk> and other applications are now tied to sort of move in AI and so when we think about it. This is going to drive even if youre not looking as an industry to add a lot more bit capacity itself.
Speaker Change: Want to shift that two thirds of it is manufactured still in the one X X layer technologies youre going to shift that to no.
Speaker Change: <unk> that are taking advantage of things like.
Speaker Change: Sell under array or being able to <unk>.
Speaker Change: Molly transition, we talked about all of those things allow NAND manufacturer to be a lot more competitive for the for the parts of the market that are seeing a lot of strength and so.
Speaker Change: The reason that is so important for Lam as we play a really critical role and we capture a very high percentage of all of those upgrades and so our anticipation is that the industry will.
Speaker Change: We still in a recovery mode next year, but if most of the spending is directed towards technology upgrades and it's pulling in all of those things I just talked about that's right. We're lambs product portfolio plays.
Speaker Change: Plays its really up sweet spot and so that's why.
Speaker Change: We are optimistic on NAND, almost regardless of whether Wi Fi itself like rises a tremendous amount.
Speaker Change: It's really spending will be in our favor.
Yeah, No I appreciate that and then accelerated from Q dynamics, continuing very strong rate, obviously, that's putting the need from our HBM memory. As you mentioned last call you talked about driving more than $1 billion in HCM revenue. This year is that number even higher law at them.
Wondering if you can maybe quantify the HTM outlook for this year as we look into next year, although HCN bit supply is only going to represent 67% of total gift supply spinoff.
Todd for something like 20%, 25% of total DRAM wafer capacity right in that.
Speaker Change: <unk> itself was up 67% versus this year, how are you thinking about sort of the growth trajectory of your HBM in advanced packaging business next year and even over the next several years.
Yes, sure Harlan I think we will.
Speaker Change: We're not probably going to have a new milestone number but we did talk about this $1 billion achievement in our advanced packaging business really driven by the strength in AI.
Speaker Change: What I would say is since the last call that part of our business has continued to strengthen.
Speaker Change: Even beyond what we had originally thought I highlighted some of that in my commentary around the sabre <unk> the copper plating.
Speaker Change: It's just a very strong part of the business right now and I think the companies that have good exposure to it.
Speaker Change: Primarily companies like etch and deposition companies.
Speaker Change: We are seeing outsized benefit right now from that trend I don't think advanced packaging slows down anytime and from my view from my conversations with customers et cetera, It's an enabling technology, that's allowing system level performance that is very hard to achieve through.
Speaker Change: Chip chips themselves and the immediate requires really this architectural change so.
Speaker Change: We're very positive on advanced packaging next year and when we get to January we will will probably highlight a little bit more about what we see in terms of new numbers for that segment.
Speaker Change: Thank you Tim.
Tim: Thanks, Sean.
Speaker Change: And our next question comes from Toshi Hari with Goldman Sachs. Please go ahead.
Toshi Hari: Hi, Thanks, so much for taking the question I had two as well first.
Toshi Hari: Tim you talked about the adoption of moly in <unk> NAND and you also mentioned, leading edge foundry and logic and DRAM to follow in the out years I was hoping you could help us sort of translate some of that maybe not specific numbers, but how we should be thinking about your ability to grow the business.
With Mali, and 25 and beyond is it a net.
Toshi Hari: Gain opportunity for you or because youre already quite strong in that space is there an offset to the introduction of Mali.
Toshi Hari: Yes.
Tim Archer: It is it is an area, where we're quite strong already and the tungsten as you pointed out, especially in NAND, but its still turns out to be a net net gain for us is.
Toshi Hari: And then.
Toshi Hari: There are certain benefit that comes from from upgrades and moving technology forward and there is additional benefit if you are basically selling a new high value added technologies for our customers and so again, the fact that it helps resolve.
Toshi Hari: Some of the word line issue worldwide resistance issues that exist.
Toshi Hari: And really as a major materials migration that then can sort of carry the industry forward for several nodes after that.
Toshi Hari: As a kind of step up for us in terms of a business through that transition.
Toshi Hari: And then as we see those same transitions occur in foundry logic and DRAM I think it represents a gain opportunity for us as though there is well out into future years.
Speaker Change: Got it thank you.
Speaker Change: Then my follow up is on leading edge foundry logic.
Speaker Change: I think both you and Doug.
Speaker Change: Characterize.
Speaker Change: Characterize that area as an area of strength.
Speaker Change: A peer of yours last week.
Speaker Change: They kind of lowered their 25 outlook based on some of the competitive.
Speaker Change: The dynamics going on in that space I think there's one customer that's doing really well maybe two others that are doing not so well.
Speaker Change: Is the net net in your view as it pertains to the 25 outlook is that unchanged relative to 90 days ago or have you seen any kind of shifts in the outlook when you.
Speaker Change: Think about overall, leading edge foundry and logic. Thank you.
Speaker Change: No I don't think it's really changed from our perspective in the last 90 days, but thats because generally if I think about what's driving our business.
It's a little less has to do with volume as much as technology inflections and so as you move forward from a node that wasn't gate all around for one that's gate all around that creates opportunities for Lam that.
Speaker Change: Some companies that might actually be somewhat of a similar opportunity, but for Lam because we can now penetrate new.
Speaker Change: New tools like selective etch and AMD at rates that we had not been able to previously.
Speaker Change: That that may be why it hasnt changed as much for us.
Speaker Change: We see it as a positive opportunity we also see.
Again, we can't put an exact timing on it but we have said we believe in 2025, you start to see the introduction of what we would consider to be quite etch and depth intensive.
Inflections like the backside power distribution and further advanced packaging used in leading edge logic foundry and so those are things that I think primarily benefit companies with portfolios that looked like lamps etch and deposition strong so.
I don't know I can't speak to everybody's outlook, but I know that the way we look at these technology transitions there quite favorable for our our portfolio setup.
Speaker Change: Very helpful. Thank you so much.
Speaker Change: Thanks Tricia.
Speaker Change: And our next question comes from Vivek Arya with Bank of America Securities. Please go ahead.
Vivek Arya: Thanks for my question. The first one going back to China, So syndicated down about I think $250 million or so.
Vivek Arya: In calendar Q4, this China stay at these levels for the next several quarters and it paid off if it does it decline what is sort of the broad assumption and I think Tim in the last earnings call. You had suggested 25 could be a decent year.
Vivek Arya: China, but that.
Vivek Arya: It seems to have changed somewhat and I am curious what changed what market what are the signals, but just kind of China versus December levels.
Vivek Arya: What has changed in the overall, China view of 425.
Speaker Change: Yes, maybe I'll take it as Doug Yeah, China is trending down a little bit right now, but let me be very very clear, it's not going away. It's just trending lower as a percent of our overall revenue that's partly due to the fact that yes, we as we sit here today, we look at China WP is lower next year, but other things are strengthening at the same time. So when you look at the percent of the.
Total revenues, it's trending a little bit lower but let me be very clear, it's not going away.
Yes.
Speaker Change: That was.
Speaker Change: If if I made the comment about China being a decent year next year. It's basically I think it has to come into done just made which is we always have expected it to normalize as lambs business in our strongest markets like NAND and now some of these new emerging areas like advanced packaging really come on even more strongly in 'twenty.
Speaker Change: <unk> 25, and so we've always expected as a percentage of our total revenues it would trend down and so.
Speaker Change: I don't know that the outlook has changed dramatically in the last few months.
Speaker Change: And then for my follow up maybe one on <unk>.
Speaker Change: Gross margins.
Speaker Change: So I think Q3, you beat quite nicely up.
So what drove that and I think for calendar Q4, it's coming to 47%.
Speaker Change: So as we look out Doug over the next several quarters given that China mix would it be lower should we assume that 47% as a baseline and then you'll get some leverage on top of it or just.
Speaker Change: How should we conceptually think about calendar 'twenty five gross margin versus kind of into 'twenty four.
Speaker Change: Scenario, where you can keep the gross margins flattish year on year.
Speaker Change: Vivek. Thanks for the question, yes listen there are many many things that can move gross margin around in the near term here customer mix product mix operational efficiencies and so forth.
Speaker Change: We've been trying to signal for a while that hey, this customer stuff is going to be a little bit of a headwind is.
Speaker Change: China percent of total begins to.
Soften a little bit and you're seeing that in the December guide. However, if you remember back when business turned down at the end of 'twenty two into 'twenty three we embarked on what we described as operational efficiency initiatives trying to pivot the company grow that footprint in the factories.
Speaker Change: In the Asia region, which as business grows we will benefit from those operational efficiencies. So you're beginning to see some of that or maybe more than some you are beginning to see that show up if you remember we report China ticked up as a percent of our revenue we were at I don't know roughly 46% and now you're kind of <unk> 47.
Speaker Change: So we've we've pivoted the company actually in a beneficial way from a cost standpoint, and you'll still see more of that as we go forward, but theres a lot of things that move gross margin around I'm not going to get into guiding it specifically.
Speaker Change: But thats some some of the steps we should be thinking about.
Speaker Change: Thank you.
Speaker Change: Thanks Vivek.
And our next question today comes from C. J Muse with Cantor Fitzgerald. Please go ahead.
Speaker Change: Yes, good afternoon, and thank you for taking the question I guess for first question was hoping to focus on <unk> and reliant.
Speaker Change: As you think about a world where China is slowing down is that a piece that we should be thinking about it at least as part of <unk> that that would decline.
Speaker Change: Sure.
For my education.
Speaker Change: As you think about slower China is that better or worse in terms of the CSP revenue intensity for you guys.
Speaker Change: Yes, I mean from a reliance standpoint.
When you think about investment in the specialty nodes or maybe the trailing edge nodes, thats, where reliant will ebb and flow and obviously, you know where the restriction sit in the China region and so mainly that's what you've got going on in China, but there's other components of it as well right outside of China. There is a decent profile of investment there.
Speaker Change: But yes, as wip, perhaps reduces a little bit in China that will be a bit of a headwind for the reliant business unit. The other components of it though spare service upgrades will have a lot to do with what's going on globally.
In the overall capacity of every process node.
Speaker Change: Yes, I think C. J I would just add I mean, I mentioned a couple of these couple of things around the equipment intelligence in previous.
Speaker Change: Calls, we've talked about our cobalt activity.
Speaker Change: I think that as leading edge devices continue to.
Speaker Change: Grow and also become more complex the need for these types of.
Speaker Change: Data, driven troubleshooting and tool matching capabilities and even sort of automated maintenance.
Speaker Change: Become a bigger part of our <unk> revenue stream as well so.
Speaker Change: We look to that as an area, where we can continue to keep moving forward.
Speaker Change: Very helpful. And then I guess, maybe on Opex you started the year, Doug talking about.
Speaker Change: The need to invest for projects that you have.
Speaker Change: Real line of sight for growth.
Speaker Change: And Opex will narrowly outgrow topline. This year curious are you at the state where you are funding what you need to fund and how should we think about operating leverage into calendar 'twenty five.
Speaker Change: Yes. So just thanks for the question, yes, we funded pretty much everything.
Speaker Change: We came into the year, we expected that we needed to fund in fact, maybe even a little bit more.
Speaker Change: Revenue turned out to be probably a little bit stronger and in fact, you'll remember as we began the year I was suggesting we were suggesting that you wouldn't see leverage from us this year and in fact, we actually have we have delivered over a full percentage point of operating margin leverage at the midpoint of the December guide. So I think we all feel pretty good I feel pretty good about.
Speaker Change: What we've been able to do.
Speaker Change: As we get into next year.
Speaker Change: Depending on how WP grows how our top line grows I hope, we'll be able to continue to deliver some leverage into next year as well.
Speaker Change: Thank you.
Roger: Thanks Roger.
And our next question comes from Krish Shankar with TD Cowen. Please go ahead.
Krish Shankar: Yeah, Hi, Thanks for taking my question I feel them first one Tim.
Speaker Change: Understand thanks for the early view on calendar <unk>.
Speaker Change: You said that land revenue should outgrow continue to add good avia fee here.
Speaker Change: Statically is outperformance.
Speaker Change: Outperformance happened during strong values and you do expect <unk> to grow but I'm, just wondering if not still going to be the driver, especially with all this noise around cryo maybe for 2026, even not 2025 I'm just trying to figure out what are the drivers for outperformance for Lam in calendar 'twenty five and then I had a follow up.
Speaker Change: Yes.
Speaker Change: Well I think you probably did see the announcement from Lam on our <unk> III no technology, not too long ago, and so I think.
Speaker Change: There's some of that noise is what lam is creating around the benefits of of new technology upgrades to our own systems and so I think the most important thing to think about with NAND is that the most efficient way to go from.
A certain layer count to a higher layer count when you get the benefits of those new technologies.
Speaker Change: Upgrade the installed base you already have in your fab.
Speaker Change: So.
Speaker Change: That's why we're talking about this high capture rate Lam has around NAND upgrades.
Speaker Change: Now thats beneficial both for us and for our customers and so I think 2025, whatever the <unk> spend is in NAND or be dominated by those technology upgrades and land is by far the best positioned to deliver both the technology and.
Speaker Change: Enormous value to our customers. So that's that's kind of the way I see that demand NAND market playing out next year and it's a little too early for us to say exactly what the spend will be but again the requirements for those higher quality bids I think are are being discussed and talked about in light of these new AI applications pretty pretty publicly.
Speaker Change: <unk>.
Speaker Change: Chris just everything else that we've been.
We've also been talking about for a while advanced packaging backside power gate all around dry photo resist stride Tim talks about this every time in his script, because we are going to outperform in those areas too. So when you layer. These two things together.
Tim Archer: Is where our confidence comes from yes, I think I mentioned in the script.
This comment, which I assume people are picking up on but it's the etch and dep intensity of the technology inflections that are coming I think the technology landscape is changing somewhat and it's it's beneficial to companies that are well positioned.
Tim Archer: Positioned to help in the building of these three dimensional architectures that exist, whether it's backside power distribution, which is effectively a three dimensional architecture on the backside of the wafer or the advanced packaging two five D and <unk> packages those get built by etch and deposition equipment and so as those parts.
Tim Archer: The market are kind of be outperformers, because of what they do for power consumption and high pump.
Tim Archer: High power high computation devices, what theyre doing in terms of enabling these multi chip packages.
Tim Archer: I would expect etch and depth to continue would actually outperformed the BSC with those as the underlying technology trends.
Got it got it very helpful. And then just a quick follow up for Doug.
Tim Archer: <unk>.
Tim Archer: The inventory level has been pretty light Canadian managing really well.
Youre talking about the up cycle next year. The historically you kind of start building inventory, maybe a quarter or two before kind of curious is it more <unk> of the shape of the recovery next year or is it more the inventory managing those as changing as much more efficient that it is kind of more like just in time.
Tim Archer: Thank you.
Speaker Change: Yes, I mean, you got to actually Peel, the onion back on inventory one level beneath just what's the total number to understand this a lot of the inventory when you think back to when when business turned down a lot of it was in memory and specifically in NAND and so a lot of the <unk>.
Speaker Change: Inventory we have.
Speaker Change: Just to build tools that go into the NAND segment, and so you will only really be able to move that inventory lower when NAND business ticks up which obviously, we think that will happen. This year. So that's a little bit of.
Speaker Change: You got to wait for that offsetting that though other things are strengthening obviously you saw the guide at four three and so you have to have components ready to build the tools that go into those segments. So those are the two things that you have to think about relative to the total balance.
Speaker Change: Thanks, Doug.
Doug: Thanks, Chris.
And our next question today comes from <unk> <unk> with Raymond James. Please go ahead.
Speaker Change: Thank you couple of follow ups at this point Tim.
Speaker Change: Your comment about <unk> growing next year I'm just curious.
Speaker Change: Either by market segment or by product segment, what would you say you have the best visibility and where do you think there is still some uncertainty out there.
Speaker Change: Yes.
Speaker Change: Okay falloff.
Start getting very close to giving a full 2025 I'll look if I go through all that detail but.
Speaker Change: I think that obviously some of our comments.
Speaker Change: One is we believe NAND has been in a very prolonged down cycle and so it's not too much of a stretch to say that we would see.
WMC higher we're not going to quantify that but again higher and driven by these technology upgrades.
Speaker Change: That I just talked a lot about.
Speaker Change: I think that we said that.
Speaker Change: Leading edge foundry logic, we continue to see.
Quite strong and with many of those <unk>.
<unk>.
Speaker Change: Targeted towards new technology pull ins that help with performance and power consumption and then finally I think advanced packaging I think it's not a stretch to say that we believe advanced packaging WPC.
I made the comment that has gotten stronger and just the last 90 days and so I don't see what would what would prevent them from continuing to trend higher as we move through 2025, and then we said China WEC lower and so you kind of like there is a third puts and takes but in general one of the things that are key to us we think trend higher.
Speaker Change: Great. Thank you that's helpful and then another follow up Tim.
Speaker Change: I guess.
Speaker Change: On the tech transitions that you talked about a lot of questions on NAND et cetera, but.
Speaker Change: Look at your product.
Speaker Change: Revenue mix on logic and foundry is like 60% of your mix today.
Speaker Change: Quite quite different from what it used to be.
Speaker Change: You talked about things like backside power, GAA et cetera, increasing the intensity for you.
Speaker Change: I'm just curious outside of just the.
Speaker Change: Deposition and etch intensity going up.
Do you think about your market share because we hear about these tech transition from some of your competitors as well it looks like a lot of a lot of your benefiting but I'm just curious as to how you think about your market share what is the implied market share assumption when you say youre going to outperform wf for next year.
Speaker Change: Sure well I think that in some of these areas I talked about specifically when you think about what foundry logic.
Speaker Change: Leading edge foundry logic is really doing is it is pulling in nodes like gate all around for us that allows us to gain expand Sam and gained share in markets, where we didn't previously compete so every selective when etch wind for us is basically new market.
Speaker Change: <unk> is expanding and new share market for us. So we do have opportunities where again we've talked.
Speaker Change: Talking about transforming our product portfolio and we've expanded the product portfolio to address those markets and so.
Speaker Change: For us many of those are not only the new wins and their share gain.
Speaker Change: And for those who have already been participating in those markets at prior nodes in prior technologies.
Speaker Change: You'd probably see a lot more replacement revenue versus actual share gains. So I think that is one thing that distinguishes lam.
Speaker Change: We are coming from a historically lower exposure to that particular segment advanced packaging again, very strong product portfolio for that backside power I think everybody knows we're extremely strong in terms of our positioning in comp.
Speaker Change: Copper plating, so a lot more use as you add more metal layers onto the back side of the wafer.
Speaker Change: Represents share gain.
Speaker Change: Overall <unk> when you see changes coming like that so I think youre right to say that a lot of people are going to benefit from continued.
Speaker Change: Technology advancement in general equipment intensity increases overall, but we do think that etch and deposition increases faster than many of the other segments and therefore land as an opportunity to.
Speaker Change: To gain share.
Speaker Change: Very clear thanks, Dan.
Sure.
Our next question today comes from Stacy <unk> with Bernstein Research. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking my questions.
Speaker Change: First I wanted to drill in again, a bit more into the China gross margin tradeoff. So.
Speaker Change: Clearly if <unk> is growing and your share is growing next year, but China is down youre trying to mix does get worse and I know you don't guide gross margins, but.
Speaker Change: Do you think that the other drivers you have on gross margins can be enough to offset.
Speaker Change: The negative mix from trying to like bank of China makes went down to 25% of your revenue next year.
Like is there enough around the other drivers you have to try to offset that.
Speaker Change: I'm wondering if I should be thinking about the Q4 gross margin as the as the floor is the trough.
Speaker Change: And then growing.
Speaker Change: With some of the other drivers of just how do we think about that.
Speaker Change: Yes, Stacy listen some of the things I pointed to you have to think through it holistically and part of it will depend on revenue levels, and obviously I'm not going to guide specificity into next year, but we have done a whole bunch relative to pivoting the footprint of the company to be closer to where the customers' fabs are lower cost structure.
More affordable supply chain charter freight distances I mean, those things are going to be beneficial as we get into a growing top line.
Speaker Change: Offset by some of that customer mix I am not going to give you specifics because I'm not sure exactly what revenue is next year, but I feel pretty good about our ability to continue to drive the operational side of gross margin improvement.
Speaker Change: And then the customer mix will be one of the things, we're working to overcome but I'm not going to give you enough specificity that you want right now, but certainly we will do that as we get into next year on the next call.
Speaker Change: Okay, and then at a minimum I guess you do see revenues up at least so that should be a positive.
Speaker Change: Yes, it should be done.
Speaker Change: Got it thanks for my follow up I wanted to drill in a little bit of this on NAND.
Speaker Change: <unk> transitioned versus capacity I think I understand the idea of that.
Speaker Change: <unk> Tec transitions are lower <unk>, but you have a big installed base and your share is higher.
Speaker Change: Dollar basis, what is better for you.
Speaker Change: Capacity, driven market or a technology transition market.
Speaker Change: I know, you've said, you're agnostic, but I don't.
Speaker Change: Just don't see how that can be true so like what am I missing.
Speaker Change: Well I mean, I guess, what we talked about outperformance of there'll be a fee. Then there is no doubt of the tech transition market is better for us.
Speaker Change: I think there's been a lot of questions I think what we've been trying to addresses is.
Speaker Change: Perhaps some of the skepticism about the desire and need for the market right now to invest in significant additional capacity.
Speaker Change: And so whether that's true or not that'll be our customers' decision, but what we're saying is that regardless of within that that's why we gave this two thirds of bits and fill it sub 200 layers. We believe there is a need.
Speaker Change: Both technically and economically to move those forward to more advanced nodes.
Speaker Change: I mean, asking is would your NAND dollars be higher in a capacity driven market or an upgrade driven market, that's what I'm trying to understand.
Speaker Change: It depends on the overall level of investment, especially it's not a straightforward question, we get a decently higher share of spend when it's a transition.
Or an upgrade year, but the industry, obviously spend less but but our relative outperformance in a situation like that which is largely what we see next year, we're going to outperform more.
Then the rest of it you have to get into the specific numbers, which obviously, we're not going to do right now.
Speaker Change: Okay. That's helpful. Thank you guys I appreciate it.
Speaker Change: Thanks Joseph.
Speaker Change: Sure.
Speaker Change: And our next question today comes from <unk> Malik with Citi. Please go ahead.
Speaker Change: Hi, Thank you for taking my questions. My first question is on China the BSP.
Speaker Change: I'm glad you expecting China to come down, but not as much as your P&L reported last week, they expect China sales to come down 30% next year I'll be dynamic.
I mean between Lipography in depth edge that.
Speaker Change: We'll help explain.
Speaker Change: Why the policy could be coming down.
Speaker Change: So maybe something to do with the other lines of business or or spare parts or anything.
Speaker Change: If you have any thoughts on that.
Speaker Change: Obviously, it's extremely hard if not impossible for us to compare what someone else is thinking versus what we think because we don't know what theyre thinking for sure to be perfectly honest I would observe though if you look at how much perhaps some of our peers growth in that specific geography grew versus what we did.
The numbers are very different right and the lead times are very different between different tool types, and so something ship sooner than others and so you cant make a direct comparison.
Because frankly, I don't know exactly what somebody else is seeing.
Speaker Change: But others have grown a lot more in that region than we have and so you have to kind of factor all of this stuff in temperature on add anything no. I think it's just it's very hard to make those comparisons for all the reasons that Doug just mentioned.
Especially in terms of the rate at which people have been shipping at this point and lead times.
Speaker Change: Not much more we can say.
Thank you and then my follow up Tim.
Speaker Change: I was positively surprised.
Speaker Change: See that one of your large memory makers in Korea is adopting drivers for their one cdrom generation Costco.
Speaker Change: We've been under the impression that maybe drivers this happens when the high end to come.
Speaker Change: Come out.
Speaker Change: Any changes in terms of the adoption curve for drivers.
Speaker Change: Well we.
Speaker Change: I don't know how dry resistant forgot intricately tied to <unk> other than what we've said is when you get to <unk>. We had believed that there likely is no other choice, but clearly we have been working hard there are.
Speaker Change: To <unk> earlier based on all of the benefits, we've talked about with dry UV and dry UV processing in general which is multiple steps. It's the underlayer, it's the resistance.
Speaker Change: The dry develop and.
Speaker Change: Those cases, there is economic benefits from having to be able to shorten the exposure we've talked about pattern fidelity benefits, there's benefits from using the dry developer versus the wet process in terms of deal activity and so I think that you've just with each customer you reach a point where.
Speaker Change: They see enough of those benefits tipping over to where they can make the change and so it's.
Speaker Change: It's not necessarily tied to any particular node and so I think that.
Speaker Change: I think that we'll see over time customers adopt a different different technology nodes.
Okay.
Speaker Change: Thanks Roger.
Speaker Change: And our next question comes from Joe Moore with Morgan Stanley. Please go ahead.
Joe Moore: Great. Thank you guys.
Joe Moore: Sorry to ask about China again as you make these comments about December and next year.
Joe Moore: How are you thinking about the Commerce Department export controls I mean have you had I'm asking what do you think the decision will be but have you had conversations where you have some kind of.
Joe Moore: General sense of what the restrictions may be or are you kind of guessing like the rest of us and if youre guessing.
Joe Moore: How are you, making those guesses.
Speaker Change: Yes, I think that the view, we've given you contemplates our best understanding.
Speaker Change: And our best estimate of what we think will happen. So I don't know if you call that our guests an educated guess I mean I doubt all of you guys are just guessing you have sources of information.
Speaker Change: And so I think that that's just.
Speaker Change: That's our view.
Speaker Change: And.
Speaker Change: Best we can say right now is what we've said about our how we see China WP, both due to the next quarter as well as into next year.
Speaker Change: Okay. That's helpful. Thank you and then.
Speaker Change: As you think about <unk>.
Speaker Change: December if China drops down to 30%.
Speaker Change: Double digit growth ex China, I mean first of all am I being too literal and precise about that but if you are going to grow double digits ex China kind of what gives you the confidence around that.
Speaker Change: I mean, Joe it's the same thing we do every time, we guide you with numbers, we understand what customers expect from US what we think theyre going to order what to the best of our ability every single region. An ROE is going to do every single customer every single fab and so forth we put it together in the same every single quarter and thus what we've just done.
Speaker Change: The only thing we've done incrementally here because there's been so much chatter about China is give you a number on China, which normally we don't do any geographic stuff.
Speaker Change: But the $4 three we've just guided you to we've gone through the same process. We do every single quarter to put put.
Speaker Change: Data together to support that.
Speaker Change: Thanks, guys. Thank you so much.
Speaker Change: Sure.
Speaker Change: And our next question today comes from Blayne Curtis with Jefferies. Please go ahead.
Blayne Curtis: Thanks for squeezing me in and I feel bad that Joe said, one more on China, because I had one more on China, but.
Blayne Curtis: I just kind of curious I think the fact that you're getting $250 million is the math that come out in December I guess that go into the expectation was that like the Chinese DRAM would be front end loaded.
Blayne Curtis: And I guess, you've seen I think you recognize as nonvolatile, that's come down so im assuming thats less of a headwind. So I guess roundabout way of saying <unk> be down in December it would seem like that would be the bulk of the 250 that comes out I. Just can you dial it down a little bit to where what segment that that headwind is.
Manned blayne I don't know if I can answer your question. Its a possible see SPG is down next quarter sure. It's possible the relying component does attach.
Blayne Curtis: The specialty node stuff, which is obviously correlated to a certain extent with China, not only but elsewhere also.
Blayne Curtis: But there is other stuff going on in there that ties to upgrade cycles and utilization and so forth.
I don't know if I'm, helping you I am just kind of rambling here a little bit.
Speaker Change: It's fine I just wanted to ask you also I think the messaging on NAND is a lot more positive I think people have gotten incrementally more negative on timing of man just kind of curious the timing that youll see those upgrades. Obviously you've had this headwind from the Chinese customer, but do you expect that tailwind to be a tailwind kind of a.
Speaker Change: Rest of this calendar year or is it truly a 25 sterling.
Speaker Change: No.
Speaker Change: We were speaking about that primarily from a 2025 perspective, it didn't give any to any timing within that particular year. It's just again predicated.
Speaker Change: <unk> on this idea of that.
Speaker Change: The down cycle has been quite long.
Speaker Change: And the.
Which is putting a number of quite a large portion of the capacity at technology nodes that we think.
Speaker Change: It can be significantly improved for current uses through technology upgrades.
Speaker Change: Those are the conversations we're having with customers we.
Speaker Change: We will give more more on the timing once we have a better view of that as we move into early next year.
Speaker Change: Got you. Thanks, so much.
Speaker Change: Alright, Thanks, Blayne and operator, we will take one more question.
Speaker Change: Sure thing and our final question today will come from Chris Caso with Wolfe Research. Please go ahead.
Chris Caso: Yes. Thank you.
Chris Caso: I guess a question on on DRAM and <unk>.
Chris Caso: Not a lot of discussion on that heading into next year.
Chris Caso: Whats your view on the trends Youre seeing there and again have theres been a lot of mixed signals on that has that changed in the last 30 days last 90 days point.
Speaker Change: No Chris It really hasnt changed in the last 90 days you know you've got a product cycle in DRAM DDR four garner DDR five you've got the high bandwidth memory, that's going on in there and that's pulling through a need for incremental equipment. We believe that growth again next year.
Speaker Change: Thank you so much percentage relative to our outlook in DRAM.
Speaker Change: Yes.
Speaker Change: Okay. Thanks.
Just as a.
Speaker Change #100: Follow up.
Speaker Change #101: Help me one more close it out on one more China question.
Speaker Change #101: With what you said about China at 30% of revenue exiting the year is it safe to say buy will always hold.
Speaker Change #101: With the expectation for some of the other segments foundry logic.
Speaker Change #101: For NAND to grow next year that.
Speaker Change #102: Most likely that China comes in if we look for the full year at below 30% of revenue is below 30% of total revenue as we look at the whole year, obviously I know it depends upon what your total revenue looks like but.
Speaker Change #103: It feels like Youre seeing growth elsewhere, and probably not in China from the fourth quarter quarterly level is that at least at a rational way to think about it.
Yes, Chris it's not unreasonable rethinking about it that way and frankly like I said, we're not guiding 25 numerically, it's possible that China trends down below 30% for sure.
Speaker Change #103: It's too soon for us to get numerically specific on next year, but we will certainly do that on the call next quarter.
Chris Caso: Got it that's helpful. Thank you.
Chris Caso: Yes, Thanks, Chris.
Operator.
Speaker Change #104: <unk> concludes the call here, thanks, everybody for joining and I'm sure we'll be talking to most of you as the quarter progressed.
Speaker Change #105: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change #105: Yeah.
Speaker Change #105: Yes.
Speaker Change #105: Okay.
Speaker Change #105: Yeah.
Speaker Change #105: [music].
Speaker Change #106: Good day and welcome to the Lam Research September Q1 earnings Conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Speaker Change #106: After todays presentation, there will be an opportunity to ask questions.
Speaker Change #106: Ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two.
Speaker Change #106: Please note this event is being recorded.
Speaker Change #107: I would now like to turn the conference over to Rob <unk>, Vice President of Investor Relations. Please go ahead Sir.
Rob <unk>: Thank you and good afternoon, everyone welcome to the Lam Research quarterly earnings Conference call with me today are Tim Archer, President and Chief Executive Officer.
Rob <unk>: It didn't get executive Vice President and Chief Financial Officer.
During today's call, we will chat an overview on the business environment and will review our financial results for the September 24th quarter, and our outlook for the December 2024 quarter.
Rob <unk>: A press release detailing our financial results was distributed a little after one PM Pacific time.
Rob <unk>: The release can also be found on the Investor Relations section of the Companys website, along with the presentation slides that accompany today's call.
Today's presentation and Q&A include forward looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings.
Rob <unk>: Please see accompanying slides in the presentation for additional information.
Rob <unk>: Today's discussion of our financial results will be presented on a non-GAAP financial basis, unless otherwise specified a.
Rob <unk>: A detailed reconciliation between GAAP and non-GAAP results can be found in the accompanying slides in the presentation.
Rob <unk>: This call is scheduled to last until <unk> PM Pacific time.
Rob <unk>: Replay of this call will be made available later this afternoon on our website and with that I will hand, the call over to Tim.
Tim: Thank you, Rob and good afternoon, everyone Lamb posted a strong September quarter with revenues and earnings per share higher than the midpoint and profitability above the high end of the guided ranges.
Tim: These results marked the fifth consecutive quarter of revenue growth for the company.
Tim: When combined with our solid outlook for the December quarter lands performance points to strong execution and the industry environment, where NAND spending is yet to recover.
Tim: Our view on calendar year, 2024, <unk> remains mostly unchanged spur.
Tim: Spending is expected to be in the mid $90 billion range. We continue to see AI driving strong investments in leading edge logic nodes as well as advanced packaging segments, including high bandwidth memory or HBM.
Tim: We expect domestic China, <unk> will be down in the second half relative to the first half with China's share of lambs overall revenue normalizing to the 30% range in the December quarter.
Tim: Per our normal cadence, we will provide the full details of our 2025 WP outlook on our January earnings call. However, at this point our early view for next year is for Wip growth from the <unk> from 2020 fours mid $90 billion range more.
Tim: More importantly, we see an outstanding opportunity for Lam to outperform overall wip growth in 2025.
This is due to the critical role the etch and deposition play as fundamental enablers of higher performance more scalable semiconductor device architectures Lam is strongly positioned to benefit both from improvements in NAND spending.
Tim: And increased customer investments across multiple technology inflections.
In NAND, we expect the spending recovery to be driven primarily by technology upgrades, which is a highly favorable dynamic for lam given our industry leading position in critical NAND processes in.
Tim: In foundry logic and DRAM, we are set to benefit from growing investment in gate, all around backside power distribution advanced packaging and dry UV resist processing.
Tim: Each of these advancements is more etch and deposition intensive and we have talked about our progress in these areas over the past several quarters, we expect to see increasing adoption across all four inflections in 2025.
Tim: First on NAND.
Tim: This segment has seen a prolonged cyclical downturn, but technology conversions to more advanced nodes will be critical to meeting the increased demand for high speed high capacity enterprise ssds as well as satisfying the need for low cost high capacity storage and client devices.
Tim: Currently over two thirds of bids are still manufactured using older sub 200 layer technologies. We believe customers will continue converting this capacity to more advanced nodes in 2025.
Tim: The industry's largest installed base of <unk> NAND equipment Lamb should benefit disproportionately as these upgrades occur.
Tim: Furthermore, NAND manufacturers must also address the growing Challenge award wining resistance. This sets up an important materials migration from tungsten to molybdenum or Molly which offers superior thin film resistivity simplifies the process of minimizing leakage and yields the lowest.
Tim: <unk> resistance.
Tim: <unk> has more than a decade of learning embedded in our metal atomic layer deposition or <unk> applications with customer engagements on moly across NAND DRAM and foundry logic.
Tim: We have production wins for the moly transition in NAND. It will scale in 2025 with foundry logic and DRAM ramps to follow.
Tim: Outside of NAND, we continue to build momentum and gate all around nodes with our selective etch tools, including recent wins in large foundry logic customer.
Tim: In advanced <unk> patterning, our latest conductor etch tool with direct drive technology is gaining ground with broader adoption across key customers.
Tim: In the evolution the backside power distribution in foundry logic, we see expansion of our served market and share in dielectric etch in copper plating in 2025 due to the introduction of additional via formation steps and new metal layers.
Tim: Advanced packaging has been a highlight this year driven by the performance needs of advanced AI devices.
Tim: Lamb established early technological leadership in deposition for advanced packaging.
Tim: Our unmatched experience and copper plating hardware design and process technology is enabling <unk> to deliver best in class co planarity uniformity and deep activity and high throughput.
Tim: This has translated into significant market share gains in 2024 and strong momentum as we look ahead into 2025 or.
Tim: Our sabre <unk> revenue has more than doubled this year as both the number of two five D and <unk> packages and the metal layer count per package has grown as.
Tim: As the complexity of advanced packaging continues to increase over time more stringent performance requirements should play to lambs strengths.
Finally.
Tim: In our customer support business group or <unk>, we are seeing strong customer pull for productivity enhancement extend ability and reuse of lamps installed base of tools.
Tim: In both DRAM and NAND there is intense focus on lowering <unk> cost through efficient reuse of the installed base.
Tim: This has led to recent market share wins were upgrades of existing Lam installed base systems provided better value than the newbuild alternatives offered by competitors.
Similarly, our customers focus on installed based productivity.
Tim: Is driving greater adoption of lamps equipment intelligence services with an additional 500 process chambers.
Tim: Subscribed in the past quarter.
Tim: To wrap up.
Tim: As we look at the changes ahead for every leading edge device and every advanced package, we see more and more opportunity for Lam.
Tim: The AI era is here, we have transformed our business and expanded our product portfolio to prepare for this next generation of semiconductor industry growth.
Tim: Our investments are in the early stages of paying off I am looking forward to sharing more about why we believe the best is yet to come for Lam at our Investor Day on February 19th in New York City.
Doug: Now here's Doug.
Doug: Excellent. Thank you Tim good afternoon, everyone and thank you for joining our call today during what I know.
Doug: Busy earnings season.
Doug: Before I start I want to remind everyone that on May 21, 2024, we announced a 10 for one stock split.
Doug: Which was effective October 2nd of 2024.
Doug: All references made to share or per share amounts in my remarks have been adjusted to now reflect the stock split.
Doug: We delivered strong results in the September 2024 quarter, our revenue and earnings per share came in above the midpoint of our guided range.
Doug: <unk> gross margin and operating income percentage exceeded our guidance range.
Doug: I am pleased with the Companys continued strong revenue and profitability execution as well as our solid generation of free cash flows for the quarter, which came in at $1 $4 6 billion or 35% of revenue.
Doug: Let's look at the details of our September quarter financial results revenue for the September quarter was $4 $1 7 billion.
Doug: Which was an increase of 8% from the prior quarter.
Doug: Our deferred revenue balance at the end of the quarter was $2 5 billion, an increase of $495 million from the June quarter.
Doug: This grew mainly due to customer advance payments.
Doug: I believe our deferred revenue balance will trend lower into calendar year 2025.
Doug: But you will likely continue to see fluctuation quarter to quarter.
Doug: From a segment perspective September quarter systems revenue and memory was 35%.
Doug: Roughly in line with the prior quarter level of 36%.
Doug: Within the memory segment, though DRAM increased coming in at 24% of systems revenue versus 19% in the June quarter.
Doug: DRAM spending was focused on technology upgrades to one alpha one beta and some initial ramp of <unk> gamma notes to enable DDR five and high bandwidth memory.
Doug: The non volatile memory segment represented 11% of our systems revenue, which was down from 17% in the prior quarter.
Doug: This decline is driven by the timing of one customers sequentially lower investment and specialty DRAM that we characterized as a non volatile investment because it has a non volatile component in the device.
Doug: Demand segment has experienced a prolonged down cycle compared to historical norms. However.
Doug: However, we anticipate that spending will increase in calendar 2025.
Doug: As utilization rates improved to more normal levels and our customers begin to invest in conversions to <unk> 256, and 384 layer class devices.
Doug: The foundry segment represented 41% of systems revenue.
Doug: Slight decrease from the percentage concentration in the June quarter of 43%.
Doug: In dollar terms spending was relatively unchanged quarter to quarter.
Doug: The logic and other segment was 24% of our systems revenue in the September quarter up from the prior quarter level of 21%.
Doug: The increase was driven by an uptick in both leading edge and specialty nodes logic devices.
Doug: Now I'll discuss our regional contribution of our total revenue.
Doug: The China region accounted for 37% down slightly from 39% in the prior quarter and a little bit stronger than we expected.
Doug: Most of our China revenue continued to come from domestic Chinese customers.
Speaker Change #108: And as Tim mentioned, we expect spending from this region will decline in the December quarter, I think perhaps to approximately 30% of december's revenue.
Speaker Change #108: Our next largest geographic concentration was Korea at 18% of revenue in the September quarter, which was flat with the June quarter, and finally, Taiwan and the United States rounded out the remainder of the top four regions.
Speaker Change #108: Our customer support business group generated approximately $1 $8 billion in revenue for the September quarter.
Speaker Change #108: Up 4% from the June quarter, and 25% higher than the same period in 2023.
Speaker Change #108: The sequential dollar growth was split evenly between reliant systems and all other components of <unk>.
Speaker Change #108: The spare parts components <unk> continues to be individual largest piece of this business unit's revenue.
Speaker Change #108: Let's turn to gross margin the.
Speaker Change #108: The September quarter came in at 48, 2%, which exceeded our guided range.
Speaker Change #108: Gross margin decreased a little sequentially, however, reflecting a decline in customer mix as well as an increase in incentive compensation.
Speaker Change #108: These factors were partially offset by improved factory utilization as we continued to make progress on our operational initiatives.
Speaker Change #108: Operating expenses for September were $722 million up from the prior quarter amount of $699 million.
Speaker Change #108: The increase was partly due to growth in program spending as.
As well as higher incentive compensation tied to the company's increased profitability outlook.
Speaker Change #108: R&D accounted for 67% of the total spending.
Speaker Change #108: Operating margin for the current quarter was 39% slightly above the June quarter level of 37% and above the high end of our guidance range, primarily because of the higher revenue and continued strong gross margin performance.
Speaker Change #108: Our non-GAAP tax rate for the quarter was 13, 8%.
Generally within range of our expectations.
Speaker Change #108: Our estimate for the tax rate to continue to be in the low to mid teens range in the near term.
Other income and expense for the September quarter came in at $13 million in income compared with $19 million of income in the June quarter.
Speaker Change #108: The decrease in <unk> was primarily due to foreign exchange fluctuations.
Speaker Change #108: <unk> will continue to be susceptible to market related variations that could cause some level of volatility quarter to quarter.
Speaker Change #108: Let me pivot to the capital return side of things.
Speaker Change #108: We allocated approximately $1 billion to open market share repurchases and we paid $261 million in dividends in the September quarter.
Speaker Change #108: I would just highlight that in August we announced a 15% growth in the dividend in line with our plan to deliver an annual growth in the dividend.
Speaker Change #108: And I just mentioned since paying our first dividend in 2014, we have now raised the dividend and 10 consecutive years.
Speaker Change #108: We have $9 8 billion remaining on our board authorized share repurchase plan.
Speaker Change #108: And we continue to track towards our long term capital return plans of returning 75% to 100% of our free cash flow.
Speaker Change #108: For the September quarter diluted earnings per share was <unk> 86.
Above the midpoint of our guided range.
Speaker Change #108: The diluted share count was approximately $1 3 billion shares which was a reduction from the June quarter.
Speaker Change #108: On the balance sheet, our cash and cash equivalents totaled $6 1 billion at the end of the September quarter up from $5 9 billion at the end of the June quarter.
Speaker Change #108: The increase was largely due to cash from operating activities offset by cash allocated to share buyback dividend payments and capital expenditures.
Speaker Change #108: Days sales outstanding was 64 days in the September quarter, an increase from 59 days that we saw in the June quarter.
Speaker Change #108: Inventory at the end of the September quarter totaled $4 2 billion.
Inventory turns improved to two one times from the prior quarter level of one nine.
Speaker Change #108: We will continue to manage inventory levels to the best of our ability to align with customer demand.
Our noncash expenses for the September quarter included approximately $80 million for equity compensation.
Speaker Change #108: $80 million in depreciation and $14 million in amortization.
Speaker Change #108: Capital expenditures for the September quarter were $111 million up $10 million from the June quarter.
Speaker Change #108: Capital spending was mainly centered on lab investments in the United States and Asia as well as manufacturing facilitation supporting our global strategy to be close to bulk customers development as well as manufacturing locations.
Speaker Change #108: We ended the September quarter with approximately 17700 regular full time employees, which is an increase of approximately 500 people from the prior quarter.
Speaker Change #108: Headcount growth was predominantly in field and factory personnel to support increased tool installation as well as growing manufacturing activity levels.
Speaker Change #108: Let's now turn to our non-GAAP guidance for the December 2024 quarter.
Speaker Change #108: We're expecting revenue of $4 3 billion, plus or minus $300 million.
Speaker Change #108: Gross margin of 47% plus or minus one percentage point.
Speaker Change #108: The gross margin guidance is reflective of a quarter to quarter headwind and customer mix.
Speaker Change #108: Operating margins of 30% plus or minus one percentage point.
This reflects our continued commitment to managing our expense level as we prioritize critical R&D investment areas.
Speaker Change #108: And finally earnings per share of <unk>, 87, plus or minus <unk> 10 based on a share count of approximately $1 two 9 billion shares.
Speaker Change #108: So let me wrap up we continue to execute well in 2024.
Speaker Change #108: I believe that's reflected in our September results as well as guidance for the December quarter.
Speaker Change #108: We are on track to achieve modest improvement in our operating leverage for the full calendar year.
Speaker Change #108: As we prioritize critical investments to extend our technology differentiation, while carefully managing our overall spending levels.
Speaker Change #108: The investments, we're making positions <unk> well to benefit from the architectural and materials inflections, we see ahead.
Speaker Change #108: We believe that we will continue to gain traction and outperform the overall growth in Wi Fi in calendar year 2025.
Speaker Change #108: We continue to see 2025 as a growth year in both <unk> and more importantly lamps topline.
Speaker Change #109: Operator that concludes our prepared remarks, we would now like to open up the call for questions.
Speaker Change #110: Certainly we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change #111: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change #111: At any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change #111: At this time, we will pause momentarily to assemble our roster.
Speaker Change #112: And our first question today comes from Tim Arcuri with UBS. Please go ahead.
Tim Arcuri: Thanks, a lot Tim Tim and Doug I know that you don't want to Traject, 220, <unk> and I'm not asking you to give us a number but can you just talk about the puts and takes I guess, particularly around China.
Tim Arcuri: I mean, obviously there is going to be some additions to the entity list, but it seems like even a bigger factor might be the consolidation of some of this.
Tim Arcuri: Our legacy node stuff. It seems like there is a huge can validate <unk> have a lot of these fabs that have been built that are ultimately connected to either Huawei are BYD. So can you just talk sort of conceptually about the puts and takes and particularly about China I mean, it's down about 10 points.
Of your revenue.
Speaker Change #113: Sure Thanks, Tim and thanks for not pressing us on in early 2025 guide.
Speaker Change #114: We are trying to we are we realize theres a lot of questions and we are trying to give some additional color where we can.
Speaker Change #114: We said that we believe year on year WC overall would be up next year, specifically our view for China WSI next year would be that it is lower.
Speaker Change #114: For all.
Speaker Change #114: You can pick all the variety of reasons that you may have just listed and debt as a percent of lambs total revenue China would represent a lower percentage next year.
Speaker Change #114: And this year.
Speaker Change #114: And so I think thats about all we can say right now obviously in January we'll give a lot more color on the full market.
Speaker Change #115: Yes, just to add a little bit.
Speaker Change #116: Outside of China, though think about everything else going on leading edge foundry and logic continues to be quite the DRAM continues to be pretty robust with DDR five high bandwidth memory.
Speaker Change #116: What the trailing edge specialty nodes stuff does outside of China, I think as an industry work our way through the inventory positions. We're in so trends are actually pretty good.
In most of the industries I'd, just remind you of that and I know that.
Speaker Change #116: And I think timna.
Speaker Change #116: Maybe I think gets lost when we talk about percentages as we've talked about it a tremendous number of technology inflections and investments.
During my prepared remarks.
Speaker Change #116: None of which would actually be occurring in China. As a result of the either restrictions already in place of the technology nodes that they are at or the fact that we know.
Speaker Change #116: Again <unk> for instance.
Speaker Change #116: For us those upgrades would be generally occurring outside of domestic China.
Speaker Change #116: <unk> nodes.
Speaker Change #116: Nodes like gate, all around obviously are outside of domestic China and so when you think about percentages the stronger those trends are for Lam and for the industry then naturally thats why we see China.
Speaker Change #116: <unk> to trend lower as a percentage of our total revenue.
Right. Thanks, and then just like Super Clicked up for you. So <unk> was up.
Was better can you talk about that and I guess, maybe does that tie also into deferred being up a lot is that like reliant related things.
Speaker Change #117: Yeah, a little bit what you heard me say is the growth in <unk> was a combination of growth and reliant and then everything else. So reliant was pretty strong.
Again last quarter.
Tim Arcuri: So yes, Tim that's part of it.
Tim: Thank you.
Tim: Yes, Thanks, Tim.
Speaker Change #118: And our next question comes from Harlan sur with Jpmorgan. Please go ahead.
Harlan Sur: Hello, Good afternoon, Thanks for taking my question.
Harlan Sur: Last call you guys talked about Ron Utilizations, moving higher driving growth in spares.
Harlan Sur: Did you see that trend continue.
Into the September quarter, and you've talked about confidence on NWS unit growth outlook for next year.
Harlan Sur: The confidence level, a straw on WSI spending growth outlook relative to let's say 90 days ago and are you starting to get some order in forecast visibility to support that.
Speaker Change #119: Yes, Harlan I think that.
Speaker Change #120: What I'd like to point out on NAND is it's a combination of things.
Speaker Change #120: We continue to see utilization being strong for the capacity that's in place, but what I was talking about in my prepared remarks was this need for what we would consider to be higher quality bps.
Speaker Change #120: Higher performance to meet the needs of of enterprise Ssds and.
Speaker Change #120: <unk> and other applications that are now tied to sort of this move and AI and so when we think about it this is going to drive even if youre not looking as an industry to add a lot more bit capacity itself.
Want to shift that two thirds of it is manufactured still in the one X X layer technologies youre going to shift that to nodes that are taking advantage of things like.
Speaker Change #120: Sell under array or being able to <unk>.
Speaker Change #120: Molly transition, we talked about all of those things allow NAND manufacturer to be a lot more competitive for the for the parts of the market that are seeing a lot of strength and so.
Speaker Change #120: The reason that is so important for Lam as we play a really critical role and we capture a very high percentage of all of those upgrades and so our anticipation is that the industry will.
Speaker Change #120: These still in a recovery mode next year, but if most of the spending is directed towards technology upgrades and it's pulling in all of those things I just talked about that's right. We're lambs product portfolio plays.
Speaker Change #120: Plays its really up from spot and so that's why.
Speaker Change #120: We are optimistic on NAND, almost regardless of whether Wi Fi itself like rises a tremendous amount.
Speaker Change #120: It's really spending will be in our favor.
Speaker Change #121: Yes, no I appreciate that and then accelerated from Q dynamics, continuing very strong rate, obviously, that's clothing the need for more HBM memory. As you mentioned last call you talked about driving more than $1 billion in HCM revenue. This year is that number even higher law at them.
Speaker Change #122: Wondering if you can maybe quantify the HBM outlook for this year as we look into next year, although HCN bit supply is only going to represent 7% of total bit supply.
Todd for something like 20%, 25% of total DRAM wafer capacity right and that in and of itself was up 60%, 70% versus this year. How are you thinking about sort of the growth trajectory of your HBM in advanced packaging business next year and even over the next several years.
Speaker Change #123: Yes, sure Harlan I think we will.
Speaker Change #124: We're not probably going to give a new milestone number but we did talk about this $1 billion achievement in our advanced packaging business really driven by the strength in AI.
Speaker Change #124: What I would say is since the last call that part of our business has continued to strengthen.
Speaker Change #124: Beyond what we had originally thought I highlighted some of that in my commentary around the sabre <unk> the copper plating.
Speaker Change #124: It's just a very strong part of the business right now and I think the companies that have good exposure to it.
Speaker Change #124: Which primarily companies like etch and deposition companies.
Speaker Change #124: Are seeing outsized benefit right now from that trend.
Speaker Change #124: I don't think advanced packaging slows down anytime and from my view from my conversations with customers et cetera, It's an enabling technology, that's allowing system level performance that is very hard to achieve through.
Speaker Change #124: Chip chips themselves and it requires really this architectural change so.
Speaker Change #124: We're very positive on advanced packaging this year and when we get to January we will we'll probably highlight a little bit more about what we see in terms of new numbers for that segment.
Thank you Tim.
Sean: Thanks, Sean.
Speaker Change #126: And our next question comes from Toshi Hari with Goldman Sachs. Please go ahead.
Toshi Hari: Hi, Thanks, so much for taking the question I had two as well first.
Toshi Hari: Tim you talked about the adoption of moly in <unk> NAND and you also mentioned, leading edge foundry and logic and DRAM to follow in the out years I was hoping you could help us sort of translate some of that maybe not specific numbers, but how we should be thinking about your ability to grow the business.
Toshi Hari: With Mali, and 25 and beyond is it a net.
Toshi Hari: Gain opportunity for you or because youre already quite strong in that space is there an offset to the introduction of Mali.
Yes.
Tim Archer: It is it is an area, where we're quite strong already and the tungsten as you pointed out, especially in NAND, but its still turns out to be a net net gain for us is.
Tim Archer: Again, there are certain benefit that comes from from upgrades and moving technology forward and there is additional benefit if you are basically selling a new high value added technologies for our customers and so again, the fact that it helps resolve.
Some of the worldwide issue worldwide resistance issues that exist.
And really as a major materials migration that then can sort of carry the industry forward for several nodes after that.
Tim Archer: As a kind of step up for us in terms of a business through that transition.
Tim Archer: And then as we see those same transitions occur in foundry logic and DRAM I think it represents a gain opportunity for us as though there is well out into future years.
Speaker Change #127: Got it thank you.
Speaker Change #127: Then my follow up is on leading edge foundry logic.
Speaker Change #128: I think both you and Doug.
Speaker Change #127: Characterize.
Speaker Change #127: Characterize that area as an area of strength.
Speaker Change #127: A peer of yours last week.
They kind of lowered their 25 outlook based on some of the competitive.
Speaker Change #127: The dynamics going on in that space I think there's one customer that's doing really well maybe two others that are doing not so well.
Speaker Change #129: Is the net net in your view as it pertains to the 25 outlook is that unchanged relative to 90 days ago or have you seen any kind of shifts in the outlook. When you think about overall, leading edge foundry and logic. Thank you.
I don't think I don't think it has really changed from our perspective in the last 90 days, but thats because generally if I think about what's driving our business.
Speaker Change #129: It's a little less has to do with volume as much as technology inflections and so.
Speaker Change #129: As you move forward from a node that wasn't gate all around to one thats gate all around that creates opportunities for Lam that.
Speaker Change #129: Some companies that might actually be somewhat of a similar opportunity, but for Lam because we can now penetrate.
Speaker Change #129: New tools like selective etch and AMD at rates that we had not been able to previously.
Speaker Change #129: We think that that may be why it hasnt changed as much for us.
We see it as a positive opportunity we also see.
Speaker Change #129: Again, we can't put an exact timing on it but we have said we believe in 2025, you start to see the introduction of what we would consider to be quite etch and depth intensive.
Speaker Change #129: Inflections like the backside power distribution and further advance packaging use in leading edge logic foundry and so those are things that I think primarily benefit companies with portfolios. It looked like lamps etch and deposition strong so.
Speaker Change #129: I don't know I can't speak to everybody's outlook, but I know that the way we look at these technology transitions there quite favorable for our our portfolio setup.
Speaker Change #130: That's very helpful. Thank you so much.
Speaker Change #131: Extra sure.
Speaker Change #132: And our next question comes from Vivek Arya with Bank of America Securities. Please go ahead.
Thanks for my question.
Vivek Arya: First one going back to China. So it's indicated down about I think $250 million or so.
Vivek Arya: In calendar Q4, this China stay at these levels for the next several quarters and it but it also fit does it decline what is sort of the broad assumption and I think Tim in the last earnings call. You had suggested 25 could be a decent dear.
Vivek Arya: For China, but that.
Vivek Arya: It seems to have changed somewhat and I am curious what changed market what are the signals, but just kind of China versus December levels.
Vivek Arya: What has changed in the overall, China view of 425.
Speaker Change #133: Yes, maybe I'll take it as Doug Yeah, China is trending down a little bit right now, but let me be very very clear, it's not going away. It's just trending lower as a percent of our overall revenue that's partly due to the fact that yes, we as we sit here today, we look at China WPS lower next year, but other things are strengthening at the same time. So when you look at the percent of the.
Speaker Change #133: Total revenues, it's trending a little bit lower but let me be very clear, it's not going away.
Speaker Change #133: Yes.
Speaker Change #133: That was.
Speaker Change #134: If if I made the comment about China being a decent year next year. It's basically I think it has to come into it than just made which is we always have expected it to normalize as lambs business in our strongest markets like NAND and now some of these new emerging areas like advanced packaging really come on even more strongly in 'twenty.
Speaker Change #134: <unk> 25, and so we've always expected as a percentage of our total revenues it would trend down and so.
Speaker Change #134: I don't know that the outlook has changed dramatically in the last few months.
Speaker Change #135: And then for my follow up maybe one on <unk>.
Speaker Change #136: Gross margins.
Speaker Change #137: So I think <unk> you beat quite nicely.
Speaker Change #137: So what drove that and I think for calendar Q4, it's coming to 47%.
Speaker Change #137: So as we look out Doug over the next several quarters given that China mix would it be lower should we assume that 47% of the baseline and then you'll get some leverage on top of it or just.
Speaker Change #137: How should we conceptually think about calendar 'twenty five gross margin versus kind of into 'twenty four.
Speaker Change #164: Scenario, where you can keep the gross margins flattish year on year calendar year.
Speaker Change #138: Vivek. Thanks for the question listen there are many many things that can move gross margin around in the near term here customer mix product mix operational efficiencies and so forth.
Speaker Change #138: We've been trying to signal for a while that hey, this customer mix stuff is going to be a little bit of a headwind is.
Speaker Change #138: China percent of total begins to.
Speaker Change #138: Soften a little bit and you're seeing that in the December guide. However, if you remember back when business turned down at the end of 'twenty two into 'twenty three we embarked on what we described as operational efficiency initiatives trying to pivot the company grow that footprint in the factories.
Speaker Change #138: In the Asia region, which as business grows we will benefit from those operational efficiencies. So youre beginning to see some of that or maybe more than some you are beginning to see that show up if you remember we report China ticked up as a percent of our revenue we were at I don't know roughly 46% and now you're kind of assist to 47.
Speaker Change #138: So we've we've pivoted the company actually in a beneficial way from a cost standpoint.
Speaker Change #138: You'll see more of that as we go forward, but theres a lot of things that move gross margin around I'm not going to get into guiding it specifically, but.
But thats some some of the steps we should be thinking about.
Speaker Change #139: Thank you.
Vivek Arya: Thanks Vivek.
Speaker Change #140: And our next question today comes from C. J Muse with Cantor Fitzgerald. Please go ahead.
Speaker Change #141: Yes, good afternoon, and thank you for taking the question I guess for first question was hoping to focus on <unk> and reliant.
Speaker Change #142: As you think about a world where China is slowing down is that a piece that we should be thinking about it at least as part of <unk> that that would decline.
Speaker Change #141: Sure.
Speaker Change #143: For my education.
Speaker Change #144: As you think about slower China is that better or worse in terms of the CSP revenue intensity for you guys.
Speaker Change #145: Yes, <unk> I mean from a <unk> standpoint.
Speaker Change #145: When you think about investment in the specialty nodes or maybe the trailing edge nodes. That's we're reliant will ebb and flow and obviously, you know where the restriction sit in the China region. So mainly that's what you've got going on in China, but there's other components of it as well right outside of China. There is a decent profile of investment there.
Speaker Change #145: But yes as Wi Fi perhaps.
Speaker Change #145: Reduces a little bit in China that will be a bit of a headwind for the rely on business unit. The other components of it though spare service upgrades will have a lot to do with what's going on globally.
Speaker Change #145: In the overall capacity of every process node.
Yes, I think C. J I would just add I mean.
Speaker Change #146: I've mentioned a couple of these are couple of things around the equipment intelligence in previous.
Speaker Change #146: Calls, we've talked about our cobalt activity.
Speaker Change #146: I think that as leading edge devices continue to.
Speaker Change #146: Grow and also become more complex the need for these types of.
Speaker Change #146: <unk>.
Speaker Change #146: Data, driven troubleshooting and tool matching capabilities and even sort of automated maintenance.
Speaker Change #146: Become a bigger part of our <unk> revenue stream as well and so we.
Speaker Change #146: We look to that as an area, where we can continue to keep moving forward.
Speaker Change #147: Very helpful. And then I guess, maybe on Opex you started the year, Doug talking about Neil.
Speaker Change #147: The need to invest for projects that you have.
Real line of sight for growth.
Speaker Change #147: And Opex will narrowly outgrow topline. This year curious are you at the state where you are funding what you need to fund and how should we think about operating leverage into calendar 'twenty five.
Speaker Change #148: Yes. So just thanks for the question, yes, we funded pretty much everything as we came into the year, we expected that we needed to fund in fact, maybe even a little bit more.
Speaker Change #148: Revenue turned out to be probably a little bit stronger and in fact, you'll remember as we began the year I was suggesting we were suggesting that you wouldn't see leverage from us this year and in fact, we actually have we have delivered over a full percentage point of operating margin leverage at the mid point of the December guide. So I think we all feel pretty good I feel pretty good about.
Speaker Change #148: What we've been able to do.
Speaker Change #148: As we get into next year.
Speaker Change #148: Depending on how WP grows how our top line grows I hope, we'll be able to continue to deliver some leverage into next year as well.
Speaker Change #149: Thank you.
Speaker Change #150: Thanks C J.
Speaker Change #151: And our next question comes from Krish Shankar with TD Cowen. Please go ahead.
Krish Shankar: Yes, hi, Thanks for taking my question I feel them first one Tim.
Krish Shankar: I understand thanks for the early view on calendar 'twenty AWP.
Speaker Change #152: Said that land revenue should outgrow continue to add good avia fee historically is outperforming.
Krish Shankar: Outperformance happen during strong nine years, and you'd expect <unk> to grow but I'm, just wondering if not still going to be the driver, especially with all this noise around <unk>, maybe it's a 2026, even though 2025 I'm just trying to figure out what are the drivers for outperformance for Lam in calendar 'twenty five and then I had a follow up.
Speaker Change #152: Yes.
Speaker Change #153: Well I think you probably did see the announcement from Lam on our <unk> three <unk> technology, not too long ago, and so I think.
Speaker Change #153: There's some of that noise is what lands, creating around the benefits of of new technology upgrades to our own systems and so I think the most important thing to think about with NAND is that the most efficient way to go from.
Speaker Change #153: A certain layer count to a higher layer count when you get the benefits of those new technologies.
Speaker Change #153: Upgrade the installed base you already have in your fab.
Speaker Change #153: So.
Speaker Change #153: That's why we're talking about this high capture rate Lam has around NAND upgrades.
Speaker Change #153: Now thats beneficial both for us and for our customers and so I think 2025, whatever the WC spend is in NAND will be dominated by those technology upgrades and land is by far in the best position to to deliver both the technology and.
Speaker Change #153: Enormous value to our customers. So that's that's kind of the way I see that demand NAND market playing out next year and it's a little too early for us to say exactly what the spend will be but again the requirements for those higher quality bids I think are are being discussed and talked about in light of these new AI applications pretty pretty publicly.
Speaker Change #153: <unk>.
Speaker Change #154: Chris just everything else that we've been.
We've also been talking about for a while right advanced packaging backside power gate all around dry photo resist stride Tim talks about this every time in his script, because we are going to outperform in those areas too. So when you layer. These two things together.
Tim Archer: Is where our confidence comes from yes, I think I mentioned in the script.
Tim Archer: This comment, which I assume people are picking up on but it's the etch and dep intensity of the technology inflections that are coming I think the technology landscape is changing somewhat.
Tim Archer: It's beneficial to companies that are well positioned to help in the building of these three dimensional architectures that exist, whether it's backside power distribution, which is effectively a three dimensional architecture on the backside of the wafer or the advanced packaging two five D and <unk> packages.
Tim Archer: Will get built by etch and deposition equipment and so as those parts of the market are kind of the outperformers because of what they do for power consumption and high pump.
Tim Archer: High power high computation devices, what theyre doing in terms of enabling these multi chip packages.
Tim Archer: I would expect etch and depth to continue would actually outperformed the VSP with those as the underlying technology trends.
Speaker Change #155: Got it got it very helpful. And then just a quick follow up for Doug.
Speaker Change #155: Sure.
Speaker Change #155: The inventory level has been pretty light Canadian managing really well.
Speaker Change #156: Youre talking about the up cycle next year. The historically you kind of start building inventory, maybe a quarter or two before kind of curious is it more <unk> of the shape of the recovery next year or is it more the inventory management.
Speaker Change #156: Change is much more efficient that it is kind of more of that just in time. Thank you.
Speaker Change #157: Yes, I mean, you got actually Peel, the onion back on inventory one level beneath just what's the total number to understand this a lot of the inventory when you think back to when business turned down a lot of it was in memory and specifically in NAND and so a lot of the <unk>.
Inventory we have.
<unk>.
Speaker Change #157: Just to build tools that go into the NAND segment, and so you will only really be able to move that inventory lower when NAND business ticks up which obviously, we think that will happen. This year. So that's a little bit of.
You got to wait for that offsetting that though other things are strengthening obviously you saw the guy that four three and so you have to have components ready to build the tools that go into those segments. So those are the two things that you have to think about relative to the total balance.
Speaker Change #158: Thanks, Doug.
Chris Caso: Thanks, Chris.
Speaker Change #159: And our next question today comes from <unk> <unk> with Raymond James. Please go ahead.
Speaker Change #160: Thank you couple of follow ups at this point Tim.
Speaker Change #161: Your comment about W. W. <unk> growing next year I'm just curious.
Speaker Change #161: Either by market segment or by product segment would you say you have the best visibility and where do you think there is still some uncertainty out there.
Speaker Change #161: Yes.
Speaker Change #162: Okay Fellow.
Speaker Change #163: Start getting very close to giving a full 2025 outlook if I go through all that detail but.
Speaker Change #163: I think that obviously some of our comments.
Speaker Change #163: One is we believe NAND has been in a very prolonged down cycle.
Speaker Change #163: So it's not too much of a stretch to say that we would see.
Speaker Change #163: WMC higher we're not going to quantify that but again higher and driven by these technology upgrades.
Speaker Change #163: That I just talked a lot about.
Speaker Change #163: I think that we said that leading edge foundry logic, we continue to see.
Speaker Change #163: Quite strong and with many of those investments.
Speaker Change #163: Targeted towards new technology pull ins that help with performance and power consumption and then finally I think advanced packaging I think it's not a stretch to say that we believe advanced packaging WC.
I made the comment that has gotten stronger and just the last 90 days and so I don't see what would what would prevent them from continuing to trend higher as we move through 2025, and then we said China WC lower and so you kind of like Theres, a third puts and takes but in general one of the things that are key to US we think trend higher.
Speaker Change #165: Great. Thank you that's helpful and then another follow up Tim.
Speaker Change #166: I guess.
Speaker Change #167: On the tech transitions that you talked about a lot of questions on NAND et cetera, but.
Speaker Change #168: Look at your product.
Speaker Change #168: The revenue mix in logic and foundry is like 60% of your mix today.
Speaker Change #168: Quite quite different from what it used to be.
Speaker Change #168: You talked about things like backside power, GAA et cetera, increasing the intensity for you.
Speaker Change #168: I am just curious outside of just the.
Speaker Change #168: Deposition and etch intensity going up.
Speaker Change #168: Do you think about your market share because we hear about these tech transition from some of your competitors as well it looks like a lot of lot of youre benefiting but I'm just curious as to how you think about your market share and what is the implied market share assumption. When you say youre going to outperform W are for next year.
Speaker Change #169: Sure well I think that in some of these areas I talked about specifically, we think about what foundry logic.
Speaker Change #169: Leading edge foundry logic is really doing is it is pulling in nodes like gate all around for us that allows us to gain expand Sam and gained share in markets, where we didn't previously compete. So every selective win win for US is basically new market.
Speaker Change #169: <unk> is expanding and new share market for us So we do have opportunities where again.
Speaker Change #169: I talked about transforming our product portfolio and we've expanded the product portfolio to address those markets and so.
Speaker Change #169: For us many of those are not only the new wins and their share gain.
Speaker Change #169: And for those who have already been participating in those markets at prior nodes in prior technologies.
Speaker Change #169: You'd probably see a lot more replacement.
Speaker Change #169: Revenue versus actual share gains. So I think that is one thing that distinguishes lam.
Speaker Change #169: We are coming from a historically lower exposure to that particular segment.
Speaker Change #169: Advanced packaging again, very strong product portfolio for that backside power I think everybody knows we're extremely strong in terms of our positioning in copper.
Speaker Change #169: Copper plating, so a lot more use as you add more metal layers onto the back side of the wafer.
Speaker Change #169: Represents share gain.
Speaker Change #169: Overall <unk> when you see changes coming like that so I think youre right to say that a lot of people are going to benefit from continued.
Speaker Change #169: Technology advancement in general equipment intensity increases overall, but we do think that etch and deposition increases faster than many of the other segments and therefore land as an opportunity to.
Speaker Change #169: To gain share.
Speaker Change #170: Very clear thanks, Dan.
Sure.
Speaker Change #171: And our next question today comes from Stacy <unk> with Bernstein Research. Please go ahead.
Speaker Change #172: Hi, guys. Thanks for taking my questions.
Stacy: First I wanted to drill in again, a bit more into the China gross margin tradeoff. So.
Speaker Change #174: Clearly if <unk> is growing and your share is growing next year, but China is down youre trying to mix does get worse and I know you don't guide gross margins, but.
Do you think that the other drivers you have on gross margins can be enough to offset.
Speaker Change #174: The negative mix from trying to like bank of China makes it went down to 25% of your revenue next year.
Speaker Change #174: Like is there enough around the other drivers you have to try to offset that.
Speaker Change #174: I'm just I'm wondering if I should be thinking about the Q4 gross margin as the as the floor is the trough.
Speaker Change #174: And then growing.
Speaker Change #174: With some of the other drivers of just how do we think about that.
Speaker Change #175: Yes, Stacy listen some of the things I pointed to you have to think through it holistically and part of it will depend on revenue levels, and obviously I'm not going to guide specificity into next year, but we have done a whole bunch relative to pivoting the footprint of the company to be closer to where the customers' fabs are lower cost structure.
Speaker Change #175: More affordable supply chain charter freight distances I mean, those things are going to be beneficial as we get into a growing top line.
Speaker Change #175: Offset by some of that customer mix I am not going to give you specifics because I'm not sure exactly what revenue is next year, but I feel pretty good about our ability to continue to drive the operational side of gross margin improvement.
And then the customer mix will be one of the things, we're working to overcome but I'm not going to give you enough specificity that you want right now, but certainly we will do that as we get into next year on the next call.
Speaker Change #176: Okay, and then at a minimum I guess you do see revenues up at least so that should be a positive.
Speaker Change #177: Yes, it should be.
Speaker Change #178: Got it thanks for my follow up I wanted to drill in a little bit of this on NAND.
Speaker Change #179: Tech transition versus capacity I think I understand the idea of that.
Speaker Change #179: Tech transitions are lower <unk>, but you have a big installed base and your share is higher from a dollar basis, what is better for you.
Speaker Change #180: Capacity, driven market or a technology transition market.
Speaker Change #180: I know, you've said, you're agnostic, but I don't.
Speaker Change #180: Don't see how that can be true so like what am I missing.
Speaker Change #181: Well I mean, I guess, when we talk about outperformance Adobe a fee then there is no doubt of the tech transition market is better for us.
Speaker Change #181: I think there's been a lot of questions I think what we've been trying to address is.
Speaker Change #181: As you have perhaps some of the skepticism about the desire and need for the market right now to invest in significant additional capacity.
Speaker Change #181: And so whether that's true or not that'll be our customers' decision, but what we're saying is that regardless of within that that's why we gave this two thirds of bits and fill it sub 200 layers. We believe there is a need.
Speaker Change #181: Both technically and economically to move those forward to more advanced nodes.
Speaker Change #182: I mean, asking is would your NAND dollars be higher in a capacity driven market or an upgrade driven market, that's what I'm trying to understand.
Speaker Change #183: It depends on the overall level of investment, especially it's not a straightforward question, we get a decently higher share of spend when it's a transition.
Speaker Change #183: Or an upgrade year, but the industry, obviously spend less but but our relative outperformance in a situation like that which is largely what we see next year, we're going to outperform more.
Speaker Change #183: Then the rest of it you have to get into the specific numbers, which obviously, we're not going to do right now.
Speaker Change #184: Okay. That's helpful. Thank you guys I appreciate it.
Speaker Change #184: Thanks Joseph.
Speaker Change #184: Sure.
Speaker Change #186: And our next question today comes from <unk> Malik with Citi. Please go ahead.
Speaker Change #187: Hi, Thank you for taking my questions. My first question is on China, the BSP at Sao.
Speaker Change #188: I'm glad you expecting China to come down, but not as much as your P&L that reported last week, they expect China sales to come down 30% next year I'll be dynamic.
Speaker Change #188: I mean between Lipography in depth edge that.
Speaker Change #189: We'll help explain.
Speaker Change #189: Why the policy could be coming down.
Speaker Change #190: So maybe something to do with the other lines of business or or spare parts or anything.
Speaker Change #190: If you have any thoughts on that.
Speaker Change #191: Obviously, it's extremely hard if not impossible for us to compare what someone else is thinking versus what we think because we don't know what theyre thinking for sure to be perfectly honest I would observe though if you look at how much perhaps some of our peers growth in that specific geography grew versus what we did.
Speaker Change #191: The numbers are very different right and the lead times are very different between different tool types, and so something shipped sooner than others and so you cant make a direct comparison.
Because frankly, I don't know exactly what somebody else is seeing.
Speaker Change #192: But others have grown a lot more in that region than we have and so you have to kind of factor all of this stuff in on our temperature on add anything no. I think it's just it's very hard to make those comparisons for all the reasons that Doug just mentioned.
Speaker Change #192: Especially in terms of the rate at which people have been shipping at this point and lead times.
Speaker Change #192: Not much more we can say.
Speaker Change #193: Thank you and then my follow up Tim.
Speaker Change #194: I was positively surprised.
Speaker Change #195: See that one of your large memory makers.
Speaker Change #195: Korea is adopting drivers there for the one cdrom generation process.
Speaker Change #195: We've been under the impression that maybe drivers this happens when the high end tools.
Speaker Change #195: Come out have there been any changes in terms of the adoption curve for <unk>.
Speaker Change #195: Drivers of this.
Speaker Change #196: Well we.
Speaker Change #197: I don't know how dry resist ever got.
Speaker Change #197: Intricately tied to <unk> other than what we've said is when you get to <unk>. We had believed that there likely is no other choice, but clearly we have been working hard there are.
Speaker Change #197: To <unk> earlier based on all of the benefits, we've talked about with dry UV and dry UV processing in general which is multiple steps. It's the underlayer, it's the resistance.
Speaker Change #197: The dry develop and.
Those cases, there is economic benefits from having to be able to shorten the exposure we've talked about pattern fidelity benefits, there's benefits from using the dry developer versus the wet process in terms of deep activity and so I think that you've just with each customer you reach a point where.
Speaker Change #197: They see enough of those benefits tipping over to where they can make the change and so it's.
Speaker Change #197: It's not necessarily tied to any particular node and so I think that.
Speaker Change #197: I think that we'll see over time customers adopt a different different technology nodes.
Speaker Change #197: Okay.
Speaker Change #198: Thanks Roger.
Speaker Change #199: And our next question comes from Joe Moore with Morgan Stanley. Please go ahead.
Joe Moore: Great. Thank you guys.
Joe Moore: Sorry to ask about China again as you make these comments about December and next year.
Joe Moore: How are you thinking about the Commerce Department export controls have you had I'm asking what do you think the decision will be but have you had conversations where you have some kind of high.
Joe Moore: General sense of what the restrictions may be or are you kind of guessing like the rest of us and if youre guessing.
How are you, making those guesses.
Joe Moore: Yes, I think that the view, we've given you contemplates our best understanding.
And our best estimate of what we think will happen. So I don't know if you call that our guests an educated guess I mean I doubt all of you guys are just guessing you have sources of information.
Joe Moore: And so I think that that's just.
Joe Moore: That's our view.
Joe Moore: And.
Joe Moore: Best we can say right now is what we've said about our how we see China WP, both through the next quarter as well as into next year.
Okay. That's helpful. Thank you and then.
Speaker Change #200: As you think about <unk>.
Speaker Change #200: December if China drops down 2% to 30%.
Speaker Change #200: Double digit growth ex China, I mean first of all am I being too literal and precise about that but if you are going to grow double digits ex China kind of what gives you the confidence around that.
Speaker Change #201: I mean, Joe it's the same thing we do every time, we guide you with numbers, we understand what customers expect from US what we think theyre going to order what to the best of our ability every single region. An ROE is going to do every single customer every single fab and so forth we put it together at the same every single quarter and thus what we've just done.
Speaker Change #201: The only thing we've done incrementally here because there's been so much chatter about China is give you a number on China, which normally we don't do any geographic stuff.
But the four three we just guided you to we've gone through the same process. We do every single quarter to put put.
Speaker Change #201: Data together to support that.
Speaker Change #202: Thanks, guys. Thank you so much.
Speaker Change #201: Sure.
Speaker Change #203: And our next question today comes from Blayne Curtis with Jefferies. Please go ahead.
Blayne Curtis: Thanks for squeezing me in and I feel bad that Joe said, one more on China, because I had one more on China, but.
Blayne Curtis: I just kind of curious I think the fact that you're getting $250 million is the math that come out in December I guess that go into the expectation was that like the Chinese DRAM would be front end loaded.
Blayne Curtis: And I guess, you've seen I think you recognize as nonvolatile, that's come down so im assuming thats less of a headwind. So I guess roundabout way of saying that <unk> be down in December it would seem like that would be the bulk of the 250 that it comes out I just can you dial it down a little bit as to where what segment that that headwind is.
Speaker Change #204: Man Blayne I don't know if I can answer your question. Its a possible see SPG is down next quarter sure. It's possible the relying component does attach.
Speaker Change #204: The specialty nodes stuff, which is obviously correlated to a certain extent with China, not only but elsewhere also.
Speaker Change #204: But there is other stuff going on in there that ties to upgrade cycles and utilization and so forth.
Speaker Change #204: I don't know if I'm, helping you im just kind of rambling here a little bit.
Speaker Change #205: It's fine I just wanted to ask you also I think the messaging on NAND is a lot more positive I think people have gotten incrementally more negative on timing of man just kind of curious the timing that youll see those upgrades, obviously, you've had the headwind from the Chinese customer, but do you expect that tailwind to be a tailwind kind of a.
Speaker Change #205: Rest of this calendar year or is it truly a 25 sterling.
Speaker Change #205: No.
Speaker Change #206: We were speaking about that primarily from a 2025 perspective can you give any to any timing within that particular year. It's just.
Speaker Change #206: Again predicated on this idea of that.
The down cycle has been quite long.
Speaker Change #206: And the.
Speaker Change #206: Which is putting a number of quite a large portion of the capacity at technology nodes that we think.
Speaker Change #206: It can be significantly improved for current users through technology upgrades.
Speaker Change #206: And those are the conversations we're having with customers we.
Speaker Change #206: We will give more more on the timing once we have a better view of that as we move into early next year.
Speaker Change #207: Got you. Thanks, so much.
Speaker Change #208: Alright, Thanks, Blayne and operator, we will take one more question.
Speaker Change #209: Sure thing and our final question today will come from Chris Caso with Wolfe Research. Please go ahead.
Chris Caso: Yes. Thank you.
Chris Caso: I guess a question on on DRAM and <unk>.
Chris Caso: Not a lot of discussion on that heading into next year.
Chris Caso: Whats your view on the trends Youre seeing there and again have theres been a lot of mixed signals on that has that changed in the last 30 days last 90 days point.
Speaker Change #210: No Chris It really hasnt changed in the last 90 days you know you've got a product cycle in DRAM DDR four garner DDR five you've got the high bandwidth memory, that's going on in there and that's pulling through a need for incremental equipment. We believe that growth again next year.
Speaker Change #210: Thank you so much percentage relative to our outlook in DRAM.
Speaker Change #210: Yes.
Chris Caso: Okay. Thanks.
Just as a.
Speaker Change #212: Follow up.
Speaker Change #212: You can help me one more close it out on one more China question.
Speaker Change #212: With what you said about China at 30% of revenue exiting the year is it safe to say buy will always hold.
Speaker Change #212: With the expectation for some of the other segments foundry logic.
Speaker Change #212: For NAND to grow next year that.
Speaker Change #213: Most likely that China comes in if we look for the full year at below 30% of revenue is below 30% of total revenue as we look at the whole year, obviously I know it depends upon what your total revenue looks like but.
Speaker Change #214: It feels like Youre seeing growth elsewhere, and probably not in China from the fourth quarter quarterly level is that at least at a rational way to think about it.
Speaker Change #215: Yes, Chris it's not unreasonable rethinking about it that way and frankly like I said, we're not guiding 25 numerically, it's possible that China trends down below 30% for sure.
Speaker Change #215: It's too soon for us to get numerically specific on next year, but we will certainly do that on the call next quarter.
Chris Caso: Got it that's helpful. Thank you.
Chris Caso: Yes, Thanks, Chris.
Chris Caso: Yes.
Chris Caso: Later.
Speaker Change #216: <unk> concludes the call here, thanks, everybody for joining and I'm sure we'll be talking to most of you as the quarter progressed.
Speaker Change #217: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.