Lam Research Corporation

Good day and welcome to the LAM Research Corporation's March 2021 Quarter Financial Conference Call. At this time, I would like to turn the conference over to Tina, Corporate Vice President of Investor Relations and Corporate Finance. Please go ahead.

Thank you and good afternoon, everyone. Welcome to the LAM Research Quarterly Earnings Conference Call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment and we'll review our financial results for the March 2021 quarter and for the June 2021 quarter. The press release detailing our financial results was distributed a little after 1 o'clock p.m. Pacific time this afternoon. The release can also be found on the investor relations section of the company's website, along with the presentation slides that accompany today's call. Today's presentation and Q&A includes 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. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified. A detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings press release. This call is scheduled to last until 3 o'clock p.m. Pacific time. A replay of this call will be made available later this afternoon on our website. And with that, I'll call over to Tim.

Great. Thank you, Tina, and thank you to everyone joining the call today. LAM posted excellent results in the March quarter, with record revenues from both systems and install businesses, as well as record cash flow from operations and record earnings per share. Our performance reflects solid execution by LAM employees and our partners worldwide, despite ongoing COVID-19 related impacts. The investments we are making in manufacturing and supply chain resiliency are enabling us to support our customers' needs amid a broad-based strengthening in semiconductor demand. We are very optimistic on our positioning and see continued strong growth for LAM in the future. Let me first begin by updating our expectations for wafer fabricate equipment spending. Since our last earnings call, we have seen WFE spending plans increase for the calendar year. Our outlook for 2021 WFE is trending above $75 billion, and we now believe that WFE spending in the second half of the calendar year will be higher than the first half across all device segments. Several factors are at play in driving this robust WFE growth. First, secular tailwinds such as AI, 5G, and I continue to strengthen. And over the past year, COVID-19-related impacts like work and learn from home have accelerated adoption of these technologies. Second, the complexity of manufacturing advanced semiconductor devices continues to increase at a rapid rate. leading to a rise in equipment capacity across all segments. Third, innovative consumer products are incorporating more semiconductor-enabled functionality, driving faster growth in semiconductor content per year. On our last call, we talked about new gaming consoles as an incremental driver for semiconductor demand and WFE. A similar example is the PC and wearables. These devices are utilizing an increasing number of sophisticated sensors manufactured using mature technology nodes to deliver added functionality such as body temperature measurement, heart rate monitoring, and blood oxygen sensing. Wearables are integrating these sensors with advanced node semiconductors that deliver lower power and lower latency in addition to the computation capability required to support new AI and machine learning-enabled applications. This is having a marked effect on semiconductor content in these products, and today's wearables contain nearly double the amount of DRAM and four times the amount of NAND versus five years ago. Semiconductors are also capturing a greater share of the value within the electronics supply chain, and we see 2021 semiconductor revenues as of electronics revenues breaking out of the historic averages of the last 15 years. And finally, The growing importance of semiconductors to global industries has led governments in the U.S., Europe, and Asia to call for actions to mitigate supply chain risk, which will likely include increased investment in regional semiconductor manufacturing capacity. When combined, these four factors of accelerated technology adoption, growing complexity, increasing semiconductor content, and capacity investment support a compelling case for a strong multi-year WFE spending environment, one in which LAM is executing extremely well. In 2020, we gained share across both etch and deposition, including significant gains in conductor etch. We expect to deliver overall share growth again in 2021. Our positive momentum demonstrates how we are successfully positioning LAM as the partner of choice for our customers at a time when technology complexity is increasing, 3D scaling of device and packaging architectures will be a primary focus of the industry for the remainder of this decade. And LAM approaches this challenge with unique experience. We were the leader in enabling the transition to 3D devices through our early engagement in the nation. And as a result, we built enduring leadership positions in the most critical etch and deposition applications. And as the 3D NAND roadmap is evolving to multi-stack scaling for higher layer counts, our technical contribution continues to grow. To integrate multiple stacks to build taller devices, innovative solutions are required for stress management, etch selectivity, and defect control. The increase in complexity of multi-stack scaling is creating new product opportunities for LAM, and this quarter we recorded a key deposition win for a multi-stack enabling film and a leading memory customer. Through our leadership in the 3D NAND market, LAM has developed a portfolio of products and acquired the expertise in high-volume manufacturing to help customers' highly complex 3D scaling challenges across other device segments. In Foundry logic, the adoption of 3D-like gate-all-around or nanosheet-type structures introduces unique processing requirements. In the last earnings call, I highlighted the momentum of our latest conductor etch system, Keogx, which utilizes an innovative plasma pulsing capability to deliver superior high aspect ratio etch results for nanosheet structures. In order, we saw additional application wins with Keogh at multiple Foundry Logic customers. We are also seeing share gains with our new suite of selective edge products designed for ultra-high selectivity removal processes previously performed using systems. Related to the challenge to the back end of line scaling, we are taking new approaches to deposit lower K materials and deliver better interface controls. New material integration schemes enabled us to win multiple 5-nanometer back-end-of-line applications, and in the March quarter, we extended our wins to more advanced nodes as well. In addition to device scaling, we remain equally focused on our customers' objectives to improve cost and operating efficiency in their fabs. You will recall that we announced our new Vantex dielectric etch process module on the Sensai platform. Vantex on Sensai delivers best-in-class etch technology and brings to market unique and innovative solutions to lower overall cost of ownership. The Sensai platform architecture increases wafer output per square meter of fab space. New RF power designs consume less energy to support cost and ESG roadmaps. And advanced equipment intelligence and self-maintenance capabilities minimize required onsite human intervention. With semiconductor demand at unprecedented levels, these factors have become critical differentiators as customers look to cost effectively and sustain ramp capacity on advanced nodes. As a result, we continue to make solid progress on Sensei adoption and leading customers. Our focus on helping customers solve productivity and manufacturing challenges is also reflected in the excellent performance of our install-based business, where we are safe and in growth. CSBG revenue eclipsed $1.3 billion in the March quarter, yet another record. We are executing very well in this business, and as we sit here today, we are tracking ahead of the growth model that we shared with you at last year's Investors Day. All product lines within CSBG had record revenues in the quarter. Our upgrades business is expected to roughly double over the two-year period ending in 2021. By enhancing productivity and extending installed base capability for multiple generations, our upgrades business plays an important part in our customers' cost reduction roadmaps. In Reliant, we see specialty technologies continuing to grow in areas like CIS, power, and RF devices. In SPARES, we successfully closed with a key customer the single largest annual contract in the company's history, which includes commitments for critical leading-edge parts. And lastly, we are seeing great progress in services. Big data and equipment intelligence are playing an increasingly critical role in the operation of advanced semiconductor fabs. This quarter, we closed a multi-region data services license contract, with a major memory manufacturer to provide enhanced tool data to enable their smart manufacturing roadmap. Additionally, our services team completed the first year of a comprehensive multi-year equipment intelligence services contract at another major memory producer. System performance under this contract exceeded objectives, leading to a significant return on investment for the customer. So to conclude, We are in an environment where industry fundamentals continue to strengthen. The strategic relevance of semiconductors is reaching new height, and semiconductor capital equipment is well positioned to benefit. Amidst strong WFE spending, GLAM is delivering great results and making foundational investments in new products and infrastructure to drive continued outperformance. Thanks again for joining today, and now here's Doug.