Lam Research Corporation

Good day, ladies and gentlemen, and welcome to the Lamb Research Corporation's September Quarter Earnings Call. At this time, I would like to turn the conference over to Ms. Tina Correa, Corporate Vice President, Corporate Finance and Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to the Lamb 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 September 2021 quarter and our outlook for the December 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 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. 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 hand the call over to Tim.

Thanks, Tina, and welcome, everyone. LEM delivered a solid September quarter with revenues in line and earnings per share above the midpoint of our guided ranges. These results represent our sixth consecutive quarter of revenue and earnings per share growth for the company. Over this time period, we have scaled our operations to support rapidly growing demand for our products and services. And as we look forward, we see continued strengthening across both leading edge device segments and specialty technology markets. In response, we have expanded our manufacturing capacity at existing facilities in the United States, Korea, and Taiwan. In the September quarter, we celebrated the grand opening of our new Malaysia facility, which when fully ramped, will be the largest factory in our global network. And just last month, we announced a new factory in Oregon, primarily designed to meet increased demand for LAM tools and foundry logic and advanced packaging applications. With these investments, we are building a solid foundation for delivering on our long-term growth objectives. In the near term, however, we are not immune to the widely reported supply chain constraints and elevated costs that continue to create new challenges for lamb and others across our industry. Our employees and supply chain partners are working tirelessly to meet the needs of our customers, and I would like to sincerely thank them for their efforts. From a wafer fab equipment spending perspective, we now see calendar 2021 ending in the mid $80 billion range. Overall, WFE is higher in the second half versus the first half of the year, with both DRAM and Foundry logic up in the second half, while NAND is more balanced. Demand remains strong. And while it's a bit early to give a specific forecast for calendar year 2022, indications are that it will be another year of WFE growth. We believe sustained strength in WFE spending is due to several factors we have previously highlighted. First, drivers of semiconductor demand continue to broaden, and sectors such as automotive, healthcare, and security are increasingly dependent on semiconductor content to deliver the performance requirements of end users. As a result, we are seeing a strong uptick in trailing edge technology nodes served by our Reliant business. Our Reliant business has now posted 11 consecutive quarters of record revenues. And in calendar year 2021, we expect Reliant to outgrow the WFE investment in this segment. Furthermore, high utilization rates across our installed base are driving strength in all subsegments of our CSBG business. And in the September quarter, CSBG revenues increased year over year by more than 30%. At the leading edge, semiconductor content growth, larger die, and rising capital intensity are fueling increased wafer starts and strong WFE spending. In Foundry Logic, for instance, the next generation processor chip for a top smartphone maker is more than 20% larger than its prior iteration. In DRAM, higher capital intensity is being driven by the increasing need to correct single bit errors to the addition of an extra on-chip bit. In 3D NAND, increasing device layer counts and the resulting higher degree of manufacturing difficulty is requiring the addition of new deposition and etch processes to address stress management, defect control, and multi-stack integration challenges. As a result, we see the WFE investment required to achieve the same bit growth percentage over the next five years to be notably higher than the five-year period just completed. However, as the leading equipment supplier to the 3D NAND market, we are investing in new and differentiated capabilities to ensure scaling remains cost effective. As one example, LAM has developed a new high productivity cryo-etch solution, which increases etch rates in high aspect ratio features required for NAND devices with greater than 200 layers. We have installed this new capability at every major 3D NAND manufacturer for qualification, with additional systems now shipping to support planned ramps to high-volume production next year. While initially developed to meet the demanding requirements of high aspect ratio edge in 3D NAND, we believe the technology may also have benefits for foundry logic and DRAM at the leading edge, where we are presently engaged with customers on critical applications. Looking in more detail at the foundry logic segment, we see spending at record levels. LAM's foundry logic revenues are likewise set to grow significantly in 2021. And we expect this expansion to continue in 2022 as well. Foundry and logic performance in the sub-5 nanometer era is being driven by both device architecture innovation and traditional area scaling. We are prioritizing technology development in three areas where we see the fastest growth and the greatest need. Namely, deposition and etch processes to support the efficient adoption of EUV patterning, new etch capabilities to enable the formation of critical transistor features, and new materials and deposition techniques to assist in RC management. In patterning, we are using the learning we have acquired over many years of multi-patterning etch leadership to win new applications as the industry adoption of EUV progresses. EUV requires use of special photoresist materials, which given the material composition, can amplify existing challenges with pattern roughness and defectivity. Unaddressed, these will lead to performance and yield loss, especially at smaller device dimensions. LAM has developed critical etch and deposition technologies to help solve these EUV implementation issues. In etch, we introduced earlier this year a new pulsed plasma etch capability that has demonstrated an order of magnitude reduction in EUV-related pattern defectivity. This innovative etch solution is currently shipping to leading Foundry and Logic customers. In deposition, hard masks and transfer films require enhanced mechanical properties in order to maintain fidelity of extremely small features and minimize line roughness. Utilizing a combination of proprietary hardware design and RF power technology, we are depositing high-quality films that have replaced incumbent technologies such as PVD and spin-on materials at multiple FoundryLogic customers. Related to the formation of critical transistor features, including gates, fins, and source drains, we saw significant etch winds in the September quarter. These winds continue to confirm the benefits of our unique plasma pulsing capabilities in conductor etch for gate-all-around and FinFET applications. For advanced device architectures, we also see ultra-high selectivity isotropic etch increasingly required. LAM's growing selective etch portfolio delivers superior results through a combination of process technologies and reactor innovations that include new chemistries and plasma sources. This has helped us win a greater number of applications in recent quarters. And finally, RC management continues to be a limiter on performance scaling, and we are seeing demand for our atomic layer deposition technologies as a result. Our striker ALD system deposits thin, low-K films that can withstand harsh integration steps encountered later in the process flow. These films have demonstrated the ability to reduce capacitance by 20 to 30 percent, and Stryker is now the tool of record at leading FoundryLogic customers. This technology is also extendable to gate-all-around devices where there is an additional requirement of conformal coverage in recessed cavities, which can then be selectively etched back. In advanced packaging, momentum remains strong, with orders received in the September quarter from multiple FoundryLogic customers for through-silicon via etch and deposition systems. Our experience in high aspect ratio etching has allowed us to deliver a production-proven process with fast esterates and smooth profiles, helping to minimize the cost of integrating TSVs in the overall flow. Similarly, for copper metallization, our Sabre 3D solution enables void-free fill by employing an innovative advanced pretreatment, and our high-throughput electroplating process reduces cost of ownership. So to wrap up, We delivered a solid September quarter in an environment of ongoing supply chain challenges. We are seeing robust semiconductor demand across all segments, broadening of semiconductor applications across industries, and rising capital intensity. We are excited about the healthy outlook for WFP spending and believe our innovative product portfolio is poised to capture new opportunities as semiconductor technology continues to advance. Thanks again for joining. Now here's Doug to cover the detail, quarter in more detail.