Lam Research Corporation

Currently holding for the Lamb Research Corporation's December quarter 2021 earnings conference call. At this time, we are assembling our audience and will be underway in about one minute. We thank you for your patience in holding us. Please remain on the line. Thank you. Good day and welcome to the LAM Research Corporation's December quarter 2021 earnings conference call. At this time, I would like to turn the conference over to Tina Correa, Corporate Vice President, Corporate Finance and Investor Relations. Please go ahead, ma'am.

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 of and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we'll share our overview on the business environment and we'll review our financial results for the December 2021 quarter and our outlook for the March 2022 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 the accompanying slides in the presentation. 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.

Thank you, Tina, and Happy New Year to all that are joining us today. Calendar 2021 was another year in which companies and our communities had to respond to significant challenges on many fronts. LAM's operations and results were impacted by the effects of COVID-19, labor shortages, freight and logistics cost escalation and supply chain constraints. But I am proud and thankful for how LAM employees responded at every turn with commitment, and agility to support our customers and business. As the digital transformation of both the global economy and our everyday activities accelerated throughout the year, demand for wafer fabrication equipment continued to strengthen. LAM delivered record revenues and record earnings per share in calendar year 2021. Embedded in these results is record revenue in every area of our business, including NAND, DRAM, and Foundry Logic, and within every sub-segment of our customer support business. Even in a year with relatively higher foundry logic spend versus memory, we gained market share in both etch and deposition. As we close out 2021 and enter the new year, demand for lamb products has never been higher. Yet, as we have discussed in prior quarters, the global supply chain remains severely stressed at these unprecedented output levels. In the December quarter, unexpected shipment delays primarily for components from a critical supplier surfaced in the last two weeks of the quarter, leaving us with insufficient time for full recovery despite the diligent efforts of our supplier and our global operations team. The resulting shipment delays caused revenues to come in below the midpoint of our guidance range. Revenue for the tools that were impacted in December will be recognized in the March quarter. Looking into the first weeks of 2022, we see that supply challenges have broadened, with the COVID Omicron surge adding further disruption to freight and logistics operations, as well as exacerbating skilled labor shortages. We also continue to encounter significant scarcity of certain components and parts, including semiconductors. As a result, our March quarter revenue levels will be limited by the output constraints of our global supply chain. and this is reflected in our guidance. We are aggressively working on the issues with our suppliers and believe we will see progressive improvement as we move through the next few quarters. Overall, for calendar year 2022, we expect to deliver strong across the board revenue growth. On the demand front, we are seeing continued momentum in wafer fabrication equipment spending. We believe that spending in calendar year 2021 ended consistent with the mid-$80 billion estimate we provided on our last call. Strength was broad-based, with NAND, DRAM, and Foundry Logic all growing double digits. As we look to calendar year 2022, there are multiple themes underpinning our view for continued WFE growth, including powerful end-market demand trends, rising device complexity, strong semiconductor industry operating profitability, and regional government support and incentives. In end markets, the technology landscape continues to build, not only on the prevalent drivers of AI, IoT, the cloud, and 5G, but also now along another vector as advances in virtual and augmented reality lay the groundwork for the metaverse over the coming decade. Immersive gaming experiences will be a primary driver of metaverse development and adoption, and I've spoken on prior calls about how advanced processors and memory devices for gaming are favorable for WFE demand due to both leading-edge performance requirements and semiconductor content growth. Across the semiconductor industry, we see more than 20 new fabs being built, and customers have already announced significant CapEx increases for the year. Consequently, we expect 2022 WFP spending to be in the $100 billion range with strong growth across all segments. We believe that our performance in 2021 has strengthened our ability to win in the robust demand environment we see ahead. We launched innovative new etch and deposition products, gained market share at key technology inflections, and rapidly grew our installed base. On this last point, our customer support business group continues to exceed expectations. Our chamber count grew approximately 13% in calendar year 2021 to approximately 75,000 units. Our revenue per chamber, which we highlighted at our 2020 Investor Day as a key growth objective, increased nearly 24% year on year in 2021, or nearly twice the growth in chamber count. We expect calendar year 2022 to be another strong growth year for our CSBG business. Our large and growing installed base also adds immense value to our product innovation process. The high volume of wafers running on our installed base every day enable us to detect newly emerging challenges more quickly and accelerate our cycles of learning. both of which are critical in an era of increasing device and manufacturing complexity. On the product front, 2021 was a year of significant milestones for LAM. To highlight just a few, our Vantex dielectric etch system became the fastest ramping new etch product in LAM history. Built on our groundbreaking new Sensai platform, Vantex helps customers reduce costs by enabling higher etch rates and improving fab footprint efficiency, while new process capabilities extend our technology leadership and high aspect ratio edge. We expect continued growth in Vantech shipments in 2022 with overall revenues from this product roughly doubling year over year. Our VectorDT product for backside deposition achieved process tool of record status at all customers for 3D NAND devices with more than 200 layers. further demonstrating our leadership in 3D scaling enablement. We achieved several important leading edge wins with our selective etch, strip, and surface treatment solutions, including applications for gate all around at a Foundry Logic customer and our first selective etch win in DRAM. As device complexity increases across logic and memory devices, the need for angstrom level precision is driving greater adoption of LAM's selective edge solutions compared to conventional wet edge methods. This should enable selective edge revenues to double this year as customers adopt our innovative suite of products for current leading edge applications as well as for future device architectures. And finally, we increased our deposition market share with wins in critical bit line and spacer applications for RC reduction and are now qualified at all leading nodes for this application. To conclude, our product momentum and outperformance in our install-based business have put LAM in a great position to capitalize on the tremendous demand we see for wafer fabrication equipment. Our top priority is to alleviate the near-term supply constraints that have impacted our output capacity, our delivery predictability, and our financial results. With progress expected on this front over the next several months, we believe calendar year 2022 will be another outstanding period of growth for LAM. Thank you, and now here's Doug to cover the financial results and our outlook.