Lam Research Corporation

Good day and welcome to the LAM Research September 2023 Financial Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Tina Correa, Corporate Vice President, Chief Accounting Officer, and Investor Relations. 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 September 2023 quarter and our outlook for the December 2023 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.

Thanks, Tina, and welcome, everyone. LAM produced solid results for the September quarter. Revenues came in above the midpoint of our guidance, and for the second quarter in a row, our gross margin, operating margin, and earnings per share all exceeded the high end of the guidance range. Our revenue and earnings per share are expected to improve further in the December quarter, demonstrating our continued strong execution in a cyclically soft calendar year 2023. Turning to the wafer fabrication equipment environment, we see spending for calendar year 2023 in the $80 billion range. The adjustment in WFE from our prior view of mid $70 billion is based on updated checks on non-LAM related markets as well as restricted FAB spending in China. It does not change our assumptions on LAM revenues for the year. On the device segment side, NAND weakness continued in the quarter as customers adjusted spending levels down and further lowered utilizations to drive a faster path to supply demand balance. While NAND WFE is down significantly in 2023, supply actions are starting to have a positive impact. Customers have recently indicated that pricing trends have stabilized and NAND bid demand has increased from high single-digits percent year-over-year growth to high teens, as certain consumer markets are demonstrating greater demand elasticity in per-unit content. DRAM spending is modestly up relative to our prior view, driven by better trends in high bandwidth memory related demand, as well as further upside from domestic China customers. Meanwhile, the foundry logic segment is down slightly versus our prior baseline due to weakness in both leading edge and non-China based mature node investments. Looking forward, it remains hard to call the timing and pace of WFE recovery, but we believe LAM is in a good position to benefit from both cyclical and structural drivers of demand. When memory investments begin to recover from current cyclical lows, we expect to see early benefits in our install-based business as fab utilization improves, driving increased demand for spares, services, and equipment upgrades. Longer term, LAM's growth story is strong and is underpinned by the fact that etch and deposition are fundamental enablers of higher performance more scalable semiconductor device architectures. To address emerging technical challenges, customers continue to identify new innovative use cases for vertical scaling. Backside power delivery is a good example, as it is an emerging device architecture being developed to address the scaling limitations of traditional back end of line integration schemes. Etch and deposition play a critical role in enabling this transition And backside power delivery is expected to add close to $1 billion of incremental SAM opportunity for LAM per 100,000 monthly wafer starts. Today, power interconnects increasingly compete for space in the complex back end of line wiring, while also taking up considerable area at the transistor level. Additionally, managing power loss between the external source and the transistors is increasingly challenging due to resistance. A backside power delivery architecture enables the separation of the signal and power delivery paths to free up valuable way for real estate and minimize power loss. Furthermore, customers are implementing changes, including the use of thicker metal layers, in order to efficiently integrate backside power with their advanced packaging schemes. New etch and deposition capabilities are needed, and the trends are favorable for LAM. Due to our existing strength in backend processes, we've been able to quickly extend the capabilities of our copper electroplating and PVD deposition products to address the throughput and productivity requirements of backside power applications. We now have tool of record positions at a leading FounderLogic customer and expect these positions to continue to grow. As we approach the end of the year, our installed base is closing in on 90,000 chambers. As semiconductor manufacturing is becoming increasingly complex, our customer support business group is seeing more opportunities to deliver innovation, productivity, and yield enhancement. In the September quarter, we expanded our equipment intelligence offering at multiple customers to include the first big data application of high resolution optical emission spectroscopy, or OES. The equipment intelligence capabilities we are delivering with OES are highly differentiated due to the complexity of collecting and interpreting plasma spectra in manufacturing over time and across a large fleet of tools. Our solution allows customers to resolve performance issues that would otherwise remain undetected. Recently, our CSBG team also put the industry's first collaborative maintenance robot, or cobot, into a production fab at a leading customer. Cobots help execute complex maintenance tasks with precision and reliability, leading to improved tool-to-tool performance matching and higher equipment availability. Also, we believe Cobots as a new service offering can play an important role in addressing anticipated skilled labor shortages as semiconductor manufacturing expands and becomes more regionalized. Overall, we see tremendous vectors of growth ahead for the semiconductor industry and for LAM. Scaling and complexity challenges are driving multiple inflections towards 3D architectures, and in turn, greater etch and deposition intensity. LAM has a strong track record of execution, and we are committed to making the strategic investments needed to position the company to outperform as the industry and our markets grow. Over the last two years, we've been laying the groundwork for greater scale and efficiency with the expansion of our manufacturing, supply chain, and warehousing capabilities in Asia in order to better serve our customers in that region. We are also increasing our R&D efforts to extend our technology differentiation and expand our product portfolio to capture new inflection-driven applications. While the current business environment remains challenging, secular industry trends play extremely well to land strengths, and we are excited by the breadth of opportunities we see ahead for the company. Thank you, and I'll now turn it over to Doug.