Lam Research Corporation

Good evening and welcome to the Land Research June Quarterly Earnings Call. All participants will be in a 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 touchtone phone. To withdraw your question, please press star, then two. Please note this call has been recorded. I would now like to turn the conference over to Mr. Ram Ganesh, VP, 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 will review our financial results for the June 2024 quarter and our outlook for the September 2024 quarter. The press release detailing our financial results was distributed a little after 1 p.m. Pacific time. 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 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, Ram, and good afternoon, everyone. In the June quarter, LAM delivered another set of solid results, with revenues, profitability, and earnings per share all coming in above the midpoint of our guidance. Our CFPG business posted strong growth, with revenues up 22% sequentially, led by reliant and spares. On the manufacturing side, we achieved a key milestone in the quarter, with our Malaysia factory shipping its 5,000th chamber This is the fastest ramp of a new manufacturing facility in LAM's history, and we remain on track to achieve our long-term cost reduction goals through an expanded global manufacturing and supply chain footprint. As previously communicated, 2024 is a year of strategic investment for LAM, where we are prioritizing product development for key technology inflections, global R&D infrastructure close to our customers, and digital transformation for operational efficiency at scale. We believe these investments will put Lam in a position to outperform as the industry moves into a period of multi-year WFE spending expansion. Now turning to WFE, we expect this year's spending to be in the mid $90 billion range. Our customer investment profile is generally unchanged from our prior view, apart from slightly stronger domestic China spending and additional demand related to the ramp of high bandwidth memory or HBM capacity. We see foundry logic, DRAM, and NAND investments all up on a year-on-year basis. Global spending on mature node technologies is expected to be roughly flat year-on-year. Looking ahead to 2025, we see a positive environment for continued growth in WFE spending. The power of AI as a transformative business tool is still yet to be fully realized. Today, the focus on AI model training is driving strong demand for GPUs and HBM. However, as AI use cases expand, we believe inferencing at the edge will spur content growth of low-powered DRAM and manned storage in enterprise PCs and smartphones. Investments for AI-enabled edge devices play particularly well to LAM's strengths. We anticipate that memory customers looking to scale capacity and lower bit cost will bias WFE spending toward technology upgrades of the installed base. For NAND, the etch and deposition intensity of upgrades is significantly higher than in a greenfield investment. When you consider LAM's sizable installed base in memory, including roughly 7,500 high aspect ratio dielectric etch chambers for NAND alone, we are positioned to outgrow overall WFE when customers upgrade existing memory production lines to next generation nodes. Longer term, etch and deposition are set to play an increasingly vital role in the industry's efforts to develop faster, more power efficient, and lower cost semiconductors to serve AI-related applications. By delivering critical solutions for atomic-level device scaling, new materials innovation, and advanced packaging integration, we see tremendous opportunity for LAM to expand our served market and increase our share at each successive process technology node. To this end, our R&D focus is yielding exciting new products. including this year our first direct power coupled conductor etched tool with matchless power source and bias. Known as direct drive, this new power source uses solid state drivers to stabilize the plasma in the etched chamber 500 times faster than current industry standards. By combining direct power coupling with LAM's unique plasma pulsing capabilities, our latest conductor etched systems are delivering best in class performance for newly emerging 4F squared DRAM applications. In 4F squared devices, the nature of the bit line placement requires precise etchings of ultra small high aspect ratio silicon structures to avoid device shorts or leakage. With direct power coupling and plasma pulsing, LAM connects the vertically oriented 4F squared transistor architectures with unprecedented depth uniformity and profile control. Similarly, conductor etch is becoming a critical enabler for EUV patterning for gate all around and DRAM due to the need to reduce edge placement error. For nodes below 2 nanometers, the requirement is for roughly 40% tighter control than at 5 nanometers. Our new conductor etch tool delivers a 30% reduction in feature roughness, which is one of the main contributors to edge placement error. In addition, we can achieve one to two orders of magnitude improvement in defectivity for a given EUV dose, further helping customers reduce the overall cost and improve the capability of the EUV patterning process. Turning demand, AI applications are driving demand for faster, higher capacity enterprise SSDs. NAND makers are pursuing both vertical and lateral scaling of NAND arrays, as well as increasing bits stored per cell through implementation of QLC and PLC technologies. In support of these efforts, LAM is developing new dielectric etch and deposition capabilities. Earlier today, we announced LAM Cryo 3.0, LAM's third generation of cryogenic etch technology. Building on our learning from nearly 1,000 cryogenic etch chambers running in NAND fabs worldwide, this new patented cryogenic etch process delivers industry-leading control of the NAND memory channel hole profile. When LAM-CRYO 3.0 is deployed on our VANTEC system, the etcher delivering the industry's highest available ion energy, we can create a 10-micron deep channel hole that has a top-to-bottom profile deviation of less than 10 nanometers, or less than 0.1% relative to its depth. Such tight profile control allows customers to increase bit density by packing more cells per layer, while also having the flexibility to add more layers per tier. LAM Cryo 3.0 also addresses our industry's need for more sustainable solutions. delivering a 40% reduction in energy consumption per wafer and a 90% reduction in greenhouse gas emissions per wafer compared to non-cryogenic etchers. Deposition technology is also advancing quickly to support increased bit density and lower cost through multi-tier stacking. Polysilicon and tungsten gap fill materials have typically been used to enable tier stacking in high layer count NAMPs. Integration of these materials, however, has resulted in poor control of critical dimensions and overlay, negatively impacting yield and performance. LAM's innovative PECVD-based pure carbon gap fill process provides an attractive alternative material. With a unique combination of high etch selectivity, superior mechanical properties, and simplified dry post process removability, It also reduces the number of process steps required in some cases by approximately 50% compared to traditional approaches. Overall, etch and deposition are becoming increasingly critical to addressing the complex semiconductor requirements of a growing AI environment. We are excited by the breadth of opportunities we see ahead for the company, especially those created by technology inflections to gain all around backside power delivery, advanced packaging, and dry EUV-resist processing. All of these are etch and deposition intensive, and each represents a billion-dollar or higher growth opportunity for LAM. We look forward to sharing our progress on these fronts, as well as our long-term financial model at our next investor day, which we are planning to hold in February 2025. With that, I'll turn it over to Tim.