Lam Research Corporation

Good day, and welcome to the LAM Research September Q1 Earnings Conference 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 a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Ram Ganesh, Vice President of Investor Relations. Please go ahead, sir.

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 September 2024 quarter and our outlook for the December 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.

Thank you, Ram, and good afternoon, everyone. LAM posted a strong September quarter, with revenues and earnings per share higher than the midpoint and profitability above the high end of the guided ranges. These results marked the fifth consecutive quarter of revenue growth for the company. When combined with our solid outlook for the December quarter, LAM's performance points to strong execution in an industry environment where NAM's spending has yet to recover. Our view on calendar year 2024 WFE remains mostly unchanged, spending expected to be in the mid $90 billion range. We continue to see AI driving strong investments in leading edge logic nodes, as well as advanced packaging segments, including high bandwidth memory or HBM. We expect domestic China WFE will be down in the second half relative to the first half, with China's share of land's overall revenue normalizing to the 30% range in the December quarter. For our normal cadence, we will provide the full details of our 2025 WFE outlook on our January earnings call. However, at this point, our early view for next year is for WFE growth from 2024's mid $90 billion range. More importantly, we see an outstanding opportunity for LAM to outperform overall WFE growth in 2025. This is due to the critical role that etch and deposition play as fundamental enablers of higher performance, more scalable semiconductor device architectures. LAM is strongly positioned to benefit both from improvement in NAND spending and increased customer investments across multiple technology inflections. In NAND, we expect the spending recovery to be driven primarily by technology upgrades, which is a highly favorable dynamic for LAM given our industry-leading position in critical NAND processes. In Foundry Logic and DRAM, we are set to benefit from growing investment in gate all-around, backside power distribution, advanced packaging, and dry UV resist processing. Each of these advancements is more etch-and-deposition intensive, and we have talked about our progress in these areas over the past several quarters. We expect to see increasing adoption across all four inflections in 2025. First on NAND, this segment has seen a prolonged cyclical downturn, but technology conversions to more advanced nodes will be critical to meeting the increased demand for high-speed, high-capacity enterprise SSDs, as well as satisfying the need for low-cost, high-capacity storage in client devices. Currently, over two-thirds of bits are still manufactured using older sub-200 layer technologies. We believe customers will continue converting this capacity to more advanced nodes in 2025. With the industry's largest installed base of 3D NAND equipment, LAMs should benefit disproportionately as these upgrades occur. Furthermore, NAND manufacturers must also address the growing challenge of word line resistance. This sets up an important materials migration from tungsten to molybdenum, or moly, which offers superior thin-film resistivity, simplifies the process of minimizing leakage, and yields the lowest resistance. LAM has more than a decade of learning embedded in our metal atomic layer deposition, or ALV, applications, with customer engagements on moly across NAND, DRAM, and FounderLogix. We have production wins for the MOLLE transition in NAND that will scale in 2025 with FoundryLogic and DRAM ramps to follow. Outside of NAND, we continue to build momentum and gate all around nodes with our selective edge tools, including recent wins and a large FoundryLogic customer. In advanced EUV patterning, our latest conductor edge tool with direct drive technology is gaining ground with broader adoption across key customers. In the evolution to backside power distribution in Foundry Logic, we see expansion of our served market and share in dielectric etch and copper plating in 2025 due to the introduction of additional Zia formation steps and new metal layers. Advanced packaging has been a highlight this year, driven by the performance needs of advanced AI devices. LAM established early technological leadership in deposition for advanced packaging. Our unmatched experience in copper-plating hardware design and process technology is enabling Sabre 3D to deliver best-in-class coplanarity, uniformity, and defectivity at high throughput. This has translated into significant market share gains in 2024 and strong momentum as we look ahead into 2025. Our Sabre 3D revenue has more than doubled this year, as both the number of 2.5D and 3D packages and the metal layer count per package has grown. As the complexity of advanced packaging continues to increase over time, more stringent performance requirements should play to LAM's strengths. Finally, in our Customer Support Business Group, or CSBG, we are seeing strong customer pull for productivity enhancement, extendability, and reuse of LAM's installed base of tools. In both VRAM and NAND, there is intense focus on lowering bid cost through efficient reuse of the installed base. This has led to recent market share wins where upgrades of existing LAM installed base systems provided better value than the new build alternatives offered by competitors. Similarly, our customers' focus on installed base productivity is driving greater adoption of LAM's equipment intelligence services, with an additional 500 process chambers subscribed in the past quarter. So to wrap up, as we look at the changes ahead for every leading-edge device and every advanced package, we see more and more opportunity for LAM. The AI era is here. We have transformed our business and expanded our product portfolio to prepare for this next generation of semiconductor industry growth. Our investments are in the early stages of paying off. I'm looking forward to sharing more about why we believe the best is yet to come for Lamb at our investor day on February 19th in New York City. Now here's Doug.