Lam Research Q2 2025 Earnings Report

Lam Research EPS Results

• Actual EPS: $0.91
• Consensus EPS: $0.87
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

Lam Research Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $4.32 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Lam Research Announcement Details

• Quarter: Q2 2025
• Date: 1/29/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, January 29, 2025
• Conference Call Time: 5:00PM ET

Lam Research (NASDAQ:LRCX) is a semiconductor equipment manufacturer headquartered in Fremont, California. Founded in 1980, the company specializes in designing, manufacturing, and servicing equipment fabricating integrated circuits. Lam Research's products enable the production of advanced memory and logic chips used in various electronic devices, including smartphones, tablets, and computers.

The company has a global presence, manufacturing facilities and sales offices in North America, Europe, and Asia. Over the years, Lam Research has received several awards and recognitions for its innovative products, including the 2020 IEEE Corporate Innovation Award for its leadership in advancing the semiconductor industry.

Lam Research's leadership team is led by Tim Archer, who serves as the President and CEO. Mr. Archer joined the company in 2012 and has been instrumental in driving the company's growth and success. Under his leadership, Lam Research has expanded its product portfolio, strengthened its global footprint, and improved its operational efficiency.

Other key company management team members include Doug Bettinger, Chief Financial Officer, and Richard Gottscho, appointed Chief Technical Officer in 2023. 

Lam Research has seen continued growth in revenue and profitability over the past few years. The company has also returned value to shareholders through dividends and share repurchases. The company's cash flow could be a concerning issue. Lam Research has seen strong performance in the stock market in recent years. 

Lam Research operates in the semiconductor equipment industry, which has grown enormously recently. The increasing demand for advanced electronic devices, such as smartphones and other connected devices, drives the industry. However, the industry is also subject to cyclical trends, with demand for semiconductor equipment closely tied to the overall health of the global economy.

Lam Research faces competition from other semiconductor equipment manufacturers, including Applied Materials, ASML, and Tokyo Electron. The industry is also subject to regulatory and political risks, particularly in trade policy and export controls.

Lam Research has several growth opportunities in the coming years. The company is investing in research and development to create new and innovative products that will enable the continued growth of the semiconductor industry. Lam Research also expands its presence in key growth markets, such as China, where it invests in new manufacturing facilities and research centers.

Another growth opportunity for Lam Research is advanced memory technologies, such as 3D NAND and DRAM. These technologies are critical for developing high-performance computing and data storage applications, and Lam Research's expertise in this area positions the company well to capitalize on this growth opportunity.

Lam Research is also focused on expanding its service business, which provides ongoing maintenance and support to customers' equipment. This business offers a stable revenue source and helps build long-term customer relationships.

One of the main risks facing Lam Research is the cyclical nature of the semiconductor industry. Demand for semiconductor equipment can be highly volatile, and the industry is subject to fluctuations in the global economy. If demand for electronic devices declined, it could significantly impact Lam Research's revenue and profitability.

The semiconductor industry is also subject to intense competition, with many established players and new entrants vying for market share. Lam Research must continue to innovate and invest in new products and technologies to remain competitive.

Another risk facing Lam Research is the potential for regulatory and political challenges. The company operates in a highly regulated industry, and changes in export controls or trade policy could impact its ability to do business in specific markets.

While there are risks and challenges facing the company, Lam Research's focus on research and development, expansion into key growth markets, and investment in its service business should help to mitigate these risks and drive long-term growth and profitability. As such, Lam Research may be an investment opportunity for investors seeking to gain semiconductor industry exposure.

Lam Research Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Good afternoon, and welcome to the Lam Research December 2024 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Ram Ganesh, Vice President of Investor Relations.

[Operator]

Please go ahead.

[Ram Ganesh, Investor Relations Officer at Lam Research]

Thank you,

[Ram Ganesh, Investor Relations Officer at Lam Research]

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 Bittinger, 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 December 2024 quarter and our outlook for the March 2025 quarter. The press release detailing our financial results was distributed a little after 1 P.

[Ram Ganesh, Investor Relations Officer at Lam Research]

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 and 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.

[Ram Ganesh, Investor Relations Officer at Lam Research]

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.

[Ram Ganesh, Investor Relations Officer at Lam Research]

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.

[Tim Archer, President and CEO at Lam Research]

Thank you, Ram, and thank you all for joining the call today. Lam closed out 2024 with another solid performance. December quarter revenue, gross margin, operating margin and EPS were all above our guidance midpoints, reflecting strong and consistent operational execution. Wafer fabrication equipment spending for 2024 finished in line with the mid $90,000,000,000 range we guided earlier in the year. Overall, 2024 was a good year for Lam even as NAND spending remained at muted levels.

[Tim Archer, President and CEO at Lam Research]

System revenues in both DRAM and foundry logic grew to record highs and the size of our installed base increased to approximately 96,000 chambers. Our results show that we are making good progress on our strategy of broadening Lam's exposure across end market device segments. It also demonstrates the increasing strength of our product portfolio as semiconductors move into the AI era. For example, gate all around and advanced packaging technologies are critical enablers for AI device manufacturing, including GPUs and high bandwidth memory. They are also highly deposition and etch intensive.

[Tim Archer, President and CEO at Lam Research]

And as a result, we saw Lam's shipments for gate all around nodes and advanced packaging each grow to exceed $1,000,000,000 in 2024. In calendar 2025, we see WFE spending rising slightly to approximately $100,000,000,000 Again, we expect technology inflections to lead to faster growth for Lam as AI applications demand greater device and package level performance. In 2025, LAM shipments to gate all around nodes and advanced packaging combined should be well over $3,000,000,000 Customer migration towards backside power distribution and dry resist processing technologies will add further opportunity in the coming year. As we look forward, we view the increasing importance of deposition and etch technology as a differentiator for Lam and an opportunity to outperform. With this in mind, we have made strategic investments over the past few years to expand our R and D infrastructure, scale our organization and transform our innovation process for greater speed.

[Tim Archer, President and CEO at Lam Research]

We are now seeing these investments yield important product advances. Our recently introduced cryo 3.0 technology is winning at the leading edge, delivering best in class results for high aspect ratio dielectric etch applications on our latest Vantek CX Plus product and also helping extend the capabilities of our large flex installed base through cryo upgrades. Our breakthrough drive resist capability for EUV is enabling patterning of extremely fine devices, vice features with greater precision, reduced defectivity, higher productivity and reduced environmental impact. You may have seen that earlier today, we announced that our ether dry resist solution has achieved a major milestone, having just been selected as the production tool of record for high bandwidth DRAM at a leading memory customer. Technology inflections in DRAM and foundry logic combined with an upgrade focused NAND environment create what we believe is a unique setup for Lam to outgrow WFE spending and strengthen our bottom line in calendar 2025.

[Tim Archer, President and CEO at Lam Research]

In NAND, the industry is looking to transition the current installed capacity to higher layer counts to achieve better device performance at lower bit cost. Here, several trends play to our favor. One is the transition to molybdenum or Moly. Lam's patented multi station sequential deposition technology allows us to employ a differentiated liner and fill process sequence that is proving to be a winner with customers. The momentum for our new Moly product is strong.

[Tim Archer, President and CEO at Lam Research]

A second trend is the adoption of carbon gap fill to enable higher bit density and lower cost through multi tier stacking. Our innovative pCVD based pure carbon gap fill process provides high etch selectivity, superior mechanical properties and simplified dry process removability. While we are in the early innings of these transitions and early in the industry upgrade cycle overall, we expect adoption of moly and carbon gap fill to drive several $100,000,000 in NAND shipments for Lam in calendar 2025. Lam's opportunity will grow even further in future years as more of the 1,000,000 plus wafer starts per month installed capacity converts to higher layer counts. The differentiation we are delivering for customers runs deeper than the process technology itself.

[Tim Archer, President and CEO at Lam Research]

Our semi burst solutions capabilities apply advanced modeling, simulation, data science, analytics, machine learning and artificial intelligence to further enhance our equipment performance and reduce the time needed for process optimization. This is strengthening our competitiveness and most recently we used our semi burst solutions capabilities to successfully defend the key dielectric etch application at a major memory manufacturer. Furthermore, we are leveraging these capabilities to help address the semiconductor industry's global workforce shortage. Through collaborations with universities in the United States, India and Korea, SemiVerse solution software is already being used to educate the next generation of semiconductor industry innovators. And our goal is to provide access to Lam's semiconductor simulation technology to tens of thousands of aspiring engineering students through the rest of the decade.

[Tim Archer, President and CEO at Lam Research]

In CSBG, our equipment intelligence and in fab service automation solutions are seeing significant traction with customers. Last month, we announced the industry's first collaborative maintenance robot. Since then, we have shipped our DEXTRA cobot to a 3rd major memory manufacturer and it is being installed in their fab as part of a multi year services agreement. Over the next decade, semiconductor industry is expected to witness a strong expansion of fab capacity globally and our cobot technology offers an important and cost effective solution to enable precise and repeatable maintenance beyond what human workers alone can achieve. Lastly, our strategic investments in scaling our operations are paying off.

[Tim Archer, President and CEO at Lam Research]

Our Asia operations continue to ramp very efficiently and in 2024 help drive meaningful improvement in both our responsiveness to rising customer demand and our gross margin. Doug will provide some additional detail in his prepared remarks, but as a headline, I am pleased we delivered in calendar 2024 approximately 160 basis points of operating margin expansion even as we invested heavily in new products and infrastructure to fuel future growth. So to wrap up, Lam is in a strong position as we enter the New Year. Deposition and etch are becoming increasingly vital to semiconductor manufacturing and we have made key investments to strengthen Lam's product portfolio. I look forward to sharing more on this at our upcoming Investor Day.

[Tim Archer, President and CEO at Lam Research]

Thank you, and I'll now pass it on to Doug.

[Doug Bettinger, EVP and CFO at Lam Research]

Great. Thank you, Tim. Good afternoon, everyone, and thank you for joining our call today during what I know is a very busy earnings season. We delivered strong financial results in calendar year 2024 with revenue of $16,200,000,000 in diluted earnings per share of $3.36 We're obviously pleased with the company's continued strong execution. For calendar year 2024, CSBG revenue increased 11% to

[Doug Bettinger, EVP and CFO at Lam Research]

$6,600,000,000

[Doug Bettinger, EVP and CFO at Lam Research]

exceeding our expectations. Gross margin came in at 48.2%, which was the highest annual result since Lam merged with Novelis in 2013. Let's look at the details of our December quarter financial results. Our revenue gross margin, operating margin and earnings per share were all above the mid point of our guided range. Revenue for the December quarter was $4,380,000,000 which was an increase of 5% from the prior quarter.

[Doug Bettinger, EVP and CFO at Lam Research]

Our deferred revenue balance at quarter end was $2,000,000,000 essentially flat with the September quarter. I do believe our deferred revenue balance will trend lower into calendar year 2025, but will likely fluctuate from quarter to quarter. From a market segment perspective, December quarter systems revenue in memory was 50%, up from 35% in the prior quarter. Within memory, nonvolatile memory increased coming in at 24% of our systems revenue, up from 11% in the prior quarter. This market segment has reached the high point since the end of 2022, driven by NAND spending on tech conversions from 1XX layer class devices to 256 layer.

[Doug Bettinger, EVP and CFO at Lam Research]

We expect these conversions to continue in calendar year 2025. DRAM represented 26% of systems revenue compared with 24% in the September quarter. DRAM spending was focused on tech upgrades to the 1 alpha, 1 beta and some initial ramp of 1 gamma nodes to enable DDR5 and high bandwidth memory. HBM and high bandwidth memory. HBM investments in our tools enabling through silicon via capability continues to be strong.

[Doug Bettinger, EVP and CFO at Lam Research]

Foundry represented 35% of our systems revenue, a decrease from the percentage concentration in the September quarter of 41%. Growth for gate all around node spending partially offset the decline in mature node spending. The Lutzky and Other Market segment was 15% of our systems revenue in the December quarter, down from the prior quarter level of 24%. The decrease was driven by reduced spending in both leading edge as well as specialty technology nodes. Now I'll discuss the regional composition of our total revenue.

[Doug Bettinger, EVP and CFO at Lam Research]

The China region accounted for 31%, which was down from 37% in the prior quarter. Most of our China revenue continued to come from domestic Chinese customers. The next largest geographic concentration was Korea at 25 percent of revenue in the December quarter, an increase compared with September quarter level of 18%. And finally, Taiwan and the United States rounded out the remainder of the top four regions. The customer support business group generated almost $1,800,000,000 in revenue for the December quarter, consistent with the September quarter and 20% higher than the same period in 2023.

[Doug Bettinger, EVP and CFO at Lam Research]

Sequentially, growth in upgrade revenue largely offset the decline that we saw in Reliant Systems. While

[Doug Bettinger, EVP and CFO at Lam Research]

spares and

[Doug Bettinger, EVP and CFO at Lam Research]

the Reliant product line continue to be the 2 largest components CSBG revenue generation, we achieved record upgrade revenue demonstrating the strength of that growing installed base. Turning to gross margin performance. The December quarter came in at 47.5%, which was above the midpoint of our guided range, but was down from the September quarter level of 48.2%. This was primarily a result of unfavorable customer mix, which we foreshadowed in the last earnings call. We've improved elements of our cost structure during the past 2 years and expanded the gross margin contribution from our Asia operation strategies by a little more than 100 basis points as we exited calendar year 2024.

[Doug Bettinger, EVP and CFO at Lam Research]

We expect incremental benefit to gross margins as we continue to scale production on a go forward basis from this strategy. Operating expenses for December were in line with our expectations at $735,000,000 up from the prior quarter amount of $722,000,000 The increase was primarily due to higher incentive compensation tied to the company's increased profitability. R and D accounted for 67% of total operating expenses. Operating margin in the current quarter was 30.7%, a little bit below the September quarter level of 30.9% and near the high end of our guidance range primarily because of that higher revenue and the stronger gross margin performance. And I just reiterate what Tim mentioned that we delivered 160 basis point improvement in operating margin for calendar year 2024.

[Doug Bettinger, EVP and CFO at Lam Research]

Non GAAP tax rate for the quarter was 13.2%, within range of our expectations. Our estimate for the March 2025 quarter is for the tax rate to be in the lowtomidteens range. Other income and expense for the December quarter came in at $11,000,000 in income compared with $13,000,000 in income in September quarter. The slight fluctuation in OI and E was due to lower interest income, which was somewhat offset by lower foreign exchange losses and a little bit of gain in equity investments. OI and E will continue to be subject to market related fluctuations that will cause some level of volatility quarter to quarter.

[Doug Bettinger, EVP and CFO at Lam Research]

And as we sit here today, I do believe OI and E will have a slight negative bias in the March quarter. On the capital return side of things, we allocated approximately $650,000,000 to open market share repurchases and we paid $298,000,000 in dividends in the December quarter. For the 2024 calendar year, we returned 98% of free cash flow, totaling $4,000,000,000 which was at the high end of our long term capital return plans of 75% to 100% of free cash flow. For the December quarter, diluted earnings per share came in at $0.91 The diluted share count was roughly 1,290,000,000 shares, which was a reduction from the September quarter. During 2024, we repurchased nearly 34,000,000 shares through our share buyback program and we have $9,200,000,000 remaining on our board authorized share repurchase plan.

[Doug Bettinger, EVP and CFO at Lam Research]

Let me pivot to the balance sheet. Our cash and short term investments totaled $5,700,000,000 at the end of the December quarter, down from $6,100,000,000 at the end of the September quarter. The main driver of the cash decrease was obviously our capital return activity. Day sales outstanding was 69 days in the December quarter, an increase from 64 days in the September quarter. Inventory at the December quarter end totaled $4,400,000,000 a slight increase from the September quarter as we prepare for higher revenues in the March 2025 quarter.

[Doug Bettinger, EVP and CFO at Lam Research]

Inventory turns were 2.1 times flat from the prior quarter level. We will continue to manage inventory levels to the best of our ability to align with customer demand. We're pleased to announce that we upsized our revolving credit facility from $1,500,000,000 to $2,000,000,000 Additionally, I just mentioned that we have $500,000,000 of unsecured notes maturing in March this year, which we intend to simply pay off using cash on the balance sheet. We may choose to refinance this notional amount in the future as we continue to monitor the interest rate environment. By bolstering our liquidity with the credit facility, we've created some optionality and flexibility here.

[Doug Bettinger, EVP and CFO at Lam Research]

Non cash expenses for the December quarter included approximately $82,000,000 for equity compensation, dollars 83,000,000 in depreciation and $13,000,000 in amortization. Capital expenditures in the December quarter were $188,000,000 up $78,000,000 from the September quarter. Spending was mainly centered on lab related investments in the United States and Asia and manufacturing facilities, supporting our global strategy to be close to customers' development and manufacturing locations. We ended the December quarter with approximately 18,300 regular full time employees, which is an increase of approximately 600 people from the prior quarter. Growth was predominantly in field and factory roles to support increased tool installation as well as growing manufacturing activities.

[Doug Bettinger, EVP and CFO at Lam Research]

Now let's turn to our non GAAP guidance for the March 2025 quarter. We're expecting revenue of $4,650,000,000 plus or minus $300,000,000 gross margin up 48% plus or minus 1 percentage point. We anticipate roughly consistent levels of customer concentration. Operating margin of 32% plus or minus 1 percentage point. This guidance accounts for the normal seasonal increase in operating expenses that we always see at the beginning of the calendar year.

[Doug Bettinger, EVP and CFO at Lam Research]

And finally, earnings per share of $1 plus or minus $0.10 based on a share count of approximately 1,290,000,000 shares. I would mention that as we look into 2025, we plan to continue to deliver incremental leverage to the bottom line. At the same time, we will be growing R and D and continuing to grow investment in a digital transformation project that we initially launched in 2023. Each of these investments is expected to enable future financial benefits to the P and L that we plan to show you in February. So let me wrap up.

[Doug Bettinger, EVP and CFO at Lam Research]

We executed well in calendar year 2024. We delivered 11% growth in CSPG and 160 basis point improvement in operating margin, both of which exceeded our expectations from the beginning of last year. We've made key investments in our product portfolio to drive served available market and share opportunity and we've grown the global infrastructure to collaborate and deliver innovative solutions for our customers. We also grew spending in that digital transformation program. We look forward to sharing more details on the strength of our product portfolio as well as an updated long term financial model at our Investor Day in New York City on February 19th.

[Doug Bettinger, EVP and CFO at Lam Research]

We hope to see you there. Operator, that concludes our prepared remarks. Jim and I would now like to open up the call for questions.

[Operator]

We will now begin the question and answer Our first question today is from Tim Arcuri with UBS. Please go ahead.

[Timothy Arcuri, Managing Director at UBS Group]

Thanks a lot. Doug, can you speak about the gross margin? The guidance is pretty good. And you talked about Malaysia now is turning to a tailwind. And I know that China mix has basically reset.

[Timothy Arcuri, Managing Director at UBS Group]

So how to think about the puts and takes for gross margin as you move March and through the rest of the year?

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Tim, I think we're going to be a pretty tight range kind of where we've been in the last quarter, plus or minus a little bit. And the puts and takes, as you know, because we've talked about this in the past, you're going to continue to see some headwinds from customer concentration. I think there's more headwind as we go through the year most likely offset to a certain extent by that Asia operation strategy. So those are the things to think about. I wouldn't run away from where we are right now though.

[Doug Bettinger, EVP and CFO at Lam Research]

In fact, maybe trim it just a little tiny bit as we go through the year.

[Timothy Arcuri, Managing Director at UBS Group]

Got it. And then can you give any color, I know you're saying that WFE is going to be up maybe $3,000,000,000 $4,000,000,000 $5,000,000,000 year over year. But can you provide any color by end market? I know and I've asked you this before, but one of your peers is talking about NAND basically doubling this year. So can you give any color there?

[Timothy Arcuri, Managing Director at UBS Group]

And do you think that it is possible that it doubles this year? Thanks.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Tim, maybe I'll unpack it just a little bit of color. We're not going to give specific details, but NAND will be up this year. I don't know that it's going to double necessarily. Understand also though that NAND spending, there will be a little bit of NAND spending that will occur in China with a customer we can't sell to. So that may be a little different from the peer you're asking about.

[Doug Bettinger, EVP and CFO at Lam Research]

I think leading edge foundry is going to be pretty strong this year. I think that's pretty well understood. And DRAM will be plus or minus coming off a very strong year last year. I think it will continue to be pretty strong this year.

[Timothy Arcuri, Managing Director at UBS Group]

Thank you, Doug.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes. Thanks, Dan.

[Operator]

The next question is from Krish Sankar with Cowen and Company. Please go ahead.

[Krish Sankar, Managing Director at TD Cowen]

Yes. Hi. Thanks for taking my question. First one Doug,

[Krish Sankar, Managing Director at TD Cowen]

I have for you is kind of

[Krish Sankar, Managing Director at TD Cowen]

A, on China, what is kind of your visibility in terms of lead times? And also can you help us quantify the impact of these recent China export controls for Lam in calendar 2020 5? And then I had a follow-up.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Krish, our lead times really haven't changed too much. And I don't know if you're asking specific to China, but China is no different than the rest of the world. Geographically, lead times are pretty much the same. And yes, obviously, in early December, there were some new regulations that came out restricting a handful of customers. That certainly impacted us.

[Doug Bettinger, EVP and CFO at Lam Research]

The forecast we had from that group of customers was probably, I don't know, dollars 700,000,000 or so, that obviously we won't be able to ship to those customers. And that revenue footprint when we were looking at the forecast originally would have been a little bit second half weighted in 2025. So that's the way to think about it. I don't know that that's all that different than what you've heard from our peers, Krish.

[Krish Sankar, Managing Director at TD Cowen]

Got it. That's very helpful for quantifying that, Doug. And then just a quick follow-up, you spoke about your WFE growing maybe 4%, 5% this year on a year over year basis. How to think about the split between systems and CSBG in March and how that evolves through the rest of the year?

[Doug Bettinger, EVP and CFO at Lam Research]

I'm not going to get into the detail of kind of how much is CSPG and how much is systems. I would tell you that there's some headwinds in CSPG related to the Reliant grouping, right? I think that's pretty well understood. There's not a huge amount of spending in mature node outside of China. And then within China, we've got a handful of customers that, like I said, are now restricted.

[Doug Bettinger, EVP and CFO at Lam Research]

Offset though, it's going to be a strong year for upgrades. And we've been talking about that, right? We believe NAND spending is going to be largely upgrade related and that's going to benefit the upgrade product line within CSPG.

[Krish Sankar, Managing Director at TD Cowen]

Got it. Thanks a lot, Doug.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes. Thanks, Krish.

[Operator]

The next question is from C. J. Muse with Cantor Fitzgerald. Please go ahead. J.

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

Muse:] Yes. Thank you for taking

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

the question. I guess to maybe piggyback on that question, could you speak to if you had to rank order by product or upgrade or whatnot, how we should be thinking about what are the biggest kind of incremental drivers for you? I think you talked about gate all around and advanced packaging growing an incremental $1,000,000,000 in calendar 2025. Could you kind of add to that in terms of NAND upgrades, Moly, anything else that is relevant that we should be thinking about in 2025?

[Tim Archer, President and CEO at Lam Research]

Yes. C. J, let me start with that one. I think that from perspective of kind of the most impactful change year on year, I think for us, it's NAND. It's NAND starting to come back and again the very strong position we have within every dollar spent on a NAND upgrade.

[Tim Archer, President and CEO at Lam Research]

And that's kind of across the board that the edge tools and such that need to be upgraded. But at the same time, on the last call, I mentioned this point that about 2 thirds of the bits are still being manufactured on nodes below 200 layers. What happens as you move above 200 layers is not only do you have to upgrade the existing tools, but you have to start adding additional tools to deal with the complexity of that transition. And so that's what we talk about like the new carbon gap fill tool, which is key to multi tier stacking, which you start to see in the 200, 300 layer generations. And as you get to 300 layers and beyond, you start seeing new tools get added like Moly, that transition.

[Tim Archer, President and CEO at Lam Research]

So it depends on which customer and exactly which transitions they're switching to. But NAND from both an upgrade and new tool shipment is probably our largest year on year difference. But there's no doubt that our strong position in advanced packaging and the strength that Doug alluded to within leading edge foundry and what that means for advanced packaging continues to show growth there. And so I feel like, as I said, there's a nice setup here where many of the areas we've been investing in really are starting to come together this year.

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

It's very helpful. I guess as a follow-up, and Doug, I'm not sure you're going to want to answer this, but if I were to annualize implied shipments for March, that would suggest pretty meaningful top line growth year on year relative to the WFE growth that you outlined. So should we be thinking about revenues lower in the second half? Or are you really highlighting tremendous outperformance in 2025?

[Doug Bettinger, EVP and CFO at Lam Research]

Yes. I don't know, C. J. I'm not going to answer that question. So you kind of answered your own question.

[Doug Bettinger, EVP and CFO at Lam Research]

I'm not going to get into giving you a quarter by quarter guidance. Listen, WFE is going to grow a little bit. We're going to outperform WFE. We're confident about making those statements. We've been making it for a little bit of time now.

[Doug Bettinger, EVP and CFO at Lam Research]

The rest of it will depend on profile of spending and so forth. I don't know if you just annualize March, if that's the right way to look at it. Like I said, we're going to guide 1 quarter at a time. I don't know. You got to do a little of your own pencil work.

[Doug Bettinger, EVP and CFO at Lam Research]

Don't lose sight of what I did say though about the second half weighting of some of that China customer that all of a sudden we can't ship to any longer. That would have been a little bit second half weighted. So comprehend that as you build your model for the year.

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

Great. Thank you.

[Doug Bettinger, EVP and CFO at Lam Research]

Thanks, C. J.

[Operator]

The next question is from Harlan Sur with JPMorgan. Please go ahead.

[Harlan Sur, Executive Director - Equity Research at JP Morgan Chase & Co]

Good afternoon. Thanks for taking my question. On advanced packaging and high bandwidth memory, I know you guys started last year with a view that your advanced packaging business would do about $700,000,000 $800,000,000 in revenues on the April earnings call. You upped that to $1,000,000,000 and then that number was further upped to over $1,000,000,000 Can you guys just true us up, what was the actual revenue you drove in calendar 2024 on advanced packaging? And then with bit demand growth for HBM targeted to grow 50%, 70% per year over the next couple of years, the move from 8 high to 12 high, you've got the move in advanced packaging from 2.5 gs to 3 d SOIC, like how should we think about your advanced packagingHBM growth profile for this year?

[Harlan Sur, Executive Director - Equity Research at JP Morgan Chase & Co]

And in general, over the next few years, sort of, how do we think about the mid to longer term growth profile?

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Harlan, maybe I'll turn in and then let Tim add on. Yes, I mean, I'm not going to give you a precise number, but in 2024, we finished above $1,000,000,000 I don't think that surprises you. And I'm not going to give you a precise number for this year, but it is certainly going to grow again in 2025. And it's being driven by all those things you talked about, right? HPM 3 going to 3e to potentially going to 4 at the end of the year, 8 going to 12 going to 16 die.

[Doug Bettinger, EVP and CFO at Lam Research]

We do all that TSV. So we're set up to do really well. We're pretty excited about it. I don't know, Tim, do you want to?

[Tim Archer, President and CEO at Lam Research]

Yes. No, I think, Carlin, the only thing I'd add is that, we've been saying for a while that and I think you've been hearing it in the marketplace, advanced packaging and getting the yield and productivity right on these processes isn't easy. And so this is where Lam has a critical process supplier with expertise in things like copper plating and etching. We're delivering value there. So we feel very good about our positions.

[Tim Archer, President and CEO at Lam Research]

And we're going to continue to grow with that market and then do very well. So we can't put an exact number on it. But again, we did indicate we will grow again this year. And I think that's about all I can say.

[Harlan Sur, Executive Director - Equity Research at JP Morgan Chase & Co]

That's helpful. And then for Doug, this is the 3rd, 4th consecutive quarter where your gross margins are coming in better than expected, continued strength on the guidance for the March quarter, right? The overall sustainability and growth of your gross margins has been very, very solid. I've actually been surprised at how rapidly you've ramped your Malaysia manufacturing facility, low cost geography, you've got strategically aligned supplier base in this region. At the same time, you guys have also, I think, consolidated a significant part of the higher cost manufacturing base.

[Harlan Sur, Executive Director - Equity Research at JP Morgan Chase & Co]

So is it fair to assume that on incremental revenue growth going forward, most of this is flowing through Malaysia and so better incremental gross margin flow through and maybe any way to help us kind of quantify that?

[Doug Bettinger, EVP and CFO at Lam Research]

Yes. I'm not going to quantify it. I mean, I just gave you a number right that we've delivered over 100 basis points from the strategy already. There's a little bit more to go for sure. Don't lose sight of the fact though that we're going to have the headwind from customer mix that we've been talking about for a while.

[Doug Bettinger, EVP and CFO at Lam Research]

So I'm trying to telegraph that to you as well. I guess, yes, listen, we're pretty pleased with our performance on gross margin. Frankly, this was all done by us, right? This was a proactive strategy. Things turned down in early 'twenty three.

[Doug Bettinger, EVP and CFO at Lam Research]

We jumped on the horse and started riding down the trail. And frankly, the guys and gals in our global operations organization have done a phenomenal job here, right? So super happy with what's going on. We're going to keep driving this. But don't run away with it too much right now because like I said, we've got that customer concentration headwind that we got to deal with here.

[Tim Archer, President and CEO at Lam Research]

And Harlan, the

[Tim Archer, President and CEO at Lam Research]

only thing I would add is that I think that you should take away from this that Lam is committed to make investments to see a sustainable step up in performance. And that's what we did. Doug, for many quarters, was talking about how Malaysia was a headwind. That investment we're making as we ramped it, it wasn't yet up and going. And now you're seeing a little bit of the same thing with the investment we keep talking about with digital transformation.

[Tim Archer, President and CEO at Lam Research]

There's going to be a period here where we're investing. But long term, we have a view that this company and the semiconductor industry in general are

[Tim Archer, President and CEO at Lam Research]

going to be bigger.

[Tim Archer, President and CEO at Lam Research]

And we want to have fundamental improvements in our operations and in our cost structure. And so I think Malaysia is a great sign of what we've done and I think the digital transformation is something that's still yet to come And it just shows that we have a very long term commitment to improving the financials of this company.

[Harlan Sur, Executive Director - Equity Research at JP Morgan Chase & Co]

Yes. Thanks, Tim. Thanks, Doug.

[Doug Bettinger, EVP and CFO at Lam Research]

Thanks, Harlan.

[Operator]

The next question is from Toshiya Hari with Goldman Sachs. Please go ahead.

[Toshiya Hari, Managing Director at Goldman Sachs]

Hi, good afternoon. Thank you so much for taking the question. I had 2 as well. The first one, the outperformance relative to WFE you guys expect to deliver this year. Is that mostly a function of dep and etch growing as a percentage of the overall WFE market?

[Toshiya Hari, Managing Director at Goldman Sachs]

Or is it that plus you guys winning share in within dep and etch? And if it's both, on the latter, which applications do you guys have the highest expectations from a market share gains perspective?

[Tim Archer, President and CEO at Lam Research]

Well, it is both. But as we've described in the past that often the way we look at market share gains is the wins of new applications, some of which didn't exist before. And so it's not always a head to head fight that results in one winner for an application. I gave an example of that with the carbon gas field, new application that gets created simply because of the growing complexity of tier stacking in NAND. Ultimately, that results in share gain as measured by our share of our SAM and also our share of the market itself.

[Tim Archer, President and CEO at Lam Research]

So there are a number of those. I think there are pure market share wins. We talked about obviously our ETHER announcement today where that win is created through SAM expansion where we move into markets where we previously haven't competed before and do become the pool of record based on superior technology and product performance. And so it's hard. It really is a makeup of many different things as to why we think we outperform, but it's really driven by what you said at the beginning.

[Tim Archer, President and CEO at Lam Research]

Etch and deposition are becoming incredibly more important to the building of these complex structures, whether it's gate all around, it's the advanced packaging three d structures, it's the new architectures in DRAM, it's the multi tier stacking and NAND. All of those are accomplished through new very complex etching-depth processes that Lam is leading in.

[Toshiya Hari, Managing Director at Goldman Sachs]

Got it. That's great. Thank you. And then for CSPG, maybe for Doug, I know you're not going to guide the full year. The spares part of the business, upgrade part of the business, historically, it's been obviously correlated with your chamber account, which continues to grow.

[Toshiya Hari, Managing Director at Goldman Sachs]

Is there a way to think about Reliance in 2025 on a year over year basis?

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Reliant is probably going to be down year over year, Toshiya, as I think about puts and takes. And that's I don't think that's surprising, right? If you look at what's going on in specialty note investment, mature note investment in areas like analog, microcontrollers, there's not a lot of spending occurring outside of China. And then I think China WFE is going to be softer year over year, 24% to 25%, and we lost a handful of customers as well. So that will contribute to all of that there relative to Reliant.

[Doug Bettinger, EVP and CFO at Lam Research]

Offsetting that though, I think it's going to be a good upgrade year, right? We've been talking about that. Such that right now, if I was giving you a little bit of color to think about CPG, we're probably flattish, again, plus or minus. And we'll keep giving you updates as we go through the year as things change.

[Tim Archer, President and CEO at Lam Research]

Yes. And Toshiya, the only thing I'd add on CSPG is, obviously, we recognize that each of the different components of CSPG sort of move around. So maybe it's helpful to think about the areas that ultimately are long term future growers. And the one we've highlighted recently that I talked about today is how you use equipment intelligence and cobots and other things to disrupt the way in which service is done inside the fab and therefore capture some of that value while still delivering a lot of productivity to the customer. So I think that's an area that still is less tapped, I would say, than our spares and upgrades and Reliant business that we talked about so much.

[Tim Archer, President and CEO at Lam Research]

And so there's still a lot of opportunity to come there as we start to roll out these new products onto new platforms and into fabs.

[Toshiya Hari, Managing Director at Goldman Sachs]

Very helpful. Thank you.

[Doug Bettinger, EVP and CFO at Lam Research]

Thank you, Toshiya.

[Operator]

The next question is from Srini Pajjuri with Raymond James. Please go ahead.

[Srini Pajjuri, Managing Director at Raymond James Financial]

Thank you. Doug, I just want to clarify the previous answer you gave on CSBG. So when you say flattish, are we talking calendar 2024 being flattish or is that fiscal I'm sorry, calendar 2025 being flattish or is it fiscal or are you talking sequentially for next few quarters, I guess?

[Doug Bettinger, EVP and CFO at Lam Research]

Calendar 2025, I never talk about fiscal years, almost never. It's year over year. You should think of CSPG in total as flattish.

[Srini Pajjuri, Managing Director at Raymond James Financial]

Got it. Thank you for that. And then my question maybe for Tim is on Molyb, I know you said several $100,000,000 of contribution. I'm just trying to reconcile what we are hearing from your customers, Tim. Obviously, demand is not great and the utilization levels are lower and some customers are actually lowering their factory loadings.

[Srini Pajjuri, Managing Director at Raymond James Financial]

So maybe you can help us how broad based of a transition are you seeing? Is it like a handful of customers? I know there are only handful of customers, but just

[Srini Pajjuri, Managing Director at Raymond James Financial]

if you could give

[Srini Pajjuri, Managing Director at Raymond James Financial]

us some additional color as to how do you feel about the sustainability of molyb as we go through the year? That will be helpful. Thank you.

[Tim Archer, President and CEO at Lam Research]

Yes. I think

[Tim Archer, President and CEO at Lam Research]

it's the sustainability, I mean, we are we've talked about the fact that, like I mentioned in the last call, the largest number of the industry bits, we said 2 thirds of the bits still being manufactured under 200 layers. Those are all nodes, those are all bits being manufactured without Moly. And so over time, and we've said this is a multi, multi year transition, as you start to move this 1,000,000 plus wafer starts per month capacity that exists towards higher layer counts. Now different customers have different intercept points as to when Moly comes in, whether it's at exactly what layer count. And I won't I can't go into that detail customer by customer.

[Tim Archer, President and CEO at Lam Research]

But what it says is we're going to see Moly coming in in as each customer reaches that transition point. Now how do we reconcile the fact that customers are spending to go to higher layer counts and introduce new technologies like Moly and carbon gap fill with their statements as well that they might be wanting to cut spending. Well, 1st of all, I mean upgrades are very efficient way to move forward the technology. And so that's a reduced WFE means by which to get bits to higher layer counts. And frankly, higher layer counts result in lower bit costs for manufacturing and higher performance.

[Tim Archer, President and CEO at Lam Research]

And for certain end applications, you need higher performance to meet those requirements. And so I think that this is not a broad a very broad and large upgrade move, but it's the early signs and that's why we're starting to see improvement in our numbers. But over the next several years, you'll continue to see Moly contribute more and more as the number of wafers at those higher layer counts continues to increase.

[Srini Pajjuri, Managing Director at Raymond James Financial]

Got it. Thank you.

[Doug Bettinger, EVP and CFO at Lam Research]

Thanks, Srini.

[Operator]

The next question is from Vivek Arya with Bank of America Securities. Please go ahead.

[Vivek Arya, Managing Director at Bank of America]

Thanks for taking my questions. Doug, just one or two clarifications. Why will CSBG be flat this year? And then how should we think about OpEx growth in calendar 25?

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Vivek, it's what I described. We're coming off a pretty strong year for the Reliant product line. That's probably going to be less strong next year. Offsetting that, I believe, will be the spending on upgrades, kind of based on what Tim just told you, right? There's an aging set of equipment in band.

[Doug Bettinger, EVP and CFO at Lam Research]

There's upgrades in other places too. So look, that's the up and the down, I guess, is the way to think about it. Does that make sense?

[Vivek Arya, Managing Director at Bank of America]

Yes. And the OpEx growth?

[Doug Bettinger, EVP and CFO at Lam Research]

Listen, we're going to increase spending this year, right? I talked about we're growing R and D. We're investing in a digital transformation project that's going to deliver future financial benefit. But also listen to what I said in the scripted remarks, we plan to deliver some of them on the leverage this year too, right? We're going to deliver leverage to the P and L.

[Doug Bettinger, EVP and CFO at Lam Research]

So revenue should grow faster than OpEx is the way to think about it.

[Vivek Arya, Managing Director at Bank of America]

So last year, Doug, just OpEx was up mid teens, should we assume a similar kind of OpEx growth given the digital transformation projects or would it be very different from that run rate?

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Vivek, I'm going to guide you 1 quarter at a time. You'll get a little bit of leverage from us this year. So that's as much as I'm going to give you right now.

[Vivek Arya, Managing Director at Bank of America]

Okay. Thank you.

[Operator]

The next question is from Atif Malik with Citi. Please go ahead.

[Atif Malik, Analyst at Citigroup]

Hi. Thank you for taking my questions. First, a quick clarification that 100,000,000,000 dollars WFE number is unrestricted WFE, meaning it includes your expectations, what your indigenous competitors are going to earn in sales as well? That's the first question.

[Doug Bettinger, EVP and CFO at Lam Research]

Atif, it's all in. It's everything, right? There were restricted customers in 2024, there's restricted customers in 2025. We're describing it all in to the best of our ability.

[Atif Malik, Analyst at Citigroup]

Okay. And then Doug, you made a comment that you're expecting similar customer concentration in the March quarter. And I was wondering if you're expecting similar regional concentration as well. I'm just trying to see if China sales are going to come down again in the March quarter after the drop in the December quarter?

[Doug Bettinger, EVP and CFO at Lam Research]

You got to listen to my euphemisms when I described stuff. Customer concentration actually is pretty tied to geographic concentration when I talk about it right now. So you should expect that to be roughly consistent December to March, roughly. I do believe that, again, we said this on the last call, again, China concentration for a year will be down versus 2024 in 2025.

[Atif Malik, Analyst at Citigroup]

Got it.

[Doug Bettinger, EVP and CFO at Lam Research]

Makes sense?

[Atif Malik, Analyst at Citigroup]

Yes.

[Doug Bettinger, EVP and CFO at Lam Research]

Okay. Thanks, Han.

[Operator]

The next question is from Stacy Rasgon with Bernstein Research. Please go ahead.

[Stacy Rasgon, Analyst at Bernstein]

Hi, guys. Thanks for taking my questions. Doug, I don't mean to harp on it, but I want to go back to the CSBG outlet flat. So just on a run rate basis, you'd be down like $100,000,000 a quarter versus where you ran in December. And I'm just confused given like the NAND strength that's upgrade driven presumably a lot of that would be CSNG.

[Stacy Rasgon, Analyst at Bernstein]

So I wasn't aware of that. I mean, Reliance must be like falling like by a huge amount a year over year for me to just fit that outlook. I mean, I'm just trying what am I getting wrong or is it just conservatism built in there or like why such a No, it's

[Doug Bettinger, EVP and CFO at Lam Research]

not conservatism. Reliant is going to be down, right. We just lost a bunch of customers in China that largely purchase Reliant Systems. So that's part of what's going on too.

[Stacy Rasgon, Analyst at Bernstein]

Okay. So that was the said like did you have $700,000,000 in calendar 2024 in CSPB for Reliant in China that goes away in 2025? Was it that

[Doug Bettinger, EVP and CFO at Lam Research]

Stacy, dollars 700,000,000 was our forecasted revenue for that set of customers, what they would have spent in 2025, but now they're not spending. And a lot of that would have been Reliant, Stacy.

[Stacy Rasgon, Analyst at Bernstein]

Okay, okay. All right. I guess maybe along those lines, again, to go back to the China mix, I mean, you said customer mix, it sounds like the customer mix headwinds increase as we go through the year. Did I get that right? And if that's true, again, does that imply that China percentage ought to be going down as we go like into the second half?

[Doug Bettinger, EVP and CFO at Lam Research]

I said the China revenue percentage should be down in 25 versus 24.

[Stacy Rasgon, Analyst at Bernstein]

I'm talking about versus the current run rate because you talked about the customer headwinds sort of increasing and it sounds like

[Stacy Rasgon, Analyst at Bernstein]

the rest of the business will grow and

[Stacy Rasgon, Analyst at Bernstein]

you're missing China revenue in the back half. So does that percentage go down in the back half versus where you're running now? Sounds like that's Yes.

[Doug Bettinger, EVP and CFO at Lam Research]

Listen, I'm not going to guide more than 1 quarter at a time because stuff changes. Year over year, Stacy, though, it's going to go down.

[Stacy Rasgon, Analyst at Bernstein]

Got it.

[Stacy Rasgon, Analyst at Bernstein]

All right, guys. Thank you.

[Doug Bettinger, EVP and CFO at Lam Research]

Thanks, Joe.

[Operator]

The next question is from Joe Moore with Morgan Stanley. Please go ahead.

[Joseph Moore, Analyst at Morgan Stanley]

Great. Thank you. In terms of NAND being the strongest growth business, can you kind of characterize where we are from a NAND WFE basis? And I guess, it's a little surprising because we're seeing these utilization cuts and things like that. And I know you'd alluded to technology transitions, but just maybe a little bit more color on why NAND is strong at a time when the economics of NAND seem to be softening?

[Tim Archer, President and CEO at Lam Research]

Yes. Well, I think that, one, we would characterize the NAND spending today very much as technology migration. And so I think that, as I said, comes into play for different reasons. One is it does help reduce bit cost and also improve device performance. And so there are customers that are looking to make some changes there on certain lines they have.

[Tim Archer, President and CEO at Lam Research]

Now when we talked about the growth, we haven't obviously given a number for what NANDWFE would be in 2025, but it's coming off of, as you know, a very low base. And if primarily all of the spending this year is on upgrades, again, the strength in Lam's, we spoke specifically about that being a strong grower for Lam, our strongest growing segment, then we would say that, that is because of our very high capture rate of WFE spent on upgrades. And so I can't speak to every customer and what they're going to be spending this year, but all we can say is that there is still a strong desire to move certain lines forward to higher levels of technology and that's what we're seeing.

[Joseph Moore, Analyst at Morgan Stanley]

That's very helpful. Thank you.

[Doug Bettinger, EVP and CFO at Lam Research]

Thanks, Joe.

[Operator]

The next question is from Vijay Rakesh with Mizuho. Please go ahead.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Yes. Hi. Just a quick question on the NAND side. Sorry if I somebody asked this question already, I joined late. Nice rebound there, but as you look at the full year, given how much NAND has come down, any thoughts on how much you see NAND growing this year in 2025?

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Percent?

[Doug Bettinger, EVP and CFO at Lam Research]

We're not going to give you a number, Vijay. It's going to be up though.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Yes. Got it. Okay. And then on the can you talk to what you're seeing on the cryoeth side? I think you guys have talked about an opportunity with QLC NAND.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

How do you see that for 2025, I guess?

[Tim Archer, President and CEO at Lam Research]

Yes. I mentioned in my prepared remarks and we had a release late last year on what we call our cryo 3.0 technology, which really is a breakthrough in terms of performance for being able to etch very deep, very vertical holes for NAND flash memory. And also those that same technology can be used for other devices like DRAM that also need a high aspect ratio dielectric etch. And so we're very happy with the progress that's been made. What makes it very attractive is that these cryo our cryo technology can also not only be sold on new tools going forward, but also used to upgrade existing systems we have in the installed base, which is very attractive for our customers financially.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Got it. Thank you.

[Operator]

The next question is from Joe Quatrochi with Wells Fargo. Please go ahead.

[Joe Quatrochi, Director & Equity Research Analyst at Wells Fargo]

Yes. Thanks for taking the question. For the December quarter, the strength that you saw in NAND revenue, just wanted to clarify, was there anything in there from the Chinese customer that you can no longer ship to? I just want to kind of understand the strength that you saw is really the core NAND customer upgrades?

[Doug Bettinger, EVP and CFO at Lam Research]

No, there's nothing from a Chinese NAND indigenous Chinese NAND customer, nothing.

[Joe Quatrochi, Director & Equity Research Analyst at Wells Fargo]

Okay, helpful.

[Joe Quatrochi, Director & Equity Research Analyst at Wells Fargo]

As a follow-up, as we

[Joe Quatrochi, Director & Equity Research Analyst at Wells Fargo]

just think about like the 2 thirds of NAND capacity below 200 layers, I mean, how should we think about like that trajectory exiting this calendar year in terms of that changes of mix?

[Tim Archer, President and CEO at Lam Research]

Well, I think that's

[Tim Archer, President and CEO at Lam Research]

the question that we've been hearing quite a number of times on the call, which is can we predict the rate and pace? I think you have to look the one thing we're certain of is over time, more and more of that installed base will continue to be upgraded to higher levels of technology. Yes, I think you have to look at the state of demand market, the requirements of each individual end application and what device requirements it holds. And that will tell us a little bit more about the rate and pace. But at this point, we can't really detail that

[Tim Archer, President and CEO at Lam Research]

in any way for you right now.

[Joe Quatrochi, Director & Equity Research Analyst at Wells Fargo]

Okay. Thank you.

[Tim Archer, President and CEO at Lam Research]

Yes.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes. Thanks, Joe.

[Operator]

The next question is from Tom O'Malley with Barclays. Please go ahead.

[Thomas O'Malley, Director - Equity Research at Barclays]

Hey, thanks for taking the question guys. Doug, I'll test you with one more, man. One forgive me. I know you've gotten a lot here. So in terms of the upgrades really coming in strong, I think it's actually very impressive that you're able to guide CSBG kind of flattish for the year.

[Thomas O'Malley, Director - Equity Research at Barclays]

Just I was under the assumption that Reliant was a bigger portion of that mix of the bucket. So to totally offset that is surprising and I guess very good. But when I look back at like the last 3 years with where NAND spend has been kind of in like the high single digit billions, I think people are give or take that. But you've seen the market struggle and you really haven't seen this take off in terms of spend. What's driving this above 200 layer upgrade this year?

[Thomas O'Malley, Director - Equity Research at Barclays]

I guess I'm asking the question a bit differently, like why the urgency? Just because the numbers you're describing for this next year need to be pretty robust. Just want to understand why that's happening so quickly. It's obviously a really good thing for you.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes, Tom, I guess it's really what Tim described. The technology out there, 2 thirds of it is sub-two hundred layer, it needs to get upgraded. Listen, it's not like we're back to the races at peak NAND spending, it's nowhere close to that. But you got enterprise SSDs evolving to need QLC, which needs the capability of structures that are beyond 200 layer, right? You got to get the circuit under the array.

[Doug Bettinger, EVP and CFO at Lam Research]

You need to have wafer bonding capability 100 layer don't enable that. That's what's going on. In addition to what Tim mentioned earlier, right, when you upgrade, you get a lower cost per bit. And so there's still economics that makes sense there to a certain extent. And that's largely what we see going on this year.

[Doug Bettinger, EVP and CFO at Lam Research]

I don't know, Tim, if you'd add anything.

[Tim Archer, President and CEO at Lam Research]

No, no, I think that's right.

[Doug Bettinger, EVP and CFO at Lam Research]

That makes sense, Tom?

[Thomas O'Malley, Director - Equity Research at Barclays]

It does.

[Doug Bettinger, EVP and CFO at Lam Research]

Okay. Do you have a follow-up, Tom?

[Thomas O'Malley, Director - Equity Research at Barclays]

Yes. I guess I'll pivot over to the foundry logic side. Obviously, as smaller percentage of the business, we haven't really focused on it much this call. You're kind of pointing to the NAND business being a leader in your growth outlook for this coming year. But just given the CapEx guide that we saw from TSMC, any view of the change in market share dynamics and how that may impact you in the next year?

[Thomas O'Malley, Director - Equity Research at Barclays]

Obviously, the view is that some of the other leaders are losing out to TSMC. How does that impact you? You've been asked this question previously, but wanted to get your update after the print there.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes. I'll let Jim talk about leading edge foundry.

[Tim Archer, President and CEO at Lam Research]

Yes, yes, sure.

[Tim Archer, President and CEO at Lam Research]

No, in fact, we would hate for people to walk away thinking we're back to focused only on NAND. It's just that it's been many years we've been waiting for the NAND recovery to start. And so we're able to talk about the fact that through these upgrades that's kind of begun and is showing up in our numbers. But the reality is, I mentioned the strategy we had to pivot more of our R and D and our new product expansion into DRAM and foundry logic. That is paying off.

[Tim Archer, President and CEO at Lam Research]

We gave a number on gate all around nodes. We have a number of tools to play very well into that inflection. Plus, our strength in advanced packaging shows up very prominently in leading edge foundrylogic since nearly all leading edge foundrylogic right now is driving and being driven by the advanced packaging capabilities. And so, we're participating in that way. So as you see leading edge foundry, logic customers spending, I would say that is a share those are share gain opportunities for Lam at this point.

[Doug Bettinger, EVP and CFO at Lam Research]

Thanks, Tom. Operator, we're going to take one more call. Yes. Thanks, Tom. Operator, we're going to take one more call.

[Operator]

And that question is from Brian Chin with Stifel. Please go ahead.

[Brian Chin, Analyst at Stifel Financial]

Hi, there. Good afternoon. Thanks for letting us ask a few questions. For trying to resist deposition and development, can you remind us of the SAM or maybe revenue potential per 10 ks wafer start per month? And then tied to that, what is the timing and magnitude of your revenue opportunity and this win?

[Brian Chin, Analyst at Stifel Financial]

And where are you with other DRAM players?

[Doug Bettinger, EVP and CFO at Lam Research]

Listen, we're in a good position. We've talked about previously a DQR position. We've got hardware in everybody's R and D facility. Everybody's looking at this that's using the I guess is what I would tell you. We were super excited about this one because it's a production tool, a record decision, right?

[Doug Bettinger, EVP and CFO at Lam Research]

It's going to ramp. It's not going to be huge dollars this year, Brian, but it is going to certainly be generating revenue, but it was a real important milestone for us.

[Brian Chin, Analyst at Stifel Financial]

Okay.

[Brian Chin, Analyst at Stifel Financial]

That's great. Maybe for the quick follow-up, what factor does the introduction of wafer binding on NAND roadmaps, I guess, have on your capture rate of NAND spending?

[Tim Archer, President and CEO at Lam Research]

Always an upgrade. I mean, primarily, we do a lot of things mostly related to the stack is what we've been talking about. There are other elements of our say certain tools that can go into and play in the wafer bonding space, but we don't do wafer bonding itself. But I'd say it's minimal impact. I mean our capture rate of an upgrade cycle will still be very high.

[Tim Archer, President and CEO at Lam Research]

And that's primarily as you stack to we talked about carbon gap fill, we talked about the need to upgrade other tools to do higher aspect ratio mixes, etcetera. We haven't even talked about the fact that for many years we've been selling tools that also help offset stress of higher layer counts. And so really the complexity of these devices now adding wafer bonding as well, it opens up a lot of opportunities for a critical process supplier like Lam to participate.

[Brian Chin, Analyst at Stifel Financial]

Okay, great. Thank you.

[Doug Bettinger, EVP and CFO at Lam Research]

Yes. Awesome. Thank you, Brian.

[Doug Bettinger, EVP and CFO at Lam Research]

With that, operator, we're going to wrap the call up. Listen, Tim and I and the Russ and Nedis team are super excited to see you guys on February 19 in New York at our Investor Day. I hope you are all going to be able to make it. We'll have some interesting new products to talk about. And like I said, we're going to update the financial model.

[Doug Bettinger, EVP and CFO at Lam Research]

So operator, with that, let's close off the call.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Ram Ganesh, Investor Relations Officer
• Tim Archer, President and CEO
• Doug Bettinger, EVP and CFO

Analysts

• Timothy Arcuri, Managing Director at UBS Group
• Krish Sankar, Managing Director at TD Cowen
• CJ Muse, Senior Managing Director at Cantor Fitzgerald
• Harlan Sur, Executive Director - Equity Research at JP Morgan Chase & Co
• Toshiya Hari, Managing Director at Goldman Sachs
• Srini Pajjuri, Managing Director at Raymond James Financial
• Vivek Arya, Managing Director at Bank of America
• Atif Malik, Analyst at Citigroup
• Stacy Rasgon, Analyst at Bernstein
• Joseph Moore, Analyst at Morgan Stanley
• Vijay Rakesh, Managing Director at Mizuho Financial Group
• Joe Quatrochi, Director & Equity Research Analyst at Wells Fargo
• Thomas O'Malley, Director - Equity Research at Barclays
• Brian Chin, Analyst at Stifel Financial