The paragraph is from a Lam Research earnings conference call held in December 2024. The operator introduces the event and passes the call to Ram Ganesh, Vice President of Investor Relations, who welcomes everyone and introduces other key executives, Tim Archer (President and CEO) and Doug Bettinger (Executive VP and CFO). Ram outlines the agenda, which includes a discussion on the business environment, a review of the company's financial results for the December 2024 quarter, and the outlook for the March 2025 quarter. The press release with detailed financial results is available on the company's website. The call will include forward-looking statements and non-GAAP financial results, with a GAAP reconciliation provided in the slides. The call is scheduled to last until 3 p.m. Pacific time, with a replay available later. Tim Archer then takes over to acknowledge a solid performance for the year.

In 2024, Lam exceeded its financial guidance, driven by strong operational execution and growth in system revenues for DRAM and Foundry Logic, despite muted NAND spending. The company's installed base grew significantly, and its product portfolio strengthened as semiconductors entered the AI era. Lam's shipments for gate all-around nodes and advanced packaging surpassed $1 billion, with expectations for further growth in 2025 as WFE spending is anticipated to rise slightly. The emphasis on deposition and etch technologies positions Lam for differentiation and potential outperformance. Strategic investments in R&D and organizational scaling are yielding significant product advancements, offering growth opportunities in areas such as backside power distribution and dry-resist processing technologies.

The paragraph discusses Lam's advancements in etch technology, highlighting the Cryo 3.0 and Vantex CX+ products for high-aspect ratio dielectric etch applications, as well as a breakthrough dry resist capability for EUV that enhances precision and productivity. Lam's Aether dry-resist solution was selected for high bandwidth DRAM production, indicating strong growth potential. The company expects to outgrow WFE spending in 2025 due to technological shifts in DRAM and Foundry Logic and an upgrade-focused NAND environment. The adoption of Molybdenum and carbon gapfill technologies is noted as a key driver for increased NAND shipments and improved device performance at lower cost.

Lam is poised for future growth as more wafer capacity transitions to higher layer counts. Their Semiverse Solutions, which utilize advanced technology like AI and machine learning, improve equipment performance and process optimization, enhancing competitiveness. These tools also help tackle the industry's workforce shortage by educating future engineers through university collaborations. Significant traction is seen in equipment intelligence and automation, highlighted by the introduction of the Dextro Cobot for fab maintenance. This technology addresses increasing global fab capacity by offering precise, cost-effective maintenance solutions. Strategic investments are yielding successful results for Lam.

The paragraph discusses Lam's strong performance in 2024, highlighting efficient operations in Asia that improved responsiveness to customer demand and increased operating margins by approximately 160 basis points. Despite substantial investments in new products and infrastructure, Lam posted revenue of $16.2 billion and diluted earnings per share of $3.36. The CSBG revenue rose 11% to $6.6 billion, surpassing expectations. The gross margin reached 48.2%, the highest since the merger with Novellus in 2013. In the December quarter, revenue was $4.38 billion, up 5% from the previous quarter, with deferred revenue remaining flat at $2 billion but expected to decrease in 2025.

In the December quarter, the systems revenue from the memory market segment increased significantly, with non-volatile memory contributing 24%, up from 11% in the previous quarter, driven by NAND spending for tech upgrades. DRAM also saw a rise, making up 26% of the revenue, with investments focusing on upgrades for new memory nodes. Foundry revenue decreased to 35% as spending shifted towards newer nodes, partially offsetting the decline in mature nodes. The Logic and Other Markets segment dropped to 15% due to reduced spending on advanced technology nodes. Regionally, China accounted for 31% of revenue (down from 37% previously), while Korea's share grew to 25% from 18%. Taiwan and the United States were also significant contributors. The Customer Support Business Group maintained stable revenue at $1.8 billion, with growth in upgrade revenue balancing a decline in Reliant Systems.

The paragraph discusses the financial performance of a company, highlighting record upgrade revenue and gross margin performance for the December quarter at 47.5%, slightly below the previous quarter's 48.2%, due to an unfavorable customer mix. Despite this, improvements in cost structure and operations in Asia contributed to a 100 basis point increase in gross margin by the end of 2024. Operating expenses rose to $735 million, driven by higher incentive compensation linked to profitability, with R&D making up 67% of these expenses. The operating margin was 30.7%, slightly below the prior quarter but near the high end of guidance, reflecting higher revenue and strong gross margin performance. A 160 basis point improvement in operating margin was achieved for 2024. The non-GAAP tax rate was 13.2%, in line with expectations, with the March 2025 rate anticipated to be in the low to mid-teens. Other income and expenses totaled $11 million in December, down from $13 million in September.

The paragraph discusses financial activities for a company in the December quarter and provides an outlook for the future. A slight fluctuation in Other Income and Expenses (OI&E) occurred due to lower interest income, with an expected negative bias for the March quarter. The company allocated $650 million to share repurchases and paid $298 million in dividends, returning 98% of its free cash flow for the 2024 calendar year. It repurchased nearly 34 million shares, with $9.2 billion remaining for future repurchases. The cash and short-term investments decreased to $5.7 billion due to capital returns. The days sales outstanding and inventory levels both increased, indicating preparations for higher revenues in the upcoming quarter. Additionally, the company expanded its revolving credit facility to $2 billion.

The paragraph outlines the company's financial and operational activities and projections. They plan to pay off $500 million in unsecured notes maturing in March using existing cash but might refinance later. The company increased its liquidity through a credit facility. Non-cash expenses for the December quarter included equity compensation, depreciation, and amortization, while capital expenditures rose due to lab and manufacturing investments in the U.S. and Asia. The employee count increased by 600 to 18,300, primarily in field and factory roles. For the March 2025 quarter, the company expects revenue of $4.65 billion, a gross margin of 48%, an operating margin of 32%, and earnings per share of $1, with normal seasonal increases in operating expenses. They intend to improve profitability in 2025.

In this paragraph, the speaker discusses recent advancements and future plans for their company. In 2024, they successfully achieved 11% growth in CSBG and a 160 basis point increase in operating margin, surpassing expectations. The company invested in their product portfolio and global infrastructure, as well as in a digital transformation project initiated in 2023. They plan to present future financial benefits to their profit and loss statement in February. Additionally, the company intends to share more details about their product portfolio and updated long-term financial model at an Investor Day event in New York City on February 19. During the Q&A session, Tim Arcuri from UBS inquires about gross margins and Doug Bettinger responds that gross margins will remain steady, with some minor fluctuations and ongoing headwinds from customer concentration.

The paragraph is a discussion involving Tim Arcuri and Doug Bettinger about the semiconductor market outlook, specifically focusing on NAND, leading-edge foundry, and DRAM. Doug Bettinger mentions that NAND will increase this year, though not necessarily doubling, and there will be some NAND spending in China that they can't sell to. Leading-edge foundry is expected to be strong, while DRAM is anticipated to continue its strength following a robust previous year. Krish Sankar then asks about lead times and the impact of recent China export controls on Lam in 2025. Doug Bettinger responds that lead times haven't changed much.

In the paragraph, Doug Bettinger discusses the impact of new regulations introduced in December, which restrict some customers and result in a reduction of approximately $700 million in anticipated revenue. This revenue was initially forecasted for the second half of 2025. Despite these regulatory challenges, Bettinger notes that their wafer fab equipment (WFE) business is expected to grow by 4-5% year-over-year. He highlights that while there are headwinds in the Customer Support and Business Group (CSBG), particularly related to the Reliant grouping, there is not significant spending on mature nodes outside of China. However, within China, a few customers remain unrestricted. Bettinger mentions the strong year anticipated for upgrades, especially in NAND spending, which will benefit their upgrade product line within CSBG.

Tim Archer discusses the major incremental drivers for growth, highlighting NAND as the most significant factor due to its recovery and the company's strong position in NAND upgrades. He explains that as NAND technology transitions to nodes above 200 layers, both upgrades to existing tools and the addition of new tools become necessary, such as the carbon gapfill tool and molybdenum-based tools for multi-tier stacking. While NAND is identified as the largest year-on-year difference, Archer also notes the continued growth in advanced packaging, driven by investments in leading-edge foundry and advanced packaging technologies. Overall, the company is well-positioned for growth across various areas.

In the paragraph, C.J. Muse is inquiring about Doug Bettinger's expectations for implied shipments and potential top-line growth based on March figures. Doug Bettinger refrains from providing specific future revenue guidance, emphasizing that the company will provide guidance on a quarterly basis and suggesting that just annualizing March shipments may not be the right approach for projections. He mentions the impact of restrictions on shipments to a China customer, which could affect the second half of the year. Additionally, Harlan Sur from JPMorgan asks about the revenue generated from the Advanced Packaging business, noting that expectations for the revenue were increased from $700-800 million to over $1 billion during the previous year.

The paragraph discusses the anticipated growth in demand for High Bandwidth Memory (HBM) and advanced packaging technologies over the next few years. Doug Bettinger and Tim Archer express confidence in their company's ability to capture this growth, with expectations of surpassing $1 billion in revenue by 2024 and further growth in 2025. The focus is on advancements from 8 high to 16 die stacks and transitioning from 2.5D to 3D packaging. They highlight the company's expertise in critical processes like copper plating and etching as a significant advantage. Additionally, the company's gross margins have exceeded expectations for multiple consecutive quarters, demonstrating strong sustainability and growth.

The paragraph discusses the rapid development of a manufacturing facility in Malaysia, highlighting its strategic geographical advantages and alignment with suppliers. The company has also consolidated its higher-cost manufacturing base, which could lead to improved gross margins from future revenue growth. Doug Bettinger mentions that while they have already achieved over 100 basis points from this strategy, a customer mix headwind should be considered. He credits the global operations team for their success and emphasizes the company's proactive approach. Tim Archer adds that Lam is committed to sustainable performance improvements and refers to past challenges as they invested in Malaysia and ongoing efforts in digital transformation.

The paragraph discusses a company's long-term investment strategy in the semiconductor industry, focusing on improving operations and cost structure, exemplified by their activities in Malaysia. Tim Archer addresses questions from Toshiya Hari from Goldman Sachs, explaining that their expected outperformance relative to WFE (Wafer Fab Equipment) is due to both the growth in deposition and etch sectors and gaining market share through new applications. An example given is the carbon gapfill, a new application arising from increasing NAND complexity, which contributes to market share gains. Archer also mentions the company's recent Aether announcement, highlighting both new application wins and pure market share gains.

The paragraph discusses the strategic growth and expectations for Lam Research's business. It highlights that their success is driven by expansion into new markets and their advanced etch and deposition technologies, which are crucial for modern complex structures like gate-all-around, advanced packaging, and 3D structures in DRAM and NAND. Doug Bettinger comments that the Reliant segment is expected to decline year-over-year in 2025 due to decreased investment in specialty and mature nodes outside China and softer spending by China WFE. Despite this, he anticipates a strong upgrade year. Overall, projections for the CSBG (Customer Support Business Group) are to remain relatively flat, with updates provided as circumstances evolve.

The paragraph is a discussion about CSBG and Moly B, where Toshiya Hari expresses appreciation for insights on the potential of using equipment intelligence and cobots to enhance service within fabrication facilities, highlighting growth opportunities in less tapped areas compared to established segments. Doug Bettinger clarifies that their outlook for CSBG is generally flat year-over-year for calendar 2025. Srinivas Pajjuri asks Tim Archer about Moly B amidst lower demand and reduced factory loadings by customers, seeking clarity on the breadth of this transition, given reported lower utilization and customer actions.

Tim Archer discusses the sustainability of using molybdenum (moly) in semiconductor manufacturing as the industry transitions to higher layer counts. He notes that currently, two-thirds of bits are produced with fewer than 200 layers, which do not use moly. However, as production shifts to higher layer counts, moly will be increasingly utilized. This transition will occur at different rates for different customers based on their specific technology adoption timelines. While there are concerns about potential cuts in spending, upgrading existing technologies is seen as a cost-effective strategy to achieve higher performance and reduce manufacturing costs. Over the next several years, moly is expected to contribute more significantly as manufacturing processes evolve.

In the discussion, Vivek Arya questions Doug Bettinger about the expectations for CSBG being flat this year and the anticipated growth in operating expenses (OpEx) in 2025. Doug explains that CSBG's performance is expected to balance out with the strong previous year and the need for equipment upgrades, making it neutral. In terms of OpEx, Doug indicates an increase in spending due to R&D growth and a digital transformation project, yet anticipates revenue growth will outpace OpEx growth, providing some leverage. When asked if OpEx growth would be similar to last year’s mid-teen increase, Doug opts for a cautious approach, providing guidance quarterly rather than offering a yearly forecast. Atif Malik, another analyst, inquires about the $100 billion WFE (Wafer Fabrication Equipment) figure, seeking clarification if it includes sales from indigenous competitors and restricted customers in 2024, to which Doug confirms that it is comprehensive, including all factors.

In the conversation, Atif Malik asks Doug Bettinger about customer and regional concentration, specifically regarding a potential decrease in China sales from December to March. Doug indicates that customer concentration is closely linked to geographic concentration and expects it to remain consistent. He also mentions that China concentration will decrease overall in 2025 compared to 2024. Stacy Rasgon then questions the significant drop in the CSBG outlet's run rate, expressing confusion over the flat outlook despite strong NAND demand. Doug clarifies that the decrease is not due to conservatism but to losing a substantial number of Reliant system customers in China, resulting in reduced sales.

In this paragraph, Doug Bettinger and Stacy Rasgon discuss a forecasted $700 million revenue for a group of customers in 2025, which is now not expected to materialize, particularly affecting Reliant. They also discuss the impact of changes in customer mix, suggesting an expected decrease in China's revenue contribution from 2024 to 2025, and potentially even in the second half of the current year, due to increasing customer headwinds. Joe Moore asks about the growth in the NAND business despite economic downturns. Tim Archer explains that current NAND spending is focused on technology migration, which helps reduce costs and improves device performance.

The paragraph discusses the prospects and developments in the NAND market, particularly focusing on upgrades and technology improvements. While specifics about NAND growth for 2025 aren't provided, it is indicated that growth will occur. The conversation highlights a strong interest among customers to advance their technology lines. Tim Archer mentions the company's Cryo 3.0 technology, which enables significant advancements in etching deep vertical holes for NAND flash memory and can also be applied to other devices like DRAM. The technology is seen as a breakthrough in performance, and there is satisfaction with the progress being made in this area.

The paragraph contains an earnings call discussion where investors ask questions about the company's NAND revenue and its sources. Joe Quatrochi from Wells Fargo inquires if the growth in NAND revenue for the December quarter involved any Chinese customers, to which Doug Bettinger clarifies there were no contributions from indigenous Chinese NAND customers. Joe also asks about the expected changes in the mix of NAND capacity below 200 layers by the end of the calendar year. Tim Archer responds that while more of the installed base will be upgraded to advanced technology over time, they cannot currently predict the exact rate and pace of these changes. The conversation ends with Tom O'Malley from Barclays preparing to ask another question about NAND.

The paragraph discusses the technological upgrades in NAND memory, specifically focusing on moving beyond the 200-layer technology. Doug Bettinger explains that while the NAND market isn't at peak spending levels as seen in past years, there's a significant push to upgrade technologies because most existing systems are below the 200-layer mark. This upgrade is driven by evolving enterprise SSDs that require higher-level structures like QLC, which demand more advanced capabilities such as wafer bonding. The need for these upgrades is also economically beneficial due to lower cost per bit, despite not matching peak spending trends of the past. Tom O'Malley acknowledges the explanation and indicates he will shift focus to the foundry logic aspect next.

The paragraph discusses the focus of a business call, addressing the NAND business's role in expected growth for the coming year and noting that other areas, such as DRAM and foundry logic, are also significant due to increased R&D and new product development. Tim Archer emphasizes that the company is not solely focusing on NAND, despite the long-awaited recovery in that area, as they are also capitalizing on leading-edge foundry logic through advanced packaging capabilities. These areas are seen as opportunities for gaining market share, particularly in light of market dynamics influenced by companies like TSMC. Doug Bettinger and Tim Archer highlight their strategic pivot and express confidence in their positioning for potential growth and opportunities in the market. Finally, the operator indicates there will be one more question from another participant.

In the paragraph, the discussion revolves around the revenue potential and market positioning for a technology related to wafer production in the semiconductor industry. Doug Bettinger mentions they are well-positioned with their hardware present in all major R&D facilities and that it will generate revenue, albeit not large this year. Tim Archer addresses the impact of wafer bonding on NAND road maps, noting that while they do not engage in wafer bonding, their capture rate from upgrade cycles remains high. Their tools facilitate processes like stacking and carbon gapfill, contributing to handling higher complexity in devices. Overall, they see technological developments as opportunities for growth. The conversation concludes with an acknowledgment from Doug Bettinger to wrap up the call.

The management team, including Tim, is eager to see everyone at their Investor Day event in New York on February 19, where they will discuss new products and update the financial model. The call concluded with the operator ending the conference.

This summary was generated with AI and may contain some inaccuracies.