LAM RESEARCH CORP — Call Transcript 2026

Tech conference. I'm Vivek Arya from our Semiconductor Semicap Equipment team. I'm really delighted to have the team from Lam Research join us for this fireside, and Doug Bettinger, the Chief Financial Officer. As always, I'll go through my questions, but please feel free to raise your hand if you would like to bring something up. Before we start, Doug, I believe you have a safe harbor. Yeah, I need to start with a safe harbor to keep my legal team happy. Give me a minute here. Today's discussion may include forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. Additional information concerning factors that could cause results to differ materially from those forward-looking statements can be found in the risk factors disclosed in our public file links with the SEC, including our most recent 10-K and 10-Q. I'm done. Wonderful. Thank you, Doug. That's the exciting part of the discussion. I know people are always excited to see how fast I can read that. Maybe just let's start, Doug, with kind of a state of the union. Since the start of the year, we have seen Lam consistently raise expectations for a Wafer Fab Equipment market- Yeah This year. From started in the mid low $130s, now it's kind of over $140, right? We should, yeah. For this year. What do you think have been the incremental drivers of growth since the start of the year? I think the first thing to understand is the industry, from our point of view, is constrained by clean room space availability. I think you're hearing that. Right Statement from everybody. You're absolutely right, Vivek. We started the year thinking WFE was going to be $135. It's a specific number. On the last call, Tim and I updated it to $140, perhaps with a bias to a little bit of upside. What's changed is it's been across all segments of the business. There's just a little bit more clean room. Maybe projects got pulled in a little bit. One of our customers bought a fab and was able to take equipment a little bit sooner. Everybody's trying to figure out, in this constrained environment, how to squeeze a little bit more out of what's there, and that's exactly where we saw the upside. It wasn't any one specific thing, just a little bit everywhere. I'm not saying there's going to be a little bit more, but everybody's working on trying to get a little more output. That's what showed up. Is there a way to think about what the unconstrained WFE might be this year, if there was enough clean room space available? Yeah. Listen, everybody wants to know the answer to that question. Frankly, I don't have a specific number for you, except I would tell you the industry is undersupplied right now. You're seeing it in memory pricing, absolutely, in profitability. Advanced foundry is constrained. Advanced packaging is super tight. I don't have a specific number for what unconstrained WFE might be, but what I will tell you is this bodes pretty well for what WFE is going to be next year, because this is going to roll into next year as projects come more available into 2027. I think it's going to be a pretty darn good year in 2027 and maybe beyond that. Right. Got it. I don't have a specific number for you, Vivek. Got it. Okay. If you look at visibility, that seems to be extending out over the next number of years. Yeah. Is there a way to quantify, Doug, what is kind of your usual period of visibility and what it is right now? I think what I would tell you is right now, given the environment I described, there's very deep conversations occurring with every one of our customers about, okay, what does the next several quarters look like? What do you have? What could push or pull in or out and so forth based on these clean room projects that are underway? Then the conversation almost immediately transitions to, okay, what does that mean for next year? Because at the end of the day, our customers don't want us to be what constrains them, and we certainly don't want to be in that position either, right? Okay, that project looks like it's showing up in 2027, in the second half, and so what might that mean for what do you need from us? It doesn't necessarily mean I've got a purchase order for next year. Right The robustness of these conversations is as strong as I've ever seen it, frankly, in all the time I've been in the industry. Right. That's what's happening. It's pretty easy to understand, okay, that new fab project is scheduled to be completed next year. We can also do our own assessment of, okay, the customer's saying this, and we look at it and say, "Yeah, okay, that generally makes sense." That's what's happening right now. It follows on, obviously, for us, then we're going to go talk to our supply chain partners. We're going to plan our own physical bricks and mortar consistent with what is the customer saying they're going to need from us. That's what's happening right now. Right. Like I said, the richness, the conviction in these conversations is as strong as I've ever seen it. Got it. The fact that it's the data center end market that is driving- It's AI. It's AI. Yeah. You're right. Versus in the past, many of the growth cycles have been more consumer-driven, whether it was PCs or phones and such. Well, PC, it was internet, it was mobile. Yeah, all of those things. Now AI is layered on top of it, frankly, the longevity of this, to me, feels like it's here for quite a good amount of time. Got it. Okay. It's AI-driven, where everyone wants to build as soon as possible, do you think there is an acceleration in how quickly customers are willing to adopt the high end of the stack, so to speak, your leading-edge technology, versus in prior times? Where demand is showing up from these AI compute-- These accelerator chips are very, very big die on maybe not the most advanced node, but pretty close. That generally means it's the most advanced equipment, it's the newest capability required to deliver these very advanced features, very small, high aspect ratio features and things that you look at. It's high bandwidth memory. It's a lot of DRAM needed in the compute infrastructure. NAND is also beginning to show up, right? You've got to store these tokens, not just generate them. It's showing up everywhere, and it's primarily showing up at a pretty advanced process node, which certainly needs our most advanced equipment. Okay. In terms of Lam's specific outgrowth, right? Lam has been a market share gainer. I think in the past you said that the goal was to go from kind of the mid-30s WFE SAM towards the high 30s. Where is Lam in that transition, and do you think your SAM kind of expands? It absolutely has been and will continue to be. That's the unique story about our company. Everybody benefits in equipment when WFE raises. That's great. Rising tide lifts everybody. The unique position we sit in, and maybe we're a little bit lucky, but also we're executing extremely well. You look across the totality of advanced process nodes in foundry, in logic, in DRAM, in NAND, things are inflecting in the third dimension, right? High-bandwidth memory is a 3D structure. 6F² going to 4F² is a 3D structure. 3D DRAM is being worked on, is an even more 3D structure. The NAND stack keeps growing. That's a 3D structure. Gate-All-Around is an advanced 3D structure. Advanced packaging is a 3D structure. When things inflect in the third dimension, etch and deposition intensity grows. That's all we do. A year and a half ago, we began describing this growth in our addressable market. What we said back then in early 2025, we did our last Investor Day. Then we were coming off a year where we addressed low 30% of overall WFE. Call it $0.32 of every dollar spent on WFE was spent on etch and deposition. We said we see a path over the next several years for that to grow to the high 30s. That's what you were just describing, Vivek. Right. As we sit here today, it's in the mid-30s. Right? A year and a half later, after we said low 30s, we're already in the mid-30s because of the evolution of these architectures. This is going to continue. There's a couple cool data points, I think from my point of view anyway, cool data points, where we said in foundry from five nanometer to CFET, our SAM per wafer will double because of the intensity of creating this very complicated CFET structure. Gate-All-Around is a step towards that. backside power is another step towards that. These are just examples of what I'm describing. We sit in a unique position within the equipment sector in that everything we do is growing. That's wonderful. On top of that, the strength of our product portfolio has never been stronger from my point of view and from the executive team's point of view. As we see this growing SAM, based on our products that are coming out, like Akara, like Vantex, like the Moly tool, like Halo we call it, we believe we're going to win half of this growing SAM. Right? Low 30s going to high 30s, we believe because of what we're able to deliver, we're going to do really well in winning that growing SAM. That's the unique story about Lam Research. Everybody in equipment's going to do well over the next several years. We're going to do even better. We outperformed WFE last year. We're going to outperform it this year. We're going to outperform it for the next several years based on what I see. What I've been pointing out, actually, I think people that know the company know that NAND flash is our strongest end market. That is growing a good amount, but growing slower than the other leading-edge process nodes. Yet we're still outperforming, with NAND still sort of on the come line. I feel great about where we're positioned, about what we've invested in, about how we're executing. We're going to keep delivering on that. Got it. I think you piqued at my next question, so let me ask it again. You can go for a hard bout at it. I get excited about this stuff. Yes, I can see. Despite NAND having a relatively slower year, right, versus DRAM foundry logic packaging, what do you think is helping Lam outgrow? I can only imagine it's mostly share gains, people do associate Lam more with NAND than with DRAM. Despite NAND being a softer year, what do you think is helping Lam outgrow the market? What if NAND is softer next year also, can you still outgrow the market? Yeah. Listen, everything I just rattled on about, all of these 3D architectures is what's happening, and the strength of the product portfolio is what is enabling us to win a good amount of that. One thing I'll point out, Vivek, yes, people think of us as the NAND company or the memory company from an equipment standpoint. Last quarter, 54% of our systems revenue was in foundry. The quarter before, 59% was in foundry. Yes, I love our memory strength. I love our memory customers immensely, but we've done extremely well in advanced foundry and logic because of investments we made three or four years ago. We saw some of these inflections coming. We knew we were going to be really well-positioned to win, and we've delivered on it. Right. Right? It's Gate-All-Around, it's backside power that really hasn't meaningfully showed up quite yet. It will. It's advanced packaging where we do the through-silicon via steps. I call it the drill and fill. We etch the silicon to create the space for the interconnect. Then we have a wonderfully strong electroplating business. Right. That's the fill, the drill and the fill. We own a good amount of that across the totality of the industry, HBM, CoWoS, Foveros, all of those things we enable with the TSV, and we do other things in advanced packaging. We're just really well-positioned On the memory side, Doug, if we were to think of a scenario where, let's say, if memory pricing goes down next year for whatever reason, do you think your memory customers would still be as incentivized to put money in all these fabs, build all these clean rooms? Or do you think their thinking is very sensitive to the pricing of memory? I think everybody is being very purposeful about investments that they're making. Honestly, if you think about everything around AI, there are many things that are constraining the ability of everybody in the industry to supply true end demand, be it power, be it data center, be it leading-edge foundry, be it high-bandwidth memory, all of these things right now, the demand is beyond what supply is able to support. I see everybody legging their way into trying to step that forward to a certain extent, but also with a clear eye on profitability. That's important. As long as everybody is as profitable as they are, they're going to invest, and they are investing. Got it. One thing we have seen is several of these memory companies starting to do more long-term agreements with their customers. I imagine that. Good for everybody, yeah. Yeah, it kind of helps extend that visibility. Has the nature of their discussions with their suppliers, i.e., Lam, have they changed? Because now they are on the hook to provide and assure that assurance of capacity for the next few years. I think that's probably a part of what's behind these very rich, robust, longer-term conversations that I was describing earlier in our talk. Like I said, the confidence in these conversations is very, very high, and this is certainly part of it. Got it. On DRAM, how is your content changing from HBM3 to 4, and I saw yesterday Samsung talk about HBM5 as well. How is your kind of content evolving along these different HBM generations? Yeah. As the stack grows and as the dimensionality of the holes we're drilling gets tighter, the need for equipment grows. Obviously, right, if you go from eight to 12-16 die you're putting together for the same construct, you need more equipment. Got it. Again, we own the TSV. We do most of the TSV for everybody in the industry, and so that's a big part of what's showing up. Then you layer on these die get bigger, the trade ratio changes. You've got the process node in and of itself going from 1-beta to 1c to 1-gamma and beyond. Our SAM grows just in the process itself, and then you layer HBM on top of it. Got it. Does your opportunity change, Doug, if memory goes from kind of more conversions and upgrades towards more greenfield? If you could kind of walk us through, does it make any difference to Lam? You're really asking a NAND question now because largely what we see happening in NAND are conversions, right? The installed base is converting from one process node to the next, is what's happening right now. Right. I'll take you back to a year and a half ago. We described a view that the industry would need to spend $40 billion over several years to go through these conversions. On our last call, Tim updated that statement to be, okay, that $40 billion, we believe, will be largely complete by the end of next year. Right. It's happening sooner. At the point that you get through, okay, things have been converted, you're going to need wafer capacity added. We're happy with conversions. We get a bigger share of spending. When wafer capacity gets added, the customer base will need to spend more. Our share is still quite strong, so we're almost agnostic between one or the other. We're here to support customers in whatever makes sense for them. Right now, that's largely oriented around conversions, but at some point, you're going to need a little bit more wafer capacity. Do you think the allocation of new clean room to NAND kind of lags? Most memory companies are a lot more profitable than DRAM, so it makes more sense for them to allocate to DRAM. That's right. That's what I observe happening, whether people are consciously saying this or not. Right now, clean room is a constraining item. Three of my customers do both NAND and DRAM. To the extent that there's clean room constraining things, what are you going to invest in? Well, you're going to invest in where the highest profit opportunity is. Right now that's DRAM. NAND is getting closely caught up, though. Profitability is quite attractive in NAND right now. NAND will accelerate at some point. Right now DRAM is getting the priority is what I observe happening. Got it. The fact that, over time, more clean rooms, if, let's say, there is a lag with which clean rooms get allocated to NAND, does that extend your growth cycle kind of further out, right, versus some of your peers who might be more DRAM exposed? You know, I think so. Listen, everything is tight right now, and so that's going to extend the investment profile. Right Until these constraints start loosening up, which I just don't see happening in the near term. Okay. Within the clean room that customers have, do you see them upgrade their tools faster? I'm talking more DRAM rather than NAND. Listen, there's always upgrades that happen. Yeah. That's a high-return way to get the next-generation tool capability is if there's an upgrade path for a tool, almost always the first priority is going to be do the upgrade before buying new equipment. Okay. What do you think has helped Lam do so well in foundry logic, right? You mentioned over half the business was in foundry the last two quarters. Yeah. Is it all share gains? Is it just that the pace with which technology is rolling out? You mentioned the change in transistor geometries and transistor forms. Yeah. What has helped Lam? Yeah, it's back to what I tried to describe earlier. Things are collecting in the third dimension. In the most advanced foundry, you have a FinFET structure going to a Gate-All-Around. If you look at the little pictures of this, there's these nanosheets that need to get created. They get created by depositing material and then etching it, sometimes selectively etching it. It's a different way of etching. You're doing it sideways. That's etch and deposition. Our SAM grows. The opportunity to sell more equipment grows because of the technology inflections that show up. That's one statement, right? There's ALD steps in there's selective etches in there. There's always conductor and dielectric etch in there. It plays to the strength of what we do, and the product portfolio is very strong. We are the unequivocal leader in conductor etch in this industry, unequivocal by a lot. When you see that showing up, that helps. Then you layer on top of that advanced packaging. Again, back to the TSV, these are 3D structures. Right. It's just what we do. Got it. One of the very key part of your business is the Customer Service and Business Group, CSBG. In many ways, Vivek, it's my favorite part of the business model, is the Customer Support Business Group. Right. now over $2 billion. $2.1 billion last quarter. $2.1 billion. Yeah. When do you think the growth rate there starts to converge with your tool business? It is, that's just the natural consequence of this is kind of a long tail, kind of secular, embedded base business as opposed to something that's. Yeah Opposed to new tools. Yep. Let me unpack it a little bit for those that might be new to the story. The customer support business group, we call it CSBG. Four components of that business. It's upgrades, it's service, it's spare parts. Spare parts is a pretty large component of it. When you think through why is it so strong right now, utilization in the industry is very high. It's basically running at 100%. You think about spares and service, the consumption of spares and service is modulated by the number of chambers in the field as well as utilization. Utilization is 100%, can't get any higher. Right. In the March quarter, that's why it grew so much. 100%. You can't grow beyond 100%. Those two things in the more near term are going to grow, but not as much as you saw in the March quarter. That's why I tried to pull people back a little bit relative to what's going on. The place we're innovating in this is what we call advanced service. It's using Equipment Intelligence and cobots to deliver service in a different, more predictable way that frankly, customers like quite a lot. That portion of when you think about service, that drives incremental growth on top of everything else. I love this part of the business model, and in fact, a lot of these meetings I've been doing today and last week, people don't ask about this part of the business. It's a third of the business. Right. Very profitable, very recurring. Fabs are always running, which means they consume spares and service. Like I said, in many ways, to me as the CFO of the company, this is my favorite part of the business model. It just keeps running. People are often surprised to hear that our tools literally will run for decades. The Reliant product line I didn't talk about, but this is the part of the business where we're selling tools that have been around for a long time. It used to be refurbished tools. Today, there's almost no refurbished because nobody's given up equipment, but it's selling older model equipment into fabs. That's a really good part of the business model because the tool was designed a long time ago, requires not a lot of R&D. We're just building the same tool that we built 10 years ago and selling it. You see that in the analog space, in power, in CMOS Image Sensors. A lot of the business that we have in the China region is the Reliant product line. Great part of the business. Anyway, when you put this all together, it's quite profitable, it's quite cash generative, and it's very recurring. Got it. I know we have had this discussion before, do you think you would ever feel comfortable giving like a backlog? If this business is to be rated as let's say a SaaS, subscription-type business, people would also love to know what is the backlog. No, we don't give backlog. Okay. Asked and answered. Listen, I think the thing everybody, when you ask me about backlog, you want to know the visibility we have into the business. I already described what's going on there. Industry's constrained. Industry's going to grow again next year. I mean, the nature of the conversations showing up are very robust. You don't need backlog to hear me describe that, and I'm a pretty conservative guy, generally speaking. I'm talking as optimistically as you've ever heard me, if you've listened to me talk for a while, because I've not seen it as rich as it is right now with these conversations, Vivek. Right. One thing that I think Lam has perhaps said, or some of your peers have said, is that there is the potential for just fab equipment to grow faster in 2027 than in 2026. Is that still a reasonable expectation, do you feel? I think 2027 is going to be a pretty good growth year. Again, because we're constrained this year. All of the unmet demand will roll into next year. Clean rooms will become more available. If you look at totality of projects in the industry, 2027 should be a pretty good year. Do you think the mix changes in any way? Does it favor any one of the areas? I think you're going to see continued investment in leading-edge foundry. You're going to see continued investment in DRAM, and you're going to see NAND begin to catch up a little bit to those other two. Okay. One of the questions that, Doug, as you have seen come up is, are semi caps extracting as much value as every other player in the ecosystem? When we have definitely seen gross margins that used to be in the mid-40s have now come up right towards 50%. Into the low 50s. Yeah. Yeah, low 50s. Do you think that's a durable trend? How much more upside is left in this margin expansion journey? Yeah. Listen, I think we're very focused on right now making sure we're getting fairly paid for the value we're delivering. That's not a new phenomenon. That's always been the case with our business. We're always working on that. Your observation is exactly right. For the first decade I was at the company, our gross margin was pretty consistently in the middle 40s, and then we moved into the high 40s, and we're now touching low 50s. We've got inflationary headwinds we're dealing with when you've got oil above $100 a barrel, right? We fly stuff all over the world. You got to manage all of those type things that show up, both for us directly as well as in our supply chain. We're dealing with a little bit of a headwind in customer mix, right? Right. Some of the most profitable customers aren't growing nearly as much as the biggest customers who tend to get a little more favorable pricing, a little bit anyway. As you think through that, I went out of my way on the last call to say, "Listen, as we go through the year, we see these headwinds. We're working on efficiencies, we're working on pricing." I said, "Keep gross margin right where it is in that 50-ish%, 50.5% is what we just guided to." We're managing the headwinds that we see in the short term through a variety of things, including pricing. Right. Historically, WFE and Semi CapEx have grown in that 8%-10% range. Here we are in front of multiple years of 20%-25%, right? Strong growth. Yeah. Much stronger than before. How is Lam prepared right from an operational perspective, from a capacity perspective? Where are you seeing the constraints in your ability to execute to that growth? Listen, I think, again, also on our last call, we went out of our way to say, "Hey, we're building a second manufacturing facility in Malaysia." That's part of this. We anticipated what was happening, and we're getting ready for it. Like I said, we are spending a lot of time with customers working on the demand signal they're providing to us, such that we can then make sure that propagates back through our own supply chain. I don't want to say it's working flawlessly perfectly. When you build as complicated of a product as we build, there's always things that you're having to expedite and work on, and it costs money to expedite things. We're managing all of that pretty effectively. It's not to say that it's easy. It's absolutely requiring a ton of time, a ton of effort to make sure every single component in the bill of materials shows up when it is required and needed. We're having to expedite lots of different stuff, but we're managing it pretty well. I know my team listens to me when I talk at these things. I want to thank the global operations organization at Lam Research. I know everybody that works there is working super hard on all of this stuff, and it's enabling execution that is extremely good from us. Got it. Hypothetically, if next year WFE grows 35%, 40%+, what would Lam need to do differently today? We're doing everything we can do to make sure we are not going to be the constraining item in the industry based on the demand signal we're getting from our customers. We're actioning everything that I think we need to do to be ready for what customers are telling us they need. Got it. I'm not going to say that growth number you said is the right growth number, but. It's too low? It's going to be a good year next year, but I'm not going to endorse that number necessarily. Got it. China, should one just assume it kind of stays in this 25%-30% exposure, and that's just the easiest way to think about. I think so right now. The way we've described the Wafer Fab Equipment spending in China is it's flattish to slightly up this year from last year. As a result, as a % of overall WFE and as a % of Lam Research's revenue, it will decline because everything else outside is growing faster than that. That's the right thing about China. It's not going away. It's just pretty steady. Got it. On just kind of capital allocation. I think the semi cap industry has done a remarkable job, although not always appreciated as much for kind of buybacks and returns, right? Yeah. Actually retiring a big chunk of outstanding shares. How do you think about capital allocation, and is there a scope to actually target even higher dividend yields, or you think buybacks are still a better way to use your cash? Great question. Listen, our plans are to return 85% of free cash flow to shareholders. In the last several years, we've returned more than that. Underneath the covers of that, our intention is to grow the dividend on an annual basis. I think the last three years we've grown it annually 15%. We'll grow the dividend again this year. I'm not going to apologize for the fact that the dividend yield has declined because the share price has gone up. That's a good problem for all of us. I do look at that yield. I do benchmark it to everybody else in the industry. I want to make sure we're competitive with that. To get to the 85%, we supplement that annually growing dividend with share buyback, and that's still the plans of the company. Got it. I know M&A is tough in the industry, any places where you think there is a scope for kind of tuck-in acquisitions? I don't know. Over the years, we've done some small tuck-ins. We did a panel packaging tuck-in that I'm super happy that we did a few years ago. That's all that's left in the industry. The big stuff is in the rearview mirror. Large scale M&A, I think is in the past. Perfect. Thank you so much, Doug. Really appreciate your time. Thanks for having me. Appreciate it. All the best. Really delighted to have the team from Analog Devices join us this morning. Rich Puccio, the Chief Financial Officer. We'll go through my list of questions, but please feel free to raise your hand if you would like to bring up anything. Really warm welcome to you, Rich. Really appreciate you doing this conference. Thanks, Vivek. Thanks for having us.

Speaker 3: Tech conference. I'm Vivek Arya from our Semiconductor Semicap Equipment team. I'm really delighted to have the team from Lam Research join us for this fireside, and Doug Bettinger, the Chief Financial Officer. As always, I'll go through my questions, but please feel free to raise your hand if you would like to bring something up. Before we start, Doug, I believe you have a safe harbor. Tech conference. tech conference I'm Vivek Arya from our Semiconductor Semicap Equipment team. i'm vivek arya from our semiconductor semicap equipment team I'm really delighted to have the team from Lam Research join us for this fireside, and Doug Bettinger, the Chief Financial Officer. i'm really delighted to have the team from lam research join us for this fireside and doug bettinger the chief financial officer As always, I'll go through my questions, but please feel free to raise your hand if you would like to bring something up. as always i'll go through my questions but please feel free to raise your hand if you would like to bring something up Before we start, Doug, I believe you have a safe harbor. before we start doug i believe you have a safe harbor

Speaker 1: Yeah, I need to start with a safe harbor to keep my legal team happy. Give me a minute here. Today's discussion may include forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. Additional information concerning factors that could cause results to differ materially from those forward-looking statements can be found in the risk factors disclosed in our public file links with the SEC, including our most recent 10-K and 10-Q. I'm done. Yeah, I need to start with a safe harbor to keep my legal team happy. yeah i need to start with a safe harbor to keep my legal team happy Give me a minute here. give me a minute here Today's discussion may include forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. today's discussion may include forward-looking statements that are subject to risks and uncertainties and actual results may differ materially Additional information concerning factors that could cause results to differ materially from those forward-looking statements can be found in the risk factors disclosed in our public file links with the SEC, including our most recent 10-K and 10-Q. additional information concerning factors that could cause results to differ materially from those forward-looking statements can be found in the risk factors disclosed in our public file links with the sec including our most recent 10-k and 10-q I'm done. i'm done

Speaker 3: Wonderful. Thank you, Doug. That's the exciting part of the discussion. Wonderful. wonderful Thank you, Doug. thank you doug That's the exciting part of the discussion. that's the exciting part of the discussion

Speaker 1: I know people are always excited to see how fast I can read that. I know people are always excited to see how fast I can read that. i know people are always excited to see how fast i can read that

Speaker 3: Maybe just let's start, Doug, with kind of a state of the union. Since the start of the year, we have seen Lam consistently raise expectations for a Wafer Fab Equipment market- Maybe just let's start, Doug, with kind of a state of the union. maybe just let's start doug with kind of a state of the union Since the start of the year, we have seen Lam consistently raise expectations for a Wafer Fab Equipment market- since the start of the year we have seen lam consistently raise expectations for a wafer fab equipment market-

Speaker 1: Yeah Yeah yeah

Speaker 3: This year. From started in the mid low $130s, now it's kind of over $140, right? This year. this year From started in the mid low $130s, now it's kind of over $140, right? from started in the mid low $130s now it's kind of over $140 right

Speaker 1: We should, yeah. We should, yeah. we should yeah

Speaker 3: For this year. What do you think have been the incremental drivers of growth since the start of the year? For this year. for this year What do you think have been the incremental drivers of growth since the start of the year? what do you think have been the incremental drivers of growth since the start of the year

Speaker 1: I think the first thing to understand is the industry, from our point of view, is constrained by clean room space availability. I think you're hearing that. I think the first thing to understand is the industry, from our point of view, is constrained by clean room space availability. i think the first thing to understand is the industry from our point of view is constrained by clean room space availability I think you're hearing that. i think you're hearing that

Speaker 3: Right Right right

Speaker 1: Statement from everybody. You're absolutely right, Vivek. We started the year thinking WFE was going to be $135. It's a specific number. On the last call, Tim and I updated it to $140, perhaps with a bias to a little bit of upside. What's changed is it's been across all segments of the business. There's just a little bit more clean room. Maybe projects got pulled in a little bit. One of our customers bought a fab and was able to take equipment a little bit sooner. Everybody's trying to figure out, in this constrained environment, how to squeeze a little bit more out of what's there, and that's exactly where we saw the upside. It wasn't any one specific thing, just a little bit everywhere. Statement from everybody. statement from everybody You're absolutely right, Vivek. you're absolutely right vivek We started the year thinking WFE was going to be $135. we started the year thinking wfe was going to be $135 It's a specific number. it's a specific number On the last call, Tim and I updated it to $140, perhaps with a bias to a little bit of upside. on the last call tim and i updated it to $140 perhaps with a bias to a little bit of upside What's changed is it's been across all segments of the business. what's changed is it's been across all segments of the business There's just a little bit more clean room. there's just a little bit more clean room Maybe projects got pulled in a little bit. maybe projects got pulled in a little bit One of our customers bought a fab and was able to take equipment a little bit sooner. one of our customers bought a fab and was able to take equipment a little bit sooner Everybody's trying to figure out, in this constrained environment, how to squeeze a little bit more out of what's there, and that's exactly where we saw the upside. everybody's trying to figure out in this constrained environment how to squeeze a little bit more out of what's there and that's exactly where we saw the upside It wasn't any one specific thing, just a little bit everywhere. it wasn't any one specific thing just a little bit everywhere I'm not saying there's going to be a little bit more, but everybody's working on trying to get a little more output. That's what showed up. I'm not saying there's going to be a little bit more, but everybody's working on trying to get a little more output. i'm not saying there's going to be a little bit more but everybody's working on trying to get a little more output That's what showed up. that's what showed up

Speaker 3: Is there a way to think about what the unconstrained WFE might be this year, if there was enough clean room space available? Is there a way to think about what the unconstrained WFE might be this year, if there was enough clean room space available? is there a way to think about what the unconstrained wfe might be this year if there was enough clean room space available

Speaker 1: Yeah. Listen, everybody wants to know the answer to that question. Frankly, I don't have a specific number for you, except I would tell you the industry is undersupplied right now. You're seeing it in memory pricing, absolutely, in profitability. Advanced foundry is constrained. Advanced packaging is super tight. I don't have a specific number for what unconstrained WFE might be, but what I will tell you is this bodes pretty well for what WFE is going to be next year, because this is going to roll into next year as projects come more available into 2027. I think it's going to be a pretty darn good year in 2027 and maybe beyond that. Yeah. yeah Listen, everybody wants to know the answer to that question. listen everybody wants to know the answer to that question Frankly, I don't have a specific number for you, except I would tell you the industry is undersupplied right now. frankly i don't have a specific number for you except i would tell you the industry is undersupplied right now You're seeing it in memory pricing, absolutely, in profitability. you're seeing it in memory pricing absolutely in profitability Advanced foundry is constrained. advanced foundry is constrained Advanced packaging is super tight. advanced packaging is super tight I don't have a specific number for what unconstrained WFE might be, but what I will tell you is this bodes pretty well for what WFE is going to be next year, because this is going to roll into next year as projects come more available into 2027. i don't have a specific number for what unconstrained wfe might be but what i will tell you is this bodes pretty well for what wfe is going to be next year because this is going to roll into next year as projects come more available into 2027 I think it's going to be a pretty darn good year in 2027 and maybe beyond that. i think it's going to be a pretty darn good year in 2027 and maybe beyond that

Speaker 3: Right. Got it. Right. right Got it. got it

Speaker 1: I don't have a specific number for you, Vivek. I don't have a specific number for you, Vivek. i don't have a specific number for you vivek

Speaker 3: Got it. Okay. If you look at visibility, that seems to be extending out over the next number of years. Got it. got it Okay. okay If you look at visibility, that seems to be extending out over the next number of years. if you look at visibility that seems to be extending out over the next number of years

Speaker 1: Yeah. Yeah. yeah

Speaker 3: Is there a way to quantify, Doug, what is kind of your usual period of visibility and what it is right now? Is there a way to quantify, Doug, what is kind of your usual period of visibility and what it is right now? is there a way to quantify doug what is kind of your usual period of visibility and what it is right now

Speaker 1: I think what I would tell you is right now, given the environment I described, there's very deep conversations occurring with every one of our customers about, okay, what does the next several quarters look like? What do you have? What could push or pull in or out and so forth based on these clean room projects that are underway? Then the conversation almost immediately transitions to, okay, what does that mean for next year? Because at the end of the day, our customers don't want us to be what constrains them, and we certainly don't want to be in that position either, right? Okay, that project looks like it's showing up in 2027, in the second half, and so what might that mean for what do you need from us? It doesn't necessarily mean I've got a purchase order for next year. I think what I would tell you is right now, given the environment I described, there's very deep conversations occurring with every one of our customers about, okay, what does the next several quarters look like? i think what i would tell you is right now given the environment i described there's very deep conversations occurring with every one of our customers about okay what does the next several quarters look like What do you have? what do you have What could push or pull in or out and so forth based on these clean room projects that are underway? what could push or pull in or out and so forth based on these clean room projects that are underway Then the conversation almost immediately transitions to, okay, what does that mean for next year? then the conversation almost immediately transitions to okay what does that mean for next year Because at the end of the day, our customers don't want us to be what constrains them, and we certainly don't want to be in that position either, right? because at the end of the day our customers don't want us to be what constrains them and we certainly don't want to be in that position either right Okay, that project looks like it's showing up in 2027, in the second half, and so what might that mean for what do you need from us? okay that project looks like it's showing up in 2027 in the second half and so what might that mean for what do you need from us It doesn't necessarily mean I've got a purchase order for next year. it doesn't necessarily mean i've got a purchase order for next year

Speaker 3: Right Right right

Speaker 1: The robustness of these conversations is as strong as I've ever seen it, frankly, in all the time I've been in the industry. The robustness of these conversations is as strong as I've ever seen it, frankly, in all the time I've been in the industry. the robustness of these conversations is as strong as i've ever seen it frankly in all the time i've been in the industry

Speaker 3: Right. Right. right

Speaker 1: That's what's happening. It's pretty easy to understand, okay, that new fab project is scheduled to be completed next year. We can also do our own assessment of, okay, the customer's saying this, and we look at it and say, "Yeah, okay, that generally makes sense." That's what's happening right now. It follows on, obviously, for us, then we're going to go talk to our supply chain partners. We're going to plan our own physical bricks and mortar consistent with what is the customer saying they're going to need from us. That's what's happening right now. That's what's happening. that's what's happening It's pretty easy to understand, okay, that new fab project is scheduled to be completed next year. it's pretty easy to understand okay that new fab project is scheduled to be completed next year We can also do our own assessment of, okay, the customer's saying this, and we look at it and say, "Yeah, okay, that generally makes sense." That's what's happening right now. we can also do our own assessment of okay the customer's saying this and we look at it and say "yeah okay that generally makes sense." that's what's happening right now It follows on, obviously, for us, then we're going to go talk to our supply chain partners. it follows on obviously for us then we're going to go talk to our supply chain partners We're going to plan our own physical bricks and mortar consistent with what is the customer saying they're going to need from us. we're going to plan our own physical bricks and mortar consistent with what is the customer saying they're going to need from us That's what's happening right now. that's what's happening right now

Speaker 3: Right. Right. right

Speaker 1: Like I said, the richness, the conviction in these conversations is as strong as I've ever seen it. Like I said, the richness, the conviction in these conversations is as strong as I've ever seen it. like i said the richness the conviction in these conversations is as strong as i've ever seen it

Speaker 3: Got it. The fact that it's the data center end market that is driving- Got it. got it The fact that it's the data center end market that is driving- the fact that it's the data center end market that is driving-

Speaker 1: It's AI. It's AI. it's ai

Speaker 3: It's AI. It's AI. it's ai

Speaker 1: Yeah. Yeah. yeah

Speaker 3: You're right. Versus in the past, many of the growth cycles have been more consumer-driven, whether it was PCs or phones and such. You're right. you're right Versus in the past, many of the growth cycles have been more consumer-driven, whether it was PCs or phones and such. versus in the past many of the growth cycles have been more consumer-driven whether it was pcs or phones and such

Speaker 1: Well, PC, it was internet, it was mobile. Yeah, all of those things. Now AI is layered on top of it, frankly, the longevity of this, to me, feels like it's here for quite a good amount of time. Well, PC, it was internet, it was mobile. well pc it was internet it was mobile Yeah, all of those things. yeah all of those things Now AI is layered on top of it, frankly, the longevity of this, to me, feels like it's here for quite a good amount of time. now ai is layered on top of it frankly the longevity of this to me feels like it's here for quite a good amount of time

Speaker 3: Got it. Okay. It's AI-driven, where everyone wants to build as soon as possible, do you think there is an acceleration in how quickly customers are willing to adopt the high end of the stack, so to speak, your leading-edge technology, versus in prior times? Got it. got it Okay. okay It's AI-driven, where everyone wants to build as soon as possible, do you think there is an acceleration in how quickly customers are willing to adopt the high end of the stack, so to speak, your leading-edge technology, versus in prior times? it's ai-driven where everyone wants to build as soon as possible do you think there is an acceleration in how quickly customers are willing to adopt the high end of the stack so to speak your leading-edge technology versus in prior times

Speaker 1: Where demand is showing up from these AI compute-- These accelerator chips are very, very big die on maybe not the most advanced node, but pretty close. That generally means it's the most advanced equipment, it's the newest capability required to deliver these very advanced features, very small, high aspect ratio features and things that you look at. It's high bandwidth memory. It's a lot of DRAM needed in the compute infrastructure. NAND is also beginning to show up, right? You've got to store these tokens, not just generate them. It's showing up everywhere, and it's primarily showing up at a pretty advanced process node, which certainly needs our most advanced equipment. Where demand is showing up from these AI compute-- These accelerator chips are very, very big die on maybe not the most advanced node, but pretty close. where demand is showing up from these ai compute-- these accelerator chips are very very big die on maybe not the most advanced node but pretty close That generally means it's the most advanced equipment, it's the newest capability required to deliver these very advanced features, very small, high aspect ratio features and things that you look at. that generally means it's the most advanced equipment it's the newest capability required to deliver these very advanced features very small high aspect ratio features and things that you look at It's high bandwidth memory. it's high bandwidth memory It's a lot of DRAM needed in the compute infrastructure. it's a lot of dram needed in the compute infrastructure NAND is also beginning to show up, right? nand is also beginning to show up right You've got to store these tokens, not just generate them. you've got to store these tokens not just generate them It's showing up everywhere, and it's primarily showing up at a pretty advanced process node, which certainly needs our most advanced equipment. it's showing up everywhere and it's primarily showing up at a pretty advanced process node which certainly needs our most advanced equipment

Speaker 3: Okay. In terms of Lam's specific outgrowth, right? Lam has been a market share gainer. I think in the past you said that the goal was to go from kind of the mid-30s WFE SAM towards the high 30s. Where is Lam in that transition, and do you think your SAM kind of expands? Okay. okay In terms of Lam's specific outgrowth, right? in terms of lam's specific outgrowth right Lam has been a market share gainer. lam has been a market share gainer I think in the past you said that the goal was to go from kind of the mid-30s WFE SAM towards the high 30s. i think in the past you said that the goal was to go from kind of the mid-30s wfe sam towards the high 30s Where is Lam in that transition, and do you think your SAM kind of expands? where is lam in that transition and do you think your sam kind of expands

Speaker 1: It absolutely has been and will continue to be. That's the unique story about our company. Everybody benefits in equipment when WFE raises. That's great. Rising tide lifts everybody. The unique position we sit in, and maybe we're a little bit lucky, but also we're executing extremely well. You look across the totality of advanced process nodes in foundry, in logic, in DRAM, in NAND, things are inflecting in the third dimension, right? High-bandwidth memory is a 3D structure. 6F² going to 4F² is a 3D structure. 3D DRAM is being worked on, is an even more 3D structure. The NAND stack keeps growing. That's a 3D structure. Gate-All-Around is an advanced 3D structure. Advanced packaging is a 3D structure. When things inflect in the third dimension, etch and deposition intensity grows. That's all we do. It absolutely has been and will continue to be. it absolutely has been and will continue to be That's the unique story about our company. that's the unique story about our company Everybody benefits in equipment when WFE raises. everybody benefits in equipment when wfe raises That's great. that's great Rising tide lifts everybody. rising tide lifts everybody The unique position we sit in, and maybe we're a little bit lucky, but also we're executing extremely well. the unique position we sit in and maybe we're a little bit lucky but also we're executing extremely well You look across the totality of advanced process nodes in foundry, in logic, in DRAM, in NAND, things are inflecting in the third dimension, right? you look across the totality of advanced process nodes in foundry in logic in dram in nand things are inflecting in the third dimension right High-bandwidth memory is a 3D structure. 6F² going to 4F² is a 3D structure. 3D DRAM is being worked on, is an even more 3D structure. high-bandwidth memory is a 3d structure 6f² going to 4f² is a 3d structure 3d dram is being worked on is an even more 3d structure The NAND stack keeps growing. the nand stack keeps growing That's a 3D structure. that's a 3d structure Gate-All-Around is an advanced 3D structure. gate-all-around is an advanced 3d structure Advanced packaging is a 3D structure. advanced packaging is a 3d structure When things inflect in the third dimension, etch and deposition intensity grows. when things inflect in the third dimension etch and deposition intensity grows That's all we do. that's all we do A year and a half ago, we began describing this growth in our addressable market. What we said back then in early 2025, we did our last Investor Day. Then we were coming off a year where we addressed low 30% of overall WFE. Call it $0.32 of every dollar spent on WFE was spent on etch and deposition. We said we see a path over the next several years for that to grow to the high 30s. That's what you were just describing, Vivek. A year and a half ago, we began describing this growth in our addressable market. a year and a half ago we began describing this growth in our addressable market What we said back then in early 2025, we did our last Investor Day. what we said back then in early 2025 we did our last investor day Then we were coming off a year where we addressed low 30% of overall WFE. then we were coming off a year where we addressed low 30% of overall wfe Call it $0.32 of every dollar spent on WFE was spent on etch and deposition. call it $0.32 of every dollar spent on wfe was spent on etch and deposition We said we see a path over the next several years for that to grow to the high 30s. we said we see a path over the next several years for that to grow to the high 30s That's what you were just describing, Vivek. that's what you were just describing vivek

Speaker 3: Right. Right. right

Speaker 1: As we sit here today, it's in the mid-30s. Right? A year and a half later, after we said low 30s, we're already in the mid-30s because of the evolution of these architectures. This is going to continue. There's a couple cool data points, I think from my point of view anyway, cool data points, where we said in foundry from five nanometer to CFET, our SAM per wafer will double because of the intensity of creating this very complicated CFET structure. Gate-All-Around is a step towards that. backside power is another step towards that. These are just examples of what I'm describing. We sit in a unique position within the equipment sector in that everything we do is growing. That's wonderful. On top of that, the strength of our product portfolio has never been stronger from my point of view and from the executive team's point of view. As we sit here today, it's in the mid-30s. as we sit here today it's in the mid-30s Right? right A year and a half later, after we said low 30s, we're already in the mid-30s because of the evolution of these architectures. a year and a half later after we said low 30s we're already in the mid-30s because of the evolution of these architectures This is going to continue. this is going to continue There's a couple cool data points, I think from my point of view anyway, cool data points, where we said in foundry from five nanometer to CFET, our SAM per wafer will double because of the intensity of creating this very complicated CFET structure. there's a couple cool data points i think from my point of view anyway cool data points where we said in foundry from five nanometer to cfet our sam per wafer will double because of the intensity of creating this very complicated cfet structure Gate-All-Around is a step towards that. backside power is another step towards that. gate-all-around is a step towards that backside power is another step towards that These are just examples of what I'm describing. these are just examples of what i'm describing We sit in a unique position within the equipment sector in that everything we do is growing. we sit in a unique position within the equipment sector in that everything we do is growing That's wonderful. that's wonderful On top of that, the strength of our product portfolio has never been stronger from my point of view and from the executive team's point of view. on top of that the strength of our product portfolio has never been stronger from my point of view and from the executive team's point of view As we see this growing SAM, based on our products that are coming out, like Akara, like Vantex, like the Moly tool, like Halo we call it, we believe we're going to win half of this growing SAM. Right? Low 30s going to high 30s, we believe because of what we're able to deliver, we're going to do really well in winning that growing SAM. That's the unique story about Lam Research. Everybody in equipment's going to do well over the next several years. We're going to do even better. We outperformed WFE last year. We're going to outperform it this year. We're going to outperform it for the next several years based on what I see. What I've been pointing out, actually, I think people that know the company know that NAND flash is our strongest end market. As we see this growing SAM, based on our products that are coming out, like Akara, like Vantex, like the Moly tool, like Halo we call it, we believe we're going to win half of this growing SAM. as we see this growing sam based on our products that are coming out like akara like vantex like the moly tool like halo we call it we believe we're going to win half of this growing sam Right? right Low 30s going to high 30s, we believe because of what we're able to deliver, we're going to do really well in winning that growing SAM. low 30s going to high 30s we believe because of what we're able to deliver we're going to do really well in winning that growing sam That's the unique story about Lam Research. that's the unique story about lam research Everybody in equipment's going to do well over the next several years. everybody in equipment's going to do well over the next several years We're going to do even better. we're going to do even better We outperformed WFE last year. we outperformed wfe last year We're going to outperform it this year. we're going to outperform it this year We're going to outperform it for the next several years based on what I see. we're going to outperform it for the next several years based on what i see What I've been pointing out, actually, I think people that know the company know that NAND flash is our strongest end market. what i've been pointing out actually i think people that know the company know that nand flash is our strongest end market That is growing a good amount, but growing slower than the other leading-edge process nodes. Yet we're still outperforming, with NAND still sort of on the come line. I feel great about where we're positioned, about what we've invested in, about how we're executing. We're going to keep delivering on that. That is growing a good amount, but growing slower than the other leading-edge process nodes. that is growing a good amount but growing slower than the other leading-edge process nodes Yet we're still outperforming, with NAND still sort of on the come line. yet we're still outperforming with nand still sort of on the come line I feel great about where we're positioned, about what we've invested in, about how we're executing. i feel great about where we're positioned about what we've invested in about how we're executing We're going to keep delivering on that. we're going to keep delivering on that

Speaker 3: Got it. I think you piqued at my next question, so let me ask it again. Got it. got it I think you piqued at my next question, so let me ask it again. i think you piqued at my next question so let me ask it again

Speaker 1: You can go for a hard bout at it. I get excited about this stuff. You can go for a hard bout at it. you can go for a hard bout at it I get excited about this stuff. i get excited about this stuff

Speaker 3: Yes, I can see. Despite NAND having a relatively slower year, right, versus DRAM foundry logic packaging, what do you think is helping Lam outgrow? I can only imagine it's mostly share gains, people do associate Lam more with NAND than with DRAM. Despite NAND being a softer year, what do you think is helping Lam outgrow the market? What if NAND is softer next year also, can you still outgrow the market? Yes, I can see. yes i can see Despite NAND having a relatively slower year, right, versus DRAM foundry logic packaging, what do you think is helping Lam outgrow? despite nand having a relatively slower year right versus dram foundry logic packaging what do you think is helping lam outgrow I can only imagine it's mostly share gains, people do associate Lam more with NAND than with DRAM. i can only imagine it's mostly share gains people do associate lam more with nand than with dram Despite NAND being a softer year, what do you think is helping Lam outgrow the market? despite nand being a softer year what do you think is helping lam outgrow the market What if NAND is softer next year also, can you still outgrow the market? what if nand is softer next year also can you still outgrow the market

Speaker 1: Yeah. Listen, everything I just rattled on about, all of these 3D architectures is what's happening, and the strength of the product portfolio is what is enabling us to win a good amount of that. One thing I'll point out, Vivek, yes, people think of us as the NAND company or the memory company from an equipment standpoint. Last quarter, 54% of our systems revenue was in foundry. The quarter before, 59% was in foundry. Yes, I love our memory strength. I love our memory customers immensely, but we've done extremely well in advanced foundry and logic because of investments we made three or four years ago. We saw some of these inflections coming. We knew we were going to be really well-positioned to win, and we've delivered on it. Yeah. yeah Listen, everything I just rattled on about, all of these 3D architectures is what's happening, and the strength of the product portfolio is what is enabling us to win a good amount of that. listen everything i just rattled on about all of these 3d architectures is what's happening and the strength of the product portfolio is what is enabling us to win a good amount of that One thing I'll point out, Vivek, yes, people think of us as the NAND company or the memory company from an equipment standpoint. one thing i'll point out vivek yes people think of us as the nand company or the memory company from an equipment standpoint Last quarter, 54% of our systems revenue was in foundry. last quarter 54% of our systems revenue was in foundry The quarter before, 59% was in foundry. the quarter before 59% was in foundry Yes, I love our memory strength. yes i love our memory strength I love our memory customers immensely, but we've done extremely well in advanced foundry and logic because of investments we made three or four years ago. i love our memory customers immensely but we've done extremely well in advanced foundry and logic because of investments we made three or four years ago We saw some of these inflections coming. we saw some of these inflections coming We knew we were going to be really well-positioned to win, and we've delivered on it. we knew we were going to be really well-positioned to win and we've delivered on it

Speaker 3: Right. Right. right

Speaker 1: Right? It's Gate-All-Around, it's backside power that really hasn't meaningfully showed up quite yet. It will. It's advanced packaging where we do the through-silicon via steps. I call it the drill and fill. We etch the silicon to create the space for the interconnect. Then we have a wonderfully strong electroplating business. Right? right It's Gate-All-Around, it's backside power that really hasn't meaningfully showed up quite yet. it's gate-all-around it's backside power that really hasn't meaningfully showed up quite yet It will. it will It's advanced packaging where we do the through-silicon via steps. it's advanced packaging where we do the through-silicon via steps I call it the drill and fill. i call it the drill and fill We etch the silicon to create the space for the interconnect. we etch the silicon to create the space for the interconnect Then we have a wonderfully strong electroplating business. then we have a wonderfully strong electroplating business

Speaker 3: Right. Right. right

Speaker 1: That's the fill, the drill and the fill. We own a good amount of that across the totality of the industry, HBM, CoWoS, Foveros, all of those things we enable with the TSV, and we do other things in advanced packaging. We're just really well-positioned That's the fill, the drill and the fill. that's the fill the drill and the fill We own a good amount of that across the totality of the industry, HBM, CoWoS, Foveros, all of those things we enable with the TSV, and we do other things in advanced packaging. we own a good amount of that across the totality of the industry hbm cowos foveros all of those things we enable with the tsv and we do other things in advanced packaging We're just really well-positioned we're just really well-positioned

Speaker 3: On the memory side, Doug, if we were to think of a scenario where, let's say, if memory pricing goes down next year for whatever reason, do you think your memory customers would still be as incentivized to put money in all these fabs, build all these clean rooms? Or do you think their thinking is very sensitive to the pricing of memory? On the memory side, Doug, if we were to think of a scenario where, let's say, if memory pricing goes down next year for whatever reason, do you think your memory customers would still be as incentivized to put money in all these fabs, build all these clean rooms? on the memory side doug if we were to think of a scenario where let's say if memory pricing goes down next year for whatever reason do you think your memory customers would still be as incentivized to put money in all these fabs build all these clean rooms Or do you think their thinking is very sensitive to the pricing of memory? or do you think their thinking is very sensitive to the pricing of memory

Speaker 1: I think everybody is being very purposeful about investments that they're making. Honestly, if you think about everything around AI, there are many things that are constraining the ability of everybody in the industry to supply true end demand, be it power, be it data center, be it leading-edge foundry, be it high-bandwidth memory, all of these things right now, the demand is beyond what supply is able to support. I see everybody legging their way into trying to step that forward to a certain extent, but also with a clear eye on profitability. That's important. As long as everybody is as profitable as they are, they're going to invest, and they are investing. I think everybody is being very purposeful about investments that they're making. i think everybody is being very purposeful about investments that they're making Honestly, if you think about everything around AI, there are many things that are constraining the ability of everybody in the industry to supply true end demand, be it power, be it data center, be it leading-edge foundry, be it high-bandwidth memory, all of these things right now, the demand is beyond what supply is able to support. honestly if you think about everything around ai there are many things that are constraining the ability of everybody in the industry to supply true end demand be it power be it data center be it leading-edge foundry be it high-bandwidth memory all of these things right now the demand is beyond what supply is able to support I see everybody legging their way into trying to step that forward to a certain extent, but also with a clear eye on profitability. i see everybody legging their way into trying to step that forward to a certain extent but also with a clear eye on profitability That's important. that's important As long as everybody is as profitable as they are, they're going to invest, and they are investing. as long as everybody is as profitable as they are they're going to invest and they are investing

Speaker 3: Got it. One thing we have seen is several of these memory companies starting to do more long-term agreements with their customers. I imagine that. Got it. got it One thing we have seen is several of these memory companies starting to do more long-term agreements with their customers. one thing we have seen is several of these memory companies starting to do more long-term agreements with their customers I imagine that. i imagine that

Speaker 1: Good for everybody, yeah. Good for everybody, yeah. good for everybody yeah

Speaker 3: Yeah, it kind of helps extend that visibility. Has the nature of their discussions with their suppliers, i.e., Lam, have they changed? Because now they are on the hook to provide and assure that assurance of capacity for the next few years. Yeah, it kind of helps extend that visibility. yeah it kind of helps extend that visibility Has the nature of their discussions with their suppliers, i.e., Lam, have they changed? has the nature of their discussions with their suppliers i.e lam have they changed Because now they are on the hook to provide and assure that assurance of capacity for the next few years. because now they are on the hook to provide and assure that assurance of capacity for the next few years

Speaker 1: I think that's probably a part of what's behind these very rich, robust, longer-term conversations that I was describing earlier in our talk. Like I said, the confidence in these conversations is very, very high, and this is certainly part of it. I think that's probably a part of what's behind these very rich, robust, longer-term conversations that I was describing earlier in our talk. i think that's probably a part of what's behind these very rich robust longer-term conversations that i was describing earlier in our talk Like I said, the confidence in these conversations is very, very high, and this is certainly part of it. like i said the confidence in these conversations is very very high and this is certainly part of it

Speaker 3: Got it. On DRAM, how is your content changing from HBM3 to 4, and I saw yesterday Samsung talk about HBM5 as well. How is your kind of content evolving along these different HBM generations? Got it. got it On DRAM, how is your content changing from HBM3 to 4, and I saw yesterday Samsung talk about HBM5 as well. on dram how is your content changing from hbm3 to 4 and i saw yesterday samsung talk about hbm5 as well How is your kind of content evolving along these different HBM generations? how is your kind of content evolving along these different hbm generations

Speaker 1: Yeah. As the stack grows and as the dimensionality of the holes we're drilling gets tighter, the need for equipment grows. Obviously, right, if you go from eight to 12-16 die you're putting together for the same construct, you need more equipment. Yeah. yeah As the stack grows and as the dimensionality of the holes we're drilling gets tighter, the need for equipment grows. as the stack grows and as the dimensionality of the holes we're drilling gets tighter the need for equipment grows Obviously, right, if you go from eight to 12- 16 die you're putting together for the same construct, you need more equipment. obviously right if you go from eight to 12- 16 die you're putting together for the same construct you need more equipment

Speaker 3: Got it. Got it. got it

Speaker 1: Again, we own the TSV. We do most of the TSV for everybody in the industry, and so that's a big part of what's showing up. Then you layer on these die get bigger, the trade ratio changes. You've got the process node in and of itself going from 1-beta to 1c to 1-gamma and beyond. Our SAM grows just in the process itself, and then you layer HBM on top of it. Again, we own the TSV. again we own the tsv We do most of the TSV for everybody in the industry, and so that's a big part of what's showing up. we do most of the tsv for everybody in the industry and so that's a big part of what's showing up Then you layer on these die get bigger, the trade ratio changes. then you layer on these die get bigger the trade ratio changes You've got the process node in and of itself going from 1-beta to 1c to 1-gamma and beyond. you've got the process node in and of itself going from 1-beta to 1c to 1-gamma and beyond Our SAM grows just in the process itself, and then you layer HBM on top of it. our sam grows just in the process itself and then you layer hbm on top of it

Speaker 3: Got it. Does your opportunity change, Doug, if memory goes from kind of more conversions and upgrades towards more greenfield? If you could kind of walk us through, does it make any difference to Lam? Got it. got it Does your opportunity change, Doug, if memory goes from kind of more conversions and upgrades towards more greenfield? does your opportunity change doug if memory goes from kind of more conversions and upgrades towards more greenfield If you could kind of walk us through, does it make any difference to Lam? if you could kind of walk us through does it make any difference to lam

Speaker 1: You're really asking a NAND question now because largely what we see happening in NAND are conversions, right? The installed base is converting from one process node to the next, is what's happening right now. You're really asking a NAND question now because largely what we see happening in NAND are conversions, right? you're really asking a nand question now because largely what we see happening in nand are conversions right The installed base is converting from one process node to the next, is what's happening right now. the installed base is converting from one process node to the next is what's happening right now

Speaker 3: Right. Right. right

Speaker 1: I'll take you back to a year and a half ago. We described a view that the industry would need to spend $40 billion over several years to go through these conversions. On our last call, Tim updated that statement to be, okay, that $40 billion, we believe, will be largely complete by the end of next year. I'll take you back to a year and a half ago. i'll take you back to a year and a half ago We described a view that the industry would need to spend $40 billion over several years to go through these conversions. we described a view that the industry would need to spend $40 billion over several years to go through these conversions On our last call, Tim updated that statement to be, okay, that $40 billion, we believe, will be largely complete by the end of next year. on our last call tim updated that statement to be okay that $40 billion we believe will be largely complete by the end of next year

Speaker 3: Right. Right. right

Speaker 1: It's happening sooner. At the point that you get through, okay, things have been converted, you're going to need wafer capacity added. We're happy with conversions. We get a bigger share of spending. When wafer capacity gets added, the customer base will need to spend more. Our share is still quite strong, so we're almost agnostic between one or the other. We're here to support customers in whatever makes sense for them. Right now, that's largely oriented around conversions, but at some point, you're going to need a little bit more wafer capacity. It's happening sooner. it's happening sooner At the point that you get through, okay, things have been converted, you're going to need wafer capacity added. at the point that you get through okay things have been converted you're going to need wafer capacity added We're happy with conversions. we're happy with conversions We get a bigger share of spending. we get a bigger share of spending When wafer capacity gets added, the customer base will need to spend more. when wafer capacity gets added the customer base will need to spend more Our share is still quite strong, so we're almost agnostic between one or the other. our share is still quite strong so we're almost agnostic between one or the other We're here to support customers in whatever makes sense for them. we're here to support customers in whatever makes sense for them Right now, that's largely oriented around conversions, but at some point, you're going to need a little bit more wafer capacity. right now that's largely oriented around conversions but at some point you're going to need a little bit more wafer capacity

Speaker 3: Do you think the allocation of new clean room to NAND kind of lags? Most memory companies are a lot more profitable than DRAM, so it makes more sense for them to allocate to DRAM. Do you think the allocation of new clean room to NAND kind of lags? do you think the allocation of new clean room to nand kind of lags Most memory companies are a lot more profitable than DRAM, so it makes more sense for them to allocate to DRAM. most memory companies are a lot more profitable than dram so it makes more sense for them to allocate to dram

Speaker 1: That's right. That's what I observe happening, whether people are consciously saying this or not. Right now, clean room is a constraining item. Three of my customers do both NAND and DRAM. To the extent that there's clean room constraining things, what are you going to invest in? Well, you're going to invest in where the highest profit opportunity is. Right now that's DRAM. NAND is getting closely caught up, though. Profitability is quite attractive in NAND right now. NAND will accelerate at some point. Right now DRAM is getting the priority is what I observe happening. That's right. that's right That's what I observe happening, whether people are consciously saying this or not. that's what i observe happening whether people are consciously saying this or not Right now, clean room is a constraining item. right now clean room is a constraining item Three of my customers do both NAND and DRAM. three of my customers do both nand and dram To the extent that there's clean room constraining things, what are you going to invest in? to the extent that there's clean room constraining things what are you going to invest in Well, you're going to invest in where the highest profit opportunity is. well you're going to invest in where the highest profit opportunity is Right now that's DRAM. right now that's dram NAND is getting closely caught up, though. nand is getting closely caught up though Profitability is quite attractive in NAND right now. profitability is quite attractive in nand right now NAND will accelerate at some point. nand will accelerate at some point Right now DRAM is getting the priority is what I observe happening. right now dram is getting the priority is what i observe happening

Speaker 3: Got it. The fact that, over time, more clean rooms, if, let's say, there is a lag with which clean rooms get allocated to NAND, does that extend your growth cycle kind of further out, right, versus some of your peers who might be more DRAM exposed? Got it. got it The fact that, over time, more clean rooms, if, let's say, there is a lag with which clean rooms get allocated to NAND, does that extend your growth cycle kind of further out, right, versus some of your peers who might be more DRAM exposed? the fact that over time more clean rooms if let's say there is a lag with which clean rooms get allocated to nand does that extend your growth cycle kind of further out right versus some of your peers who might be more dram exposed

Speaker 1: You know, I think so. Listen, everything is tight right now, and so that's going to extend the investment profile. You know, I think so. you know i think so Listen, everything is tight right now, and so that's going to extend the investment profile. listen everything is tight right now and so that's going to extend the investment profile

Speaker 3: Right Right right

Speaker 1: Until these constraints start loosening up, which I just don't see happening in the near term. Until these constraints start loosening up, which I just don't see happening in the near term. until these constraints start loosening up which i just don't see happening in the near term

Speaker 3: Okay. Within the clean room that customers have, do you see them upgrade their tools faster? I'm talking more DRAM rather than NAND. Okay. okay Within the clean room that customers have, do you see them upgrade their tools faster? within the clean room that customers have do you see them upgrade their tools faster I'm talking more DRAM rather than NAND. i'm talking more dram rather than nand

Speaker 1: Listen, there's always upgrades that happen. Listen, there's always upgrades that happen. listen there's always upgrades that happen

Speaker 3: Yeah. Yeah. yeah

Speaker 1: That's a high-return way to get the next-generation tool capability is if there's an upgrade path for a tool, almost always the first priority is going to be do the upgrade before buying new equipment. That's a high-return way to get the next-generation tool capability is if there's an upgrade path for a tool, almost always the first priority is going to be do the upgrade before buying new equipment. that's a high-return way to get the next-generation tool capability is if there's an upgrade path for a tool almost always the first priority is going to be do the upgrade before buying new equipment

Speaker 3: Okay. What do you think has helped Lam do so well in foundry logic, right? You mentioned over half the business was in foundry the last two quarters. Okay. okay What do you think has helped Lam do so well in foundry logic, right? what do you think has helped lam do so well in foundry logic right You mentioned over half the business was in foundry the last two quarters. you mentioned over half the business was in foundry the last two quarters

Speaker 1: Yeah. Yeah. yeah

Speaker 3: Is it all share gains? Is it just that the pace with which technology is rolling out? You mentioned the change in transistor geometries and transistor forms. Is it all share gains? is it all share gains Is it just that the pace with which technology is rolling out? is it just that the pace with which technology is rolling out You mentioned the change in transistor geometries and transistor forms. you mentioned the change in transistor geometries and transistor forms

Speaker 1: Yeah. Yeah. yeah

Speaker 3: What has helped Lam? What has helped Lam? what has helped lam

Speaker 1: Yeah, it's back to what I tried to describe earlier. Things are collecting in the third dimension. In the most advanced foundry, you have a FinFET structure going to a Gate-All-Around. If you look at the little pictures of this, there's these nanosheets that need to get created. They get created by depositing material and then etching it, sometimes selectively etching it. It's a different way of etching. You're doing it sideways. That's etch and deposition. Our SAM grows. The opportunity to sell more equipment grows because of the technology inflections that show up. That's one statement, right? There's ALD steps in there's selective etches in there. There's always conductor and dielectric etch in there. It plays to the strength of what we do, and the product portfolio is very strong. Yeah, it's back to what I tried to describe earlier. yeah it's back to what i tried to describe earlier Things are collecting in the third dimension. things are collecting in the third dimension In the most advanced foundry, you have a FinFET structure going to a Gate-All-Around. in the most advanced foundry you have a finfet structure going to a gate-all-around If you look at the little pictures of this, there's these nanosheets that need to get created. if you look at the little pictures of this there's these nanosheets that need to get created They get created by depositing material and then etching it, sometimes selectively etching it. they get created by depositing material and then etching it sometimes selectively etching it It's a different way of etching. it's a different way of etching You're doing it sideways. you're doing it sideways That's etch and deposition. that's etch and deposition Our SAM grows. our sam grows The opportunity to sell more equipment grows because of the technology inflections that show up. the opportunity to sell more equipment grows because of the technology inflections that show up That's one statement, right? that's one statement right There's ALD steps in there's selective etches in there. there's ald steps in there's selective etches in there There's always conductor and dielectric etch in there. there's always conductor and dielectric etch in there It plays to the strength of what we do, and the product portfolio is very strong. it plays to the strength of what we do and the product portfolio is very strong We are the unequivocal leader in conductor etch in this industry, unequivocal by a lot. When you see that showing up, that helps. Then you layer on top of that advanced packaging. Again, back to the TSV, these are 3D structures. We are the unequivocal leader in conductor etch in this industry, unequivocal by a lot. we are the unequivocal leader in conductor etch in this industry unequivocal by a lot When you see that showing up, that helps. when you see that showing up that helps Then you layer on top of that advanced packaging. then you layer on top of that advanced packaging Again, back to the TSV, these are 3D structures. again back to the tsv these are 3d structures

Speaker 3: Right. Right. right

Speaker 1: It's just what we do. It's just what we do. it's just what we do

Speaker 3: Got it. One of the very key part of your business is the Customer Service and Business Group, CSBG. Got it. got it One of the very key part of your business is the Customer Service and Business Group, CSBG. one of the very key part of your business is the customer service and business group csbg

Speaker 1: In many ways, Vivek, it's my favorite part of the business model, is the Customer Support Business Group. In many ways, Vivek, it's my favorite part of the business model, is the Customer Support Business Group. in many ways vivek it's my favorite part of the business model is the customer support business group

Speaker 3: Right. now over $2 billion. Right. now over $2 billion. right now over $2 billion

Speaker 1: $2.1 billion last quarter. $2.1 billion last quarter. $2.1 billion last quarter

Speaker 3: $2.1 billion. $2.1 billion. $2.1 billion

Speaker 1: Yeah. Yeah. yeah

Speaker 3: When do you think the growth rate there starts to converge with your tool business? It is, that's just the natural consequence of this is kind of a long tail, kind of secular, embedded base business as opposed to something that's. When do you think the growth rate there starts to converge with your tool business? when do you think the growth rate there starts to converge with your tool business It is, that's just the natural consequence of this is kind of a long tail, kind of secular, embedded base business as opposed to something that's. it is that's just the natural consequence of this is kind of a long tail kind of secular embedded base business as opposed to something that's

Speaker 1: Yeah Yeah yeah

Speaker 3: Opposed to new tools. Opposed to new tools. opposed to new tools

Speaker 1: Yep. Let me unpack it a little bit for those that might be new to the story. The customer support business group, we call it CSBG. Four components of that business. It's upgrades, it's service, it's spare parts. Spare parts is a pretty large component of it. When you think through why is it so strong right now, utilization in the industry is very high. It's basically running at 100%. You think about spares and service, the consumption of spares and service is modulated by the number of chambers in the field as well as utilization. Utilization is 100%, can't get any higher. Yep. yep Let me unpack it a little bit for those that might be new to the story. let me unpack it a little bit for those that might be new to the story The customer support business group, we call it CSBG. the customer support business group we call it csbg Four components of that business. four components of that business It's upgrades, it's service, it's spare parts. it's upgrades it's service it's spare parts Spare parts is a pretty large component of it. spare parts is a pretty large component of it When you think through why is it so strong right now, utilization in the industry is very high. when you think through why is it so strong right now utilization in the industry is very high It's basically running at 100%. it's basically running at 100% You think about spares and service, the consumption of spares and service is modulated by the number of chambers in the field as well as utilization. you think about spares and service the consumption of spares and service is modulated by the number of chambers in the field as well as utilization Utilization is 100%, can't get any higher. utilization is 100% can't get any higher

Speaker 3: Right. Right. right

Speaker 1: In the March quarter, that's why it grew so much. 100%. You can't grow beyond 100%. Those two things in the more near term are going to grow, but not as much as you saw in the March quarter. That's why I tried to pull people back a little bit relative to what's going on. The place we're innovating in this is what we call advanced service. It's using Equipment Intelligence and cobots to deliver service in a different, more predictable way that frankly, customers like quite a lot. That portion of when you think about service, that drives incremental growth on top of everything else. I love this part of the business model, and in fact, a lot of these meetings I've been doing today and last week, people don't ask about this part of the business. It's a third of the business. In the March quarter, that's why it grew so much. 100%. in the march quarter that's why it grew so much 100% You can't grow beyond 100%. you can't grow beyond 100% Those two things in the more near term are going to grow, but not as much as you saw in the March quarter. those two things in the more near term are going to grow but not as much as you saw in the march quarter That's why I tried to pull people back a little bit relative to what's going on. that's why i tried to pull people back a little bit relative to what's going on The place we're innovating in this is what we call advanced service. the place we're innovating in this is what we call advanced service It's using Equipment Intelligence and cobots to deliver service in a different, more predictable way that frankly, customers like quite a lot. it's using equipment intelligence and cobots to deliver service in a different more predictable way that frankly customers like quite a lot That portion of when you think about service, that drives incremental growth on top of everything else. that portion of when you think about service that drives incremental growth on top of everything else I love this part of the business model, and in fact, a lot of these meetings I've been doing today and last week, people don't ask about this part of the business. i love this part of the business model and in fact a lot of these meetings i've been doing today and last week people don't ask about this part of the business It's a third of the business. it's a third of the business

Speaker 3: Right. Right. right

Speaker 1: Very profitable, very recurring. Fabs are always running, which means they consume spares and service. Like I said, in many ways, to me as the CFO of the company, this is my favorite part of the business model. It just keeps running. People are often surprised to hear that our tools literally will run for decades. The Reliant product line I didn't talk about, but this is the part of the business where we're selling tools that have been around for a long time. It used to be refurbished tools. Today, there's almost no refurbished because nobody's given up equipment, but it's selling older model equipment into fabs. That's a really good part of the business model because the tool was designed a long time ago, requires not a lot of R&D. We're just building the same tool that we built 10 years ago and selling it. Very profitable, very recurring. very profitable very recurring Fabs are always running, which means they consume spares and service. fabs are always running which means they consume spares and service Like I said, in many ways, to me as the CFO of the company, this is my favorite part of the business model. like i said in many ways to me as the cfo of the company this is my favorite part of the business model It just keeps running. it just keeps running People are often surprised to hear that our tools literally will run for decades. people are often surprised to hear that our tools literally will run for decades The Reliant product line I didn't talk about, but this is the part of the business where we're selling tools that have been around for a long time. the reliant product line i didn't talk about but this is the part of the business where we're selling tools that have been around for a long time It used to be refurbished tools. it used to be refurbished tools Today, there's almost no refurbished because nobody's given up equipment, but it's selling older model equipment into fabs. today there's almost no refurbished because nobody's given up equipment but it's selling older model equipment into fabs That's a really good part of the business model because the tool was designed a long time ago, requires not a lot of R&D. that's a really good part of the business model because the tool was designed a long time ago requires not a lot of r&d We're just building the same tool that we built 10 years ago and selling it. we're just building the same tool that we built 10 years ago and selling it You see that in the analog space, in power, in CMOS Image Sensors. A lot of the business that we have in the China region is the Reliant product line. Great part of the business. Anyway, when you put this all together, it's quite profitable, it's quite cash generative, and it's very recurring. You see that in the analog space, in power, in CMOS Image Sensors. you see that in the analog space in power in cmos image sensors A lot of the business that we have in the China region is the Reliant product line. a lot of the business that we have in the china region is the reliant product line Great part of the business. great part of the business Anyway, when you put this all together, it's quite profitable, it's quite cash generative, and it's very recurring. anyway when you put this all together it's quite profitable it's quite cash generative and it's very recurring

Speaker 3: Got it. I know we have had this discussion before, do you think you would ever feel comfortable giving like a backlog? If this business is to be rated as let's say a SaaS, subscription-type business, people would also love to know what is the backlog. Got it. got it I know we have had this discussion before, do you think you would ever feel comfortable giving like a backlog? i know we have had this discussion before do you think you would ever feel comfortable giving like a backlog If this business is to be rated as let's say a SaaS, subscription-type business, people would also love to know what is the backlog. if this business is to be rated as let's say a saas subscription-type business people would also love to know what is the backlog

Speaker 1: No, we don't give backlog. No, we don't give backlog. no we don't give backlog

Speaker 3: Okay. Asked and answered. Okay. okay Asked and answered. asked and answered

Speaker 1: Listen, I think the thing everybody, when you ask me about backlog, you want to know the visibility we have into the business. I already described what's going on there. Industry's constrained. Industry's going to grow again next year. I mean, the nature of the conversations showing up are very robust. You don't need backlog to hear me describe that, and I'm a pretty conservative guy, generally speaking. I'm talking as optimistically as you've ever heard me, if you've listened to me talk for a while, because I've not seen it as rich as it is right now with these conversations, Vivek. Listen, I think the thing everybody, when you ask me about backlog, you want to know the visibility we have into the business. listen i think the thing everybody when you ask me about backlog you want to know the visibility we have into the business I already described what's going on there. i already described what's going on there Industry's constrained. industry's constrained Industry's going to grow again next year. industry's going to grow again next year I mean, the nature of the conversations showing up are very robust. i mean the nature of the conversations showing up are very robust You don't need backlog to hear me describe that, and I'm a pretty conservative guy, generally speaking. you don't need backlog to hear me describe that and i'm a pretty conservative guy generally speaking I'm talking as optimistically as you've ever heard me, if you've listened to me talk for a while, because I've not seen it as rich as it is right now with these conversations, Vivek. i'm talking as optimistically as you've ever heard me if you've listened to me talk for a while because i've not seen it as rich as it is right now with these conversations vivek

Speaker 3: Right. One thing that I think Lam has perhaps said, or some of your peers have said, is that there is the potential for just fab equipment to grow faster in 2027 than in 2026. Is that still a reasonable expectation, do you feel? Right. right One thing that I think Lam has perhaps said, or some of your peers have said, is that there is the potential for just fab equipment to grow faster in 2027 than in 2026. one thing that i think lam has perhaps said or some of your peers have said is that there is the potential for just fab equipment to grow faster in 2027 than in 2026 Is that still a reasonable expectation, do you feel? is that still a reasonable expectation do you feel

Speaker 1: I think 2027 is going to be a pretty good growth year. Again, because we're constrained this year. All of the unmet demand will roll into next year. Clean rooms will become more available. If you look at totality of projects in the industry, 2027 should be a pretty good year. I think 2027 is going to be a pretty good growth year. i think 2027 is going to be a pretty good growth year Again, because we're constrained this year. again because we're constrained this year All of the unmet demand will roll into next year. all of the unmet demand will roll into next year Clean rooms will become more available. clean rooms will become more available If you look at totality of projects in the industry, 2027 should be a pretty good year. if you look at totality of projects in the industry 2027 should be a pretty good year

Speaker 3: Do you think the mix changes in any way? Does it favor any one of the areas? Do you think the mix changes in any way? do you think the mix changes in any way Does it favor any one of the areas? does it favor any one of the areas

Speaker 1: I think you're going to see continued investment in leading-edge foundry. You're going to see continued investment in DRAM, and you're going to see NAND begin to catch up a little bit to those other two. I think you're going to see continued investment in leading-edge foundry. i think you're going to see continued investment in leading-edge foundry You're going to see continued investment in DRAM, and you're going to see NAND begin to catch up a little bit to those other two. you're going to see continued investment in dram and you're going to see nand begin to catch up a little bit to those other two

Speaker 3: Okay. One of the questions that, Doug, as you have seen come up is, are semi caps extracting as much value as every other player in the ecosystem? When we have definitely seen gross margins that used to be in the mid-40s have now come up right towards 50%. Okay. okay One of the questions that, Doug, as you have seen come up is, are semi caps extracting as much value as every other player in the ecosystem? one of the questions that doug as you have seen come up is are semi caps extracting as much value as every other player in the ecosystem When we have definitely seen gross margins that used to be in the mid-40s have now come up right towards 50%. when we have definitely seen gross margins that used to be in the mid-40s have now come up right towards 50%

Speaker 1: Into the low 50s. Yeah. Into the low 50s. into the low 50s Yeah. yeah

Speaker 3: Yeah, low 50s. Do you think that's a durable trend? How much more upside is left in this margin expansion journey? Yeah, low 50s. yeah low 50s Do you think that's a durable trend? do you think that's a durable trend How much more upside is left in this margin expansion journey? how much more upside is left in this margin expansion journey

Speaker 1: Yeah. Listen, I think we're very focused on right now making sure we're getting fairly paid for the value we're delivering. That's not a new phenomenon. That's always been the case with our business. We're always working on that. Your observation is exactly right. For the first decade I was at the company, our gross margin was pretty consistently in the middle 40s, and then we moved into the high 40s, and we're now touching low 50s. We've got inflationary headwinds we're dealing with when you've got oil above $100 a barrel, right? We fly stuff all over the world. You got to manage all of those type things that show up, both for us directly as well as in our supply chain. We're dealing with a little bit of a headwind in customer mix, right? Yeah. yeah Listen, I think we're very focused on right now making sure we're getting fairly paid for the value we're delivering. listen i think we're very focused on right now making sure we're getting fairly paid for the value we're delivering That's not a new phenomenon. that's not a new phenomenon That's always been the case with our business. that's always been the case with our business We're always working on that. we're always working on that Your observation is exactly right. your observation is exactly right For the first decade I was at the company, our gross margin was pretty consistently in the middle 40s, and then we moved into the high 40s, and we're now touching low 50s. for the first decade i was at the company our gross margin was pretty consistently in the middle 40s and then we moved into the high 40s and we're now touching low 50s We've got inflationary headwinds we're dealing with when you've got oil above $100 a barrel, right? we've got inflationary headwinds we're dealing with when you've got oil above $100 a barrel right We fly stuff all over the world. we fly stuff all over the world You got to manage all of those type things that show up, both for us directly as well as in our supply chain. you got to manage all of those type things that show up both for us directly as well as in our supply chain We're dealing with a little bit of a headwind in customer mix, right? we're dealing with a little bit of a headwind in customer mix right

Speaker 3: Right. Right. right

Speaker 1: Some of the most profitable customers aren't growing nearly as much as the biggest customers who tend to get a little more favorable pricing, a little bit anyway. As you think through that, I went out of my way on the last call to say, "Listen, as we go through the year, we see these headwinds. We're working on efficiencies, we're working on pricing." I said, "Keep gross margin right where it is in that 50-ish%, 50.5% is what we just guided to." We're managing the headwinds that we see in the short term through a variety of things, including pricing. Some of the most profitable customers aren't growing nearly as much as the biggest customers who tend to get a little more favorable pricing, a little bit anyway. some of the most profitable customers aren't growing nearly as much as the biggest customers who tend to get a little more favorable pricing a little bit anyway As you think through that, I went out of my way on the last call to say, "Listen, as we go through the year, we see these headwinds. as you think through that i went out of my way on the last call to say "listen as we go through the year we see these headwinds We're working on efficiencies, we're working on pricing." I said, "Keep gross margin right where it is in that 50-ish%, 50.5% is what we just guided to." We're managing the headwinds that we see in the short term through a variety of things, including pricing. we're working on efficiencies we're working on pricing." i said "keep gross margin right where it is in that 50-ish% 50.5% is what we just guided to." we're managing the headwinds that we see in the short term through a variety of things including pricing

Speaker 3: Right. Historically, WFE and Semi CapEx have grown in that 8%-10% range. Here we are in front of multiple years of 20%-25%, right? Right. right Historically, WFE and Semi CapEx have grown in that 8%-10% range. historically wfe and semi capex have grown in that 8%-10% range Here we are in front of multiple years of 20%-25%, right? here we are in front of multiple years of 20%-25% right

Speaker 1: Strong growth. Yeah. Strong growth. strong growth Yeah. yeah

Speaker 3: Much stronger than before. How is Lam prepared right from an operational perspective, from a capacity perspective? Where are you seeing the constraints in your ability to execute to that growth? Much stronger than before. much stronger than before How is Lam prepared right from an operational perspective, from a capacity perspective? how is lam prepared right from an operational perspective from a capacity perspective Where are you seeing the constraints in your ability to execute to that growth? where are you seeing the constraints in your ability to execute to that growth

Speaker 1: Listen, I think, again, also on our last call, we went out of our way to say, "Hey, we're building a second manufacturing facility in Malaysia." That's part of this. We anticipated what was happening, and we're getting ready for it. Like I said, we are spending a lot of time with customers working on the demand signal they're providing to us, such that we can then make sure that propagates back through our own supply chain. I don't want to say it's working flawlessly perfectly. When you build as complicated of a product as we build, there's always things that you're having to expedite and work on, and it costs money to expedite things. We're managing all of that pretty effectively. It's not to say that it's easy. Listen, I think, again, also on our last call, we went out of our way to say, "Hey, we're building a second manufacturing facility in Malaysia." That's part of this. listen i think again also on our last call we went out of our way to say "hey we're building a second manufacturing facility in malaysia." that's part of this We anticipated what was happening, and we're getting ready for it. we anticipated what was happening and we're getting ready for it Like I said, we are spending a lot of time with customers working on the demand signal they're providing to us, such that we can then make sure that propagates back through our own supply chain. like i said we are spending a lot of time with customers working on the demand signal they're providing to us such that we can then make sure that propagates back through our own supply chain I don't want to say it's working flawlessly perfectly. i don't want to say it's working flawlessly perfectly When you build as complicated of a product as we build, there's always things that you're having to expedite and work on, and it costs money to expedite things. when you build as complicated of a product as we build there's always things that you're having to expedite and work on and it costs money to expedite things We're managing all of that pretty effectively. we're managing all of that pretty effectively It's not to say that it's easy. it's not to say that it's easy It's absolutely requiring a ton of time, a ton of effort to make sure every single component in the bill of materials shows up when it is required and needed. We're having to expedite lots of different stuff, but we're managing it pretty well. I know my team listens to me when I talk at these things. I want to thank the global operations organization at Lam Research. I know everybody that works there is working super hard on all of this stuff, and it's enabling execution that is extremely good from us. It's absolutely requiring a ton of time, a ton of effort to make sure every single component in the bill of materials shows up when it is required and needed. it's absolutely requiring a ton of time a ton of effort to make sure every single component in the bill of materials shows up when it is required and needed We're having to expedite lots of different stuff, but we're managing it pretty well. we're having to expedite lots of different stuff but we're managing it pretty well I know my team listens to me when I talk at these things. i know my team listens to me when i talk at these things I want to thank the global operations organization at Lam Research. i want to thank the global operations organization at lam research I know everybody that works there is working super hard on all of this stuff, and it's enabling execution that is extremely good from us. i know everybody that works there is working super hard on all of this stuff and it's enabling execution that is extremely good from us

Speaker 3: Got it. Hypothetically, if next year WFE grows 35%, 40%+, what would Lam need to do differently today? Got it. got it Hypothetically, if next year WFE grows 35%, 40%+, what would Lam need to do differently today? hypothetically if next year wfe grows 35% 40%+ what would lam need to do differently today

Speaker 1: We're doing everything we can do to make sure we are not going to be the constraining item in the industry based on the demand signal we're getting from our customers. We're actioning everything that I think we need to do to be ready for what customers are telling us they need. We're doing everything we can do to make sure we are not going to be the constraining item in the industry based on the demand signal we're getting from our customers. we're doing everything we can do to make sure we are not going to be the constraining item in the industry based on the demand signal we're getting from our customers We're actioning everything that I think we need to do to be ready for what customers are telling us they need. we're actioning everything that i think we need to do to be ready for what customers are telling us they need

Speaker 3: Got it. Got it. got it

Speaker 1: I'm not going to say that growth number you said is the right growth number, but. I'm not going to say that growth number you said is the right growth number, but. i'm not going to say that growth number you said is the right growth number but

Speaker 3: It's too low? It's too low? it's too low

Speaker 1: It's going to be a good year next year, but I'm not going to endorse that number necessarily. It's going to be a good year next year, but I'm not going to endorse that number necessarily. it's going to be a good year next year but i'm not going to endorse that number necessarily

Speaker 3: Got it. China, should one just assume it kind of stays in this 25%-30% exposure, and that's just the easiest way to think about. Got it. got it China, should one just assume it kind of stays in this 25%-30% exposure, and that's just the easiest way to think about. china should one just assume it kind of stays in this 25%-30% exposure and that's just the easiest way to think about

Speaker 1: I think so right now. The way we've described the Wafer Fab Equipment spending in China is it's flattish to slightly up this year from last year. As a result, as a % of overall WFE and as a % of Lam Research's revenue, it will decline because everything else outside is growing faster than that. That's the right thing about China. It's not going away. It's just pretty steady. I think so right now. i think so right now The way we've described the Wafer Fab Equipment spending in China is it's flattish to slightly up this year from last year. the way we've described the wafer fab equipment spending in china is it's flattish to slightly up this year from last year As a result, as a % of overall WFE and as a % of Lam Research's revenue, it will decline because everything else outside is growing faster than that. as a result as a % of overall wfe and as a % of lam research's revenue it will decline because everything else outside is growing faster than that That's the right thing about China. that's the right thing about china It's not going away. it's not going away It's just pretty steady. it's just pretty steady

Speaker 3: Got it. On just kind of capital allocation. Got it. got it On just kind of capital allocation. on just kind of capital allocation I think the semi cap industry has done a remarkable job, although not always appreciated as much for kind of buybacks and returns, right? I think the semi cap industry has done a remarkable job, although not always appreciated as much for kind of buybacks and returns, right? i think the semi cap industry has done a remarkable job although not always appreciated as much for kind of buybacks and returns right

Speaker 1: Yeah. Yeah. yeah

Speaker 3: Actually retiring a big chunk of outstanding shares. How do you think about capital allocation, and is there a scope to actually target even higher dividend yields, or you think buybacks are still a better way to use your cash? Actually retiring a big chunk of outstanding shares. actually retiring a big chunk of outstanding shares How do you think about capital allocation, and is there a scope to actually target even higher dividend yields, or you think buybacks are still a better way to use your cash? how do you think about capital allocation and is there a scope to actually target even higher dividend yields or you think buybacks are still a better way to use your cash

Speaker 1: Great question. Listen, our plans are to return 85% of free cash flow to shareholders. In the last several years, we've returned more than that. Underneath the covers of that, our intention is to grow the dividend on an annual basis. I think the last three years we've grown it annually 15%. We'll grow the dividend again this year. I'm not going to apologize for the fact that the dividend yield has declined because the share price has gone up. That's a good problem for all of us. I do look at that yield. I do benchmark it to everybody else in the industry. I want to make sure we're competitive with that. To get to the 85%, we supplement that annually growing dividend with share buyback, and that's still the plans of the company. Great question. great question Listen, our plans are to return 85% of free cash flow to shareholders. listen our plans are to return 85% of free cash flow to shareholders In the last several years, we've returned more than that. in the last several years we've returned more than that Underneath the covers of that, our intention is to grow the dividend on an annual basis. underneath the covers of that our intention is to grow the dividend on an annual basis I think the last three years we've grown it annually 15%. i think the last three years we've grown it annually 15% We'll grow the dividend again this year. we'll grow the dividend again this year I'm not going to apologize for the fact that the dividend yield has declined because the share price has gone up. i'm not going to apologize for the fact that the dividend yield has declined because the share price has gone up That's a good problem for all of us. that's a good problem for all of us I do look at that yield. i do look at that yield I do benchmark it to everybody else in the industry. i do benchmark it to everybody else in the industry I want to make sure we're competitive with that. i want to make sure we're competitive with that To get to the 85%, we supplement that annually growing dividend with share buyback, and that's still the plans of the company. to get to the 85% we supplement that annually growing dividend with share buyback and that's still the plans of the company

Speaker 3: Got it. I know M&A is tough in the industry, any places where you think there is a scope for kind of tuck-in acquisitions? Got it. got it I know M&A is tough in the industry, any places where you think there is a scope for kind of tuck-in acquisitions? i know m&a is tough in the industry any places where you think there is a scope for kind of tuck-in acquisitions

Speaker 1: I don't know. Over the years, we've done some small tuck-ins. We did a panel packaging tuck-in that I'm super happy that we did a few years ago. That's all that's left in the industry. The big stuff is in the rearview mirror. Large scale M&A, I think is in the past. I don't know. i don't know Over the years, we've done some small tuck-ins. over the years we've done some small tuck-ins We did a panel packaging tuck-in that I'm super happy that we did a few years ago. we did a panel packaging tuck-in that i'm super happy that we did a few years ago That's all that's left in the industry. that's all that's left in the industry The big stuff is in the rearview mirror. the big stuff is in the rearview mirror Large scale M&A, I think is in the past. large scale m&a i think is in the past

Speaker 3: Perfect. Thank you so much, Doug. Really appreciate your time. Perfect. perfect Thank you so much, Doug. thank you so much doug Really appreciate your time. really appreciate your time

Speaker 1: Thanks for having me. Appreciate it. Thanks for having me. thanks for having me Appreciate it. appreciate it

Speaker 3: All the best. All the best. all the best Really delighted to have the team from Analog Devices join us this morning. Rich Puccio, the Chief Financial Officer. We'll go through my list of questions, but please feel free to raise your hand if you would like to bring up anything. Really warm welcome to you, Rich. Really appreciate you doing this conference. Really delighted to have the team from Analog Devices join us this morning. really delighted to have the team from analog devices join us this morning Rich Puccio, the Chief Financial Officer. rich puccio the chief financial officer We'll go through my list of questions, but please feel free to raise your hand if you would like to bring up anything. we'll go through my list of questions but please feel free to raise your hand if you would like to bring up anything Really warm welcome to you, Rich. really warm welcome to you rich Really appreciate you doing this conference. really appreciate you doing this conference

Speaker 2: Thanks, Vivek. Thanks for having us. Thanks, Vivek. thanks vivek Thanks for having us. thanks for having us