Lam Research Corp (LRCX) September 2026 Conference Transcript

All right, it looks like we're starting time, but I don't have any cell site support here. So anybody have any questions in the room? Listen, I know Jim is probably on his way over. I'll start with everybody, please have a look at the safe harbor language that's up on the screen right now. By the way, I do not intend to make any new statements today, so I don't think this is all that important. But to the extent that I do talk about any forward-looking statements, it's protected by the safe harbor language that you see on the screen and that you will also find on the investor relations portion of our website. So, I don't know where Jim Schneider is. Jim is coming.

Probably coming from Dan Media.

Yeah, he's probably on his way. Okay, I'm going to do an audible. Anybody in the room have any questions you'd like to ask me to get this going?

Oh, there's Jim. There you go.

You know, I know you're moving from room to room, Jim. I understand. I got to spend with the safe harbor. How are you? Very well. Good to see you.

Okay. Sorry to be late. Welcome, everybody. I think you've already done the intro to the safe harbor, Doug?

I did that, yeah.

Okay, excellent.

I got going without you.

Okay, excellent. So thanks, everybody. Jim Schneider from Goldman Sachs. Thank you for being here, guys. Of course. No, thanks for having us. Doug, I want to maybe start out from a strategic perspective for a second. what are the one or two most critical imperatives you're driving the company to over the next 12, 18 months, and what's going to dictate your success in achieving those kind of both near and medium term?

Yeah, no, that's a great spot to start. Yeah, you know, Tim and I and the leadership team at LAM, I think right now we're very focused on customers for obvious reasons, right? Demand is extremely strong. It's grown quite quickly, and honestly, Customers want things sooner than we can get it for them. Things are relatively tight. So a lot of the focus right now, and it's maybe not strategic, Jim, it's more tactical and operational, is making sure we can take care of customer commitments. On-time delivery, managing lead times, managing quality, honestly, hiring. We're hiring tons of people right now because business is so strong. There's lots of new fabs and new locations all over the world that we need to put new teams in place, so that's a key focus. And frankly, in an environment like this, it's critically important to manage operational execution, but also not lose sight of the long term, not lose sight of the product delivery roadmap, not lose sight of the R&D roadmap, not lose sight of the schedules that we have for new products that are not yet in customers' hands because you've got to manage that and manage the long term and not just get myopically focused on the short term. So there's lots of stuff going on, a lot of which is operational, but it's also make sure the product roadmap continues to be executed the way it needs to be executed.

Maybe can you help us frame the level that you see in terms of demand and visibility, either in terms of the duration of forecasts you're seeing or in terms of order backlog?

Maybe let me describe a little bit of how things are working with customers and then how that shows up relative to how we're managing the company. I think that will provide color for everybody that hopefully will be illustrative. Listen, things are sold out, right? The industry is fundamentally sold out. The industry is constrained right now by clean room availability, and there's tons of new clean room coming online between now and the end of next year and beyond, frankly. We've talked about look at our tier one customers, read that to be the biggest customers, Jim. We see 8 to 10 new cleaning rooms coming online between now and the end of next year. And so right now, the conversation of every single customer is, tell us what you need today, tell us what you need over the next year, and tell us where you think you're going beyond that. I wouldn't tell you that that doesn't always happen. It does, but frankly, I would tell you that the intensity of those conversations, the conviction of those conversations, I've never seen stronger in my time in the industry. So I think that's important. We need to know what the customers need. We need to know when they need it so that we can be prepared. We don't want to be the constraining item, and our objective is not to be. And so the customer doesn't want us to be either. So that's important to understand. That's an important starting point for us then to step back and say, okay, where do we need to be with our own bricks and mortar and hiring plans? to manufacture tools, as well as to do installation and warranty work in all of these new locations. So that's important for us. And then we have to take that and propagate it back to our own supply chain to make sure they're prepared as well. Everybody understands demand is very, very strong right now, and almost everybody's willing to make the investments needed, but everybody needs to know to what degree, to what magnitude. So that's kind of what's happening right now. Hopefully that maybe didn't directly answer your question, but gives you color around, I think, what you were getting at you.

Never been better.

Frankly, I haven't seen it this strong, and I've been around for a while.

Yeah. And to the point, you have been around for a while. You've seen prior cycles.

So is there anything that kind of like gives you any warning signs or a sense of kind of like concern that we're potentially in a risky situation in terms of overbuilding the industry or anything like that? uh listen this industry has always had a level of a cycle to it that's always in the back of everybody's mind right now but it's pretty far in the back right now i think i'm more concerned for the company and the leadership is more concerned about missing the upside yeah um i don't want to tell you we've forgotten how to you know think about hey if a downturn comes what are we going to do we've developed an operating model over 40 years where we know how to run the company when and if that happens, but that's not the primary concern right now.

Yeah. Now, to that point on sustainability, your customers are incredibly profitable right now, more so than I've ever seen in my career. Yeah, I agree.

Probably more than they've ever been.

Exactly. But some of your customers' customers who are actually driving the ultimate spending on those chips, they're spending well over a trillion dollars per year run rate, and that appears to be moving a lot higher. But many of those companies even are tapping capital markets just to sustain the current levels of GAPEX. So how do you think about the ultimate returns of AI as you see them for the supply chain and, again, kind of like any systematic risk that you worry about?

Yeah, I mean, I think everybody tries to understand that. When I step back and generically look at what is going on in the industry, I think you see these large levels of investment because the end customer ultimately sees a real opportunity to create barriers to entry around what they're doing. And that requires investment and compute infrastructure, and that will be fundamentally differentiating. And so the investments I look at and kind of step back and think about, well, if I was running those companies, if I was the CFO of those companies, would I be doing anything different? And the absolute answer is no. I'd be making all those same investments. I'd be doing all the same things because they are fundamentally creating barriers to entry around what the future is going to look like, I think. Then when I abstract and look at what I see us at LAM doing, and frankly probably what all of us in this room are doing with AI, it is fundamentally changing everything you do. The value is obvious when you actually look at things, and you may ask me about, like, what are you doing with AI at LAM? I'm happy to get into that. But it is very differentiating, and if you're not doing it, you're going to be at a fundamental competitive disadvantage to someone that is. And so that's, I just see immense value from all of this opportunity to do things differently and do it better, which I think is important at the end of the day. There's clear value here.

Now, to that point, I'm asking, I mean, this conference is permeated by discussions around AI. I'm asking all the companies that I talk to, what are you doing internally at your company to leverage AI? And what does that mean? Is it just a cost-giving thing, or is it actually something that's going to drive revenue and maybe talk a little bit about that.

I think it's both, Jim, at the end of the day. And listen, we're doing tons of things. I'd spend all the rest of the time talking about all of it if we got into it. Maybe I'll select a couple things just to give you an indicative of what we're doing. One of the really interesting things I think we're doing with the company is providing AI capability for the engineering community that's in the field. What am I talking about? We hire tons of engineers that have to support our customers. They have to go in and install our equipment. They have to come in and troubleshoot the equipment. They need to provide warranty services. They need to help just do fundamental service. Oftentimes, listen, and we hire the best and the brightest, but if you're a new engineer coming in and doing this work, you're not really good at it on day one. There's an experiential component of you just have to have seen certain things. And historically how that would show up is a new engineer goes into the customer's fab, sees a problem, maybe has a couple ideas, tries some things, can't fix the problem, then has to come back out of the fab, start making phone calls, has to start talking to his or her manager and trying to figure out, okay, what do I need to do to fix this? And then go back into the fab, try something out, and hopefully fix it, but if not, this will iterate. right? Every time we ever solve a problem, we document how we solved it. We have 30-plus years of history of all this data of every time we've troubleshot something, what did we do? Well, we're training AI models on this to make the field service engineer more productive. The uptake of this, when we look at, like, who's using this, it's two-thirds of the engineering community in the field. So obviously there's huge value or you wouldn't see two-thirds of the engineering community using it. This is one example, and there's many more of things like this, but this is a really big opportunity for us, I think, to drive productivity, to drive time to solution, and frankly to begin to deliver new advanced services using this kind of capability. So that's an example, Jim. It's a huge opportunity, I think, for us, and there's many more like that as well.

Yeah, excellent. Okay, I want to ask about some of the regional dynamics of your business, starting with the U.S. I mean, obviously, the U.S. has lagged the world in semi-productive production for the last 20-plus years. It seems like that could be me changing a little bit with TSMC in Arizona, Samsung Foundry, and now Intel. Maybe speak to a little bit about your position in the U.S. market, if you can dimensionalize it that way. And, you know, does that reflect maybe just the broad global share you have among your largest customers, or are there specific focus points you have among those kind of capacity customers in the U.S. that give you a bit of an advantage?

Our strategy is to try to do what we do and do it being close to customer, because our point of view on that is you can do it more effectively and better if you're near where the customer is doing what they do. And so when you think about the fact that, yeah, there's a lot of new fab investments in the United States, we are making investments in all of those locations to make sure we've got the engineering capabilities for what the customer needs in those locations. So that's one. You probably also saw, Jim, I think it was two weeks ago, we announced a large new lab investment in Oregon, right, which is a key part of a $3 billion investment that we plan to do in lab and engineering capability. we do a lot of the innovation at the company here in the United States where the company is headquartered not far from here in Fremont, California but we also have a large engineering organization in Oregon and so when you think about all that innovation we're making large investments because that's where we do what we do and now we do it elsewhere also but the biggest lab investments that we're making in the company are frankly in the United States so you've got to support the customer you've got to support the customer and where the customer is, and the fact that a lot of our customers are doing more and more in the United States means so are we.

So do you think your share of U.S. capacity can actually be higher than it is globally? Consistent, yeah.

It's not really any different. If you think about a large customer like our TSMC, what they're doing in Arizona, if they weren't doing theirs, they would have probably been doing it in Taiwan, and we support them the same no matter where they are.

There's a few unconventional customers that are coming to market now. notably SpaceX with TerraFab. Maybe talk about sort of like, do you have a technical collaboration with them and sort of like, what do you see the opportunity for that project in general being for the industry or for you?

Yeah, listen, there's a potential large amount of demand that shows up there. We are deeply engaged already with that specific customer. I have to be careful not talking too, too much about any one customer, but the engagement there is already in place and will be. And also, when you think about a new type customer, the opportunity to do more and provide even more for a customer like that is very high, and we're making sure we're very, very focused on it, Jim.

Yeah, okay, excellent. You know, China's been kind of a point of controversy for years going back now. I mean, I think, you know, I want to ask about two kind of elements of it. One is just in terms of the CapEx opportunity you see there, I mean, clearly China feels like is now spending more, again, from a CapEx perspective, China-native-based semiconductor companies, now there's been, you know, export controls have been a challenge for you in terms of who you can play with. Yeah, exactly. So I guess the first question I had is just sort of, like, it seems like you can now expect that China is going to grow a little bit for you. Do you think that's sustainable? And then maybe can you talk about just kind of the competitive landscape from China-based equipment companies as you see it and their ability to kind of in any way threaten your position in the customers you can serve via export controls.

First, let me describe what we see happening in China relative to WFE. When you think about, okay, it's slightly up, that's good. It's good to have things growing. Everything outside of that region in the world is growing a whole lot more. And so I think when you listen to all of us in the equipment space describe, China as a percent of overall spending is going to come down because the significant growth you see is happening outside of China. So that's one thing to understand. You're right, Jim. There's a whole bunch of customers and certain technologies in China that we can't support because of regulations or restrictions.

That is what it is.

So there's a set of customers that are making investments that we can't sell to any longer. When you think about, okay, what does that mean for the local Chinese equipment industry? Well, they have a captive set of customers then that, frankly, are making investments that they uniquely are able to supply to. So they're doing well in those areas for obvious reasons. We can't sell. I would tell you in the customer base where we can sell, our market share continues to be very high in China. But, you know, you comply with the rules and regulations. and it just kind of is what it is.

Yeah, I understand. So maybe you want to talk about the end markets in your business segments as well. You know, CSBG is kind of a key driver for you. I love CSBG. I know, I know. You know, when you think about moving pieces in that business, you know, what continues to kind of come in directionally above or below your expectations? And then sort of going forward, you know, where do you think growth rates are going to head as we go into 2027?

Yeah, let me unpack CSBG. It's a big room here, and there may be some people here that haven't heard us talk about it. So first let me describe, what is CSBG? It's Customer Support Business Group is the acronym. This is the business we have that comes from just having a very large and growing installed base. Opponents that show up for us in CSBG. Spare parts, service, equipment upgrades, and then we call it the Reliant product line. It's the mature node investments that occur in tools that have been around for a while. So if you think about it, all of those have different characteristics. We just finished the third consecutive record quarter of revenue in CSBG, nearly $2.5 billion for us, driven by all of those things. So if you think about what's happening right now and how that might continue to show up over the next several years, spares and service benefit when utilization is really high. obviously utilization is really high in the industry right now so spares is doing extraordinarily well and so is service because the more you run the equipment the more you need to replace spares and the more you need to service the installed base so that's part of what's happening in CSPG those two components of CSPG are just doing really well because you the third is upgrades So obviously when you think about what's happening across the industry, there's a lot of conversions happening, especially in the NAND segment of the business. And so when you look at that, that aspect of the business is doing extremely well because of what's happening there. And then the Reliant product line is more tied to mature node investment, which is doing okay, right? Think about what's happening in analog and industrial and a little bit of the mature set of customers in China. So all of those things contribute to the fact that CSBG is just doing really, really well right now. I have a hard time envisioning that not continuing for the first time.

Doug, you have a very, very strong position in etch and also in deposition. Is there any one of these or maybe a specific product area that you see as kind of being particularly exciting over the next, say, two to three years?

You know what? I've got Ram up here with me. I'm going to let Ram chime in on this afterwards.

No, fundamentally, I know this kind of ties into some of your earlier questions. I think the biggest debate with investors today is, hey, how much better can things get? Hey, what's happening in semi-cap equipment, right? And there's everyday noise in today, whatever, maybe memory. But you have to take a step back and look. You know, fundamentally, LAM is back to some of the faster-growing segments within WFE, right? We are in the etch and deposition market. When we take a step back and look at the roadmaps that are happening, the inflections that are happening the next several years, they're very etch and deposition conducive. And the company has proactively invested in a forward-looking product portfolio, right? Even in the downturn, there was a heavy R&D investment. So we have talked about multiple different products across the end markets, like the Acara Conductor Edge tool or Vantex. We've talked about the highest ionage energy in a chamber for that with Cryo. and then several of the ALD products. And then more recently, we have talked about things that we are doing in advanced packaging. So it's not just one or two products. It's about the elements of etch and deposition intensity for the vertical inflections, and within that having a suite of products that are really addressing the key inflection challenges for our customers, right? If you take a step back and the concern is, It's like, what is the cost of missing a product cycle for our customers? Say, for example, if an HPM cycle is delayed a little bit. It's enormous because the scale of AI is so much that they cannot afford to miss the product cycle. So things that we do with the car, for example, with the direct drive, things we do with what we bring in terms of capabilities for Rantex, those are all things that we feel very excited about in terms of both the scale of WFP and the ability for LAMP to gain share within that.

Yeah, great. And I think, you know, relative to those couple markets, I mean, people think about the memory cycle that we're in. I think a lot of investors classically think of you as being exposed to a lot of NAND flash spending, but DRAM, in fact, has been a very, very strong growth driver for the company.

So is Leading Edge Foundry Logic.

And Leading Edge Foundry Logic, too. But I did want to maybe ask about memory and, like, sort of, like, as you see it, like, going into 2027 feels like a lot of what's driving the market is both capacity expansions in DRAM and also a lot of spending in leading-edge foundry logic. So maybe if you think about those two in particular, like, which one do you think is going to be stronger and how much capacity do you think we actually see in DRAM?

Yeah, you know, when you think about those two things, the first thing about what's driving this AI compute, right? We've gone from training to inference to agentic to eventually physical AI showing up. All of that needs the most leading-edge silicon that you can get. That's what's driving the investment in Leading Edge Foundry and DRAM. And when you think about what's happening there to what Ram was just talking about, things are inflecting in the third dimension. Gate all around is a 3D architecture. We do extremely well depositing material using ALD approaches, selectively etching the structure of the gate. We have described that as, for every 100,000 wafers starts, of capacity that gets put in place, our SAM expands by a billion dollars. Similarly, you've got backside power coming, right? It's the same quantification, roughly speaking, so similar, right? That's also a 3D structure. A billion-dollar incremental SAM for every 100,000 wafer start shows up there. Advanced packaging is a 3D structure where we do extraordinarily well in the through-silicon via process. We call it the drill and fill, right? We do the silicon etching and the copper electroplating. That's a 3D structure. When you look at what's happening in DRAM, similarly, you've got an evolution of the process, but you also have high bandwidth memory showing up. That also uses through silicon via. The strength that we have shows up there as well. So when you put all of those things together and look at the record numbers we've been putting up in Leading Edge Foundry as well as DRAM, it's being driven by the architectural innovations that are happening and the 3D evolution of that. Well, they're on top of that strength of the product portfolio right now, things Ram just talked about, specifically Acara, our new Conductor Edge platform, is a really, really good product. And so the customer pull on that, ads on top of that, that's what's happening.

Longer term, we have more on the drive for the rest.

There's more coming. So this isn't done. You may remember a year and a half ago at our last formal investor day, We said, hey, right now we address nominally low 30% of overall WFE. We see an ability for that to go into the high 30%. Because of these things I was just rambling on about, frankly, we've made really strong progress on that already beyond where we expected we would be. It's going to continue.

Carry handicap, whether Foundry or DRM grows faster for you next year?

Both are going to grow quite fast, and so is NAND.

Okay, yeah. And so maybe a follow-up on, did you want to say something, Rob?

Basically, the way we had articulated from a WFE point of view for 2026, we ranked for you guys that it's by far led by a DRAM, WFE, followed by Leading Edge Foundry Logic and NAND. We see a similar setup in terms of ranking, and what we have said on the earnings call is Leading Edge Foundry Logic, and it's still led by DRAM next year, but the gap between Leading Edge Foundry Logic, WFE spend, and DRAM is probably a little closer next year. Leading is boundary logic is very strong next year.

How would you handicap the ability for the industry to actually accelerate growth next year?

Listen, I think we hang our hat on what I referred to earlier. We see 8 to 10 new Tier 1 fabs showing up between now and the end of next year. Those things wouldn't be happening if the demand wasn't there and if the intention wasn't to equip those fabs. So that's the best substantiation I can provide to what we're talking about. It's strong. It seems pretty good.

And then the last part of our question on NAND, I mean, we've kind of left that out, but I think it's pretty clear that we're moving from a place where it's mostly been upgrade-driven to a place where we could see some greenfield in the future. So how do you think about the transition from upgrade-driven business to greenfield business over time?

Listen, the way I would want people to think about it, I'll take you back to things that we've said just to frame it for you. I'll go back to that investor day a year and a half ago. We described the point of view that the industry would go through this conversion process and spend $40 billion. We described it as over several years. We more recently updated that to say, you know, that $40 billion is still the right number, but it's going to happen by the end of next year. At which point, we believe there will be a higher level of new wafer capacity put in place. And you've seen several of our customers announce new fabs that are intended to be NAND investments. Now, I would point out to you, I understand there is some new wafer capacity that's showing up this year, but when you go through a conversion cycle, you actually lose raw wafer capacity. And so how that is showing up right now is from the peak wafer capacity to where we think it shows up the end of this year, it's down 20% from a wafer charge standpoint. At some point, you'll need to supplement that with some new wafers. Yeah.

Okay. Then I want to close on a couple of financial questions for you. I think one thing, I'm sure you've met with investors today, people are very focused on the industry's ability to take price or to at least price for value. That's historically been difficult because of the concentration of customers you have. But maybe speak to Lamb's ability to take price, both on a like-for-like basis, shorter term, as well as a longer-term basis with new products.

I guess I'm going to answer a slightly different question, Jim, but I'll get to what you're asking about. But listen, we just delivered the highest gross margin in 20 years at Lamb Research, right? And we just printed 52% gross margin and guided to 52% again and said, hey, we're kind of in this 51% to 52% range. On the call, we also said, hey, I need to update the long-term profitability objectives for the company. And said, we see an ability to move this into the middle 50s from a gross margin standpoint. So how are we doing that? I guess I would point to three things. One, we've already talked about some of the new products coming out. Generally speaking, when you've got a new differentiated tool, profitability is pretty good. And so that's an aspect of how are we delivering it and how do we think we can keep driving it. Second, I would say, frankly, this close-to-customer strategy that we've been embarked on over the last four to five years continues to be how we plan to do what we do, right? manufacturing close to customers, R&D close to customers, that delivers efficiencies. And so we'll keep doing those things. And then, yeah, we're absolutely working on pricing and everything that we do. So when you think about all of those levers, we're going to keep kind of working on all of those things to keep incrementally doing better and better from a profitability standpoint.

So fair to say that it's kind of in that order. Is it new product mix and then, you know, Malaysia and the other facilities close to customer and then direct pricing?

All of it contributes. I didn't specifically put a sequence on it to indicate any order of priority. We're working on all of those things.

Yeah, okay. And then timeframe for kind of getting there. I mean, you said, I think, over some number of years.

Several years. I was nondescript or we were nondescript about the specific year that that shows up. I think the important thing, though, is we see more opportunity, and we're going to keep working on those opportunities.

Okay, maybe the sort of last question I wanted to hit is just in terms of M&A. We haven't seen a lot of M&A for you of any size for quite a while.

You brought Laminate and Velas together in 2012, Jim. There's been some small and tough, but I mean that's the best transaction in the history of the industry in my opinion.

Exactly, so I guess the question would be you've had tremendous success. your batting rate's like 1,000 or close to it. So I guess what is your level of appetite for doing more or something in that space to kind of diversify the business even further? And do you think that's even possible today in the regulatory environment?

I think what I would tell you is I wouldn't want anybody to think M&A is part of an ongoing strategy of the company. If we simply execute on the organic opportunity we have in front of us, it's going to be outstanding. Our core markets are growing. These architectural innovations I described are happening. I wouldn't trade our position in the industry with anybody relative to the opportunity to outperform what the industry is doing. So we're going to be really happy and pleased if we just execute on the organic opportunity. I wouldn't expect you to see any big M&A happening.

It's not going to.

There might be some small tuck-ins here and there. And we have done that over the last few years, but it's been pretty small stuff. That's how I want people to be thinking about it.

Maybe a real final question for you then. If we're back on stage here again in five years, let's say, or three years, what do you think would be the thing that, looking back, investors might be most surprised about?

I don't know if they'd be surprised, but hopefully you all are going to be pleased with the operational execution, the company, the strength that we have been able to deliver relative to outperformance with the new portfolio of products. I think the execution of the company will continue to be extremely good. We're good executors. We know how to do what we do. We're going to keep delivering on that. I don't know if that surprises anybody, but I think those are the things that we're very focused on making sure we do as a company.

Excellent. I think with that we're almost on time, but thank you very much, Doug, for being here. We appreciate it. Jim, thanks for having us.