Lam Research Corp (LRCX) September 9, 2026 Conference Transcript

Welcome to Day 2 of Citi Global TMT Conference. My name is Atif Malik. I cover U.S. semiconductors and semiconductor equipment stocks. It's my pleasure to welcome Doug Bettinger, EVP, Chief Financial Officer, Ram Ganesh, VP of Investor Relations at Lamb Research. I'll get off with my five-side questions first, and then we'll give an opportunity to the audience to ask their questions. If you have a question, please raise your hand, and the mic will come to you. Doug is going to open with some.

Yeah, let me, I technically need to kick all of these things off with a reminder that the safe harbor language that is on our investor relations website is relevant to anything that I may say today. I may make forward-looking statements, but I'll be quite clear. I'm not going to tell you anything new today. It'll be consistent with everything you've heard from the company before. So if you have an expectation something new is coming out, it's probably not. But please have a look at our safe harbor nonetheless. So my lawyers will be happy, Atif. Now I'm going to get going. All right, let's get started.

Doug, let's talk about the WFAB equipment outlook and next year's visibility. With calendar 26 WFB expectations recently raised to the low $150 billion range on accelerating AI demand, where is the upside coming from this year?

And also, I forgot the objective you guys have used in terms of super exciting, whatever outlook you have into next year. help us understand how next year is shaping up yeah um listen as we've gone through this year we've moved our view of wfe up from 135 to 140 now to low 150s to your point um and basically what has happened is everybody in the industry clean room is what's constraining the investment right now right the industry is fundamentally under supplying demand and clean room is a constraint. But what I observe has happened is every one of our customers or nearly every one of our customers has figured out how to do a little bit more with what they had. Squeeze things a little bit closer together. Perhaps, frankly, we've done a lot of that. We can talk about that as well. Maybe pull some things forward, maybe buy some clean room that was there and make it production worthy a little bit quicker than anyone expected. And as the year has progressed, That's basically what has happened. However, the industry is still under supplying demand, and that leads to our confidence in next year being a growth year. I think everybody that you listen to right now is communicating that. And we say that because we see cleanrooms coming online. We have described ATIF 8 to 10 new what I would call tier one fabs coming online over the course of the next year. basically, or through the end of 27. That reinforces our confidence in the fact that WFE is going to grow into next year. The constraint will still be there. However, it will get somewhat better. And when we look at that, and when we do our own top-down analysis, which Rahm and his team do for the company, we continue to see AI demand remaining very strong, moving beyond training into inferencing, into eventually physical AI. And that gives us confidence also in the need to invest more. So that is basically what is happening. It is a tops down and bottoms up assessment of what is going to be able to be supported next year. And frankly, I think a year after that probably continues to be even stronger than that.

All right. On that tops down point that you made, Doug, a question for you, Ram, you guys introduced this kind of rule of thumb for Every 100 billion of AI data center CapEx could translate to roughly 8 billion of WFE, which was super handy for the cell-siders. And recently, you suggested this number could now be 1 to 2 billion higher. What has driven this increase? Is it more silicon content or memory intensity? Can you explain that?

Yeah, it's a combination of both. We kind of looked at the timing of when we gave that number. It was the most pertinent thing, right? Everybody was talking about how many gigawatts of data centers are coming. We felt that was the most useful thing for you guys to think about the industry and specifically how the tiering between Leading Edge Foundry, Logic, DRAM, and NAND was. So we gave that number. And you're correct. Since then, we upticked that number by a couple of billion. When we first came out, actually, people said, oh, you're being optimistic on that number, right? And then, lo and behold, it's become even better than that. The uptick is all three. If you look at it, we used the initial flavors of the hardware that came out. The large GPU maker had released some new versions of their latest GPU, and we used that as a benchmark in the industry pricing on capital intensity to come up with that number. And since then, things have inflected higher both on the hardware content as well as on the intensity side. If you remember, we recently took up the NAND Samper wafer from 1.8x that we gave at the analyst data 2x. So the complexity of these devices also is a little bit higher than what we originally included in that model. So that was the gist of how we had taken that number up.

Doug, you mentioned customer cleanroom space being the driver in terms of how much higher the WFE.

It's a constraining item, and I think we'll be through next year for sure.

All right. Any other supply restrictions around utilities or labor or your manufacturers? a great question.

Listen, I think maybe let me describe sort of what's going on in the industry relative to conversations just to help you frame everything. First, we are having very deep conversations with every one of our customers about what do you need next quarter? What do you need next year, right? Give us an understanding of where you're going so that we can get ready. And we absolutely are getting ready. And so the intensity of those conversations and the conviction of those conversations, I've never seen stronger, frankly, in all my years in the industry. The conversation intensity is really, really high. Everybody wants to make sure that they're going to get what they think they need. Right. So that's happening between us and our customers. Then we take that back and propagate that back to our supply chain with the same intensity to make sure that they're ready for what we're going to need. We're doing the same thing with our own bricks and mortar. We talked about the second facility in Malaysia. We're doing a bunch of things in existing facility footprints, densifying our ability to actually get more output from the same square footage of clean room that we previously had. You know, necessity is the mother of invention, and that's very much what's happening. We're trying to squeeze everything out. But we were fortunate in that we already had plans for a second facility in Malaysia, essentially a cookie cutter of the previous facility. So we're pulling hard on making that available sooner. We're hiring and training and focusing on making sure we're not going to be the bottleneck. I would tell you, though, when you manufacture and make as many different tool types as we do that have thousands and thousands of parts in them, there's always something that is constraining us. And then you work, we've got an amazing supply chain organization that goes and works on things that pop up. It's very much manageable, but there's always something that's popping up. It's not easy, but we've got a great organization that knows how to do all these things. so that's very much what's happening and I think all of us also are doing our own tops down modeling for where is this going, I'm fortunate to have Ram and his team, great group of people that can do extraordinary modeling so we can make sure bottoms up and tops down generally make sense and it absolutely does Great, let's talk about your products and markets, I had the experience to travel with Tim last week Yep, and thanks for taking him on the road but I think it was a really good set of meanings.

Yeah, so for me, it was really interesting. Like, you know, LAM historically has been viewed as more of a memory-centric company with a lot more memory exposure. But the progress that you've made on the Foundry logic side, particularly with the Conductor Edge tool, surprised me, you know, based on...

Yeah, the Acara tool is doing extraordinarily well.

This is a great product. So I think that the point that Tim was making was that historically, you know, So the cycles in spending have been more kind of Moore's law driven. It's all about, you know, making incremental improvements in performance. But in this day of AI, you know, you're getting paid. The incremental performance and latency and any kind of change you can make is super important to your customers. And that's driving the adoption of some of these newer products like Acara and Conductor Edge. So that's what's different this cycle, that performance has become the bigger kind of…

AI compute is driving everything. And any incremental performance in the parallel compute architecture that you can squeeze out is hugely valuable. And so, frankly, greater tool performance contributes to greater silicon performance. And we are fortunate over the last, I don't know, three to five years, Atif, We've increased R&D investment such that these new products that are coming online, like Aqara, like Vantex, like Halo, are hugely beneficial in that area. So I think that's probably what Tim was communicating in your meetings last week.

Right. If I may add one thing is, if you look at our customers and the scale of AI, if they miss the product cycle or if, you know, they don't have the right products at the right time, the cost of missing that, given where industry spending is, I mean, a semiconductor industry's demand is, then it's very high, which means if an equipment company can help them with the velocity of the execution in totality, right, then that's a very good thing, right? So that's where you kind of deliver the value that our customers really kind of appreciate, you know, products like Acara, you know, market.

And maybe you guys can talk about, you know, You've talked about high 30s SAM share of the market. And as we look into these products, particularly your momentum on the Foundry and Logic side and maybe using some of these products in DRAM, how should we think about the upside to that SAM percentage over time?

Yeah, let me unpack it a little bit, and then I'll come back to your last question a little bit on why are we doing so well on Foundry and Logic. We had an investor day early last year where we talked about, hey we see our sam expanding from the low 30s to the high 30 percent of wfe frankly this year we're north of the mid-30s probably north of 36 so it's accelerated right we're we've moved forward a little more quickly perhaps than we had thought back then and what's contributed part of it's been foundry logic it's also been an acceleration of um different node migrations that have that have happened and so let me come back to your your last question a little bit why are we winning in foundry and logic our sam is expanding at foundry and logic because we're moving to gate all around gate all around is more etch and deposition intensive it's got selective etch requirements it's got ald requirements those are things we do and things we do really well it's got high aspect ratio etching acara as an example uh we're doing well there um and frankly if you remember things we've talked about we said hey for every hundred thousand wafer starts to get all around capacity our sam expands by a billion dollars later on top of that when backside power eventually shows up and it will relatively soon that is another incremental billion dollar sam expansion opportunity for every hundred thousand starts so that is showing up on top of that advanced packaging is critically important in the foundry space as you know atif right? Our advanced packaging business is growing north of 70% this year. And a big contributor to that is what is happening in Foundry and Logic. And honestly, you've not yet seen the move to the panel form factor, which you're going to, and that will show up in Foundry and Logic. So when you put all of these things together, it leads to the strength of the business and the performance that you've seen from us in Pound Reactive.

Just on the panel-level packaging, how close is the industry to meaningful volume adoption and what are the challenges around uniformity yield? And do you need to be looking at inorganic growth to expand the market?

We don't need inorganic growth, no. Listen, the things we do well at a wafer level, we will do well in panel. Read that to be the TSV approach, silicon etching and copper electroplating we're going to be extraordinarily strong there in addition to other things that we do in advanced packaging at a wafer level um will continue to do well in a panel form factor now you may remember we acquired a company a few years ago in austria that actually did some of the panel form factor capability and that's accelerated our uh our r&d progress there so we don't need anything new we don't need anything incremental it'll all be organic. And we are very well situated for that transition when it happens. We are investing R&D right now to make sure we continue to be well positioned for this change.

Just to round up the discussion on the products, Tim spoke very highly on surface preparation, just getting... Selective edge. I call it selected. And then Ether dry resist is something you guys have talked about in the past $1.5 billion cumulative five-year revenue opportunity. Can you update us on what's going on on the Ether Dry Resist program?

Yeah, no, thanks for asking about that. Listen, you probably saw some announcements about high-end adoption over the last day or so from players in the industry. That's going to be beneficial for us. Listen, the pull for Dry Resist is really strong. I'm quite confident that billion-and-a-half number is going to be higher than a billion and a half. I'm not ready to give you a new number yet, but I'm highly confident we're going to do better than that. And I say that based on things I hear from customers, things I see from customers, opportunity that's incremental to what we previously saw. We're going to upside that billion and a half. Pull is really, really good. All right.

Ram, going back to you, NAND, you do a lot of work in thinking around the drivers of the NAND market, KV Cash. How is this market changing? And you guys have laid out this $40 billion NAND upgrade opportunity historically through calendar 27. Can you help us understand what's changing in the NAND market from a demand perspective if you have an updated number or how are you looking at the NAND opportunity?

Yeah. I mean, answering the latter part of your question, the $40 billion was given with the assumption on what it takes to go from sub-200 layers to over 200 layers. That's a fixed number, right? What has changed is not the number per se, but the rate at which we originally said that number and people assumed, hey, we said several years and there was a range between three to five years. And since then, we have said it will be down by end of 2027, which is compressing it by So the pace at which the change happened was the one that is the newer, not the amount because that's a fixed amount, right? How much you need to upgrade to the next layer. NAND, if you take a step back in the first part of your question in terms of demand, clearly when we came out a little bit more optimistic on the NAND at the analyst day, people were questioning. Now it's the other way around. People do understand, but then there's the supply and demand balance that people want to understand. Hey, can NAND do conversions predominantly versus when do they need capacity? Look, from historically how capacity has been added, if you take that as a baseline, still 26 and 27 is conversion driven. There's a little bit of greenfield capacity in any given year that comes. And that is the case for 26 and 27. But for majority, it's still conversion driven for Nian. And if you tie that in with customer new fab announcement, we do think that beyond 27, if demand where to sustain, which we don't see a reason why it should derail, given where AI is going and memory hierarchy is going, that you probably need some capacity addition, say, maybe like second half of 28 and beyond, right? At times with the fab announcement made by some of our leading customers.

Yeah, and I'll just add on, you know, when you look from peak capacity to where NAND is going to be the end of this year, raw wafer starts are probably coming down 20%. So you got to supplement that at some point. There are some wafer capacity additions this year and into next year. It's just not that much. Got it.

The question is around the high bandwidth flash of the new generation NAND. there's a lot of buzz around beyond conventional enterprise SSD, emerging high-performance NAND architectures, HPF. Can you just talk about from your kind of vantage point, are you seeing any momentum in these technologies getting some sort of volume adoption or making a breakthrough or this is more of a longer-term roadmap?

Listen, you're hearing a lot of our customers talk about this. People are working on it. You're not seeing any volume yet. But to the extent that this does ultimately show up, this is going to be great for us. You know the strength that we already have in NAND. You know the strength we have in the through silicon via. This combines both together. So if this does actually begin to show up as part of the memory hierarchy in a more meaningful way, this is going to be great for us.

All right. But moving on to a very topical question on gross margins, Doug, I almost feel guilty asking you this question because you have done so well in expanding gross margins to where they are. But my clients are greedy. They want more.

Everybody wants more. What have you done for me lately? But if you will allow me, I'll point out, we just printed 52% gross margin. That was the highest gross margin in 20 years at RAM Research. So I feel great about how we're managing things. It's been a combination of new product introduction. It's added to the close-to-customer strategy, right? The factories being closer to where customers are. There's been an aspect of pricing in it. So we're working on everything, pulling all the levers that we can. All right. Is there a framework on pricing? Yeah, I was just going to add, maybe I'm jumping ahead on your question. We also, on the last earnings call, talked about a new objective relative to the profitability target for the company, right? we just delivered 52 we guided 52 and then communicated hey we think we see a path to get to the mid 50s gross margin continuing to exercise all those things that i just mentioned it'll be an extension of close customer strategy ramping that second factory in malaysia benefits from uh just the supply chain being close to us that helps uh new product introduction right when you have a product like akara coming out you tend to be able to get paid for things when you're delivering really good results performance on the wafer and we're doing that and then we're working on pricing where we can all of those things contribute to what we're trying to deliver and frankly i feel great about what we've been able to do and we see continued opportunities we go forward good that's helpful doug let's talk about the cspg business with more than 100k installed chambers how is cspg opportunity evolving as tools become more complex and customers put greater value on uptime yield and productivity yeah let me unpack cspg a little bit relative to how you should be thinking about things going forward first i mean the last quarter that we delivered third consecutive record nearly two and a half billion dollars in revenue from from cspg it's doing great um we're going to benefit from the fact that wp is pretty strong this year. So chamber count will grow nicely this year, which will provide an incremental opportunity to do more. So that's one thing to think about. Spare parts are the biggest individual component in CSBG. We're benefiting right now from the fact that utilization in the industry is basically at 100%. And so spare parts consumption is high. That's going to continue for sure. Upgrades are very strong. It's got a heavy footprint in what's going on in NAND, right? You saw our NAND business last quarter was very strong. So upgrades are doing well and will continue to. The Reliant product line is doing pretty well, right? That is the equipment that goes into more mature known spending. Even though everything you're hearing us talk about right now is focused on the leading edge, the mature known investment is actually pretty strong. When you look at what's happening in analog and industrial and so forth you're seeing strengthening there and then layer on top of that the things we're doing strategically in service right we are beginning to offer to customers different kinds of service offerings using cobots and equipment intelligence and different algorithmic data techniques to change how we deliver service for our customers and this is exciting to the customer because you're delivering incremental performance capability and when you look at all those things it moves the service opportunity this is all incremental to the historic way we have delivered service which has been show up and do a task right provide some maintenance to the equipment all of that is still here but what the cobots and equipment intelligence enable us to do is you go in look at the fleet of the customer's tools and identify different opportunities we can do to make things better and when output is at such a high value right now the pull for that is is very strong and so it changes the opportunity here to deliver service in a different way by guaranteeing some outcome um and the customers really like that when you go in tell them you can do something do a proof of concept and deliver it and then the opportunity continues to grow so that's what i we're quite excited about in the service area of CSBG, that's got a lot of pull right now.

Doug, on the Cobot, you know, Tim was super excited about being an early adopter on Dextro Cobots. We helped to understand what is different about your tools or products or you just being an early adopter to enable better serviceability and uptime for your customers by using Cobots. But is it different, something different about your products that you guys are doing it more so than your peers?

Listen, I think we saw this before others saw it. And I think right now, because the customer has seen such value from us, they're going to force our competitors to do this as well. But we're meaningfully ahead of where anybody else is with this. We identified the opportunity to do this way before anybody else did. We brought product offering way before anybody else even thought about doing this. And as always in this industry, when you do something better than your competition, your customer then goes to your competition and says, you need to do this as well. So I think that's going to happen. But we're quite a ways ahead of this. We're investing R&D. We've expanded from a single tool type to, I think, eight now. And it's growing beyond that. So you're going to see us continue to provide real leadership, I think, in the industry in this space.

Let me pause here and see if there are any questions in the audience. If you have a question, please raise your hand. Yep, we got one up front here.

We got a mic up here.

Possibly like de-specking of DRAP. So just wanted to understand how that will impact you for terms of, and how, and if you're hearing that trend, how long would that be going for?

Yeah, listen, it hasn't changed anything our customers are doing. And frankly, I've been getting this question, and it may say, this is a red herring. It's got really no impact that I can see. Ram, I don't know. You've done more work on this than I have.

Yeah, I mean, look, ultimately, there is a requirement for the model, right? Like the models can require a certain amount of compute power. And the way we look at it from our vantage point of view is the hardware totality of requirements as we look from the transition to, you know, agentic AI to physical AI over the next multi-year period, the compute per gigawatt, which is the most important metric for generating the right amount of tokens for these models, is very, very hardware favorable in totality. And equipment companies in general are very well pecked to that trend. And we see this as just a short-term noise just because of various other things that are going on. We don't see a direct impact to our business.

Good question, though. Yep, we got another one up here.

Doug, Micron, at a conference in August, made this statement that 2027 would be even tighter than 2026. Sorry, 2028. Yeah, 2027 would be tighter than 2026. Is that an industry wide belief? And, you know, I look at some of the industry forecasts for CapEx, you know, for DRAM, $60 billion last year, going to over $100 billion this year. What does it take for DRAM memory in general to get into supply-demand balance?

Yeah, I mean, we've got a ways to go to get there. You can just look at pricing and profitability. And I would never disagree with any of our customers if my friend said that. That's an accurate representation of what's happening. um likely an industry-wide representation um and yeah i mean things we the industry needs more clean room space and that's beginning to come online but it's it just takes time right you can't like snap your fingers and and have it show up it takes a couple of years to bring new clean room on online so that's what's concerning things right now we made a comment earlier about 2028 looking like another strong year that's something that comes up as you know 2028 is there's some level of uncertainty maybe because it's still a year behind the way

but what gives you what makes you optimistic at this point about 20?

Our top-down modeling, the bottoms-up conversations with customers about where things are heading and our view of kind of the timing of clean room showing up again i'm not going to put my neck out quite yet on 28 there's still a long ways away lots can change but the strength of ai demand continuing um the fact that you hear comments from some of our customers like you just mentioned um that things are still going to be undersupplied in 27 leads you to think 28 is probably a pretty decent year as well yep we got one in the middle here thank you um just following up on those same questions i think

a lot of the memory players have talked about 20 to 25 percent capacity growth year-on-year within DRAM for example and they're doing that the constraint of that is the you know one of the constraints is the clean rooms as you've been saying you mentioned earlier about your supply chain though as an example and that even when clean rooms come online that doesn't solve all the problems automatically because you know land supply chain and your suppliers would also need to increase that yes so so if if i'm wondering if you just elaborate that on elaborate on that a little bit more if clean rooms did magically you know sort themselves out within a year or 18 months longer what are the challenges for lamb um or or generally within semi-cap in order to be able to meet that new demand from from the memory players if they were to try and you know i don't know grow capacity 600,000 wafers per month or something like that more than the 400 that they're talking about yeah listen we have a pretty good understanding of clean rooms that are showing up when they're showing up because they can't just magically like come from nowhere um maybe what would help is i'll describe the conversations that are happening to make sure it's pretty clear there's someone at lamb whose job it is in fact teams of people to know what every single customer

plans to do over the next year, two years and beyond, right? We've got account teams, that's our job. When I listen to them describe to me what's going on, the conviction of those conversations has never been higher, right? And so all of our customers have a huge motivation to make sure we're able to get them what they need. So I would say that's where everything starts. Like every single customer, what do you think you're going to need next year? what's the point estimate, what's the upside, and then tell me when, right? What's the error bar around it? We then take that and make sure we're going to be ready with the same thing. Now, the good news from our point of view is, generally speaking, our lead time to get ready is shorter than our customers is because we can just do things quicker. We're not building as big a clean room and so forth. We were fortunate in that we had another facility coming online in malaysia right i've talked about that so we're getting that ready the lead time we have there is to facilitate it hire and train people that can actually build product and then we take all of this information that's coming back from our customers to us then go back to our supply chain to make sure they're going to be prepared for it as well right in the i think the intensity of all of those conversations because none of us want to be the constraining item in the industry that's not a great place to be. And so that conversation is happening with an intensity that I can't remember in the past. And I think all of us, if you go all the way back to our supply chain, even maybe a layer or two behind that, everybody sees this AI demand. It's obvious that it's here. Everybody just needs to know to what magnitude. And so those conversations are quite robust right now to make sure we're all getting prepared for what everybody needs did that help in malaysia too you were going to say malaysia face too yeah i mean i talked about we've got another facility in malaysia that's coming online and in some of the like i said necessity is another invention in this industry we're going through a process of trying to get more output from the existing square footage we already have we're densifying things right we're getting more output from the same square footage and you might say hey why weren't you always doing that well you know you didn't know you needed to until you needed to and so there's a lot of creative things we're doing

with our own capability to try to squeeze a little bit more out and frankly i think my customers are doing the same our customers are doing the same thing questions doug last one for me um in terms of your china sales exposure you guys are a bit unique that you you do have a bit higher international fab exposure in China versus peers because of your NAND market share. And DRAM. And DRAM, too. And so fundamentally, if the non-China market is growing faster than the China, should we be thinking about your China sales exposure roughly stable around these levels this year, Listen, I think this is kind of a numerator, denominator thing.

The China investment continues. It's not like it's gone away. however when you look at where all of the growth is showing up it's with the leading edge customer base it's it's it's DRAM it's it's NAND it's going into AI compute from the leading foundry and others that's where that growth is really happening over and above where it was last year it's not that China has gone away it absolutely has not but everything else is just growing faster and so I think you're going to probably see over the next several years a continuation of those trends. And as a result, I think for everybody in the industry, as well as for us, you will see China as a percent of overall revenues declining, not because China's going away. It absolutely is not. But everything is just growing much faster.

But there will be quarter to quarter variability, Yath. It's not going to monotonically decline, right? It's always lumpy.

Awesome. We're almost out of time. Doug and Ram, thank you for coming to the Citi Conference.

Of course. Thanks for having us, Atip. I appreciate it. And thanks for taking him on the road last with me, I think.