– Business is about as good as it gets- $75B WFE in 2021?
– China remains strong at 32% despite SMIC lack of license
– NAND remains 48% of revs versus 31% foundry
– DRAM steady @ 14% – Service was record $1.3B
Strong results in a strong market
Lam reported revenues of $3.85B and EPS of $7.49 for the March quarter, with record performance in many categories. Guidance was also strong at $4B +- 250M in revenues and $7.50 +- $0.50 in EPS.
The stock was down in after market trading likely in part due to an interpretation of flattish guidance. We think its likely Lam being a bit more conservative as is usual for them
Lam remains a “memory” poster child
Memory was 62% of Lam’s business while foundry was half that at 31%. While its clear that the vast majority of shortage related spending will be on the foundry side we would not exclude Lam from getting its fair share of foundry business as well.
Investors who may be concerned that Lam will not see as much benefit may be nervous but the results seem to belie that concern.
A memory comeback in the second half?
DRAM spending remains reasonable (as pointed out in our earlier note and ASML management earlier today). There likely remains room for more business there while NAND continues its strength for high aspect ratio etch for multi layer technology.
Even with record NAND revenue, foundry revenue was a record as well.
Service is large at $1.3B
Confirming a trend we have been seeing with companies in the space the percent of revenue from “service” continues to climb. Older fabs and equipment are being pushed hard as are new tools.
Customers don’t want downtime and want to squeeze as much out of tools as is possible.
This trend will help build a strong defense against the eventual down cycle which always follows these exuberant times.
A fairly “boringly” good quarter despite Covid
Other than shipping costs being high and overall capacity tight we don’t see any problems caused by Covid or related supply chain issues. There was nothing remarkable other than the record performance in several categories.
We think Covid issues are behind the industry for the most part and Lam does not have the supply chain issues of more complex technology like EUV.
Share gains in dep and etch
Management talked about share gains in both dep and etch and especially conductor etch. While good, they were not likely huge as we haven’t heard of big “takeaway” wins it is more likely a case of customer mix.
Lam’s stock was off in the after market after having a strong day on the coat tails of ASML’s good news which drove all the equipment stocks.
The flattish guide likely weighed the stock down in the after market but we think that is likely prudent, conservative guidance.
Concerns about having less benefit from foundry related chip shortage spend are somewhat real but its not like Lam is not getting its fair share of foundry spend.
Lam remains a bit of a memory story which could develop more if DRAM comes back more.
At this point we think the onus is on KLA which is the poster child for the foundry business who should echo strong foundry performance seen by ASML when they report the quarter.
Following that AMAT is the house that built TSMC so they should also have a great quarter.