Lam Research(US:LRCX)2023-07-27 01:16Financial Data and Key Metrics Changes - The June quarter revenue was $3.2 billion, a decrease from the prior quarter as expected, with systems revenue declining due to reduced levels of deferred revenue [25][39] - Gross margin for the June quarter was 45.7%, above the guided range and up from 44% in the March quarter, attributed to cost and efficiency improvements [5][6] - Operating margin came in at 27.3%, exceeding guidance due to strong gross margin performance [6] - Diluted earnings per share for the June quarter was $5.98, over the high end of guidance, driven by stronger revenue and improved gross margin [30] Business Line Data and Key Metrics Changes - Customer Support Business Group (CSBG) revenue totaled approximately $1.5 billion, a decrease of 7% from the prior quarter and 8% lower than the June quarter in 2022, representing 47% of total revenue [4][39] - Memory systems revenue was low at 27%, down from 32% in the prior quarter, marking the lowest concentration in a decade [27] - Foundry segment revenue concentration increased to 47% in the June quarter from 46% in the March quarter, with investments focused on leading-edge devices [28] - Logic and other segment revenue reached a record 26% of systems revenue, up from 22% in the prior quarter, driven by spending in advanced packaging and other applications [29] Market Data and Key Metrics Changes - The China region accounted for 26% of total revenue, up from 22% in the prior quarter, with domestic customers being the majority [3] - The US region saw a decline from record levels in the previous quarter, primarily due to the timing of customer projects [3] - WFE spending in 2023 is expected to track to the mid $70 billion range, with memory WFE down approximately 40% compared to last year [9][10] Company Strategy and Development Direction - The company is focused on broadening its product portfolio for processing at the atomic scale, with significant investments in advanced packaging and specialty technologies [12][15] - The strategy includes leveraging existing R&D and tools to efficiently expand product offerings in high-growth markets [17] - The company aims to create competitive differentiation by addressing technical, workforce, and sustainability complexities in the semiconductor industry [21][22] Management's Comments on Operating Environment and Future Outlook - Management noted that while 2023 is a down year for WFE, long-term growth dynamics for the semiconductor industry remain strong, driven by emerging technologies like generative AI [10][11] - The company expects to see WFE spending in the second half of 2023 tracking higher than the first half, with potential upside from domestic China spending and high bandwidth memory demand [9][44] - Management expressed confidence in maintaining leadership and market share, particularly in advanced packaging and memory segments [57][59] Other Important Information - The company returned 109% of free cash flow in the June quarter, aligning with long-term capital return plans [41] - Cash and short-term investments totaled $5.6 billion, flat with the March quarter, while inventory turns decreased from 1.9 times to 1.5 times [31][32] - The company ended the June quarter with approximately 17,400 full-time employees, a decrease of about 1,300 from the prior quarter due to restructuring actions [42] Q&A Session Summary Question: How has the team seen utilizations starting to stabilize? - Management noted that while utilization cuts have slowed, they have not seen improvements in utilization levels yet, particularly in the memory space [48][50] Question: What is the outlook for the advanced packaging opportunity? - Management highlighted strong demand for advanced packaging driven by high bandwidth memory and AI, indicating growth in this segment [52][65] Question: How does the company view the impact of last year's export controls on its China business? - The estimated impact of last year's restrictions is around $2 billion in revenues, with the company managing to make some shipments that were previously uncertain [120] Question: What signs should be looked for regarding memory utilization picking up? - Management indicated that an uptick in the CSBG spares and service business would be a key indicator of improved memory fab utilization [124]