GLAM Research at Bernstein Conference: Strategic Diversification and Growth

On Wednesday, 28 May 2025, GLAM Research (NASDAQ:LRCX) presented at the Bernstein 41st Annual Strategic Decisions Conference 2025, outlining its strategic shift and growth prospects. CEO Tim Archer highlighted the company’s transition from a memory-centric business to a diversified player in the semiconductor industry. Despite challenges such as export controls, GLAM Research remains optimistic about its future, driven by technological advancements and strategic investments.

Key Takeaways

• GLAM Research is transitioning from a memory-focused company to a diversified semiconductor player.
• The company anticipates strong growth in etch and deposition markets, outpacing broader WFE growth.
• Export controls have impacted the China business, but strategic focus on advanced technologies mitigates risks.
• A commitment to returning over 85% of free cash flow to shareholders through dividends and buybacks.
• GLAM Research targets a long-term gross margin of 50%, supported by new manufacturing facilities.

Financial Results

• Gross Margin: Achieved the highest in company history, with a target of 50%. The Malaysia facility has improved margins by 200 basis points.
• Operating Margin: Forecasting the highest since the 1990s.
• Capital Return: Plans to return more than 85% of free cash flow to shareholders, with over $8 billion authorized for buybacks.

Operational Updates

• Diversification: Expanded from memory to include foundry logic and advanced packaging.
• Advanced Packaging: Surpassed $1 billion revenue forecast early; expected to exceed $3 billion in revenue.
• Customer Service: Introduction of cobots for maintenance could save $100 million per 100,000 wafer start fab.
• Manufacturing: Strengthened presence in Asia, US, and Europe; Malaysia facility boosts gross margins.
• Export Controls: Faced $2 billion impact from 2022 restrictions and $700 million from 2025 restrictions.

Future Outlook

• WFE Growth: Anticipates semiconductor market to reach $1 trillion, with GLAM Research outperforming industry growth.
• Foundry/Logic Growth: Expected to double.
• DRAM and NAND Growth: Projected to grow 1.8x and 1.7x, respectively.
• Technological Transitions: Moving to CFET, with significant NAND upgrades expected as customers transition to nodes above 200 layers.

Q&A Highlights

• CryoEtch: Strong position with Cryo 3.0 technology.
• Specialty Technologies: Focus on innovation and new applications to differentiate from lagging-edge technologies.
• Moly ALD: Maintains a strong position in Moly atomic layer deposition for NAND and logic.
• Chinese Competition: Emphasizes leading-edge technology to stay ahead.
• Dry Resist: Secured first production win at a DRAM manufacturer.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Stacy Rasgon, Analyst, Bernstein: I cover The US semiconductor and semi cap space here at Bernstein. And it’s my great honor to introduce our guest, the president and CEO of GLAM Research. I’m mister Tim Archer. Before I start, I wanna mention thank you. Before I start, I wanna mention, if you have questions you’d like me to ask during the presentation, you have a link to the pigeonhole form where you can submit those.

We will have time for q and a at the end. Now look. The semi cap industry has really been enjoying a renaissance over the last several years. More recently, really seems to have come into its own. It’s still cyclical.

We, you know, we we we know that. But both, I’d say, industry growth and it seems industry capital intensity have inflected materially higher over those cycles. I think contributions from companies like have become more important than ever to keep the industry going. Lam’s really transformed along with it. They both nurtured kind of their core franchises.

They were kinda known as an as a NAND company, But they’ve also done a really good job diversifying the portfolio into new areas. They’ve taken strong advantage of new drivers of growth in in the industry. I’d say the space and the company have been top of mind for my clients as well. I mean, there’s there’s lots of the near term questions, you know, trade and tariffs and NAND spending and upgrades and everything else. But I’m also increasingly getting people looking at the longer term potential of this industry as they start to view it a more than a more secular rather than the purely cyclical terms.

And around some of these new technology inflection points where I think Lam is really a key enabler and a beneficiary of them. And and to tell us all about it, it’s my great pleasure to welcome Tim to our session today. So thank you so much for coming.

Tim Archer, President and CEO, GLAM Research: Yep. Got the mic. Guess these these are on. Well, great. Thank thanks, Stacy.

You bet. No. So so, again, thank thank

Stacy Rasgon, Analyst, Bernstein: you for coming. I’m I’m I’m thrilled. We will get to some of the near term stuff. I don’t wanna get to it I wanna I wanna talk a little broader.

I mean I mean, look. So everybody, like, clearly is concerned all always over WFE outlook, the wafer fabrication equipment for those of you who may not know. But I I’d say over the last couple of years, this industry shaped up far better than anticipated. I I mean, spending, everybody wondered, oh, can we get to a hundred billion dollars? So they were were were kinda there.

Right? Things mostly look like they’re even even this year, they’re kinda mostly at least hanging in the in that area. And, again, capital intensity has been going up and everything. I guess, just can you talk about some of the contributors to this strength over the last few years and and and what’s kind of enabled the industry to to to get there even in a semiconductor environment that is not at least, especially from a unit standpoint, has not really been that spectacular. We’ve had China.

We’ve had packaging. You know, we’ve had we’ve had memory. We’ve had leading edge growth. I mean, what what are some of the things that has been driving that WV growth, and how is Lam benefiting from those? True.

Tim Archer, President and CEO, GLAM Research: Yeah. Again, thanks, Stacy, having us. Since we’re jumping right into Outlook, I think you all saw the safe harbor jump up here. But

Stacy Rasgon, Analyst, Bernstein: There we go. I think even Outlook we’ll get to Outlook in a minute. But I’m I’m more interested about sort of this How it’s gotten here. Yeah.

Tim Archer, President and CEO, GLAM Research: Yeah. No. I think that back to our, investor day we did in 2020 right here in New York City. And at that time, you know, we saw the high end of our WFE outlook for around the 2024 range being $70,000,000,000. And, you know, we got a we got a few, incredulous looks, I think, in that conference just because, you know, really, people couldn’t see what would be the drivers of WFE.

But I I think there’s a number of different things we need have to think about, having transpired in the last few years. You know, first and foremost, of course, I think going back to 2020, nobody quite saw the impact that AI would have on semis and semi demand in general, especially within very certain segments. But I think more specifically for the semiconductor equipment companies was really the impact that the acceleration of leading edge devices and performance requirements, what impact that would have on complexity. And, you know, we’ve we’ve clearly seen this acceleration of complexity in devices and architectures and mature materials that, you know, is ripe ground for equipment companies to to benefit, especially leading edge focused companies like Lam. You talked about our, transformation.

I became CEO six years ago, and at that time, we really were a very memory focused company.

Stacy Rasgon, Analyst, Bernstein: 60 to 80%, I think, depending on the year was was memory. Right?

Tim Archer, President and CEO, GLAM Research: You know? But but I saw that, really, they increased the value of the company. I felt we needed to better balance across all the segments of the devices as well as improve, our positioning in in the the aftermarket and effectively the the the spares and services business as well. And I think we’ve made tremendous progress in the last five or six years in those areas. A lot of that improvement has come by focusing on the most complex, applications, and those are the areas that think we’ve seen WFE outperform probably what our expectations were years ago.

The second, item, you know, beyond complexity is also, I don’t think we we predicted what would happen with die sizes. Mhmm. You know? And if you take HBM as an example, you know, if we went back five years ago and comparing today, an HBM device today requires about three x, maybe even a little bit more on some of the latest, generations of HBM to produce the same bit that it made just years ago. And, of course, equipment companies, I mean, effectively, while we always work on productivity of our equipment, you have to produce three times as many wafers per bit, you’re gonna sell more equipment.

And so I think die size has driven up WFE, capital intensity, as well. And and then you have, I think, the one that’s been a little bit hard for any of us to predict, and that is this strategic government overlay. Mhmm. I mean, again, you went back five years ago when we thought it might be 70. I don’t think any of us quite saw this Yeah.

The rush that got created for regionalization of the semiconductor industry in a way that clearly has driven more spending, more investment. And, you know, again, I I I talked about it as strategic because a lot of it is driven not by the end market demand that people see today, but by this feeling that you need to have some amount of semiconductor manufacturing capability within your within your region, for other reasons of economic security, etcetera.

Stacy Rasgon, Analyst, Bernstein: Is that bad eventually, though? Right? I I mean, I always I always sort of thought about, like, the regionalization and and the government investments is not necessarily driving excess capacity, but more determining where those projects get started. But it sounds like you’re suggesting maybe it is driving excess, at

Tim Archer, President and CEO, GLAM Research: least some amount of Well, I I think that, you know, there’s always there’s always different phases of investment. I mean, when when a if if you start up a a new region and some of those maybe even new entrants into the semiconductor space, there’s always a period of more investment for the same amount or or even perhaps very little output during those initial years. Eventually, that begins to normalize out to you know, the the semiconductor demand is global, and it gets satisfied globally. But I would say that in the long run, a more regionalized semiconductor manufacturing footprint is likely a bit less efficient than a highly concentrated and consolidated, footprint. And so, therefore, I think over time, it’s a it’s a likely a small adder to the WFE and the capital intensity.

Stacy Rasgon, Analyst, Bernstein: Got it. How do you think in general about capital intensity going up? Like, if if you’re thinking about just, WFE growth over the cycle versus semiconductor growth, like, how much is it in line? Is it above? Sounds like it should be above.

I I think it’s yeah.

Tim Archer, President and CEO, GLAM Research: We think it’s above. I mean, obviously, there’s there’s a limiter of the economics of the semiconductor industry for that. But what’s most important for Lam is where capital intensity is is really increasing. I mean, you know, as we look at the technology trends at the leading edge, there’s no doubt that every device type is becoming more etch and depth intensive. And so, you know, if you think about the economics, you know, there may be parts of that pie that have to shrink as a result.

But but etch and deposition is playing a more critical role Mhmm. In building these three d devices, playing a more critical role in the the latest trends, whether it’s HBM or it’s advanced packaging for, the latest AI accelerators. Etch and deposition is at the center of that, so it’s expanding significantly faster. And and in fact, we gave a a number in our most recent analyst day just this earlier this year where we said that as you transitioned from where we are today in foundry logic to this through the CFET transition Mhmm. The, LAMSAM per wafer would double.

And I don’t think anybody expects WFE itself to double in that same time period. So we’re highly confident that the etch and deposition portion of the market will outgrow WFE for many, many years to come because of the technology changes.

Stacy Rasgon, Analyst, Bernstein: Got it. You said CFET, which is the by this complementary field effect transistor. These are n type and t type t type transistors that are stacked on top of each other.

Tim Archer, President and CEO, GLAM Research: So Essentially, generation after gate all around.

Stacy Rasgon, Analyst, Bernstein: Yes. Yes. I guess that that there really is a foundry logic, kinda area, which is a I wouldn’t say a new area for you, but, like, on a relative basis, that’s an area where you’ve seen a tremendous amount of growth relative to the to the memory focus that you had five, six, seven years ago. Maybe can you talk a little bit about, like, some of the efforts that you’ve had in the logic and foundry space, and and maybe the drivers of that growth that we’ve seen? And and, again, sounds sounds like you see that growth continuing pretty materially as we go forward.

Tim Archer, President and CEO, GLAM Research: Yeah. I guess if there’s, one one advantage of being, slightly underexposed in the market is you have you have a lot of, white space to to pick where those next, next areas are that you wanna focus. And so we, you know, we look to our strength. I mean, one, you know, one thing that I I guess I would say Lam has been successful in is staying true to where we believe our expertise really exists, and that’s in the etch and deposition spaces. So as I mentioned, etch and deposition itself is becoming more intense, but also the the requirements are becoming much more complex.

And so we’ve seen, new requirements emerge in areas like atomic layer deposition, atomic layer etching. You know, these are these are areas where we have invested and, introduced new tools. Mhmm. Even in what we would consider more traditional, like conductor etch, dielectric etch, the move to EUV and smaller, higher aspect ratio features is driving capabilities and and the need for new chemistries that just didn’t exist before. And so those are all opportunities where, you know, there’s not really a strong incumbent for those those those markets.

And, therefore, they’ve been great opportunities for Lam to invest in new equipment, expand our market, and win those applications. I mean, Stacy, I know you have a lot of expertise in the in in etching and, you know, lab. Time that I have forgotten more than I ever knew at this point. But yeah. We just didn’t you know, I I think if you look at, at a lot of Lam’s earnings transcripts, it’s I’m feeling starting to feel like a broken record talking about the industry’s first this industry’s first stat.

But we just did introduce, what we what we said was the industry’s first, matchless RF plasma system. No matching network? No matching network. And what allows us to do is to cycle, the the pulsing within the plasma Uh-huh. About a hundred times faster than previous generations, which becomes incredibly important as those EUV pattern features become very small and very tall.

Uh-huh. And so, again, it’s a new requirement driven by this push below, say, two nanometer, and therefore, we can introduce a new tool that allows us to Got it. To to gain shares.

Stacy Rasgon, Analyst, Bernstein: So definitely doesn’t sound like you’re worried about e EUV. I mean, there was always this bear case. You know, there’s EUV come comes on you. You you have less steps. You need less etch and debit.

Definitely, that doesn’t seem like it.

Tim Archer, President and CEO, GLAM Research: Well, I think that, you know, in general, there’s all there’s always there’s all it it’s really I guess, I would say the the mantra inside Lam is, is agility. Uh-huh. And and, you know, we we take the market for what it is and where where the needs are, and then we we pivot. So back in the EUV case, people worried about multipatterning going away, and that would be detrimental to Lam. Well, in, you know, in some ways, we did lose some multipatterning opportunities Mhmm.

But it also opened up additional challenges and complexities that allowed us to innovate new tools, new capabilities, and, you know, strengthen our existing positions, but also grow into new ones. And so, you know, as I say, when when one door closes and maybe one or two more open up for you, and that’s that’s really what we see.

Stacy Rasgon, Analyst, Bernstein: I mean, my general view on that was, like, yes. Like, without EUV, you’d use a lot more etch and depth. But without it, everything probably comes to a screeching halt anyways. Right? I mean

Tim Archer, President and CEO, GLAM Research: That’s right. The most important thing to remember for equipment companies and specifically a company like Lam that’s very focused at the leading edge is that we need technology transfers to transitions to occur at their regular cadence. Meaning, we you know, if technology tech transitions slow down, that’s not great for equipment companies. And so we work very hard with our customers to, you know, to solve those problems. And they can be technical problems.

They can be cost problems. Whatever they are, we work to solve those so that they can move forward on that schedule. Got it. Got it. So what are some

Stacy Rasgon, Analyst, Bernstein: of the the, I guess, the things that you’re most excited about within, like, the the logs? I’ll talk about memory in a minute, but within logic and foundry, that are driving the extreme. And, I’m I’m I can’t remember trying to remember where the mix was versus was versus today. Mean, the memory mix is up a bit because the upgrades are starting again. But in general, if I think back five, six, seven years, logic foundry logic was, best case, probably 40% of your revenue.

It’s with 60 or 70% now, something

Tim Archer, President and CEO, GLAM Research: like that. I mean, it I it’s it’s improved materially. And and, you know, a lot of that is, of course, foundry logic spending is higher. But as as part of our mix, it’s it’s gotten better because we’ve introduced new tools. I talked about of course, we have growing strength in atomic layer deposition.

And, again, we’re focusing on on new emerging applications, new material types. We talked recently about some wins we had in, low case spacer films that help, improve, the performance transistors in in gate all around. Mhmm. But, also, you know, I just talked about the conductor etch tools. There’s more traditional things associated with the small feature patterning.

But I think one area that that is sometimes overlooked, when we talk about foundry logic, we’re often thinking the transistor and the device. Mhmm. Well, it’s become incredibly important in foundry logic is advanced packaging. And this is an area where, again, highly etch and depth intensive and highly skewed towards types of technologies that Lam is incredibly good at. Mhmm.

Like copper plating, something that we’ve we’ve been a leader in copper plating for twenty plus years. We were really the company that sort of pioneered the transition from aluminum to copper way back in the nineties. And so advanced packaging plays an incredibly important role in all of these AI GPUs and and and advanced foundry logic. And so as foundry logic spending has increased, a larger portion of their equipment budgets have been allocated towards putting these chips all into these very sophisticated three-dimensional and 2.5 dimensional, packages. And so that’s been a a huge area of growth for Lam as well.

In fact, we we had given an original forecast a few years ago that we would do a billion dollars Yeah. Of revenue in the future. We hit that a couple years early just last year. Okay. And this year, we said gate all around plus, advanced packaging would be well over $3,000,000,000 Uh-huh.

Of revenue for Lam. So it’s a very fast growing part of the the business.

Stacy Rasgon, Analyst, Bernstein: Now some of that package here will be in in memory as well. Right? I mean, the HBM and

Tim Archer, President and CEO, GLAM Research: That’s right. And and so packaging also includes, the HBM portion, where Lam has a very strong position, for the the through silicon, the TSVs that basically help connect, the TSVs that help connect the DRAM.

Stacy Rasgon, Analyst, Bernstein: Got it. Got it. No. It’s it’s it’s very exciting. Is there any difference for how you think about, like, I I foundry versus logic?

A lot of times we throw those, like, together, like, mentally, but, I mean, they’re not necessarily different customers, maybe different needs. Like, how do we how do we think about the differences between those?

Tim Archer, President and CEO, GLAM Research: You know, not not not specifically. From a from a technology requirement perspective, we don’t think about them so so differently. Clearly, you know, it kinda

Stacy Rasgon, Analyst, Bernstein: We don’t mention any specific customers.

Tim Archer, President and CEO, GLAM Research: I think that’s, you know, also, we we lump them together so we’re never forced to speak to, to to one specific customer. But, technology wise, I’d say, from an etch and depth perspective, very similar requirements.

Stacy Rasgon, Analyst, Bernstein: Got it. Got it. I wanna switch over to the memory side, though. So memory is an area that that, technically, has been very weak until very and and I’m trying to remember where where was it the trough for you? NAND what did it trough?

4% of revenue or something like that? I mean, at at the bottom? Maybe even more. I mean, it

Tim Archer, President and CEO, GLAM Research: was Yeah. It was it was really low. I I don’t don’t recall the exact percentage, but it’s But,

Stacy Rasgon, Analyst, Bernstein: you know, we can make it a

Tim Archer, President and CEO, GLAM Research: point part of our business.

Stacy Rasgon, Analyst, Bernstein: Earlier before we started. So this this is a company that that was historically viewed as being NAND focused. In in memory, again, back then, this could be 60 to 80%, most of which two thirds of it back then was probably NAND. And in the trough quarter for NAND, this is this is pre stock split, but, you know, they had guided something like $5 for the and you you beat the number at the time, but it’s fine. So it’s like a $20 annualized guide for a purportedly NAND focused semi cap going with no NAND.

It it it wasn’t bad word versus, like, prior NAND cycle, which had never been that bad. But if they had been, you you would have been bleeding. Right? NAND is coming back now. Right?

And it seems to be mostly upgrade spending rather than, like, capacity spending. But maybe you could talk a little bit about the difference between capacity spending versus upgrade spending and how NAND act and how WAM actually benefits from one versus the other.

Tim Archer, President and CEO, GLAM Research: Yeah. Sure. Yeah. No. I think it’s it’s important before beforehand, Stacy, I are talking.

Sometimes you need to see your big market go away so you can just see the progress you’re making in the other areas. And, essentially, we did. We saw Nand go down more than 75%. And in fact, in that year, we still delivered, I think, was about 27% operating income. So, you know, the company has learned to to adjust to these kinds of changes within big markets, but I think it really showed the strength of the other markets as we just talked.

But within NAND, it wasn’t like we sat still during that that time period. You know, we continued to invest even though the spending was kinda like I think we said sort of mid single digits, maybe mid to high single digits spending WFE in billions. We continue to invest, work with our customers because we knew that eventually, you needed to to advance the technology. Like I said, technology advancement is the way for our memory customers to lower their cost per bit and to improve performance. And so we knew the day would come when memory memory can fall off, but it always comes back.

And, and so on the first earnings call of this year, I believe, we said that two thirds of the bits produced were still stuck at the the one x x level. And we gave a number. We said, eventually, nobody leaves all those bits behind. And so over some period of time, customers would spend $40,000,000,000 to upgrade that capacity to nodes that were above 200 layer. And, I think that that’s, you know, we didn’t put a time frame on it because, like, ultimately, that’ll depend on when our customers feel the need to deliver more bits more of those higher quality, higher performance bits into the market.

But we know it will happen. And so then it’s a matter of how much of that opportunity is available for Lam. And we said of that upgrade business, more than 75% of that spend is Lam’s served market. Mhmm. And we capture a very high percentage of that SAM.

So it’s a it’s a really nice revenue stream that we we can somewhat predictably anticipate coming in the in the the next several years. And what what’s most important is that the types of equipment that need to be purchased are things that enable the layer stacking. And so that’s more etch and deposition equipment to build the the stacks and to etch the the features. Mhmm. But it also includes new types of equipment that are required to overcome the the complexity of stacking.

And so, again, it’s back to this complexity argument. If you stack more than 200 layers on a wafer, the wafer begins to bow. And so then you need to introduce another step which deposits a film on the backside of the wafer to counteract that stress. A tool that didn’t exist at for the hunt the one x x layer, but now beyond two x x, you start to it creates another opportunity for us. Similarly, when you want to stack one tier of layers on top of another tier Mhmm.

You have to do something about the hole you’ve opened. You have to protect it. And so you have to deposit a sacrificial carbon gap fill film into that hole, which can later be removed. Again, that’s only needed once you start tier stacking above the two x x level. It’s another new tool Lam sells.

It’s another new tool that we’ve developed with our customers. We have very, strong share in that in that application. And, you know, it just shows how complexity, you know, creates new opportunities for the company that’s most engaged and is kinda leading in those technology transitions. And so, yeah, I would just say that the the demand, given that our SAM itself expands and etched up intensity expands, the higher layer count goes. We actually have said we don’t need WFE to get back to prior peaks before Lam could conceivably reach peak new peak revenue levels.

Stacy Rasgon, Analyst, Bernstein: Got it. So I’m I’m like, how does your, I guess, your opportunity vary between, like, upgrade spending in NAND versus, like, pure capacity? Well,

Tim Archer, President and CEO, GLAM Research: you know, I think that we’re we’re we’re realistic about the the need to add pure capacity at this point.

Stacy Rasgon, Analyst, Bernstein: Mean, won’t be we’re gonna be adding anything a lot.

Tim Archer, President and CEO, GLAM Research: Right? Something that, you know, we we work closely with our customers, and I would say they’re they’re the best to comment on that. But it’s that’s driven by the economics and, you know, the demand of the market. Yeah. So we focus in in on really enabling our customers to get the capacity of higher performance bits in the cheapest way possible.

And that absolutely is by upgrading the installed base they have today, and that’s why we think that the majority of spending in NAND over the next couple of years will certainly be more upgrade focused than than really adding any additional capacity through Greenfield. And as I said, on a relative basis, that’s a great story for Lam in terms of output.

Stacy Rasgon, Analyst, Bernstein: I guess what I was asking is, like, if if there’s, you know, a billion dollars of spending capacity, I always think about Lam getting, I don’t know, 25% of that. Like, if it’s a billion dollars of upgrade spending, how much of that

Tim Archer, President and CEO, GLAM Research: is Lam capturing? Well, we haven’t broken that specific numbers about we said it was

Stacy Rasgon, Analyst, Bernstein: I just Is it fair to say it’s higher? Higher.

Tim Archer, President and CEO, GLAM Research: What we said was 75% of the upgrade SAM is our SAM. Uh-huh. And we capture a very high percentage of that. So you can imagine it’s it’s much higher.

Stacy Rasgon, Analyst, Bernstein: Got it. So I think this is a good pivot into the into the customer service business because, actually, a lot of this upgrade spending actually doesn’t show up in your equipment segment. It shows up in service, which which, by the way, is is sort of a pain to model. I I wish you would do it a little bit differently. Can I ask a dumb question?

Like, why do you include equipment sales to both 200 millimeter tools and and, I guess, upgrade equipment in services versus in equipment.

Tim Archer, President and CEO, GLAM Research: Well Why? I guess they say say just to keep you keep keep you working a little harder and keep you guessing. But, I don’t know if there’s a a really good way, but a reason to explain it. But I think, traditionally, long ago, we thought of all of this work is tied to the installed base. Right?

And and, really, it is the power of the installed base. You have the tools already installed, already facilitated within the customer’s fab. And so when we think about an upgrade, it really is, you can have a technology upgrade. You can have a productivity upgrade. These are things that just make the tools they’ve already purchased, more efficient, more useful for for the customer.

So I think it’s always lived there. And once you start reporting it that way, it’s been it’s been it’s been hard and to to probably make a change. It is become a much bigger part of our business, though. And with NAND being very upgrade and, focused going forward, I think we’re gonna see more of that, more growth in that area. But I think that you know, so upgrades is a big part of the CSBG business.

But, really, the CSBG, our installed base spares and service business, we see that as, you know, another tremendous growth driver for the company. We used to talk about it, and everybody would wait till the end of the year to see, like, how many modules how many new modules have been added or new chambers to the installed base and try to compute the growth. But we’ve also been working hard the last five years to expand the market Mhmm. Opportunity for us in that as well. We’ve talked recently back again to one of these industry firsts.

The very end of last year, I I, we introduced the, industry’s first maintenance cobot. So this is a a cobot that basically does maintenance on on our systems, essentially preventative maintenance type activities that would have previously been done by a person. And they are very efficient and incredibly repeatable in the work that they do. And so, again, thinking about how you expand your services business in a way that, you know, is really a win win for both us and the customers. As customers move fabs into regions where labor is not easily attainable, especially the the skilled labor to do Mhmm.

Like, highly complex maintenance on the system, they really desire a lot more intelligent services, and those can be data data services like our equipment intelligence that speed troubleshooting, or they can be these preventative maintenance cobots. And What what is it doing? It’s, like, replacing the pumps and It changing out the focus ring? You know what? It it depends on the the piece of equipment, but, first implementation was on a a dielectric etch tool.

Uh-huh. Dielectric etchers, at a regular frequency, you have to do a chamber cleaning. You have to replace the parts. As you know, etchers themselves consume themselves, as part of the process. It’s as you’re etching the wafer, you’re also etching the chamber.

And so at a determined frequency, you need to replace those parts. So the cobot, basically, it can disassemble the tool, replace the parts, reassemble the tool, and and effectively, get you ready to go back into production. Could’ve used one of those twenty years ago with You know, we’ve we’ve our estimate is that, cobots can improve machine availability in a fab by about 8%. Wow. And if you can get 8%, presumably in a fab where you ultimately have all cobots, 8% could be worth over a hundred million dollars of running cost savings for a hundred thousand wafer start fab.

And so it’s a it’s a big opportunity. It’s a it’s a the very early stages, but we’re right now from that first use case that’s proven out running in production, now expanding the number of cobots we have for other applications.

Stacy Rasgon, Analyst, Bernstein: Is everybody running that use case using the cobots now? Or it, like, at a single customer now?

Tim Archer, President and CEO, GLAM Research: It’s it’s expanding. It’s at multiple customers now. Yep.

Stacy Rasgon, Analyst, Bernstein: Wow. Wow. How does the the customer service business just break up by the different pieces? So we’ve we’ve got 200 millimeter tools, got upgrades, we’ve spares, we’ve got services. I guess we have cobots.

Tim Archer, President and CEO, GLAM Research: I don’t know where those would be. They would be in they would be in services.

Stacy Rasgon, Analyst, Bernstein: And so,

Tim Archer, President and CEO, GLAM Research: yeah, so the the this our customer support business group, which focuses on these installed base applications effectively is comprised of the Reliant business, as you said, which is things like specialty technologies, 200 millimeter tools, the spares business, the services business, and the upgrades business.

Stacy Rasgon, Analyst, Bernstein: Got it. You wanna give me any sort of

Tim Archer, President and CEO, GLAM Research: color on the splits? Color on this oh, the rank order. You know, it it it it’s moved around a little bit in the but the two two largest segments tend to be spares and Reliant. And then up service upgrade upgrades obviously can can be strong in in certain upgrade cycles and then, services after that. And I would say, you know, nobody likes to be at the at the bottom.

And so services, that’s why we’re working hard to innovate around Yeah. The services and really see a huge opportunity to grow there. Mhmm. Like I said, in an area where customers have an identified need. I mean, just because, because there’s a lot more fabs being built than there are engineers being created in some of these places.

Mhmm. Got it. You your one

Stacy Rasgon, Analyst, Bernstein: of your competitors talks a lot about, you know, service contracts and subscription and and recurring revenue and that’s How do you guys think about that? Is that, a key focus for you, especially for the services portion of that business?

Tim Archer, President and CEO, GLAM Research: Well, I I think that the the form of the contract can vary, differently to each customer. But, I mean, it’s, I would say there’s probably no fundamental difference in in the way that any of us engage with our customers. I mean, customers look to us to to provide the services and spares for our systems, but it can, as I say, it can take different forms, with different customers. Okay. Got it.

Stacy Rasgon, Analyst, Bernstein: To look at the 200 millimeter, and that this has a a number of branch off topics into China and and, you know, just the broader demand environment right now. I guess it’s fair to say that the 200 millimeter has probably been weaker than it was. We’ve got you know, the end markets that that tends to sell into are probably not so great right now, industrial and auto and some of those. And and and I’d like to use that actually as a lead in to China and maybe, like, the broader geopolitical situation that we have now.

Tim Archer, President and CEO, GLAM Research: Well, I think that if you look at sort of that lagging edge, market outside of China, I’d say it’s probably been weak for the last couple years. I mean, probably for the reason you’re just talking about. Some of the end end drivers, automotive, industrial, and

Stacy Rasgon, Analyst, Bernstein: such of We’re in a you came off of industrial downturn maybe.

Tim Archer, President and CEO, GLAM Research: Yeah. And you came off of, COVID where clearly there was a lot of investment and a lot of demand. And and I think, you know, we know we know those kinds of cycles very well in in the, the equipment business. And so I think we’ve seen that playing out. Obviously, strength in in China at the trailing edge sort of filled in for some of that.

So it’s still maintained as as quite a strong part of the market. Mhmm. But, you know, really, when we talk about what’s leading semiconductors, WFE higher, you know, really is I mean, again, back to our focus, it’s about leading edge Mhmm. The complexity and the expansion that’s occurring there. But, you know, we do extremely well in trailing edge.

You know, we’ve really turned a lot of our attention though towards, again, places where we think we add can add technical value. So this isn’t you know, we sell a lot of equipment into that space, but, I mean, I think where we’re most excited is in the area, what we refer to as specialty technology.

Stacy Rasgon, Analyst, Bernstein: So you’re innovating there as well. It’s not okay.

Tim Archer, President and CEO, GLAM Research: And and and in fact, we’ve, it’s one area where, you know, we’ve made in the the past couple years a couple of small acquisitions. I mean, these are things that, again, that are places where we’ve talked, I think, publicly about our pulse laser deposition, tool. You know, it’s a very small market, but very you know, again, a very highly specialized technology that has a specific application for 200 millimeter, use. We wouldn’t have considered that years ago as the traditional trailing edge or lagging edge, which is just more of the same thing you bought ten or twenty years ago. So I I think we’ve expanded our thinking to, of course, selling trailing edge tools, but really, also innovating on new applications that just happened to be at

Stacy Rasgon, Analyst, Bernstein: a smaller wafer size. Got it. Got it. I guess along those lines, like, does China fit into all of this? And and and, clearly, you guys have been impacted by sort of increasing waves of export controls, which have not been all that fun.

China was still buying a lot of especially those kinds of of of tools. Sometimes it’s it’s unclear to me who’s actually doing the buying in China. I guess just how do we think about the general environment in China, the geopolitical situation? I always worry, like, what’s the risk of further export controls? I mean, could could our, you know, our new president wake up one morning and, you know, after eating a bad burrito or something and decide to to cut everything off.

I mean, this is something I I wish I don’t think it’s likely, but I wish I could say I thought that risk was non zero, and I’m not sure that it is. So, like, how does how does Lem think about those kinds of risks?

Tim Archer, President and CEO, GLAM Research: Well, obviously, we’re we’re aware of the risks because we’ve been affected by by export controls.

Stacy Rasgon, Analyst, Bernstein: I said several you said billions of dollars are ever. Right?

Tim Archer, President and CEO, GLAM Research: Go back to October 2022. Yeah. We were restricted to to the tune of about $2,000,000,000, in the first wave of restrictions, primarily limiting our ability to sell to companies that did things like higher layer account NAND. That was a big impact for us. But, obviously, even with that impact that exists in our numbers today, that’s that’s I think what what what we’re really happy about is Yeah.

Clearly, we’ve been impacted, yet we’re still posting extremely strong results. And I think that shows that the strategy of of diversifying the company years ago really is playing out. This year, January of twenty five, and, again, we had another set of restrictions that that took out about $700,000,000 from our forecast Mhmm. Predominantly in the second half of the year, which is why, you know, we’ve been signaling through the, you know, the last couple calls that probably the second half is still a little bit, weaker than the first half Mhmm. Simply because of those restrictions that came in.

Yeah. So we’re well aware that there are export restriction risks. But I think in some ways, our goal, again, back to how we think about our strategy is by really accelerating our investments and and SAM expansion and share gains at the leading edge and really participating in this growing etch and depth intensity Mhmm. Which is really, like we’ve mentioned, advanced packaging and all these other applications that are coming, and creating opportunity. Over time, the the impact of China and, therefore, the risk of further China restrictions tends to diminish.

Doesn’t become zero, but it but it tends to diminish as you grow the rest of your business. So we’re pressing hard on, you know, really this this idea of expanding and growing at the leading edge as a way of of addressing a risk that we otherwise don’t really have a means to address. Got it. And China now is what? Roughly 30%?

Roughly roughly 30%. We said it would trend down, and we thought year over year from last year to this year as a mix as a percent of the mix, it would be lower.

Stacy Rasgon, Analyst, Bernstein: Yeah. No. That that makes sense. How do you guys think about the risk of, you know, indigenous Chinese semi cap players? Because, I mean, I I give you my my view.

I I mean, they’re, you know, they’re I don’t think they’re as capable, but, I mean, these these are real companies, right, with real products. And they’re selling to customers who, in some sense, have no choice but to use them. And I think they’re actually working together probably more than they used to be before the expert comes. It’s like,

Tim Archer, President and CEO, GLAM Research: how does Lam sort of

Stacy Rasgon, Analyst, Bernstein: judge the risk of of of those guys? How capable are they, like, relative to what you’re delivering?

Tim Archer, President and CEO, GLAM Research: Well, I think in our in our business, scale and number of wafers you run equates to learning. And so, you know, as we’ve been restricted from selling into China, clearly, those companies have grown because they’re then the only other alternative for for domestic Chinese companies. And so we’ve seen them grow, and we would we would assume, therefore, become more capable for those trailing edge applications. Now, again, back to there’s not much we can do about that, but that’s not core to Lam’s future growth strategy. And so, again, it’s back to maybe even just further confirmation that our future lies in expanding our SAM and and growing our share at the leading edge.

Got it. That makes sense.

Stacy Rasgon, Analyst, Bernstein: I wanna talk about some of the the the near term environment. Not not so much like WFE. Right? I I get your your outlook for, like, back half, and I understand that. But just this this general environment, tariffs and and everything else, sounds sounds like I I guess, first, I’d just like to remind us, like, what are you guys baking in or thinking about in terms of tariffs right now, both from a revenue as well as a potentially a cost impact?

And then I’d I’d like to talk a little more about your global footprint, is actually becoming more global and I think maybe benefiting you, like, quite a quite a bit recently. But but it’s in general, like, what are you seeing right now just in this? Because I’ll be honest. I don’t I don’t know what the hell I’m seeing right now. Well,

Tim Archer, President and CEO, GLAM Research: you know, and, look, you we we can only factor in what we kind of do know. And so, the only thing I can say is from a direct impact of tariffs, the tariffs that are in place today that that do exist are factored into the forecast we just gave. And so you can see that, we still have quite a quite a good forecast throughout in terms of, revenue and profitability. I think longer term, obviously, indirect impact of tariffs on on demand. I have to listen to it.

That that’s really something, obviously, we’re working with customers on, but I think that those would play out in a a longer a longer time frame. With respect to how we’re managing through and kind of as we think about how we manage this, You know, we’ve been somewhat fortunate that, you know, if we went back again those five years ago and we talked about diversifying our product portfolio, you know, really, the COVID period taught us also that we we needed to diversify our manufacturing footprint to to be prepared and be flexible during periods of of large demand increases or perhaps large demand decreases. And so, on the demand increase side, we expanded manufacturing and supply chain closer to our customers to put us more within those regions so that we could be more responsive to what was taking place there. And so it means that given the the the investment that’s made in Asia, we have a much stronger and larger Asia footprint now than we did back then. Still have a large US presence as well.

We have a European presence. And so I think when I look at Mhmm. How Lam is situated today in terms of geographic footprint, I feel like we’re, with this diverse capability of manufacturing and supply chain, quite well positioned, not to, eliminate the risk of tariffs, but to to be able to navigate through them, as they come and and and try to be as responsive as possible. Got it. Got it.

Stacy Rasgon, Analyst, Bernstein: And I guess specifically, like like, what is Malaysia doing for you? This is facility you’ve been building out for several years. It looks like it’s finally kinda coming into its own now. Like, what what’s the purpose of it? And, like, how is it actually helping the model?

Tim Archer, President and CEO, GLAM Research: Well, I think that, you know, we’ve we we have seen that flow through in our gross margin clearly. Obviously, when you have the opportunity to build the facility, at scale, close to your customers, close to, your supply chain, a lot of costs come out of the system. And so, you know, one thing that we we did, years ago was we embarked on the the plan to put in that facility in Malaysia. For a couple of years, we talked about it as a a headwind. I mean, we put in Yeah.

We put it in at scale so that at scale, it would be very beneficial to our operating, efficiency. But until full, I mean, it was it was a it was a drag. And so, I think as now we went through the downturn and coming back out and really seeing significant output from that facility, you’ve seen our gross margins jump up, about 200 basis points as a result of the investments we’ve made in those in new facilities like that. And, you know, that’s gotten us a lot closer already to our our target margin, that we just laid out at our financial, investor day for 50%.

Stacy Rasgon, Analyst, Bernstein: Right. So I I know I always ask you in this forum, why do your gross margins have to start with a four, like, given everything? It doesn’t sound like they necessarily have to now, and I thought it was really interesting. You know? So you you have set out this, like, this, like, longer term 50% target.

You guided next quarter 49, and that was actually with, I guess, some amount of of tariff cost impact. I I almost feel like you would have been there next quarter if it wasn’t for the tariffs. Is there any reason why we shouldn’t be thinking about this kind of level of margin, at least where we’re sitting now, as sustainable? Like, what are what are some of the headwinds? Well If there are I mean I mean, should it not be fit?

Maybe it’s not. Maybe it’s

Tim Archer, President and CEO, GLAM Research: higher than Yeah. Well We we knew we knew when we put out those numbers immediately, people would think that we had, sandbagged our Investor Day target. But I think just to explain, I mean, we we recognize that the business you know, the the levels will always vary with, product mix and customer mix and, you know, whatever the the the scale might be in that particular quarter. And so I think what we put out that longer term model of 50%, we’re really talking about that as becoming more of the new normal. Mhmm.

If you went back a couple of years ago, we would have said we oscillated around kind of the maybe the 46 and a half, 47% gross margin range. If we can get to where we’re now sort of varying around the 50% margin range with, product mix and and and customer mix kind of in there, means you’re gonna have quarters above that. You’re gonna maybe have some quarters below that. But it it will materially step us up in terms of what we consider to be the new Okay. The new model.

And so you’re right. This quarter right now, I mean, we’re we’re we guided 49 and a half, which would be the highest gross margin in the company’s Ever? The combined company history. And we also guided for the highest operating margin for the company since the nineteen nineties. And so I’d say say from a profitability perspective, we’re we felt like we’re we’re hitting on all cylinders right now.

Stacy Rasgon, Analyst, Bernstein: And what are your thoughts on, like, using that cash that that that profitability is generating?

Tim Archer, President and CEO, GLAM Research: Well, we we we have a we have a strong track record of cash return to, to shareholders, and we’re gonna continue that. We we upped our commitment to greater than 85% of free cash flow return, through combination of dividends and buybacks.

Stacy Rasgon, Analyst, Bernstein: I feel like you’ve had

Tim Archer, President and CEO, GLAM Research: that as much doing we’ve been doing more around a % range, but, yeah, obviously, we’ll we’ll we we committed 85 just in case, in case there is something. But, realistically, we’ve increased our dividend every year, and, we’ve continued to be opportunistic, and aggressive in the buyback. So we have, I think, a little over $8,000,000,000 in in authorized buyback still remaining. And so, you know, I think that we’ll find uses for the cash.

Stacy Rasgon, Analyst, Bernstein: Got it. Got it. We got seven or eight minutes left. Do you feel like going to the lightning round?

Tim Archer, President and CEO, GLAM Research: Sure. Got quite a few. I was thinking I couldn’t imagine what you haven’t already asked, but I guess we’ll see.

Stacy Rasgon, Analyst, Bernstein: I’ve I’ve got a lot more questions here. Okay. Can you talk more in detail about the CryoEtch opportunity in LEMS positioning there? And I I know this is this tends to be a controversy. Tokyo

Tim Archer, President and CEO, GLAM Research: Electron talks

Stacy Rasgon, Analyst, Bernstein: a lot about CryoEtch. So, like, what do

Tim Archer, President and CEO, GLAM Research: think about CryoEtch?

Stacy Rasgon, Analyst, Bernstein: Well, I think we’re,

Tim Archer, President and CEO, GLAM Research: we’re extremely well positioned. We launched cryo what we call cryo three point o, our third generation CryoEtch capability last year, doing extremely well, and I think that, we feel very strong about, our our positions. Also, remember, if the vast majority of spending is going to be on upgrades and Lam has the technical capability, the most cost efficient way for our customers to get to that next technology node is to upgrade the tool they have today with Lam’s Cryo three point o. Mhmm. Got it.

Stacy Rasgon, Analyst, Bernstein: What’s been your pricing model historically? And do you see this changing amid technology inflections and increased of your tools? And what could that mean for gross margins?

Tim Archer, President and CEO, GLAM Research: Well, I think obviously, you know, pricing is, something that, we can’t talk about in detail. But, clearly, you know, we believe that as we invest and strategically, we’re focused more on the the leading edge, most complex, most enabling applications, we we can we should and can get paid for those, for that value delivered. Mhmm. Got it.

Stacy Rasgon, Analyst, Bernstein: Okay. Are your customers different in in what you call specialty technologies versus lagging edge? Again, I guess, question is what’s the difference between those two terms? Do they just mean the same thing? Well, I

Tim Archer, President and CEO, GLAM Research: think there are there are comp companies that truly would classify as lagging edge and that they’re they’re really doing applications that are done by other companies, and they’re just sort of competing for, in that application. There are companies that are we would consider specialty technologies, new types of devices, new applications that haven’t existed, and, so we see them very differently. We’re engaged with a research consortia, for instance, in Europe on, these new emerging specialty technology applications and and the types of equipment that are needed for those. They just happen to be done at 200 millimeter, so often they get lumped into that same same bucket, but they are they are often new deposition or etch techniques that are required. Things like atomic layer etching for ultra low damage to certain types of materials.

It’s a new deposition materials of, like, multi, basically, very complex materials for, like, RF applications. So we look at those look at those somewhat differently, and the customers tend to be different as well. Got it. Got it.

Stacy Rasgon, Analyst, Bernstein: Can you talk about the opportunity you see in Moly atomic layer deposition for gate all around? Is the Moly transition an opportunity to take share?

Tim Archer, President and CEO, GLAM Research: Well, Moly itself, first is being implemented into NAND, and, and Lam has a very strong position there. We’re also engaged for Moly into logic, which will come next. And, you know, I think it is it is an opportunity for us to take share in places where we’ve not been the predominant supplier of, say, tungsten to those those customers.

Stacy Rasgon, Analyst, Bernstein: Mhmm. Got it. How quickly can the Chinese WFE companies catch up on leading edge? I guess I would add, can they catch up on leading edge?

Tim Archer, President and CEO, GLAM Research: Well, I I I guess I would just speak to the challenge of it, which is, again, if you think about Lam’s strategy at the leading edge, it is incredibly close collaboration. In fact, often through our close to customer labs, we have technology centers in both Korea and Taiwan and in The US next to each of those leading edge companies. And we we collaborate very closely to create those next processes and equipment that’s needed for the leading edge. I think that, the customer plays a huge role. You have to have a leading edge customer to make Mhmm.

Fast progress. And so, you know, I think if we we continue to execute, you know, we can continue to maintain our lead.

Stacy Rasgon, Analyst, Bernstein: Got it. I guess I would add to that. Is is Huawei a lead customer enough for them to try to develop? And I I know they have problems given what they’re, you know, under right now. But I

Tim Archer, President and CEO, GLAM Research: guess I guess when I’m talking about customers, I’m specifically talking about the chip maker themselves. And so therefore Okay. You know, the deep in the technology of the the chip market the the actual device manufacturing itself, not not necessarily application. Got it. Got it.

Stacy Rasgon, Analyst, Bernstein: Can you talk about dry resist?

Tim Archer, President and CEO, GLAM Research: Sure. We think, dry resist becomes a a critically enabling technology as you move below two nanometer, especially, as you move

Stacy Rasgon, Analyst, Bernstein: Do you wanna talk about what it is, by the

Tim Archer, President and CEO, GLAM Research: way? Sorry.

Stacy Rasgon, Analyst, Bernstein: Yes. Dry

Tim Archer, President and CEO, GLAM Research: resist. So dry resist is a is a a new class of material for photoresist for EUV patterning. It’s it basically both increases the productivity of EUV patterning and also, perhaps more importantly, improves the fidelity of the printed features. And as you move to smaller and smaller EUV patterns, that fidelity, the line edge roughness, the the the elimination of potential defects that occurred during patterning becomes that much more important, especially as you move into high NA where, essentially, you’ve invested a tremendous amount of money to be able to print very small features. You want those features to look like what you wanted them to look like as printed.

And so Lam has been investing in this technology. It’s deposited dry, which means that it instead of wet on a track, which means it’s very well suited to the type of equipment the Lam makes. Dry resist actually is also it’s it’s really a suite of tools. It includes a underlayer that helps with photon absorption, includes the resist, deposition itself, and it also includes dry development. And so, really, it is a

Stacy Rasgon, Analyst, Bernstein: like an etch. Right?

Tim Archer, President and CEO, GLAM Research: The the development. Exactly. And so it’s really a, a suite of tools that’s used to accomplish the the the the patterning and and and development of that resist.

Stacy Rasgon, Analyst, Bernstein: But have you guys I can’t remember what you’ve sized that opportunity at.

Tim Archer, President and CEO, GLAM Research: Well, we said we said a billion and a half dollars over five years. Okay. Just bigger. It might we’ll we’ll we’ll see how it we’ll see. We’ll we’ll see.

Let us get there first, and then we’ll we’ll we’ll resize. But, we did announce that we just had our first, production win and production implementation at a DRAM manufacturer. Again, we often talk about foundry logic, but DRAM also has significant EUV patterning challenges. And, and so that’s our first implementation, and that’ll give us a lot of of learning and, I think, accelerate our progress on that that application.

Stacy Rasgon, Analyst, Bernstein: Got it. But, Tim, we we got about a minute left. As always, I will give you your soapbox. You’ve got a big in big room here with lots of investors. Why should they buy your stock?

Tim Archer, President and CEO, GLAM Research: Sure. Well, I think that, you know, when you when you think about investing in a company, I think you the the easiest way to think about it is do they have natural tailwinds? I mean, things that that that are really supportive of whatever strategy is that the company might be executing. And when I think about Lam, this the rising capital intensity for etch and deposition equipment across every device segment, whether you look at foundry logic, you look at DRAM, you look at NAND, any of the new applications, they will use more etch and deposition equipment in the future. As I mentioned, in the trillion dollar semiconductor industry, which isn’t really that far away We did six thirty last year.

So

Stacy Rasgon, Analyst, Bernstein: pretty close.

Tim Archer, President and CEO, GLAM Research: Kind of best estimates might be that WFE grows roughly 50% or so from here. We said that our served market in foundry logic grows by two x. In DRAM and NAND, it also grows 1.8 x and 1.7 x. So it means etch and deposition, Lam’s markets will significantly outperform the growth rate of the industry overall. And then you look at all the new products we’ve introduced, all the industry first, we’re gaining share.

I think it’s just Mhmm. You know, we’ve got tailwinds that are basically supporting our own internal execution.

Stacy Rasgon, Analyst, Bernstein: Got it. I think that’s a good place to end it. Thank you so much. It’s been great.

Tim Archer, President and CEO, GLAM Research: Yep. Thank you.

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