Lam Research at Citi’s 2025 Conference: Strategic Growth and Challenges

On Wednesday, 03 September 2025, Lam Research (NASDAQ:LRCX) participated in Citi’s 2025 Global Technology, Media and Telecommunications Conference. The discussion, led by CFO Doug Bettinger, emphasized both the promising growth prospects and the challenges faced by the company. Lam Research is leveraging its robust product portfolio and strategic geographic positioning to navigate industry trends and regulatory hurdles.

Key Takeaways

• Lam Research is experiencing strong growth, driven by demand for etch and deposition equipment.
• The company aims to increase its Serviceable Available Market (SAM) to the high-30s percentage range long term.
• China remains a key market, with expectations for spending to remain steady despite new regulations.
• Financially, Lam is committed to returning at least 85% of free cash flow to shareholders.
• Gross margins reached 50%, though a slight dip is anticipated in the December quarter.

Financial Results

• Gross margins have improved significantly, reaching 50% in recent quarters.
• A slight decrease to around 48% is expected in the December quarter due to customer mix and tariffs.
• The company has increased its dividend by 13% and continues its accelerated share repurchase program.

Operational Updates

• Lam Research is outperforming the overall Wafer Fab Equipment (WFE) market.
• The company’s product portfolio includes new tools like Halo, Acara, and Ventex.
• A "close to customer" strategy, particularly in Asia, has contributed to margin improvements.
• Advanced packaging and dry resist technology present significant growth opportunities.

Future Outlook

• Lam aims to reach a high-30s percentage of the overall WFE market by 2028 or 2029.
• Advanced packaging, with applications like CoWoS and High Bandwidth Memory, is a major growth driver.
• The Customer Support Business Group is expected to see modest growth, driven by higher utilization and advanced service offerings.

Q&A Highlights

• Leading-edge technology is more service-intensive than lagging-edge.
• Tariffs are expected to rise in December compared to previous quarters.
• CFO Doug Bettinger expressed optimism about the strength of Lam’s product portfolio.

In conclusion, Lam Research remains confident in its ability to outperform the market and deliver sustainable growth. For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Citi’s 2025 Global Technology, Media and Telecommunications Conference:

Atif Malik, Analyst, Citi Global TMT: Of Citi Global TMT Conference. My name is Atif Malik. I cover US semiconductor, semiconductor equipment, and networking equipment stocks. It’s my pleasure to welcome Doug Bettinger, EVP, CFO, Lam Research as well as Ram Dinesh, Friendly Neighborhood IR. I’m going to kick it off with my questions.

And if you have any questions, feel free to feel free to raise your hands, I’ll call on you. Doug, appreciate you being here at the Citi conference. We are both on a red eye flight. We

Doug Bettinger, EVP, CFO, Lam Research: got in late, didn’t we? Exactly. So so you definitely wanna be in front of your shareholders. You can step back and talk about what’s going on. If if you allow me, let me just point out to everybody the forward looking statements.

Please have a look at this. I’d like to keep my attorneys happy. So, have a look at this. It’s on our IR website. So, anyway, sorry to interrupt you.

Atif Malik, Analyst, Citi Global TMT: No worries. I want to step back and talk about, what we’re seeing in the semiconductor equipment industry. And I’ve been doing cell site research for fifteen plus years and I’ve never seen such a powerful confluence of spending drivers that are non lithography driven, whether it’s create all around HBM or advanced packaging.

Doug Bettinger, EVP, CFO, Lam Research: It’s absolutely amazing. It’s wonderful to be an etch and deposition company right now. Yeah. Was gonna get that. So so

Atif Malik, Analyst, Citi Global TMT: I think that that and and the the second thing is that I I’ve also never seen a divergence in performance of around some of your peers the way we’re seeing, given your exposure to, you know, all these four or five different drivers. Now when we look at the WFE outlook that you guys have given, which is 105,000,000,000 and then second half being flat half or half, you’re outperforming WFE meaningfully 20 plus points this year. You’ve you’ve talked about your SAM in mid thirties this year into next year and long term goal of high thirties. So if you just kind of walk

Doug Bettinger, EVP, CFO, Lam Research: us Maybe big picture high level, and then we can get it. I know you got a lot of detailed stuff. Basically, when we look at what’s what’s going on in the industry right now, you have an evolution of three d device architectures occurring. You referenced some of it. Gate all around is one.

We can talk about that. Advanced packaging is another one. We can talk about that. NAND flash, well, we’re not back to the races, in terms of peak investment levels. You’re seeing conversion related spending.

That is a three d device architecture, obviously. Backside power is beginning to show up or maybe more next year. When you think about these things, it’s enabled by etch and deposition. And you absolutely have the the high level story. Right?

We did an investor day back in February where we described an outlook that suggests when we look at the spending on wafer fab equipment, we believe it evolves from the low 30% going towards etch and deposition to when you get to the latter part of the decade, call it ’28, ’29, that being high 30% of overall wafer fab equipment going towards up and depth intensity. So I describe it as we live in a good neighborhood, and we’ve got the nice house up on the hill because, frankly, right now, when Tim and I and the management team look at the strength of the product portfolio right now, it’s never been stronger in our assessment. We’ve got a new metalization tool. We call it Halo. We’ve got a new conductor etch tool.

We call it Acara. We’ve got a new dielectric etch tool. We call it Ventex. These are brand new bottoms up designs of things we’ve done for a long time, And the customer pull on these is really very strong. And so when we look at this evolution of WFE going into the high 30% from the low 30%, we believe we’re going to take 50% of that growing SAM because of the strength of the product portfolio.

But that’s kind of what you’re seeing us delivering on right now, and we believe into the next several years. Like I said, we live in a good neighborhood. So that that’s the big picture top level. Great. And going back to Tim’s comment on next year, I

Atif Malik, Analyst, Citi Global TMT: know it’s early days, but he started confident on some of the drivers like gate all around and your SAM kind of sustaining in this mid-30s next year and Lam to outperform whatever WFE is going to be next year. Is that is that the right just that

Doug Bettinger, EVP, CFO, Lam Research: Still the way we think about it. Right? These things I described continue into next year and the year after and the year after that. It’s too soon for us to give you an assessment of, okay, what’s WFE next year? Everybody’s got their own opinion.

We’ll we’ll probably give you some color on that when we get to the next earnings call. But this continuation of etch and deposition intensity, we see over the next several years. So that’s the confidence that you heard Tim referring to is these things aren’t going to change.

Atif Malik, Analyst, Citi Global TMT: Okay. So let’s talk about some near term topics that coming up with investors. The the first one, one of your US peer reported earnings after you guys and talked about weaker October guidance driven by China being down and some kind of push outs on leading edge foundry. And I’m just curious why is there such dichotomy in what they’re seeing and what you guys are seeing?

Doug Bettinger, EVP, CFO, Lam Research: Yeah. Listen, it’s hard for me to tell you what somebody else is seeing. I can tell you what we’re seeing. Yeah. We if you go back to our last call, we raised WFE because we saw a little bit of strengthening in China and maybe a little bit of DRAM, frankly, as well.

And we had previously suggested, yeah, it feels a little first half weighted. It now seems fairly balanced to us. And honestly, we see China strengthening into our September, although I do think it’s gonna pull back a little bit in the December. What they’re seeing, I I don’t know. Right?

I didn’t see any change in leading edge foundry and logic. Right? That’s been pretty well understood for a while. I didn’t see any change in China for I don’t know what they were describing there, Atif, to be honest. You know, everybody’s lead times are a little different.

They they have a broader portfolio, maybe losing a little bit of share to the local equipment suppliers in China, I would guess. But I don’t know. You heard what we’re seeing, and it does feel a little

Atif Malik, Analyst, Citi Global TMT: bit different. Okay. Sticking on China. Doug, talked about China being stronger in the September on domestic and then maybe down in December. But I think more interestingly, you saw strength in international China fabs in your

Doug Bettinger, EVP, CFO, Lam Research: June. In the June, we did, yeah. Mean that ticked up quite a good amount. Off a smaller base, I understand the vast majority of the spending in China is still local Chinese customers, but there are multinationals there with fabs. And that was up sequentially in

Atif Malik, Analyst, Citi Global TMT: the June for sure. Okay. So if you look at the full year kind of picture, is it fair to say that the domestic could still be down from last year and international is up year over year?

Doug Bettinger, EVP, CFO, Lam Research: Yeah. I’m not going to break down what’s what in China. We came into the year thinking China was going to be a little bit softer. It’s probably flattish as a percent of overall spending this year. So that has strengthened a little bit.

I’m not going to break down how much is, the global multinationals because that’s kind of only a couple of customers, so. All right.

Atif Malik, Analyst, Citi Global TMT: And any initial thoughts on the recent news in the Commerce Department revoking the waivers for the international customers who will have to apply for the licenses? The news actually came out in June, that was before you reported, but any initial thoughts on that?

Doug Bettinger, EVP, CFO, Lam Research: Listen, I think our assessment, why they made this change, not entirely sure. I think the reality of it is, we’re now gonna have to apply for licenses in partnership with our customers. We will do that. We have an expectation that those licenses are going to be approved. In fact, I think commerce has suggested they will be approved.

It’ll just require, you know, go apply and and get the paperwork in. And we’re we’re beginning to

Atif Malik, Analyst, Citi Global TMT: do that as we speak. That’s that’s good news. Let’s talk about your foundry sales. I think most people, have perceived lab as more of a memory play historically, but you guys have been quietly outperforming the foundry investments. So in terms of your foundry sales, if you can just kind of separate what’s kind of Yeah.

Let me unpack it. Drive it. Yeah.

Doug Bettinger, EVP, CFO, Lam Research: Let me unpack it a little bit for you. I think there’s some things going on, some of which we’ve already spoken about. First, leading edge foundry and logic. Gate all around is where the investment is going towards as well as maybe the very beginning of backside power. When you think about those things, we’ve described a growing addressable market for etch and deposition of a billion dollars for gate all around for every 100,000 wafer starts at capacity that gets put put in place.

So that’s a big deal. Similarly, with backside power, when that begins to show up, probably not until next year in a in a bigger way, that also is a growth in our addressable market of a billion dollars for every 100,000 wafer starts that uses backside power. So at the leading edge, you’re beginning to see that show up, obviously. Right? Gate all around for sure.

On top of that, when you look at the evolution of architectures, advanced packaging has become a very important component of what’s going on in foundry as well. Right? When you look at how big some of these compute die are, they’re frankly at the radical limit. They can’t get any bigger. So order to drive performance forward, packaging has become a solution.

We have a very strong product offering in the through silicon via process. I call it the drill and fill. It’s the silicon etching and the copper electroplating. That’s our Sindian tool and the Sabre three d tool is what we call those two. Very strong presence there.

So advanced packaging shows up there as well. In addition to the fact that honestly in in the more mature foundries, and you’re seeing this in our our China footprint, we’re doing extraordinarily well. In fact, we’re growing share, believe, in China in some of the more mature foundries. So when you put all of those things together, Atif, that’s what you see going on and you’re absolutely right. One of the comparisons I was looking at when I was getting ready for earnings was the last time we’re at these revenue levels at the ’22.

We, I think the record revenue for the company was nearly $5,300,000,000. At that point, December 22, memory was half of the equipment sales. Last quarter, foundry was 52% of system sales. So obviously, there’s been a transformation in the composition of our business because of the things we’re talking about. That’s not to say we don’t have a wonderful presence in memory, NAND and DRAM.

We absolutely do. We love our memory customers. I love our memory customers. But I also love the fact that some of these new products that I described earlier are getting real traction in foundry and logic as well.

Atif Malik, Analyst, Citi Global TMT: Taeghan, just in the foundry spending, gate all around two nanometer, 1.4, are you seeing some sort of a peak in near term in terms of wafer starts with rapid layering on top of TSMC? Or do you think this is just seasonality and then the spending picks up in first half next year?

Doug Bettinger, EVP, CFO, Lam Research: Again, I’m not going to give you an outlook for next year, but this stuff isn’t going away out of. Great.

Atif Malik, Analyst, Citi Global TMT: Let’s talk about NAND. You guys are outperforming the equipment spending market, but it’s still almost half the run rate it peaked at, which was around $2,021,000,000,000 dollars a few years back. And so but you guys are particularly exposed to the NAND upgrade opportunity with Moly and Halo, your product platform. Can you just talk about the momentum you have on that product across NAND makers? And how do you see the spending kind of normalize in

Doug Bettinger, EVP, CFO, Lam Research: let me describe what’s number you’ve going on in NAND. You’re absolutely right. We’re nowhere close to by our peak investment levels. But that’s not really what’s going on in the NAND set of customers. When we look at what’s happening, we believe over the next several years, it’s going to be largely defined by conversion, converting the installed base.

The good thing for Lam is we are the constraint tools in the installed base. That memory hole etch, the alternating film layers, the metallization, we kinda have all of that across the totality of the industry. When our customers go through a conversion, what they do is upgrade the installed base. Again, that’s largely us. Our our share of the spending, our SAM, when that happens is nominally two thirds of every dollar that’s spent.

We don’t have a 100% share, but it’s an etch and deposition, Sam, very intensive in that. And that’s that’s largely what we see happening right now. We have an expectation that over the next several years and when we’re in the early innings of this right now, the conversion related spending will be roughly $40,000,000,000 over the next several years. So can round that off to whatever number you think that is each year. It’ll not be exactly the same every year, but that’s what’s happening.

The installed base skinning upgrade, we’re the constraint tool. Our share spending is quite high. You always get a little bit of new equipment purchase when upgrades are happening. Right? You have to buy new bottleneck tools and whatnot.

And then layering on top of that is what you referred to in in molybdenum, the metallization change. You’re gonna begin to see this layering in there as well over the next several years, especially as the industry evolves to being driven by QLC devices in enterprise SSDs, Moly shows up there first. So when we step back and look at what’s going on, that’s largely what you see happening right now is conversions. The beginning of this several year $40,000,000,000 spending profile, and we get a very large share of

Atif Malik, Analyst, Citi Global TMT: that spending. That that’s what’s happening. Right. Let’s talk about advanced packaging. You you guys don’t really break it out in terms of your sales.

But if you can just talk about the growth you’re seeing in that end market. The number that caught my attention was Tim mentioning that it’s 1% of WFE, but it’s growing like 6x or something.

Doug Bettinger, EVP, CFO, Lam Research: Going to 6%. Yep, exactly right. You picked up on everything. That’s good. Yeah, so advanced packaging.

Last year, we described advanced packaging as a business that was a little more than a billion dollars in revenue for us. Describing it this year, we combined it with that data all around node and said, putting those two together, it’s north of $3,000,000,000 So obviously, you see decent growth there. It’s showing up really in two places, advanced packaging and foundry, Think about COWAS and the big GPU compute tiles and ASICs and and all of those type things. It also shows up in high bandwidth memory. Right?

When you got HBM three going to three e going to four, you’ve got an eight die stack going to 12, eventually going to 16. That’s all interconnected with that through silicon via process. Again, our drill and fill, our our silicon etching and copper electroplating, Those two areas are driving a lot of the spending that we’re seeing in advanced packaging, HBM and CoWoS. And it’s all about AI compute, right? HBM layers on top of those parallel compute tiles in an integrated package solution.

And again, we do that through Silicon Via. We do other things there as well, but the TSV is what we’re, just have an extraordinarily strong presence.

Atif Malik, Analyst, Citi Global TMT: Great. Let’s switch on to the model and the gross margins. Great job in getting it to 50% guide for the September. If you can just parse through the margins, said December could be down in the gross margins, like what’s driving the mix and the shift?

Doug Bettinger, EVP, CFO, Lam Research: Yes. First, if you’ll allow me, again, that comparison that I was referring to earlier, right? If you go back to last time we’re at these revenue levels, gross margin was roughly 46%. We just printed a 50. Really proud of the execution of the company in terms of how we’ve delivered that.

If you’ve been following the company for a while, we told you we were gonna do this. We suggested to you back in ’22 when memory turned down that we were gonna more aggressively adopt a close to customer both r and d and manufacturing strategy when business growth came back. So business took down for a couple quarters and then we’ve grown every quarter since then. And that incremental volume has been more closely manufactured where the customers are, which tends to be in Asia. We we ramped our new factory in Malaysia, not really new anymore and factory is five years old at this transformed gross margin.

Now we’re also benefiting from a a positive a favorable customer mix. But the execution of the company with that close to customer strategy, think about it. We were 46. We now printed a 50. A lot of that had to do with us driving manufacturing to be closer to the customers.

And yes, you’re right. When we we went out of our way to describe in the December quarter that customer mix is probably gonna be somewhat less favorable and I suggested you

Atif Malik, Analyst, Citi Global TMT: should

Doug Bettinger, EVP, CFO, Lam Research: be thinking about a 48% for December roughly. I just didn’t want people to run ahead with the fact that we printed a 50% in June and guided a 50% in September. I wanted to kinda set expectations properly, Atif. So that’s that that’s what

Atif Malik, Analyst, Citi Global TMT: we got going on right now. Super. Let me pause here and see if there are any questions in the audience. If you have a question, please raise your hand.

Doug Bettinger, EVP, CFO, Lam Research: It’s a full room, but everybody’s quiet this morning.

Atif Malik, Analyst, Citi Global TMT: Alright. I’ll continue. CSBG, a great business. My favorite part of the company’s business. Right.

And so so this year, there was a little bit of upside when you’re talking about modest growth for CSPG for this year. Curious what is driving the modest upside to the CSPG outlook? And also if you can share any preliminary thoughts on next year.

Doug Bettinger, EVP, CFO, Lam Research: Yeah. So if you’re new to the story, let me describe what the customer support business group is. CSBG is the acronym. Four things to think about, spare parts, service, equipment upgrades, and then what we call the Reliant product line. Think of that this is older tools, tools that have been around for, I don’t know, ten plus years in in some cases.

That’s what’s in CSPG. We came into the year thinking or suggesting CSPG is probably gonna be down a little bit. And we reset that on the last call to suggest it’s gonna be I think I used the word modest growth. And so unpacking that a little bit, frankly, utilization is a little bit stronger. Higher utilization drives a little higher consumption of spare parts as well as service.

So that’s kind of what has moved it from slightly down to slightly up. We’re also really excited about, and you hear Tim talk about this a lot, cobots or advanced service offerings, equipment intelligence. Increasingly, what we’re trying to do with the service portion of CSPG is pivot to be more, I guess I’d call it results based outcomes as opposed to show up and do tasks in terms of service. And we’re using equipment intelligence and cobots to deliver a more consistent service outcome. And honestly, when we look sometimes at what we see fabs running and and outcomes, we realize that with some of this advanced service, we can deliver a better outcome for the customer.

And so that’s what we’re doing. We’re pivoting how we’re delivering service to be more outcome based. And frankly, the customers like this because they get something that they might not have been able to get on their own. And it moves the conversation from being more about what’s the value of this as opposed to, you know, what’s what’s the cost of it, if you will, Atif. So that’s also part of what we’re excited about relative to the future as we look forward with CSBG is advanced services.

You’re going hear us talking more and more about this. Customers really like it. Great.

Atif Malik, Analyst, Citi Global TMT: Part of your business that you’ve talked about in the last few years, dry strip, it has been Dry for the resist. Yep. Yeah, dry resist dry strip. And I know recently you guys had some kind of meeting with ASML in terms of the progress of the dry strip. If you can share with us where is the adoption Yep.

Going for

Doug Bettinger, EVP, CFO, Lam Research: the dry resist? Yeah. We’re very excited about this dry photoresist. It’s putting resist on using a more deposition like process as opposed to wet chemistry. When we look at it, you can control it better.

And yes, we’re you’re absolutely right. We are collaborating and have been collaborating with ASML for quite a long time on this capability. What I would describe to you is when we look at the business, we believe over the next five years, call it, that this cumulatively has an opportunity to deliver for us $1,000,000,000 in revenue based on where we see it being adopted. What I would also describe to you is every one of our customers that uses EUV has our hardware in the lab evaluating what this is capable of doing. So that’s a strong statement.

Customers don’t allocate lab space to hardware unless they see something of value. We’ve announced two tool of record decisions and we have one ramping into production as we speak with the leading DRAM customer. So we’re excited about it. It’s it’s showing up. It’s all incremental for us.

This is the most exciting thing when I look at it from a financial standpoint. It’s really hard in this industry to find something that’s quote unquote greenfield or or brand new space and this is for us. So we’re very excited about what it’s going to deliver. And like I said, ramping into production with one leading customer. And I see Erica’s hand up over here if we can get a mic.

Is it going back to services for a moment, if the spares and services are any different with the rising utilization of lagging edge versus leading edge? Yeah. So on the webcast, the question was, is there a different, I’d call it attach rate, Erica, between leading and lagging edge from a service and spares? What I would describe to you leading edge is somewhat more spares and service intensive. And that’s where a lot of this advanced service is targeted at more leading edge customers today.

Now we can propagate it over time and we often do this from leading customers back to more mature customers. But the intensity, Erica, is is higher in the leading edge at the leading edge.

Atif Malik, Analyst, Citi Global TMT: On the same lines, the mature logic, you mentioned earlier that you guys could be gaining a bit of share in China, the mature logic. But outside China, your peer was talking about some green shoots where the companies outside China have started to maybe invest more in the mature logic.

Doug Bettinger, EVP, CFO, Lam Research: A little little bit.

Atif Malik, Analyst, Citi Global TMT: You’ve seen the same thing. Okay.

Doug Bettinger, EVP, CFO, Lam Research: Yes. I mean, what need to think about is that set of customers were still well, maybe we’re getting to the tail end of the inventory cycle. And when you’re sitting on inventory, you generally aren’t investing in equipment. And when I look at the totality of what’s going on in analog, power, all of those places, we seem to be coming through the back part of the inventory cycle. And so inevitably what happens is a little bit more equipment investment.

Atif Malik, Analyst, Citi Global TMT: And just on the topic of tariffs, you guys have manufacturing presence in Malaysia as well as in US. How are you juggling your manufacturing? How are thinking about the long term footprint around manufacturing?

Doug Bettinger, EVP, CFO, Lam Research: Listen, the good part about the way we’ve got the company structured is we have manufacturing globally. And what that means is we got factories in California, in Ohio, in Oregon, in Malaysia, in Taiwan, in Korea, and in Austria. And so once you understand what whatever the tariff environment is, you can adjust things if you need to to optimize. Now you can’t make it’s not going to go away. If tariffs are here and and enforced, it’ll never be zero.

But you can I don’t know, minimize is the right word, but set the structure of the company up to support where the customer wants certain things? You can’t do it instantaneously, Atif. But once you understand what the what the final rules of the game are, so to speak, you can you can adjust. Part of that gross margin that I was describing in December at 48% also contemplates the fact that tariffs are probably gonna be somewhat higher in December, certainly than they were in June and and September as well. So so that’s part of also describing that.

K. Let me see if there

Atif Malik, Analyst, Citi Global TMT: are other questions in the the audience. Then on the capital allocation, you were very clear on your earnings call that you will continue the ASR into the September. Can you just walk us through your most recent thoughts on capital allocation?

Doug Bettinger, EVP, CFO, Lam Research: Yes. I mean, it really is unchanged from the February. In February at the Investor Day, we updated the plans for the company or basically described it in a way that suggests we plan to return percent, at least 85% of free cash flow to shareholders through a combination of dividends and buyback. I don’t know if you saw our announcement last week, but we raised the dividend by $03 a share on a quarterly basis. I think that’s a 13% increase, fairly consistent with what we’ve done over the last five or six years, kind of a low mid teens raise in the dividend.

So, you know, I know I know that’s what a lot of shareholders really want to see from us is grow that dividend on an annual basis. We plan to do that. And I always point out to people that level of dividend is comfortably supported by the cash generation in CSBG. So that’s something to kind of have in the back of your mind. And then we supplement it with the share buyback.

You’re absolutely right. In the June, we entered into an accelerated share repurchase agreement with a couple of banks that executed in June and will continue executing into the September. And then we supplement it with open market or 10b5-one share buyback plans and that’s very much kind of how we manage the buyback portion of things.

Atif Malik, Analyst, Citi Global TMT: We have a few minutes. If you have any questions for Doug, you can come up and ask Doug. With that, let me close out. Thank you, Doug for coming to the Citi conference. Okay, Arthur.

Thank you.

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