Semiconductor Industry Insights: Lam Research's Market Outlook and Operational Excellence
2024-01-30
Lam Research, a leading supplier of wafer fabrication equipment (WFE), recently held its December 2023 quarterly earnings conference call. The call, which took place on January 24, 2024, featured key executives including Tim Archer (President and CEO), Doug Bettinger (Executive VP and CFO), and Ram Ganesh (Head of Investor Relations).
During the call, Lam Research discussed its strong performance in the December quarter. The company reported that its revenues, gross margin, operating margin, and EPS all exceeded the midpoint of their guided ranges. Lam Research attributed this success to improved positioning in the foundry, logic, and specialty technology segments, growth in their customer support business group, and improved cost management and operational efficiency.
In terms of the wafer fab equipment (WFE) market, Lam Research provided insights into the estimated spending for 2023. The company stated that the spending is expected to be in the low $80 billion range. Lam Research noted that the slight increase in WFE spending in 2023 was driven by continued strength in domestic China spending, particularly in equipment segments where Lam Research does not participate. However, memory WFE decreased by nearly 40% year on year, with NAND spending decreasing by more than 75% due to cuts in spending. Non-memory WFE also decreased in the mid-single digits range, with mature node growth in China partially offsetting declines in leading-edge node spending in the rest of the world.
Looking ahead to calendar 2024, Lam Research provided an early view of WFE spending. The company expects the spending to be in the mid- to high $80 billion range. Growth in DRAM is anticipated to be driven by capacity additions for high-bandwidth memory and node conversions. Additionally, foundry logic spend is expected to grow in 2024, particularly in China.
Lam Research also discussed its focus on enhancing responsiveness and resilience for customers through in-region capabilities and leveraging the benefits of global flexibility. The company highlighted its investments in digital capabilities, such as virtual twinning, advanced simulation, and AI, to accelerate problem-solving and improve operational excellence. Lam Research is also reengineering its business processing systems to drive operational excellence at a greater scale. The company announced a small workforce reduction predominantly at the executive level to align resources with execution priorities and drive efficiency and speed of decision-making.
In terms of financials, Lam Research reported revenue of $14.3 billion and diluted earnings per share of $27.33 in calendar year 2023. For the December quarter, revenue was $3.76 billion, up 8% from the prior quarter but down 29% from a year ago. The company's gross margin performance in the December quarter was 47.6%, which was above the midpoint of guidance and generally in line with the September quarter level.
Lam Research also provided insights into its cash flows from operations in 2023, which amounted to $5.3 billion. The company reported a days sales outstanding of 66 days in the December quarter and an improvement in inventory turns to 1.8 times from the prior quarter level of 1.5. Noncash expenses for the December quarter included approximately $70 million for equity compensation, $78 million for depreciation, and $13 million for amortization. Capital expenditures for the December quarter were $115 million, with primary areas of spending focused on product development activities and lab expansions in the United States and Asia. Lam Research had approximately 17,200 regular full-time employees at the end of the December quarter.
Overall, Lam Research's December 2023 quarterly earnings conference call covered a range of important business topics, including the company's financial performance, the WFE market outlook, customer support business growth, regional revenue composition, and investments in operational excellence and digital capabilities. The call provided valuable insights into Lam Research's strategies and plans for continued success in the semiconductor industry.