LRCX - Lam Research Corporation (LRCX) Management Presents at Bank of America Global Technology Conference (Transcript)
2023-06-06 22:39:06 ET
Lam Research Corporation (LRCX)
Bank of America Global Technology Conference Transcript
June 6, 2023, 5:40 PM ET
Executives
Doug Bettinger - Chief Financial Officer
Analysts
Vivek Arya - Bank of America
Presentation
Vivek Arya
All right. Let’s get started. Good afternoon. Welcome to this afternoon session. I am Vivek Arya. I cover semiconductor, semiconductor equipment at BoFA. I am really delighted to have the team from Lam Research join us, Doug Bettinger, the Chief Financial Officer. What we will do is go through some of my Q&A, but please feel raise your hand if you would like to bring up a question.
But with that, warm welcome, Doug, and I know you have…
Doug Bettinger
Good afternoon, Vivek.
Vivek Arya
… some exciting announcement.
Doug Bettinger
We have been doing exciting. Just real quick Safe Harbor to keep all of my attorneys happy. So let me read this real quick and please take a look at what’s up on screen. Today’s discussion may include forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially.
Additional information concerning factors that could cause results to differ materially from those forward-looking statements can be found in the risk factors disclosed public filings with the SEC on Form 10-Q.
So, with that, we can actually talk about the business.
Question-and-Answer Session
Q - Vivek Arya
Thanks, Doug. Thank you. So maybe let’s just start with the state of the union that, I mean, versus what you thought at the start of the year in terms planning assumptions of demand in your various end markets? How is -- if you do kind of a midyear check, how are they panning out versus our original assumption?
Doug Bettinger
Yeah. No. That’s a great place to start. Not only different, frankly, when I think about it. We started the year, it did change a little bit. So I will unpack that slightly. So it is a down year, right? And that statement is especially remained in memory side of our business and I will talk a little bit about that.
But we began the year with a view that wafer fab equipment investment spending mid-70s and we take that down to the middle tiny bit after the last quarter’s earnings. And so now we are saying low mid-70s. We began the year thinking things were a little bit first half weighted. As we sit here today, we now think of a little bit second half weighted.
Subtle movements around in there. It’s probably no surprise to people that follow the semiconductor industry know that memory got a little bit softer. Foundry got a little softer, too, relative to 90-plus days ago or something, right? That was part of the downtick in total.
Offsetting that to a certain extent and part of the reason why it’s a little bit second half weighted is, we got some clarification on the rule -- the regulations relative to what we could ship into China that provided a little bit of an upside that we believe we are going to ship in the second half. I describe that for Lam as a few hundred million dollars that will show up in the second half.
So when you unpack the whole thing, we see WFE down more than 20%, memory down more than 50%, within that NAND down well more than overall memory and DRAM a little bit less so. So that’s kind of how we achieve things.
Vivek Arya
Got it. So we go through the different end markets, but I have to ask this obligatory question about AI?
Doug Bettinger
I love. There is no question.
Vivek Arya
We are very excited to answer.
Doug Bettinger
We are in the best company in the industry to ask any question. It’s kind of tongue and cheek. But, yeah, go ahead.
Vivek Arya
Yeah. So what’s your sense, right? There’s a lot of excitement, right, in parts of the data center. How does -- how do we connect the dots from that excitement to what it means for Lam?
Doug Bettinger
I think, listen, when I think about this, there are two incremental growth drivers as I think forward over the next several years. One of which is what’s going to occur in the cloud and driven in a big way by AI.
It’s new stuff, new use cases, new compute architectures that are going to show up. And frankly, today, even though there’s lots of excitement about it, it’s still a really modest amount of room spending at the end, right? If you think about total servers that are true AI servers, it’s probably only 5%-ish, something like that, but it’s going to meaningfully grow over time.
And when we look at that and like study the motherboards in there and the architectures that we see, you tend to have very big logic die just staying around microprocessors, exceller like GPU. It’s obvious, right? FPGAs other custom TPUs and things like that.
Maybe equally importantly for Lam is the memory content that shows up in these servers. When we look at the DRAM footprint, it’s nominally 8 times as much as an enterprise server and in NAND it’s 3 times to 5 times.
And so, today, there’s tons of excitement about it and I am super excited about it too. But the future is really going to where it shows up and impacts our business. And frankly, right now, it’s not really doing anything with equipment orders, not yet.
Vivek Arya
Okay.
Doug Bettinger
Right. And so you will see that leading its foundry and you will see it in memory.
Vivek Arya
Got it. Is that because on the memory side, data center still has inventory there deep…
Doug Bettinger
That’s part of it.
Vivek Arya
… that’s really the.
Doug Bettinger
That’s part of it. And then when you think forward, okay, there’s a new set of CPUs ramping Sapphire Rapids in general. It’s going to pair itself in bigger way with DDR5. That’s going to begin to help the industry move through the cycle when that began to be a bigger contributor to the total bid demand.
Vivek Arya
Got it. And then just one last thing there, Doug. Longer term, do you think that data center and AI is incremental to industry growth or is it merely going to offset, right, the maturation of the consumer part of the industry?
Doug Bettinger
I think it’s going to be incremental. I mean if you go read these studies that are out there about the $1 trillion semi industries, it’s almost obligatory and then sometimes like to stay away from that number.
But anyway, be there it May, if you actually go read the stuff that people have done the work, there’s two things that contribute to incremental growth. One is this, AI and very high-end compute architecture and the other is the content growth in automotive, both I believe are going to be incremental as we go forward.
Vivek Arya
Got it. One other kind of near-term is, we heard that TSMC might change their CapEx towards the lower end of their outlook. I was under the assumption that when you gave your outlook or others that you have kind of contemplated some of that softness in the leading edge also, right? So was that news to you or was it kind of already sort of contemplated and how you were thinking about the year?
Doug Bettinger
Generally speaking, when our customers make public announcements, usually, they have communicated with us beforehand, usually well in advance, because we have to plan, we need to be positioned for whatever might be changed.
So almost always when our customers are making public statements, we have known about it ahead of time and to the best of our ability, contemplated that and how we describe what’s going on in the industry. This is no different.
I’d also tell you, we have a pretty robust process, when we get on an earnings call. We have gone through a cycle of talking to all of our customers. What are your plans? Is there any change? That’s one. It’s a bottoms-up process.
But then my corporate analytics and IR team goes through and does a top-down analysis of the market and do these two things kind of hold together to the best of our ability to analyze it. And when we communicate something to you, I want to be as accurate as we can be, so we go at this in a pretty rigorous way.
Vivek Arya
Got it. Now if you take a step back, Doug, last year the discussion was the industry would be a $100 billion, WFE unconstrained number even higher. And here we are, right, I think, what you suggested is what, low-to-mid-70s?
Doug Bettinger
Low-mid-70s what I am seeing.
Vivek Arya
Yeah. So how much of that is the cycle and how much of that could be the fact that maybe $100 billion was a very abnormal and I am -- I know it’s all hindsight, but maybe that number was too hard to begin with?
Doug Bettinger
Listen, with hindsight, it’s very clear to me what occurred when it was -- when we are in the middle of it, it wasn’t apparent to me. And so when I think about where we sit today, often the cycle in semis is more about supply than it is about demand.
I think about the last year and a half, it’s been as much about demand and change in demand outlook as it is supply related. And by that, I mean, if you take yourself back in time to the beginning of last year, I think, all of us believe there was going to be unit growth PCs and unit growth in smartphones.
And the industry configured itself according to that point of view. Well, that didn’t turn out to be what happened, right? I think some aspect of it, we perhaps mistook secular growth a little bit for demand pull-forward that occurred because of COVID. Anyway, with hindsight, I can look at it and say, that’s probably what happened. So there was that aspect to it.
It was confounded actually and made it a little bit worse and this is maybe as much supply. We went through this crazy period of everything being completely constrained. In the entire industry rallied itself around the stuff you could get, maybe let’s get a little bit more, right, just in case, waiting for that mythical golden screw. We all did it.
And when you put those two things together, it created a cycle that we are seeing today. And I can look back on it and intellectually what I just described, I thought deeply about and that’s my conclusion. But when it was happening, it wasn’t apparent to me anyway that that’s what was going on.
Vivek Arya
Got it. So as we start to think about like the next two years, three years, what is the right formulation if you are an RC to predict what WFE can be, right? So not like the specific number, but when you have to make your predictions about WFE, like do you start with semiconductor industry growth, and say, look, if in the past, semis grew X, right, WFE grew 20%, 30% faster than that, you think that kind of formulation is. So, let’s say, if I say, semiconductor industry growth is 10% next year.
Doug Bettinger
Yeah.
Vivek Arya
Does that inform you what WFE might be next year?
Doug Bettinger
It helps. I mean the first thing I would say is, listen, I am a firm believer in the growth aspect of this industry. This industry is going meaningfully bigger five years, 10 years from now than it is today. That’s an important thing to believe.
And if you don’t believe that you are in the wrong room, invested in the wrong sector. I think we all believe better. You wouldn’t be here listening to talk about this. So that’s one thing, right? The future growth is important.
But this is a growth cyclical industry. Every year does not grow, as much as I wish it did, it just doesn’t work there, and it never has and as things have consolidated, there was a kernel of help I had at one point that it would have got somewhat better, and frankly, it hasn’t. So it is what it is, a growth cyclical industry.
But the growth piece is important, because you have to be prepared for that future growth. And for Lam, as I think about, okay, we are in a down cycle right now. What are we doing? We are making sure we have got the best product roadmap we can possibly have for.
Even though we are trimming spending a little bit, we are keeping R&D full steam ahead, because you must have the best products in the industry to win and that is what we are intending to do and what we are doing. Our product lineup has never been stronger. You must be convicted and we are, right? Don’t sacrifice the long-term to manage the short-term P&L. You can’t do it.
Then you also must construct the company and have an operating model that has a level of variability to it. We have done that extremely well over the 43-year history of the company and we keep refining that. We are fine-tuning that. It’s not fun to go through the downturn where you got to kind of trim the workforce and whatnot, but that’s what we just did, and frankly, we are setting the company up.
Here’s something else I have been saying. At the end of the day in the near-term, I can’t control what the customers are going to spend kind of is what it is. But what we can control is make sure you get the best products coming out, we are doing that, new edge platform, new drivers. We have got a whole bunch of different things that we are extremely focused on.
And then try to make the operating model better, right? We are working extremely hard right now, maybe restructuring is not quite the right word, but I will use it anyway. To take advantage of the manufacturing footprint, we have grown in Asia over the last three years or four years to pivot to it in a bigger way when growth does come back, so that we are more efficient, more profitable company.
That’s very much what the leadership team at Lam Research is focused on this year is control the stuff you can control and be better when the business gets better is how I have been describing it. I believe we are going to be extraordinarily well positioned when that growth does come back whenever it is.
Vivek Arya
A few more things back about the back half and then we will talk about the longer term. The incremental approvals for China. Is that a one-off business or do you think that is kind of then becomes a baseline and it will do then whatever overall China WFE does moving forward?
Doug Bettinger
Yeah. The first thing I want to make sure people understand is the rules didn’t change. There are no new rules. The rules that came out on October 7th are the rules. There was some level of uncertainty we had with a specific customer at a specific process node. We had a view that it was not crossing that technology line was out there.
And the industry actually working together, kind of we came together and went had that conversation with government we got that clarification. So the rules didn’t change. I think there was -- maybe we didn’t describe this well.
There was some people that thought, hey, did something change? No, not really. We just got a clarification. And so as I think through that, that’s part of that, it’s a little bit second half weighted year, because we didn’t ship any of that in the first half, it will show up in the second.
Vivek Arya
Got it. But is that then the new baseline? So…
Doug Bettinger
I think…
Vivek Arya
… all else being equal then it is part of the new baseline, right, for whatever China WFE does?
Doug Bettinger
I -- yes. It is…
Vivek Arya
There is not like one-off that was from last year that was something. Go ahead.
Doug Bettinger
No. But having said that, let me not, let me remind you, this was a big impact on our business, right? We described a $2 billion revenue that we believed would have shown up this year that we -- it’s not there any longer, because the rules restricted our ability to ship. So we had to respond to that and we have. It’s still a big impact. It’s a little bit less than we previously thought.
Vivek Arya
Right. Do you think these China restrictions have reduced how we think about WFE going forward, because their intensity used to be higher? So even if, let’s say, overall industry sales are the same, is it possible that we should be preparing for somewhat incrementally lower intensity, given that the customer with higher intensity may not be there because of these restrictions?
Doug Bettinger
Yeah. I don’t necessarily think so. At the end of the day, in the longer term, really what matters is demand for semiconductors.
Vivek Arya
Right.
Doug Bettinger
Geographically, where it’s supplied doesn’t matter all that much. The demand for semiconductors is based on form factors we are all buying, digitization of everything going on in society, it’s the consumption of that, that at the end of the day matters. Geographically, if something moves from one place to another to another, we are just shipping to a different location.
Vivek Arya
Got it. And one last one kind of more semantics than anything. If Lam’s view is kind of low-to-mid-70s and your competitors are saying mid-70s. Is that just an end market difference, right? Like what does that just noise I am getting, why did those against [ph]?
Doug Bettinger
I don’t read too much into it. Frankly, there’s -- none of us get this perfect.
Vivek Arya
Right.
Doug Bettinger
We generally know our markets pretty well. In fact, perfectly, it was too strong a statement, but pretty well. And then we estimate the stuff that we don’t participate in, like, litho, C&P and ion implant and what not. And we don’t always get that as correct as we get our own market. So there’s -- I think there’s a little bit of noise from that.
And frankly, I think, everybody would say the same thing. And this year, because there was some level of like deferred shipment that spilled into this year, it’s maybe even a little bit more confusing what the hard number is going to be.
Vivek Arya
Right.
Doug Bettinger
The important thing to understand, though, at the end of the day, the market is the market. It will be what it will be.
Vivek Arya
Got it.
Doug Bettinger
And it’s not going to be different from one company versus another, it’s the same market.
Vivek Arya
Right. And then on the deferred revenue, kind of unchanged at that $2 billion, what was your original plan when the year started? Like where do you -- is this a new normal for deferred revenue now? And why is that, why has the normal change for deferred?
Doug Bettinger
It’s probably a little bit higher than it used to be. But it no longer has anything to do with all of the, like, deferred shipments that we had going on. When we came through the supply chain, we had a phenomenon where we couldn’t get everything we needed and we were shipping somewhat incomplete systems to the customer so that we could begin installation, qualification and then we would ship the final components to the customer fab and assemble it and then turn it over to the customer. So that created a level of deferred revenue, because if the tool isn’t complete, you can’t recognize revenue.
Vivek Arya
Right.
Doug Bettinger
We always have a little bit of that, but it went well beyond what was normal in terms of how we generally like to be running the business. But it’s what the customers want it, because we can start the installation process soon.
Vivek Arya
Right.
Doug Bettinger
As we exited the March quarter, that phenomenon largely is back to normal, meaning there’s not some kind of abnormal volume of these incomplete tool shipments out there any longer and we are caught up. We are background in the business in a normal fashion.
However, what occurred in -- also in the March quarter is deferred revenue stayed flat, what offset that reduction in these incomplete tool shipments was cash and advance payments, which oftentimes when they have a new set of customers that we haven’t done business before -- with before they pay us ahead before we deliver and ship the tool. So that offset it. So we have several relatively newer customers…
Vivek Arya
Right.
Doug Bettinger
… that are in that bucket. The way I have described that is, yeah, that is where it is. I believe the majority of that revenue is by the end of the calendar year. So it’s maybe still a little bit elevated, it will come down to a more normal level as we exit the calendar year.
Vivek Arya
Got it. Next on memory. Would you agree that this is kind of the biggest X factor for when WFE really starts to recover? And if, yes, then as we sit here today, what’s -- what are the typical landmarks you are looking for to suggest when that investment comes out. So sure, it’s 70% off of pies, but we said when it was 50% off of pies, it’s down a lot?
Doug Bettinger
It’s down like same.
Vivek Arya
So…
Doug Bettinger
Yeah. Listen, here’s the, like, I attention too and you guys can pay attention to a lot of this stuff, too. First is inventory, right? You parse everybody’s earnings call, look at their balance sheet, is inventory coming down in the memory space. That’s the first thing that has to happen.
Vivek Arya
Right.
Doug Bettinger
There’s a lot of inventory out there, more maybe than I can remember seeing for the reasons we have already spoken about. As that begins coming down, that’s essentially a reduction in supply, right? ECON 101, supply comes down, pricing gets better. So that’s how -- that’s another metric you should be paying attention to is where is memory pricing. It’s still going down. Maybe the rate of decline is getting a little bit better. So those two things are important.
That then shows up in my customer’s P&L and their cash generation. And when that begins to happen, the way we are going to -- I believe where it will show up in our business is utilizations and the first thing that will happen is utilizations will come back to a more normalized level. We will see that in our spares and service business. So the customer support business group, a component of the spares and service will begin to get better. That’s when if you listen to our description of what’s happening, that’s when you will know it’s starting to show up at Lam.
First -- so utilization will come back up to a more normalized level. The next thing that will happen is, there’s a large installed base out there in memory that’s not being upgraded right now. The node conversion -- pace of the node conversions…
Vivek Arya
Right.
Doug Bettinger
… has slowed to a certain extent. That equipment, we shipped in 2021 and 2022 is not being upgraded. When we get past the increase in utilization, the upgrades will begin to happen. That’s also in our CSBG business. So that’s the next thing you will begin to hear us talking about whenever this does begin to get better is, okay, the upgrades are happening again.
And then eventually, you get to the point that new wafer capacity begins to get put in place again. I am very hesitant to communicate any timeframe for any of this, because I -- frankly, I don’t really know, my phone is ringing sorry. But that’s how I know what it will show up, because that’s how it always shows.
Vivek Arya
So have you seen any green shoots, any changes at all in behavior in those?
Doug Bettinger
Nothing I am seeing right now.
Vivek Arya
And how much of an early warning system is that, right, in that, let’s say, if you are not seeing those green shoots today that, does it mean like effectively you know what the situation is for the next six months or do you think that memory -- when things change, they change very quickly. So things could change three months from now, right? Or do you think that’s too optimistic?
Doug Bettinger
Yeah. I am being super hesitant on timeframe. I am just not going to engage the conversation. But frankly, I don’t know for sure. Here’s what I do know, though, I have been in the industry for 30 years. It’s been a while. I am kind of long in the tooth here in some ways. For every downturn, the upturn always comes. The pace and the shape, I don’t know.
Vivek Arya
Right.
Doug Bettinger
But I do know it will happen, because it always does.
Vivek Arya
Got it. One other behavior, right, we have seen that some of the memory customers have written inventory off, right? So before the increased utilization, is it possible to first sell that per price…
Doug Bettinger
Okay.
Vivek Arya
… because it’s a cost, right?
Doug Bettinger
Yeah. Very possible.
Vivek Arya
The shareholders have already paid for it.
Doug Bettinger
Very possible.
Vivek Arya
So they first sell that and then they start increasing utilization and then you start getting the orders.
Doug Bettinger
I think that’s what happened.
Vivek Arya
Happened.
Doug Bettinger
Yeah.
Vivek Arya
Got it. Okay. Do you see any differences in behavior NAND versus DRAM or do you think that’s pretty much the same?
Doug Bettinger
It’s not all that different. Frankly, three of my customers do both.
Vivek Arya
Right. That’s won’t matter.
Doug Bettinger
Not all that much. We are not in exactly the same timing cadence, pricing and inventory…
Vivek Arya
Right.
Doug Bettinger
… is a little bit different between the two, but it’s not terribly, terribly different.
Vivek Arya
I see. Then on lagging edge, like, as you must have heard that there is a concern that there is pull in, there are over investments, right? If you could address that, both in terms of China versus non-China, what part of lagging edge investments and growth that we are seeing this year is sustainable and where is it kind of unsustainable?
Doug Bettinger
Yeah. Again, I kind of think about this very simplistically, but first thing you have to think about when you are trying to ask…
Vivek Arya
Right.
Doug Bettinger
… answer a question like that is, what is the secular demand growth driver? What’s going on? And is there secular demand that is requiring the investment? And there is in this case, right? And it’s -- if you think about what’s going on in industrial, automotive, security, analog, IoT, is there secular growth in all that? There is.
Is it a segment of the business that’s probably been somewhat underinvested in over the last several years? Yeah, probably is. And so that’s important to get your head wrapped around. If you believe that, then it will make more sense when you start decomposing okay, who’s investing and why are they investing?
When I look at the mature node spending, it’s pretty resilient this year. That shows up in our Reliant business. So I have described that. It’s a global set of customers investing. It’s not any one or another region because of the secular demand. So that’s important to understand.
Now there is an aspect of this that is, yes, there’s a set of customers in China investing. I would tell you that, that set of customers is relatively new to some of this stuff. And so if you think about the level of investment they are likely making relative to the amount of output they are generating, it’s very likely less efficient…
Vivek Arya
Right.
Doug Bettinger
… than somebody that’s been doing this for 40 years. And is that overinvestment, I don’t think that’s overinvestment. It’s just a state of where a newer customer finds themselves and they will get better and more efficient over time.
And so that’s the way I think about this is, first, is there secular demand? Yes, I believe there is. Is it an area that needs the investment? Yes, there is. Are there unique demand drivers in here? Yeah, there are.
And that’s the most important thing. And then you decompose, who’s investing and at what stage are they and where the edge of the fab, you got to then go decompose it sort of customer-by-customer.
Vivek Arya
Got it. So is there a way to quantify what is Lam’s lagging edge exposure? How much has it grown this year?
Doug Bettinger
It’s -- the Reliant product line has done very, very well and continues to do very well. I have now been describing as there’s like a number one and number two size of business in CSBG. Spares and Reliant are kind of one and two.
Vivek Arya
Got it.
Doug Bettinger
But I haven’t put hard numbers on it.
Vivek Arya
Got it. The CSBG business, right, very attractive part of the portfolio…
Doug Bettinger
I love…
Vivek Arya
It’s been very resilient. Why not start giving a backlog for that business, if it is resilient and if it needs to be valued as a subscription and software type business, then why not provide a backlog?
Doug Bettinger
I don’t provide backlog for anything. It’s not a business that backlog is actually all that relevant for or all that important for. I mean, yeah, this service stuff clearly has long-term contracts. But there’s a lot of it that is just think about spares consumption.
Vivek Arya
Right.
Doug Bettinger
A lot of that is transactional based on where the fabs are and where the utilization is and it’s a very large part of the business. Backlog isn’t really all that relevant to consumption spares. Same with upgrades.
Vivek Arya
Right.
Doug Bettinger
Really not all that relevant to backlog. So why would I provide backlog when it’s not relevant for a significant portion of the business? I don’t. That’s why. But that doesn’t underestimate the recurring nature of this section of the business, right? I have been reminding people today and sometimes I forgot to do this. Our tools actually generate revenue for decades.
Vivek Arya
Right.
Doug Bettinger
On average, over an average tools sold at Lam, over the life of the tool, it generates more revenue than we sell the tool itself. We have spent the whole 30 minutes talking about WFE and where is that at and so forth. But this is an important component of what the business model here is and how we make money and how we generate free cash flow. It’s a very recurring portion of the business.
And before this year, I used to kind of run around shaking my head and saying it’s a business that grows every single year. Well, this year is not going to grow, because utilization is down so much and I didn’t anticipate that, when I used to say it grows every year. But it is only down a little bit.
Vivek Arya
Right.
Doug Bettinger
With utilization down as much as I have ever seen it. So it’s an important statement on the quality of this business.
Vivek Arya
Got it. And look, even kind of a trough scenario Lam is still putting up almost $5, right, a quarter in...
Doug Bettinger
Just guided to $5.
Vivek Arya
Yeah.
Doug Bettinger
Precisely.
Vivek Arya
Make sense. Significantly above the last. But if I were to look at margins, right, they are about the same as they were kind of on the trough right, about 44%, 45% with just...
Doug Bettinger
44% gross margin.
Vivek Arya
44%, right. But your revenues are significantly higher than the last trough. So why shouldn’t trough margins be higher given that your revenues are significantly higher than the last trough?
Doug Bettinger
This is not a fixed cost business. And you know that, I am just reminding…
Vivek Arya
Right.
Doug Bettinger
… you, right, when the revenue goes up and down, so goes cost of goods sold here. And that’s part of the operating model and why we show resiliency in part of the cycle. It -- actually, I am quite proud of where the profitability of the company is performing.
And frankly, one thing I have been pointing out today and we talked about on our earnings call, not all that long ago, is, frankly, if you go to the last memory down cycle in 2019, our installed base is 40% higher than it was then. That’s part of the reason why earnings and cash generation, frankly, are as resilient as they have been.
Gross margin will ebb and flow with volume. It’s just -- it’s the way this business runs. But the earnings resiliency has a lot to do with CSBG, which people often -- I believe in -- when they look at our business, underappreciate the quality of that business. It’s a great business.
Vivek Arya
Right. Got it. And just one last conceptual one, Doug, which is, if in the next several years, so WFE grows, but EUV and litho takes up a lot more of those WFE dollars, doesn’t that reduce the SAM for dep and etch markets?
Doug Bettinger
Why would you think that? I mean, you don’t buy a litho tool in isolation. You don’t put the print on the wafer and then…
Vivek Arya
Right.
Doug Bettinger
… that will create the features. You got to deposit the films and etch the films to create the transistor in the structure. If you buy an EUV, you are buying etch and deposition as well. EUV and etch define the patterning module.
So if EUV is doing well, we are going to do well also, right? You need it all together. And frankly, there’s some new stuff we are doing and we have been talking about this for a while, right, like, drive resist…
Vivek Arya
Right.
Doug Bettinger
… through partnership with ASML. But we are going to do our best to actually make the full-time absorptions with the resist we are putting down more efficient and better.
Vivek Arya
Right.
Doug Bettinger
So there are also incremental opportunities for us as EUV ramp. So you shouldn’t think of it as it’s a zero-sum game here. If you are buying a litho tool, you got to create the features too, you need the process tools.
Vivek Arya
Got it. And the last one, Doug, is just there’s been some excitement about maybe CHIPS Act funding adding to fab investments, right, in U.S. and obviously, every country has its own version…
Doug Bettinger
It seems like every region in the world is trying to do something.
Vivek Arya
That’s right.
Doug Bettinger
Exactly.
Vivek Arya
So have you seen any of those benefits come through or they are all overwhelmed by the cycle or are those management teams, right, because they need to partner with folks like yourself to make sure that those fabs come up in time. So have you seen any of those benefits or all that goodness is to come or it’s not that big to begin with?
Doug Bettinger
Not too much. And again, I am often a little cautious when I describe this, towards sight of the fact that the demand for semiconductors is what matters at the end of the day. If there’s some government assistance, it will move the fabs around, and if you have more fabs than fewer, it’s probably going to create some level of incremental investment in WFE, but it’s not just pure upside.
Vivek Arya
Right.
Doug Bettinger
Demand for semiconductors would matters. And frankly, that’s why I am so excited about it since -- because demand for semiconductors in the longer term is going to be extremely strong I believe.
Vivek Arya
That’s possible.
Doug Bettinger
That’s the most important thing. Don’t lose sight of that.
Vivek Arya
Right. Excellent. Thank you so much, Doug. Really appreciate your time.
Doug Bettinger
Thanks for having us.
Vivek Arya
Yeah. Thanks.
Doug Bettinger
Thank you.
Vivek Arya
Thanks.
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Lam Research Corporation (LRCX) Management Presents at Bank of America Global Technology Conference (Transcript)