The importance of Lam Research in the semiconductor equipment industry is almost on par with Applied materials (see the my dedicated post of: “How does Applied Materials, lord of semiconductor equipment, make money?“)
Company Profile
Founding of the company
Lam Research (ticker: LRCX) was founded in 1980 by David K. Lam, a Chinese scientist and entrepreneur who was born in Saigon, Guangdong and grew up there. It is headquartered in Fremont, California. The company’s name “Lam” means the surname of overseas Chinese in Vietnam, Lin.
As of 2023, it is the third-largest manufacturer in the Bay Area, behind Tesla (ticker: TSLA) and Intuitive Surgical (ticker ISRG).
Main business
is a U.S. supplier of wafer manufacturing equipment and related services to the semiconductor industry. The products are primarily used in front-end wafer processing, which involves the steps of creating the active components (transistors, capacitors) of semiconductor devices and their wiring (interconnects). The company also manufactures related equipment for back-end wafer-level packaging (WLP) and micro-electromechanical systems (MEMS).
The Importance of Lam Research
In terms of supplying equipment for semiconductor factory production, Lam Research is on par with Applied Materials. The two hold the core equipment for the production of all semiconductor factories in the world. Without equipment from either of them, semiconductor factories would be almost unable to produce.
IPO
In May 1984, Lam Research was listed on the Nasdaq.
Tailwind for semiconductor equipments
The world is building semiconductor fundry
Chip manufacturers continue to wait Chip manufacturers continue to wait Chip manufacturers continue to wait Chip manufacturers continue to expand the production capacity of artificial intelligence chips based on 5 nanometer and more advanced processes, and TSMC’s large chip manufacturing plants in the United States, Japan and Germany.
They are expected to It will be gradually completed starting in 2024 and Intel will build a new large-scale chip factory in the United States and purchase high-end semiconductor equipment such as photolithography machines, etching equipment, and thin film deposition required for core manufacturing in large quantities. These semiconductor equipment suppliers mainly include top equipment manufacturers in the chip industry chain such as ASML, Applied Materials, Tokyo Electron and BE Semiconductor.
AI drives chips demand
The current global demand for artificial intelligence chips is extremely strong, and this explosive demand is expected to continue until 2025. Therefore, chip manufacturers such as TSMC, Samsung, and Intel will fully expand their production capacity, and storage giants such as SK Hynix and Micron will expand the production capacity of HBM. , both require large quantities of semiconductor equipment required for chip manufacturing and advanced packaging, and even some core equipment needs to be updated.
After all, artificial intelligence chips have higher logic density, more complex circuit designs, and higher power and accuracy requirements for equipment, which may lead to problems in photolithography, etching, thin film deposition, multi-layer interconnection, and thermal management. Higher technical requirements require customized manufacturing and testing equipment to meet these requirements. Therefore, semiconductor equipment giants such as ASML, Applied Materials, and Lam Research can be said to hold the “lifeblood of chip manufacturing.”
Lam Research and the semiconductor supply chain
Lam Research is on par with Applied Materials
Semiconductor equipment giants such as ASML, Applied Materials, and Lam Research can be said to hold the “lifeblood of chip manufacturing.” In the chip factory, Lam Research and Applied Materials are everywhere. Please see my post of “Top five semiconductor equipment providers” as well.
Unlike ASML, which has always focused on the field of photolithography, the high-end equipment provided by Lam Research and Applied Materials plays the most critical role in almost every step of manufacturing wafers, playing an important role in the production of semiconductor factories.
Semiconductor equipment supply chain
Because in the capital expenditure of advanced semiconductor processes, front-end process equipment accounts for as high as 80~90%, mainly provided by the five major equipment suppliers. In addition to Applied Materials, there are also ASML (ticker: ASML) , Lam Research (ticker: LRCX), Tokyo Electron (ticker: TOELY), KLA Corp (ticker: KLA).
These five major semiconductor equipment manufacturers occupy more than 70% of the global semiconductor device manufacturing industry with their leading technology and strong financial support.
Due to the technology gap, local manufacturers in Taiwan have less focus on front-end process equipment. The main entry points are all low-end area like outsourcing, factory engineering, back-end process equipment, component maintenance and access, etc. Related supply chains such as Foxsemicon Integrated, MicB2B, Feedback Technology, CalTech and GongIn etc.
For a complete description of the semiconductor equipment supply chain, please see:
- Another of my previous articles, “The lucrative semiconductor supply chain“
- A dedicated introduction to Section 3-2 of my book “The Rules of 10 Baggers“
Lam Research’s products
Lam Research’s expertise
Lam Research designs and manufactures products for semiconductor manufacturing, including equipment for thin film deposition, plasma etching, photoresist stripping and wafer cleaning processes. Throughout the semiconductor manufacturing process, these technologies help create transistors, interconnects, advanced memory and packaging structures. They are also used in applications in related markets such as microelectromechanical systems (MEMS) and light-emitting diodes (LEDs).
Lam Research Product Line and Features
Its products mainly cover the following core aspects of important chip manufacturing:
Thin film deposition
Thin film deposition systems deposit submicroscopic layers of conducting (metallic) or insulating (dielectric) materials that make up integrated circuits, a process involving nanometer-scale uniformity.
Lam Research uses electrochemical deposition (ECD) and chemical vapor deposition (CVD) techniques to form copper and other metal films for conductive structures, and atomic layer deposition (ALD) is also used for tungsten metal films in features such as contacts and plugs. .
Photoresist strip
Lam Research’s dry stripping systems use plasma technology to selectively remove photoresist masks as programmed following a range of front-end wafer processing and advanced packaging applications.
Plasma etch
Lam Research uses proprietary technology in its plasma etching equipment to selectively remove material from the surface of a wafer in a programmed process to create features and patterns on the wafer.
Wafer cleaning
Lam Research’s wet spin cleaning and plasma-based bevel cleaning products remove particles, residues and films from wafer surfaces before or after adjacent processes.
Products
In 1981, Lam Research introduced his first product, the AutoEtch 480, an automated polycrystalline silicon plasma etcher.
Important acquisitions
- In March 1997, Lam Research acquired OnTrak Systems, a wafer equipment manufacturer specializing in chemical mechanical planarization (CMP) cleaning, for $225 million. CMP cleaning is a hybrid process that uses etching and mechanical polishing to smooth surfaces.
- In 2006, Lam Research acquired Bullen Semiconductor, now Silfex.
- In 2011, Lam Research agreed to acquire Novellus Systems, a San Jose, Calif., chip equipment manufacturer for $3.3 billion.
- In October 2015, Lam Research announced plans to acquire wafer inspection equipment supplier KLA-Tencor for US$10.6 billion. This move was regarded as a major consolidation measure in the semiconductor industry. But in October 2016, Lam Research announced the termination of the acquisition offer because of concerns that the transaction would not receive regulatory approval from the U.S. Department of Justice due to antitrust issues.
- In September 2017, Lam Research announced the acquisition of Coventor, a chip simulation company headquartered in Cary, North Carolina. The company’s software will reportedly allow Lin to shorten the time to market for his new chips.
- In November 2022, Lam Research announced the acquisition of Salzburg-based supplier of wet processing semiconductor equipment Semsysco GmbH.
- In November 2022, Lam Research acquired ion simulation company Esgee Technologies.
Investors’ reward
Stock split
On May 21, 2024, it announced a stock repurchase authorization of up to $10 billion, saying it was consistent with the company’s “plan to return 75% to up to 100% of free cash to shareholders through dividends and repurchases.” painting”. In addition, Lam Research is conducting a forward stock split of its issued ordinary shares at a “1-for-10” stock split, which is expected to take effect after the market close on October 2, 2024.
Stock repurchase
On May 21, 2024, Lam Research also announced the latest repurchase authorization. The semiconductor equipment giant plans to repurchase up to $10 billion of common shares. The authorization has no expiration date and can be suspended or terminated at any time. Lam Research said the repurchase program fully replenishes any remaining balances previously authorized by Lam Research.
Main risks
Chinese market dominates its revenue
“Nikkei Asia” reported that Lam Research’s sales from January to March this year came from China, with 42% of its sales coming from China, an annual growth of 20 percentage points.
US expands chip ban on China
In October 2022, the Biden administration’s chip ban on mainland China set off a storm in the semiconductor equipment industry. After the U.S. government announced the expansion of its ban on Chinese chips, U.S. suppliers such as Applied Materials, KLA and Lam Research were severely affected.
Take YMTC (Yangtze Memory) as an example
These American suppliers have begun to evacuate their employees stationed in Jiangjiang Storage and suspended their operations in China. Applied Materials, KLA and Lam Research have suspended equipment installation support for YMTC (Yangtze Memory) and have begun to evacuate their employees from YMTC (Yangtze Memory).
Reuters revealed that several U.S. semiconductor equipment suppliers have received letters from the legal department and must immediately stop supplying some products to customers operating in China, including NAND wafers with 128 layers or above, 18 nanometers and more advanced. DRAM chips and high-end logic chips, etc.
Loss of potential business opportunities
Since China accounts for 30% of Lam Research’s revenue, Lam Research said the company’s annual revenue will be reduced by US$2 billion to US$2.5 billion.
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