Lam Research Corporation ($LRCX)

Good morning. Thank you all for coming today. I'm Stacy Rasgon. I cover the U.S. semiconductor and semiconductor capital equipment sector, if you're at Bernstein. It's my great honor to introduce our guest, the President and CEO of Lam Research, Mr. Tim Archer. Before I start, I want to mention if you have questions you'd like to ask during the presentation. You should have a link or QR code, I think, to the pigeonhole form where you can submit those. I will get them up here and we'll have time for Q&A at the end. So semi cap. So after enjoying -- it's had a bit of a risk on already over the last several years, but the capital equipment industry has really shifted into overdrive recently as AI has gone mainstream. With the demand profiles that we're seeing, calling for at the end of the day, just simply more, more chips, more wafers, more tools. And in that world, the contributions from companies like Lam are becoming more important than ever. And to tell us all about it, it gives me great pleasure to welcome Tim to our session today. So thank you so much.

I have to say I've been super excited to sit down. This is actually my first session of the conference. And I'm glad it's starting with you guys.

Great. I mean, let's just jump to it. I mean let's talk about AI. I mean, clearly, I said it's created a renaissance in WFE. It wasn't that long ago that $100 billion in WFE was just sort of in this aspiration that was out there. And we've blown through that now, right? I mean we'll probably do -- I can't remember your numbers or something?

140 with the bia.

Yes. bias to the upside. And as strong as that is, I mean, look, it's a constrained number like we were short of clean room space. And -- just -- I mean maybe just at a high level to start off, maybe just talk about what AI has done for wafer and equipment demand. I mean, maybe by end markets like leading edge logic, DRAM, flash, packaging, even lagging edge. What has it done?

Yes. It's -- I mean, first of all, I agree with you on this point of this is a renaissance, and it's driven by AI demand that has really touched every segment of the equipment market, the devices and device markets.

I mean in semis, by the way, you could have owned anything. It's gotten so big, it's dragging everything along with it. It feels like.

I hope some are better than others, but I mean -- and I think that we'll talk a little bit more about the markets we're in. But as you said, AI, I think what's been most amazing about it is that it has driven performance across every device type. I mean, there used to be -- there would always be a discussion of what's good enough. But I mean in AI right now, more is more and so you want to have more leading-edge compute power at the foundry logic side. You need more storage. You need more memory, higher bandwidth, lower latency. And that's just created changes very rapidly to the architecture devices, how they're packaged, the materials that are used to manufacture the devices and so forth an etch and deposition focused equipment company. I mean it's a very exciting time.

And this time is different is always sort of a dangerous kind of statement. But I could make the argument maybe it could be. So I mean, like how would you respond to that? Is this just a function of just demand is overwhelming. Is that what's different? Is there something different about the types of things that, that demand is driving like as it relates to you guys, like, how would you respond to that?

Yes. I think as I was talking about I think what is different is this almost insatiable desire for and need for more performance.

I mean we've always wanted more performance in the space, haven't we?

Yes. But I think that in this case, it is really -- it makes the end product that much more capable in a way that I think is a little bit unique. It's always been there, but it is also quite unique that it's performance across all types of devices and including packaging. And I think that -- the other thing that's a little bit unique and maybe different is that we have visibility to these waves of demand. And so we've started in training and that drove certain performance requirements around certain types of devices and really accelerated this push towards more advanced foundry logic to get the compute and HBM to get that capability. But now as we move into inference and then we move into agentic-AI and ultimately into physical AI, we see different parts of the market and different requirements. We clearly now see much stronger demand for NAND, for instance, than people had anticipated. Again, as you start to make this transition from training to inference into agentic. We've seen the same thing with CPUs and therefore, different parts of the market, different process requirements for some of those devices. And so I think that's perhaps what's different is the visibility into this road map in March of performance requirements that really allows us to marry up our road maps for new equipment, new materials and really engage customers to be ready as those waves come in.

How much visibility are you actually getting now? And like what does that look like versus what would have been typical a few years ago?

It's interesting. We we look at visibility in 2 different ways. I mean, what's most important for us is visibility of the technology road map because the reality is we are already engaged in qualifying for device architectures and materials that won't ramp into manufacturing until probably the early 2030s. And so having that visibility, that customer intimacy where you're really exchanging what's possible around architectures[indiscernible] that visibility has always been strong. And I would say today, in many ways, is even stronger because of the criticality of our tools to their ability to deliver products to their customers. Capacity, visibility and those needs. I think one, we could never ask for enough and we never get as much as we want. But I would say...

Do you mean your own capacity or...

No, Customer demand. I mean -- meaning that at this point, if you look at our WFE forecast, every call, it's sort of been -- we've used this term we're in an accelerating demand environment. What that fundamentally means is every time we come to that next checkpoint there's more than we thought there was. And so I would say that the visibility is not as good as we would desire, but it's much stronger. Therefore, it's exactly the good kind of lack of visibility. And it's quite far into the future at this point.

Got it. And maybe to go back to that point. I mean, clean rooms right now, what you see is that the primary constraint on things right now.

Yes. We've been clearly vocal about the fact that clean rooms are constraining the ability to ship more. Obviously, there's a lot of activity in that space to try to bring new clean rooms online. But frankly, it just takes time. It's a big process to build one of these very advanced semiconductor fabrication facilities. And so I think that we -- that's why I say I'd say the visibility at this point, once a fab starts construction, you kind of know where your demand is coming from maybe 2 years out, right? And so I'd say we have quite nice visibility from that.

How many fab projects are you guys tracking right now? I don't think you ever given that number.

I don't think we've given that number, but it's a lot. .

Hundreds.

I don't know if there would be -- in terms of new greenfields, I don't think it's quite that number, but clearly, every fab is also going through continual technology upgrades and refreshes to make sure that they have the capacity needed to meet the performance demands that really is where the market is today.

So let's maybe take a look at the different end markets. Let's start with NAND. I know you guys used to be thought of as the NAND player. And you really -- you still are, but not anymore, -- it's -- it used to be is fully dependent on it, and it's clearly not the case. And I still remember seems quite now, but it was a few -- a few years ago during the NAND trough and that was before the stock split, but you guided something like a $5 EPS for the following quarter for a nominally NAND focused semi-cap company with no NAND in the guide right? Because it was fine right? And so the diversification story has done really well. . At the same time, though, we are -- I don't know that we've seen a ton, especially given all the demand that there clearly is for NAND and for storage. We haven't seen a ton of greenfield builds yet. It's been primarily upgrades. My view has been the NAND guys decided they'd like to earn money for a change, which is a little new. But I guess maybe talk a little bit about the differences between the NAND upgrades and expectations potentially for greenfield because I feel like they've got to start adding greenfield at some point. I don't know how far the upgrades can carry us.

Yes. Actually, I'd love to answer that question, and I will in just a minute. But first, I have to sort of at least clarify a little bit of this, Lam is the memory company versus what we've become.

Because you really I think that's an important, transformed, I think.

Because -- and we still wear that memory leadership like proudly, but the reality is we've come so much more. And the last -- if we went back 5 years ago, Lam, our business is about 60% in memory. Last year, it was 60% foundry logic. And that was a deliberate strategy of ours to not give up this tremendous position we built as the enabler of a lot of these memory road maps. But it was a strategy to diversify the company in a way that we could participate in a much bigger way in the device architecture inflections and the advanced packaging advances that were coming for foundry logic. And I mentioned this, the visibility that's important to us is we see where these road maps are going 5, 6, 7, 8 years in advance. And so really about 7, 8 years ago, we said there's a huge wave coming for foundry logic. Advanced packaging is going to become a pretty big thing. And so we pivoted the company in terms of where we put a lot of our R&D spending, the new products we were developing and now it takes several years to get those products completed. It takes several years to get them qualified in customers. And now you really see that rolling through. And I think you've seen Lam gaining both expanding our SAM through this new portfolio, but also gaining share with those new products. And I think every earnings call we talked about low KLD. And we can get into all of this a little bit next .

Was have to -- but run forum because I can start to go down[indiscernible]

Exactly, we'll come back to your NAND question. But the company has reshaped, but we have not given up that NAND leadership. And I think that now you're starting to see that roll through, not through greenfield yet. But last year, at our Investor Day, February 2025, we had talked about this upgrade cycle. And in the NAND business for years, the upgrades and in sort of the natural way of making use of that installed base and just scaling the number of layers.

So this is simplistically using the installed base to put out wafers with more bits on.

With more bits on the Yes. And so what we had said last year was that it would take several years but the customers would upgrade the tools they had in their installed fleet from kind of the 100-plus layer counts to 200-plus layer count devices, and therefore, get more bits and also those bids might be higher performance, more capable bids. We've seen a dramatic pull-in in that upgrade cycle. We said several years and now we -- on our most recent call, said that entire $40 billion upgrade spending would likely be complete by the end of 2027. Now that's .

How far along we are on the $40 billion, by the way.

We haven't really, but we're, again, back to this accelerating demand environment. It means most likely it's about -- it's from this point forward more back end weighted. But it's an indication of 2 things. One, the role of NAND within the AI Herky is becoming more prominent. There's stronger demand, whether that's for enterprise SSDs or use of NAND and KV cash or any of these new data storage projects that you've seen from companies. But it also is the indication of your clean room shortage, which is there just weren't enough clean rooms available to satisfy all the demand of HBM and this rising demand of NAND. And I think that NAND has found itself first going through an upgrade cycle, but then eventually, as you've seen as there's been shortages effectively needs to start building greenfield. And you've just started to see some of those announcements. But it takes a while to build those fabs. So it's still pretty far out there on the horizon. And I think that it's probably more of a '28 and beyond event, which I think from our perspective is fantastic because, again, we can focus right now on a lot of these upgrades, get the installed base up to that technology. And then as a next wave of growth for the company, really see these greenfields come in and the additional shipments that come from those that demand.

And then maybe 2 follow-ons to that. One is, do you care upgrades versus greenfield, like what does your exposure look like between the 2? Is one better than the other? And then number two, just to clarify, the upgrade is really an installed base kind of business. You guys control the vast majority of the installed base not there NAND, correct?.

Yes, we do. We are clearly the leader in NAND. And we're, more importantly, the clear leader in the critical technologies that are required to enable the upgrade, meaning the -- if you think about the way NAND flash is manufactured, with that big memory stack and then the etching and deposition done inside of that to create the devices, Lam has a significant -- significantly high market share of all of those steps. And so if the customer wants to build a taller device, typically, the majority of the spending is actually on Lam equipment to build taller stacks and create those devices. So upgrades are great for us. We have a very, very high percentage of the SAM of the WFE that's being spent on the upgrade. But actually greenfield is great, too, because it grows our installed base. and it makes that next upgrade cycle even that much bigger. And so I think that what I also want people to understand is when we put out the number, they said $40 billion to upgrade from the 100x level to the 200x level, -- that's not a 1 and done because then a couple of years down the road, 200x needs to go to 300 or 400. And then that needs to go even bigger. And so you see our customers they've been stories out and talk out about building 600, 700, 800, 900 layer NAND devices just recently. And so that's a road map that fundamentally we look to help enable in the years to come. And -- so both are -- in the upgrade, we capture a higher percentage of the customer spend. But in the greenfield, we build an even bigger installed base for an even brighter future. And so both are good.

Got it. Let's talk about some of the other segments. And you mentioned advanced packaging that's clearly been on a lot of radar screens as [indiscernible] laws slowing or stopping innovation is not stopping. And what it means is we have to do other things and packaging is clearly one of those other things. So what does Lam actually do in advanced packaging. Where are you actually like where is your primary contribution? And how big is this business for you now?

Well, maybe I'll reach all the way back into, I think, the 1990s when the Novelis portion of our company was known as the King of Copper. Today, all these years later, we're still the King of copper. And so if you think about advanced packaging, a lot of the copper plating everything is done to create the metal interconnect is an area where we're incredibly strong, etching, of course, things -- whatever the device if it's HBM or it's advanced packaging, TSV etching, silicon etch is a...

Through silicon vias by the way through silicon, holes they go all the way through the wafer.

And so that etch but also advanced packaging has become quite a complicated architecture. And so there's a number of dielectric gapfill inter-dye gap fill, we call it as well to go in chips. -- just a number of steps. And so if you look at the advanced packaging and you think about where the money gets spent, A very large percentage of the dollars are directed towards etch and deposition applications. Essentially, it's a building and interconnect type of architecture. And so that's -- it's really great for our portfolio.

How big is that for you now? And how is it growing?

Yes, we said that it's -- this year would grow over 50% from our prior year.

Did you give a dollar number or...

We've sized it in the range of around $2 billion. I mean it's kind of like we -- maybe that's probably about as close as we're going to.

Clearly growing in. Certainly, I think, gaining in importance as the complexities of these chips continue to .

Yes. No, it is a fast-growing area. Again, it enables, again, as you said, for the end customer to create something that's very difficult to create on the chip itself. And so to your point of when shrinks aren't the best way to get to an answer, the industry is finding ways to create an alternative path to know, get out and do that.

Got it. Got it. And so you're talking about memory before, but you've -- you were known as the memory player, but it was still mostly NAND. Like what do you guys do in DRAM? Clearly, some of the packaging piece, I mean, for HBM, you're going to need TSVs and other things. If I'm looking at what the wafer volume like inside one of these big GPU racks, by the way, it seems to be dominated to be by HBM by DRAM. It's like where is Lam's exposure like in the DRAM space.

Yes. within DRAM, as DRAM dimensions continue to shrink, the criticality of our etch platforms has become even bigger. In recent earnings calls, last few quarters, we've talked about wins in conductor etch, things that are tied very closely to the formation of those very small features that are now on these DRAM devices. We also have had good success with our drivers this product. .

I want to talk about that a little later.

Yes, we can talk about that. But DRIVEREsISTis, again, DRAM is utilizing more layers of EUV. And so again, Lam's strengths around patterning and the feature formation. And so that's become a lot more critical as our customers continue to try to push DRAM to its performance limits. On the deposition side, again, you mentioned in HBM through silicon via, copper plating. Those are markets where we're in applications where we're incredibly strong. And so our share of DRAM has been growing as we've continued to broaden our portfolio.

Got it. And then, I guess, finally, I mean, to round it out to foundry logic, I guess, both leading edge as well as trailing node. What are you doing differently there now that maybe like if you look back 5 years or 10 years, these used to be relatively small parts of your business that are quite sizable now. There's been clear share gains, adding customers. It's like what have you been doing there? And like what are you seeing there?

Well, Stacy, maybe if I can add a little humor here. I mean the 3D NAND transition was huge for Lam. I wish they had called like gate all around 3D logic. And maybe Lam's participation would have been a little bit -- it's not quite the same, but at that transistor level, if you kind of think about what a gate all around looks like, it really is starting to get into that realm of 3D processing. You now have these nano sheets and you have to in these layers that you've got to like deposit and then fill and then selectively etch the material out. And so many of the things that you would do in a NAND device clearly, the processes are different, but the concept is the same. And so we've been.

You guys need better marketing.

We need better marketing. As we've gone into -- as foundry logic has transitioned into more 3-dimensional device architectures. The demand for Lam products like our selective etch have grown pretty dramatically. Atomic layer deposition has grown. Of course, you're also talking about the shrink to 2-nanometer and below, which means conductor etch and the ability to form these -- to etch the pattern that's been printed by this very precise EUV process. You've got to be able to translate that into the underlying device. So I would say that the demands of foundry logic today are much better suited to the portfolio of products that we've been working on. And I said that was part of that shift. A lot of these products have been introduced just in the last several years. like low case spacers using ALD. These are products that we started to develop as we shifted from this, not just a memory focus, but really wanting to own the logic transitions as well. And I think we've done quite nicely there.

Can you give us any color on some of the things you're looking at now that would be more in that 20, 30 plus kind of time frame? Or is -- that's not something you can talk about .

Probably on a product perspective, I'd rather not do that.

But general concepts?

Well, I think general concepts, anywhere where you see a push for one, new performance-enhancing materials. Obviously, like if you think about what we have going on right now, we're leading the push towards molybdenum like within NAND and ultimately within foundry logic. And so when you kind of see that, I'll leave it at that. It's like we've built an incredible base of deposition and etch technologies. And I think that now it's about how to continue to expand the applications of those into forming these new devices. But there's a lot of new architectures coming to out there in that 2030 road map.

Those are going to sheets and CF FETs

And then across every device, there's new things coming. And so what I'm happy about is we today, and we say this and it's -- you can kind of see it if you look at the full lineup of products. I mean we have the broadest, most competitive product portfolio in the company's history. And so we feel like we are well positioned to like address these new inflections that are coming.

Got it. Let's talk about some of the more like internal aspects of the company now and start with maybe margins. It's funny like in this session, I always ask you, why do your gross margins have to start with 4? And I don't have to ask it anymore now because they don't start with the 4 anyone, how they start with 5. Maybe talk a little bit about how -- like what that process looks like to get there. And some of it's going to be mix. I don't know how much of it is pricing. Some of it is new products and new value add. But how do we get there? And where can things go on? And I know you gave -- you had the Analyst Day a little over a year ago, and you gave margin targets. I think these were '28 that you've now hit I think you've talked about we may be getting new targets later on in the year. I don't know if you're going to have another Analyst Day you're just going to give them to us, but...

Probably not a new Analyst Day at this point.

I'm assuming you're not ready to give them to us today. I give them today. But I mean, in general, it's just what is the -- and there's been other things, right? I mean you've -- I think you guys have been out in front of adding supply in front you certainly -- you built up Malaysia. And I remember Malaysia was a margin headwind for years while that was happening, and now that's paying off benefits. And it looks like you've actually added to that now as well. Maybe touch just a little bit about some of the internal things that the company has done around the execution, margin supply. Anything else that comes to mind because I think it's another reason beyond just like the market lifting all boats, Lam has clearly outperformed over the last year came on with the stock is up year-over-year, 200%, 250%, like whatever it is.

I really look at it Sure. No, it is Yes. No, a lot of it has been self-help. I mean we -- but it was with this eye that we were going to become a much bigger company. We've had that confidence. And so many of the items that you talked about First of all, I do like living in the 50s neighborhood better than 40s neighborhood. So that's good. But some of it did come from our large manufacturing expansion. Obviously, as we went through COVID, we saw that and the big boom there and the difficulty to supply to the demand. I think we all sort of internalize, we don't want to let this happen again. And so we've made significant investments both in our manufacturing capabilities and our supply chain over the last several years. And I think that's starting to really pay off. As you said, for a few years, it was a bit of a headwind as we were filling that up. We've now had no problem filling it. And in fact, we -- later this year, we'll be opening our second facility in Malaysia that will be approximately equal size to the first one.

will it be equipped? Or is it just like floor space?

No, it will be in use in the second half of this year. So the good news for us is it does not take quite as long to build a equipment manufacturing facility is to build a full-on clean room. And so we are able to respond more quickly.

Your CapEx is what.

Our CapEx runs 4% to 5% of revenue all in labs, manufacturing, everything, so we're pretty CapEx light from that perspective. But it -- so it's a combination of becoming significantly more efficient in our own operations plus A lot of the applications I just talked about where we've moved into these spaces where they're really in technology-enabling capabilities tied to sort of the customers' latest devices, gate all around or HBM, high layer count NAND. And we've built products where we've -- we're delivering significant value. And so I think that the combination of all those things has driven the margins up. I would also point out that from a mix perspective, in general, some of the -- that would have been known in the past is higher mix portions of -- higher margin portions of our business have become a little bit lower part of the mix. And we'll probably talk about China a little bit. But so what it actually says is the core part of our business, non-China, -- you can imagine the margins from our own work have done even slightly better.

Got it. And I guess, are tariffs a thing now? If you had like cost increases or anything, I assume you're offsetting that, but [indiscernible] little trying to...

I'll contemplated in the numbers. We have reported and put out. And so I think you can see that even if there are, it's part of the margin improvement story.

Yes. So maybe, I mean, that is a good segue into China. And you're right. I know for a while, you were getting a boost when China was a bigger piece of the business, and China has fallen off a bit, which I don't think investors are terribly sad about, frankly, as long as the rest of it is growing and the margins still look really good. But what are you seeing in China? Like I mean, clearly, we've had general decline in like lagging edge logic, a lot of -- I don't think it's all China, by the way, but like a lot of it is China. I get a lot of questions clearly about Chinese competition and local players, which my general view, by the way, has been that they are real companies like they're not -- they're very capable what they can't do everything. And they will probably take more share than they would ordinarily deserve to take because of some of the regulatory issues, they have no choice. But in general, what are you seeing there? It doesn't seem like it's been an investment controversy in a word, but it doesn't seem like it's really slowed anything down at all for you guys or frankly, for the industry as a whole.

Yes. I think that 2 things. One, maybe just to address the regulatory issue we comply, obviously, with all regulatory requirements. And so we don't do any business in places where we're not allowed to.

You're not shipping like YNTC here and..

So therefore, local equipment suppliers have filled in for the -- where we can't compete. But places where we can compete in China, which tends to be, as you say, the lagging edge nodes, there's still tremendous value that's delivered from Lam tools. Even though those tools were likely engineered and developed by land more than 10 years ago. And so I think that, that speaks to, one, the quality and capability of Tools land builds plus the local support capabilities that our team provides. But the business itself, as you say, it's -- we see China in general is kind of flattish to to maybe roughly up a little bit this year. So compared to the last few years of growth, I mean, it's clearly moderated.

Yes I mean it was what, 40% of your revenue or something at the peak, I can't remember.

Yes, and now come down quite substantially. And so I think that that's, as you said, look, that's the kind of balance we want to see in the business. And so it's an important region for us, and we satisfy demand from the customers we can serve with tools that we can sell. And I think that, that's but it's no longer like quite the headline story. I think every earnings call, we used to get questions about China sustainability. And I think now it appears to be in this relatively sustainable run rate right now. our story now has transitioned much more towards our growing SAM, growing deposition etch intensity at leading edge, driven by AI. And I think I like telling that story a lot more at this point.

Yes. Certainly more fun to tell. Do you have any thoughts on some of the Huawei announcements that we've seen over the last couple of days, logic folding? And I don't know if you've been if you followed it.

I've seen it, but no. I haven't internalized a comment at this point.

Maybe just one more question just as long as we're in China in lagging edge. China is a big piece of your lagging-edge business, but it's not all in. I guess how much is in China? And maybe just a few comments on that business. This is the Reliant business, right. Most of the 200-millimeter business. Although I guess all of your lagging edge probably is -- it isn't all 200-millimeter, I'm assuming.

That's right. There's quite a lot of mature node technology that's at 300 quite a lot. And within our company, actually, some of it to a mature node, some of it will come out of Reliant, some of it will actually still come out of our primary business units. So it's therefore a little bit harder for you to track down. But we do see -- obviously -- the reality is complex electronic systems today, they require leading-edge chips and they require a whole lot of .

We're starting to see growth in the lagging edge now to . We're in an industrial cyclical recovery. And clearly, the AI, like power semis have all been on a tear. I mean you're seeing -- we're not seeing any signs of real recovery in trailed yet. That's right. We are.

We're seeing some growth in that area. But I think more importantly, what we are also focused on is, again, this idea of engaging on where those markets are going. So it's a little bit less about -- we serve capacity that comes in demand that comes for the things we already have. But we see an emerging opportunity in what we considered to be the specialty technology space. Again, there's a lot of new applications where there are new materials require new deposition techniques. And while none of them are quite the market size that you see from AI, they're very good businesses for us to pursue, given that quite often, we either have the equipment available and it's really about application development or it's equipment that can easily be derived from the fundamental technologies that are within our company. And so we have a group that focuses on those applications. These would be things like photonics, maybe some materials for RF applications, special materials for powered devices. And so those are all -- in many cases, they're materials, they're deposition or etching applications. And so very well suited to what Lam can do. And I would say that we intend to pursue those as well as we again look to broaden our portfolio across these markets.

Got it. Now those reliance tools are in the services business. This is a good segue of services. I still got to ask, any plans to move it out of there. I think AMAT move there at their 200-millimeter back into equipment. It seems like it makes more sense.

Yes, we haven't I would add -- we understand the comment and don't have any plans .

But let's talk about services. So again, this is an installed base business even in a down year for equipment, it tends to grow because the installed base grows even in a down year. I think your services revenue per tool has been going. I can't remember the CAGR, I have the numbers somewhere, but it's been growing at a pretty good clip. I think services, you've talked about is sort of like a sustained double digit. I think the one time it didn't happen is when you had some of the China issues do the sanctions a few years ago. But just talk in general about the services business, where is the value add there? What are the different pieces in there again, I went over a little bit growth but how do you see the growth structure going forward? And what does that add for you guys?

Sure. Well, it's a really important part of our business. In fact, the services or CSBG, as we refer to it, is about 1/3 of our business at this point which -- because a lot of that is based on the installed base and it's some of the larger components in there, things like spares and upgrades and really install.

So all that NAND upgrade revenue is actually in services. It's not an some of -- not all of it's in there Okay.

But it's very installed base focused. And so our installed base right now is about 100,000 chambers and growing. And again, in operation they're all running

Yes. what's the lifetime typically of these tools, by the way.

A couple of decades or more than a couple of decades. In fact, a few years ago, I had a had the team go look at -- to find -- my first job was actually installing tools at the company. It was like a process engineer inside the customer fabs. And I said, "Go find that very first tool I installed. And they actually track it down -- that was about 25 years after I've done that job, still running.

We had, by the way, my lab at MIT 20 years ago, we had an old Lam rainbow TCP.

Okay. I didn't install that one. But the reality is like the installed base, it's the gift that keeps on giving, right? So it has multiple revenue streams. Of course, we service them, maintain those tools in many cases, spare parts, a lot of proprietary parts on our tools. So as the installed base gets bigger, especially when you're in these high WFE years like now, installed base is rapidly expanding. That's a future revenue stream for the company that continues to grow. But the more exciting thing about services is what's happening as a result of all -- of 2 things. One, the rapid expansion of fabs everywhere in the world, often in places where resources, trained resources are not readily available. And you combine that with the fact that the AI is demanding the most -- the highest performance, most precise device manufacturing we've ever seen which means that the tools condition and the maintenance on those tools is kind of reaching the engineering or technician limit in terms of precision and repeatability. And so for several years now, Lam has been working on what we call -- we call Equipment Intelligence, but think about it as building AI models around the data that's coming off of your tools. And we've also been working on cobots.

Cobots.

And so we call it sort of a new product we have called Dextro.

Physically servicing the tool.

Physically servicing the tools. .

Taking off flanges or I don't know.

And reinstalling and cleaning the chambers and all the things that an engineer actually would hate to do anyway, the cobot can now do. And what we've seen, these are now running in production, maintaining tools in several of our customers' fabs. And what you see is you see a dramatic improvement in first-time right after mains. You see an improvement in maintenance sensitive measures like edge uniformity around the wafer in an etch tool, you install like a plasma tuning ring. And we asked the engineer -- the focus ring you asked the engineer to basically align that thing to like a 50-micron tolerance, right? It's just difficult. Cobot has no problem because the cobot will have kind of a vision system. It can basically take measurements, install.

Is the robot mobile? Or is it parked next to a single tool like.

Yes. From a cost perspective, remember, you don't need to do maintenance that often around. So it can one cobot can service depending on which type of tool, a large number of modules. And so that service opportunity for us -- it adds significant value. It eliminates this resource constraint that has become a challenge for ramping new fabs. And frankly, just from a technical perspective, the precision and repeatability of cobot driven maintenance is dramatically better and shows up in on-wafer performance.

So how does that work? Do you sell the robot? Or is it part of -- to subscriptions SP-9 Part of a service agreement subscription you often use that service agreement . Have you ever talked about how much of your like services revenue you're actually under like agreements versus one-offs?

We haven't really. I don't believe we've given that number. But it's growing. I mean this is these -- a cobalt becomes a very sticky type of service simply because now you're relying on that piece of equipment to effectively maintain your other equipment. We combine that then with what we call Equipment Intelligence. And this is another big focus of ours, which is we've always collected a lot of data from the tools. But now as these processes are becoming so much more complex, we're finding and also AI engines are becoming so much more capable of handling disparate types of data input that [Technical Difficulty] start to do things like video analysis -- you can -- and you start feeding those into the engine and effectively.

Look at the wafer will attach .

Yes, look at the wafer, look at the plasma condition, these sorts of types of data streams. And what it's really helping us do is start to really match tool performance across very large fleets of land equipment running in different fabs that might be located, one in Asia, one in the U.S. and you want to run the same process, the same customer. And our customer would want to do that. And the ability to match those fleets of tools really is becoming dependent on this equipment intelligence capability to do that. And it has a meaningful impact on tool-to-tool matching and performance. And so again, that is also a service that that we would provide to .

Presumably, you're able to charge for this

Yes, presumably Yes, we are.

I mentioned, I wanted to give you a chance to talk about dry resist.

Yes. .

What is dry resist, talk to us about .

Sure. So .

I just think it's phenomenal. .

Yes. No, dry resist is -- I mean it's the way Lam is disrupting some of these very -- these technologies that like didn't appear to be disruptible.

Yes. I mean, there's this big controversy back EUV was going to be bad for you. It doesn't seem to be the case. .

No, not for us.

Certainly push back on that?

Yes. Well, a little bit. I mean, one, it turned out that EUV wasn't bad for us because the smaller features you printed more critical or tools became. And so that argument of multiple patterning versus a single print just made our tools actually much more critical for the capability to etch those single print features. And and now you have multiple patterning anyway. So the -- in any case, that part of our business has been fine. But we looked at dry RECIST and this idea of like how do you continue to shrink and push kind of the limits of lithography and one of the limitations we saw was in the resist itself and not only in the material but really in the deposition technique of the resist. And so for I don't know, 5 decades or more. I mean, basically, you've spun the resist on the wafer and the resist is delivered as a wet chemical. And in most cases, wet processes over the years have gone to drive for controllability and repeatability, defect control, all sorts of reasons. And so I guess, about 6, 7 years ago, Lam introduced dry resist, probably a little ahead of its time. But what drives this does is it is a material that replaces the wet resist for the most critical lithography applications on certain devices. And so it took a while for us to gain customer confidence to disrupt something that they were so comfortable using. But we introduced a suite of tools we call Ether. These ether solutions consist of an underlayer that helps with photoabsorption from EUV, that resist itself and then a dry develop process. So it's a suite of tools.

So it turns the developing all of to an etch process rather than like they currently use a liquid, it's almost like development of photograph.

Yes. Correct. It's like a deposition and etch type processing environments. And so therefore, much more controllable. And looks like many of your other processes. And so it is now in ramping in production in 2 memory makers. This process of record than at 2 memory makers. So memory these solutions. Interestingly, I think it's just the pace at which some of these -- you've got to be very, very far ahead in the foundry logic world to get that cut in. And so I think that as we continue to push forward to the below 2-nanometer regime. I mean, as etching -- as patterning continues to become more critical, we'll find the adoption there as well. But memory is one that moves a little bit -- can move a little bit faster and the volume of wafers is quite high and EUV adoption in memory is also accelerating. And so I think that it's it's on its way now.

You guys gave some revenue targets to walk back. I don't think it was upgraded .

Yes. We haven't really changed them at this point. We said over a 5-year period, about $1.5 billion of revenue back-end weighted. And so we're now into that into that 5-year period.

Got it. So we got about 5 minutes left. I should go to the lightning round. Let's see what we've we've got here. Okay. Where are you seeing -- or do you see the biggest bottlenecks within the AI value chain right now? I would to rephrase it, is semi-cap itself a bottle like a relic -- is it going to get worse?

We've worked really hard. We talked about our operational investments manufacturing supply chain to not become the constraint. So I think that we're not. But I think you see where the constraints are. As we said, clean rooms have been 1 we've talked about quite a lot. -- that problem can get resolved. -- constraint that we're addressing. We just talked about the intelligence and cobots is how long it takes to then ramp and start up and get to mature yield in those -- that will be a little bit of a time constraint. I mean it's solvable, but we're trying to address that as well. But I think it's -- I think right now, it feels like there's a little bit of shortages everywhere, but most of them are are being addressed.

Where do you think WFE growth will be next year of clean room availability was not an issue.

I'm not going to give you an unconstrained number. But we've said 2027, even with the constraints in place is going to be a year of compelling WFE growth.

It's safe to say that it would be more if there was no constraint.

I think it's safe to say there would be more if there were more clean rooms, but...

I won't hold you to a number, though. Let's see here. Okay. As packaging Koos, HBM stacking, et cetera, becomes a gating step for AI compute. wafer fab and packaging, the boundary between wafers and wafer fabs and packaging is blurring. Is Lam's road map converging with the packaging equipment players like Besi.

Well, what I would say is -- I mean, we have a very clear road map for advanced packaging. We play a critical role in that market. I would say that the the biggest investment we're making is we're believers in this transition to larger format advanced packaging. I mean, from an efficiencies perspective, from an enabling.

Say a larger format, do you mean like panel as channels.

Panels of various sizes at this point. There's not just one. And so as a critical supplier, one of the largest for wafer-based advanced packaging, it's a natural evolution for us. We acquired a company several years ago that has large panel packaging positions, and we've significantly invested in that company now based out of Austria. We just opened a couple of days ago, our center of excellence for advanced packaging for panel packaging in Austria. And effectively, we're wanting to lead through this transition. As AI devices themselves become larger and larger for the packages, that's a larger format is becoming almost a necessity and so...

Any thoughts on when that goes mainstream panel level?

We're making shipments now. I think it's within the the foreseeable future. It's coming.

Okay. Okay. We've got about 2 minutes left. I will ask you the same question I always ask you, and we've got a whole room full of investors here, some may be new to the story. You talked about it through the section, but I can sum up. Why should investors buy your stock?

Well, great. Normally, you give me like 30 seconds. I got 2 minutes, but which feels No, no, really, we've touched on a number of the key points. But if I were to sort of sum it up, it is we are, like the rest of the industry excited about these multiple waves of AI demand. And so from a demand perspective, the move from training to inference to genetic to physical fits extremely well with kind of Lam's breadth of position across advanced foundry logic and then into, of course, HBM, but then really the excitement that coming is kind of further use cases for NAND. And so I think that sets us up for multiyear opportunities for growth in WFE and specifically growth within our segment. I think the Lam specific story then drills down to the increasing role that etch and deposition play in enabling the technology devices and new architectures that are coming. The world is going 3D. I joked about 3D logic. But I mean, the reality is, as you said, CFIT 4F Square, ultimately 3D DRAM. These are all 3D implementations, leveraging that vertical scaling dimension because 2-dimensional scaling, while still occurring is becoming so much more difficult. -- etch and deposition is synonymous with 3D. And so we see etch and deposition intensity as its share of total WFE spending continuing to rise from now as far as we can see these road maps. And so that's it says Lam is in exactly the right markets, and that's where we put all of our focus, etch and deposition leadership. And then finally, I think the reality is we're gaining share. We if you look at the last 2 years' performance, I mean, we've gained share of WFE. Partly, it's that our markets are expanding faster than WP, but partly, it's that we have, I think, at a faster pace than most refreshed our product lines. We just introduced a new Acara conductor etch tool with this direct drive RF capability. I mean, so we're sitting here with a great product portfolio in the right markets and really excited about the future growth opportunities.

Got it. Right place, right time, right stuff.

There you go. Perfect.

With that, I think we'll close it out. Thank you so much.

Thank you.