LRCX • 10-K • FY 2021 • Positive

Lam Research Rides Semiconductor Super-Cycle with Record $14.6B Revenue, 45.1% Margins

August 17, 2021 • 1 min read

TL;DR

Lam Research delivered exceptional FY2021 performance with revenue surging 45% to $14.6B amid unprecedented semiconductor demand. Gross margins expanded 130bps to 46.1% despite supply chain constraints, driven by operational efficiencies and pricing power. The company's leadership in etch and deposition technology positions it to capture growth from rising semiconductor capital intensity. Management expects sustained momentum from memory, foundry and logic customers as chip shortages persist int

Financial Performance Overview: Revenue grew 45% YoY to $14.6B, with systems revenue up 48% and customer support revenue up 26%. Gross margins expanded 130bps to 46.1% while operating margins reached 31.7% (+320bps YoY). Operating cash flow increased 71% to $3.9B, enabling $2.0B in share repurchases and a 15% dividend increase. Growth was broad-based across memory, foundry and logic segments, with particularly strong demand in DRAM and leading-edge logic nodes.
Strategic Initiatives and Operational Changes: Management expanded manufacturing capacity by 40% through facility additions in Malaysia, Taiwan and Korea. R&D investment increased 22% to $1.5B (10.3% of revenue) focused on next-generation EUV integration and advanced packaging solutions. The company launched new selective etch products for gate-all-around transistors and expanded its installed base management offerings. Supply chain diversification efforts helped partially mitigate component shortages.
Market Position and Competitive Dynamics: Lam maintained 55%+ market share in dielectric etch and strengthened its deposition leadership with 62% share in atomic layer deposition. Customer concentration increased with top 2 customers representing 43% of revenue vs 36% in FY20. The company gained share in foundry/logic while maintaining strong positions in DRAM and NAND. Rising capital intensity in leading edge nodes provides sustainable growth tailwinds.
Operational Efficiency and Profitability: Gross margin expansion of 130bps came despite logistics headwinds, driven by favorable product mix and manufacturing efficiencies. Operating expenses grew slower than revenue at 28% YoY, demonstrating strong operating leverage. Factory utilization reached 95%+ while inventory turns improved to 3.8x from 3.2x. Management expects continued margin expansion as volumes grow and new facilities ramp.
Growth Catalysts and Material Risks: Key growth drivers include accelerating logic/foundry investment by Intel and TSMC, continued memory capacity additions, and rising semiconductor content in automotive/IoT. Primary risks include cyclical industry downturn, geopolitical tensions impacting China sales (35% of revenue), and intensifying competition in key product areas. Supply chain constraints expected to persist through early 2022.

Revenue

$14.6B ( YoY) with systems $10.2B () and services $4.4B ()

↑ +45%

Rd Spend

$1.5B ( YoY) at of revenue

↑ +22%

Net Income

$3.9B ( YoY) with net margin (+400bps)

↑ +71%

Gross Margin

(+130bps YoY) driven by mix and efficiencies

↑ 46.1%

Free Cash Flow

$3.7B ( YoY) with conversion rate

↑ +75%

Operating Margin

(+320bps YoY) with strong operating leverage

↑ 31.7%

Growth Indicators

$5.1B ( of total, YoY)

↑ 35%

Deferred Revenue ↑$1.1B (+52% YoY)

Customer Concentration ↑Top 2 customers 43% of revenue (vs 36% FY20)

Key Risks

China exposure (35% of revenue) amid ongoing trade tensions
Customer concentration with top 2 at 43% of revenue
Supply chain constraints impacting costs and lead times
Cyclical industry dynamics despite structural growth

Key Opportunities

Logic/foundry investment cycle accelerating ($30B+ TAM)
Memory capacity additions as pricing environment improves
Services growth from expanding installed base
New markets in advanced packaging and selective etch

Bottom Line

Lam Research delivered outstanding FY2021 results while positioning for sustainable long-term growth. Record revenue of $14.6B and expanding margins demonstrate strong execution despite macro challenges. The company's technology leadership in critical semiconductor manufacturing processes provides competitive advantages as industry capital intensity rises. While customer concentration and geopolitical risks warrant monitoring, multiple growth vectors support continued momentum. Key metrics to watch include gross margin trajectory, China exposure, and supply chain normalization timeline.