Lam Research 2020年二季度业绩电话会议
（CY2Q2020）：行业大周期，公司刻蚀、ALD获新进展
会议要点:
1、这一轮周期与上一轮周期的背景不同，在新技术、新应用的驱动下，存储需求可恢复到之前的水平且仍将持续增长。下游需求增长叠加半导体工艺复杂程度的提高将为晶圆设备需求的持续扩张打下基础。
2、目前存储市场有积极的驱动因素，但NAND的恢复速度会比DRAM快一些，对于DRAM而言，应当把更多的目光放在2021年。公司对数据字节长期需求的高增速很有信心，其中NAND增速达30%-40%间的高位水平，DRAM增速达10%-20%间的高位水平。NAND和DRAM的应用场景十分广泛，我们认为存储投资未来几年仍将持续增长。
3、中国大陆地区可能会有30到40亿美元增量,占增量市场的60%左右。二季度中国大陆地区为Lam Research贡献了34%的收入，成为Lam Research收入的第一大来源。
4、今年二季度Lam Research的刻蚀设备在维护存量市场和开拓新客户方面均取得成功，并在以下两个方面取得了关键性进展：（1）高深宽比硬掩模刻蚀和接触孔刻蚀在DRAM和NAND中的运用;（2）运用独特的硬件功能进行射频控制以提高产量，在DRAM的四重曝光和EUV光刻工艺方面获得新的市场地位。
5、Lam Research正在努力扩大ALD的应用基础。过去，阻止ALD被运用通常是因为过高的成本而负担不起。这是一项伟大的技术，而不是伟大的生产力。目前，公司正在扩大ALD在不同领域的应用基础，即随着ALD产品系列的不断增加，公司在3D NAND间隙填充工艺和代工厂/逻辑中的多层薄膜沉积工艺取得新进展，在DRAM和代工厂领域的关键侧墙工艺上，公司ALD解决方案也正在加速替代传统方案。ALD产品卓越的薄膜质量、集成度和生产效率提升对于公司的成功也非常起到重要的作用。
（由中银机械杨绍辉团队，根据Lam Research公开电话会议翻译，转载请注明来源：半导体设备与材料）
一、Q&A环节
Q1：您提到晶圆设备的需求有500到600亿美元区间的中高水平，但是根据三季度的指引进行推算市场规模可能略微超过600亿美元，故根据您早前的预算可能会意味着四季度的需求会略有平淡，是这样么？
我们每次只会给出下一个季度的业绩指引，这次不会给出四季度的指引。但是，可以很确定地说四季度公司仍将保持强劲，或许你的计算没有问题，但是我并不站在季度层面考虑WFE市场。根据存储等各方面趋势，下半年公司业务将维持强劲的势头。
Q2：存储方面，市场目前处于周期的哪个位置呢？当前比上一个低谷高出30%，但比以前的峰值低40%，您对此有何看法，尤其是是否其与您强调的2021年的积极趋势相关？
存储方面，2018年处于周期顶部随后步入下行通道。但是，站在当前时点，存储市场有积极的驱动因素，无论是NAND和DRAM。我们对数据字节长期需求的高增速很有信心，其中NAND增速达30%-40%间的高位水平，DRAM增速达10%-20%间的高位水平。在此基础上，且如前所述，NAND和DRAM的应用场景十分广泛，我们认为存储投资未来几年仍将持续增长。在WFE市场合计600亿美元的前提下，考虑到存储支出的份额，公司将会快速增长。
NAND的恢复速度会比DRAM快一些。二者目前都在进行库存管理，投资相对谨慎，这种情况在今年年底或许会结束，并且DRAM或许会小幅上涨一点。对于DRAM而言，应当把更多的目光放在2021年。应当综合考虑近期的情况，也要考虑公司以及公司的代工厂客户的情况。
Q3：在服务业务方面，二季度同比增长17%，增长的持续性以及对三季度、四季度的表现如何？
服务业务中，一季度的递延并没有产生很大影响，延期的货物一定是与退货有关的。该业务的增长是与新设备相关的，我对CSBG未来的发展并不担忧（注：CSBG业务即CustomerSupport Business group，指的是客户支持业务）。
这是公司为客户提供持续的服务以增加收入的努力。随着公司的发展、设备的安装，这项业务会有更大的机会。
Q4：目前，军事终端应用情况如何？公司客户中来自中国大陆的较多，可能比预想的要多10亿美元以上。这些客户似乎认为日后会受到限制，所以当前正持续加大投入。如何看待出口管制？在军事终端应用尽职调查后，合作是否顺利呢？
在公司的了解、询问客户、第三方研究，以及咨询外部律师意见后，我们得出结论：目前对公司没有任何实质性的、财务或商业影响。未来，公司将持续不断地评估这对公司经营的影响。公司目前与中国大陆客户的业务往来主要集中在NAND和代工厂，目前来看没有受到相关规则的影响。
目前的规则并不影响我们的向中国大陆的客户供货。
Q5：近期，一家大型逻辑制造商谈到转向更外包业务模式的可能，这种行业结构的变化对公司业务的潜在影响是什么？
就行业转向外包模式而言，这显然这是一个长期的、超过20多年的过程。任何以更低的成本用更好的技术生产的模式，无论是内部还是外包，对行业都是有利，对Lam Research也是有利的。例如，代工厂的进展使得Lam的业务在过去20年中受益匪浅，技术节点的持续迁移对Lam来说是最好的事情。
过去，公司在NAND、DRAM和逻辑代工的每个技术节点迁移中都获得了更大的目标市场空间。每个公司都必须独立确定哪种方式能以最低的成本推进技术进步。我们关心的是技术进步和晶圆制造是否扩大及其对公司的业务的影响。从结果看，代工厂并没有对公司产生不利的影响。
对于Lam Research重要的是全行业的晶圆生产数量，而内部生产还是外包在很大程度上无关紧要。因为不管怎样，它都需要设备。
Q6：公司是否已经摆脱了早前的供应链和物流受阻的局面，早前的积压情况是否已经解决？
不能说完全解决，但是二季度进展很好。
Q7：似乎二季度的成本仍然因COVID-19而有所增加，三季度的影响有多少，什么时候对财务估值的模型可以忽略？
影响最大的是货运和物流，公司正在努力协调解决这个问题。其他方面，公司正在努力提高效率，这也是公司所擅长的。对公司毛利率有影响，但是我无法给出量化的结果。
尽管疫情使得短期的运输成本增加，但是也加速了远程支持技术的应用，这个影响目前还没有量化衡量。目前，工程师可以连接到fabs和一些新技术提供专业帮助，这可以减少差旅、提高生产效率。因此，公司正在对此进行投资，我认为这是类似于“阳光总在风雨后”的现象。
Q8：能否谈一谈公司在先进封装中的定位。目前chiplet封装芯片数量并不多，但是英特尔计划在明年下半年的某个时候使用第二代10纳米工艺，这看似已经为chiplet技术的加快应用做好了准备。公司在这方面具有优势，但是想听听你们的评论和市场空间？
整个行业都在寻找以最低成本实现所需性能的最佳方法。有时，关注系统的总体性能和先进封装3D芯片，只是实现系统性能的一种方法，而不必为每个应用使用最先进技术节点的芯片。公司持续处于行业领先地位，是早期的行业投资者，在TSV应用中的刻蚀和depth都处于领先地位。
每当新技术加速应用，公司都很受鼓舞。例如，公司的高深宽比刻蚀工艺和其他技术意义重大，在电镀铜填充领域20多年的领先地位。这些是3D封装和异构集成应用的关键技术。
Q9：目前WFE中存储支出是不足的，公司的收入还有很大潜力。如果回到最近的2018年3月的周期峰值，考虑到公司市场份额的提升，LamResearch的收入能达到多少？与上一周期相比能提高多少？
我们预料到会有类似的问题，但是这一轮周期与上一轮周期的背景不同，无法给出量化的结果。不过，我相信公司的发展潜力，在新技术、新应用的驱动下，存储需求可恢复到之前的水平且仍将持续增长。
在考虑盈利模型时，可以看到存储业务的增长、CSBG业务增长、在代工厂的优势持续增加。
Q10：ALD的增长在多大程度上是由技术驱动的，而不是因为ALD工作的生产效率还很低？
LAM正在努力扩大ALD的应用基础，代表这是一个技术驱动的决定。过去，阻止ALD被运用通常是因为过高的成本而负担不起。这是一项伟大的技术，而不是伟大的生产力。目前，公司正在扩大ALD在不同领域的应用基础，例如3D NAND间隙填充、代工厂/逻辑中的多层应用等，我们认为发展势头良好。
Q 11：公司预计2020年中国大陆的客户总支出约为100亿美元，这在内存、逻辑和代工厂之间大概是怎么划分的呢？存储方面，包括整个行业目前都处在这样一个状态：即你们的客户正在投资，但是目前还没有开始供应。公司预计中国大部何时开始供货，并且投资强度会受到影响？
中国大陆地区的市场基础是广泛的，公司的客户数量比较多，我无法讨论投资效率的问题。事实上任何一个区域的客户都需要首先购买设备，效率的提高是需要时间来实现的。
中国大陆地区的新增投资和其他地区是相同的，其投资成果的体现需要时间。因此，我们并不认为该地区有一些额外的低效支出从而增加公司的收入。根据模型和其他地区的经验，预计2023-2024年这些投资在各个细分领域都会见效。
Q 12：二季度公司取得了两份服务业务的合同，这是否会促进业务的增长，或者对公司报告期盈利的波动产生影响，或者是对公司盈利能力的影响？
不是的，我提到这两个合同的原因是它们的期限和体量都比典型的合同更长或者更大。这对于公司如何经营这一方面的业务很重要，表明客户对我们的交付和创造价值的能力有信心，这与我们过去的期望是一致的。
Q 13：为什么晶圆设备需求的增长在中国以外的地区没有出现相同的增长，我认为您之前提到过的远程支持技术的因素在各个地区应当都是一致的？
目前，晶圆设备中的2/3在中国以外，所以各个地区都有贡献。今年，代工厂增长强劲，DRAM较去年略有上升，但很大程度上各地区是独立的。
Q14：事实上，我想问的是给出的增长指引是50到70亿美元，其中增量中的很大部分来自中国，为什么其他地区没有类似的增量增长，或者其他地区的增量增长需要等明年？
中国大陆地区可能会有30到40亿美元增量（译注：占增量市场的60%左右），剩下的增量来自其他国家和地区。
Q15：关于CSBG业务，上一财年增长率约为7%，那之前增速如何？作为公司业务的重要组成部分，这部分业务如何与公司累积销售的反应腔数量相关联？过去2-3年CSBG业务增速与反应腔增长有关吗？应当如何理解7%的增长，并对该项业务进行预测？
预测的话，此前曾经给出过，建议为到2023-24年，它将增长40%。CSBG增长理由包括：腔体数量、腔体价格（计算起点2013年，腔体价格1.0,然后达到1.5，目标是继续增长到1.7）、一些创新的服务（如对设备进行远程诊断，试图为客户创造更多的价值，并从中获得报酬）。
Q16：应该如何预测未来几个季度的客户支持业务？还是应该专注于您提到的存储的投资(考虑到其比代工厂更好)？还是说更多关注您此前提到的收入增长趋势？
CSBG业务的优点是不太会随着季度而产生波动。公司目前已经在超过6万个chamber安装了设施。公司CSBG业务的收入部分来自20多年前发货的工具，且他们的服务合同有升级周期(由于含易耗件)。这项业务就类似于公司收入的稳定器，平滑周期波动，可以帮助客户在已有设备上获取更大价值，这也是公司对此进行大量投资的原因。
Q17：CSBG业务的增速是否会高于内存/代工厂/其他市场?
可以从两方面理解这个问题：
第一，设备安装业务每年都会增长，公司试图为客户提供更多的服务、创造更大的价值，因此这项业务也会受益。我没有表示是否每个季度都会增长，但是考虑到某些服务合同的达成、某些客户可能在特定季度做出升级的决定，在年度的基础上，你可以认为它每年都在增长。
第二，关键应用(criticalapplications)、Lam对关键应用的关注，以及它的重要性。一方面，这是具有粘性的；另一方面，为了执行这些最困难的应用，客户必须保持系统的顶级性能，而这实际上倾向于驱动了更多与备件和服务有关的需要。因此，在Lam强大的critical applications中，CSBG业务的开展往往会更加深入。这与设备类型的关联少一点，但与应用需求的关联多一点。
此外，criticalapplications往往也有更加频繁的升级周期，因此客户需要保持设备能够在最新的技术节点(technology note)运行。
Q18：一季度时，您曾经提供疫情可能会导致3亿美元的收入会因为供应链的挑战而延迟，是否可以这样认为：二季度是否已经追赶上了一定进度，三季度会持续追赶进度还是说整体节奏和没有疫情影响下一致？
无法给出量化的回答。二季度追赶进度的表现良好，但是还没有完全赶上；公司正在提高效率，对目前供应链的情况表示满意。
Q19：产能方面，公司每季度超30亿美元，问题主要是和供应链有关，在接下来的几个季度里，是否会出现供应无法满足需求的情况？
公司拥有全球制造网络，非常有信心避免供应不足的情况。这并不是说公司有一个产量最大的制造网络，只不过上一季度的供应受到限制，这是当时业绩指引受到限制的原因。目前，公司可以满足超过30亿美元的需求，对三季度的供应充满信心。随着时间的推移，公司的供应能力会逐渐提高。我不会给出公司最高的供应量，但是绝对可以满足公司的需求。
Q20：您之前重申过长期来看公司会有75%到100%的自由现金流的长期资本回报，这是表明本季度和年底股票回购行动会加速？
公司上一季度暂停了股票回购，在本季度末之前逐步回购，未来我们仍将根据市场具体情况而定。
Q21：在成本方面，您曾经提到差旅费用的下降、远程服务的兴起。但是如果疫情结束之后商业、旅行和营销方式回归以前的方式，明年营业成本是否会明显上升？此外，雇员人数也增加，明年是否还会持续？
我无法给出明年的预测。不过，我们会从现在的运作方式中吸取经验并成长，这是公司所擅长的。疫情之后，若业务模式回归正常，营业成本会有所回升，但我不认为会和以前一样。
一方面，历史记录表明公司管控运营成本的能力是很强的。另一方面，正如我们的2023、2024年的投资计划，公司近期曾经公告过一些投资项目，如：1)在韩国成立技术中心，这是一项战略投资以扩大研发能力并贴近公司的大客户；2）在马来西亚新建一个工厂，扩大全球制造网络，提供额外的弹性，降低成本。
因此，短期内公司正在推进一些对长期前景充满信心的投资计划，这些投资会产生一些开支，但是更多的R&D投资可以为长期增长提供动力，并且我们对公司的产品非常有信心。
二、公司基本情况介绍
Tim Archer (President & Chief Executive Officer)
新冠疫情在全球范围内肆虐，各国面临宏观经济波动，中美关系摩擦不断，今年公司的业务运行面临着影响全世界人民的巨大的不确定性和前所未有的挑战。技术正在发挥非常关键的作用，使人们能够时刻保持紧密联系、企业维持高效生产，并加速当前全球所面临的问题的解决。
我对公司员工表现出对彼此和社区的关心、以及为支持顾客的成功所付出的巨大努力感到非常满意。在员工们杰出的工作下，公司二季度业绩表现出色，同时三季度业绩指引增长强劲。针对 COVID-19，我们制定了安全并且有效的规章制度公司必要的运作，同时使得绝大多数员工能够在远程工作的情况下维持较高的工作效率，这也体现了公司应对疫情的决心和灵活性。
公司的生产和供应能力已经从初期的停滞中逐步恢复和稳定，能满足超过30亿美元/季度的需求。正如业绩指引所说，三季度产出将接近创造公司历史新纪录，而这则凸显出我们的持续经营规划、全球制造网络和可靠供应链合作伙伴的有效性。我们将持续不断地学习以提高公司经营的韧性并在未来更好的服务客户。不过，我对公司员工和合作伙伴在一个充满困难和挑战的时期所取得的成绩感到骄傲。
在讨论本季度公司的经营成果前，我想简单谈谈对半导体设备在中国销售的新规则的看法。中国仍然是全球半导体生态系统的重要组成部分，Lam Research在中国市场有坚实的业务基础。我们正在密切跟踪并遵守所有监管指令，据评估我们认为目前新规则对公司与中国相关的业务往来并没有实质性影响。
2020年Q2的收入和EPS超出我们的预期。业务利润率提高，经营性现金流超8亿美元。正如公司三季度的业绩指引所表明的那样，我们认为下半年的经营前景维持乐观。此外，Q2的业绩也代表了我们正朝着实现长期目标的方向持续前进。三季度业绩指引表明公司的收入将接近创纪录水平，但我们认为公司业务仍将保持强劲的增长。
支持我们的判断的论点包括：1)Memory投资将会持续增长，以满足长期需求驱动因素。年初至今，公司的Memory收入占比不足总收入的60%，也低于历史高点。我们预计随着NAND和DRAM投资的增加，公司在Memory市场的领先地位将推动公司在WFE市场份额的提升。2)随着我们在代工厂/逻辑这一细分市场收入增长快于市场成长周期，早前公司提高在代工厂/逻辑客户的目标市场空间和份额（市占率）的努力正逐步取得成效。3）年初至今，客户支持业务合计贡献全部收入的34%，这对公司收入创纪录的贡献越来越重要。
我们认为晶圆设备未来有望维持强劲增长。虽然COVID-19给半导体行业带来巨大冲击，但进一步来说，它进一步凸显了企业和个人对半导体产业及半导体产业链所涉及的产品和技术的依赖。例如，视频广泛深入到商业和消费者活动中，导致互联网视频流量加速增长，这一点在居家工作、远程学习、远程医疗、在线游戏和视频流等集中表现。
全球近2/3的消费者将视频作为获取信息的首选媒介，因此对数据传输、分析和存储的需求将继续增加。5G时代逐步来临，视频清晰度从4K提高到8K，云和企业数据中心正在扩大，增加了对数据流量的需求。视频清晰度每提高一倍，NAND存储内容增加近70%，新一代服务器架构的存储通道较上一代增加超30%。
尽管最近智能手机的数量有所下降，但我们认为2020年5G终端的爆发将使得智能手机的NAND增长超出我们之前的预期。同时，游戏机市场新产品的推出也将推动NAND需求的不断增加，有的游戏平台的SSD存储容量达到1TB级别。预计新游戏的推出将拉动2020年NAND bit需求实现0%-5%的增长。下游需求增长叠加半导体工艺复杂程度的提高将为晶圆设备需求的持续扩张打下基础。
2020年，由于存储、代工厂/逻辑投资的增长，我们估计晶圆设备市场规模将超500亿美元，为500-600亿美元的中高水平。虽然潜在的需求驱动因素因 COVID-19而产生波动，但目前预计的晶圆设备总额与年初的预期接近。
综合来看，晶圆设备中的存储客户份额2020年维持上升趋势，但低于2019年，且这一上升趋势或将持续到2021年。对于DRAM而言，库存水平在2020年年底会更低。对于NAND和DRAM而言，今年bit的供应增速低于长期需求，且预计NAND的复苏节奏快于DRAM。
地域上，中国本土客户仍然是晶圆设备需求的重要来源之一，预计2020年支出范围在100亿美元左右。中国WFE投资的同比增长主要由NAND和代工厂部门贡献。
从更广泛、更长远的角度看，随着数字经济的发展和半导体工艺复杂程度的提高，为晶圆设备支出增长到600亿美元的水平夯实了基础，因此我们对晶圆设备前景充满信心。在这个前提下，公司专注于实现经营目标：相比2019年，到2023或2024年实现超过50%的收入增长，以及翻倍的EPS增厚。实现目标的关键在于推进目标市场空间的拓展和设备整机安装市场份额的增加。
在系统方面，公司业务体现出持续的积极势头。以公司内部几年前开始跟踪的三年远期收入这一指标进行衡量，今年二季度我们的刻蚀设备(Etch Business)在维护存量市场和开拓新客户方面均取得成功。此外，公司在以下两个方面取得了关键性胜利：1)高深宽比硬掩模刻蚀和接触孔刻蚀(Aspect Ratio Mask Open andContact Etch)在DRAM和NAND中的运用;2)运用独特的硬件功能进行射频控制以提高产量(去年提出的技术)。
公司进一步巩固了在高深宽比导体和介质刻蚀工艺(highaspect ratio processes across both conductor and dielectric etch)这一技术领域的领导地位。公司还将这些技术与hydro patterning系统相结合，该系统由LAM的设备智能启用，并输入Fab数据来提高客户的产量。运用这个系统，公司可以在DRAM的四重曝光和EUV光刻工艺方面获得新的市场地位
2020年二季度，公司在以更具创新性和可延展性的Lam产品解决方案替代老设备方面取得较大成效。随着ALD产品系列的不断增加，公司在3D NAND间隙填充工艺和代工厂/逻辑中的多层薄膜沉积工艺取得新进展。卓越的薄膜质量、集成度和生产效率提升对于公司的成功也非常起到重要的作用。
在DRAM和代工厂领域，公司的ALD解决方案在关键侧墙工艺上也正在加速替代传统方案。总的来说，我们相信公司不断改进的ALD解决方案有助于帮助客户提高性能并降低成本的。同时，公司持续帮助客户从其应用Lam设备中获取更大价值。
2020年Q2，公司客户支持业务收入环比增长约8%，年初至今该项业务收入增速超过设备安装业务。公司的Reliant Systems业务收入连续八个季度创新高，主要驱动因素是模拟-混合-数字CIS和微型控制器。
COVID-19加快了远程设备支持新技术等的应用。在Fab厂可实时访问遍布世界各地的Lam Service Experts，我们减少了设备安装和故障排除所需的时间，而不必长途出差。此外，伴随着基于机器学习的分析方法被越来越频繁地运用，利用客户的大数据可以更快地发现和解决问题。正如我们在投资者日分享的那样，这些进步是投资的结果，目的是为客户提供服务、创造价值，并且提高单个腔体的收入机会。
Doug Bettinger
得益于良好的应对COVID-19的政策，公司Q2经营情况稳步改善。公司经营效率越来越高，二季度经营业绩优异。需求爆发下，公司收入达到28亿美元。我们的客户正在投资先进制程技术以促进增长，例如5G，数据中心和游戏机市场。公司很强的执行力体现在收入、毛利率和EPS(4.78美元)等方面。此外，相比于一季度，公司的递延收益余额回归到一个更正常的范围。
各类业务占比方面，二季度存储客户占比从一季度的56%提高到61%，其中NAND客户占比从Q1的40%提高到Q2的45%。新增投资广泛覆盖64层、96层和早期的128层设备。Q1和Q2的DRAM客户占比均为16%，重点是节点的转换，主要是向1y和1z转变。
在积极的库存管理和谨慎的投资节奏的作用下，存储市场整体仍然健康。在代工厂方面，不同的终端市场应用维持了投资的需求。虽然代工厂占比从Q1的31%下降到Q2的29%，但以美元计算的收入实际上有所增加，为该项业务收入公司历史第二高。
最后，逻辑和其他部分Q2收入占比10%，而Q1为13%。
二季度，中国大陆投资保持强劲，34%的总收入来自该地区。中国大陆地区所有细分市场的客户都在进行投资，其中大部分收入是由中国大陆本土客户所贡献的。公司认为中国全年的投资维持在一个较为稳定的水平，对中国业务保持信心。
二季度，公司的客户支持业务收入创历史新高，为9.27亿美元，环比增长8%，同比增长逾17%。备件、服务、升级和新的Reliant工具等方面为公司的客户支持业务收入可持续增长夯实基础。二季度，公司执行了两项重要的长期备件合同，使得该业务的经常性进一步提高，且体现了客户对公司为客户创造价值的能力的信任。
二季度，公司毛利率为46.1%.。二季度初， COVID-19有关的不确定性导致公司的供应链伙伴以及内部生产的受限。此后，公司提高了生产效率，产量扩大、毛利率提高，好于我们季度之初的预期。
COVID-19使得几个领域的成本变高，特别是运费和物流。公司正在尽最大努力通过压缩其他成本来应对这个压力。Q2，公司营业费用4.93亿美元，略高于Q1。公司支出集中在R&D，大约1/2的支出为研发相关。我们的奖励补偿费用增加，这与公司盈利水平提高有关。同时，公司管控了其他方面的支出，Q2下降最显著的是差旅费用。
二季度，公司的营业收入为7.95亿美元，营业利润率28.5%，较上季度增加160个基点。二季度公司的税率是7.6%。公司利率水平很低，可能是因为收入的地区结构比较占优势，更可能是因为公司在上一财年结束时进行了财务费用的调整，公司的利率水平在季度间可能会发生波动。(在财务估值模型中)投资者应当认定公司当前的低两位数的低税率水平仍将持续。其他收入和支出余额二季度略有增加，合计约3300万美元支出。
二季度，公司相机调整了资本结构。4月底，公司成功发行了20亿美元投资级债券的发行，期限为10、30和40年，息票率分别为1.9%、2.875%和3.125%。公司用12.5亿美元债务收益以偿还滚动贷款余额，现已全部还清。
目前，公司员工递延薪酬计划的成本和抵消对冲余额在GAAP原则中仍然不匹配。考虑二季度市场的波动，我们在O line和E line上的GAAP原则支出之间存在着很大的波动，套期保值基本上是在净收入水平上抵消的。
投资者应当注意，其他收入和支出的余额中包含未偿债务的利息费用，而利息费用由现金和投资余额的利息收入抵消；其他收入和支出将受几个与市场相关的项目影响而在季度间波动；其他类似于外汇之类的因素也值得注意。
在资本回报方面，一季度业绩电话会中公司指出将在二季度暂停股票回购，直到对业务环境有更清晰的判断。因此，公司只在二季度后半部分有少量的股份回购，加上红利，合计大约2亿美元用于资本回报。公司仍然计划将75%到100%的自由现金流作为长期资本回报。
稀释后的每股收益是4.78美元。其中，税收的一次性优惠大约0.14美元。二季度，稀释后的股股本为1.47亿股，由于股票回购力度较小，仅略有下降。股本中包含了2041张可转债中约100万股的稀释影响。2041张可转债的稀释时间表可在我们的投资者关系网站上查阅。
资产负债表方面，公司的现金和短期投资(包括限制性现金)二季度增加到70亿美元，一季度为56亿美元。本季度业务现金流量强劲，为8.13亿美元，原因是盈利能力良好，收款情况扎实。季度环比的增加与债务发行有关，其由滚动贷款的偿还所抵消。二季度，DSO由一季度的80天减少到68天，显示出优异的回款速度。库存周转次数与上季度持平，为3.2次。公司有意预留了更高的库存，以支持三季度更高的收入体量。
非现金支出包括大约5000万美元的股权补偿、5400万美元的折旧和1700万美元的摊销。二季度，资本支出与Q1的5100万美元一致。
雇员方面，二季度合计约为11300名正式全职雇员。这反映了为支持增量业务而在公司工厂和外地增加的雇员。同时，为保证交付力度(如the new Sense.i Etch platform and the dry resist program)，公司亦补充了研究和开发工作中的投入。
接下来是公司2020年三季度的业绩提供non-GAAP指引：预计公司收入将达到31亿美元，±2亿美元左右；毛利率提升至46.5%，±1%；营业利润率29.5%，±1%；每股收益$5.15, ±$0.40，股本按1.47亿股计算。考虑到COVID-19的持续不确定性，波动范围可能更大。预计公司在2020年下半年将处于有利地位，因为我们认为WFE的投资仍然乐观。公司从存储和代工厂客户中看到持续的势头，其是由更具战略性的技术投资需求驱动的。此外，客户支持业务也有望为公司收入增长提供持续动力。
Lam Research Corporation (NASDAQ:LRCX) Q4 2020 Results Conference Call July29, 2020 5:00 PM ET
Company Participants
Tina Correia - Corporate VicePresident, Investor Relations
Tim Archer - President & ChiefExecutive Officer
Doug Bettinger - Executive VicePresident & Chief Financial Officer
Conference Call Participants
Timothy Arcuri - UBS
C.J. Muse - Evercore ISI
Harlan Sur - J.P. Morgan
John Pitzer - Credit Suisse
Krish Sankar - Cowen & Company
Toshiya Hari - Goldman Sachs
Blayne Curtis - Barclays
Vivek Arya - Bank of America MerrillLynch
Mehdi Hosseini - SIG
Joe Moore - Morgan Stanley
Joe Quatrochi - Wells Fargo
Weston Twigg - KeyBanc Capital Markets
Operator
Good day and welcome to Lam Research'sJune Quarter Earnings Conference Call. At this time, I would like to turn theconference over to Tina Correia. Please go ahead, ma'am.
Tina Correia
Thank you, operator. Thank you and goodafternoon, everyone. Welcome to the Lam Research quarterly earnings conferencecall. With me today are Tim Archer, President and Chief Executive Officer; andDoug Bettinger, Executive Vice President and Chief Financial Officer.
During today's call, we will share ouroverview on the business environment and review our financial results for theJune 2020 quarter and our outlook for the September 2020 quarter. The pressrelease detailing our financial results was distributed a little after 1o'clock PM, Pacific Time this afternoon. The release can also be found on theInvestor Relations section of the company's website along with the presentationslides that accompany today's call. Today's presentation and Q&A includesforward-looking statements that are subject to risks and uncertainties,reflected in the risk factors disclosed in our SEC public filings. Please seeaccompanying slides in the presentation for additional information. Today'sdiscussion of our financial results will be presented on a non-GAAP financialbasis unless otherwise specified. A detailed reconciliation between GAAP andnon-GAAP results can be found in today's earnings press release. This call isscheduled to last until 3 o'clock PM, Pacific Time. A replay of this call willbe available later this afternoon on our website.
With that I will hand the call over toTim.
Tim Archer
Thank you, Tina. And welcome, everyone.The global pandemic, volatility in the macroeconomy, ongoing US-China tensions.We are operating this year amid tremendous uncertainty and unprecedentedchallenges impacting people all over the world. We see technology playing acritical role, keeping people connected, enabling businesses to remainproductive and accelerating solutions to the myriad of problems the world isconfronting.
I am very pleased with how Lam'semployees have demonstrated care for each other and our communities and haveresponded with great effort to support our customers' success. As a result oftheir outstanding execution, today, we are reporting strong performance for theJune period and guiding to another quarter of solid growth. Specific to theCOVID-19 pandemic, our teams have demonstrated agility and resolve inestablishing safe and effective protocols to perform essential work in ourfacilities, while also enabling the majority of our employees to remainproductive while they continue working remotely.
We have ramped and stabilized oursupply and production capability after an initial period of disruption, tosupport revenues greater than $3 billion per quarter. As you have seen from ourguidance, we will be nearing record output levels for the company in theSeptember quarter, highlighting the effectiveness of our business continuityplans, our global manufacturing network and our trusted supply chain partners.We will continue to capture learnings to further improve business resilienceand better serve our customers in the future, but overall, I am proud of whatour employees and partners have accomplished during this challenging period.
Before discussing our results for thequarter, I wanted to comment briefly on our review of the new rules regardingsales of semiconductor equipment into China. China remains an important part ofthe global semiconductor ecosystem and Lam has a solid track record of businessin this market. We are closely monitoring and complying with all regulatorydirectives and based on our assessment we currently see no material, financialor business impact from the new rules.
Turning now to the June quarter.Revenue and EPS came in above our expectations. Operating margins improvedsequentially and we generated over $800 million in cash from operations. As theSeptember quarter guidance indicates, we see continued positive momentum as wemove into the second half of the year. The results also represents sustainedprogress towards our long-term objectives. As we mentioned earlier, ourguidance indicates, we are nearing prior record levels of revenue, but webelieve that our opportunity for growth remains robust.
Key point supporting our view include,one, memory investments must continue to grow to meet secular demand drivers.Lam's memory mix year-to-date as slightly below 60% of system revenues is wellbelow historic highs. We expect our strong memory position to driveoutperformance in share of WFE spent, as NAND and DRAM investment levelsincrease. Two, our actions to improve our Foundry/Logic SAM and Share areyielding results. With our revenue growth in this segment outpacingFoundry/Logic WFE growth cycle-to-cycle. And three, our customer supportbusiness group at 34% of total revenues year-to-date is an increasingly greatercontributor to our top line than in the past.
Looking at the broader WFE environment,our outlook remains strong. While COVID-19 has created volatility for thesemiconductor industry, in a larger sense it is underscored the rapidly growingreliance of individuals and businesses on semiconductors and the products andtechnologies they enable. For example, we are seeing accelerated growth inInternet video traffic, as video becomes embedded in a broad range of businessand consumer activities. This is manifesting currently in work-from-home,e-Learning, telehealth, online gaming and of course, video streaming.
Nearly 2/3 of global consumers, citevideo as their preferred medium for obtaining information. The demand that thisplaces on data transport, analysis and storage, will continue to rise. Mobilenetworks are migrating to 5G. Video quality is doubling from 4K to 8K and cloudand enterprise data centers are expanding to support the enhanced data traffic.A 2x resolution improvement in mobile video drives roughly a 70% increase inNAND storage content and newer server architectures are expected to have over30% more memory channels versus prior generations.
Despite the recent downtick insmartphone units, our own assessment of NAND content in smartphones, incalendar year 2020 has trended higher versus our prior baseline due to agreater mix shift towards 5G devices. We are also seeing increased NAND demandrelated to new product cycles in the game console segment, with some of the newplatforms adding up to a terabyte of SSD based storage. Launches of the newgame consoles are expected to add low to mid-single-digit percent growth to overallNAND bit demand in 2020. These demand drivers in combination with increasingsemiconductor manufacturing complexity create a compelling set up for sustainedstrength in WFE spending.
In 2020, we estimate WFE to be in themid to high $50 billion, driven by growth in both Memory and Foundry/Logicinvestment. Although we have seen underlying demand drivers fluctuate due tothe challenges presented by the COVID-19 pandemic, our current WFE forecast intotal is very close to what we expected at the beginning of the year.
From a mix perspective, we see memoryshare of WFE growing in 2020, off a low 2019 level. This trend should continueinto 2021. Particularly in DRAM, we believe inventory levels will be lower aswe get to the end of 2020. In both NAND and DRAM, we see bit supply growthlower than long-term demand this year and NAND recovery progressing ahead ofDRAM.
By geography, domestic China customerscontinue to be a strong source of WFE demand, with expected calendar year 2020WFE spend in the $10 billion range. Year-on-year growth in China investment ispredominantly driven by NAND and foundry segments.
Looking more broadly at longer termglobal WFE spend, we are increasingly confident that the acceleratingdigitization of the economy, along with the rising complexity of semiconductormanufacturing at each technology migration is establishing a higher base of WFEspending at the $60 billion level. With this outlook. We are focused ondelivering on our objectives to drive greater than 50% growth in revenue andmore than a doubling of EPS by 2023, 2024 compared to our 2019 results. Key toachieving these goals is to execute on the SAM expansion, market share growthin installed base revenue opportunities, we laid out at our Investor Day inMarch.
On the system side, we continue to seepositive momentum across our businesses. The June quarter marked a record fornet penetration and defense wins in our Etch business, as measured by threeyear forward revenue, which is a metric we began tracking internally a fewyears ago. We achieved key wins in High Aspect Ratio Mask Open and Contact Etchapplications in both DRAM and NAND and leveraging unique hardware capabilitiesfor RF Control an edge yield enhancement that we introduced last year.
We have further extended our technicalleadership in high aspect ratio processes across both conductor and dielectricetch. We also combine these technologies with our hydro patterning system,which is enabled by Lam's equipment intelligence and uses fab data inputs toimprove customer yield. With this system, we were able to secure new positionsin Quad and EUV patterning for DRAM.
In the June quarter, we also made goodprogress in our effort to disrupt older equipment segments with moreinnovative, extendable Lam solutions. With our enhanced ALD family of products,we achieved 2 new wins for 3D NAND gap fill applications and a multi-layerapplication win in Foundry/ Logic. Superior film quality, integration andarchitecturally enabled productivity were instrumental to our success.
In DRAM and Foundry, we are also seeingaccelerated adoption of our ALD solutions for critical spacer applicationswhich have traditionally been done using furnaces. Overall, we believe ourenhanced ALD solutions are helping to enable the performance and cost road mapsour customers need. At the same time, we continue to help customers extractmore value from their installed base of Lam equipment.
In the June quarter, our customersupport revenues grew approximately 8% from the March period and our revenuegrowth has exceeded installed base unit growth year-to-date. Our ReliantSystems business posted its eighth straight quarter of record revenues, drivenprimarily by shipments to analog-mixed-signal CIS and microcontroller segments.
The challenges of the COVID-19 pandemichave also accelerated the deployment of important new technologies for remoteequipment support. By enabling real time in fab access to Lam Service Expertslocated worldwide, we have reduced installation and troubleshooting timewithout the need for extensive travel. In addition, increasing adoption of ourmachine learning based analytics, leveraging big data at customer sites isenabling faster detection and resolution of issues. These advances are theresult of investments that as we shared at our Investor Day, are targeteddelivering services innovation that create value for our customers and alsoincreases our revenue opportunity per chamber.
So to wrap up, Lam delivered a verystrong June quarter and we see continued strength ahead. We are seeing positivemomentum in our efforts to grow our installed base revenue, expand our servedmarkets and increase our market share. And as a result, we believe we areincreasingly well positioned to benefit from the long-term secular growthdrivers in the semiconductor industry.
Thank you, all for joining and for yoursupport. And I'll now turn it over to Doug.
Doug Bettinger
Awesome. Thank you, Tim. Goodafternoon, everyone. And thank you for joining us today. I hope all of you andyour families have been safe and healthy.
Our operation steadily improvedthroughout the June quarter as we executed well in this COVID-19 environment.We've become increasingly more efficient and effective in our operations, whichI think are well reflected in the results from the June quarter. Our revenuescame in at $2.8 billion driven by broad based demand. Our customers areinvesting in leading-edge technologies to service the growth you're seeing in5G, data centers and product cycle driven demand in the gaming console market.Lam's solid execution is reflected in our revenue result, our gross marginperformance, as well as our earnings per share that came in at $4.78. I'd alsojust point out that our deferred revenue balance is back to a more normal rangeas compared to the end of the March quarter.
From a system segment perspective, thetotal Memory segment in the June quarter increased to 61% of System revenuesfrom the March quarter level, which was at 56%. We saw increases in NANDspending, which contributed 45% of our system revenue which was up from 40% inthe March quarter. Net investments are broad based, focused on 64, 96 andinitial 128 layer devices. DRAM spending was consistent across the June andMarch quarters at 16% and continues to be focused on node transition, primarilyconversions to 1y and 1z.
The combined memory market remains in ahealthy place due to proactive inventory management as well as a prudentinvestment cadence. In Foundry, demand across diverse end-market applicationscontinues to drive the investment profile. While Foundry as a percentage of oursystem revenue slightly declined from the March quarter percentage of 31% quarterto the June quarter at 29%, revenue actually increased in dollar terms, comingin at the second highest system revenue level for Foundry in Lam's 40-yearhistory. We continue to be pleased with our trajectory here.
And finally, the Logic and other segmentcontributed the remaining 10% of systems revenue in the June quarter ascompared to 13% in March. Term investments continue to be strong in the Junequarter, with 34% of our total revenue coming from that region. We're seeinginvestments from customers in all market segments within China. The majority ofthe revenue again came from domestic Chinese customers. We continue to expectsolid investment levels in this region throughout the calendar year. China isobviously an important market for Lam and we remain confident in the strengthof our business there.
The June quarter revenue for ourCustomer Support Business group was a record at $927 million representing anincrease of 8% from the March quarter level, and an increase of over 17% fromthe same quarter a year ago. We're delivering sustainable growth across thecomponents of our customer support group in spare parts, service, upgrades andour refurbished Reliant tool business. Within the June quarter, we executed twosignificant longer term spares contracts, further improving the recurringnature of the revenue streams in this business and demonstrating furtherevidence of the trust our customers have in us to continuously deliver value.
Gross margin for the June quarter was46.1%. At the start of the June quarter, driven by uncertainties related to theCOVID-19 situation, we saw a potential capacity limitations both from oursupply chain partners as well as our own internal production capability.However, as the June quarter progressed, we were able to increase ourproduction efficiency. The resulting expansion in production volumes yieldedbetter effect, better factory performance that enhanced gross margin from ouroriginal expectations. In addition, gross margins fluctuate, as you know, basedon customer and product mix and in the June quarter, we ended up with aslightly more favorable mix than we anticipated at the start of the quarter.
We are seeing higher cost due to COVIDin several areas, most notably freight and logistics. We're doing our best tomitigate that headwind by managing other expenses in the factories and in thefield. During quarter, operating expense came in at $493 million, slightlyhigher than the March quarter. We focused our spending in the research anddevelopment area, as we address our customers' most critical needs. Roughlytwo-thirds of our spending remains focused towards R&D. Our incentivecompensation expense increased in the prior quarter which is tied to ourimproved profitability levels. At the same time we've managed expenseselsewhere, most notably travel and they came down throughout the June quarter.
Operating income in the June quarterwas $795 million and operating margin was 28.5%. It was an increase of 160basis points from the prior quarter. Our tax rate this quarter was 7.6%. Ourrate was low in the June quarter, primarily due to a more favorable mix ofgeographic income and maybe more importantly a one-time year-end adjustmentsrecorded as we closed our fiscal year. We will have fluctuations in the ratefrom quarter to quarter. You should continue to expect the ongoing tax rate tobe in the low-teens level for your models. Other income and expense increasedslightly in the June quarter, coming in at approximately $33 million ofexpense.
Within the June quarter, we wereopportunistic with our capital structure. At the end of April, we completed anoffering of $2 billion of investment grade bonds with maturities of 10, 30 and40 years. I was pleased with the demand for our paper, as well as the pricingwhich came in with coupons of 1.9%, 2.875% and 3.125% respectively. We used$1.25 billion of the debt proceeds to pay down the revolving credit facilitythat was then outstanding. That facility is now completely paid down.
As we discussed in last quarter's call,the cost of our employee deferred compensation plan and the offsetting hedgingbalances, remain mismatched in the GAAP P&L. You can see these results inthe GAAP reconciliation table of our earnings release. Given the volatility inthe market in the June quarter, there were large fluctuations between our GAAPexpenses in the O line and E lines that the hedge essentially offsets at thenet income level.
And you should note, the other incomeand expense balance includes the interest expense of our outstanding debtamounts, obviously, offset by the interest income from our cash and investmentbalances. You should expect that other income and expense will varyquarter-to-quarter based on several market-related items. Should think aboutthings like foreign exchange.
On the capital returns side, we notedin our March quarter earnings call, that we will be pausing our buybackactivity during the June quarter, until we had a better line of sight in thebusiness environment. As a result we had only a small amount of sharerepurchases in the latter part of the June quarter and that together withdividends ended up having us deploy approximately $200 million towards capitalreturn. Long-term capital return of 75% to a 100% of free cash flow remains ourplan.
Diluted earnings per share, as I said,was $4.78. I mentioned that the one-time benefit from the tax items Ireferenced was roughly $0.14. Our diluted share balance for the June quarterrounded down to 147 million shares, only a very slight decrease due to theminimal share repurchase activity. The share count includes a dilutive impactof approximately 1 million shares from the 2041 convertible notes. The dilutionschedule for the remaining 2041 convertible note is available on our InvestorRelations website for your reference.
Let me now move on to the balancesheet. Our cash and short-term investments, including restricted cash,increased in the June quarter to $7 billion from $5.6 billion in the Marchquarter. Cash flows from operations in the quarter were strong at $813 milliondue to healthy profitability and solid collections during the quarter.Remainder of the increase quarter-over-quarter was related to the debtissuance, offset by the pay down of the revolving credit facility. DSOdecreased in the June quarter to 68 days from 80 days in the March quarterdemonstrating strong collection performance and the resulting timing ofcustomer payments. Inventory turns were flat with the prior quarter at 3.2times. We have consciously increased our inventory balance to support thehigher revenue level that we see in the September quarter.
Non-cash expenses includedapproximately $50 million for equity compensation, $54 million for depreciationand $17 million for amortization. In quarter capital expenditures wereconsistent with the prior quarter amount coming in at $51 million.
Ending head count as of the Junequarter was approximately 11,300 regular full-time employees. This headcountreflects added resources in our factory and field operations, supportingincreased volume. As well as additions in research and development to supportongoing critical deliverables, like the new Sense.i Etch platform and the dryresist program that we announced at our Investor Day in March.
So now looking ahead, I'd like toprovide our non-GAAP guidance for the September 2020 quarter. We're expectingrevenue of $3,100,000,000, plus or minus $200 million. Gross margin increasingto 46.5% plus or minus 1 percentage point. Operating margins of 29.5% plus orminus 1 percentage point and finally, earnings per share of $5.15 plus or minus$0.40 based on a share count of approximately 147 million shares. These rangesremain wider than normal, due to the continuing uncertainty from COVID-19. Weare well positioned for the second half of calendar 2020 as we expect continuedhealthy WFE investments. We see continued strength from Memory and Foundry, forthat matter, driven by demand in more strategic technology orientedinvestments. The customer support business group is also expected to providecontinued momentum for the company.
Operator, that concludes my preparedremarks. Tim and I would now like to open up the call for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Thefirst question will come from Timothy Arcuri with UBS. Please go ahead withyour question.
Timothy Arcuri
Thanks a lot. Doug, I guess the firstquestion. You're talking about now WFE being mid to high 50s this year. If Ilook at Q3 and I look at your guidance and your sort of probably going to gainsome WFE share this year, it would sort of assume that we're running maybe inthe low 60s in Q3. So, I guess if I assume your full-year forecast and I assumemaybe you gain of 100 basis points of WFE share this year, something like that,it would sort of imply that December revenue is well sort of flattish and I'mnot asking you to guide December, but I'm just kind of wondering whether youthink that, that math holds together where you should gain like a little bit ofWFE share this year? Thanks.
Doug Bettinger
Yes. Tim, you're absolutely right.We're only guiding one quarter at time but and I'm not going to give you aspecific answer on December but I will qualitatively say, I think December willcontinue to be a strong for us. Your math -- I don't look at WFE on a quarterlybasis, I'm sure you're doing the math right, but you're also right about theobservation on share spend and where memory is trending and all of thosethings, we're setting up I think for a pretty good second half, Tim.
Operator
Thank you for the question. The nextquestion will come from CJ Muse with Evercore. Please go ahead.
C.J. Muse
Yes, thanks for taking the question. Iguess a question on the memory side of things and where are we in the cycle. Iknow 30% above the recent trough, but still 40% below the prior peak andinvestors clearly been focused on this aspect. Would love to hear your view,particularly as it relates to any positive trends you highlighted into calendar' 21?
Tim Archer
Sure, I'll start C.J. and then let Dougadd something if you want to do. Obviously, what we have, we've been saying forquite some time is that memory is a story of one kind of coming off what was avery strong 2018 and a couple of years of then digesting that, but at the sametime, there are underlying growth drivers that I think you're seeing everywherefor both NAND and DRAM, that give us greater confidence in what we've stated islong-term bit demand growth in the high 30s for NAND and in the high teens forDRAM. If those are correct and like I said, I gave you a few of the examples ofwhere the big consumers of NAND and DRAM from an application perspective on thehorizon, we think that memory investment has to continue to grow for years tocome. Yes, obviously at our Investor Day, we laid out a model of a morenormalized memory spending level in the context of total $60 billion WFE and inthat environment we grow the company quite significantly.
Doug Bettinger
Yes. And C.J. maybe I'd just add, Imean more near term tactically relative to what's going on this year. I thinkNAND is a little bit ahead of DRAM relative to the pace of recovery. When Ilook at the market both are kind of managing inventory investment -- investingwhat I described as or tried to with a prudent cadence, that's gotten end up thisyear and DRAM maybe up a little bit, but not too much. I really do think DRAMwill be more 2021 story. So think about that near term and then on top of thatas it relates to Lam, I mean we're doing extremely well in Foundry as well. So,factor that in when you think about what's going on with our company.
C.J. Muse
Very helpful. And if I could follow upon the service side, you grew that business stellar 70% [Phonetic]year-on-year. Was there any catch up there on the deferred side and I guess,thinking through that, how should we think about the potential for sequentialgrowth and into September, December? How do your tools coming off warranty andupgrades look at least based on your build plan today? Whatever you can share.Thanks.
Doug Bettinger
Yes, C.J. In this part of the business,the deferred stuff we had at the end of March, really wasn't impacting things.The deferred, if you remember what we described at the end of March, had to dowith back ordered shipment. That was really all about new equipment. So I don'tthink there's anything terribly unique going on in CSBG, Tim unless there'ssomething.
Tim Archer
No. I think it's -- again, it's justthe efforts as we've said to continue to provide services to grow our revenueopportunity per chamber. And also just our business as you pointed out, as ourcompany continues to grow faster, the installed base grows faster and generatesmore opportunity.
C.J. Muse
Thank you.
Tim Archer
I don't think there is anything unique.
Doug Bettinger
Yes, thanks, C.J.
Tina Correia
Operator, can we go back to Tim Arcurifor an additional question please.
Doug Bettinger
Yes, I thought of as Tim only had onequestion.
Operator
Yes ma'am, one moment. Your line isopen Tim.
Timothy Arcuri
Thank you. Thanks for that Doug.
Doug Bettinger
Sorry, Tim. I'm sorry.
Timothy Arcuri
Yes, sure. Sure, no worries. So, thesecond question, I guess, can you go through a little bit about the, how thewhole military end use thing is transpired, it seems like China WFE is a littlehigher, the domestic stuff is maybe $1 billion to $1 billion higher than youthought it would be and it seems like now all these customers know that thereis restrictions looming at some point. So they're going to keep on pullingstuff in. So can you just talk about how the export controls have transpired?Is commerce happy just as long as you do the due diligence with the customer onmilitary end use? Can you just kind of talk about all that? Thank you.
Tim Archer
Sure, I mean, I think Tim, in mycomments I talked about our assessment. It was quite an extensive diligenceprocess that we went through which consisted both of our own conversations inquestioning of the customers and their certification as well as the use ofthird party research and also validation by outside counsel and we arrived atour conclusions, as I stated, no material, financial or business impact as aresult of all of that work.
Now, that is an ongoing activity forus, means that we are continually assessing and doing that kind of research andso that's something that we have committed to but at this point that is ourconclusion, if by your question about and connection to domestic China WFE. Idon't think that's a connection that we're making and basically we are sayingthat China has plans to invest and I indicated that a lot of the investment iscoming from NAND as well as Foundry and at least in our view right now. We havenot made that connection that somehow domestic China WFE is in any way reallyaffected by these rules one way or the other.
Doug Bettinger
Yes. Tim, maybe a comment from me, mysense is, it's not, there is nothing pulled in say no, we may be wouldn't knowif it was or wasn't a little bit. But given we've concluded the rules are notimpacting our ability to ship. I don't know why anybody would think thereshould be pulling things in right.
Timothy Arcuri
Awesome. Okay, thank you much.
Tim Archer
Thanks, Tim.
Operator
Thank you. The next question will comefrom Harlan Sur with J.P. Morgan. Please go ahead with your question.
Harlan Sur
Good afternoon. Great job on thebusiness execution and strong results. One of the large logic manufacturersrecently talked about the potential of moving to a more outsourced businessmodel. Maybe just a continuation of the industry trend towards a fabulousbusiness model. At a high level, it would appear to be a zero-sum game. Butwanted to get your views on the potential ramifications of your business in astructural move in the industry towards a more fab like or fabulous businessmodel.
Tim Archer
Yes, okay. Let me try to take that,Harlan, to start. Obviously, we don't want to comment about the specific plansof any one customer, but to your point of the industry moving to outsourcemodel, I mean, obviously that's a more than 20 year story and I think thatanything that allows wafers ultimately to be produced with better technology atlower costs, however, that's done, in-house or outsourced, is what's good forthe industry and that's good for Lam. I'm quite certain that as a result of theadvances that have happened on the Foundry side, Lam's business has benefitedtremendously in the last 20 years and that just comes back to a statement thatI've made a number of times, which is the best thing for Lam is that technologynodes continue to migrate.
We have greater SAM at every technologynode migration across NAND, DRAM and Foundry logic and so every company has todecide for themselves, what's sort of the best answer to advancing technologyat the best cost. That can be in-house, can be outsourced. What we care aboutis whether that technology advances and more wafers get produced and so Ithink, we obviously watch it and we look at the impact on our business. Butultimately Foundry hasn't been bad for the industry or for Lam.
Harlan Sur
Absolutely.
Doug Bettinger
Yes. And Harlan, just one or twocomments from me. The way I think about it is what matters to Lam is the numberof leading edge wafers in the entire industry that are put in place, whetherit's in-source, outsource, largely doesn't matter too much. Either way it needsequipment, right? Independent of where it goes, we're selling largely the samethings to the industry.
Harlan Sur
Yes, that's great insights there. Goodto see the recovery of the business and the improvement in the supply chain andlogistical bottlenecks. Just wondering, Doug, if the team is still, even withthis strong September quarter guide, playing catch up on the delinquent backlogas a result of the earlier bottlenecks and if so, how much of that has yet tobe worked down?
Doug Bettinger
Yes, Harlan. I think we've got nicelycaught up. I don't think we're completely caught up as we sit here today, butwe made very nice progress during the quarter.
Harlan Sur
Great, thank you.
Tim Archer
Thanks, Harlan.
Operator
Thank you. The next question will comefrom John Pitzer with Credit Suisse. Please go ahead.
John Pitzer
Yes, good afternoon, guys.Congratulations on the results. Thanks for letting me ask the question. Doug,just maybe a follow on to Harlan's question, it sounds like COVID was still acost headwind in the June quarter. I'm wondering if you can help us quantifythat and as you look out into September with the guide how much sort of COVIDlogistical expense is still in there and when do you think you might be able totake that out of the model?
Doug Bettinger
Yes, John. The biggest individual item,when I look at it is freight and logistics. I mean freight lanes are morerestricted than they were obviously pre-COVID. Things are more expensive.Really tough to mitigate that. I mean, to a certain extent, you take the price,you do your best negotiate it, but you're somewhat of a price-taker there. Thatdoesn't mean we're not, as I tried to describe working to drive efficiency,effectiveness elsewhere in the operation. That's what Lam is extremely good atdoing and we're doing that, but that is where the challenges are right now. I'mnot going to quantify it, John. But it is impacting gross margin to a certainextent. I don't know, Tim, if you want to add anything.
Tim Archer
No. The only thing I'd add is;obviously, Doug pointed out some near term headwinds on the cost side. You knowfully, we would expect those to eventually roll back as things normalize postCOVID. But I mentioned this point of the acceleration of remote supporttechnologies. And I think that's -- while we haven't fully quantified kind ofwhat the benefit could be, clearly some of the benefits of less travel and moreproductivity of kind of worldwide engineers who can now connect into fabs andprovide expertise via some new technologies, that actually will be likely acost and kind of personnel benefit for us, so in -- down in the future. And sowe're investing in that and I think it's a positive headwind just further --positive tailwind just up further down the road.
John Pitzer
That's helpful. And then, Tim, you guyscovered a lot of ground at the Analyst Day earlier this year, but you couldn'tcover everything. I'm kind of curious if you can kind of spend a few minutestalking about your positioning in advanced packaging, because clearly, there'snot a lot of volume in sort of chiplets today, but as you look at Intel movingto their second generation 10 nanometer part sometime in the second half ofnext year, it seems like the tiles last chiplet strategy is really poised toaccelerate starting in the back half of next year and going forward. And I knowyou guys have some good leverage there, but I'm just trying to get a sense ofquantifying and how big do you think that market opportunity is.
Tim Archer
Sure. I don't know if I'm -- I don'tknow if we're prepared quite to quantify it for you on this call, but what Ican tell you, is it kind of follows on from my earlier comment about customersand just the industry in general looks for the best way to achieve theperformance that's required at the lowest cost. And sometimes that's by lookingat total system performance and these advanced packaging 3D chiplets, thesesorts of technologies, actually are one way to deliver system performancewithout having to necessarily utilize the most advanced node chips for everyapplication. And our position has been very strong. We've been -- we were anearly investor there. We have leading positions on both the etch and depth sidein TSV applications and we think that we're extremely well positioned when thatcomes.
And so, every time we hear aboutacceleration, we're actually quite encouraged. But it's something that our highaspect ratio etching processes and our ability, I think most people recognizeour leadership for 20 plus years in copper electroplating fill. Those arecritical technologies for these 3D packaged and heterogeneous integrationapplications.
John Pitzer
Helpful. Thank you, guys.
Tim Archer
Thanks, again. Yes, thanks, John.
Operator
Thank you. The next question will comefrom Krish Sankar with Cowen & Company. Please go ahead.
Krish Sankar
Hi, thanks for taking my question. Tim,I had a question on memory. Clearly memory, WFE is the underspending right nowand your revenue has a lot of potential upside. If I look at the last cyclicalpeak which was in March 2018, if you are able to get back to those kind of WFElevels for memory, how will Lam's revenue profile look like in memory, giventhat you gain some shares? Is there a way to quantify it, to see how muchhigher, you could be versus the last cyclical peak? And then I had a follow-up.
Tim Archer
I think Doug's signaling, I can'tquantify that. Of course, we have quantified it and that's why my comment was,we believe our opportunity. We knew there'd be this peak question but mycomment was, regardless of the fact that our revenues are approaching the lasttime and therefore the peak question starts to come up, the setup is quitedifferent and in fact, that's why we pointed out, our memory mix today is amuch lower. WFE is not back there and so I guess probably you can do the -- doit just as easily as we can. But there is still significant upside as memorygrowth continues not only to return to prior levels, but also to continue togrow to meet all of these new application drivers that we've talked about.
Doug Bettinger
Yes, Krish. Obviously, when we put afinancial model out, not all that long ago in March, we comprehended someaspect of memory being at a higher investment level. CSPG growing. Our strengthin foundry continuing to grow. So you have the data points.
Tim Archer
It's kind of all in there.
Doug Bettinger
It's all in there.
Krish Sankar
Got it, got it. No worries. And then Ihave a question on your ALD traction. I'm just curious like when you look atthe ALD, like clearly that market is going to continue growing. You guys arelike a number two player in that, I would probably say. How much of the -- howmuch of the growth in ALD is actually driven by technology versus the fact thatproductivity for ALD tools is still pretty low? Which is driving the biggerupside in ALD?
Tim Archer
Well, all of these new adoptions that Ikeep talking about, these are, these are LAM's efforts to expand theapplication base for ALD and which means it's a technology-driven decision. Butusually what has -- I mean, in the past, what has held back ALD from adoptionin many of these cases was, it's great technology, but the productivity wasn't-- it wasn't affordable to put in at a certain nodes. So people pushed it out.What we've done is, we've married both an expanding film set, more applicationswith, as I said, architecturally enabled productivity and we're getting a lotof traction across a number of different applications. I talked about 3D NANDgap fill, talked about a multilayer application in Foundry/Logic that's adifferent material, talked about critical spacers and so it's just we'vebroadened I think the target market for ALD and we're seeing good traction.
Krish Sankar
Thanks, Tim. Thanks.
Doug Bettinger
Thanks, Krish. Yes.
Tim Archer
Thanks, Krish.
Operator
Thank you. The next question will comefrom Toshiya Hari with Goldman Sachs. Please go ahead with your question.
Toshiya Hari
Hi, guys. Thanks very much for takingthe question and congrats on the strong results. Doug, you mentioned that for2020 domestic China, you guys are expecting about $10 billion in spend.Curious, what's the rough split between memory versus logic and foundry? And onthe memory side, I feel like both you and the broader industry is currently ina sweet spot where your customers are spending, but they're not reallycontributing to supply. At what point would you expect them to start to reallymove the needle on supply and as a result of capital intensity come down inlocal China? And then i have a follow-up. Thank you.
Doug Bettinger
Yes, no problem, Toshiya. We haven'tquantified what is in which segment in China but I forget if Tim said or if Isaid it in the script, it kind of blurs in my mind sometimes, we said itsbroad-based in China, in all segments. So it isn't just one, it's a broad setof customers that are investing. So, think of it that way, it's not one or theother. And you're right and I wouldn't characterize China's inefficient in theinvestment, it's just when customers are investing for the first time or arerelatively new to investing in capacity, you got to buy it. Then you have toramp it and it takes time for that to happen. It's not unique to any onegeography or any one customer that is really what's going on and over timecustomers get more efficient as they ramp things. That's how I think about it,Tim. I don't know…
Tim Archer
Yes, no, as you suggest in the earlierquestion, I think thinking about the model we've put out just back at InvestorDay, I think by the time you get to the 2023-2024 timeframe, we've comprehendedthat those additions in China are effectively the same as additions elsewherein the world. So we don't think there is some extra inefficient spending inthat case that's driving numbers higher for Lam. So I think if you just lookback at that model that's a relatively efficient spend across all segments in2023-2024.
Toshiya Hari
Got it, thank you for that. And then asa quick follow-up. Doug, in your prepared remarks, you talked about winning twoservice contracts in the quarter, I believe I wasn't sure if you meant tohighlight it as a meaningful dynamic here but did those contracts at all driveincremental growth going forward, or does it change how we should be thinkingabout quarter-to-quarter, year-to-year volatility and your installed basebusiness or profitability going forward? Thank you.
Doug Bettinger
No, not really, Toshiya. I mean I justmentioned it because one, they were a little bit longer term and two, they werebigger than perhaps typical and to me is very much part of how we run thisbusiness. It's the customer has faith and confidence in your ability to deliverand provide value, it is consistent with what we expect that business to do andit has done in the past. I just mentioned it because it was notable when welooking at the results this quarter.
Toshiya Hari
Thank you.
Doug Bettinger
Yes. Thanks, Toshiya.
Operator
Thank you. The next question will comefrom Blayne Curtis with Barclays. Please go ahead with your question.
Blayne Curtis
Hey guys, thanks for taking my questionand a great result. Just kind of curious. from a high level, the waferfront-end, you're keeping the same amount in your catching up to. I'm just kindof curious as you look at it, the way the year shaking out. I think there's alot of doubts whether you hit that number, is it the same contribution and thenany comments on the strength in the second half by geography would be helpful?
Doug Bettinger
Blayne, are you asking about WFE? Wasthat your question? Just wanted understand.
Blayne Curtis
I'm curious as you're still seeing thesame WFE forecast for the year and kind of curious...
Doug Bettinger
Yes.
Blayne Curtis
Is it contribution as we thoughtstarting the year and then any comments on geography, particularly into theback of the calendar year? Thanks.
Doug Bettinger
Yes. I think Tim specifically mentionedin his script there's puts and takes in here, right. It's ended up at the samelevel. I would suggest to you that more consumer-oriented stuff is a little bitweaker, smartphones, as an example, smartphone units aren't the same as wethought at the beginning of the year that is creating a little bit of adowntick but that's offset by other things going on in hyperscale cloudconsumption of silicon, work-from-home type things and net-net, one is up alittle bit once down a little bit. We're in the same place that we began theyear.
Blayne Curtis
And then, just -- I was just curiousfrom a geographic perspective, if you had any color into the growth intoSeptember?
Doug Bettinger
No, we never forecast the GOPs. Iwouldn't expect it to be wildly different than what you've seen over the lastcouple of quarters or so from a directional standpoint.
Blayne Curtis
Thanks.
Doug Bettinger
Thanks, Blayne.
Operator
Thank you. The next question will comefrom Vivek Arya with Bank of America Securities. Please go ahead.
Vivek Arya
Thanks for taking my question. I'mcurious about WFE growth outside of China, because when I look at your firsthalf ex-China sales are down in the last fiscal year. So when do we see -- whyare we seeing these trends, I understand this is probably a very short frame,timeframe for looking at these trends, but I'm just curious, qualitatively, whyare we not seeing the same kind of WFE growth outside of China, because Iimagine everyone is exposed to the same growth drivers?
Doug Bettinger
Vivek, I mean obviously the majority ofWFE spending is outside of China. 2/3 of it is outside of China. Right. And soyou're seeing the contribution of WFE across every geography, right. It's moreabout what's going on in the end markets. That's how you should be thinkingabout it right. Foundry is strong this year, NAND up from last year, DRAM maybeup a little bit, but to a large extent that's geographically independent.
Vivek Arya
No. I guess my question is that when Ilook at last year WFE was I think 50- 51, this year you're guiding it up $5billion to $7 billion, but a big part of that growth is coming from China.Right. The incremental growth is coming from China. So I'm just curious why weare not seeing WFE spending outside of China at that same pace or is that justsomething we will see next year perhaps?
Doug Bettinger
Yes. No, you are -- I mean there threeto four probably incremental in China and the rest of it is outside of China.Vivek?
Vivek Arya
Okay. As a follow-up, CSBG, thanks forproviding that info. So it grew I think about 7% or so last fiscal year. I'mcurious what it -- how much it grew the prior fiscal year and what part ofthat, should we think of that as kind of recurring and this is such animportant part of your business that I'm always very curious about how tocorrelate this to your growth in chambers. Is this correlated to your chambergrowth from two years ago or three years ago? Just how should we take this 7%number, and I don't know how to forecast your CSBG business. I guess that's reallywhat I'm trying to ask.
Doug Bettinger
If you're thinking about forecasting,we gave you data points at the Investor Day, which was Pat Lord, who managesthis business for us suggested that by 2023-24, it will have grown 40%. Sothere is your data point for how to forecast it. Chamber count is criticallyimportant but Pat and Tim talked about, it's not just chambers, it's dollar perchamber growing from, I think we, I forget what year we indexed it back to2013, maybe...
Tim Archer
2013.
Doug Bettinger
It was one point. Yes, it was 1.0 thenit had gone to 1.5 and we had objectives to continue growing it to 1.7, whichwas what was baked in the model. So that's how you should think about it.Chamber count is important. We're also driving some of the innovative serviceofferings like Tim talked with remote diagnostic on equipment and things, totry to add more value for the customers and get paid for it.
Vivek Arya
Thank you.
Doug Bettinger
Thanks, Vivek.
Operator
Thank you. The next question will comefrom Mehdi Hosseini with SIG. Please go ahead.
Mehdi Hosseini
Yes, sir. Thank you for taking myquestion. Just as a follow-up to the prior question, how should we model thecustomer support over the next few quarters? Should we just track the memoryinvestment you highlighted as doing better than foundry or would it be more inline with the overall revenue trend line that you described earlier?
Tim Archer
Yes. I think that again it's -- thebeauty of the CSBG business is, it probably -- it doesn't change on the timescale that you're talking about here relative to any particular quarter'schange in shipments. I don't think you're going to see that and we have aninstalled base in excess of 60,000 chambers. And we're driving revenue in ourCSBG business off of tools that were shipped 20 plus years ago and there isupgrade cycles in their service contracts that Doug talked about, there'sconsumable parts. And so I don't think you're going to see that.
But as I said, that's the beauty ofthis. This is the, let's say, it's a stabilizing function for the company'srevenue, and that's why we're investing heavily in this and it delivers valuefor the customers in reuse of and extension of installed tools.
Mehdi Hosseini
Yes. I believe this is the firstquarter that you're actually breaking this out and I was just trying to betterunderstand whether the Customer Support Business Group would grow faster withmemory or with foundry or with a bit of same for different end markets.
Tim Archer
Yes, I can -- okay. Well, I think it'sthe second quarter that we've actually put out the data. But I think the coupleof pieces of information to think about. One is, we've said that the businesswill grow every year and that's simply because again the installed base isgrowing every year and again we're investing to try to create more services,value-added services and products for that installed base. We haven't reallymade a comment about, does it grow every quarter. I mean, because it's -- againit's --you can be influenced by certain service contracts, certain upgradedecisions that customers make in any given quarter, but year-to-year, you canthink about it growing every year.
It maybe a little bit less aboutsegments. I've talked in the past about critical applications and Lam's focuson critical applications and the importance of that. I mean, one, they aresticky, but two, they actually tend to drive more parts and servicerequirements because the customers have to keep those systems at absolute topperformance because they're performing the most difficult applications in thecustomers' fab. And so you tend to see a little bit more pull-through on theCSBG business for the critical applications where Lam is extremely strong. Andso maybe that's -- yes, maybe it's a little less by device type but more by theapplication requirements.
And also critical applications tend todrive a more frequent upgrade cycle as the customers need to keep the installedbase kind of performing for that latest technology node.
Mehdi Hosseini
Thanks.
Doug Bettinger
Thank you.
Operator
Thank you. The next question will comefrom Joe Moore with Morgan Stanley. Please go ahead with your question.
JoeMoore
Great, thank you. I know you guys saidyou had --you were working your way through the supply challenges but I wonderif you could help us kind of with what the quarterly revenue progression mighthave looked like if you hadn't had those. You had said in March, to get about$300 million of revenue deferred by the supply challenges. Should we view Juneas kind of having caught up to that and then this surge in September is moreshipping directed demand or just what would that have looked like if you hadn'thad the supply challenges that you had?
Doug Bettinger
Yes, Joe. I didn't quantify that. I'dsay we've got nicely caught up. I also said we're not completely caught up atthe end of the June quarter and that's as much as I think we're going to giveyou right now. We're driving efficiencies. We're getting much better. I think,Tim and I are pretty happy with how the supply chain is performing.
Joe Moore
All right. Great, thank you very much.
Doug Bettinger
Thanks, Joe.
Operator
Thank you. The next question will comefrom Joe Quatrochi with Wells Fargo. Please go ahead.
Joe Quatrochi
Yes, thanks for taking the question andcongrats on the results from me as well. I think you mentioned that yourcapacity from a manufacturing perspective is over $3 billion per quarter nowwith all the issues with the supply chain. Is there a scenario over the nextfew quarters where you see potentially demand outstripping what you candeliver?
Tim Archer
Well, we have a global manufacturingfactory network that we're highly confident in, I think it's unlikely thatthat's the scenario. I didn't want --I did not give you a maximum output forour factory network. I was only wanting to indicate that clearly we were supplyconstrained in the last quarter, was one of the reasons why we were unable toprovide our normal guidance. Now with capability beyond $3 billion, we'reconfident in our September quarter and we're confident that over time, we'llcontinue to ramp that higher and higher. So it was -- we're not going todivulge our exact manufacturing capacity, but I'm quite certain we can continueto meet higher demand.
Joe Quatrochi
That's helpful. And then just...
Doug Bettinger
Go ahead, Joe.
Joe Quatrochi
Just a quick one on capital return.Should we think about your comments of reiterating your long-term target modelfor 75% to 100% of free cash flow is kind of indicative that we should start tosee maybe some more -- or maybe at a re-accelerations on the share repo in thecurrent quarter and into the end of the year?
Doug Bettinger
Yes, probably, Joe. I mean, we saidlast quarter, we were pausing in -- we actually came back into the market alittle bit before the end of the quarter. So we're back, looking at things andI've always said it's opportunistic in terms of how we do what we do and we'llcontinue to be opportunistic.
Joe Quatrochi
Thank you.
Doug Bettinger
Thanks, Joe.
Tina Correia
Operator, we have time for one morequestion, please.
Operator
Okay. The next question will come fromWeston Twigg with KeyBanc Capital Markets. Please go ahead.
Weston Twigg
Hi, thanks for taking my question. Ijust wanted to dig into the operating costs a little bit. Just understandingthat people aren't really traveling right now, you're probably saving somemoney, you mentioned some tailwinds around remote servicing. But should weexpect operating cost to ramp up meaningfully in 2021 assuming there is somesort of post-pandemic return to kind of a normal level of business and traveland marketing? And I kind of noticed that you added some head count as well. SoI would assume that that would roll in and I don't know if that continuesthrough next year. But just kind of wondering how next year works from anoperating cost standpoint?
Doug Bettinger
Weston, I'm not going to give you aforecast for next year yet. I think there'll be plus or minuses assuming we getback to normal, we get a vaccine, the therapeutic regimen, what have you. Ithink we're going to learn from how we're operating right now and be betterover time. I mean that's what Lam is really very good at. Looking at anopportunity, getting better and systematically doing it that way. I think wewill do that. And yes, if we get back to normal travel, come back a little bit.I don't think it would come back -- comes back to where it was, but again,we'll keep managing the P&L in the right way.
Tim Archer
Yes, I think the only thing I'd add isat the same time, we've, obviously, I think we have a great track record ofmanaging OpEx and you can kind of look at the results to support that. But weare investing in our 2023, 2024 plans. I mean, you've seen some of ourannouncements recently. The construction of a technology center in Korea,obviously there's expenses associated with that. It's a strategic investment toexpand our R&D capabilities, put it closer to some of our largestcustomers. We are building a new manufacturing facility in Malaysia, whichagain is going to expand our global manufacturing network, provide additionalbusiness resilience, help take some cost out of manufacturing structure.
So, there are some near-terminvestments that we're confident in our long-term plan. And so we are pushingthose through even right now. And we are seeing some of that reflected in ourexpenses as well, so, maybe that's offsetting a little bit some of the savingsthat that Doug talked about. But I wanted to get into the product and R&D,we continue to push more into R&D because we think it's the long-termgrowth engine of the company and we are really confident in our productpipeline and new products coming out.
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