Lam Research

As requested by @HannahBaker : TYO: $8035 (-0.19%) Analysis as of 17/11/2024.

6M: 📉 -0.48%

YTD: 📈 +9.96%

5Y: 📈 +33.55%

Company: Tokyo Electron is supplier of semiconductor production equipment (i.e., used to create semiconductor devices such as microprocessors, memory chips, integrated circuits) and flat panel display manufacturing equipment (i.e., used to create displays on tvs, phones).

Market Position: Key playe in semiconductor equipment market. Competes with $ASML (+3.19%) , $LRCX (+4.98%) , and $AMAT (+3.95%). Would be positioned well for 5G, AI, Automotive Semiconductors, and QM.

Recent Developments: Increasing demand for advanced semiconductors has increased their B2B customer orders, mainly driven by Data Centres, AI, and IoT. However, Geopolitical tensions between Taiwan, China, and the rest of the world has added uncertainty due to possible restrictions on advanced chip exports (i.e., logistics halted).

MARKET CONTEXT

Macro Trends:

• Tailwinds: Accelerating adoption of AI, 5G, and advanced computing obviously boosts demand for their equipment. For example, here in Australia, they recently shut off 3G (https://www.telstra.com.au/support/mobiles-devices/3g-closure#:~:text=From%2028%20October%202024%2C%20the,VoLTE)%20including%20VoLTE%20Emergency%20Calling.)
• Headwinds: As mentioned above, geopolitical uncertainties may slow this down. Additionally, it was reported that China has spent more on chipmaking equipment to expand its semiconductor capacity (https://www.theregister.com/2024/10/25/mature_chip_output_china/#:~:text=While%20most%20industry%20attention%20is,in%202025%2C%20according%20to%20TrendForce.)

Competitive Landscape:

• Aside from what was mentioned above (i.e., China), $ASML (+3.19%) 's dominant position in EUV lithography and $LRCX (+4.98%) 's etching may cause a problem.

INVESTMENT THESIS

Bull Case:

• Sustained revenue growth mostly driven by demand for chip manufacturing.
• Shareholder-friendly policies (e.g., dividends, buybacks).

Bear Case

• Cyclical downturn in semiconductor demand could impact earnings.
• China's in-housing of development (i.e., they may increase supply.
• Heightened geopolitical risks from US/Taiwan and China tensions.

Notes:

• I did not include a financial analysis as I am not trained in that (Any experts, I would love to hear your thoughts).
• I do not own any investments of the companies listed on this post.
• I hope you found this insightful.

U.S. CHIP TOOLMAKERS PUSH SUPPLIERS TO CUT CHINESE TIES - WSJ

Applied Materials $AMAT (+3.95%) and Lam Research $LRCX (+4.98%) have instructed suppliers to stop sourcing components or taking investments from Chinese entities, driven by U.S. government pressure to reduce China’s role in the semiconductor supply chain, per the WSJ. Suppliers failing to comply risk losing their vendor status.

These restrictions are expected to raise costs due to limited non-Chinese alternatives. Veeco $VECO (+2.02%) has issued similar guidelines, mandating the end of Chinese supplier reliance by 2025. The shift basically reflects Washington’s increasingly strict stance on tech imports and concerns over China’s influence on U.S.-critical tech.

$LRCX (+4.98%) | Lam Research Q1'25 Earnings Highlights:

🔹 Revenue: $4.17B (Est. $4.05B) 🟢; UP +8% QoQ

🔹 EPS: $0.86 (Est. $0.81) 🟢; UP +10% QoQ 

🔹 Gross Margin: 48.0%; UP 50 bps QoQ

🔹 Operating Income Margin: 30.3%; UP 120 bps QoQ

Q2 Guidance:

🔹 Revenue: $4.0B-$4.6B (Midpoint $4.3B; Est. $4.22B) 🟢

🔹 EPS: $0.77-$0.97 (Midpoint $0.87; Est. $0.85) 🟢

🔹 Gross Margin: 47.0% ± 1%

Key Operational Metrics:

🔹 Systems Revenue: $2.39B; UP from $2.17B in Q2 FY2024

🔹 Customer Support & Other Revenue: $1.78B; UP from $1.70B QoQ

Geographic Revenue Breakdown:

🔸 China: 37%

🔸 Korea: 18%

🔸 Taiwan: 15%

🔸 United States: 12%

🔸 Japan: 7%

🔸 Southeast Asia: 6%

🔸 Europe: 5%

Balance Sheet & Cash Flow:

🔹 Cash, Cash Equivalents, and Restricted Cash: $6.1B (vs. $5.9B QoQ)

🔹 Deferred Revenue: $2.05B (vs. $1.55B QoQ)

🔹 Capital Expenditure: Continued investments to support long-term technology inflections

Strategic Highlights:

🔸 Stock Split: Effective October 2, 2024 (10-for-1 split)

🔸 Technology Focus: Strong focus on etch and deposition technologies to enable next-gen semiconductors

🔸 Customer Support: Increased customer service and spares revenue via Reliant® product line

🔸 Deferred Revenue Growth: Increased deferred revenue in Japan due to acceptance-based accounting

CEO Commentary:

🔸 Tim Archer, CEO:

"Lam delivered another quarter of strong financial performance, ahead of expectations. As we continue to focus on etch and deposition technologies, we remain well-positioned to outperform wafer fabrication equipment (WFE) market growth in 2025 and beyond.

Still downtrend red zone until this weeks and i think can take more like $ABNB (-0.66%) , $CTAS (+2.12%) , $LRCX (+4.98%) for my list. Good reason if you still use signal indicator but condition market not blind it to hide all. Good day for all 👍💫