You Can Benefit From Lam Research’s Memory Exposure

Lam Research (NASDAQ:LRCX) witnessed a fantastic year as evident from its full-year results. Gartner’s recent cut in its capital spending forecast for semiconductor equipment manufacturers clouds Lam Research's future prospects. The company appears resilient as it’s backed by the memory industry, not to mention its exposure to Asia Pacific.

Lam Research had an impressive year, resulting in revenue and EPS beat. The company posted revenue of $8.01 billion, up 36.1% on a year-over-year basis. Fourth-quarter revenue came around $2.34 billion compared to the consensus of $2.31 billion. Full-year GAAP EPS was $9.24, translating into a notable 77% year-over-year increase. 

Most of the revenue comes from memory as the company caters to the manufacturing needs of Micron Technology (MU) and SK Hynix Inc. Increasing foundry revenue can be attributed to Lam Research’s exposure to Samsung (SSNLF) and Taiwan Semiconductor Manufacturing Co. (TSM). Shrinking process node technologies continue to benefit Lam Research.

Samsung, TSMC, SK Hynix and Micron are among the top companies in terms of capital expenditure in the semiconductor industry. With a 31% increase, the DRAM/SRAM segment is expected to display the largest percentage increase in capital expenditures of the major products types listed this year, cited IC Insights in its May Update to the 2017 McClean Report. 

Lam Research is poised to benefit as four of the top five capital expenditure intensive companies belong to Lam’s client list. Lam Research’s exposure to the memory market also bodes well for the company. The company generates more than 60% of its revenue from the memory market.

Overall, slowdown in growth isn’t expected to hit Lam Research much because of its heavy presence in the memory market and Asia Pacific. Note that Asia Pacific is set to remain the highest-growing market in WFE going forward.

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