It's not uncommon for chip makers in need of critical manufacturing equipment to go on the Lam. Lam Research is a top maker of semiconductor processing equipment. The company's products address two key steps in the chip-making process. Its plasma etch machines are used to create tiny circuitry patterns on silicon wafers. Lam also makes cleaning equipment that keeps unwanted particles from contaminating processed wafers. The company's customers include many of the world's large chip makers; customers outside the US, primarily in Asia, represent the majority of sales.
Sales and Marketing
Lam's top three customers - Samsung Electronics, SK Hynix, and Taiwan Semiconductor - together account for half of overall revenue.
South Korea represents Lam's largest market, accounting for about a third of sales. Taiwan and North America together generate another third. Lam also does substantial business in Japan and other Asian countries, as well as in Europe.
Mergers and Acquisitions
In 2012 the company acquired rival Novellus Systems in an all-stock transaction worth $3.3 billion. The companies have complementary products, with Lam's focus on etch and single-wafer clean equipment providing a nice fit for Novellus' thin-film deposition and surface preparation technologies. The combined company is well-positioned to lead the industry through transitions to next-generation technology, including 3-D structures in advanced logic and NAND memory, as well as scaling to 450 mm wafers.
Lam has staked a claim on its niche markets, and showed itself quick to introduce equipment designed to process the latest-generation wafers. The company has been hurt, however, by the trend toward joint ventures and partnership in the semiconductor manufacturing industry, as chip makers look to reduce the amount they spend on new equipment. On the other hand, as the market improves, chip makers that have combined manufacturing operations are better able to afford the newest wafer processing technologies, which often come with a very high price. Nearly a third of Lam's sales in 2011 and 2012 have come from products introduced during the last two years, which highlights the importance of new products and technologies.
With improvement in the global economy and semiconductor industry, Lam was able to boost revenue significantly in fiscal 2010 and 2011. But with the cyclical nature of the semiconductor industry, sales fell 18% in fiscal 2012 (ended June 30) to $2.7 billion because of lower demand for semiconductor equipment, particularly in the first half of the fiscal year.
Net income also fell in 2012, sinking more than 75% to $169 million on increased R&D spending and expenses related to the Novellus acquisition. – less