Lam Research: Compelling Investor Narrative, But Can It Overcome a Decade of Underperformance?
Introduction
Lam Research’s LRCX) stock performance is clearly not doing as well as all they hyperbole in the press about it being a “Fabulous Company” according to Cramer. Chart 1 shows its performance versus my top rated semicap company KLA (KLAC), ASML (ASML) which maintained its #1 position in the semiconductor equipment market according to my January 28, 2025 Substack article entitled ASML Solidifies Position as the #1 Semiconductor Equipment Company in 2024 Over Applied Materials, and Applied Materials (AMAT).
In this article, I explain why.
Chart 1
During its Investor Day 2025 Presentation, Lam Research (on February 19, 2025, management delivered a compelling outlook, highlighting a path to substantial outperformance over the coming years. The company introduced two key financial models—one targeting CY28 and another for the long term, when the semiconductor industry reaches $1 trillion in annual sales. These models indicate that Lam is poised for accelerated growth, backed by strong demand for etch and deposition equipment, increasing semiconductor complexity, and its leadership in key inflection points such as Gate-All-Around (GAA), high-layer 3D NAND, and emerging 3D DRAM technologies.
In the NAND memory sector, which is the topic of this article, LRCX management anticipates that the NAND market is set for significant growth, with the serviceable available market (SAM) per wafer projected to expand by 1.8 times as manufacturers transition from 128-layer NAND to 5XX-layer NAND in the coming years. This shift demands increasingly advanced fabrication techniques, including cryo etch, molybdenum (Moly) deposition, and CMOS bonding, all of which are areas where Lam Research holds a competitive edge. As NAND manufacturers push beyond 200+ layers, the upgrade cycle presents a $40 billion opportunity, with Lam positioned to capture approximately two-thirds of this expanding market through its specialized process.
But is this just hyperbole? Recent analyses suggest that projections of significant growth in the NAND market and Lam Research's (LRCX) potential to capture a substantial share may be overly optimistic. The NAND flash memory sector has been grappling with challenges, including oversupply and declining prices. As of February 2025, NAND flash prices have been on a downward trajectory due to an oversupply in the market, compelling manufacturers to reduce production to address the imbalance.
Global Revenues at Lam Research
I’ve written numerous articles about Lam Research, and most have been negative, primarily about excuse after excuse of supply chain disruptions causing poor financials. In Chart 2, I show Lam’s share of the WFE (wafer front end) equipment market between CY 2014 and 2024. The dotted purple Trendline shows Lam’s share against all global competitors continues to decline.
Why is this important? When a company loses market share it means competitors are gaining, and this implies that the competitor’ equipment is considered “Best of Breed” by customers. Lam’s loss of share suggests competitors in the deposition and etch market such as Tokyo Electron (TEL) (TOELY) have better equipment as evaluated by potential customers.
Chart 2
Currently, Lam’s share of the $90+ billion WFE market stands at 9.9% as shown above in Chart 2, raising doubts how the company expects to increase this to 12.9% by CY28, returning to its historical range of 11-14%. Long term, Lam aims for a high-30% share of the total serviceable addressable market (SAM) for WFE, up from the low-30% range today, and hopes to capture more than 50% of incremental SAM share growth.