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, according to my report Applied Materials: Competing Analysis of Served Markets, and details of the report can be found on my website at www.theinformationnet.com.

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 May 2025, NAND flash prices remain weak, with several rounds of production cuts still in effect to rebalance supply.

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.

Revenues by Segment

Lam’s most significant customers during the fiscal years ending June 30, 2024, June 25, 2023, and June 26, 2022, and June 27, 2021 included Micron Technology, Inc. (MU) [NAND/DRAM]; Samsung Electronics Company, Ltd. (OTCPK:SSNLF) [NAND/DRAM/Foundry]; SK hynix Inc, (HXSCL) [NAND/DRAM], and Taiwan Semiconductor Manufacturing Company (TSM) [Foundry].” Note I added the principle products in the brackets, which clearly shows the preponderance of memory customers.

Table 1 shows Lam’s equipment revenues by Chip type. NAND decreased from 46.8% in FY 2021 to 17.5% in FY2023. Three out of four top customers make NAND. A key point is that in FY 2021 NAND was the highest sector of customer sales while in FY 2024 it was reduced to the lowest.