Lam Research, a key player in the semiconductor manufacturing equipment industry, has forecasted third-quarter revenue that surpasses analysts’ estimates, showcasing a rebound in demand for electronics products and a recovery from the challenges faced in the previous year. The company experienced difficulties in 2023 due to an inventory buildup at chipmakers caused by decreased demand for mobile devices and computers.
As certain electronics markets show signs of recovery, coupled with a surge in demand for artificial intelligence (AI), chipmakers are increasing their capacity, driving orders for Lam Research’s manufacturing equipment. The Fremont, California-based company is poised to benefit from the resurgence in these markets and the expansion plans of chip firms.
Lam Research anticipates third-quarter revenue of $3.7 billion, plus or minus $300 million, exceeding the average analyst estimate of $3.68 billion, according to data from LSEG. The company also forecasts net income per share of $6.9, plus or minus $0.75, surpassing expectations of $6.64. Following this positive outlook, Lam Research’s shares rose nearly 2% in after-hours trading.
The recovery in the chip sector is further corroborated by Dutch computer chip equipment maker ASML, which disclosed a growing order backlog, indicating a rebound in the computer chip market. Lam Research’s revenue from China, however, decreased to 40% of total sales in the December quarter, down from 48% in the prior quarter, attributed to U.S. export restrictions.
For the quarter ending December 24, Lam Research reported revenue of $3.76 billion, surpassing estimates of $3.71 billion. Despite challenges, the company’s resilience is evident, and its adjusted profit per share stood at $7.22, exceeding estimates of $7.1.
The overall positive trend in the chip sector is supported by strong results from Taiwan Semiconductor Manufacturing Co (TMSC), considered a bellwether of the industry. TMSC projected a 20% growth in 2024 revenue, primarily driven by the increasing demand for high-end chips used in AI applications. This marks a significant turnaround from the over 4% drop in revenue experienced in the previous year.
Furthermore, the global smartphone market is exhibiting signs of recovery, with a notable 8.5% increase in shipments in the fourth quarter of 2023, according to International Data Corp. While the year saw a 3.2% decline in smartphone shipments overall, the positive momentum in the final quarter suggests a potential rebound in consumer demand for electronic devices.
In conclusion, Lam Research’s optimistic third-quarter forecast, driven by a resurgence in demand for electronics and the expansion of AI-related chip production, reflects the broader recovery in the semiconductor industry. The positive performance aligns with trends observed in key players like TMSC and signals a potential upswing in the global electronics market. The ongoing rebound in smartphone shipments further contributes to the positive outlook for Lam Research and the semiconductor sector as a whole.
