How Lam Research Corporation Generates Revenue
Lam Research Corporation (NASDAQ:LRCX) generates its revenue by supplying wafer fabrication equipment and services to the semiconductor industry. It breaks its revenue out into three segments: memory, foundry, and integrated device manufacturing, but a majority of the revenue comes from the memory segment.
- Integrated Device Manufacturers (IDMs): IDMs are companies that design, manufacture, and sell integrated circuit products.
- Foundry: Foundries manufacture integrated circuits for other companies.
- Memory: The memory segment of its revenue is from selling memory chips such as DRAM and NVM.
For its last fiscal year, June 25, 2017, the percentage of revenue from each segment was 67% from memory, 27% foundry, and 6% from integrated device manufacturing.
For its most recent fiscal year, June 24th, 2018, the percentage of revenue from each segment was 78% from memory, 14% from foundry, and 8% from integrated device manufacturing.
Lam Research's drastic increase in revenue and share price can be directly attributable to the massive growth in the semiconductor industry last year, specifically the growth in demand for NAND and DRAM. There was a large increase in the demand for NAND and DRAM and a tight supply, so throughout 2017 there was a large increase in the need for new equipment to help the industry match the demand. From June 2016 to June 2017, revenues increased from $5,885 million to $8,013 million (36.12% increase), and in 2018 revenues increased from $8,013 million to $11.017 million (38.22% increase). Additionally, gross margins have continued to increase over the past 3 years, from 44.5% in 2016 to 46.6% in 2018. The company attributes that to a favorable margin mix, higher revenue, and improved factory utilization.
There was exceptional growth in the industry as a whole; we cannot expect it to grow at a similar pace as 2017, but
