Lam Research Corp.

S&P Global Ratings' stable outlook on Lam reflects our expectation that the company will maintain its leadership positions in etch, deposition, and clean products within the semiconductor capital equipment industry. We also expect it will maintain a conservative financial policy despite heightened share repurchases post tax reform, providing a buffer for potential industry volatility. We would consider an upgrade if Lam continues to improve its competitive positioning through market-share gains, broader product portfolio and customer diversification through potential industry cycles, and adhering to a conservative financial policy. Although a downgrade is unlikely over the next two years, we could lower our rating if Lam's financial performance deteriorates significantly beyond our base case due to external shocks (U.S.-China trade escalation, for

...The company's profitability remains resilient despite an industry downturn.After two years of robust growth, Lam Research Corp.'s revenues fell 13% in fiscal 2019 to $9.7 billion as memory oversupply led to pricing pressure and reduced capital spending by memory manufacturers. However, Lam's profitability and cash flow has remained resilient, with FOCF reaching a historical high of $2.9 billion during fiscal 2019. Wafer fab equipment (WFE) spending will remain cyclical, especially within the memory segment to which Lam is overexposed. But we believe Lam, along with the semiconductor equipment industry at large, is gradually becoming less cyclical due to industry consolidation and broadening end markets. We expect improving memory market conditions through calendar 2020 and forecast that Lam will continue to generate solid cash flow in fiscals 2020 and 2021....

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