2.13.25
Within the memory types, Applied’s strength is in DRAM. Lam is the leader in NAND. Applied’s tool sales for DRAM manufacturing rose 26% sequentially, to $1.5B in the quarter. Until the third quarter of 2023 – which was in the middle of the last downturn – Applied had only one quarter with more than a billion dollars in DRAM WFE sales. That was in the fourth quarter of calendar 2021, the peak of the last DRAM upcycle. The last six quarters have all been over a billion in DRAM sales for Applied. Some of this is driven by purchases from CXMT in China and some by equipment needed for HBM and for node transitions. We are already in a regime of high DRAM spending and have been for more than a year. This quarter was at the high end of this high range, but not so high as to indicate overinvestment is imminent in DRAM. WFE sales to NAND customers were almost flat from last quarter. For the last two full years, Applied’s sales into NAND fabs have been around $200M per year. This is down from 3x that level at the end of the last upcycle. Calendar year 2022 averaged $674M per quarter in NAND sales for the company. The nuclear winter continues for Applied Materials’ NAND equipment sales.
The WFE industry has signaled recently that there will be a reduction in sales to fabs in China. That trend is evident this quarter in Applied’s results. China was 45% of total revenue in Q1 of FY24 and is down to 31% in Q1 of FY25. The company guided for flat total revenue in the current quarter. Commentary in the prepared remarks indicated that sales to DRAM customers in China have declined from a year ago. Overall demand in the DRAM market is “healthy” but they anticipate the purchases from Chinese customers seen last year will not repeat in 2025. They are seeing some growth in NAND, but off of historically low levels.
Following the strong initial sales to add HBM capacity, they have seen the rate slow there. They are still selling equipment but at a lower rate. As all three major DRAM companies are ramping HBM as fast as they can, I think this means those companies are increasing efficiency and utilization of equipment they already bought for HBM more than adding new tools. While China is slowing, they see the rate of investment in DRAM continuing in the rest of the world. HBM and advanced nodes have strong demand, so they have continued momentum in DRAM included in their outlook for the current quarter (FQ2-25). Overall in the Q&A on the analyst call, there were few questions about memory investment and the memory markets overall. Most of what we learned this quarter was from their sales by segment and the comments around sales into Chinese DRAM fabs slowing in CY25 compared to CY24.
– Smooth Hughes (short MU)