Lam Research Corp LRCX is considering a seismic shift in its supply chain framework in response to the unpredictable impact of U.S. export restrictions on its operations in China.
A Strategic Courtship in Hanoi
The company’s Group Vice President of Global Operations, Karthik Rammohan, embarked on a strategic pilgrimage to Hanoi and held discussions with Vietnam’s Prime Minister Pham Minh Chinh. The talks spurred the Vietnamese government to invite Lam Research to pledge a whopping $1 billion towards local manufacturing efforts. This partnership falls in line with Vietnam’s ambitious agenda to carve a niche for itself in the ever-competitive semiconductor sector, as detailed in the Nikkei Asia report.
A Blossoming Alliance
The Vietnamese government, via its official portal, unveiled plans for Lam Research to collaborate with Seojin, a South Korean enterprise with operational hubs in Bac Ninh and Bac Giang provinces—known fortresses forSamsung Electronics Co., Ltd.’s SSNLF robust phone and semiconductor manufacturing endeavors.
A Shift in the Semiconductor Saga
Lam Research appears intent on reducing its reliance on China, which gobbled up 26% of its revenue pie in 2023—a slight drop from previous years, as per the report. Though the alliance with Seojin is yet to be rubber-stamped by the latter, it marks a pivotal move in Lam Research’s overarching strategy of distancing itself from Chinese dominance.
Skirting Challenges Amid Regulatory Rumbles
Acknowledging the strain of U.S. export curbs on its financial health, Lam Research braces itself for potential exacerbation. Despite drawing materials from eight Vietnamese entities, including the Alibaba-backed Masan conglomerate, Lam Research appears to be keeping its cards close to its chest on expanding operations in Vietnam. Complicating the narrative, Intel Corp (INTC) recently pumped the brakes on its Vietnamese investment aspirations, citing concerns over power supply reliability and red tape.
An Uncertain Horizon Amid Rising Tides
Industry pundits foresee a bumpy ride for China, which had hitherto employed a front-loading tactic to dodge forthcoming export barriers but might find the going tough in the medium term. This dicey landscape poses a challenge for Lam Research, heavily enmeshed in China’s semiconductor labyrinth, shaking the very foundation of its growth trajectory.
An Episodic Drama of Speculation and Success
Analysts oscillate between caution and optimism regarding Lam Research’s prospects in China. While some foresee China’s demand tapering off in the near term, they anticipate Lam basking in the glory of its foundry and logic sector conquests. On the flip side, optimism looms large, with whispers of Lam’s robust position in China extending well into 2024’s second half and potentially beyond—an anticipatory scenario that could underpin Lam’s ongoing turnaround story, which kicked off in Q1.
Riding High on the Market Wave
With a staggering 94% surge over the past year, Lam Research has morphed into a magnet for investors eyeing a slice of the action. Interested investors can ride the Lam wave by tapping into the Columbia ETF Trust I Columbia Seligman Semiconductor And Technology ETF (SEMI) and the Pacer US Cash Cows Growth ETF (BUL).
Price Action: LRCX shares were seen braving the tide with a 0.61% uptick to $988.60 in premarket trading on the last Friday check.
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