Lam Research Eyes Vietnam To Diversify Supply Chain Away From China: Report

Lam Research Corp LRCX is reportedly exploring its supply chain diversification amid concerns over the impact of U.S. export controls on its business operations in China. 

The company’s Group Vice President of Global Operations, Karthik Rammohan, visited Hanoi for discussions with Vietnam’s Prime Minister Pham Minh Chinh, during which the Vietnamese government encouraged Lam Research to commit $1 billion to local production efforts. This initiative is part of Vietnam’s push to become a more significant player in the semiconductor industry, the Nikkei Asia reports.

On its official website, the Vietnamese government disclosed plans for Lam Research to collaborate with Seojin, a South Korean company with production facilities in Bac Ninh and Bac Giang provinces—areas known for Samsung Electronics Co., Ltd.’s SSNLF extensive phone and semiconductor manufacturing activities. 

Despite Seojin’s reluctance to confirm this partnership, the move signifies Lam Research’s strategic shift towards minimizing its reliance on China, which accounted for 26% of its income in 2023, a decrease from the previous year, the report added.

Lam Research acknowledged the adverse effects of U.S. export restrictions on its revenues, which could worsen. Despite sourcing materials from eight Vietnamese companies, including the Alibaba Group Holding Limited BABA-supported Masan conglomerate, Lam Research has no immediate plans for expansion in Vietnam. Meanwhile, in 2023, Intel Corp INTC reportedly abandoned its plans for further investment in Vietnam, attributing the decision to worries over power supply stability and excessive bureaucracy. 

Previously, industry experts proposed that China’s strategy of advancing existing orders to circumvent possible future export restrictions might not hold up over the medium term for Lam Research, which has significant exposure to the country. They warned that tighter export regulations could hinder China’s capacity to sustain its robust growth rates in semiconductor equipment acquisitions.

Previously, analysts remained divided about Lam Research’s China prospects. Some flagged possibilities of China’s demand to moderate in upcoming quarters, yet see Lam benefiting from its advances in foundry and logic sectors. At the same time, some expected the company’s strong performance in China could extend beyond the second half of 2024 into the third quarter, potentially sustaining Lam’s recovery, which was initiated in Q1.

The stock surged over 94% in the last 12 months. Investors can gain exposure to the stock via Columbia ETF Trust I Columbia Seligman Semiconductor And Technology ETF SEMI and Pacer US Cash Cows Growth ETF BUL.

Price Action: LRCX shares traded higher by 0.61% at $988.60 premarket on the last check Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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