US Chip Equipment Firm Lam Research Starts Layoffs in China

Lam Research, a US-based supplier of chip wafer fabrication equipment and provider of services for the semiconductor industry, has started to cut 10% or more of its staff in China, Chinese media outlet Xinzhixun reported on December 9.

An individual familiar with the matter said that a “voluntary resignation” can result in higher compensation before a compulsory layoff stage starts.

The layoffs are mainly the result of new regulations announced by US authorities on October 7, which have made it impossible for the company to continue to sell semiconductor equipment and technology needed to manufacture logic chips in the country, with non-planar transistor architectures of 16nm, 14nm or below, NAND flash memory chips with 128 layers or more, DRAM memory chips of 18nm half-pitch or less, unless approved by the US Department of Commerce.

Timothy Archer, CEO of Lam Research, revealed in a financial report conference call for the first quarter of fiscal year 2023, “We have taken necessary measures to ensure full compliance with the new rules and stop shipping and provide support as needed.” Lam Research also warned at that time that its revenue in 2023 could be reduced by $2 billion to $2.5 billion due to the restrictions.

“These layoffs have greatly affected the team of Lam Research serving the two major storage wafer factories in China. However, according to my guess, it is impossible for all employees in this part to be laid off, and some backbones need to be retained. Therefore, layoffs may start in departments that are not particularly affected,” a source familiar with the matter said, adding that “after mid-December, there may be more large-scale layoffs.”

Founded in 1980, Lam Research designs and builds products for semiconductor manufacturing, including equipment for thin film deposition, plasma etch, photoresist strip, and wafer cleaning processes. In 1994, it officially entered China. By the end of 2020, it had nine offices in China, located in Beijing, Shanghai, Wuhan, Hefei, Dalian and other places, with more than 600 employees.

Lam Research’s revenue in 2021 was about $16.524 billion, 33% of which came from the Chinese mainland, followed by South Korea with 26.8%, Taiwan with 15% and the US with 5.5%.

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It is worth noting that Applied Materials, Inc., another major semiconductor equipment manufacturer in the US, has also been affected by the new regulations on China.

In November this year, Gary Dickerson, the president and CEO of Applied Materials, said that the company had taken all necessary actions to comply with the new export regulations, including suspending shipments and stopping providing support. The impact of the new regulations on fiscal year 2023 may be as high as $2.5 billion, and the actual impact can be reduced to $1.5 to $2 billion, which will partly depend on the speed of approval by the US government and how the company readjusts its investment priorities.

Applied Materials has operated in the Chinese mainland for nearly 40 years. By the end of 2021, it had about 2,800 full-time employees in the country. At present, it is not clear whether it will replicate Lam Research’s layoffs to its China-based staff.