Tim Archer: Well, obviously, since we’re not guiding future quarters, I mean, I don’t — I think it’s just somewhat natural in general. I mean, we’ve seen in certain segments, very high spend rates as companies have looked to bring on capacity to meet demand in these mature nodes. And our industry goes through digestion phases where those tools have then started going up, and you get output and you sort of figure out whether demand is there, that requires more and it’s what makes our investment cycle somewhat lumpy. And I think that’s what we’re really looking at right now. And if long-term demand, which we believe long-term demand for semiconductors is growing, eventually, you come back and put in more capacity into those fabs as well.
Joe Moore: Okay. Thank you.
Tim Archer: Thanks, Joe.
Operator: Thank you. And our next question today comes from Toshiya Hari with Goldman Sachs. Please go ahead.
Toshiya Hari: Hi, guys. Thank you so much for taking the question. I had a follow-up question to Joe’s question on non-China trailing etch. And Tim, I apologize if I missed this, but can you point to any end markets or any device types that’s driving the near-term weakness? And can you remind us how big or small of a market this is for you guys today?
Doug Bettinger: Toshi, I’ll take it and then let Tim add on. It’s a broad set of customers investing when you look at this, the specialty nodes. I mean, it’s across multiple customers unlike like leading etch foundry as an example. And so I can’t really point to any one or another for you. And quite frankly, I think we all know there’s inventory out there in a lot of these device types, but these are long-term investments as well, right? This isn’t something that comes in one quarter and then goes away just because of what’s happening in the near-term marketplace. But it is in any one segment or another, Toshi, just kind of the broad set of customers.
Tim Archer: Yes. And Toshi, the only thing I would add is, I think this is going to be an area that I think we’re going to have to sort of acceptably a little harder to forecast from the standpoint. It’s also a part of the market that is impacted by a number of the different chip stack type government support activities around the world. And so, you may see as certain regions try to build up their capabilities we may not be able to point in that moment to the demand being greater than the supply, and that’s why they’re investing. As Doug said, this is about long-term build-out what I think everybody sees is a much bigger demand for these types of devices over all these various types of applications in automotive and IoT and CMOS image sensors, et cetera, et cetera, over time.
Toshiya Hari: Got it. I appreciate the color. And then as my follow-up, one for Doug, on the 2024 model you talked about mix normalizing and you guys potentially experiencing some headwinds in gross margin. You also talked about 2024 potentially being a growth year from an R&D spending perspective. So I guess on gross margins, I guess what’s the baseline that we should be working off of? Is the Q4 rate a good starting point? Or is that still kind of high given where China is. And then from an R&D spending perspective, I guess, relative to answer if you can kind of hold our hand and quantify how low leverage could be in 2024 versus history that would be super helpful.
Doug Bettinger: All right, Toshi, I’ll give you a couple of data points, maybe for a little bit of color, but I’m not going to guide next year. Yes, we’re still at an elevated level of gross margin from customer mix relative to where I think things normalize. Maybe a good way to think of it is go back to the June quarter, which was before we saw a lot of this China favorable mix. That’s not an unreasonable baseline to start from for gross margin. So anyway, I don’t know if that’s helpful. And then I guess what I described from an R&D standpoint. R&D, quite frankly, has to follow a cadence independent of the level of revenue sometimes. I don’t know what WFE next year is going to be. I don’t know what our top line is going to be quite yet.
We’ll give you some color next quarter. But I do know we see an enormous number of opportunities around these technology inflections that if we don’t invest right now three, four years from now, we’ll look back and say, why didn’t we, right? I’d be all around. Tim talked about backside power. There’s high bandwidth, there’s so many things that play to the strength of what we do well. So I think if you look at the December quarter and compared to September, spending up, the March quarter independent of the fact that we’re going to invest more in R&D is a 14-week quarter. So you got to comprehend that. And then we’re going to grow R&D as we go into next year, maybe a little bit independent of what revenue turns out to be. I guess what I would want you to think about is, historically, when business grows at Lam, you’ve seen nice leverage in the model.
It’s maybe going to flatten out a little bit, honestly, is how I’m trying to like, come to you to think about it a little bit. And again, that’s because we see a lot of opportunities that we think played at the strength and is going to set us up to win in the longer term. I don’t know if that helps, Toshiya.
Toshiya Hari: Yes, it makes sense. I appreciate the color, Doug.
Doug Bettinger: Okay. Thank you.
Operator: Our next question today comes from Vivek Arya with Bank of America Securities. Please go ahead.
Vivek Arya: Thanks for taking my question. For the first one, I’m trying to understand the usual delta between the recovery in your CSBG business and your memory systems. So how effective of a leading indicator is CSPG recovery? And what is it telling you right now about conceptually when memory system orders recover? Like is it in Q1, Q2, Q3, of next year, like what has been that delta historically? And what is that telling you right now about when your memory system orders can recover?
Tim Archer: Yes. I mean we’ve — first, I’d point out the fact that it’s been a long time if ever that we’ve seen fab utilization is quite this low. I mean our prior commentary had been that spares generally grows every year because the installed base continues to get bigger. One piece of that is true is the installed base continues to get a lot bigger. And in fact, we’ve said it’s up more than 40% since the last cyclical downturn. And so the fact that we’ve seen spares and upgrades and all of these things sort of be off all at one time is pretty unique. We are anticipating that as fab utilization starts back, we’ll see spares come back. And I think the one thing that will come back, and it’s a little hard to predict is certain is the technology upgrade portion of this.
