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US Chip Toolmaker Lam Research to Invest Over $1 Billion in India

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Lam Research (LRCX.O), a U.S.-based chip toolmaker, announced it will invest over 100 billion rupees (approximately $1.2 billion) in India’s Karnataka state, marking a significant contribution to the country’s semiconductor development plans. The announcement was made during an ‘Invest Karnataka’ event on Tuesday, where Lam Research signed a memorandum of understanding (MoU) with the Karnataka Industrial Area Development Board (KIADB) to formalize the investment.

The Indian government, led by Prime Minister Narendra Modi, has been actively working to boost the country’s semiconductor industry, with initiatives such as a $10 billion incentive package aimed at stimulating growth in this sector. India’s semiconductor market is projected to reach $63 billion by 2026, and global chip firms are increasingly investing in the country to strengthen its semiconductor ecosystem and compete with dominant hubs like Taiwan.

India’s IT minister hailed Lam Research’s investment as a “big vote of confidence” in the government’s semiconductor vision and described it as a “milestone” in India’s journey to becoming a significant player in the global chip industry.

Headquartered in Fremont, California, Lam Research develops essential tools for semiconductor manufacturing, focusing on wafer-processing and semiconductor device wiring. Karnataka, home to the IT hub of Bengaluru, plays a major role in India’s economy and is a leading exporter of software, IT services, and manufactured goods.

Chipmakers Surge on Optimism Fueled by AI Demand

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Shares of chipmakers saw significant gains on Monday, driven by optimism surrounding strong AI-driven demand. Microsoft’s plan to invest $80 billion in AI-enabled data centers in fiscal 2025 sparked expectations that semiconductor demand will remain robust. Micron (MU.O) led the charge with a 10.6% rise in its stock, while other key players like Applied Materials (AMAT.O), Lam Research (LRCX.O), and KLA Corp (KLAC.O) saw increases between 5.1% and 5.5%.

The Philadelphia Semiconductor Index (.SOX) surged 3.9%, reaching its highest point since mid-October, and has risen over 19% in 2024. The broader Nasdaq (.IXIC) also advanced, leading Wall Street’s major indexes higher, while semiconductor stocks in Europe and South Korea saw similar gains.

Citigroup noted that while Microsoft’s spending plan was in line with analysts’ expectations, it was seen as a “modest positive” for the sector, alleviating concerns about a potential drop in capital expenditure.

“AI data centers are very chip hungry, that’s why you have people running towards the chip sector right now,” said Michael Matousek, head trader at U.S. Global Investors.

The strong demand for AI servers, evidenced by Foxconn’s (2317.TW) record revenue for Q4, further fueled the sector’s positive momentum. Nvidia (NVDA.O), a key Foxconn customer, added 5.1%, with CEO Jensen Huang scheduled to deliver a keynote speech at the CES trade show later in the day. AI server manufacturer Super Micro Computer (SMCI.O) saw a 10.3% surge.

Although Nvidia’s quarterly results in November pointed to a slowdown in revenue growth, the surge in demand for the company’s AI chips, which dominate the market, has mitigated those concerns.

 

Semiconductor Groups Criticize Biden Administration’s New Export Controls

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A coalition of semiconductor and manufacturing trade groups has expressed concern over new export control regulations announced by the Biden administration, claiming they were rushed through without proper industry consultation. In a private letter dated January 13 and addressed to U.S. President Joe Biden, groups such as the Semiconductor Industry Association (SIA) and SEMI voiced objections to new rules that could affect the global distribution of advanced computing chips.

The Biden administration’s regulations, released on Monday, introduced a three-tier system governing the placement of U.S.-made chips, including those from companies like Nvidia, in AI data centers. These rules mandate that most countries will need to obtain licenses to use these chips in such projects.

In their letter, the trade groups expressed concerns over an additional rule expected to be announced soon, which would impose even stricter controls on high-bandwidth memory, a critical component for AI chips. The groups argued that these regulations were being implemented without adequate input from industry stakeholders, raising fears about the impact on U.S. companies and the potential to shift market share to international competitors.

High-bandwidth memory is primarily produced by U.S. and South Korean firms, and the new rules could limit its sale to China. A source familiar with the upcoming regulations indicated that the measures might also reverse a previous interpretation, potentially reducing revenue for companies like Lam Research, which supplies chip-making equipment to China. Lam Research has yet to comment.