UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

þ    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 28, 200927, 2010

OR

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to.

Commission file number: 0-12933

LAM RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:(510) 572-0200

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesþ    No¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨    Noþ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ    No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes¨    No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨    Noþ

The aggregate market value of the Registrant’s Common Stock, $0.001 par value, held by non-affiliates of the Registrant, as of December 28, 2008,27, 2009, the last business day of the most recently completed second fiscal quarter with respect to the fiscal year covered by this Form 10-K, was $1,776,033,995.$3,744,253,386. Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock has been excluded from this computation in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination of such status for other purposes.

As of August 20, 2009,13, 2010, the Registrant had 126,636,886124,172,201 outstanding shares of Common Stock.

Documents Incorporated by Reference

Parts of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders expected to be held on or about November 5, 20094, 2010 are incorporated by reference into Part III of this Form 10-K. (However, the Reports of the Audit Committee and Compensation Committee are expressly not incorporated by reference herein.)

LAM RESEARCH CORPORATION

20092010 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

With the exception of historical facts, the statements contained in this discussion are forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Certain, but not all, of the forward-looking statements in this report are specifically identified.identified as forward-looking, by use of phrases and words such as “we believe,” “we anticipate,” “we expect,” “may,” “should,” “could,” and other future-oriented terms. The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to our future revenue, shipments, cost and margins, product development, demand, acceptance and market share, competitiveness, market opportunities, levels of research and development (R&D), the success of our marketing, sales and service efforts, outsourced activities and operating expenses, anticipated manufacturing, customer and technical requirements, the ongoing viability of the solutions that we offer and our customer’scustomers’ success, tax expenses, our management’s plans and objectives for our current and future operations and business focus, the levels of customer spending or R&D activities, general economic conditions, the sufficiency of financial resources to support future operations, and capital expenditures. Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value and effect, including without limitation those discussed below under the heading “Risk Factors” within Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (SEC)(the “SEC”), such as our quarterly reports on Form 10-Q and our current reports on Form 8-K .8-K. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed hereinin this report and in ways notwe cannot readily foreseeable.foresee. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on information currently and reasonably known to us. We do not undertake noany obligation to release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances that occur after the date hereofof this report or to reflect the occurrence or effect of anticipated or unanticipated events. All references to fiscal years apply to our fiscal years, which ended June 28, 2009, June 29, 2008, and June 24, 2007.

Incorporated in 1980, Lam Research Corporation (“Lam Research,” “Lam,” “we,” or the “Company”) is headquartered in Fremont, California, and maintains a network of facilities throughout North America, Asia, and Europe in order to meet the needs of its global customer base.

Additional information about Lam Research is available on our website at http://www.lamresearch.com.

Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Forms 8-K, and any amendments to those reports are available on our website as soon as reasonably practical after we file them with or furnish them to the Securities and Exchange Commission (“SEC”) and are also available online at the SEC’s website at http://www.sec.gov.

The Lam Research logo, Lam Research, and all product and service names used in this report are either registered trademarks or trademarks of Lam Research Corporation in the United States and/or other countries. All other marks mentioned herein are the property of their respective holders.

All references to fiscal years apply to our fiscal years, which ended June 27, 2010, June 28, 2009, and June 29, 2008.

Lam Research is a leading supplier of wafer fabrication equipment and services to the worldwide semiconductor industry. For more than twenty fivethirty years, our wafer fabrication equipment, services, and extensive technical expertise have contributed to advancing semiconductor manufacturing and producing some of the world’s most advanced semiconductor devices. We are recognized as the global market share leader in plasma etch and as a providermaintain the largest installed base of innovative solutionssingle-wafer wet clean modules in single-wafer clean.the world.

We design, manufacture, market, refurbish, and service semiconductor processing equipment used in the fabrication of integrated circuits. Semiconductor wafers are subjected to a complex series of process and

preparation steps that result in the simultaneous creation of many individual integrated circuits. We leverage our expertise in thesethe areas of etch and single-wafer clean to develop integrated processing solutions whichthat typically benefit our customers through reduced cost, lower defect rates, enhanced yields, or faster processing time.time, and/or reduced cost. Many of the technical advances that we introduce in our newest products are also available as upgrades to our installed base of equipment,equipment; this is a benefit that can provide customers with a cost-effective strategy for extending the performance and capabilities of their existing wafer fabrication lines.

Our innovative etch and clean technologies enable customers to build some of the world’s highest-performing integrated circuits. Our etch systems shape the microscopic conductive and dielectric layers into circuits that define a chip’s final use and function. Our broad portfolio of single-wafer clean technologies allows our customers to implement customized yield-enhancing solutions. With each new technology node, additional requirements and challenges drive the need for advanced manufacturing solutions. We strive to consistently deliver these advanced capabilities with cost-effective production performance, as we understandperformance. Lam Research understands the close relationship between customer trust and the timely delivery of new solutions that leads to shared success with our customers.

Incorporated in 1980, Lam Research is headquartered in Fremont, California,Our Customer Support Business Group (“CSBG”) provides products and maintainsservices to maximize installed equipment performance and operational efficiency. We offer a networkbroad range of facilitiesservices to deliver value throughout the United States, Japan, Europe,lifecycle of our equipment, including customer service, spares, upgrades, and Asia Pacific in orderrefurbishment of our etch and clean products. While most semiconductor device manufacturers have transitioned to 300 mm wafer technology, there are still many who utilize 200 mm technology, requiring prior-generation equipment. To address this market and to meet thecustomers’ needs for high-performance, low-risk equipment, our Reliant™ Systems Business offers a suite of our global customer base.

Additional information aboutnew and refurbished Lam Research is available on our web site at http://www.lamresearch.com.

Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Form 8-K,legacy equipment for etch and any amendments to those reports are available on our website as soon as reasonably practicable after we filed them with or furnish them to the Securities and Exchange Commission (“SEC”), and are also available online at the SEC’s web site at http://www.sec.gov.spin clean.

Etch Process

Etch processes, which are repeated numerous times during the wafer fabrication cycle, are required to manufacture every type of semiconductor device produced today. Our etch products selectively remove portions of various films from the wafer in the creation of semiconductor devices by utilizingdevices. These products use various plasma-based technologies to create critical device features at current and future technology nodes. Plasma consists of charged and neutral particles that react with exposed portions of the wafer surface to remove dielectric or conductive materials and produce the finely delineated features and patterns of an integrated circuit.

Dielectric Etch

For dielectricDielectric etch new materials integration often requires etching multi-layer film stacks. Smaller node sizes increase the complexity of the structures being etched, and repeat on-wafer performance remains critical. In addition to the challenges introduced by new materials and scaling, device manufacturers’ desire to reducefocus on reducing overall cost per wafer has placed an increased emphasis on the ability to etch multiple films in the same chamber(in situ).

DFC Technology

Production-proven in high-volume manufacturing for nearlythe past 15 years, our patented Dual Frequency Confined™ technology has been extended to incorporate multi-frequency power with a physically confined plasma. The application of power at different frequencies provides enhanced process flexibility and allows different materials to be etched in the same chamber. Physical confinement of the plasma to an area directly above the wafer minimizes chemical interaction with the chamber walls, eliminating potential polymer build-up that could lead to defects on the wafer. Confinement also enables our proprietaryin situWaferless Autoclean™ (“WAC”) technology to clean chamber components after each wafer has been etched. Used together, multi-frequency and WAC™WAC technologies provide a consistent process environment for every wafer, preventing process drift and ensuring repeatable process results wafer-to-wafer and chamber-to-chamber.

2300^® Exelan^® Flex™, 2300^® Exelan^® Flex45™, 2300^® Flex™ D Series Dielectric Etch Systems

Our 2300 Flex dielectric etch product family represents a continuous evolution of the productivity and performance benefits of DFC technology. The 2300 Flex family allows a single chamber design to meet the requirements of a wide range of applications throughat multiple technology generations.nodes. Advances in system design, such as multiple

frequencies, higher power capabilities and tunable wafer temperature, meet the more demanding uniformity and profile requirements for applications at the 32 nm node and beyond.

Conductor Etch

As the semiconductor industry continues to shrink critical feature sizes and improve device performance, a variety of new etch challenges have emerged. For conductor etch, these challenges include processing smaller features, new materials, and new transistor structures on the wafer. Due to decreasing feature sizes, the etch process can now require atomic-level control across a 300 mm wafer. The incorporation of new metal gates and high-k dielectric materials in the device stack requires advanced multi-film etching capability. Furthermore, the adoption of double patterning techniques to address lithography challenges at the 45 nm node and beyond is driving the etch process to define the feature on the wafer as well as to transfer the pattern into the film. All of these challenges require today’s conductor etch systems to provide advanced capabilities, while still providing high productivity.

TCP Technology

Introduced in 1992, our Transformer Coupled Plasma™ technology continues to provide leading-edge capability for advanced conductor etch applications at the 32 nm node and beyond. By efficiently coupling radio frequency (“RF”) power into plasma at low pressures, the TCP technology provides capability to etch nanoscale features into silicon and metal films. The advanced TCP source design ensures a uniform, high-density plasma across the wafer, without requiring magnetic enhancements that could cause device damage. With a wide process window over a range of power, chemistry, and pressure combinations, TCP technology provides the flexibility required to perform multiple etch steps in the same chamber.

2300^® Versys^® Kiyo^®, 2300^®Versys^® Kiyo45™, 2300^® Kiyo^® C Series, 2300^® Versys^® Metal, 2300^®  Versys^® Metal45™, 2300^® Versys^® Metal L Conductor Etch Systems

Now in its third generation, the 2300 Kiyo product family combines iterative advances in technology to provide critical dimension (“CD”) uniformity and productivity for a wide range of conductor etch applications. The 2300 Versys Metal product family leverages Lam’s proprietary TCP technology to provide a flexible platform for back-end-of-line metal etch processes. Our etch products perform production-provenin situetch etches of complex features. In addition, proprietary pre-coat and post-etch chamber clean techniques provide the same environment for superior repeatability, as well as high uptime and yield wafer after wafer.

MEMS and Deep Silicon Etch

Micro-electromechanicalDeep silicon etch is an enabling process for several emerging technologies, including micro-electromechanical systems (“MEMS”) devices, CMOS image sensors, and power devices. Many of these technologies are increasingly being used in consumer applications, such as ink jet printer heads, accelerometers, and inertial sensors. This is driving a number of MEMSdeep silicon etch applications to transition into high-volume manufacturing, which requires the high levels of cost-effective production typically seen in commodity semiconductor memory devices. To achieve high yield in mass production, the MEMSdeep silicon etch process requires wafer-to-wafer repeatability.

TCP^® 9400DSiE™ Deep Silicon Etch System

The TCP 9400DSiE system is based on our production-proven TCP 9400 silicon etch series. The system’s patented high-density TCP plasma source provides a configuration to meet the challenges of silicon deep reactive ion etch, (“DRIE”), offering broad process capability and flexibility for a wide range of MEMS, advanced packaging, and power semiconductor applications. Incorporation of our proprietaryin situchamber cleaning technology provides etch rate stability.

Three-Dimensional Integrated Circuit Etch

The semiconductor industry is developing advanced, three-dimensional integrated circuits (“3-D ICs”) using through-silicon vias (“TSVs”) to provide interconnect capability for die-to-die and wafer-to-wafer stacking. In

addition to a reduced form factor, 3-D ICs can enhance device performance through increased speed and decreased power consumption. Manufacturers are currently considering a wide variety of 3-D integration schemes that present an equally broad range of TSV etch requirements. Plasma etch technology, which has been used extensively for deep silicon etching in memory devices and MEMS production, is well suited for TSV creation.

2300^® Syndion^® Through-Silicon Via Etch System

The 2300 Syndion etch system is based on our patented TCP technology and the production-proven 2300 Versys Kiyo conductor etch system. The Syndion system can etch multiple film stacks in the same chamber, including silicon, dielectric, and conducting materials, thereby addressing multiple TSV etch requirements.

Clean Process

The manufacture of semiconductor devices involves a series of processes such as etch, deposition, and implantation, which leave particles and residues on the surface of the wafer. The wafer must generally be cleaned after these steps to remove particles and residues that could adversely impact the processes that immediately

follow them and degrade device performance. Common wafer cleaning steps include post-etch and post-strip cleans and pre-diffusion and pre-deposition cleans, among others.

Specific challenges at the 45 nm node and beyond include efficient particle and residue removal while minimizing substrate material loss, protecting structures with fragile new materials and smaller feature sizes, and efficient drying. In addition, management of potential defect sources at the wafer edge becomes increasingly challenging as new materials are introduced in the process flow.

Single-Wafer Wet Clean

As device geometries shrink and new materials are introduced, device flows become more complex, and the number of wafer cleaning steps increases. The need to have better control of the cleaning process, to increase overall clean efficiency, and to clean fragile structures without causing damage are reasons why chipmakers are turning to single-wafer wet clean processing technology for next-generation devices.

Over the past decade, a transition from batch to single-wafer processing has occurred for back-end-of-line wet clean applications and a similar migration is now taking place for front-end-of-line wet clean applications appears to be occurring as the need for higher particle removal efficiency without device structure damage becomes more critical. Single-wafer wet processing is particularly advantageous for those applications where improved defect performance (removing particles without damaging the wafer pattern) or enhanced selectivity and CD control can improve yield.

Single-Wafer Spin Clean Products: SP Series, Da Vinci^®, DV-Prime™

With the acquisition of SEZ Holding AG (“SEZ”) in March 2008, we have expanded our portfolio to include single-wafer spin systems, in addition to gaining more thanIntroduced over 20 years of experience in clean technology and a substantial installed customer base. This single-waferago, SEZ^® spin technology for cleaning and removing films has assisted the industry transition from batch to single-wafer wet processing. This proven technology provides the productivity and flexibility needed for both high-volume manufacturing and leading-edge development across multiple technology nodes and for all device types. By offering advanced dilute chemistry and solvent solutions in our systems, our single-wafer spin wet clean systems address certain defectivity and material integrity requirements.

Single-Wafer Linear Clean Product: 2300^® Serene™Serene^®

To meet the challenges of smaller critical dimensions, increasing aspect ratios, and new materials integration, our 2300 Serene wet clean system is targeted at applications requiring high-selectivity residue removal without damaging sensitive device structures. The system’s C3™ (Confined Chemical Cleaning™) technology combines linear wafer motion with chemically-driven single-wafer cleaning to remove residues with chemical exposure times as short as a few seconds. The cleaning exposure time is optimized for efficient removal of the target materials, while limiting the impact on critical materials. This technology addresses applications that require high-selectivity cleaning, such as high-k metal gate post-etch clean.

Plasma-Based Bevel Clean

Semiconductor manufacturers are paying increasing attention to the wafer edge as a source of yield limiting defects. New materials like porous low-k and organic films often do not adhere as well as traditional silicon or polymer-based films and have the potential to be significant defect sources. By including cleaning steps that target the bevel region, the number of good die at the wafer’s edge can be increased to maximize yield.

2300^® Coronus™ Plasma-BasedCoronus^® Plasma Bevel Clean System

The 2300 Coronus plasma-basedplasma bevel clean system incorporates plasma technology to remove yield limiting defect sources. The system combines the ability of plasma to selectively remove a wide variety of materials with a proprietary confinement technology that protects the die area. Incorporating our Dynamic Alignment technology on the production-proven 2300 platform, the Coronus system provides highly accurate wafer placement for reproduciblerepeatable process results and superior encroachment control and is designed to remove a wide range of material types, in multiple applications, throughout the manufacturing process flow.

The Lam Research logo, Lam Research, and all product and service names used herein are either registered trademarks or trademarks of Lam Research Corporation in the United States and/or other countries. All other marks mentioned herein are the property of their respective holders.

Research and Development

The market for semiconductor capital equipment is characterized by rapid technological change and product innovation. Our ability to obtainachieve and maintain our competitive advantage depends in part on our continued and timely development of new products and enhancements to existing products. Accordingly, we devote a significant portion of our personnel and financial resources to R&D programs and seek to maintain close and responsive relationships with our customers and suppliers.

Our R&D expenses during fiscal years 2010, 2009, and 2008 and 2007 were $320.9 million, $288.3 million, $323.8 million, and $285.3$323.8 million, respectively. The majority of R&D spending isover the past three years has been targeted at etch and other plasma-based technology applications, with an increasing proportion focused on adjacent markets includingtechnologies, single-wafer clean, and pre- and post-etch step opportunities.other semiconductor manufacturing products. We believe current challenges for customers at various points in the pre- and post-etch applicationssemiconductor manufacturing process present opportunities for us.

We expect to continue to make substantial investments in R&D to meet our customers’ product needs, support our growth strategy, and enhance our competitive position.

Marketing, Sales, and Service

Our marketing, sales, and service efforts are focused on building long-term relationships with our customers and targeting product and service solutions designed to meet their needs. These efforts are supported by a team of product marketing and sales professionals as well as equipment and process engineers who work closely with individual customers to develop solutions for their wafer processing needs. We maintain ongoing service relationships with our customers and have an extensive network of service engineers in place throughout the United States, Europe, Taiwan, Korea, Japan, and Asia Pacific. We believe that comprehensive support programs and close working relationships with customers are essential to maintaining high customer satisfaction and our competitiveness in the marketplace.

We offerprovide standard warranties for our systems that generally run for a period of 12 months from system acceptance. The warranty provides that systems shall be free from defects in material and workmanship and conform to agreed-upon specifications. The warranty is limited to repair of the defect or replacement with new or like-new equivalent goods and is valid when the buyer provides prompt notification within the warranty period of the claimed defect or non-conformity and also makes the items available for inspection and repair. We also offer extended warranty packages to our customers to purchase as desired.

International Sales

A significant portion of our sales and operations occur outside the United States and, therefore, may be subject to certain risks, including but not limited to tariffs and other barriers, difficulties in staffing and managing non-U.S. operations, adverse tax consequences, foreign currency exchange rate fluctuations, changes in currency controls, compliance with U.S. and international laws and regulations, including U.S. export restrictions, and economic and political conditions. Any of these factors may have a material adverse effect on our business, financial position, and results of operations and cash flows. Revenue by region was as follows:

		Year Ended
		June 27, 2010			June 28, 2009			June 29, 2008
		(in thousands)
Revenue:
United States		$	186,036		$	171,359		$	417,807
Europe			133,685			121,178			235,191
Japan			318,641			234,070			455,322
Korea			539,312			239,911			554,924
Taiwan			703,854			208,053			502,683
Asia Pacific			252,248			141,375			308,984
Total revenue		$	2,133,776		$	1,115,946		$	2,474,911

Customers

Our customers include many of the world’s leading semiconductor manufacturers. Customers continue to establish joint ventures, alliances and licensing arrangements which have the potential to positively or negatively impact our competitive position and market opportunity.opportunities. In fiscal year 2010, revenues from Samsung Electronics Company, Ltd., Taiwan Semiconductor Manufacturing Company, Ltd., and Toshiba Corporation accounted for approximately 24%, 15%, and 11%, respectively, of total revenues. In fiscal year 2009, revenues from Samsung Electronics Company, Ltd. and Toshiba Corporation accounted for approximately 19% and 11%, respectively, of total revenues. In fiscal year 2008, revenues from Samsung Electronics Company, Ltd. and Toshiba Corporation accounted for approximately 19% and 13%, respectively, of total revenues. In fiscal year 2007, revenues from Hynix Semiconductor and Samsung Electronics Company, Ltd., each accounted for approximately 14% of total revenues.

A material reduction in orders from our customers in the semiconductor industry could adversely affect our results of operations and projected financial condition. Our business depends upon the expenditures of semiconductor manufacturers. Semiconductor manufacturers’ businesses, in turn, depend on many factors, including their economic capability, the current and anticipated market demand for integrated circuits and the availability of equipment capacity to support that demand.

Backlog

Our unshipped ordersIn general, we schedule production of our systems based upon our customers’ delivery requirements. In order for a system to be included in our backlog, the following conditions must be met: 1) a written customer request that has been accepted, 2) agreement on prices and product specifications, and 3) scheduled shipment within the next 12 months. The spares and services backlog includes customer orders for systems, spares, and services where written customer requests have been accepted and the delivery of products or provision of services is anticipated within the next 12 months. Our policy is to revise our backlog for order cancellations and to make adjustments to reflect, among other things, spares volume estimates and customer delivery date changes. In general, we schedule production of our systems based upon purchase orders in backlog and our customers’ delivery requirements. Included in our systems backlog are orders for which written requests have been accepted, prices and product specifications have been agreed upon, and shipment of systems is expected within one year. The spares and services backlog includes customer orders for products that have not yet shipped and for services that have not yet been provided. Where specific spare parts and customer service purchase contracts do not contain discrete delivery dates, we use volume estimates at the contract price and over the contract period, not exceeding 12 months, in calculating backlog amounts.

As of Our policy is to revise our backlog for order cancellations and to make adjustments to reflect, among other things, changes in spares volume estimates and customer delivery date changes. At June 27, 2010 and June 28, 2009, and June 29, 2008, our backlog was approximately $391$667 million and $410$391 million, respectively. Generally, orders for our products and services are subject to cancellation by our customers with limited penalties. Because some orders are received and shipped in the same quarter and due to possible customer changes inbecause customers may change delivery dates and cancellations ofcancel orders, our backlog at any particular date is not necessarily indicative of business volumes noror actual revenue levels for succeeding periods.

Manufacturing

Our manufacturing operations consist mainly of assembling and testing components, sub-assemblies, and modules that are then integrated into finished systems prior to shipment to or at the location of our customers. Most of the assembly and testing of our products is conducted in cleanroom environments.

We have agreements with third parties to outsource certain aspects of our manufacturing, production warehousing, and logistics functions. We believe that these outsourcing contracts provide us more flexibility to scale our operations up or down in a more timely and cost effective manner, enabling us to respond to the cyclical nature of our business. We believe that we have selected reputable providers and have secured their performance on terms documented in written contracts. However, it is possible that one or more of these providers could fail to perform as we expect, and such failure could have an adverse impact on our business and have a negative effect on our operating results and financial condition. Overall, we believe we have effective mechanisms to manage risks associated with our outsourcing relationships. Refer to Note 13 of our Consolidated Financial Statements, included in Item 15 herein,of this report, for further information concerning our outsourcing commitments.

Certain components and sub-assemblies includedthat we include in our products aremay only be obtained from a single supplier. We believe that, in many cases, we could obtain and qualify alternative sources could be obtained and qualified to supply these products. Nevertheless, aany prolonged inability to obtain these components could have an adverse effect on our operating results and could unfavorably impact our customer relationships.

Environmental Matters

We are subject to a variety of governmental regulations related to the management of hazardous materials.materials that we use in our business operations. We are currently not aware of any pending notices of violation, fines, lawsuits, or investigations arising from environmental matters that would have a material effect on our business. We believe that we are generally in general compliance with these regulations and that we have obtained (or will obtain or are otherwise addressing) all necessary environmental permits to conduct our business. Nevertheless, the failure to comply with present or future regulations could result in fines being imposed on us, suspension ofrequire us to suspend production and cessation of ouror cease operations or reduction incause our customers’ acceptance ofcustomers to not accept our products. These regulations could require us to alter our current operations, to acquire significant additional equipment, or to incur substantial other expenses to comply with environmental regulations. Our failure to control the use, sale, transport or disposal of hazardous substances could subject us to future liabilities.

Employees

As of August 20, 2009,13, 2010, we had approximately 2,7113,232 regular employees.

Although we have employment-related agreements with a number of key employees, these agreements do not guarantee continued service. Each of our employees is required to comply with our policies relating to maintaining the confidentiality of our proprietary information and with our statement of standards of business conduct. non-public information.

In the semiconductor and semiconductor equipment industries, competition for highly skilled employees is intense. Our future success depends, to a significant extent, upon our continued ability to attract and retain qualified employees particularly in the R&D and customer support functions.

Competition

The semiconductor capital equipment industry is characterized by rapid change and is highly competitive throughout the world. To compete effectively, we invest significant financial resources to continue to strengthen and enhance our product and services portfolio and to maintain customer service and support locations globally. Semiconductor manufacturers evaluate capital equipment suppliers in many areas, including, but not limited to, process performance, productivity, customer support, defect control, and overall cost of ownership, which can be affected by many factors such as equipment design, reliability, software advancements, etc. Our ability to succeed in the marketplace will dependdepends upon our ability to maintain existing products and introduce product enhancements and new products that meet customer requirements on a timely basis. In addition, semiconductor manufacturers must make a substantial investment to qualify and integrate new capital equipment into

semiconductor production lines. As a result, once a semiconductor manufacturer has selected a particular supplier’s equipment and qualified it for production, the manufacturer generally maintains that selection for that specific production application and technology node provided that there is demonstratedas long as the supplier’s products demonstrate performance to specification byin the installed base. Accordingly, we may experience difficulty in selling to a given customer if that customer has qualified a competitor’s equipment. We must also continue to meet the expectations of our installed base of customers through the delivery of high-quality and cost-efficient spare parts in the presence of third-party spare parts provider competition.

We face significant competition with all of our products and services. Our primary competitors in the etch market are Tokyo Electron, Ltd. and Applied Materials, Inc. Our primary competitor in the single-wafer wet clean market is Dainippon Screen Manufacturing Co. Ltd.

Certain of our existing and potential competitors have substantially greater financial resources and larger engineering, manufacturing, marketing, and customer service and support organizations than we do. In addition, we face competition from a number of emerging companies in the industry. We expect our competitors to continue to improve the design and performance of their current products and processes and to introduce new products and processes with enhanced price/performance characteristics. If our competitors make acquisitions or enter into strategic relationships with leading semiconductor manufacturers, or other entities, covering products similar to those we sell, our ability to sell our products to those customers could be adversely affected. There can be no assurance that we will continue to compete successfully in the future. Our primary competitors in the etch market are Tokyo Electron, Ltd. and Applied Materials, Inc. Our primary competitor in the single-wafer wet clean market is Dainippon Screen Manufacturing Co. Ltd.

Patents and Licenses

Our policy is to seek patents on inventions relating to new or enhanced products and processes developed as part of our ongoing research, engineering, manufacturing, and support activities. We currently hold a number of

United States and foreign patents covering various aspects of our products and processes. We believe that the duration of our patents generally exceeds the useful life of the technologies and processes disclosed and claimed therein.in them. Our patents, which cover material aspects of our past and present core products, have current durations ranging from approximately one to twenty years. We believe that, although the patents we own and may obtain in the future will be of value, they alone will not determine our success. Our success which depends principally upon our engineering, marketing, support, and delivery skills. However, in the absence of patent protection, we may be vulnerable to competitors who attempt to imitate our products, manufacturing techniques, and processes. In addition, other companies and inventors may receive patents that contain claims applicable or similar to our products and processes. The sale of products covered by patents of others could require licenses that may not be available on terms acceptable to us, or at all. For further discussion of legal matters, see Item 3, “Legal Proceedings,” of this Annual Report on Form 10-K as of and for the year ended June 28, 2009 (the “2009 Form 10-K”).

Other Cautionary Statements

See the discussion of risks in the section of this 2009 Form 10-K entitled Item 1A, “Risk Factors” and elsewhere in this report.

EXECUTIVE OFFICERS OF THE COMPANY

As of August 26, 2009,20, 2010, the executive officers of Lam Research were as follows:

Stephen G. Newberry was appointed President and Chief Executive Officer of Lam Research in June 2005. He joined Lam Research in August 1997 as Executive Vice President and Chief Operating Officer and was promoted to the position of President and Chief Operating Officer in July 1998. Mr. Newberry currently serves as a director of Lam Research, Amkor Technology, and Semiconductor Equipment and Materials International (SEMI), the industry’s trade association. He also serves as a member of the Haas Advisory Board, Haas School of Business, University of California at Berkeley and as a member of the Dean’s Advisory Council, University of

California at Davis Graduate School of Management. Prior to joining Lam Research, Mr. Newberry was Group Vice President of Global Operations and Planning at Applied Materials, Inc. Mr. Newberry served five years in naval aviation prior to joining Applied Materials. He is a graduate of the U.S. Naval Academy and the Harvard Graduate School of Business.Business, Program for Management Development.

Martin B. Anstice joined Lam Research in April 2001 as Senior Director, Operations Controller, was promoted to the position of Managing Director and Corporate Controller in May 2002, and was promoted to Group Vice President, Chief Financial Officer, and Chief Accounting Officer in June 2004, was named Senior

Vice President, Chief Financial Officer and Chief Accounting Officer in March 2007, and was promoted to Executive Vice President, Chief Operating Officer, in September 2008. Mr. Anstice began his career at Raychem Corporation where, during his 13-year tenure, he held numerous finance roles of increasing responsibility in Europe and North America. Subsequent to Tyco International’s acquisition of Raychem in 1999, he assumed responsibilities supporting mergers and acquisition activities of Tyco Electronics. Mr. Anstice is an associate member of the Chartered Institute of Management Accountants in the United Kingdom.

Ernest E. Maddock was appointed Senior Vice President and Chief Financial Officer of Lam Research in September 2008. Additionally, Mr. Maddock oversees Information Technology and heads Silfex Incorporated (formerly Bullen Semiconductor Corporation), a division of Lam Research. SinceFrom October 2003 through September 2008, Mr. Maddock held the position of Senior Vice President of Global Operations at Lam Research, overseeing Information Technology, Global Supply Chain, Production Operations, Corporate Quality, Global Security, and Global Real Estate & Facilities. Mr. Maddock also held the position of Vice President of the Customer Support Business Group (CSBG) with the Company. Mr. Maddock joined the Company in November 1997. Prior to his employment with Lam Research, Mr. Maddock was Managing Director, Global Logistics and Repair Services Operations, and Chief Financial Officer, Software Products Division, of NCR Corporation. He has also held a variety of executive roles in finance and operations in several industries ranging from commercial real estate to telecommunications.

Abdi Hariri was named Group Vice President, Global OperationsJeffrey Marks has spent the past 20 years in April of 2009. Prior to his current position, Mr. Hariri hadthe semiconductor industry, focusing on advanced process equipment development and business growth. He joined Lam Research Corporation in 1999, and has been Group Vice President of the Customer Support Business Group since March 2007 and Vice President and General Manager of the Customer Support BusinessClean Product Group since August 2004. Mr. Hariri previously served asMarch 2007. He is responsible for the General ManagerCompany’s spin, linear and bevel clean products. Before assuming responsibility for wet and plasma-based bevel clean, Dr. Marks managed the dielectric etch business at Lam Research. He worked for Applied Materials from 1988 until 1999 and was responsible for several key technology and business activities, including flat panel etch, CMP, dielectric etch, and dielectric CVD. He received his Ph.D. in chemistry from Stanford University and his B.S. degree in chemistry from the University of Lam Research Co. Ltd. (Japan) for approximately 18 monthsCalifornia, San Diego. He holds numerous patents and has servedauthored several technical publications in a numberthe areas of different assignments with the Field Salessemiconductor processing and Product Groups. His experience prior to his appointment in Japan included over 13 years at the Company with various responsibilities, including global business development and engineering. Prior to his employment at Lam Research, Mr. Hariri served as a Process Engineer at Siliconix, Inc. He holds a Masters Degree in Chemical Engineering from Stanford University.thin-film applications.

Richard A. Gottscho, Group Vice President and General Manager, Etch BusinessBusinesses since March 2007, joined the Company in January 1996 and has served at various Director and Vice President levels in support of etch products, CVD products, and corporate research. Prior to joining Lam Research, Dr. Gottscho was a member of Bell Laboratories for 15 years where he started his career working in plasma processing. During his tenure at Bell, he headed research departments in electronics materials, electronics packaging, and flat panel displays. Dr. Gottscho is the author of numerous papers, patents, and lectures in plasma processing and process control. He is a recipient of the American Vacuum Society’s Peter Mark Memorial Award and is a fellow of the American Physical and American Vacuum Societies, has served on numerous editorial boards of refereed technical publications, program committees for major conferences in plasma science and engineering, and was vice-chair of a National Research Council study on plasma science in the 1980s. Dr. Gottscho earned Ph.D. and B.S. degrees in physical chemistry from the Massachusetts Institute of Technology and the Pennsylvania State University, respectively.

Thomas J. Bondur, Vice President and General Manager, Sales and Marketing, since April 2009 and previously Vice President, Global Field Operations since March 2007, joined Lam Research in August 2001 and has served in various roles in business development and field operations in Europe and the United States. Prior to joining Lam Research, Mr. Bondur spent eight years in the semiconductor industry with Applied Materials in various roles in Santa Clara and France including Sales, Business Management and Process Engineering. Mr. Bondur holds a degree in Business from the State University of New York.

Sarah A. O’Dowd joined Lam Research in September 2008 as Group Vice President and Chief Legal Officer, and was appointed Group Vice President, Human Resources and Chief Legal Officer in April 2009. Prior to joining Lam Research, Ms. O’Dowd served as Vice President and General Counsel for FibroGen, Inc. from February 2007 until September 2008. Until February 2007, Ms. O’Dowd was a shareholder in the law firm of Heller Ehrman LLP for more than twenty years.

Item 1A.

Risk Factors

In addition to the other information in this 20092010 Form 10-K, the following risk factors should be carefully considered in evaluating the Company and its business because such factors may significantly impact our business, operating results, and financial condition. As a result of these risk factors, as well as other risks discussed in our other SEC filings, our actual results could differ materially from those projected in any forward-looking statements. No priority or significance is intended, nor should be attached, to the order in which the risk factors appear.

The Semiconductor Industry is Subject to Major Fluctuations and, as a Result, We Face Risks Related to the DeteriorationOur Strategic Resource Allocation Decisions

The business cycle in the General Economic Outlooksemiconductor equipment industry has historically been characterized by frequent periods of rapid change in demand that challenge our management to adjust spending and other resources allocated to operating activities. During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems, procedures for training, managing, and appropriately sizing our supply chain, our work force, and other components of our business on a timely basis.

If we do not adequately meet these challenges during periods of demand decline, our gross margins and earnings may be impaired. In late 2008 and throughout 2009, the Downturnsemiconductor industry experienced a general decline in demand, leading to a steep decline in demand for our products and services. In response to that industry demand decline and in an effort to minimize the disruptive effects of the deteriorating economic conditions on our business operating results, we made difficult resource allocation decisions, including layoffs and restructurings.

During fiscal year 2010 we transitioned into what we believe to be a period of demand growth, although the duration and intensity of the growth period is uncertain. This is fueled in large part by increased investment by customers who, during the downturn, reduced or eliminated their spending on our products. We continuously reassess our strategic resource allocation choices in response to the changing business environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during this period of growth; or, we may expand our capacity too rapidly and/or beyond what is appropriate for the actual demand environment.

Especially during transitional periods, resource allocation decisions can have a significant impact on our future performance, particularly if we have not accurately anticipated industry changes. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively.

Future Decline in the Semiconductor Equipment Industry, and the Overall World Economic Conditions on Which it is Significantly Dependent, Could Have a Material Adverse Impact on Our Results of Operations and Financial Condition

Current globalOur business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits. The semiconductor industry is cyclical in nature and historically experiences periodic downturns. Global economic and business conditions, which are often unpredictable, have historically impacted customer demand for our products and normal commercial relationships with our customers, suppliers, and creditors. Additionally, in times of economic uncertainty, some of our customers’ budgets for our products, or their ability to access credit has beento purchase them, could be adversely affected, which limitsaffected. This would limit their ability to purchase our products and services. The degree of the impact on our business of the current credit andAs a result, economic environment will continue to depend on a number of factors, including the duration and severity of the recession facing the U.S. economy and the global economy generally, and the semiconductor industry specifically. This impact maydownturns can cause potential material adverse changes to our results of operations and financial condition including, but not limited to:

Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments, revenues and operating results. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in research and development and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.

Our Quarterly Revenues and Operating Results Are Unpredictable

Our revenues and operating results may fluctuate significantly from quarter to quarter due to a number of factors, not all of which are in our control. We manage our expense levels based in part on our expectations of future revenues. If revenue levels in a particular quarter do not meet our expectations, our operating results may be adversely affected. Because our operating expenses are based in part on anticipated future revenues, and a certain amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of gross profit from a single transactionsmall number of transactions can unfavorably affect operating results in a particular quarter. Factors that may cause our financial results to fluctuate unpredictably include, but are not limited to:

Further, because a significant amount of our R&D and administrative operations and capacity is located at our Fremont, California campus, natural, physical, logistical or other events or disruptions affecting these facilities (including labor disruptions, earthquakes, and power failures) could adversely impact our financial performance.

We Derive Our Revenues Primarily from a Relatively Small Number of High-Priced Systems

System sales constitute a significant portion of our total revenue. Our systems are priced up to approximately $6 million per unit, and our revenues in any given quarter are dependent upon the acceptance of a rather limited number of such systems. As a result, the inability to recognize revenue on even a few systems can cause a significantsignificantly adverse impact on our revenues for that quarter.

We Have a Limited Number of Key Customers

Sales to a limited number of large customers constitute a significant portion of our overall revenue, new orders and profitability. As a result, the actions of even one customer may subject us to revenue swings that are difficult to predict. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers, so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results. As of June 27, 2010, two customers accounted for approximately 24% and 22 % of accounts receivable. As of June 28, 2009, three customers accounted for approximately 17%, 15%, and 14% of accounts receivable.

Variations in the Amount of Time it Takes for Our Customers to Accept Our Systems May Cause Fluctuation in Our Operating Results

We generally recognize revenue for new system sales on the date of customer acceptance or the date the contractual customer acceptance provisions lapse. As a result, the fiscal period in which we are able to recognize new systems revenues is typically subject to the length of time that our customers require to evaluate the performance of our equipment after shipment and installation, which may vary from customer to customer and tool to tool. Such variations could cause our quarterly operating results to fluctuate.

The Semiconductor Equipment Industry is Volatile and Reduced Product Demand Has a Negative Impact on Shipments

Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits and products using integrated circuits. The semiconductor industry is cyclical in nature and historically experiences periodic downturns. Business conditions historically have changed rapidly and unpredictably.

Fluctuating levels of investment by semiconductor manufacturers could continue to materially affect our aggregate shipments, revenues and operating results. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in research and development and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our financial results.

We Depend on New Products and Processes for Our Success. Consequently, We are Subject to Risks Associated with Rapid Technological Change

Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances enabling suchthat enable those processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products have reliability, quality, or qualitydesign problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses. We may be unable to develop and manufacture new products successfully, or new products that we introduce may fail in the marketplace. Our failure to complete commercialization ofcommercialize these new products in a timely manner could result in unanticipated costs and inventory obsolescence, which would adversely affect our financial results.

In order to develop new products and processes, we expect to continue to make significant investments in R&D and to pursue joint development relationships with customers, suppliers or other members of the industry. We must manage product transitions and joint development relationships successfully, as the introduction of new products could adversely affect our sales of existing products. Moreover, future technologies, processes or product developments may render our current product offerings obsolete, leaving us with non-competitive products, or obsolete inventory, or both.

We are Subject to Risks Relating to Product Concentration and Lack of Product Revenue Diversification

We derive a substantial percentage of our revenues from a limited number of products, and we expect theseour etch and clean products to continue to account for a large percentage of our revenues in the near term. Continued market acceptance of these products is, therefore, critical to our future success. Our business, operating results, financial condition, and cash flows could therefore be adversely affected by:

In addition, the fact that we offer a more limited product linelines creates the risk that our customers may view us as less important to their business than our competitors that offer additional products as well. This may impact our ability to maintain or expand our business with certain customers. Such product concentration may also subject us to additional risks associated with technology changes. Since we are primarily a provider of etch and clean equipment, our business is affected by our customers’ use of etching and clean steps in their processes. Should technologies change so that the manufacture of semiconductor chips requires fewer etching or clean steps, this could have a larger impact on our business than it would on the business of our less concentrated competitors.

We Have a Limited Number of Key Customers

Sales to a limited number of large customers constitute a significant portion of our overall revenue, new orders and profitability. As a result, the actions of even one customer may subject us to revenue swings that are difficult to predict. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers, so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results.

Strategic Alliances May Have Negative Effects on Our Business

Increasingly, semiconductor companies are entering into strategic alliances with one another to expedite the development of processes and other manufacturing technologies. Often, one of the outcomes of such an alliance is the definition of a particular tool set for a certain function or a series of process steps that use a specific set of manufacturing equipment. While this could work to our advantage if our equipment becomes the basis for the function or process, it could work to our disadvantage if a competitor’s tools or equipment become the standard equipment for such function or process. In the latter case, even if our equipment was previously used by a customer, that equipment may be displaced in current and future applications by the tools standardized by the alliance.

Similarly, our customers may team with, or follow the lead of, educational or research institutions that establish processes for accomplishing various tasks or manufacturing steps. If those institutions utilize a competitor’s equipment when they establish those processes, it is likely that customers will tend to use the same equipment in setting up their own manufacturing lines. These actions could adversely impact our market share and subsequent business.financial results.

We are Dependent UponOn a Limited Number of Key Suppliers

We obtain certain components and sub-assemblies included in our products from a single supplier or a limited group of suppliers. We have established long-term contracts with many of these suppliers. These long-term contracts can take a variety of forms. We may renew these contracts periodically. In some cases, these suppliers have sold us products during at least the last five years, and we expect that we will continue to renew these contracts in the future or that we will otherwise replace them with competent alternative suppliers. However, severalcertain of our suppliers are relatively new providers to us so that our experience with them and their performance is limited. Where practical, our intent iswe intend to establish alternative sources to mitigate the risk that the failure of any single supplier will adversely affect our business. Nevertheless, a prolonged inability to obtain certain components could impair our ability to ship products lower ourand generate revenues, and thuswhich could adversely affect our operating results and result in damage to our customer relationships.

Our Outsource Providers May Fail to Perform as We Expect

Outsource providers have played and will continue to play a key role in our manufacturing operations and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization. Although we aim at selectingattempt to select reputable providers and secure their performance on terms documented in written contracts, it is possible that one or more of these providers could fail to perform as we expect and such failure could have an adverse impact on our business.

In addition, the expansive role of our outsource providers has required and willmay continue to require us to implement changes to our existing operations and to adopt new procedures to deal with and manage the performance of these outsource providers. Any delay or failure in the implementation of our operational changes and new procedures could adversely affect our customer and/or employee relationships, and/orwhich could have a negative effect on our operating results.

Once a Semiconductor Manufacturer Commits to Purchase a Competitor’s Semiconductor Manufacturing Equipment, the Manufacturer Typically Continues to Purchase that Competitor’s Equipment, Making it More Difficult for Us to Sell Our Equipment to that Customer

Semiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing equipment into a semiconductor production line. We believe that once a semiconductor manufacturer selects a particular supplier’s processing equipment, the manufacturer generally relies upon that equipment for that specific production line application.application for an extended period of time. Accordingly, we expect it to be more difficult to sell to a given customer if that customer initially selects a competitor’s equipment.

We are Subject to Risks Associated with Our Competitors’ Strategic RelationshipsFace a Challenging and Their Introduction of New Products and We May Lack the Financial Resources or Technological Capabilities of Certain of Our Competitors Needed to Capture Increased Market ShareComplex Competitive Environment

We expect to face significant competition from multiple current and future competitors. We believe that otherOther companies are developingcontinue to develop systems and products that are competitive to ours and are planning tomay introduce new products, which may affect our ability to sell our existing products. We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely affect our ability to sell products to those manufacturers.

We believe that to remain competitive we will requiremust devote significant financial resources to offer a broad range of products, to maintain customer service and support centers worldwide, and to invest in product and process R&D. Certain of our competitors, especially those that are created and financially backed by foreign governments, have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer service and support resources than we do and therefore have the potential to increasingly dominate the semiconductor equipment industry. These competitors may deeply discount or give away products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. We also face competition from our own customers, who in some instances have established affiliated entities that manufacture equipment similar to ours. For these reasons, we may fail to continue to compete successfully worldwide.

In addition, our competitors may provide innovative technology that may have performance advantages over systems we currently, or expect to, offer. They may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we currently are developing additionalcontinue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify and we may be unable to continue to compete successfully in our markets, competition may intensify, or future competition maywhich could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.

Our Future Success Depends on International Sales and the Management of Global Operations

Non-U.S. sales accounted for approximately 91% of total revenue in fiscal year 2010, 85% of total revenue in fiscal year 2009, and 83% in fiscal year 2008 and 84% in fiscal year 2007 of our total revenue.2008. We expect that international sales will continue to account for a significantsubstantial portion of our total revenue in future years.

We are subject to various challenges related to international sales and the management of global operations and international sales including, but not limited to:

Certain international sales depend on our ability to obtain export licenses from the U.S. Government.government. Our failure or inability to obtain such licenses would substantially limit our markets and severely restrict our revenues. Many of the challenges noted above are applicable in China, which is a fast developing market for the semiconductor equipment industry and therefore an area of potential significant growth for our business. As the business volume between China and the rest of the world grows, there is inherent risk, based on the complex

relationships between China, Taiwan, Japan, and the United States that political and diplomatic influences might lead to trade disruptions whichdisruptions; this would adversely affect our business with China and/or Taiwan and perhaps the entire Asia Pacific region. A significant trade disruption in these areas could have a materially adverse impact on our future revenue and profits.

We are potentially exposed to adverse as well as beneficial movements in foreign currency exchange rates. The majority of our sales and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations related to certain of our revenues denominated in Japanese yen and Euros, and toas well as certain of our spares and service contracts, Euro denominated expenses, and expenses related to our non-U.S. sales and support offices whichthat are denominated in the related countries’ local currency.

We currently enter into foreign exchange forward contracts to minimize the short-term impact of the foreign currency exchange rate fluctuations on Japanese yen-denominated revenue and monetary assets and forecasted Japanese yen-denominated revenueliabilities, as well as monetary assets and on net intercompany liability exposuresliabilities denominated in Swiss francs, Euros and Taiwanese dollars. We currently believe these are our primary exposures to currency rate fluctuation. We expect to continue to enter into hedging transactions, for the purposes outlined, in the foreseeable future. However, these hedging transactions may not achieve their desired effect because differences between the actual timing of customer acceptances and our forecasts of those acceptances may leave us either over- or under-hedged on any given transaction. Moreover, by hedging these foreign currency denominated revenues, monetary assets and liabilities with foreign exchange forward contracts, we may miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we are exposed to short-term foreign currency exchange rate fluctuations on non-U.S. dollar-denominated assets and liabilities other(other than those currency exposures previously discusseddiscussed) and currently we do not enter into such foreign exchange forward contracts to hedge these other foreign currency exposures, andexposures. Therefore, we therefore are subject to both favorable and unfavorable foreign currency exchange rate fluctuations to the extent that we transact business (including intercompany transactions) in other currencies.

Our Ability To Attract, Retain and Motivate Key Employees Is Critical To Our Success.

Our ability to compete successfully depends in large part on our ability to attract, retain and motivate key employees. This is an ongoing challenge due to intense competition for top talent, as well as fluctuations in industry economic conditions that may require cycles of hiring activity and workforce reductions. Our success in

hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs and our ability to offer a challenging and rewarding work environment. We periodically evaluate our overall compensation programs and make adjustments, as appropriate, to maintain or enhance their competitiveness. If we are not able to successfully attract, retain and motivate key employees, we may be unable to capitalize on market opportunities and our operating results may be materially and adversely affected.

We Rely Upon Certain Critical Information Systems for the Operation of Our Business

We maintain and rely upon certain critical information systems for the effective operation of our business. These information systems include telecommunications, the internet, our corporate intranet, various computer hardware and software applications, network communications, and e-mail. These information systems may be owned and maintained by us, our outsource providers or third parties such as vendors and contractors. These information systems are subject to attacks, failures, and access denials from a number of potential sources including viruses, destructive or inadequate code, power failures, and physical damage to computers, hard drives, communication lines, and networking equipment. To the extent that these information systems are under our control, we have implemented security procedures, such as virus protection software and emergency recovery processes, to mitigate the outlined risks. However, security procedures for information systems cannot be guaranteed to be failsafe and our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business.

Our Financial Results May be Adversely Impacted by Higher Than Expected Tax Rates or Exposure to Additional Tax Liabilities

As a global company, our effective tax rate is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region. We are subject to income taxes in the United States and various foreign jurisdictions, and significant judgment is required to determine worldwide tax liabilities. Our effective tax rate could be adversely affected by changes in the split of earnings between countries with differing statutory tax rates, in the valuation of deferred tax assets, in tax laws, or by material audit assessments, whichassessments. These factors could affect our profitability. In particular, the carrying value of deferred tax assets, which are predominantly in the United States, is dependent on our ability to generate future taxable income in the United States. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability.

A Failure to Comply with Environmental Regulations May Adversely Affect Our Operating Results

We are subject to a variety of governmental regulations related to the discharge or disposal of toxic, volatile or otherwise hazardous chemicals. We believe that we are generally in general compliance with these regulations and that we have obtained (or will obtain or are otherwise addressing the need for) all environmental permits necessary to conduct our business. These permits generally relate to the disposal of hazardous wastes. Nevertheless, the failure to comply with present or future regulations could result in fines being imposed on us, suspension ofrequire us to suspend production, cessation of ouror cease operations or reduction incause our customers’ acceptance ofto not accept our products. These regulations could require us to alter our current operations, to acquire significant additional equipment or to incur substantial other expenses to comply with environmental regulations. Our failure to control the use, sale, transport or disposal of hazardous substances could subject us to future liabilities.

If We are Unable to Adjust the Scale of Our Business in Response to Rapid Changes in Demand in the Semiconductor Equipment Industry, Our Operating Results and Our Ability to Compete Successfully May be Impaired

The business cycle in the semiconductor equipment industry has historically been characterized by frequent periods of rapid change in demand that challenge our management to adjust spending and resources allocated to

operating activities. During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems and procedures, and in training, managing, and appropriately sizing our supply chain, our work force, and other components of our business on a timely basis. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively. If we do not adequately meet these challenges, our gross margins and earnings may be impaired during periods of demand decline, and we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during periods of demand growth.

If We Choose to Acquire or Dispose of Product Lines and Technologies, We May Encounter Unforeseen Costs and Difficulties That Could Impair Our Financial Performance

An important element of our management strategy is to review acquisition prospects that would complement our existing products, augment our market coverage and distribution ability, or enhance our technological capabilities. As a result, we may make acquisitions of complementary companies, products or technologies, such as our March 2008 acquisition of SEZ Holding AG (“SEZ”), or we may reduce or dispose of certain product lines or technologies that no longer fit our long-term strategies. Managing an acquired business, disposing of product technologies or reducing personnel entailsentail numerous operational and financial risks, including difficulties in assimilating acquired operations and new personnel or separating existing business or product groups, diversion of management’s attention away from other business concerns, amortization of acquired intangible

assets and potential loss of key employees or customers of acquired or disposed operations among others.operations. There can be no assurance that we will be able to achieve and manage successfully any such integration of potential acquisitions, disposition of product lines or technologies, or reduction in personnel or that our management, personnel, or systems will be adequate to support continued operations. Any such inabilities or inadequacies could have a material adverse effect on our business, operating results, financial condition, and cash flows.

In addition, any acquisition could result in changes such as potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the amortization of related intangible assets, and goodwill impairment charges, any of which could materially adversely affect our business, financial condition, and results of operations and/or the price of our Common Stock.

The Market for Our Common Stock is Volatile, Which May Affect Our Ability to Raise Capital or Make Acquisitions

The market price for our Common Stock is volatile and has fluctuated significantly over the past years. The trading price of our Common Stock could continue to be highly volatile and fluctuate widely in response to a variety of factors, includingmany of which are not within our control or influence. These factors include but are not limited to the following:

In addition, the stock market experiences significant price and volume fluctuations. Historically, we have witnessed significant volatility in the price of our Common Stock due in part to the actual or anticipated movement in interest rates and the price of and markets for semiconductors. These broad market and industry factors have and may again adversely affect the price of our Common Stock, regardless of our actual operating performance. In the past, following volatile periods in the price of their stock, many companies became the object of securities class action litigation. If we are sued in a securities class action, we could incur substantial costs, and it could divert management’s attention and resources and have an unfavorable impact on our financial performance and the price for our Common Stock.

We Rely Upon Certain Critical Information Systems for the Operation of Our Business

We maintain and rely upon certain critical information systems for the effective operation of our business. These information systems include telecommunications, the internet, our corporate intranet, various computer hardware and software applications, network communications, and e-mail. These information systems may be owned by us or by our outsource providers or even third parties such as vendors and contractors and may be maintained by us or by such providers and third parties. These information systems are subject to attacks, failures, and access denials from a number of potential sources including viruses, destructive or inadequate code, power failures, and physical damage to computers, hard drives, communication lines, and networking equipment. To the extent that these information systems are under our control, we have implemented security procedures, such as virus protection software and emergency recovery processes, to address the outlined risks. However, security procedures for information systems cannot be guaranteed to be failsafe and our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business.

Intellectual Property, Indemnity and Other Claims Against Us Can be Costly and We Could Result in the Loss ofLose Significant Rights WhichThat are Necessary to Our Continued Business and Profitability

Third parties may assert infringement, unfair competition, product liability, breach of contract, or other claims against us. From time to time, other parties send us notices alleging that our products infringe their patent or other intellectual property rights. In addition, law enforcement authorities may seek criminal charges relating to intellectual property issues. We also face risks of claims from commercial and other relationships. In addition, our Bylaws and indemnity obligations provide that we will indemnify officers and directors against losses that they may incur in legal proceedings resulting from their service to Lam Research. We also face risks of claims from commercial and other relationships. In such cases, it is our policy either to defend the claims or to negotiate licenses or other settlements on commercially reasonable terms. However, we may be unable in the future to negotiate necessary licenses or reach agreement on other settlements

on commercially reasonable terms, or at all, and any litigation resulting from these claims by other parties may materially adversely affect our business and financial results. Moreover, although we seek to obtain insurance to protect us from claims and cover losses to our property, there is no guarantee that such insurance will fully indemnifycompensate us for any losses that we may incur.

We May Fail to Protect Our Critical Proprietary Technology Rights, Which Could Affect Our Business

Our success depends in part on our proprietary technology. While we attempttechnology and our ability to protect our proprietarykey components of that technology through patents, copyrights and trade secret protection, we believe thatprotection. Protecting our success also depends on increasingkey proprietary technology helps us to achieve our goals of developing technological expertise continuing our development ofand new products and systems that give us a competitive advantage; increasing market penetration and growth of our installed base,base; and providing comprehensive support and service to our customers. However, we may be unableAs part of our strategy to protect our technology in all instances, or our competitors may develop similar or more competitive technology independently. Wewe currently hold a number of United States and foreign patents and pending patent applications. However, other parties may challenge or attempt to invalidate or circumvent any patents the United States or foreign governments issue to us or these governments may fail to issue patents for pending applications. In addition,Additionally, even when patents are issued, the legal systems in certain of the countries in which we do business do not enforce patents and other intellectual property rights as rigorously as the United States. The rights granted or anticipated under any of theseour patents or pending patent applications may be narrower than we expect or, in fact, provide no competitive advantages. Any of these circumstances could have a material adverse impact on our business if they relate to critical technologies.

Compliance with Federal Securities Laws, Rules and Regulations, as well As NASDAQ Requirements, has Become Increasingly Complex, and the Significant Attention and Expense We are SubjectMust Devote to the Internal Control Evaluation and Attestation Requirements of Section 404 of the Sarbanes-Oxley Act of 2002those Areas May Have an Adverse Impact on Our Business

PursuantFederal securities laws, rules and regulations, as well as NASDAQ rules and regulations, require companies to Section 404 ofmaintain extensive corporate governance measures, impose comprehensive reporting and disclosure requirements, set strict independence and financial expertise standards for audit and other committee members and impose civil and criminal penalties for companies and their chief executive officers, chief financial officers and directors for securities law violations. These laws, rules and regulations have increased, and in the Sarbanes-Oxley Act of 2002, wefuture are requiredexpected to include in our annual report our assessment ofcontinue to increase, the effectivenessscope, complexity and cost of our internal control over financialcorporate governance, reporting and our audited financial statements as of the end of each fiscal year. Furthermore, our independent registered public accounting firm (the “Independent Registered Public Accounting Firm”) is required to report on whether it believes we maintained, in all material respects, effective internal control over financial reporting as of the end of each fiscal year. We have successfully completed our assessment and obtained our Independent Registered Public Accounting Firm’s attestation as to the effectiveness of our internal control over financial reporting as of June 28, 2009. In future years, if we fail to timely complete this assessment, or if our Independent Registered Public Accounting Firm cannot timely attest to our assessment, we could be subject to regulatory sanctions and a loss of public confidence in our internal control. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation,disclosure practices, which could harm our operating results or cause usof operations and divert management’s attention from business operations. A failure to fail to timely meet our regulatory reporting obligations.

Our Independent Registered Public Accounting Firm Must Confirm Its Independence in Order for Us to Meet Our Regulatory Reporting Obligations on a Timely Basis

Our Independent Registered Public Accounting Firm communicatescomply with us at least annually regarding any relationships between the Independent Registered Public Accounting Firm and Lam Research that, in the Independent Registered Public Accounting Firm’s professional judgment, mightthese regulations could also have a bearingmaterial adverse effect on the Independent Registered Public Accounting Firm’s independence with respect to us. If, for whatever reason, our Independent Registered Public Accounting Firm finds that it cannot confirm that it is independent of Lam Research based on existing securities laws and registered public accounting firm independence standards, we could experience delays or other failures to meet our regulatory reporting obligations.business.

None.

Our executive offices and principal operating and R&D facilities are located in Fremont, California, and are held under operating leases expiring from fiscal years 20102012 to 2015. These leases generally include options to renew or purchase the facilities. In addition, we lease properties for our service, technical support and sales personnel throughout the United States, Europe, Taiwan, Korea, Japan, and Asia Pacific and own manufacturing facilities located in Eaton, Ohio and Villach, Austria. Our fiscal yearyears 2010, 2009, and 2008 rental expense for the space occupied during that periodthose periods aggregated approximately $6 million, $9 million.million, and $11 million respectively. Our facilities lease obligations are subject to periodic increases, and weincreases. We believe that our existing facilities are well-maintained and in good operating condition.

From time to time, we have received notices from third parties alleging infringement of such parties’their patent or other intellectual property rights by our products.rights. In such cases it is our policy to defend the claims, or if considered appropriate, negotiate licenses on commercially reasonable terms.terms as appropriate. However, no assurance can be given that we will be able to negotiate necessary licenses on commercially reasonable terms, or at all, or that anyall. Any litigation resulting from such claims would notcould have a materially adverse effect on our consolidated financial position, liquidity, operating results, or our consolidated financial statements taken as a whole. Aspect Systems, Inc. (“Aspect”) sued us for breach of contract and various business torts arising out of a transaction in which we licensed Aspect to sell certain of our legacy Autoetch and Drytek products. The case went to trial in the United States District Court for the District of Arizona in December of 2008, resulting in a jury verdict in favor of Aspect. We filed an appeal from the ensuing judgment, which is now pending. We recorded the amount of the legal judgment of $4.6 million in our consolidated statement of operations for the year ended June 28, 2009.

None.

PART II

The information required by this Item with respect to the market price of the Company’sOur Common Stock numberis traded on the Nasdaq Global Select Market under the symbol LRCX. As of holders thereof,August 13, 2010 we had 358 stockholders of record. In fiscal years 2010 and payment2009 we did not declare or pay cash dividends to our stockholders. We currently have no plans to declare or pay cash dividends. The table below sets forth the high and low prices of dividends is incorporatedour common stock as reported by reference from Item 6, “Selected Financial Data” below.The NASDAQ Stock Market, Inc. for the period indicated:

On September 8, 2008, the Company announced that its Board of Directors had authorized the repurchase of up to $250 million of Company common stock from the public market or in private purchases.purchases, using the Company’s available cash. While the repurchase program does not have a defined termination date, it may be suspended, discontinued or reinstated at any time, and is funded using the Company’s available cash. time.

The Company temporarily suspended repurchases under the Board-authorized program prior to the end of the December 2008 quarter. Subsequently, on February 2, 2010, the Board of Directors authorized the resumption of the repurchase program. Repurchases were expected to be made only in the amounts necessary to offset anticipated dilution resulting from the Company’s equity compensation plans.

Share repurchases under the repurchase program were as follows (in thousands except per share data):

The graph below matchescompares Lam Research Corporation’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index and the Research Data Group, Incorporated (“RDG”) Semiconductor Composite index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexesindices (with the reinvestment of all dividends) from June 30, 20042005 to June 30, 2009.2010.

Item 6.

Selected Financial Data(derived from audited financial statements)

UNAUDITED SELECTED QUARTERLY FINANCIAL DATA

Stock and Dividend Information:

		Three Months Ended (1)
		June 27, 2010				March 28, 2010				December 27, 2009 (2)				September 27, 2009 (2)
		(in thousands, except per share data)
QUARTERLY FISCAL YEAR 2010:
Revenue		$	695,289			$	632,763			$	487,176			$	318,548
Restructuring and asset impairments — cost of goods sold			3,438				—				—				—
409A expense — cost of goods sold			—				—				(2,696	)			(3,120	)
Gross margin			321,442				292,871				221,187				134,435
Restructuring and asset impairments — operating expenses			13,302				—				5,919				2,093
409A expense — operating expenses			—				—				(18,362	)			(20,228	)
Operating income			155,717				149,093				91,348				29,252
Net income			139,997				120,301				69,574				16,797
Net income per share
Basic		$	1.11			$	0.94			$	0.55			$	0.13
Diluted		$	1.10			$	0.94			$	0.54			$	0.13
Number of shares used in per share calculations:
Basic			126,339				127,307				127,296				126,774
Diluted			127,786				128,587				128,829				127,890
		Three Months Ended (1)
		June 28, 2009				March 29, 2009				December 28, 2008				September 28, 2008
		(in thousands, except per share data)
QUARTERLY FISCAL YEAR 2009:
Revenue		$	217,764			$	174,412			$	283,409			$	440,361
Restructuring and asset impairments — cost of goods sold			—				10,217				7,728				3,048
Gross margin			67,757				36,515				101,352				183,110
Goodwill impairment — operating expenses			7,179				89,076				—				—
Restructuring and asset impairments — operating expenses			5,396				13,028				10,121				15,968
409A expense — operating expenses			982				646				843				761
Legal judgment — operating expenses			4,647				—				—				—
Operating income			(65,186	)			(195,184	)			(37,392	)			16,519
Net income			(88,490	)			(198,359	)			(24,172	)			8,873
Net income per share
Basic		$	(0.70	)		$	(1.58	)		$	(0.19	)		$	0.07
Diluted		$	(0.70	)		$	(1.58	)		$	(0.19	)		$	0.07
Number of shares used in per share calculations:
Basic			126,273				125,566				125,084				125,527
Diluted			126,273				125,566				125,084				126,819

Our Common Stock is traded on the Nasdaq Global Select Market under the symbol LRCX. The price range per share is the highest and lowest bid prices, as reported by The NASDAQ Stock Market, Inc., on any and all trading days during the respective quarter. As of August 20, 2009 we had 371 stockholders of record. In fiscal years 2009 and 2008 we did not declare or pay cash dividends to our stockholders. We currently have no plans to declare or pay cash dividends.

The following discussion of our financial condition and results of operations contains forward-looking statements, which are subject to risks, uncertainties and changes in condition, significance, value and effect. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those discussed in “Risk Factors” and elsewhere in this 20092010 Form 10-K and other documents we file from time to time with the Securities and Exchange Commission. (See “Cautionary Statement Regarding Forward-Looking Statements” in Part I of this 20092010 Form 10-K ).10-K).

The semiconductor industry is cyclical in nature and has historically experienced periodic downturns and upturns. Today’s leading indicators of changes in customer investment patterns may not be any more reliable than in prior years. Demand for our equipment can vary significantly from period to period as a result of various factors, including, but not limited to, economic conditions (generally and in the semiconductor industry), supply, demand, prices for semiconductors, customer capacity requirements, and our ability to develop, acquire, and market competitive products. For these and other reasons, our results of operations for fiscal years 2009, 2008, and 2007 may not necessarily be indicative of future operating results.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides a description of our results of operations and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in this 20092010 Form 10-K. MD&A consists of the following sections:

Executive Summary provides a summary of the key highlights of our results of operations and our management’s assessment of material trends and uncertainties relevant to our business

Results of Operations provides an analysis of operating results

Critical Accounting Policies and Estimates discusses accounting policies that reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements

Liquidity and Capital Resources provides an analysis of cash flows, contractual obligations and financial position

Executive Summary

We design, manufacture, market, refurbish, and service semiconductor processing equipment used in the fabrication of integrated circuits and are recognized as a major provider of such equipment to the worldwide semiconductor industry. Our customers include semiconductor memory and foundry manufacturers that make DRAM, flash memory, and logic integrated circuits for a wide range of consumer and industrial electronics. Semiconductor wafers are subjected to a complex series of process and preparation steps that result in the simultaneous creation of many individual integrated circuits. We leverage our expertise in thesethe areas of etch and single-wafer clean to develop integrated and standalone processing solutions whichthat typically benefit our customers through reduced cost, lower defect rates, enhanced yields, or faster processing time, and/or reduced cost as well as by facilitating their ability to meet more stringent performance and design standards.

The demand for semiconductor manufacturing equipmentindustry is cyclical in nature and dependent on overall worldhas historically experienced periodic and pronounced downturns and upturns. Today’s leading indicators of change in customer investment patterns may not be any more reliable than in prior years. Demand for our equipment can vary significantly from period to period as a result of various factors, including, but not limited to, economic conditions. Recent adverseconditions (both general and in the semiconductor and electronics industries), supply, demand, prices for semiconductors, customer capacity requirements, and our ability to develop, acquire, and market competitive products. For these and other reasons, our results of operations for fiscal years 2010, 2009, and 2008 may not necessarily be indicative of future operating results.

Adverse conditions in the global economy have significantlyduring 2008 and 2009 severely reduced customer demand for our products. While our abilityproducts, resulting in reduced revenue and profits throughout fiscal 2009. After three quarters of net losses, we returned to predictprofitability in the September 2009 quarter as worldwide demand for wafer fabrication equipment began to recover. Our shipments, revenue and net income increased significantly in fiscal year 2010 compared to 2009, as both industry and global economic conditions continued to improve. We expect the future is

limited, weWe believe that, over the long term, demand for our products will continue to increase as our customers’ capital expenditures increase to meet growing demand for semiconductor devices. However, historically, any improvement in demand for semiconductor manufacturing equipment occurs at an uneven pace. Accordingly, any forecasts about demand for wafer fabrication equipment in the near term are subject to uncertainty, and we could experience significant volatility in our visibility for shipment volumesquarterly results of operations over the next few quarters remains very limited and, as a result, we remain cautious about forecasting any significant resumption in equipment spending in the near term.several quarters.

The following summarizes certain key annual financial information for the periods indicated below (in thousands, except percentages and per share amounts):below:

Fiscal year 20092010 results compared with fiscal year 20082009 results reflect declines in customer demand, consistent with the deteriorationcontinued improvement in the general economic outlookglobal business environment and specifically, the downturn in the semiconductor industry, which has been impactedimproved foundry fabrication utilization and an increase in the rate of next-generation DRAM and NAND technology conversions by aleading memory companies. This comparison is in sharp contrast to the decline in consumer spending for electronic goods. Fiscal year 2009 shipments were approximately $1.0 billion and decreased 59% compared to fiscal year 2008. Fiscal year 2009 revenues decreased 55% compared to fiscal year 2008.

Gross margin as a percent of revenue was 34.8% forin fiscal year 2009 and decreased sequentially compared to fiscal year 2008, and the resulting net loss in 2009.

Throughout calendar year 2009 and the first half of calendar year 2010, we maintained our investments in new product R&D to defend our market share and win new application share. Our activities also focused on improving customer productivity in our installed base by delivering continuously improved performance and lower cost of ownership. We continued to develop the operational capability to rapidly respond to short lead-time customer orders, and believe that these activities will allow us to maintain and grow our cash position over time.

We believe that the total market for wafer-fabrication equipment will increase substantially in calendar year 2010 as compared to 2009 and currently anticipate year-on-year growth in our customer shipments as a result of both expansion of the market as a whole and increases in our market share.

While conditions in our industry have clearly improved and we currently anticipate industry and market share growth in calendar year 2010, we cannot predict the robustness or pace of any macroeconomic recovery. The electronics and semiconductor industries remain significantly linked to growth in worldwide GDP and consumer spending.

Fiscal year 2010 revenues increased 91% compared to fiscal year 2009, primarily reflecting increased system shipments driven by growth in customer demand. Fiscal year 2010 shipments were approximately $2.3 billion and increased 136% as compared to fiscal year 2009. The increase in gross margin as a percentage of 47.4%.revenue for the fiscal year 2010 compared to fiscal year 2009 was due primarily to increased revenue along with improved factory utilization and a more favorable product mix as well as a decrease in restructuring and asset impairment charges recorded in cost of goods sold.

Operating expenses in fiscal year 2010 decreased as compared to fiscal year 2009. This reductiondecrease was primarily due to customer concentration, product mix,a decrease in restructuring charges and decreased factoryasset and field utilizationgoodwill impairments from approximately $141 million in fiscal year 2009 to $21 million in fiscal year 2010 and a credit in fiscal year 2010 of approximately $39 million related to a reversal of accrued liabilities due to final settlement of matters associated with our Internal Revenue Code Section 409A expenses from the 2007 voluntary independent stock option review as compared to a resultcharge of reduced shipment volumes on declining customer demand,$3 million in fiscal year 2009. These factors were partially offset by favorable warranty performance. Includedthe restoration of employee salaries and benefits, as well as higher variable compensation expense associated with our improved profitability.

Our cash and cash equivalents, short-term investments, and restricted cash and investments balances totaled approximately $992 million as of June 27, 2010 compared to $758 million as of June 28, 2009. We generated approximately $351 million in gross margin were charges for restructuring and asset impairmentsnet cash provided by operating activities during fiscal year 2010, compared to net use of $21.0 million and $12.6cash by operating activities of $78 million in fiscal years 2009 and 2008, respectively.

Fiscal year 2009 operating expenses include goodwill impairment of $96.3 million, restructuring and asset impairments of $44.5 million, a legal judgment of $4.6 million, and $3.2 million of expenses associated with the assumption of Section 409A employee liabilities. Fiscal year 2008 operating expenses include the assumption of Section 409A employee liabilities of $44.5 million and $6.4 million of restructuring and asset impairments. We continue to invest significantly in research and development focused on leading-edge plasma etch, single-wafer clean, and other new products and technologies.

Although there are near-term pressures on business from declining customer demand, we are targeting the longer term benefits of our product development activities. These factors, along with decreasing revenues and lower gross margins noted above, contributed to the fiscal year 2009 operating loss of 25.2% compared to fiscal year 2008 operating margin of 20.6%.

In both the etch and clean markets, we believe there are opportunities for market share expansion as we have placed a significant number of joint development projects and evaluation units at our customers’ locations to enable penetration of new applications while defending and growing our existing market share.

We anticipate that while there are opportunities to add to our leading etch market share position, significant market share growth opportunities will be in single-wafer clean. We intend to increase the penetration of various applications at our existing single wafer clean customers, as well as at customers who will be introducing single wafer cleaners into their fabs.

Our key positions of strength in single-wafer clean have historically been in the back-end-of-line foundry and logic markets, and spending for new equipment in those markets has recently been low, resulting in temporarily exacerbated reductions in revenue and market share for our equipment. When new capacity is added in the foundry and logic markets, we expect our market share will increase with our current tool of record positions.

Due to the current high volume of idled capacity potentially requiring remanufacture and upgrade, we anticipate that installed base upgrade and conversion activity will represent a meaningful revenue opportunity for us over the next few years. This opportunity is particularly substantial in etch, where new technology capability is typically required to meet leading edge requirements at the next technology node.2009.

We recently established our Reliant™ System Business in order to increase our focus on and capabilities in the refurbishment and upgrades business opportunities that we expect in etch. We have also recently added clean refurbishment and upgrades capabilities in order to support our customers’ needs in respect of the installed base of single wafer cleaners. In today’s etch market, our customers have idled equipment available for refurbishment or upgrade that has temporarily reduced the total demand for new equipment purchases at the leading edge. This is particularly the case at our memory customers. Once demand accelerates and capacity utilization rises, we anticipate that our customers’ requirements for refurbishment or upgrade will diminish and most leading edge wafer start additions will be filled by new equipment.

Some older installed base tools cannot be refurbished or upgraded for reuse on the leading edge, but they can be utilized in trailing edge foundries where 300-millimeter tool sets are needed. We intend to be very active in the used 300-millimeter tool set market as it develops in the coming quarters.

In this period of reduced customer spending, we have continued to make major investments in product portfolios, as we believe they represent a significant growth opportunity when the upturn comes. We do, however, remain focused on balancing the need to invest in next generation technologies with carefully managing the cash expenditures of the Company.

Results of Operations

Shipments and Backlog

Shipments for fiscal year 2010 increased by 136% compared to fiscal year 2009, reflecting improvements in the industry and economic environment as noted above. Shipments for fiscal year 2009 decreased sequentially from fiscal year 2008 by 59% reflecting declines in customer demand, consistent with the deterioration in the general economy and, specifically, the downturn in the semiconductor industry which had been impacted by a decline in consumer spending for electronic goods.

During fiscal year 2010, 300 millimeter applications represented approximately 96% of total systems shipments and economic environment noted above.96% of total systems shipments were for applications at less than or equal to the 65 nanometer technology node. During fiscal year 2009, 300 millimeter applications represented approximately 90% of total systems shipments and 87% of total systems shipments were for applications at less than or equal to the 65 nanometer technology node. We classify systemsFiscal year 2010 shipments market segmentation for fiscal year 2009 asconsisted of: Memory at approximately 58%61%, Foundry at 29% and Integrated Device Manufacturers and Logic at 10%. Fiscal year 2009 shipments consisted of: Memory at approximately 58%, Foundry at 21%, and FoundryIntegrated Device Manufacturers and Logic at 21%.

Unshipped orders in backlog as of June 28, 200927, 2010 were approximately $391$667 million and decreasedincreased from approximately $410$391 million as of June 29, 200828, 2009 consistent with reducedimproved spending commitments from our customers. The basisOur unshipped orders backlog includes orders for recording new orders is defined in our backlog policy.systems, spares, and services. Please refer to “Backlog” in Part I Item 1, “Business” of this 2009 Form 10-Kreport for additional information ona description of our backlog policy. Our unshipped orders backlog includes orderspolicies for systems, spares,adding to and services where written customer requests have been accepted and the delivery of products or provisions of services is anticipated within the next 12 months. Our policy is to revise our backlog for order cancellations and to make adjustments to reflect, among other things, spares volume estimates and customer delivery date changes.adjusting backlog.

Revenue

		Year Ended
		June 27,             2010				June 28,             2009				June 29,             2008
Revenue (in thousands)		$	2,133,776			$	1,115,946			$	2,474,911
North America			9	%			15	%			17	%
Europe			6	%			11	%			10	%
Japan			15	%			21	%			18	%
Korea			25	%			21	%			22	%
Taiwan			33	%			19	%			20	%
Asia Pacific			12	%			13	%			13	%

The sequentialrevenue increase during fiscal year 2010 compared to fiscal year 2009 reflected improvements in the industry and economic environments as noted above. The revenue decline during fiscal year 2009 reflectscompared to fiscal year 2008 reflected adverse conditions in the global economy and semiconductor industry and economic environmentsas noted above. Our revenue levels are generally correlated to the amount of shipments and our installation and acceptance timelines. The overall Asia region continues to account for a significantpredominant portion of our revenues as a substantial amount of the worldwide capacity additions for semiconductor manufacturing continues to occur in this region.region, and the concentration of revenue within the overall Asia region increased in fiscal year 2010 as it had in fiscal year 2009. Our deferred revenue balance decreasedincreased to $207.4 million as of June 27, 2010 compared to $64.7 million as of June 28, 2009, compared to $193.6 million as of June 29, 2008, consistent with the decline inincreased customer spending levels during fiscal year 2009.2010. Our deferred revenue balance does not include shipments to Japanese customers, to whom title does not transfer

until customer acceptance. Shipments to Japanese customers are classified as inventory at cost until the time of acceptance. The anticipated future revenue value from shipments to Japanese customers was approximately $52 million as of June 27, 2010 compared to $13 million as of June 28, 2009 compared to $52 million as of June 29, 2008.2009.

Gross Margin

GrossThe increase in gross margin as a percentpercentage of revenue duringfor fiscal year 2010 compared to fiscal year 2009 was 34.8%. due primarily to improved product mix and more favorable absorption from the factories. Additionally, there was a decrease in restructuring and asset impairments included in gross margin from approximately $21 million in fiscal year 2009 to $3 million in fiscal year 2010 and a credit in fiscal year 2010 of approximately $6 million related to a reversal of accrued liabilities due to final settlement of matters associated with our Internal Revenue Code Section 409A expenses from the 2007 voluntary independent stock option review.

The decrease in gross margin as a percent of revenue for fiscal year 2009 compared with fiscal year 2008 was primarily due to decreased factory and field utilization as a result of reduced shipment volumes on declining customer demand, changes in our product mix, customer concentration, and $21.0$21 million of one-time restructuring and asset impairment expenses, partially offset by favorable warranty performance. The decrease in gross margin as a percent of revenue for fiscal year 2008 compared with fiscal year 2007 was primarily due to decreased factory utilization as a result of reduced shipment volumes, as well as customer concentration and product mix challenges, $12.6 million of one-time restructuring and asset impairment expenses related to the streamlining of our combined Clean Product Group following the acquisition of SEZ, and $6.4 million of expense associated with the assumption of the employee tax liabilities as a result of the determinations from our voluntary independent stock option review.

Research and Development

We continue to make significant investments in R&D focused on plasma etch, single wafersingle-wafer clean and other semiconductor manufacturing products. The increase in R&D spending during fiscal year 2010 compared to fiscal year 2009 was due primarily to higher other employee compensation, salaries, and benefits of $25 million, mainly as a result of stronger company profitably, and higher outside services and supplies of $5 million related to customer penetration activities.

Approximately 24% and 79% of fiscal years 2010 and 2009 systems revenues, respectively, were derived from products introduced over the previous two years, which is reflective of our continued investment in new products. products and technologies.

The decline in R&D spending during fiscal year 2009 compared to fiscal year 2008, includesincluded approximately $8 million of lower salary and benefits related to cost savings measures, $11 million in lower other employee compensation on lower profits and a $26 million decrease in outside services and supplies, partially offset by $5 million in depreciation and amortization mainly related to the inclusion of SEZ. Approximately 91% and 74% of fiscal years 2009 and 2008 systems revenues, respectively, were derived from products introduced over the previous two years, which is reflective of our continued investment in new products and technologies.

The growth in R&D spending during fiscal year 2008 compared to fiscal year 2007 included approximately $22 million in salary and benefits costs for increases in headcount and employee base compensation, $9 million in engineering material supplies and outside services targeting etch and new product growth objectives, the inclusionacquisition of SEZ operations for approximately four months of fiscal year 2008, and a $3 million decrease in incentive-based compensation driven by reduced profit levels.March 2008.

Selling, General and Administrative

The growth in SG&A expense during fiscal year 2010 compared to fiscal year 2009 was driven by increases of approximately $26 million in other employee compensation as a result of increased company profitability offset by a $9 million decline in depreciation, rent and utilities expenses primarily as a result of restructuring activities, and $7 million due to a non-recurring accounts receivable reserve recorded for specific distressed customers in fiscal year 2009.

The decrease in SG&A expenses during fiscal year 2009 compared to fiscal year 2008 was driven by reductionsa reduction of approximately $34 million in other employee compensation as a result of lower company profitability, anda reduction of $7 million in salaries and benefits related to cost savings measures, a reduction of $19 million in costcosts incurred as a result of the voluntary independent stock option reviewsreview that was completed in fiscal year 2008, and a reduction of $5 million in outside services and supplies, partially offset by a $7 million charge to increase the reserves against our receivables balance for distressed customers.

The increase in SG&A expenses during fiscal year 2008 compared to fiscal year 2007 was driven by increases of approximately $24 million in salary and benefits costs for increases in headcount, $19 million in legal and accounting cost incurred as a result of the voluntary stock option review, the inclusion of SEZ operations for approximately four months, and $3 million in equity-based compensation partially offset by a decrease of $5 million in incentive-based compensation triggered by lower profit levels.

Goodwill Impairment

ADuring fiscal year 2009, a combination of factors, including the current economic environment, a sustained decline in our market valuation, and a decline in our operating results were indicators ofindicated possible impairment of our goodwill. We performed an impairment analysis and concluded in accordance with Statement of Financial Accounting Standards Number 142, “Goodwill and Other Intangible Assets”, that the fair value of our Clean Product Group hashad been reduced below its carrying value. As a result, we recorded a non-cash goodwill impairment charge of approximately $96.3 million during fiscal year 2009. No indicators of impairment resulted from our fiscal 2010 assessment.

The calculation of the goodwill impairment charge is based on estimates of future operating results. If our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of our Clean Product Group,businesses, an additional impairment analysis may be required which may result in further impairment charges.

Restructuring and Asset Impairments

During the Junefiscal year 2008, quarter, we incurred expenses for restructuring and asset impairment charges of $19.0 million related to the integration of SEZ and overall streamlining of our combined Clean Product Group (“June 2008 Plan”). We incurred additional expenses of $19.0 million under the June 2008 Plan during the quarter ended September 28, 2008.fiscal year 2009. The charges during the Junefiscal year 2008 quarter included severance and related benefits costs, excess facilities-related costs and certain asset impairments associated with our initial product line integration road maps. The charges during the September 2008 quarterfiscal year 2009 primarily included severance and related benefits costs and certain asset impairments associated with our product line integration road maps. During fiscal year 2010, we recorded a recovery of $2.2 million related primarily to inventory previously restructured in connection with our initial product line integration road maps.

During the December 2008 quarter,fiscal year 2009, we incurred expenses of $17.8 million for restructuring and asset impairment charges designed to better align our cost structure with our business opportunities in consideration of market and economic uncertainties (“December 2008 Plan”). The charges during the December 2008 quarter consisted primarily of severance and related benefits costs as well as certain facilities related costs and asset impairments.

During the Marchfiscal year 2009, quarter, we also incurred expenses of $28.6 million for restructuring and asset impairment charges designed to align our cost structure with our outlook for the current economic environment and future business opportunities (“March 2009 Plan”). The charges during the Marchfiscal year 2009 quarter consisted primarily of severance and related benefits costs as well as certain facilities related costs and asset impairments. WeThe Company incurred additional expenses of $20.9 million during fiscal 2010 under the March 2009 Plan duringconsisting primarily of certain facilities charges related to the quarter ended June 28, 2009. The charges during the June 2009 quarter consisted primarilyreassessment of future obligations for previously restructured leases, severance and related benefits costs, as well as certain facilities related costs and asset impairments.

PriorIn addition to the end of each quarter noted above, we initiated the announcedcharges incurred under specific restructuring activities and management, with the proper level of authority, approved specific actions under the June 2008 Plan, the December 2008 Plan, and the March 2009 Plan. Severance packages to affected employees were communicated in enough detail such that the employees could determine their type and amount of benefit. The termination of the affected employees occurred as soon as practical after the restructuring plans, were announced. The amount of remaining future lease payments for facilities we ceased to use and included in the restructuring charges is based on management’s estimates using known prevailing real estate market conditions at that time based, in part, on the opinions of independent real estate experts. Leasehold improvements relating to the vacated buildings were written off, as these items will have no future economic benefit to the Company and have been abandoned.

We distinguish regular operating cost management activities from restructuring activities. Accounting for restructuring activities requires an evaluation of formally committed and approved plans. Restructuring activities have comparatively greater strategic significance and materiality and may involve exit activities, whereas regular cost containment activities are more tactical in nature and are rarely characterized by formal and integrated action plans or exiting a particular product, facility, or service.

We recorded net restructuring charges and asset impairments during fiscal year 20092010 we incurred $6.0 million of approximately $65.5 million, consisting of severanceasset impairment charges related to production efficiencies and benefits for involuntarily terminated employees of $52.0 million, charges for the write-off of certain assets totaling $10.2 million, and charges for the present value of remaining lease payments, net of sublease income, on vacated facilities of $3.3 million. Of the total $65.5 millionshifts in charges, $21.0 million was recorded in cost of goods sold and $44.5 million was recorded in operating expenses in our fiscal year 2009 consolidated statement of operations.product demands.

We recorded netFor further details related to restructuring charges and asset impairments during fiscal year 2008 of approximately $19.0 million, consisting of severance and benefits for involuntarily terminated employees of $5.5 million, charges for the present value of remaining lease payments, net of sublease income, on vacated facilities of $0.9 million, the write-off of related fixed assets of $1.9 million, and asset impairments related to initial product line integration road maps of $10.7 million. Of the total $19.0 million in charges, $12.6 million was recorded in cost of goods sold and $6.4 million was recorded in operating expenses in our fiscal year 2008 consolidated statement of operations.

As a resultimpairment, see Note 18 of the June 2008, September 2008, December 2008, March 2009, and June 2009 quarters’ restructuring activities, we expect annual savings in total expenses, relativeNotes to the cost structure immediately preceding the activities, of approximately $179 million to $189 million. The estimated savings from the June 2008, December 2008, and March 2009 Plans’ discrete actions are primarily related to lower employee payroll, facilities, and depreciation expenses. Actual savings may vary from these forecasts, depending upon future events and circumstances.Consolidated Financial Statements.

Below is a table summarizing activity relating to the June 2008 Plan:

Below is a table summarizing activity relating to the December 2008 Plan:

Below is a table summarizing activity relating to the March 2009 Plan: