Over the last several years chip equipment supplier Lam Research (NASDAQ:LRCX) has benefited greatly from spending by manufacturers of memory chips. Its latest earnings results for fiscal Q3, released yesterday, showed more of the same.

The year-over-year growth rates are impressive from the top to the bottom of the income statement. Revenues grew 49% from last year to $650 million, operating income increased 72% to $189 million, and net income soared by 92% to $165 million. Despite a strong balance sheet and an enviable growth rate, Lam has a P/E around 13. It reminds me a bit of the homebuilder stocks before the housing downturn.

Business was especially strong from DRAM customers. Memory customers (meaning DRAM and NAND Flash) accounted for 78% of Lam's shipments during the quarter, with DRAM accounting for three-fourths of that amount. Shipments turn into revenue with a lag of one to five months, so expect another strong showing next quarter.

Lam has done a great job of increasing its share of its core tech market -- it claims that its market share sits around 45%. Furthermore, its share is higher at the leading-edge 65 nanometer node than it was at 90 nanometers. Lam is also expanding into adjacent markets, which should give it the opportunity to capture a greater fraction of total chip equipment spending.

The big question mark is, what will the memory customers do? NAND Flash prices plummeted by around 50% during the first three months of this year due to demand levels that were too weak to soak up the supply. A 50% drop is normally what NAND Flash manufacturers like SanDisk (NASDAQ:SNDK) and Samsung expect for an entire year. As a result some of the Asian manufacturers, at least, have pulled back on the reins a bit.

DRAM pricing has also been weak, which is part of the reason that Micron (NYSE:MU) lost money in its latest quarter. If demand doesn't pick up sufficiently it wouldn't be surprising to see DRAM makers close their wallets.

Despite the risks from the memory segment, I think that Lam is worth following. Memory manufacturers will certainly have to continue expanding their capacity over the next few years, even though they may be forced to take a breather at some point. If a slowdown occurs I'll definitely be checking in on Lam.

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Fool contributor Dan Bloom has no financial interest in any company mentioned in this column. He welcomes your comments.