Lam Research Chief Executive Officer Steve Newberry used natural-disaster metaphors to describe the impact of the recession on his company. Lam, a provider of chipmaking equipment, suffered "a full-blown Category 5 hurricane of unprecedented speed and force," Newberry said during a conference call discussing results for the December quarter of 2008. The demand drop slashed sales 27 percent that calendar year.
The storm has passed for Fremont (Calif.)-based Lam (LRCX). Sales have more than doubled in the past four quarters as customers including Samsung Electronics and Taiwan Semiconductor Manufacturing (TSM) snapped up Lam gear to crank out the parts used in Apple's (AAPL) iPhone and iPad tablet computer and other consumer electronics. "The great news is, we supply Apple's supplier," says Chief Financial Officer Ernest Maddock.
Lam finished at No. 4 in Businessweek.com's list of Tech Hot Growth Companies, a compilation of the fastest-growing technology providers, ranked by several metrics including sales growth, return on invested capital, and the change in number of employees. Our interactive table has the complete list of 50 companies and a more detailed explanation of our methodology. Among the leaders were companies that make the equipment used to produce the chips and other components inside the iPad, Amazon.com's (AMZN) Kindle, Microsoft's (MSFT) Kinect, and a host of other popular devices. The companies that produce the equipment to etch circuits—as well as the chipmakers themselves—typically see sales pick up at the very beginning of a recovery. "The first wave of growth is going through," says Andrew Bartels, a vice-president at consultant Forrester Research (FORR).
China's emergence as a technology powerhouse was also reflected in the list. Online gaming company Tencent Holdings ranked first, the first time a Chinese company has held that spot, while No. 3 was search engine Baidu. Notably absent from the top 50 are tech bellwethers Microsoft, Google (GOOG), and Intel. Apple ranked second.
Other makers of semiconductor equipment to make the list include Aixtron (AIXA) (No. 5), Varian Semiconductor Equipment Associates (VSEA) (No. 11), and ASML Holding (ASML) (No. 17). This group had collective sales growth of 137 percent in the 12 months that ended mid-November, the fastest among all the subsectors in the top 50 list, according to Bloomberg data.
Chipmakers on the list had the second-fastest sales growth in the period, at 106 percent. The semiconductor group includes No. 29 Elpida Memory and No. 30 Linear Technology (LLTC). Some chipmakers benefited from a gain in memory prices. The price per megabyte of DRAM memory, used for temporary data storage by computing devices, rose 16 percent this year, according to Shane Rau, a research director at IDC.
Linear's growth was propelled by a surge in demand for car and telecommunications equipment. After the 2009 government bailout of General Motors (GM), and a recovery in U.S. car demand, Linear started shipping more parts for in-car navigation and systems that help cars avoid collisions and lane departure, says Robert Swanson, executive chairman of Linear. Another boon came from wireless carriers that bought products boasting Linear parts to expand network capacity and meet rising demand for mobile video and other data services. "This recovery happened to be stronger than anybody thought," Swanson says.
One of the biggest beneficiaries of the recovery has been Apple. In less than a year on the market, the iPad is already eating into global demand for traditional PCs. "We do not buy desktop computers anymore," says Kyle Parker, an owner of a Chicago-based marketing business. He expects to buy some iPads instead of laptops for his 14-person company in 2011.
Demand for software to run on that new hardware has begun rising as well, and might show even stronger growth next year, according to Forrester. Software AG (SOW.GR), Oracle (ORCL), and VMware (VMW) all made the top 50. Services such as IT outsourcing and consulting are enjoying a growth revival, too. Consultants and outsourcers Accenture (ACN) and India's Tata Consultancy Services (TCS.IN), Infosys Technologies (INFY), and Wipro (WIT) all made the top 50. "In 2011, most major segments of the industry will continue to see relatively strong growth," says Maddock, of Lam. "We are at the base of that pyramid. Any direction the industry goes, it's going to benefit us."