LAM RESEARCH CORP 10-Q

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk For financial market risks related to changes in interest rates, marketable equity security prices, and foreign currency exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our 2021 Form 10-K. Other than as noted below, our exposure related to market risk has not changed materially since June 27, 2021. All of the potential changes noted below are based on sensitivity analysis performed on our financial position as of September 26, 2021. Actual results may differ materially. Fixed Income Securities Our investments in various interest earning securities carry a degree of market risk for changes in interest rates. At any time, a sharp rise in interest rates could have a material adverse impact on the fair value of our fixed income investment portfolio. Conversely, declines in interest rates could have a material adverse impact on interest income for our investment portfolio. We target to maintain a conservative investment policy, which focuses on the safety and preservation of our capital by limiting default risk, market risk, reinvestment risk, and concentration risk. The following table presents the hypothetical fair values of fixed income securities that would result from selected potential decreases and increases in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (“BPS”), 100 BPS, and 150 BPS with a minimum interest rate of zero BPS. The hypothetical fair values as of September 26, 2021, were as follows: Valuation of Securities Given an Interest Rate Decrease of X Basis Points Fair Value as of September 26, 2021 Valuation of Securities Given an Interest Rate Increase of X Basis Points (150 BPS) (100 BPS) (50 BPS) 0.00% 50 BPS 100 BPS 150 BPS (in thousands) U.S. Treasury and agencies $ 1,855 $ 1,855 $ 1,855 $ 1,849 $ 1,835 $ 1,821 $ 1,807 Foreign government bonds 15,169 15,169 15,169 15,133 15,079 15,025 14,971 Corporate notes and bonds 538,813 538,771 538,501 536,383 533,707 531,031 528,355 Mortgage backed securities - commercial 16,289 16,287 16,228 16,107 15,985 15,863 15,741 Total $ 572,126 $ 572,082 $ 571,753 $ 569,472 $ 566,606 $ 563,740 $ 560,874 We mitigate default risk by investing in high credit quality securities and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to achieve portfolio liquidity and maintain a prudent amount of diversification.