Applied Materials: Strategic Moves Amid Market Volatility

Recent Financial Performance and Earnings

Applied Materials reported strong financial performance in the second quarter of 2024, with revenue and earnings at the high end of their guidance. They project third-quarter net revenue to be approximately $6.65 billion, plus or minus $400 million, indicating continued robust performance.

"Gary Dickerson: Thank you, Mike. With second quarter revenue and earnings towards the high-end of our guided range, Applied Materials continues to deliver strong performance in 2024, and we are in a great position to benefit from secular growth trends over the longer-term." --- (AMAT, earning call, 2024/Q2)

""Applied Materials continues to deliver strong performance in 2024, with fiscal second quarter revenue and earnings towards the high end of our guided range," said Gary Dickerson, President and CEO." --- (AMAT, press release, 2024/05/16)

"See also 'Use of Non-GAAP Financial Measures' section. Business Outlook In the third quarter of fiscal 2024, Applied expects net revenue to be approximately $6.65 billion, plus or minus $400 million." --- (AMAT, press release, 2024/05/16)

"While we expect to continue to pay dividends in the future, the declaration of any future dividends or dividends at any particular rate is subject to the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Board of Directors that dividends are in the best interests of our stockholders." --- (AMAT, press release, 2024/06/13)

"Forward-Looking Statement This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook for the third quarter of fiscal 2024 and beyond, and other statements that are not historical facts." --- (AMAT, press release, 2024/05/16)

Market Positioning and Competitive Landscape

Applied Materials is strategically positioning itself by collaborating with customers on future technology generations, while competitors like KLA and Lam Research emphasize unique positioning and technological advancements. Teradyne and ASML's focus on market share capture and business momentum further illustrate the competitive landscape.

"So that is really what shapes the competitive landscape in the industry. And it's very, very clear, we're working with our customers for technology generations out into the future." --- (AMAT, earning call, 2024/Q2)

"The demand is there. And from a competitive standpoint, we're uniquely positioned to do that." --- (KLAC, earning call, 2024/Q3)

"So we're going to take those opportunities and we're going to make the investments to try to capture them while that share is available versus trying to move it after the cement sets. The one thing I will say is that the focus of our acceleration is really in our test business that we see that we have." --- (TER, earning call, 2024/Q2)

"In this environment, the winners will be the equipment companies that can accelerate the pace of technology advancement while at the same time deliver innovations that disrupt the rising cost and complexity of semiconductor fabrication." --- (LRCX, earning call, 2024/Q3)

"So all-in-all, good momentum on High NA and progressing well against customer expectation. We expect our non-EUV business to be down in 2024, primarily driven by lower emerging system sales relative to 2023." --- (ASML, earning call, 2024/Q2)

Innovation and R&D Initiatives

Applied Materials is intensifying its focus on materials-driven innovation and energy-efficient performance in semiconductor technology. Significant investments in R&D, including increased headcount for product development, underscore their commitment to advancing process technology and supporting sustainable growth in AI computing.

"I think the contributions from companies like Applied Materials are more important than ever before as materials driven innovation moves to the forefront of process technology development as physical limits get closer and closer." --- (AMAT, conference, 2024/05/30)

"You know, we're spending substantial amounts in R and D to keep moving the technology forward." --- (LRCX, conference, 2024/05/21)

""The semiconductor industry must deliver dramatic improvements in energy-efficient performance to enable sustainable growth in AI computing," said Dr. Y.J." --- (AMAT, press release, 2024/07/08)

"Such forward-looking statements relate to, but are not limited to: our outlook and guidance for future financial results, including revenue, gross margin, operating income and net income; our investment in R&D and our operations; our competitive positioning and potential to outperform within our industry; and our expectations for the strength of future wafer fabrication equipment spending." --- (LRCX, press release, 2024/07/31)

"The changes in RD&E expenses during the three and six months ended April 28, 2024 compared to the same periods in the prior year were primarily due to additional headcount to support our ongoing investments in product development initiatives, consistent with our growth strategy, offset by lower depreciation expense as a result of changes in certain assets’ useful lives effective as of the beginning of fiscal 2024 and lower impairment of fixed assets in fiscal 2024." --- (AMAT, sec filing, 2024/Q2)

Supply Chain Management and Resilience

Applied Materials has strategically enhanced its supply chain resilience by investing in capacity, building a global manufacturing footprint, and addressing new material topics with suppliers, ensuring scalability and mitigating potential disruptions from export license issues.

"I think as we come into this next up cycle, we feel very well positioned relative to all the things you just talked about the physical capacity, the trained workforce, the supply chain has been built up and made more resilient since the last big upturn in the industry where we saw lots of constraints." --- (LRCX, earning call, 2024/Q3)

"So I think we're in a pretty good place. I mean, it's one of the things that we did in the last cycle was in preparation for this plan that we're pretty convicted about was making sure we had the investments in our supply chain to deliver the capacity." --- (KLAC, conference, 2024/06/06)

"And if we identify new material topics out of our assessment, of course, this will be also transferred through this program to all our suppliers. So this is a bit the way we are working with the supply chain on that." --- (ASML, event transcript, 2024/04/24)

"And I think that we've built now a global footprint for our manufacturing supply chain that makes us significantly more resilient, allows us to scale much faster to the demand that we see coming in future and also improve our gross margin looking forward." --- (LRCX, conference, 2024/05/29)

"The possible negative effects on our future business of export licenses not being granted could be material and could disrupt our supply chain and product shipment, and impair our ability to complete product development in a timely manner, or our ability to support existing customers of covered products or supply customers of covered products outside the impacted regions, and may require us to transition certain operations out of one or more of the identified countries." --- (KLAC, sec filing, 2024/Q4)

Customer Relationships and Partnerships

Applied Materials maintains strong, collaborative relationships with its customers, working closely on new process nodes and engaging deeply on technological inflections. Ongoing conversations with large customers provide visibility and help build potential backlogs, ensuring strategic alignment amid market volatility.

"Again, if you are our customer and you're planning a new process node and you have multiple device customers that are designing on your node, this is something that you all work on for several years." --- (AMAT, conference, 2024/06/06)

"Your question, please. CJ Muse: Yeah, thank you for taking the question. I guess we'd love for you to talk about your visibility today and how your ongoing conversations are going with your large customers as it pertains both to your outlook for kind of second half versus first half on a calendar basis, as well as building that potential backlog into calendar '25." --- (AMAT, earning call, 2024/Q2)

"And we're deeply engaged with customers on that inflection. We're leading in wiring overall." --- (AMAT, earning call, 2024/2-29)

Market Expansion and Growth Opportunities

Applied Materials is poised for significant growth, driven by advancements in gate-all-around and advanced packaging technologies, with potential to double over time. The sustainability of fab construction and capacity additions, along with strategic acquisitions like Orbotech, further bolster their market expansion and growth opportunities.

"So, $2.5 billion of incremental year-over-year growth from gate-all-around, it sounds like you said the advanced packaging had the opportunity to double again over time, so that should be growing." --- (AMAT, earning call, 2024/Q2)

"Everybody sees that same end market opportunity in semis. And so I think at this point, there's sustainability of fab construction and capacity addition." --- (LRCX, conference, 2024/05/29)

"point that what we said at the Capital Markets Day in 2022. Capital Markets Day in 2022, we said we believe every single year between ‘22 and 2030, we believe 380k wafer starts and capacity needs to be added to mature." --- (ASML, earning call, 2024/Q1)

"Bren talked about the growth from last year, and it was a big driver for going back in time for the Orbotech acquisition was our belief that packaging opportunity was going to continue to grow." --- (KLAC, earning call, 2024/Q3)

"The timing of customer investment in manufacturing equipment is also affected by the timing of next-generation process development and the timing of capacity expansion to meet end-market demand." --- (AMAT, sec filing, 2024/Q2)