At its 2021 Investor Meeting held today, Applied Materials unveiled
plans to grow the company’s revenue, earnings and free cash flow by
enabling customers to accelerate improvements in chip power,
performance, area, cost and time to market (PPACt). Applied also
announced plans to generate 70 percent of future services and parts
revenue through subscription-like long-term agreements.
Applied outlined five major inflections that are fueling secular
growth and the need for innovation as the company drives its
longer-term strategy. At a macro level, the digital transformation
of the global economy is accelerating. In computing, AI workloads
are fueling the need for new architectures based on entirely new
types of silicon. Within chipmaking, traditional Moore's Law 2D
scaling is slowing, creating the need for a “new playbook” for
PPACt that enables continued chip- and system-level improvements.
Another inflection is the need to grow the industry in a more
sustainable and equitable manner. Finally, customers are seeking
not just better products, but also better outcomes, resulting in a
business model shift to solutions delivered via subscription
models.
“The core of our strategy is to be the PPACt enablement
company,” said Gary Dickerson, president and CEO of Applied
Materials. “Our broad portfolio and ability to combine technologies
in ways no other company can is accelerating value creation for our
customers and puts Applied in a leadership position to advance the
state of chipmaking for years to come.”
Applied has aligned its strategy to meet the increasingly
complex needs of its customers, many of whom participated in the
event to discuss trends in computing, semiconductor technology,
services and ESG (environmental, social and governance).
Applied summarized the evolution of its Semiconductor Systems
business. The portfolio is expanding from unit process equipment
that performs a single step to include co-optimized systems with
pre-proven combinations along with Integrated Materials Solutions
where multiple process technologies are combined under vacuum to
create novel materials and chip structures that are not otherwise
possible.
“It has been a great journey to walk with Applied Materials over
the past 30 some years,” said Dr. Mark Liu, chairman of TSMC.
“Beyond 3nm, to sustain the rate of improvement, and I believe we
will, we need to work together closer than ever before. We need to
innovate in new transistor structures, in new materials, in new
system architecture, and in new 3D integration. It is an exciting
time. We look forward to working with Applied Materials to discover
the future semiconductor innovations.”
The company also presented case studies of Applied AIX
(Actionable Insight Accelerator) – a new platform that enables
semiconductor engineers to use the power of big data and AI to
accelerate the discovery, development and commercial deployment of
new chip technologies.
“It’s hard to simply put a number on it, but we all know that
improving the process margin is the key to enable technology node
migration,” said Seok-Hee Lee, CEO and president of SK hynix. “In
many cases, it not only requires the adoption of advanced new
technologies in a number of areas including materials, process and
equipment, but it also requires all those factors to be optimized
for the integration of multiple process steps. Each change in
process variables affects others at multiple levels, so
accelerating the cycle of learning to come up with the optimal
solution is crucial. If Applied Materials develops new process
technologies which are already co-optimized with adjacent process
steps, it will help reduce development complexity for chipmakers. I
think our development activities can move at a fast pace if we work
together to harness the power of sensors, big data and AI to map
and predict the effect of many process variables.”
As electronic products become smarter the silicon content per
device is increasing, including specialty semiconductors based on
mature process nodes. Applied is addressing this growing demand
with its ICAPS group (IoT, Communications, Automotive, Power and
Sensors). The company is now generating more than $3 billion per
year in the ICAPS business.
“GF is focused on the largest, most pervasive segments of the
semiconductor industry and where technology has the broadest
impact,” said Tom Caulfield, CEO of GF. “Our industry began a
fundamental shift 15 years ago with the emergence of the smart
phone, which brought new features including image sensors, battery
management and secure pay. This also led to the Internet of
Things that’s now moving from all things connected to all things
intelligent. Gary Dickerson and team saw this trend early on and
created a group dedicated to innovation on adding features to
semiconductor products on all nodes. Today at GF, we leverage much
of Applied’s capabilities for the technologies we innovate and
manufacture.”
To support the sustainable growth of the semiconductor industry,
Applied underscored its ESG commitments with initiatives that are
being driven within the company and in collaboration with
suppliers, customers and the computing industry.
“Micron is highly committed to reducing our environmental
impact,” said Sanjay Mehrotra, president and CEO of Micron. “We
appreciate how Applied Materials has embraced similar goals and
made strong commitments to increase the eco-efficiency of its
manufacturing systems.”
2024 Financial Model
In the base case assumptions of its 2024 financial model,
Applied plans to grow revenue by over 55 percent and non-GAAP EPS
by more than 100 percent as compared to fiscal 2020. It plans to
increase Semiconductor Systems revenue by over 60 percent. The
company announced a commitment to return between 80 and 100 percent
of free cash flow to shareholders.
Applied plans to grow its services business by over 45 percent
as it increasingly moves beyond transactional parts and maintenance
to comprehensive services delivered via subscription to give
customers better outcomes from lab to fab. Key to the growth
strategy is expanding the use of digital services and remote
capabilities that use sensors, analytics and AI.
In its Display business, Applied expects to benefit from the
next wave of OLED growth as the technology becomes more pervasive
in smartphones, notebook PCs, tablets and TVs. Applied plans to
increase annual operating margin in its Display business to around
$600 million dollars on average over the four years ending
2024.
“The growth momentum in our reporting segments is the foundation
of our new target financial model,” said Dan Durn, senior vice
president and CFO of Applied Materials. “Combined with our focus on
execution, discipline and resulting margin improvements, we plan to
drive a high-ROI model that generates strong free cash flow and
attractive shareholder returns.”
A replay of the Applied Materials Investor Meeting, along with
the presentation and related materials, are available on the
company’s website at
http://www.appliedmaterials.com/company/investor-relations.
Non-GAAP and Other Financial MeasuresFree cash
flow is defined as operating cash flow, less net capital
expenditures. Reconciliations of non-GAAP to GAAP measures are
contained in the 2021 Investor Meeting presentation, which is
available on the investor page of the company’s website. The
non-GAAP adjusted EPS and gross and operating margin targets assume
non-GAAP adjustments as applicable for future periods, which we are
unable to predict without unreasonable efforts due to their
inherent uncertainty. Management uses non-GAAP adjusted financial
measures to evaluate the company's operating and financial
performance and for planning purposes. Applied believes these
measures enhance investors’ ability to review the company’s
business from the same perspective as the company’s management, and
facilitate comparisons between periods on a consistent basis. There
are limitations in using non-GAAP financial measures because they
are not prepared in accordance with GAAP and may differ from
non-GAAP methods of accounting and reporting used by other
companies.
Forward-Looking Statements This 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 through fiscal 2024, and other
statements that are not historical facts. These statements and
their underlying assumptions are subject to risks and uncertainties
and are not guarantees of future performance. Factors that could
cause actual results to differ materially from those expressed or
implied by such statements include, without limitation: the level
of demand for our products; global economic and industry
conditions; the effects of regional or global health epidemics,
including the severity and duration of the ongoing COVID-19
pandemic; global trade issues and changes in trade and export
license policies, including the recent rules and interpretations
promulgated by the U.S. Department of Commerce expanding export
license requirements for certain products sold to certain entities
in China; consumer demand for electronic products; the demand for
semiconductors; customers’ technology and capacity requirements;
the introduction of new and innovative technologies, and the timing
of technology transitions; our ability to develop, deliver and
support new products and technologies; the concentrated nature of
our customer base; acquisitions, investments and divestitures;
changes in income tax laws; our ability to expand our current
markets, increase market share and develop new markets; market
acceptance of existing and newly developed products; our ability to
obtain and protect intellectual property rights in key
technologies; our ability to achieve the objectives of operational
and strategic initiatives, align our resources and cost structure
with business conditions, and attract, motivate and retain key
employees; the variability of operating expenses and results among
products and segments, and our ability to accurately forecast
future results, market conditions, customer requirements and
business needs; our ability to ensure compliance with applicable
law, rules and regulations; and other risks and uncertainties
described in our SEC filings, including our recent Forms 10-Q and
8-K. All forward-looking statements are based on management’s
current estimates, projections and assumptions, and we assume no
obligation to update them.
About Applied MaterialsApplied Materials,
Inc. (Nasdaq: AMAT) is the leader in materials engineering
solutions used to produce virtually every new chip and advanced
display in the world. Our expertise in modifying materials at
atomic levels and on an industrial scale enables customers to
transform possibilities into reality. At Applied Materials,
our innovations make possible the technology shaping the future.
Learn more at www.appliedmaterials.com.
Contact:Ricky Gradwohl (editorial/media)
408.235.4676Michael Sullivan (financial community) 408.986.7977
Photos accompanying this announcement are available at:
https://www.globenewswire.com/NewsRoom/AttachmentNg/81aef57e-f640-4c78-93d7-e4839b652b0b
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