Applied Materials is one of the world's largest suppliers of
fabrication equipment to semiconductor, LCD and solar PV cell
manufacturers. Applied's second quarter earnings were in-line with
the Zacks Consensus Estimate and guidance was also in line with
expectations. The possibility of Tokyo Electron synergies,
proliferation of mobile devices, strength in mobility platforms, TV
capacity builds, better utilization of resources and the
recently-announced merger with Tokyo Electron are positives. Of
course, the high cost structure and customer concentration are
things to be cautious about. We therefore have a Neutral
recommendation on Applied Materials shares.
Applied Materials, Inc. (AMAT) is one of the world's largest
suppliers of equipment for the fabrication of semiconductor, flat
panel liquid crystal displays (LCDs), and solar photovoltaic (PV)
cells and modules. The company also offers deployment and support
services related to the equipment supplied.
In fiscal year 2013, Applied reported results in four segments
Silicon, Applied Global Services, Display, and Energy and
Applied Materials' Silicon segment offers equipment for
front-end operations in the semiconductor manufacturing process.
Front-end processes involve the deposition or implantation of
multiple thin layers of electronically conductive, semiconductive
and insulating materials onto and within a silicon wafer with the
help of photomasks (reticles) to give multiple copies of integrated
Specific processes enabled by Applied's equipment include atomic
layer deposition (ALD), chemical vapor deposition (CVD), physical
vapor deposition (PVD), etching (cleaning off the extra photoresist
as exposed by the mask), rapid thermal processing (RTP), chemical
mechanical planarization (CMP), wafer metrology and inspection. The
company also makes equipment for the etching, measurement and
inspection of photomasks.
With over 33,000 systems installed, the Applied Global Services
segment goes a long way to ensure customer satisfaction and
support. There are primarily three kinds of services offered. The
first, fab and equipment services, is with respect to facilitation
of processes at fabs using Applied's equipment. Offerings under
this category include spares, the ExpertConnect remote diagnostics
tool for maintaining and optimizing customers' manufacturing
operations Applied FabVantage Consulting Services delivered through
teams providing technology to identify and solve manufacturing
challenges and TechEdge advanced service services to address
manufacturing issues like excursion control and predictive
maintenance. Legacy systems essentially extend the life of 200mm
equipment through system enhancements and certification of
refurbished equipment and also include fab transition services.
Automation systems are proprietary software for factory-level or
tool-level control and automation.
Applied has developed technologies for significantly
larger-sized wafers made of materials other than silicon. This has
helped it expand its portfolio into equipment for thin film
transistor (TFT) LCDs (made from glass) and OLED, which are used in
smartphones, TVs and other consumer electronic devices. The company
operates this business under the Display segment.
The Energy and Environmental Solutions segment primarily
consists of the solar product line. The company ventured into this
business in 2006 and currently offers equipment for manufacturing
both wafer-based crystalline silicon (c-Si) and glass-based thin
film used in the solar PV cell fabrication process. To this,
Applied added the SunFab Thin Film product line for manufacturing
very large glass substrates that could be used by solar farms,
utilities and building-integrated solar PV installations. In the
third quarter of 2010, market conditions prompted the company to
discontinue sales of its fully-integrated Sunfab product to new
Applied uses a direct sales force for the distribution of its
products. The company's significant presence in Asia is
attributable to the fact that a large chunk of semiconductor
manufacturing has shifted to the region. Being a leading producer
of specialized equipment, most of the competition comes from other
large equipment makers, such as KLA-Tencor Corporation and Lam
Applied Materials, Inc. (AMAT): Read the Full
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