Applied MaterialsAMAT

Morningstar Rating

Stock Research and Analysis

by Andy Ng

Applied Materials is the behemoth of the semiconductor equipment industry, with unmatched scale and a broad product portfolio. The firm has steadily been establishing its solar equipment business in an effort to drive growth. However, severe cyclical Read more

Bulls Say

Applied Materials is the chip equipment industry's standard-bearer. The firm has the broadest product portfolio and offers customers the closest thing to a one-stop shop.

Applied has been streamlining operations to lower its cost structure. For example, the use of common platforms has reduced costs and lead times.

Applied Global Services, the firm's service business, is expected to be an opportunity for significant growth. Applied has less than 5% share in the $40 billion market and will be able to leverage its scale and vast presence to quickly expand this business.

Applied has benefited from the rising popularity of flat-panel displays, which share manufacturing technologies with those used in semiconductor fabrication. These displays have been a growth driver for the firm.

Not only has the cost of a leading-edge fabrication plant doubled to more than $2.5 billion, but Applied estimates that chip equipment now accounts for 74% of the total cost, up from 65% in previous-generation plants. Read more

Bears Say

To maintain its market share, Applied must compete successfully in various segments with numerous competitors that only specialize in their submarkets. Therefore, Applied may not have the best-of-breed product in every segment in which it competes.

Applied is exposed to the deeply cyclical semiconductor industry, which means that its financial results can fluctuate considerably.

The chip equipment business is challenging, and Applied has not always been successful when entering new segments.

Applied may have to sacrifice margins to gain share in new markets such as flat-panel display equipment, where Japanese firm Ulvac is already a dominant and entrenched competitor. Read more

Strategy

Applied's strategy is to be the comprehensive provider of semiconductor manufacturing equipment. Its vast size and broad product portfolio provide a one-stop shop for chipmakers' manufacturing tool needs. Read more

Management

Michael Splinter took over as president and CEO in April 2003 after being recruited from Intel INTC, one of Applied's largest customers. Splinter served in key roles at Intel during his 20 years there and was executive vice president before taking the Read more

Profile

Applied Materials is the world's largest supplier of semiconductor manufacturing equipment. The firm's systems are used in the chemical vapor deposition, physical vapor Read more

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