Applied Materials Sees Rising Orders for Displays, Solar
David Lammers, News Editor -- Semiconductor International, 2/13/2008 7:12:00 AM
Maintaining confidence despite market headwinds, Applied Materials Inc. (Santa Clara, Calif.) executives presented first quarter financial results that were buoyed by sharply higher sales into the flat panel display (FPD) industry, but dragged down by cutbacks by DRAM manufacturers.
For the first quarter, revenues dropped by 12% to $2.087B for the quarter, with net income declining to $262M, compared with $403M for the year-earlier quarter.
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| Michael Splinter, CEO, Applied Materials Inc. |
The boom in display equipment is due, in part, to companies pulling in orders to the first half of the year. Splinter cautioned that such robust levels of new order activity would not be sustained over the entire year. However, the company expects its larger silicon-related business to do better in the second half, leading to expectations that overall revenue could grow slightly going forward over the rest of this year.
While sales to IC makers were $1.237B for the quarter, orders were $1.075B, down from $1.343B for new orders for the quarter ending Oct. 28, 2007. Sales to DRAM makers were down by 30% while NAND-relates sales were “up a bit, but not by enough to offset the decline in DRAMs,” he said.
Pressed by one analyst who argued that it could take two years or more for oversupply in the memory sector to be worked out, Splinter said DRAM makers were cutting back on additional capacity now, with a rebound expected in the second half. “Prices continue to stay very low for DRAMs. Laptops and cell phones are all loading up on DRAM because of the low bit cost, and bit growth will be above estimates,” Splinter said, adding that he expects a balance between DRAM supply and demand by the third quarter.
With Applied Materials expecting a rebound in the second half of this year and a return to normal purchasing patterns next year, Splinter said foundries will take the lead, with memory kicking in later, while logic-related equipment purchases remain flat.
“If you look at the orders reported, that reinforces our confidence in our strategic direction. Even in a difficult economic environment, we are getting results and seeing momentum,” Splinter said.
Applied Materials’s solar equipment business, which goes by the name of Energy and Environmental Solutions, is beginning to show solid results. Splinter said the company is talking to four large customers who are contemplating building “gigawatt-scale factories” using thin-film solar cell technologies. Applied provides a turnkey “Sunfab” thin-film manufacturing line, with much of the value-added equipment coming from the company. It also sells equipment to customers using crystalline-silicon substrates for solar power electricity generation.
New orders for the energy business unit reached $260M for the first quarter, up sharply from $98M in new orders for the preceding quarter. Orders for the Sunfabs operation hit $160M, and Applied expects its customers to begin production of solar panels from Sunfab factories this year.
Splinter said the worldwide industry produced a gigawatt of power in 2007, which he said would increase to 6-8 GW by 2010. “There is a wide range in the estimates of solar capacity in the next few years,” he said.
Applied Materials negotiates performance-based contracts with its solar customers, and is applying the same kind of Moore’s Law-thinking that the silicon industry has used to drive down the cost per function. By using the same sizes of large glass substrates used by the display industry, Applied and its customers can drive down the cost of generating electricity. Splinter said, “We are very aggressively moving costs down in solar with these large panels.”
