Applied Materials Issues 2011 Proxy Statement

Applied Materials ended our fiscal year in outstanding fashion and enter 2011 with positive momentum.  Reflecting on the year as a whole, Applied Materials is pleased with the progress made against our strategic plan.

Our goals for 2010 were clear:  Capitalize on the recovery in our markets, gain share in our core businesses, and achieve a new level of operating performance and profitability.  We delivered in all three of these areas.

We increased R&D spending to 1.1 billion dollars and exit the year with a pipeline of innovative products.  This sets the stage for us to outperform our markets again in 2011.  Gathered below are highlights from FY10.

1. We gained share in all of our markets

During fiscal 2010, Applied Materials’ new orders more than doubled to $10.2 billion, from $4.1 billion for fiscal 2009 and net sales increased to $9.5 billion, the second highest level in company history. 

In semiconductor, our share gains were fueled by new product innovations, including 12 new products introduced over the past 12 months – and next year, Applied Materials expects about 20 percent of revenue to come from these products.  Applied Materials demonstrated leadership in the rapidly growing wafer-level packaging market where it won over two-thirds of the advanced packaging decisions this year.

Continued capital spending by Intel, Global Foundries and Micron is an encouraging sign for the U.S. economy and the U.S. semiconductor innovation.  Applied Materials is now tracking 17 new fabs and fab expansion projects that represent about 60 billion dollars of equipment spending over the next 8 to 12 quarters. 

In display, the tablet PC boom is the most exciting thing to happen in electronics since the internet.  Tablets and smartphones bode well for Applied Materials’ semiconductor business, and is increasing demand for the company’s touch panel and OLED products.  Touch panel equipment alone represents a $200 million opportunity in FY11. 

In energy and environmental solutions, net sales grew year over year from $1.2 billion to $1.5 billion in FY10.  In addition, the EES business became profitable after restructuring and focusing on the rapidly-growing crystalline silicon equipment business.

2. Operational Improvements led to a leaner, more efficient global supply chain

In fiscal year 2010, Applied Materials made operational improvements throughout the organization that make the company more efficient and profitable.  These changes included opening new operation centers in Singapore and Taiwan that have already improved customer delivery performance and gross margins. 

In March of 2010, Applied Materials expanded its Tainan Manufacturing Center in Taiwan. The nearly 15,000 square meter facility will enhance the company’s capability to serve its FPD and thin film solar PV customers in Asia while capitalizing on Taiwan’s excellent location, strong talent pool and supply chain efficiencies.  And in April, the Singapore Operations Center, Applied Materials’ first facility in Asia for manufacturing its advanced semiconductor equipment.

3. EES business segment had a record year and trends favor our business in FY11

EES had a record year in FY10.  The Baccini and PWS businesses surpassed previous peaks for quarterly revenues and orders in the fourth quarter and Applied Materials expects this record performance to be eclipsed in the first quarter of 2011. 

Demand in the solar market remains extremely robust.  Applied Materials now believes panel installations will reach 16 GW for the calendar year and expects 2011 installations to be in the 19 to 21 GW range.  The top panel manufacturers are running at full utilization and are still adding capacity.  Following a year that exceeded our expectations, we are projecting solar capital spending for 2011 to be approximately flat year-over-year – in the range of 13 to 15 GW - with each gigawatt of capacity representing over 200 million dollars of equipment opportunity for Applied Materials. 

China and Taiwan drove three quarters of this year’s crystalline silicon capacity additions and now constitute 65 percent of capacity worldwide.  Applied has higher market share in China than in the rest of the world, so this trend bodes well for our business.