Applied Materials 2Q16 Earnings Call Notes

Applied Materials’ (AMAT) CEO Gary Dickerson on Q2 2016 Results

Customers continue to invest to ramp new technologies as battle for leadership

“While we’re paying close attention to the global economy, at Applied, we continue to see strong demand for our products and services. This is because our semiconductor and display customers are focused on developing and ramping new technologies rather than simply building capacity. The inflection-driven investment our customers are making are highly strategic. They are battling for leadership and investing to ensure that they are ready as market demand shifts to these new technologies. In foundry, we expect investment levels for the year to be similar to 2015. We anticipate more than half of 2016 spending will be focused on the 10-nanometer node, as well as 7-nanometer pilot production.”

China is probably our strongest region

“Yes, one other thing I would say is China is probably our strongest region relative to our position with both the domestic companies and multi-national companies and as Bob said the momentum just keeps building. We have doubled revenue in china over the last 2 years and I am spending a fair amount of time there myself and certainly you look at what’s happening there now and discussions for future projects. As Bob said, multi-year wave opportunity in terms of China. ”

We returned 250% of FCF to investors in the last year. We can’t stay at that level forever

” Share is obvious. We are very committed to shareholders returns, cash returns in fact in the last year we have returned 250% of free cash flow so we can’t stay at that level. We are already committed and we also said in the call we will beat our targets of weighted average share in the model in 2018 so you know we are almost there now so we will continue to get better on that. In terms of the magnitude of the debt we have to talk to the board but we are committed to the shareholder returns. We are committed to beating away average shares in the model and the details of it will have to go through with the board in June.”

Robert Halliday

Disruptive technology changes are happening in display

“Disruptive technology changes are happening in the display market that will increase customer spending this year and beyond. In the TV market, while there is sufficient overall capacity at this time, we expect additional investments in certain regions. In longer term, I believe that technologies now being piloted in mobile will be attractive in 3Ds as well. Such adoption would be very positive for us.”

2016 should be strong year in etch share

“as I said earlier, we think that 2016 is going to be a really strong year for us in growing our Etch share. We have a very strong position, very strong position in 3D NAND conductor edge. So, as that business continues to grow, as that wave moves forward over the next few years, we are in a really great position and we have some of the most exciting products in this group that I have seen in my whole career.”