Applied Materials, Inc. (AMAT) Wells Fargo 8th Annual TMT Summit Conference (Transcript)

Company and Industry Overview * Company: Applied Materials, Inc. (NASDAQ: AMAT) * Industry: Semiconductor Equipment and Materials Key Points China Export Restrictions * Impact: China's export restrictions on certain semiconductor equipment were not unexpected and have some positive and negative aspects for Applied Materials. * Business Impact: Most of Applied's business in China is in mature nodes, so the impact is limited. However, there is uncertainty around ICAPS investment in China and its potential impact on demand. * Guidance: Applied Materials did not change its guidance for the quarter due to the restrictions, but it will take time to evaluate the impact on 2025 guidance. Market Dynamics * Leading Edge: Leading edge technologies, such as high-bandwidth memory, DRAM, advanced packaging, and leading logic, are driving the strongest market dynamics. * ICAPS: ICAPS investment in China is a significant unknown for 2025. The country aims to be self-sufficient in capacity, but it has not yet reached that level. * China Market: There is no evidence of consolidation in the Chinese semiconductor ecosystem, and Applied Materials continues to see growth in its customer base. Business Segments * Services vs. Systems: Applied Materials does not expect significant changes in the intensity between its services business and equipment business. * Display Business: Applied Materials' display business is more intensive in China compared to other regions. * Growth: Applied Materials expects the ICAPS node to grow at a mid-to-high single-digit rate over time, driven by secular trends such as EVs and renewable energy. Gate-All-Around (GAA) * Opportunity: Applied Materials sees an opportunity to gain share in the transition to GAA due to its integrated solutions and expertise in complex tooling. * Addressable Market: The addressable market for GAA is expected to grow by about 15% compared to FinFET. * Node Size: The size of the 2nm node is expected to be large, driven by end markets such as PCs, smartphones, and data centers. DRAM * Share Gains: Applied Materials has gained share in the DRAM market due to its integrated tool offerings and the increasing complexity of DRAM architectures. * HBM: High-bandwidth memory is a key growth area for DRAM, with revenue expected to continue growing in 2025. * Conventional DRAM: The DRAM market is expected to continue adding capacity, driven by secular trends. Gross Margin * Improvement: Applied Materials' gross margin has been gradually improving due to cost management and pricing improvements. * Target: The company is committed to continuing its efforts to improve gross margin. Services * Growth: Applied Materials expects low-double-digit growth in its services business due to secular trends and increased service intensity. * Recurring Revenue: Approximately 85% of Applied Materials' service revenues are recurring, providing confidence in the business. Capital Return * Dividend: Applied Materials is committed to raising its dividend, supported by its recurring service business. * Capital Expenditure: The company is expanding its lab footprint to support collaboration with customers, which will increase capital spending in 2025 and 2026.