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TV and smartphone are expected to fuel AMAT’s display segment

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Display segment earned good order growth

In 2014, Applied Materials booked over $615 million in display orders—compared to $538 million in 2013. This was an increase of ~14.31% on year-over-year, or YoY, basis. Applied Materials (AMAT) stated that due to customer demand for rapid material innovation—ramp ups in 3D NAND, FinFET, and display technologies—the semiconductor industry is currently witnessing the biggest changes in display technologies in decades.

If Applied Materials posts good results, it will benefit ETFs—like the Technology Select Sector SPDR (XLK), the VanEck Vectors Semiconductor ETF (SMH), and the PowerShares QQQ Trust (QQQ). These ETFs have significant exposure to Applied Materials.

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TV and mobile will likely drive Display segment’s growth

According to Max McDaniel, Applied Materials’ CMO, the company’s display market is basically divided into two segments—TV and mobile. McDaniel said that higher resolution, or 4K-compatible televisions, and rapid growth in higher resolution screens for mobile are some interesting trends. The trends led to the requirement of advanced manufacturing technology. This is positive for Applied Materials.

Increased demand for TV and mobile displays are expected to fuel demand for display equipment in the future. Applied Materials also provides systems that enable Samsung (SSNLF) and LG to make LCD displays.

Higher-resolution displays are becoming a key distinguishing feature. Also, they’re a major battleground for smartphones, tablets, and gaming devices. In TVs, average screen sizes are also experiencing significant growth—much faster than historic norms.

Smartphones are rapidly catching the gaming space

According to Digi-Capital, an investment bank, Asia and Europe are expected to form 87% of the global mobile and online games revenue by 2015. In particular, Asia is expected to play an integral role in this growth. More than 50% of the global growth is expected from Asia—32% in China, 12% in South Korea, and 10% in Japan.

Falling smartphone prices and the SMAC (social, mobile, analytics, and cloud) revolution led to the gaming industry’s expansion. According to the Entertainment Software Association, 59% of Americans play video games. Console gaming is still the most popular platform. However, as the above chart shows, the use of smartphones for gaming purposes is rising.

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