Applied Materials’ key growth markets
In the previous part of this series, we saw that Applied Materials’ (AMAT) fiscal 2Q17 revenue rose sequentially due to strong demand from memory customers. It grew YoY (year-over-year) due to strong demand from foundry and display customers. As major foundries are located in Taiwan and South Korea (EWY), the company’s fiscal 2Q17 revenue from these markets rose significantly.
Applied Materials’ revenue from South Korea rose 86% YoY, or 40% QoQ (quarter-over-quarter), to $942 million in fiscal 2Q17. It accounted for 27% of the company’s revenue. The growth was driven by strong demand from Samsung (SSNLF) and SK Hynix, which are ramping up their 3D NAND production. Moreover, Samsung shifted to 10-nm (nanometer) nodes, which boosted foundry revenue from this market.
Applied Materials’ revenue from Taiwan rose 177.5% YoY to $863 million in fiscal 2Q17, accounting for 24% of the company’s total revenue. The growth was driven by strong demand for 10-nm process nodes from TSMC (TSM). Applied Materials also received large orders from UMC.
The United States and Europe
Growth is picking up in the United States and Europe. Applied Materials’ US revenue rose 40.8% YoY to $383 million, driven by strong demand for memory equipment from Micron Technology (MU). In fiscal 2Q17, Applied Materials’ revenue from Europe almost doubled to $189 million. The region is still recovering from the economic crisis.
With the domestic semiconductor industry looking to become self-reliant in semiconductor manufacturing, Applied Materials has listed China (FXI) as one of its future growth drivers. In Applied Materials’ fiscal 2Q17 earnings call, CEO Gary Dickerson stated that he expects China’s wafer fabrication equipment spending to increase to $1 billion–$1.5 billion in calendar 2018. He stated that this is a conservative guidance and the country has upside potential.
Dickerson expects the company’s fiscal 2017 sales from China to be above the fiscal 2016 level of $2.9 billion. Even a modest 5% YoY growth in sales would equate to $3 billion. In fiscal 1H17, the company earned $1.4 billion in revenue from China, representing 45.6% of its targeted sales for fiscal 2017.
Dickerson stated that growth in China would largely be driven by strong demand for semiconductors and displays. Semiconductor revenue in China is expected to grow twofold between fiscal 2015 and fiscal 2017, and display and services revenue is expected to grow 50%. Next, we’ll look at Applied Materials’ profit trends.