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What’s Applied Materials’ Strategy to Tap the AI Trend?

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AI trend drives demand for memory and logic

Applied Materials (AMAT), KLA-Tencor (KLAC), and Lam Research (LRCX) are witnessing strong growth in the memory and logic segments.

Revenue from memory almost doubled on a YoY (year-over-year) basis as the AI (artificial intelligence) trend picked up.

On Applied Materials’ fiscal 1Q18 earnings call, the company’s CEO, Gary Dickerson, explained how the AI trend is boosting demand for memory and logic.

He explained that one of the principal applications of AI is NLP (natural language processing), a capability that’s now featuring in more and more devices in the form of voice assistants. As language processing is compute-intensive, it needs dedicated data centers to handle the AI workloads.

Compared to traditional enterprise servers, the new AI-based server architectures have up to eight times more logic and four times more memory content by area. Several cloud service providers have significantly increased their capital spending to grow the data center limit.

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In terms of AI at the edge, Dickerson stated that language processing carried out by voice assistants has a silicon area double the size of a mobile application processor. Now, smartphones are coming up with neural processing features via which a camera reacts to what it sees. Such features could further drive memory and logic content per device.

Wafer fab equipment spending

Dickerson also stated that chip makers are making disciplined investments in capacity and technology. Memory chip makers Samsung (SSNLF), Micron Technology (MU), and SK Hynix have increased their capital spending for 2018. AMAT expects combined wafer fab equipment spending for 2018 and 2019 to reach ~$100 billion.

AMAT’s strategy to tap semiconductor opportunity

Dickerson stated that AMAT is looking to tap the semiconductor opportunity using a three-part strategy:

First, the company will make advancements in systems in which it’s already a market leader. Such systems help chip makers improve the power, efficiency, and performance of transistors and interconnect that’s important for high-performance computing.

Second, AMAT will look to increase its market share in areas in which it isn’t the market leader, such as patterning, inspection, and metrology. Dickerson stated that the company aims to generate over $1 billion in revenue from patterning and boost revenue from e-beam inspection in 2018.

Third, AMAT is working with its customers to develop innovative technologies in materials deposition, materials removal, materials modification, and materials analysis.

Next, we’ll look at the Applied Global Services division.

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