Innovation Leadership in Expanding Markets

Transcription

1 Innovation Leadership in Expanding Markets Gary Dickerson CEO and President SEPTEMBER 27, 2017 External Use

2 Forward-Looking Statements and Other Information This presentation contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and anticipated levels of capital equipment spending, technology inflections, our strategies, our development of new products and technologies, the anticipated demand for our products, growth in our market share positions and opportunities, our business and financial performance and outlook, our financial plan and capital allocation, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; consumer demand for electronic products; customers technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology inflections; our ability to develop, deliver and support new products, expand our markets and increase market share; the concentrated nature of our customer base; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; and other risks and uncertainties described in our most recent Form 10-Q and other SEC filings. All forward-looking statements are based on management s estimates, projections and assumptions as of September 27, 2017, and we assume no obligation to update them. All information and data that speaks as of a future date are based on management s estimates, projections and assumptions, unless otherwise noted. This presentation also includes non-gaap adjusted financial measures, along with reconciliations to GAAP measures. Applied Materials, the Applied Materials logo, and other trademarks so designated as product names are trademarks of Applied Materials, Inc. Other names and brands are the property of third parties. 1

3 WHAT WE LL COVER TODAY MARKETS are strong and getting stronger Applied is in a better POSITION than ever Faster and more effective EXECUTION More expansive demand drivers Emerging trends (IoT, Big Data, AI, VR/AR) drive higher semi and display investments Technology inflections shifting value to materials engineering and Applied Broad capabilities and portfolio of businesses Innovation leadership strategy + investments Strong, passionate team Connecting capabilities across company Operating system for repeatable success Scalable growth platform 20

4 V I S I O N S T R AT E G Y Our innovations make possible the technology shaping the future Inflectionfocused innovation 21

5 Huge Shift in Value Towards Applied Value shifting to technology to and and electronics Semiconductor r content in electronics increasing Capital intensity increasing in logic, memory and display Materials-enabled technology inflections grow Applied s market Share gains enabled by new innovative platforms new platforms F 2013 to 2017F Semiconductor % of Electronics ~21% ~23% >25% Customers markets Display % of Electronics ~8% ~8% ~8% have grown from $430B to $525B WFE % of Semiconductor ~9% ~9.5% ~11% Equipment markets Display equipment % of Display ~6% ~7.5% ~14% Applied % of Electronics ~0.5% ~0.7% ~1% have grown from $36B to >$60B Semiconductor and WFE percent of Electronics based on Gartner Display and Display equipment percent of Electronics Applied estimates based on IHS and Gartner All 2017 forecasts based on Applied estimates Applied revenue as percent of electronics based on Gartner and Applied estimates 26

6 Market Evolution Layers of Demand Drivers A.I. + Big Data Era www Mobile + Social Media Era PC + Internet Era Avg. WFE $25B Avg. WFE $32B Avg. WFE $45B Gartner Gartner. Average WFE based on Applied estimates. 27

7 Market Evolution Layers of Demand Drivers www PC + Internet Era What s happening NOW Mobile + Social Media Era A.I. + Big Data Era $90B WFE* Avg. WFE $25B Avg. WFE $32B Avg. WFE $45B Gartner Gartner. Average WFE based on Applied estimates. * WFE based on Applied estimates 28

8 Today 5 Major Drivers of Applied s Growth 3D NAND Foundry Patterning Display China DEMAND: Increasing content at edge + HDD to SDD inflection in cloud TECHNOLOGY: Scaling is material-enabled DEMAND: Mobile + HPC (leading-edge) + IoT (trailing geometries) TECHNOLOGY: Power and performance enabled by our leadership BUs RESOLUTION = Traditional multi-patterning + EUV PLACEMENT = Requires innovative materials-enabled patterning solutions DEMAND: Mobile OLED + large format TVs driving Gen 10.5 TECHNOLOGY: Huge increase in complexity driving capital intensity DEMAND: Adding to Semi and Display investment TECHNOLOGY: Focus areas are IoT, memory, LCD and OLED 29

9 Healthy Market Dynamics in Memory PREMIUM SMARTPHONE 1 Avg. GB / Unit HDD to SSD TIPPING POINTS 2 Total Cost of Ownership $ NAND WFE SCENARIOS 3 WFE $B +140% k HDD costs 10k HDD costs SSD costs SSD crossover point with 10k HDD SSD crossover point with 15k HDD % bit demand growth 40% bit demand growth F 18F F 20F 22F E 18F 19F 20F 21F NAND content growing to support increased functionality (dual cameras, VR) SSD crossover point with 10k HDD this year 15k + 10k drives = ~35% of enterprise HDD market NAND market outlook = strength + upside 1) 2015 and 2016 based on GfK / Gartner, 2017 and 2018 based on Applied estimates. 2) Based on Applied estimates. 3) Applied estimates based on VLSI Research 30

10 3D NAND Scaling Roadmap + MORE PAIRS MULTI-TIERS VERTICAL SCALING LATERAL SCALING NODE (PAIR) STACK HEIGHT (µm) PAIR THICKNESS (nm) KEY STRUCTURE INFLECTIONS / 36 ~2.5 ~ / 72 ~5 ~ >90 ~7 50~60 2 Tier Staircase Optimization CMOS Under Array, Cell Layout intensification 2021 >140 >9 45~50 >2 Tier, New Materials 4 Levers to Scale, All Materials-Enabled Samsung states good 5 years of revisions with corresponding increases in speed and capacity PC PERSPECTIVE, FLASH MEMORY

11 IMPLICATIONS DRIVERS FOUNDRY DEMAND DRIVERS TRAILING GEOMETRIES LEADING-EDGE FUTURE NODES IOT = Billions of units CMOS image sensors = large, growing market Increasing content in smartphones / edge High performance computing + accelerators for A.I. / machine learning HPC / A.I. chips as big as they can make them ~40% of total foundry investment this year in 20nm and above Investments in capacity and technology 7nm node could be largest in history 7nm is 2x capital intensity of 28nm Requires innovative transistor and interconnect solutions NVIDIA TESLA V Billion transistors >100 Billion vias 815mm 2 die ~10 times fewer chips per wafer vs. smartphone processor and very challenging to yield 32

12 PATTERNING IN LOGIC / FOUNDRY RESOLUTION create smallest feature Addressed by advanced multi-patterning (80% of steps) + EUV (20% of steps) PLACEMENT put features where you want them Primarily addressed by innovative materialsenabled patterning (not EUV) Scaling is not, at this point in time, really limited by resolution. It's limited by our ability to put features wherever we want them Yan Borodovsky, INTEL FELLOW Patterning market to grow to >$4B + Applied to gain 15pts of share by

13 2.94m Multiple Waves of Growth in Display FUTURE DISPLAY Foldable OLED OLED TV Natural 3-D and more MOBILE OLED Curved form factors Needed for VR / AR LCD Scaling and resolution in TV Resolution and power in mobile Tracking 13 Gen 10.5 TV factories 65 Expect penetration of mobile OLED to increase from <20% today to >55% by m 34

14 Multiple Waves of Growth in Display FUTURE DISPLAY Foldable OLED OLED TV Natural 3-D and more MOBILE OLED Curved form factors Needed for VR / AR LCD Scaling and resolution in TV Resolution and power in mobile Display Equipment Market ~$8B per year >$18B per year KEY TRENDS: Substrate scaling to substrate scaling + new technology OLED complexity driving capital intensity based on Applied estimates Applied forecast 35

15 Increasing Complexity = Rising Capital Intensity WFE ($B) Greenfield 100k WSPM NAND DRAM FOUNDRY Equip ($B) Gen6 DISPLAY 100% ~3x Capital Intensity of Memory 60% 40% 425% Planar 3D (64L) 25nm 14-16nm 28nm 7nm LCD OLED Based on Applied estimates. WSPM = Wafer Starts Per Month, Display capital intensity model based on Gen 6 factory with 100k / month capacity 36

16 Sustainably Stronger Markets Broader set of demand drivers Capital intensity increasing, no 450mm WAFER FAB EQUIPMENT: $45B New Normal $28B $45B NOT SERVED Technology roadmap shifting to materials engineering, expanding Applied s opportunity 55% F 2020F 64% SERVED MARKET DISPLAY EQUIPMENT: Total Market 2x, Served Market 3x, Total Opportunity 6x Shifting from substrate scaling to substrate scaling + new technology OLED significantly more complex than LCD = increasing capital intensity Available market expanding with new products $8B 15% >$18B F 2020F NOT SERVED >40% SERVED MARKET 37

17 Sustainably Stronger Markets Broader set of demand drivers Capital intensity increasing, no 450mm WAFER FAB EQUIPMENT: $45B New Normal $28B $45B NOT SERVED Technology roadmap shifting to materials engineering, expanding Applied s opportunity 55% F 2020F 64% SERVED MARKET DISPLAY EQUIPMENT: Total Market 2x, Served Market 3x, Total Opportunity 6x Shifting from substrate scaling to substrate scaling + new technology OLED significantly more complex than LCD = increasing capital intensity Available market expanding with new products Display equipment market, and 2017 and 2020 forecasts based on Applied estimates. $8B 15% >$18B F 2020F NOT SERVED >40% SERVED MARKET 38

18 Market Evolution Layers of Demand Drivers Entering a NEW ERA of growth A.I. + Big Data Era www PC + Internet Era Mobile + Social Media Era A.I. related growth will boost global GDP by $16T by 2030 The Economist / PwC Data is to this century what oil was to the last one: a driver of growth and change The Economist

19 Customers Voice on Data Explosion SANJAY MEHROTRA MICRON SH LEE SK HYNIX JIM THOMPSON QUALCOMM 40

20 CONNECTIVITY Enabling the A.I. / Big Data Era DATA GENERATION IoT and Industry 4.0 driving an EXPLOSION OF DATA DATA STORAGE More data needs to be processed and stored than ever before Storage alone is not sufficient or economical COMPUTE New compute models to turn data into $$$ New compute architectures to process data at the edge and in the cloud 42

21 SMART BUILDINGS 55M GB/day SMART FACTORIES 50M GB/day PUBLIC SAFETY SYSTEMS 50M GB/day SMART VEHICLES 40M GB/day SMART AIRPLANES 4M GB/day SOCIAL MEDIA + OTHER 2M GB/day EXPLOSION OF DATA GENERATION A city of 1M people will generate 200M GB of data per day by 2020 Applied s model based on forecasts published by Cisco, Intel, Western Digital 43

22 SMART BUILDINGS 55M GB/day SMART FACTORIES 50M GB/day SMART VEHICLES IN THIS MODEL 40M Only 1% GB/day of data is PUBLIC SAFETY SYSTEMS 50M GB/day SMART AIRPLANES generated by humans 4M GB/day SOCIAL MEDIA + OTHER 2M GB/day IMPLICATION: Forecasts based on historical trends may understate data generation 44

23 NAND Shipments (EB) In Current Compute Model y = x R² = Strong empirical relationship between data generation and NAND shipments Same relationship is true for DRAM Incremental Data Generation (EB) Source: Cisco VNI, Cisco, Gartner, Factset, Applied Materials internal analysis 2006 to 2016 data from Cisco and Gartner to 2020 projections from Cisco for data generation (VNI IP traffic), and industry average estimates for DRAM and NAND content shipments 45

24 NAND Shipments (EB) A.I. / Big Data Era Needs New Compute Model 14,000 12,000 10,000 8, scenario with 1% adoption of L4 smart car 4TB PER CAR PER DAY 25x MORE NAND NEEDED (not economical) 6,000 4,000 2, forecast without new categories New innovations in computing needed to manage huge increase in data generation ,000 1,500 2,000 2,500 Incremental Data Generation (EB) 46

25 A.I. Driving New Data Center Compute Model ENTERPRISE SERVER BIG DATA SERVER A.I. SERVER GPU BASED A.I. SERVER CUSTOM ASICS e.g. Applied Data Center e.g. Facebook In-memory DB e.g. NVIDIA DGX-1 e.g. Google TPU v2 SPEC Intel Xeon E5 (176 GB DRAM) Intel Xeon E5 (256 GB DRAM) 8x Tesla V100 (128 GB DRAM) + Host CPU (512 GB DRAM) Custom ASIC (16GB HBM) + Host CPU (256 GB DRAM) LOGIC AREA 912 mm mm 2 7,432 mm 2 2,232 mm 2 MEMORY AREA 7,392 mm 2 10,752 mm 2 32,512 mm 2 16,256 mm 2 TOTAL SILICON 8,304 mm 2 11,664 mm 2 39,944 mm 2 18,488 mm 2 Applied estimates based on Google, Microsoft, Facebook, NVIDIA publications. 47

26 A.I. Driving New Data Center Compute Model ENTERPRISE SERVER BIG DATA SERVER A.I. SERVER GPU BASED A.I. SERVER CUSTOM ASICS e.g. Applied Data Center e.g. Facebook In-memory DB e.g. NVIDIA DGX-1 e.g. Google TPU v2 SPEC Intel Xeon E5 (176 GB DRAM) Intel Xeon E5 (256 GB DRAM) 8x 8x Tesla V100 (128 GB DRAM) + Host CPU (512 GB DRAM) Custom ASIC (16GB HBM) + Host CPU (256 GB DRAM) LOGIC AREA 912 mm mm 2 7,432 mm 2 2,232 mm 2 MEMORY AREA 7,392 mm 2 10,752 mm 2 32,512 mm 2 16,256 mm 2 4x TOTAL SILICON 8,304 mm 2 11,664 mm 2 39,944 mm 2 18,488 mm 2 A.I. server requires 4x Memory and 8x Logic by area Logic is 3x more capital intensive than Memory Applied estimates based on Google, Microsoft, Facebook, NVIDIA publications. 48

27 Customers Voice on A.I. SANJAY MEHROTRA MICRON MIRIAM DANIEL AMAZON 49

28 DATA EXPLOSION DRIVING INNOVATION IN THE CLOUD AND AT THE EDGE CLOUD EDGE New compute models for A.I. and Big Data driving data center inflections Architectural war ongoing (CPUs, GPUs, customized ASICs, e.g. TPU) all strong drivers for foundry / logic Foundry / logic performance roadmap 30 Billion edge devices by 2020 * Growth of A.I. at the edge applications e.g. security, smart assistance Edge requires functionality and power Foundry volume + power efficiency Enabled by new materials and structures *Source: IHS 51

29 Selective Processes Enable customers to build chips in new ways FY17E FY20F ANALOGY: Removing a single weed without damaging adjacent grass or leaving residue ANALOGY: 3D Printing putting material only where you want it (materials-enabled not litho) Selective Removal Selective Deposition #1 position $200M $450M Selective Epi Unique $550M $800M Selective Metals Unique $100M $200M *New products* Unique >$100M MORE THAN $700M INCREMENTAL OPPORTUNITY BY 2020 New manufacturing inflection made possible by Applied 52

30 WHAT WE LL COVER TODAY MARKETS are strong and getting stronger Applied is in a better POSITION than ever Faster and more effective EXECUTION More expansive demand drivers Emerging trends (IoT, Big Data, AI, VR/AR) drive higher semi and display investments Technology inflections shifting value to materials engineering and Applied Broad capabilities and portfolio of businesses Innovation leadership strategy + investments Strong, passionate team Connecting capabilities across company Operating system for repeatable success Scalable growth platform 53

31 Broadest Portfolio of Businesses and Technologies Metal Deposition Planarization Etch Inspection CVD CVD PVD Yield Parts Software Thermal Processing Implant Epitaxy Selective Etch Metrology ALD ebeam New Service Upgrades LEADERSHIP SEMI BUSINESSES HIGH-GROWTH SEMI BUSINESSES DISPLAY SERVICES High share, highly differentiated Fastest growing in fastest growing markets Leadership and growth businesses 15% CAGR *, highly stable FOCUS: Power and Performance FOCUS: Cost-effective scaling FOCUS: OLED, Flex, Cost FOCUS: Yield, Output, Cost $5.1B 2017E $4.4B 2017E $1.9B 2017E $3B 2017E +$1B next 3 years +$2B next 3 years +$1.6B next 3 years +$1.5B next 3 years * FY2017E FY2020F. FY2017E and revenue growth forecast based on Applied estimates 54

32 Breadth Accelerates Innovation A B C D E Metal Deposition Planarization Etch Inspection CVD CVD PVD Yield Parts Software Thermal Processing Implant Epitaxy Selective Etch Metrology ALD ebeam New Service Upgrades LEADERSHIP SEMI BUSINESSES HIGH GROWTH SEMI BUSINESSES DISPLAY SERVICES Examples A B C D E INTERCONNECT: Parallel development of deposition and removal Cobalt and CMP NEXT GENERATION TRANSISTOR: Epi + etch + ebeam ADVANCED PATTERNING: Innovative Films + Innovative Etch + ebeam NEW MARKETS: Technology transfer from semi to display CVD and ebeam SERVICES: Optimize ramp times, performance, yield, output and costs 55

33 STRATEGY GREATER INVESTMENT IN INNOVATION Inflection-focused innovation leadership FY13 R&D FY17E R&D UPDATES 66% UPDATES 50% NEW 34% $1.2B NEW 50% $1.8B ACCELERATING INNOVATION and PRODUCT SUCCESS RATE 45% of revenue from products released since 2013 * 86% win rate for largest opportunities in % of development positions converted to volume buys in 2017 R&D is a non-gaap adjusted measure, excludes Solar. * Based on Semiconductor and Display revenue 56

34 Operating System: Faster, More Effective Execution See inflections early Identify customers High Value Problems Develop Differentiated Valuable Sustainable products Ensure customer success Generate residual value CUSTOMER ENGAGEMENT Early, deep collaboration Increasing customers customer engagements PRODUCT DEVELOPMENT ENGINE Define winning products Develop and release products faster, better and at lower cost Trained >8,500 people CUSTOMER SUPPORT Device Performance, Yield Services and Parts Output, yield and cost optimization SCALABLE MODEL: Added >3,000 engineers in past 3 years MAYDAN TECHNOLOGY CENTER (MTC) 57

35 Maydan Technology Center Innovation Speed Advantage Other Equipment Companies Industry Consortia Semiconductor Manufacturers Full Device Array module structures Logic and memory electrical structures Integration: Transistor, interconnect, patterning Innovative materials eng + ebeam products Innovative materials R&D ACCLERATING NEW CHIPS = VERY HIGH $ VALUE Broadest portfolio of enabling technology and capabilities under one roof Innovative materials engineering solutions enable new ways to build chips Increasing number of leading logic and memory customers stationed at MTC 59

36 Strongest Product Pipeline Ever NEW PRODUCTS ENABLED Served market share gains with leadership products Fastest growing company in fastest growing areas of WFE (etch + CVD) NEW PRODUCTS FOCUS ON Power and performance: Advanced transistor and interconnect Cost-effective scaling: 3D NAND scaling + Patterning (resolution, placement) ebeam metrology and inspection *NEW* Selective processes +3.7 points of WFE share +5 points of WFE share 2012 to 2016 based on Gartner, 2017 to 2020 forecast based on Applied estimates

37 HUGE VALUE SHIFTING TO APPLIED 2x Increase to 1% of Electronics MARKETS are strong and getting stronger Applied is in a better POSITION than ever Faster and more effective EXECUTION More expansive demand drivers Emerging trends (IoT, Big Data, AI, VR/AR) drive higher semi and display investments Technology inflections shifting value to materials engineering and Applied Broad capabilities and portfolio of businesses Innovation leadership strategy + investments Strong, passionate team Connecting capabilities across company Operating system for repeatable success Scalable growth platform 61

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39 (In millions) RD&E expenses (GAAP basis) (*) APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESEARCH, DEVELOPMENT AND ENGINEERING (RD&E) EXPENSES Twelve Months Ended October 27, 2013 RD&E expenses (GAAP basis) $1,246 Certain items associated with acquisitions (6) Acquisition integration costs (2) Non-GAAP adjusted RD&E expenses $1,238 (*) Amount excludes expense related to Solar business of $74M for the twelve months ended October 27, Support for page 7 of AD slides - used to calculate R&D % of OPEX RND expense excluding Solar's business of $74M and $98M for FY13 and FY12, respectively. External Use