Applied Materials, Inc. · NASDAQ:AMAT
Applied Materials — Investor Day (September 2022)
67 slides from Applied Materials's investor day presentation, Sep 22, 2022
Slide 1: Services Master Class
Services Master Class MASTER CLASS SERIES September 22, 2022 1 | Applied Materials External
Slide 2: Forward-Looking Statements and Other Information
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 demand drivers, technology transitions, our business and financial performance and mark
Slide 3: Welcome
Services Master Class WELCOME Michael Sullivan Corporate Vice President Head of Investor Relations SERVICES MASTER CLASS | SEPTEMBER 22, 2022 3 Applied | Applied Materials Materials External External
Slide 4: Key Messages
Key Messages 1. Applied Global Services is a mostly recurring (~87%) revenue business with a growing proportion (~60%) of subscription sales. 2. Large total available market opportunity (>$14.5B) continues to grow each year. 3. Insights from the industry’s largest installed base of advanced systems
Slide 5: Agenda
Mike Sullivan AGENDA 9:00 PART 1 Introduction and Fireside Chat with Sanjiv Mittal, Ph.D. Jeremy Read Services Growth Opportunity and Strategy Joseph Werner Digital Tools Tzu-Fang Huang, Ph.D. 9:05 PART 2 Surface Technology Roberta Tonini Network of Experts Michael Wang Tailored Supply Chain Michael
Slide 6: AGS Background Information
AGS Background Information 87% Recurring parts, services and software ▪ Semiconductor industry drives ~95% of this revenue 13% 200mm and below wafer fab equipment Applied Materials External
Slide 7: Fireside Chat
FIRESIDE CHAT Sanjiv Mittal, Ph.D. Corporate Vice President Applied Global Services Applied Materials External
Slide 8: Services Growth Opportunity and Strategy
Services Growth Opportunity and Strategy Jeremy Read Corporate Vice President Applied Global Services SERVICES MASTER CLASS | September 22, 2022 Applied Materials Applied ExternalMaterials External
Slide 9: Economics of Semiconductor Manufacturing
Economics of Semiconductor Manufacturing Leading-Edge Fab Investment Applied WFE Market Share 20.6% 15.9% Logic Memory >$20B* >$10B* Logic Memory >$20B* <$10B* 2011* 2021** *Equipment cost per 100K wafer starts per month *Source: Gartner Group; **Source: TechInsights Applied Materials External
Slide 10: Lifecycle of a Semiconductor Process Node
Lifecycle of a Semiconductor Process Node R&D Transfer Ramp High-Volume Manufacturing APPLIED CUSTOMER SITE SITE Output / Yield Reducing the area between the curves is worth $ billions Time Applied Materials External
Slide 11: Lifecycle of a Semiconductor Process Node
Lifecycle of a Semiconductor Process Node R&D Transfer Ramp High-Volume Manufacturing Make 1 tool golden Make all tools golden Optimize all tools golden Output / Yield Time ▪ “Golden” tools refer to tools that are production-ready and can process wafers with high production-level yields ▪ “Yield” re
Slide 12: The Value of "t"
The Value of “t” Applied Materials External
Slide 13: Lifecycle of a Semiconductor Process Node: Value
Lifecycle of a Semiconductor Process Node R&D Transfer Ramp High-Volume Manufacturing APPLIED CUSTOMER SITE SITE Output / Yield Reducing the area between the curves is worth $ billions Time Value of 1-Month Memory Customer Logic Customer Value of 1% Customer Acceleration Value Value Improvement Valu
Slide 14: Lifecycle of a Semiconductor Process Node
Lifecycle of a Semiconductor Process Node R&D Transfer Ramp High-Volume Manufacturing Output / Yield Installation Warranty Post-Warranty Service Agreement Time ▪ AGS can reduce tool installations by up to 30 days for faster time to market ▪ Key ramp activities include chamber matching and defect red
Slide 15: Applied Parts and Services Total Available Market
Applied Parts and Services Total Available Market Installed Base (# of Tools) Service Intensity TAM ($B) $14.5B >1.65X 42.5K Tools $8.7B 1.4X 29.7K X = Tools FY’15 FY’21 FY’15 FY’21 (Installed Base) x (Service Intensity) = TAM Applied Materials External
Slide 16: Share of Parts and Services TAM
Share of Parts and Services TAM Applied Long-Term Service 60% ▪ A standard 1-year warranty is included of revenue Agreements in the price of a tool ▪ With long-term parts and service agreements, AGS provides Applied preventative and corrective Post-Warranty Transactional Options + Self Service maint
Slide 17: Service Offerings Continuum – Today & Tomorrow
Service Offerings Continuum – Today & Tomorrow AGS Service Offerings AIx™: Actionable Insight Accelerator ChamberAI™ ML algorithms Performance Services Comprehensive Production Service Agreements Parts Assurance Assurance Services AppliedPRO™ Services Transactional Parts & Services Digital twin mode
Slide 18: Driving Parts and Services Growth
Driving Parts and Services Growth 1. Installed Base Growth 2. Service Intensity 3. Share Growth (TAM) Growth $14.5B Revenue per Tool >1.65X 42.5K 1.4X $8.7B Tools 29.7K Tools 3X 1X FY’15 FY’21 FY’15 FY’21 Transactional Comprehensive Service Agreement Applied Materials External
Slide 19: Subscription Customer Benefits
Subscription Customer Benefits Multivariate Chamber Health Index Out of Range Proprietary Tool Data Analysis Within Range AGS Warehouse Footprint 3 Continents 13 Countries Supply Chain Assurance 35 Locations 1.4M Square Feet Engineering Applied Software World’s Best Experts BKMs Customer Knowledge E
Slide 20: Subscription Agreements Growing as a % of Recurring Revenue
Subscription Agreements Growing as a % of Recurring Revenue Transactions Subscriptions >40% >50% >60% FY’10 FY’16 FY’19 Applied Materials External
Slide 21: Technology-Enabled Services: The Four Pillars
Technology-Enabled Services: The “Four Pillars” Network of Digital Tools Experts Joe Werner Roberta Tonini Vice President Senior Director Applied Global Services Applied Global Services Surface Tailored Technology Supply Chain TzuFang Huang, Ph.D. Michael Wang Senior Director Senior Director Applied
Slide 22: Digital Tools
Digital Tools Joe Werner Vice President Applied Global Services SERVICES MASTER CLASS | September 22, 2022 Applied Materials Applied ExternalMaterials External
Slide 23: Digital Tools: The 1st Technology-Enabled Service Pillar
Digital Tools: The 1st Technology-Enabled Service Pillar Digital Tools are a Proprietary Servers combination of IT Remote Video Assist hardware, analytical Digital Tools software and Remote Fleet Optimizer communication technologies Remote Tool Assist Applied Materials External
Slide 24: Applied Servers Connect Engineers to Analytics
Applied Servers Connect Engineers to Analytics Applied Fleet Applied Servers Applied Customer Engineers Advanced Big Data Analytics ▪ ~42,500+ tools in the field ▪ >5,500 tools connected ▪ 7,000+ certified experts ▪ 1,000s of processes to field servers ▪ 1,000+ global locations ▪ 350+ sensors per ch
Slide 25: Remote Video Assist Connects Experts
Remote Video Assist Connects Experts Remote video assist enables Applied’s global network of experts to deliver augmented reality (AR) visual support to local service engineers, reducing barriers like location, travel restrictions and time in order to reduce unscheduled down time Applied Materials E
Slide 26: Remote Fleet Optimizer Connects Engineers to KPMs
Remote Fleet Optimizer Connects Engineers to KPMs ▪ 2x increase in preventative maintenance outcomes ▪ 75% reduction in preventative maintenance variability ▪ 13% increase in equipment availability ▪ Hundreds of thousands of Remote fleet optimizer monitors the key performance wafers per year in incr
Slide 27: Remote Tool Assist Connects Tools to Experts
Remote Tool Assist Connects Tools to Experts Secure Protocols Access to on-site server and Remote tool assist allows users to tool data is fully controlled monitor operating status in real time, by customers to maintain review event logs, adjust tool parameters data security and protect IP and recov
Slide 28: Technology-Enabled Services: The Four Pillars
Technology-Enabled Services: The “Four Pillars” Network of Digital Tools Experts Joe Werner Roberta Tonini Vice President Senior Director Applied Global Services Applied Global Services Surface Tailored Technology Supply Chain TzuFang Huang, Ph.D. Michael Wang Senior Director Senior Director Applied
Slide 29: Surface Technology
Surface Technology TzuFang Huang, Ph.D. Senior Director Applied Global Services SERVICES MASTER CLASS | September 22, 2022 Applied Materials Applied ExternalMaterials External
Slide 30: Surface Technology: The 2nd Technology-Enabled Service Pillar
Surface Technology: The 2nd Technology-Enabled Service Pillar + + + Si Etch Deposition Shaping GAA Transistor 3D NAND 3D DRAM Applied Materials External
Slide 31: Maintaining Chambers for Maximum Output & Yield
Maintaining Chambers for Maximum Output & Yield Maintenance Time Chamber maintenance includes minimizing impurities and particles that reduce yield, as well as cleaning and restoring parts to pristine condition Applied Materials External
Slide 32: Engineering Surface Chemistries
Engineering Surface Chemistries Evaluation Characterization Selection Surface engineering involves characterizing the chemical, electrical and mechanical properties of materials Applied Materials External
Slide 33: Specialized Cleaning Restores Parts to Applied Specifications
Specialized Cleaning Restores Parts to Applied Specifications Before Cleaning After Cleaning and coating processes and chemistries are proprietary -- and in some cases patented Applied Materials External
Slide 34: Lifecycle of a Semiconductor Process Node: Surface Technology
Lifecycle of a Semiconductor Process Node R&D Transfer Ramp High-Volume Manufacturing Tune Surface Design and Refine Recipes Define Maintenance Routines Parameters A customer achieved a 2.5x increase in maintenance Output / Yield Applied offers optimized Our texturized kits for >300 kit life that re
Slide 35: Technology-Enabled Services: The Four Pillars
Technology-Enabled Services: The “Four Pillars” Network of Digital Tools Experts Joe Werner Roberta Tonini Vice President Senior Director Applied Global Services Applied Global Services Surface Tailored Technology Supply Chain TzuFang Huang, Ph.D. Michael Wang Senior Director Senior Director Applied
Slide 36: Network of Experts
Network of Experts Roberta Tonini Senior Director Applied Global Services SERVICES MASTER CLASS | September 22, 2022 Applied Materials Applied ExternalMaterials External
Slide 37: Network of Experts: The 3rd Technology-Enabled Service Pillar
Network of Experts: The 3rd Technology-Enabled Service Pillar Materials Process IT Scientists Engineers Engineers Industrial Yield Engineers Management Mission: Make systems Experts businesses successful in helping our customers solve their highest-value problems Applied Materials External
Slide 38: Supporting Over 1,000 Fabs Worldwide from Applied Offices
Supporting Over 1,000 Fabs Worldwide from 77 Applied Offices Customer Fab Applied Sales, Service & Field Support Office Applied Materials External
Slide 39: Global Multidisciplinary Teams
Global Multidisciplinary Teams Teams of experts work at various levels to bring customers one step closer to Maximum ROI FabVantage® Team Components Team Process Software Team Team Escalation Team Installation Field Team Team Applied Materials External
Slide 40: Applied's Global Network of Experts is Evolving
Applied’s Global Network of Experts is Evolving Network of Experts IoT Machine Learning Artificial Intelligence ▪ >7,000 field engineers AIx ▪ >500,000 operations per year Applied Materials External
Slide 41: Technology-Enabled Services: The Four Pillars
Technology-Enabled Services: The “Four Pillars” Network of Digital Tools Experts Joe Werner Roberta Tonini Vice President Senior Director Applied Global Services Applied Global Services Surface Tailored Technology Supply Chain TzuFang Huang, Ph.D. Michael Wang Senior Director Senior Director Applied
Slide 42: Tailored Supply Chain
Tailored Supply Chain Michael Wang Senior Director Applied Global Services SERVICES MASTER CLASS | September 22, 2022 Applied Materials Applied ExternalMaterials External
Slide 43: Tailored Supply Chain: The 4th Technology-Enabled Service Pillar
Tailored Supply Chain: The 4th Technology-Enabled Service Pillar Logistics Distributors Tailored Supply Chain Fab Warehouse ▪ Certified Applied parts ▪ Advanced logistics ▪ Localized inventory ▪ Guaranteed parts availability Tailored Supply Chain Applied Materials External
Slide 44: Data Engine Drives a Global Supply Chain
Data Engine Drives a Global Supply Chain >675,000 Parts Customer Demand Applied’s proprietary data engine forecasts >1,500 Suppliers demand, plans supply and schedules logistics >1,000 Fabs execution to deliver over 2 million parts per quarter Applied Materials External
Slide 45: Subscription Agreements Provide a Competitive Advantage
Subscription Agreements Provide a Competitive Advantage Transactional Subscription Agreement ? Which parts are needed When Applied Materials External
Slide 46: Parts Distribution and Sourcing Network
Parts Distribution and Sourcing Network Inventory Locations Hub Locations 3 35 135 99% Continental Hubs Regional Hubs Inventory Locations On-Time Delivery Applied Materials External
Slide 47: Technology-Enabled Services: The Four Pillars
Technology-Enabled Services: The “Four Pillars” Network of Digital Tools Experts Joe Werner Roberta Tonini Vice President Senior Director Applied Global Services Applied Global Services Surface Tailored Technology Supply Chain TzuFang Huang, Ph.D. Michael Wang Senior Director Senior Director Applied
Slide 48: Services Growth Model
Services Growth Model Michael Daly Corporate Vice President Applied Global Services SERVICES MASTER CLASS | September 22, 2022 Applied Materials Applied ExternalMaterials External
Slide 49: Applied Materials Services Business
Applied Materials Services Business >30% OM $B FY’13 Strategy Change 6.0 Revenue CAGR ~12% 5.0 4.0 Revenue CAGR <2% <22% 3.0 OM 2.0 1.0 0.0 FY’04 FY’05 FY’06 FY’07 FY’08 FY’09 FY’10 FY’11 FY’12 FY’13 FY’14 FY’15 FY’16 FY’17 FY’18 FY’19 FY’20 FY’21 FY’22 Guide Applied Materials External
Slide 50: AGS Recurring Parts and Services Growth Formula
AGS Recurring Parts and Services Growth Formula Installed Base Service Intensity TAM TAM Share Revenue $4.2B $14.5B 42.5K Tools 29% 29.7K X = X = $8.7B 23% $2.0B Tools FY’15 FY’21 FY’15 FY’21 FY’15 FY’21 FY’15 FY’21 (Installed Base) x (Service Intensity) = (TAM) x (Share) = Revenue Applied Materials
Slide 51: Installed Base Growth
Installed Base Growth 42.5K Growth 1.4X Tools CAGR ~6% 29.7K Tools FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY'21 Every shipped tool is a lifetime revenue opportunity for AGS Applied Materials External
Slide 52: Installed Base by Tool Ship Year
Installed Base by Tool Ship Year 42.5K Tools 29.7K Tools Tool Ship FY '20-'21 '15-'19 '10-'14 '05-'09 '00-'04 <=99 >5k tools shipped prior to FY99 remain FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY'21 in production Longevity of Applied tools far exceeds depreciable lifetime Applied Materials External
Slide 53: Service Intensity Growth Further Increases TAM
Service Intensity Growth Further Increases TAM Growth >1.65X $14.5B CAGR ~9% FY15-FY21 $8.7B TAM Growth: ▪ 2/3 from installed base growth ▪ 1/3 from service intensity growth FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY'21 Parts & Services TAM (Installed Base) x (Service Intensity) = TAM Applied Materials
Slide 54: Parts and Services Share and Revenue Growth
Parts and Services Share and Revenue Growth Systems Under Revenue per Tool Parts & Services Revenue Growth Subscription Agreement >14.5k $4.2B ~10k Growth >2.1X 3X CAGR ~13% 1X FY’15 FY’21 Transactional Comprehensive Service Agreement $2.0B Revenue per Tool Share of TAM ~1.5X +6pts 29% 23% FY’15 FY’
Slide 55: Capturing TAM Share
Capturing TAM Share TAM Share TAM Capture ▪ >1,700 200mm tools under subscription $14.5B agreement +6pts 29% ▪ 200mm parts and TAM capture between 23% $8.7B FY’15-FY’21 was 38% services revenue up >20% FY’15 to FY’21 FY’15 FY’21 FY’15 FY’21 Growing 200mm tools Capturing higher share from newer tools
Slide 56: TAM Capture Opportunities
TAM Capture Opportunities Surface Technology Materials Process IT Network Scientists Engineers Engineers of Yield Experts Industrial Management Engineers Experts Proprietary Servers Digital Remote Video Assist Tailored Tools Supply Remote Fleet Optimizer Chain Remote Tool Assist Applied Materials Ex
Slide 57: Service Offerings Continuum – Today & Tomorrow
Service Offerings Continuum – Today & Tomorrow AGS Service Offerings AIx™: Actionable Insight Accelerator ChamberAI™ ML algorithms Performance Services Comprehensive Production Service Agreements Parts Assurance Assurance Services AppliedPRO™ Services Transactional Parts & Services Digital twin mode
Slide 58: Resiliency of AGS Services Model
Resiliency of AGS Services Model 13% 200mm and below systems ▪ Correlated with fab capacity additions Recurring parts, services and software 87% ▪ Correlated with wafer starts and fab utilization 87% ▪ Tends to deliver steady revenue growth Applied Materials External
Slide 59: AGS Performance During 2019 WFE Correction
AGS Performance During 2019 WFE Correction Revenue AGS Recurring Revenue Versus Wafer Starts AGS Revenue Versus 2019 WFE ($B) WSPM 90 WFE 1.6 300mm Wafer Starts* (M)9 5.0 Total AGS Revenue 87 80 Recurring Revenue 1.4 8 Subscription Revenue Subscription Revenue Transactional Revenue 70 Transactional
Slide 60: Subscription Agreements Growing as a % of Recurring Revenue
Subscription Agreements Growing as a % of Recurring Revenue Average Service Agreement Tenure (Years) Service Agreement Avg. Tenure Transactions 2.5 2.3 1.9 >60% ~1 >50% >40% >40% >50% >60% Subscriptions FY'13 FY'20 FY'21 Today FY’10 FY’16 FY’19 Renewal Rate ~90% Applied Materials External
Slide 61: Fab Regionalization
Fab Regionalization Planning ▪ AGS delivers resources to customers as they ramp fab projects in new geographies Fab Supply Expertise Chain ▪ Ability to support global Enabling customers has grown Customer substantially in recent years Success Digital Logistics ▪ Signed largest subscription & Tools a
Slide 62: AGS Revenue Tracking Ahead of Analyst Day Goals
AGS Revenue Tracking Ahead of Analyst Day Goals Revenue 7.0 ($B) Actual/Guide ▪ Tracking $500M ahead of High Case ($100B WFE) 6.7 Base Case ($85B WFE) base case 6.5 Low Case ($70B WFE) 6.1 ▪ Tracking $250M ahead of 6.0 high case 5.6 5.6 5.5 >60% 5.0 >50% >40% 4.5 4.0 FY’20 FY’21 FY’22 FY’23 FY’24 Ap
Slide 63: AGS KPIs
AGS KPIs FY’15 FY’20 FY’21 AGS Recurring Revenue (Parts, Services, Software) $2.1B $3.7B $4.4B Recurring Revenue under Subscription Agreement 47% 62% 59% Installed Base 29.7k 39.7k 42.5k Parts and Services Total Available Market (TAM) $8.7B $13.3B $14.5B Recurring Revenue per Tool $70k $92k $103k Sy
Slide 64: TechInsights Revenue Reporting: WFE and Services
TechInsights Revenue Reporting: WFE and Services Total WFE + Service ($M) Adjusted WFE ** Service * Company Rank 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 1 Applied Materials 14,016 13,468 16,365 22,387 10,869 10,224 12,540 17,878 3,147 3,244 3,825 4,509 2 ASML 12,816 12,770 15,396
Slide 65: TechInsights Services Revenue Analysis
TechInsights Services Revenue Analysis Applied Materials Top 5 SPE Companies 2021 $5.9B $5.2B $5.55B $5.6B $5.2B $3.8B $4.0B $4.9B $4.5B $4.5B $2.5B $3.1B $2.8B $1.8B $2.0B $2.7B $1.3B 2015 2018 2021 Company A Company B Company C Company D Applied 81% 82% 87% 50% 69% 75% 84% 87% Reported services re
Slide 66: Key Messages
Key Messages 1. Applied Global Services is a mostly recurring (~87%) revenue business with a growing proportion (~60%) of subscription sales. 2. Large total available market opportunity (>$14.5B) continues to grow each year. 3. Insights from the industry’s largest installed base of advanced systems
Slide 67: Cll arenas.
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