Splinter: ‘Very Dynamic Environment’ Now
Applied Materials executives said customer confidence is improving, but cautioned that the company is seeing "a very dynamic environment" in all of its major segments. China's stimulus plans may continue to support cellphone and PC consumption there, said CEO Mike Splinter following release of fiscal Q2 financial results.
David Lammers, News Editor -- PV Society, 5/12/2009
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Applied Materials Inc. (Santa Clara, Calif.) executives described an improving business climate during a conference call following release of the company’s Q2 financial results Tuesday, with CEO Mike Splinter saying that “customer confidence is growing.”
Applied had revenues of ~$1B in the quarter ending April 26, 2009, a decline of 24% from the previous quarter, with only $649M in orders. The company incurred a loss of $255M during the quarter, including a sizeable writedown in the value of its investment in joint venture Sokudo, the track business it runs with Dai Nippon Screen (DNS, Kyoto, Japan).
CFO George Davis said Applied is seeing “a level of demand not seen in a decade,” forcing layoffs of 1600 full-time employees and 300 temporary staffers by the end of the quarter. By the end of Applied’s fiscal year, Applied plans to cut 2300 staffers, he said.Overall revenues for Applied will be flat to down 15% for the current quarter, Davis estimated.
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| Demand is improving worldwide, but world economies remain weak, Applied Materials executives said. Shown here is the distribution of $649M of new orders in Q2. |
Splinter said much of Applied’s future depends on improving worldwide demand for LCD televisions, cellphones and PCs, with China’s stimulus plan for cellphones and PCs playing an important part of any improved picture during the summer. “Adoption of the DDR3 DRAMs is one of the major factors for our customers to add leading-edge capacity,” he said. “And a lot of that depends on the question: Is demand picking up for PCs?”
Splinter said total demand for wafer fab equipment will be in the range of $8B to $11B this year for all suppliers. The recent uptick in orders and customer confidence is fragile, he said, adding, “We are in a very dynamic environment, in which one or two customers can make all the difference in the world.”
In most of Applied’s major segments — silicon, displays, solar and services — Applied is seeing a “rate of decline that may be slowing,” Splinter said. Over the past few months, DRAM bit prices have increased by ~30%, with the stronger pricing supported by a ~20% cutback in DRAM production. Foundries have seen capacity utilization improve from &50% to 70% by the end of the fiscal second quarter, Splinter said. The display business is being supported by an estimated 10% improvement in LCD television demand this year. Also, some display manufacturers will move to larger Gen 10 substrates by the second half of Applied’s fiscal year, he said. Demand for spare parts is increasing, a harbinger of better things to come.
In the solar area, Applied has signed off on five of its turnkey Sunfab thin-film fabs thus far, including four this year and three more expected by the end of this fiscal year. Splinter was repeatedly asked about customers’ ability to raise capital for future solar factories.
“The little solar companies in China are failing because they can’t sell their products,” Splinter said, adding that “the bigger players can get money” for capacity expansions. The cost per watt will decline to less than a dollar next year from a large-capacity Sunfab line, Splinter said.
Revenue from the company’s crystalline silicon and thin-film solar activities was down ~30% for the quarter. Davis said Applied expects to get to 9% efficiency rates on its Sunfab lines this year and 10% next year, adding that roughly a fourth to a third of the company’s R&D funds are being spent on solar.
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