Dive Brief:
- Semiconductor manufacturer Applied Materials is expanding production of its most advanced chips as it works to bring the technology to more customers in global markets, executives said on an earnings call last week.
- Applied Materials is particularly betting on one of its most talked about chip designs, the gate-all-around transistor, to drive overall revenue, which was relatively flat year over year at $6.65 billion, and down from $6.71 million last quarter.
- CEO and President Gary Dickerson noted on the call that the gate-all-around technology is expected to earn $2.5 billion in revenue this year, with the potential to more than double that number in 2025.
Dive Insight:
Applied Materials is focused on producing chips that can power AI technologies.
"In terms of impact and scale, I believe AI will be the biggest technology inflection of our lifetimes,” Dickerson said on the call. "And at the heart of AI are some of the world's most sophisticated chips."
The California-based company has chip technology in four areas that power AI data centers — leading-edge logic, compute memory or high-performance DRAM, high-bandwidth memory and advanced packaging.
For its gate-all-around transistors, the transition to high-volume manufacturing will increase Applied Materials’ market from $6 billion to $7 billion per 100,000 wafer starts per month.
To further its AI chip technology ambitions, the company is also investing heavily in research and development efforts, spending $3 billion a year on the work, CFO and SVP Brice Hill said on the call.
Applied Materials is hoping this work will help customers integrate the technology into their own manufacturing operations faster to boost output and performance. The company saw record revenue last quarter in its service business at $1.53 billion, coming from subscriptions in long-term service agreements, Dickerson said.
China remains a key driver for the chipmaker's growth. The country made up 45% of the company's revenue in Q1, which Hill said he expects to fall back down to roughly 30% now that multiple shipments to customers in China had been filled.
The company said it will focus on the foreign business in the future and is closely monitoring around 30 factory projects in China that are expanding capacity and ramping up production of its gate-all-around transistors and interconnects, which is the wiring used to transmit data.
"We think that the China market will be very large and important market for us going forward," Hill said. "We said we don't see a cliff for that market, and I think we'd stick by all those remarks at this point.”
Yet Applied Materials’ dependence on China might take a hit after recent U.S. sanctions and increased scrutiny over the company's business in the country.
In late March, the Biden administration released revised rules that will further tighten China’s access to U.S. AI chips and chip-making tools, according to a report from Reuters. A month before, Applied Materials received subpoenas from U.S. government authorities inquiring about the company’s China shipments.
