Enabling Bigger Waves of Growth Dan Durn Chief Financial Officer 2017 ANALYST DAY External Use
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 timin g 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 | External Use
Dan Durn CFO of Applied Materials 2017 – Present Applied Materials | CFO 2015 – 2017 NXP Semiconductors | CFO 2014 – 2015 Freescale Semiconductor | CFO 2011 – 2014 GLOBALFOUNDRIES | CFO 2009 – 2011 Mubadala Development Company | Head of Technology M&A and Strategy 2000 – 2009 Goldman Sachs | VP, M&A Group Columbia Business School | MBA Education US Naval Academy | Control Systems Engineering 63 | External Use
New Waves Exponential Unit Growth A.I. + 10s of BILLIONS Big Data Era Mobile + BILLIONS Social Media Era www PC + Internet 100s of MILLIONS Era 2000 2010 2017 2020 64 64 | External Use
New Waves Exponential Unit Growth CPU GPU TPU FPGA ASIC HIGH-BANDWIDTH MEMORY A.I. + 3D NAND Big Data Era OLED ARM SOC STACKED MEMORY Mobile + NAND STORAGE Social Media Era LTPS LCD www X86 CPU PROCESSOR DIMM MEMORY PC + Internet HDD STORAGE Era LCD DISPLAY 2000 2010 2017 2020 65 65 | External Use
New Waves New High Value HIGH PERFORMANCE LOW POWER Engineering Problems COST-EFFECTIVE A.I. + SCALING Big Data Era ADVANCED DISPLAY HIGH PERFORMANCE Mobile + LOW POWER INNOVATIVE DISPLAY Social Media Era www PC + Internet HIGH PERFORMANCE Era 2000 2010 2017 2020 Avg. WFE Avg. WFE Avg. WFE $25B $32B $45B σ = $8B σ = $3B σ = 2000 – 2009 Gartner. 2010 – 2016 Gartner. Average WFE 2017 – 2020 based on Applied estimates. 66 66 | External Use
APPLIED’S Reporting Semiconductor Segments Systems Display Services 67 | External Use
APPLIED’S Portfolio Leadership High-Growth of Businesses Semi Semi Display Services 68 | External Use
High Performance Leadership and Low Power High-Growth Semi Semi Display Services 69 | External Use
Cost-Effective High-Growth 2D and 3D Leadership Semi Semi Scaling Display Services 71 | External Use
Leadership High-Growth Semi Semi Services Bigger, Better Display Displays 73 | External Use
Leadership High-Growth Semi Semi Display Services Complexity Management 75 | External Use
High Cost-Effective Performance 2D and 3D Leadership High-Growth and Low Power Scaling Semi Semi Display Services Complexity Bigger, Better Management Displays 76 | External Use
Applied’s Portfolio FY'13 – FY'17E REVENUE OP% CAGR GROWTH Leadership Semi 14% Leadership High-Growth Epi, PVD, CMP, Implant, Thermal Semi Semi +15pts High-Growth Semi 27% Etch, CVD, Process Control Display 29% +11pts Display Services Services 11% +6pts Total Applied 18% +14pts FY’17E estimates reflects midpoint of Q4 fiscal 2017 guidance. Operating Margin (OP%) is a non-GAAP adjusted measure. Presentation also reflects allocation of corporate costs based on revenue and headcount. 77 | External Use
Leadership Semi Business Enabling high performance and low power logic and memory MARKET SHARE PRODUCTS 2016 2017E Epi 90% ~ EPI, PVD, IMPLANT, CMP, PVD 74% THERMAL Implant 73% ~ CMP 66% Thermal 50% Strong and Growing Share Enabling | Unique | Valuable 2016 Market Share based on Gartner. 2017E based on Applied estimates. All market share data is calendar year. 78 | External Use
Leadership Semi Business Epi, PVD, Implant, CMP, Thermal Highly Differentiated Focused on Enabling $1B of Incremental Products with Power and Performance Revenue by 2020 Strong Share Roadmap Clear #1 across Critical to realizing Advanced transistor all businesses A.I. and big data and interconnect Selective deposition Logic-like processes in memory 80 | External Use
High-Growth Semi Business Enabling cost-effective 2D and 3D scaling 2017E vs 2013 APPLIED PRODUCTS TAM REVENUE ETCH, CVD, PROCESS Etch ~2.6x >3x CONTROL CVD ~2.4x ~3x e-Beam * ~1.4x ~2x Winning with Innovative New Products Enabling | Growing | Innovative TAM (Total Available Market) growth based on Gartner data for 2013 and Applied estimates for 2017 * e-Beam Technology: Defect Review, CD SEM, E-beam Inspection 81 | External Use
High-Growth Semi Business Etch, CVD, Process Control Fastest Growing Innovation Leader $2B of Incremental in the Fastest with Strong Revenue by 2020 Growing Markets Product Pipeline +8 points share 55% of revenue Strong pipeline gain in memory from new products including selective since 2013 dep and etch Sym3 >1,800 chambers +10 points share Next generation Selectra gain in patterning 3D NAND scaling >500 chambers since 2013 Materials-enabled patterning Share gain from 2013 to 2017E. 2013 market share based on Gartner. 2017E based on Applied Materials estimates. All market share data is calendar year. 83 | External Use
Display Business Outperforming the market DISPLAY EQUIPMENT SPENDING ~2.3x >$18B $8B 2013 2015 2017E DISPLAY REVENUE ~2.8x $1.9B PVD CVD OLED TFE* $0.7B FY13 FY15 FY17E Display equipment spending based on Applied calendar year estimates * Thin Film Encapsulation 84 | External Use
Display Business Highly Differentiated Sustainably Outperforming Leadership Products + Higher Market the Market Strong Growth Pipeline Equipment market Fastest growing Expanding portfolio doubling from business segment of enabling 2013 to 2017 technologies Capitalizing on emerging OLED wave Served market Driven by area including AR and VR growing from 15% growth and to 40% by 2020 capital intensity 86 | External Use
Services: Accelerated Growth in $16B Market SERVICES REVENUE $4.5B +15% CAGR Strong customer pull to improve and accelerate SERVICE AGREEMENTS yield and output >6K tools under tech-enabled service agreements +11% $3.0B CAGR Increasingly complex processes and costs COMPLEXITY $2.0B INSTALLED Largest installed base of 38K* tools and growing BASE High utilization at leading and legacy fabs FY'13 FY'17E FY'20F * Includes Semi, Display and other 87 | External Use
Residual Value in Our Overall Semi Business Spares and > 30% Services 200mm Equipment OF OVERALL SEMI REVENUE 300mm Upgrades / Refurbs Based on FY’17E Applied revenue estimates 88 | External Use
Applied’s Revenue Diversity Spares and 200mm Services Equipment > 40% 300mm Upgrades / OF TOTAL REVENUE Refurbs Display Based on FY’17E Applied revenue estimates 89 | External Use
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