‘Some Encouraging Signs’ at High End of Displays: Applied Materials CEO
All Applied Materials factories and R&D labs “are running smoothly at pre-COVID levels of productivity,” said CEO Gary Dickerson on a fiscal Q3 call Thursday. “We remain mindful of global economic concerns and that consumer spending is a potential headwind for many sectors, including the electronics industry.” The company supplies vapor-deposition equipment and services to Chinese panel makers and can be a bellwether of display industry health.
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Applied’s display revenue outlook for fiscal 2020 ending late October is "unchanged" at $1.6 billion, “and we expect 2021 to be similar,” said Dickerson. Its display business did $1.65 billion in sales in fiscal 2019 and $2.3 billion in 2018. The stock closed up 3.9% Friday at $67.62.
The supplier is seeing “some encouraging signs” at the high end of the display market, “specifically robust demand for 8K screens and the adoption of OLED in TVs, said Dickerson. “We remain optimistic about the long-term opportunities for Applied in the display market, as we focus on addressing future technology inflections and expanding our available market.”
COVID-19 restrictions are stimulating “many changes in the way companies in the industry are operating,” said Dickerson. Applied initiated thousands of “digital support sessions” for customers' augmented reality and video since the pandemic hit the U.S. mid-March, he said. It also held more than 900 training sessions with field support engineers using virtual reality and live distance learning, he said. Applied “fully restored” R&D lab productivity to pre-pandemic levels, “while bringing only a fraction of our engineering staff onsite,” he said.
The company views the display sector as “a great opportunity to take core technology into adjacent markets and drive enhanced revenue and cash flow for the company,” said Chief Financial Officer Dan Durn. “We know we're at a cyclical bottom. The market continues to bounce along the bottom."
There are “opportunities going forward” for the display market to grow “structurally larger off the levels that we're at now,” said Durn. The robust demand for OLED and 8K TVs at the high end typifies a “strengthening, post the initial stages of COVID, that gives us some confidence as we look into 2021.” he said. The growth of OLED TVs and the coming of age of flexible and foldable smartphones are “technology inflections” that are more “capital-intensive than the current generation of technologies,” said Durn. “We think there's some growth on the horizon in this market.”