Semiconductor Equipment - Berenberg Bank

Applied Materials Inc
Technology Hardware
We remain cautious about the likelihood of a 2-4% share gain
AMAT is aiming to gain a 2-4% WFE market share by 2016, specifically in etching
and process control. As per Figure 3, the 2-4% share gain is an important element
of AMAT’s bull-case 2016 projection, and accounts for 28% of peak $2.15 EPS.
Compared to a flat market share, the extra 2% and 4% share gain would contribute
a 7% and 10% EPS CAGR respectively.
Figure 3: 4% share gain contributes 27% $2.15 EPS
AMAT projection
Berenberg
2012 0%
2%
vs
4%
vs
1%
vs
2016
share gain share gain 0% share gain share gain 0% share gain share gain 4% share gain
Share gain 0% 2% 4% 1% -3%
% of WFE 18% 18% 20% 22% 19% -3%
WFE $bn 29.7 37 37 37 37
SSG revenue $bn 5.5 6.7 7.4 11% 8.1 22% 7.0 -13%
Other $bn 3.2 4.3 4.3 4.3 4.3
8.7 11.0 11.7 7% 12.4 13% 11.33 -9%
GM % 40.9% 45% 46% 1% 46% 1% 44% -2%
Opex % 25.0% 20% 20% 0% 20% 0% 20% 20%
Opex $bn 2.2 2.2 2.3 7% 2.5 13% 2.3 -9%
Op% 15.9% 25% 26% 1% 26% 1% 24% -2%
Op profit $bn 1.4 2.7 3.0 11% 3.2 18% 2.7 -16%
tax rate % 26% 22% 22% 0% 22% 0% 22% 0%
EPS $ 0.75 1.55 1.95 26.1% 2.15 39% 1.70 -20.9%
EPS CAGRvs 2012 20% 27% 30% 23%
No. shares mn 1,275 1,140 1,140 1,140 1,140
Source: Company data, Berenberg estimates
In our opinion, AMAT will gain a 1% WFE share by 2016/2017, but it would be
challenging to gain a 2-4% share as:
1) from 2004 to 2012, AMAT’s share in WFE was between 15-20% (Gartner
data), and it has never before gained more than a 1.1% share within any threeyear
timeframe;
2) AMAT only addresses 72% of the WFE market (Gartner data), so to gain a
further 2-4% share of the total market, it would need to gain by 3-6% from its
current customer base. We consider this to be a challenging target as the
market is highly consolidated and AMAT’s competitors are all also trying to
expand/maintain market share;
3) it may gain 1% share in etching market as silicon etching market expansion,
which is less than 1% WFE share;
4) it may gain a maximum 5% market share in process control, which is a 1%
WFE share, as the process control market is 16% of WFE spending at peak;
5) we do not think AMAT will gain a 4% market share through acquisition in the
etching or process control markets.
Etching – we expect AMAT to gain a 1% share
The etching market is dominated by LAM, which has a 47% market share.
According to Gartner’s forecast, the etching market will remain about flat between
2012 and 2016: although silicon and metal etching will grow, dielectric etching is a
segment in decline.
By our calculations (see Figure 4), AMAT can achieve a 1% etching market share
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