Applied Materials (NASDAQ:AMAT), the world’s leading supplier of manufacturing solutions for the semiconductor, display and solar industries, reported results for its first quarter of fiscal 2012 yesterday. Net orders in last quarter stood at $2 billion against net sales of $2.19 billion. Operating income was $179 million, and net income was $117 million. Applied also completed the acquisition of Varian Semiconductor Equipment Associates, Inc. during the quarter.
Continuing the trend from previous quarters, Applied’s reported EPS was higher than the estimates yet again, making the shares climb upwards of $13, around 15% higher than our estimate of $11.50.
Increased orders signal a better 2012
Silicon Systems Group orders were $1.42 billion, up 53% reflecting increased demand in foundry and the addition of Varian’s business. Net sales were $1.34 billion, up 26%. New order composition was dominated by foundry at 57% of orders and memory at around 30% of all orders. Logic and other devices accounted for rest of the orders.
Applied Global Services sales were $534 million, down 15% due to lower wafer starts. Operating income was $107 million. Display sales were $104 million, down 39%, and operating income was $5 million. Energy and Environmental Solutions sales were $207 million, down 34 percent reflecting solar industry overcapacity. The segment had an operating loss of $23 million.
Mobile devices driving growth in semiconductor capital spending
The mobility trend is driving growth as smartphone sales surpassed PCs. Around 600-700 million smartphones will be sold in 2012. In addition, the tablet market is also expected to grow by more than 60% this year on top of 65 million units sold in 2011.
Smartphones and tablets are driving demand for application processors, the production of which is being shifted to lower die sizes. As a result, foundries are aggressively investing to ramp up production at the 32nm and 25nm nodes. Applied’s last quarter orders saw a 75% increase in revenue from these customers and a sequential growth of over 40% is expected in the next quarter.
Mobile devices are also driving NAND bit growth rate, which is expected to exceed 70% this year. As a result, NAND manufacturers are investing in new capacity and moving to the 2x and 1x node.
We are in the process of updating the model and revising our price estimate for Applied Materials.