Here Is Why Applied Materials Might Witness Strong Growth In The Near Term
Despite Gartner’s forecast of a 2% decline in capital spending for 2016, Applied Materials (NYSE:AMAT) is expected to experience strong growth in coming quarters as its key customers — Samsung, Taiwan Semiconductor and Intel — are expected to ramp up their capital expenditure in the current fiscal year. Because of this, Applied should witness strong orders and revenues in the near-term. Further, Gartner’s forecast of 2% decline in capital spending in 2016 is a slight improvement over its previous forecast of 4.7% decline. As major technology inflections such as 3D NAND transitions and 10-nanometer conversions come into play, competition is expected to intensify among the top semiconductor manufacturers. In an effort to maintain their market share, semiconductor manufacturers will have to increase their capital spending to advance their manufacturing capacity to implement the latest technologies.
In the analysis below, we show how the top three semiconductor manufacturers constitute a major portion of Applied’s revenues. Further, the capital expenditure forecast for the company’s major customers shows why it might see strong growth in the near-term.
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