Infrastructure & Cities

Applied Materials: Continued growth in Asia

March 29, 2012

Asia

March 29, 2012

Asia
Our Editors

The Economist Intelligence Unit

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Applied Materials, with revenues of more than US$10bn in 2011, is the world’s largest supplier of manufacturing equipment and services for the semiconductor, flat-panel display and solar industries. “About 75% of our revenue comes from Asia, up from about 50% a decade ago. We have a significant presence throughout Asia in China, Taiwan, Singapore, India, Japan and South Korea, and are continuing to grow our footprint in the region,” says Russell Tham, regional president of Applied Materials South East Asia.

Since establishing itself in Asia more than 20 years ago with sales and technical support functions, Mr Tham says that the company has added “strategic and operational roles to cater to a market base that is shifting to Asia, and to improve cost competitiveness.”

“Competition to keep up with Moore’s Law, which drives increasingly advanced semiconductors, has resulted in a trend of consolidation for our semiconductor manufacturing customers, as well as ever increasing capital investment required to achieve the profitable economies of scale,” Mr Tham says, in explaining the high investment barriers involved in the semiconductor industry.

He believes the PE sector itself is increasingly capital intensive, particularly with the development of technologies such as three-dimensional integrated circuits, which require “significant RD&E [research, development and engineering] resources and investment that are only available to global players.” Mr Tham suggests that competition-driven consolidation among the PE industry’s customers could lead to a similar consolidation in the PE industry itself. In May 2011, Applied Materials acquired Varian Semiconductor for US$4.9bn and in November 2009, it paid approximately US$364m to buy Semitool, another semiconductor company. Similarly, wafer fabrication equipment supplier Lam Research agreed to buy rival Novellus Systems for US$3.3bn in December 2011.

To gain a competitive advantage, says Mr Tham, PE companies will have to invest in R&D “to address an increasing number of technology inflection points in order to enable Moore’s law and produce newer technologies at ever cheaper costs.” He adds that these innovations will involve new materials, unique integrated circuit design architectures, novel patterning structures and larger substrates. “The trend of globalisation has also seen companies optimise their global footprint through the development of lower cost operations and supply chains, especially in Asia,” he adds.

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