Thank you for coming everyone. I'm Stacy Rasgon, hopefully you know. I'm Bernstein's senior analyst. I cover the US semiconductor and semiconductor capital equipment space. And it's my honor to welcome our guests here today, Gary Dickerson, the president and CEO of Applied Materials. Before we get started I want to remind you if you have questions you'd like to ask during the presentation you should have a link to our pigeonhole forum where you can submit those and we will have time for Q&A at the end. So look, Semicap's been pretty remarkable um we've had a renaissance in the industry over the last several years but it's really shifted into overdrive recently as ai has gone mainstream the demand profiles that we're seeing are calling for i mean just simply more more chips more wafers more tools in that world like companies like aim at the contributions that they are bringing to that world are more important than ever as materials driven innovation moves to the forefront of process technology development and enables the industry to satisfy this incredible amount of demand that at least for now we still have. And to tell us all about what he thinks about it, it gives me great pleasure to welcome Gary. And I've been looking forward to this conversational conference, so this should be fun. Gary, thank you so much for coming.
Oh, thank you, Stacey. Really glad to be here. Always fun to hang out with you.
So like, maybe just to start on that point, I mentioned sort of a renaissance. So it wasn't that long ago that $100 billion in WFE was seen as just like aspiration. And we've blown through it, right? We might be 50% higher than that, like this year and growing. Potentially like for multi-years, I mean you guys have talked about significantly increased visibility and a multi-year long-term growth cycle. So maybe just to start there, I mean, clearly this is all driven by AI. AI is sort of dragging everything in the space along with it, which certainly helps you guys. And what has AI actually done for wafer and equipment demand? Why are we seeing what we're seeing right now in this environment? And maybe as you go through your, think through the business and the different segments and how AI is impacting all those, whether it's logic or DRAM or packaging.
yeah i mean again uh ai is the biggest technology inflection of our lifetimes really and we're using ai inside applied materials i want to ask about that a little later but innovation product development operation supply chain our service engineering process engineering you know and for me the really uh big driver is top line growth i mean certainly we're going to be more efficient and more productive but i will bring multi-billion dollar products to market faster, even some later this year, using AI technologies. And we will make our service engineers more productive so that we can deliver higher value services and increase the compound annual growth rate for that business. And so, you know, I think that, again, this is just driving tremendous computing demand. And for Applied Materials, we're the leader in materials innovation in the most important and fastest growing segments that are enabling AI. So leading edge foundry logic, DRAM, and advanced packaging, those three segments are way more than 80% of the incremental WFE spending in 26. We think that profile continues going forward. And you talked about all of the discussions with customers. I'm in very frequent discussions with customers on delivery times, and we can talk about that. We've done a lot to improve our operations and supply chains, so we have ramp agility. But the other thing, again, I'm meeting CEOs and R&D leaders all the time, is the AI computing innovations. So one thing everybody's focused on is tokens per second per watt. Tokens per second is performance. Per watt is power and cost. And again, those three segments, leading edge foundry logic, DRAM, and advanced packaging are the most important for chip architecture innovations. So again, Applied is the leader. We've said we're growing our systems equipment business more than 30% this year, mid-50s gross margins, and continuing to go higher. So again, that's making a major difference for Applied. And then advanced packaging is the other segment that is growing very quickly. Again, those architecture inflections, how you connect computing components together and how you move the data is incredibly important for tokens per second per watt. So again, Applied has the most enabling portfolio. We're in deep engagements, deeper and longer than ever before, because we're co-innovating with our customers. So we're out 10 years in the future, multiple technology nodes, and Applied is the key enabler of those new chip and packaging AI architecture inflections with this materials innovation portfolio that we have. So I've never had more fun, Steve.
We can see that. I want to take those three segments one at a time. We talked about meeting edge logic and DREM and packaging, because I do think those are the, I agree with you, I think those are the three, at least at this point, are probably driving the majority of what we're seeing. And maybe to take them one at a time, maybe to start with advanced logic and foundry, what is it that you're doing? You've talked a lot about things like gate all around. What is it that AMAT's doing and how is that actually driving the business today?
Yeah, so again, for AI, every node in FoundryLogic gives you something like 30% power, 15% performance. Do they still do that, by the way? Well, nearly that, I would say. And so, you know, if you look at the transistor, Applied is by far the leader. and also for wiring. It's a multi-billion dollar business. And I tell everybody in your smartphone, you have a processor chip with 20 billion transistors, 60 miles of wiring, and it costs $30. So what we do in the semiconductor industry is we're delivering miracles every year. I mean, that's basically what... As I've said, I'm amazed any of it works at all. And so, again, for gate all around, which is how you process the data in a transistor. There are more innovations on next generation gate all around. In the future, they're going to stack NNP transistors for CFAT. In the wiring, there are tremendous innovations. Customers are also putting the power lines on the backside of the wafer, which gives them better power performance, 30% area scaling. So all of those areas applied, as those architectures are adopted, we'll capture over 50% of those available markets and gain share. And so what we've said for foundry logic is with gate all around and backside power, it increases our revenue per wafer start about 30%. So we're gaining share. You gave one, I can't remember what it was. Yeah. So basically the combination of transistor and wiring goes from 12 to 14 billion and then for 100,000 wafer starts, but there's also share gains for us. And one thing I would say that is also very different, and this is, we can talk about DRAM or Foundry Logic that's changed in my time in the industry. I think in the past, Applied was more providing equipment to customers. But over the last seven or eight years, we've built a team of integration innovators that are as good as any of our customers. And in a transistor, you have something like 500 steps and wiring as many steps. And so there's co-innovation and co-optimization across that flow. And about 30% of our revenue is also integrated systems where we're combining multiple technologies under vacuum because some of these films are an atom or two atoms thick. And so if you go to air, you oxidize, you damage electrical properties. So I think one thing that is really important for applied materials in enabling these AI computing innovations is this portfolio we have, our ability to optimize. And that's why our customers are joining Epic. That's why we have these very, very deep partnerships with these customers, enabling AI computing innovation. So FoundryLogic is certainly an area where Applied has tremendous strength, and we will grow share as these new architectures are adopted.
I'm going to get back to the Epic Center stuff in a moment. But I want to talk about DRAM now. You picked up, I can't remember, something like 10 points of market share over 10 years in DRAM.
Overall DRAM spending. Overall DRAM spending, yes.
And now, I mean, clearly, I mean, if I'm looking at, like, one of these AI racks, and I look at, like, just the wafer area of the semiconductors within those racks, I mean, HBM DRAM must be 80% plus. There's a lot of DRAM that's going to come.
Oh, no question. And then HBM, you have to start three or approaching four times the number of wafers because you're stacking and you have, you know, some yield loss to have the equivalent number of bits versus standard DRAM. So, I mean, that, obviously, DRAM demand is extremely high. And, you know, for applied materials, again, as you said, we gained 10 points in a little over a decade in overall DRAM share. And applied is by far the leader in, you know, wafer fab equipment, process equipment for DRAM. And so there, again, for AI computing, people want really fast memory. And so in the CMOS logic, they're innovating with MetalGate and new versions of MetalGate, where Applied, again, has very, very high share to go faster. They're moving to FinFat, where, again... This is the logic portion of the DRAM. Logic portion of the DRAM, because, again, how you move the data is incredibly important. So those are all areas where Applied has tremendous strength. So, and again, we're in these multi-node, many-year engagements with these different customers. We have a great portfolio of products, and we're also in these high-velocity co-innovation relationships with customers. So, as they're innovating with the CMOS logic for higher speed, as they're innovating for a vertical channel transistor for F-squared or 3D DRAM, again, we have very deep partnerships, just like we do in Leading Edge Foundry Logic, where those innovators, integration teams, architecture teams are working with applied materials, creating those future architectures. So what we've said in DRAM is that, again, we're positioned as these new architectures are adopted, the CMOS logic, the 4F squared, the 3D DRAM, for significant share gains continuing what we've been able to deliver in the last little over a
decade. What kind of time frames are we talking about for like 4F squared or 3DDRAM? Well, I'd
rather have the customers give those timelines. So, you know, people are extending 6F squared
and then between the three... 4F squared would be a smaller cell size, so higher density of the of the memory bits on the...
Yeah, higher performance, lower power, higher area density, all of those things. But again, you know, the bets that people are placing are not exactly the same in terms of timelines. You know, so I'd rather have them talk about... But that's coming over the next... Again, the CMOS logic is the most near term because high-speed memory is so important. And that's, again, a tailwind for Applied from a market share standpoint. And then most people are 4F squared and then 3D DRAM in that kind of sequence. And that's going to happen over the next number of years.
But it really sort of brings home, you really are engaged, I mean, 10 years out. Oh, absolutely.
Yeah, again, for these architectures to be adopted, this is really the strength of Applied's portfolio. If you look at these inflections, when we look at leading-edge foundry logic, when you go to 14A, or 1.4 people use different terminology, or you go to these DRAM architectures, there's somewhere between 5 and 10 key innovations that determine timing of those architectures. Applied is by far the leader. If you look at 3D DRAM, really the top three key technologies are all from Applied Materials. What are those technologies? Well, I don't know if I want to go into exactly what all of those things are. But again, this is where we do this high-velocity co-innovation. Because in some cases, you need an order of magnitude improvement in the equipment to enable the performance, power, cost, yield of those new architectures. And that's where, so for DRAM, again, high confidence that we're going to continue to gain share there. And that's, from a memory standpoint, especially for AI, fastest growing segment in memory. And again, Applied is in a great position. We can talk about Epic, again, how we work with people with all of these architectures.
We'll get there next. But first, I want to talk about packaging because this is another huge, I mean, look, as people, Moore's Law, slowing, which the transistor scaling is slowing, and you have to do other things. Packaging is certainly one of the, how do you put together these different chips in new and interesting ways? And for AI, clearly, it's enormously important. And you guys must be the biggest advanced vendor.
We are. Yeah, we are. So again, packaging, I think, is one of the most exciting inflections in the entire industry. It's really how you connect computing components together. And so Jensen and others, they talk about wanting to make the packages as big as they can to connect as many computing components as possible at the highest density, because it's so important for tokens per second per watt. So Applied, we have, again, a very unique, broad portfolio. That business this year is growing more than 50% for Applied Materials, multiple billions of dollars. And again, we're also deeply engaged through the ecosystem on new packaging architectures. So if you look at an AI server today, in three or four years, the way you connect those computing components are going to be very different than what you see today. So there, again, people want larger body sizes. They want higher I.O. density. Applied has the leading portfolio in enabling those inflections. And we have deep relationships with companies that are currently leading and also companies that are bringing new architectures, new packaging architectures for AI to market in the coming years.
Is this like panel?
Panel is definitely one of those architectures that people are focused on. Again, warpage is an issue for packaging. So if you want to have higher I.O. density, dealing with that is very important. And then just getting a larger body size. I mean, if you look at glass substrates and glass substrates, or if you look at some of our largest customers, tech symposiums, they talk about number of reticle fields that you can connect in a single package. And so this is really important technology. And again, Applied is the leader. We've been investing for a number of years. We knew these inflections were going to have an enormous impact on AI energy-efficient computing. And so, again, over 50% growth this year. And that will be a very high compound annual growth rate for Applied going forward.
And the visibility that you have now seems better than probably you've ever.
Is it ever?
I can't remember what you said. Are you getting like eight-quarter rolling forecasts? Oh, yes.
Yeah. So I'd say the visibility we have in the technology roadmaps, because we're co-creating those roadmaps is better than ever. And also from a demand standpoint, again, frequent conversations with customers on delivery times. And so we do have eight quarter forecasts from every one of our customers and longer commitments from the customers. What's really important for us, again, we did anticipate that WFE could grow a significant amount. So we made investments to nearly double our operations capacity. But in the supply chain, you also need the lead time so that we have that ready to ramp. And so for customers, it's not only that visibility or orders sooner. it's also exact configurations because you need to know what components in the supply chain you need for this for for customers so for us for us to be able to ramp uh to meet the need again we're getting much better visibility uh from our customers than ever got it i guess that gives
you people talk about a multi-year yes they sound pretty confident of that yeah no i look i think
that what we've been seeing is that computing demand is continuing to increase. Recently, people are talking a lot about agentic AI. And so, you know, agentic AI is layering on top of the demand that was already there. And that's more weighted to CPUs. The CPU-GPU ratio is more weighted versus, you know, where we've been. And then also DRAM is up higher. NAND is up higher. What we're modeling is 90% of the incremental WFE is in leading foundry logic and DRAM. So again, and then after agentic AI, you have physical AI. And so...
They never stop again. How much of a constraint is clean room space? I've had this view that Like, as strong as this year is, and this is, we might grow WFE, say, 20% this year. I know you guys have not given a WFE number, but growth is going to be strong. But it's a constrained year, because we don't have the clean rooms. And they're coming online. I guess, how many, you guys always talk about you track that. How many FAB projects are you tracking? What kind of clean room space is coming online? And I don't know if you have a point of view on where growth could be if, like, clean rooms right now were unconstrained. Like, how much unconstrained demand is actually out there?
Yeah. Again, we certainly have a forecast for where we think WFE is going. Base case, bull case, bear case. And it's been hitting at the bull case pretty consistently. I bet objectively, even the bear case probably isn't that bad. No, absolutely. No, absolutely. So we're tracking over 100 fabs. As you can imagine, there are a lot of incremental spending in the areas that are fastest growing. I said, that over 80% is in those three areas. So that's basically what we're seeing. And I think relative to, obviously, with eight quarters, we have great visibility into 27. And from my perspective, I think AI, again, really changes how we work, how we live. I look at, I told you earlier, how we're using AI inside Applied Materials. The ROIs are tremendous, and we can see already that we are accelerating product time to market. So, you know, I believe that demand, this is a multi-year wave that, you know, Applied is in the best position because we're leading in the fastest growing segments that are enabling the tokens per second per watt.
Got it, got it. So let's talk about this co-innovation with customers. Tell me about the Epic Center. Yeah, so... It's like it's coming into its own now.
It is, yeah. We've announced 10 partners for Epic. We have TSMC, Samsung, Micron, Hynex, Broadcom. We have Adventist, Screen, some universities. You'll see more announcements coming. And again, this is what I said earlier. Relative to the chip and packaging AI architecture inflections is incredibly important for the ecosystem, but certainly for our customers, because whoever's first to market with design wins, that has an enormous impact on their business. So Applied, we have these new innovations that will enable these new architectures in Epic. And so for customers to have first access to those innovations, like I said, some of these technologies, you need an order of magnitude improvement or the architecture won't happen. So having their innovators locating...
So how does it work? So they have personnel in the facility working with your personnel on your tools, developing their processes that they're bringing into production?
Yeah. And again, it's really this co-innovation, high-velocity co-innovation concept. So we have customer reticles. We're focused on enabling those architectures, as you can imagine. And by the way, we focus on high-velocity and secure innovation is incredibly important. So we firewall innovators between the different customers, and we've been doing this for a while, but now having those people co-located, especially, again, in Silicon Valley, within 50 miles, I think, is 40% of the S&P 500, and so if you think about materials-to-systems innovation through the technology stack, which is more and more important when I talk about packaging or talk about chip innovations, those kinds of things, having these people co-located is incredibly important for velocity because you can move in parallel versus a serial process. So our goal really is to accelerate the time to market significantly, incredibly important for our customers. And then for us, being designed in with our equipment and our advanced services for those architecture inflections obviously is really important for our growth going forward. And the other thing I would say that's a real advantage for us is our visibility into those roadmaps, where to invest. If we're creating those architectures, it gives us a great idea how to optimize our R&D. And again, for customers, not only is it important for their design wins, but their R&D efficiency. If you can bring these architectures to market, because every one of them costs an enormous amount of money, there's an incredible efficiency. So this co-innovation, we have very deep partnerships through the ecosystem. And Epic, again, this is where the key materials innovations for chips and packaging will first be available, and we don't have an infinite number of innovators, so having people co-located there really increases that velocity. The stuff they're working on in Epic, how far out is it? Oh, gosh. Again, we have incredible visibility. We know performance yield of every one of these different partners.
Are you working on stuff that's going to be in production in 10 years?
I mean, we're out to, I mean, N2 is ramping now. Next is A14. You know, we're doing A10, A7, A5. So, you know, again, I talked about these miracles, Stacey, that we deliver in this industry. And so, you know, we're working on those miracles that enable those future architectures or, again, the DRAM roadmap. I mean, some of these technologies are extremely compelling for the AI computing, but they're also incredibly challenging to create the innovations that enable those architectures. So we're working, you know, 10 years out in the future, multiple technology nodes. And again, for us, it's being designed in with our equipment and services. Also, it creates a deep strategic relationship with these customers. So when I'm with the CEOs of our customers, we're focused on those future technology nodes. And for them, it's design wins in certain time frames, technologies that they need to hit those roadmaps that is really essential for their business. Do you need other players' tools in there as well?
I mean, I assume there's litho and other things in there.
So we do have partners that are some announced, some that aren't announced relative to those innovation flows. the great thing for Applied is we have more of those innovation technologies than anybody. It's not just the strength of our, people talk about deposition. Again, we have technologies that are completely unique, EPI, PVD, in addition to the rest of our deposition portfolio. So creating the materials, people really also don't understand the modification of the materials. So that's a multi-billion dollar business for us. And then there's shaping, and then also we're the world leader in e-beam technologies for analysis of the materials. But that combination of technologies enables you to create these future transistors or wiring or memory or packaging, all of those things. So I think this portfolio strength that we have in the way we're engaging with customers is really unique versus where we were, let's say, more than five years ago.
Yeah, that makes a lot of sense. I want to talk about the services business. And I guess maybe you can talk a little bit about how it's changed over the last five to ten years. I know there's a lot more. You talk about recurring. You talk about use of AI. I mean, this has got to be an area where we're using AI. So how has this business changed? And maybe talk a little bit about what the services is it brings to you and to your customers.
Yeah. So services, right now we're growing high teens, compound annual growth rate. It's a little over 20% of applied materials revenue. And we've said, you know, through cycle, longer term, we'll grow mid-teens. I think there's an opportunity for even to drive that faster over the longer term. As you can imagine, for customers, one thing that's super important right now is output per square meter. Again, so. Square meter of fab space, you mean. Absolutely. The more output they can have, the better. So yield is really important. Edge die yield is really important. And Applied, you know, I really love this part of our business. We've driven tremendous service innovations. Over two-thirds of our business are service agreements and prescription or subscription revenue. So, you know, that's been growing actually faster than our overall service business. And we have over 35,000 chambers connected to AI servers in customer fabs, and the majority of those are remotely connected. So that is really important because, again, as we're bringing these new service technologies using these digital solutions, we're optimizing output, chamber matching. That's a really important technology. So there are hundreds of thousands of opportunities per year. And again, we're using AI to optimize with all of these different parameters for all of our process tools. But then once we make one golden in high-volume manufacturing, you want to make them all golden. You want the biggest process window to give you the highest yield. And so we're innovating there with these service technologies. We're also innovating with predictive models versus reactive, corrective maintenance. Again, all of those things, I think, are great opportunities for us to grow this. What we've said is, again, kind of mid-teens growth rate going forward. It's a little over 20% of applied revenue today. And I really believe, again, the value of the services are increasing as you're ramping these complex new architectures Great opportunity for Applied.
How much of that growth is like, because it's an installed-based business, so part of it is just the installed-based growing. And some of it is this content per tool, I guess. Revenue per tool, yes. How do those contribute to this? Are either of those accelerating? I've got to imagine maybe the revenue per tool.
Revenue per tool is growing faster than the installed-based. And again, these services, as we're, and again, this is where I'm also focused on AI. In some cases, the dollar per task or hours per task, we're improving many, many, many times. So for me, the real important part is not, you know, are we saving thousands of service engineers? The important part is I can deliver high-value services and scale that much faster and drive the top-line growth with those technologies. So, again, really fantastic opportunity for applied. Got it, got it.
I want to ask about China. There's a few things going on there, clearly. Number one is there's been regulatory and other issues that have impacted your abilities as well as your peers to sell everything you would like to sell. Which is, there's also the growth of local competition. I gotta be honest, one of the biggest questions I get is what is the impact of some of these local players. I think Etch and Deposition are two of the areas where there's probably a larger piece of the TAM is satisfied by the local guys. And as I always say, these are real companies there. They're not jokers, right? Just maybe talk a little about what is going on in China. What do you see on the competition front there? I guess anything you can tell us on the regulatory front one way or the other. I think there's some other stuff coming up, the Match Act and other things that may be coming. How should we think about China?
Yeah, so 25, there was a large increase in restrictions. We had said that our business was restricted about 10%, more than double in 25. So that did have a big impact.
China sales were still very good.
Yeah, and so for today, for us, it's kind of mid-20s as our semi-equipment and service business. So for us, China is really an ICAPS business. the IoT, communication, auto power sensors. And this is where Edge AI is also a driver for that particular market. So in China this year, and in ICAPS globally, we believe that business will be flat to slightly up. How much of your founder logic is ICAPS today, by the way? Well, we haven't, you know, we had said in the past it was kind of equivalent. But actually, again, going forward, the leading edge driven by AI is growing much faster. So we think over time that ICAS will grow kind of mid to high single digits. And if you look at actually data center, wafer starts, this is an interesting statistic, will pass smartphone wafer starts, we believe next year. So, you know, these large die, you're driving a tremendous growth. So again, the growth rate for the leading edge is faster than the ICAPS market. But again, for us, that business is kind of flat to slightly up. We do have innovations. We started our ICAPS group, I remember April 12th, 2019, because I thought that was a really good strategy for applied. We have a great portfolio there. We're bringing new ICAPS innovations to market, new products that expand our total available market, new products in large segments that improve our competitiveness. So we are driving innovations there. We have deep connectivity with customers on architecture innovations and power electronics, this co-innovation, sensors, photonics, a number of different areas where we're engaged. So I think, again, that business, I have high confidence that we'll perform well there over time, but the growth rate is not going to be as fast as the leading edge, which is driven by AI.
Sure, sure. To go back to China, the competition front, the local.
Yeah. So again, that's where we're bringing these new products to market. And if you look at, you know, where we were able to compete, if you take out the restrictions, we performed well in China. And I think that with the pipeline of products that some later this year, some over the next 24 months, will expand our total available market. We have products that will improve our competitiveness. So I think where we can compete, I feel good about our ability to
compete. You can't compete everywhere, unfortunately. Unfortunately, yes. I want to talk about margin. So, you know, and I said this to Tim yesterday, but I always ask you the same question. And it's always, why do your gross margins have to start with a four?
And I don't have to ask that question anymore, right?
Because they don't start with a four anymore. I guess, what's gotten you there, number one? And then number two, how should we think about the evolution of that margin structure going forward? There's a whole bunch of drivers. There's clearly operational efficiencies that you guys are driving. There's mix. Maybe there's pricing. I don't know. Oh, for sure. So how do we think about that?
Yeah, I think that, you know, if I look at our conversations with customers, they're very different. You know, now it's about delivery times, access to our technology innovations to enable the new architectures. So we have been growing margins pretty consistently. I think you're going to continue to see us growing margins, both gross margin and operating margin, a fair amount as we keep going forward. um and so again it's really the value that we're delivering um and pricing you know we have been increasing pricing i think one thing that have you been increasing pricing of like stuff you already sell or is it more on like new both okay yeah and so and again you know different for different situations in terms of how we optimize all of that but again what's really important for customers is that we are able to make the investments in our operations, supply chain, in infrastructure for the deliveries. And what's incredibly strategically important for them is the investments in the enabling technologies for these AI compute architectures for chips and packaging. So again, those are the discussions that we have. And then for me, what I think about is winning these architecture inflections and creating value. If we're creating value, we also have a great opportunity to capture value. And one other thing I would say in the ecosystem, the profit pools are way larger than they have ever been. And so, again, that gives us an opportunity to create value and share value with our customers. And again, I feel really good about our positions in these future AI chip and packaging architectures. And we have an incredible pipeline of new miracles that will enable these architectures and give us a great opportunity to create and capture value.
Maybe on the value capture, you talked some about like integrated tool sets. And I think you said some of it. So does that percentage go up over time? I have to imagine as this stuff, features get smaller and this stuff gets harder. You're not really just selling a single process. You're literally selling a solution. We want to create a film that's this thick and it's conformal and this, and it takes 10 different processes to do. And then how do you think about capturing that incremental value versus sharing it with your customers?
Yeah, so I talked about the 60 miles of wiring, which is kind of mind-boggling when you think about moving data with almost no resistance through a wire, and it's even going higher than that. So, you know, some of these platforms, we have seven technologies integrated under vacuum because, again, if you go to air, you can oxidize those few atom interfaces. So that business of our business is growing, and the number of technologies that we're integrating is also growing. We announced some new ALD technologies, and then, again, in those technologies, the surface interface is really, really important for electrical properties. Our PVD business combined with selective ALD and CVD and copper reflow and all of these kinds of things, that's a unique capability Applied has to enable these future architecture inflections. And then it's not only the integrated products, the strength of our portfolio is our ability to optimize across these modules. So there's co-optimization to enable this tokens per second per watt across the portfolio. But the integrated is about 30%. The number of technologies we're integrating in the platform is increasing and super strategically important for customers for these architecture innovations. Got it. I guess on that note, I always think about the semi-cap
industry is, I mean, it's competitive, but everybody kind of has their own niche. But at the same time, you clearly do compete. And I'm going to leave the Chinese guys out of it. You've got the Lambs and the Tokyo Electrons of the world. What is it that customers are looking for when they're choosing a new solution? Like, what does that bake-off process look like? When does it happen? Is it the new node transition? What is it that customers are looking for when they decide to actually award the processor record to you versus your competitors?
Yeah, so I think the most important thing for customers is the race for these new architectures. That is the most important thing. And whoever, so when they're competing for design wins, they care about performance, yield, and reliability. That is the most important thing. And when their customers are evaluating them for design wins, if you don't have performance, yield, and reliability, they don't care about the cost because they can't risk their system architectures on those technologies. So for Applied, we're working through the whole tech stack and working with these customers on these new architectures. That is the most strategically important. I mentioned high-speed DRAM with the CMOS logic or any of these different types of inflections. So the first thing for Applied is, again, connecting with them on what's critical for their design wins, and then inside of that, you have a portfolio of solutions where Applied is driving innovations in each one of those different pieces or those integrated platforms, but that connectivity, I think, is more and more and more important. So when we're engaging with someone on an N plus one architecture or an N plus two architecture, we're really focused on the electrical like resistance, capacitance, threshold voltage or high speed memory or those kinds of things. And then the technologies that enable those key performance, the tokens per second per watt. And then there's a portfolio of applied solutions and key unique applied solutions that enable those technologies. So, again, the great thing for us, we have leadership. We're in great positions in the fastest growing segments that are enabling AI computing in leading edge foundry logic, DRAM, and packaging. So again, and then the other part of our portfolio that is actually growing very fast, one of the fastest growing businesses in applied is our inspection and measurement business. So we said our semi-business is growing over 30% this year. Actually, that part of applied materials is growing much faster. We're the world leader in e-beam technologies. technologies. We have the lead in resolution and imaging speed with coalfield emission. That will be over a billion dollars in revenue this year. And we have an incredible pipeline, Stacey, of new products that are coming over the next couple of years. So I have high confidence. That one is one of our fastest growing businesses. The revenue growth there is going to be multiple billions of dollars. But the other thing that's really important is that when you're building all of these new architectures, the learning rate is crucial. So Applied's e-beam technologies, we can see into those architectures and collect data orders of magnitude faster. So again, that connectivity with our leadership and the materials innovation is also strategically important for applied when we're engaging with these customers on the architecture
innovations. That makes a lot of sense. You have one other segment that you don't talk that much, it's small, but like why do you still have a display segment? What strategic
value does that play for you? Yeah, so display today is a little over 20% operating profit. And, you know, it is growing at a decent rate. The biggest opportunity there for us is we do have an opportunity to enable a new OLED architecture for IT and TV and so there has been a technical barrier so today you have single digit adoption of OLED in those in those segments of the market applied has come up with an innovation we're working with the leaders that overcomes that limitation. So it would take some time for that adoption. But I believe that that can be a good growth rate for applied, expanding the operating profit. And so that's one thing, just that business by itself. There is synergy when you talked earlier about panel processing. So if we think about our leadership in handling glass or all of the glass processing, Applied is the global leader in those technologies, we're taking that learning into these new packaging architectures. So there's synergy. We have, by the way, this is an incredible team of innovators inside Applied Materials. So there's that synergy with where packaging innovation is going in the future. Got it.
We've got a few minutes left. Should we go to the lightning round?
Sure, let's go.
And if anybody has other questions that you want to submit, you can do that. How about this? Are there any areas where you think you're participating less than your fair share in the super cycle due to competition or anything else?
No, again, I mentioned earlier, we have really great visibility in the architectures, chip and packaging architectures that will enable AI computing innovation, the tokens per second per watt. So I feel great. And again, the really great thing for Applied is that we have incredible visibility because we are working and co-innovating and co-creating these architectures through the tech stack and through the ecosystem. So we are investing in the areas that we think are going to drive the highest growth. We've made some small acquisitions. It's not possible to do the large acquisitions with the current situation. But there are areas where that can add hundreds of millions of dollars of growth and create synergies with the rest of applied material. So I feel really good about that.
Got it. Well, here's an interesting one. Is Huawei's logic folding economically real or roadmap theater?
Well, I don't know if I want to comment on that. What I would say is that there's this concept of design technology co-optimization. Some of our largest customers have talked about that. You're moving the power lines from the front of the wafer to the back of the wafer. You're getting a 30% area savings, better power and performance. You have isolation walls in the transistor. So there are those kinds of innovations that are being driven in the industry. And so I would say this is kind of along the same lines. And, you know, one of our largest customers, they talk about how the percentage of their innovation enabled by design technology co-optimization going up significantly, which is, by the way, great for applied materials. But that particular one, I think it's too early to tell. I mean, you know, you have thermal issues, yield issues, many different kinds of things that are yet to be determined. By the way, that's using bonding technology. Applied has the leading hybrid bonding technology and an integrated platform. So as those architectures are adopted, we also have innovations there.
I think it's fair to say that those particular architectures are not unique to Huawei. The industry is looking at that.
No, if you look at even like future transistor technologies, you're stacking NNP transistors. So it's really going more vertical. Or like say power lines or transistors or all of those kinds of things. Or, you know, CMOS bonded to the array and memory. So separating out those IP blocks and connecting them in different ways is a trend that the overall industry is focused on.
Maybe one more. Do you think there's a disconnect between spending expectations from the hyperscalers in the labs versus what the semi-industry can realistically deliver?
I feel very good about demand going forward, I would say. I do think, again, this is going to change how we work, how we live. AI is going to be an enormous inflection. That's going to drive tremendous computing demand and the need for computing innovation and tokens per second per watt. And applied, like I said, we have made investments in our operations so we can scale our operations. It's really making sure that we have that alignment with customers. We have to have that early visibility to ramp our supply chain. So I feel good. I mean, we've made enormous improvements in operations and supply chain over the last few years, and we're in a way better position than we've ever been in that aspect.
Got it. So we've got about one minute left. I'll close out the way I always do. I've got a full room here, Gary. Why should they buy your stock?
You know, we're in a great position. The fastest growing areas in the industry, leading edge foundry logic, DRAM, packaging, that's over 80% of the growth in WFE. Those are areas where Applied has clear leadership. And those are the areas that continue to grow significantly over the next several years. And as I mentioned, our connectivity, our relationships with our customers are deeper than ever and critical to them winning designs with their customers. So those future AI chip architectures, packaging architectures, Applied is in a great position to gain share, create value, and capture of value. So I have high confidence the growth rate for Applied is going to be very strong, both top line and bottom line going forward. Got it. I think that's a wonderful place to leave it off. Gary, thank you so much. Oh, thanks, Stacey. Thank you, guys.