Applied Materials: Market Share Decreased 0.3% In Top 10 Sectors It Serves

Continued Market Share Loss

Applied Materials (NASDAQ:AMAT) demonstrated growth of 10.3% year-over-year in 2022 in the semiconductor equipment manufacturing market, as shown in Chart 1. However, the mean growth among the top 5 manufacturers as 11.2%, and KLA (KLAC) and Tokyo Electron ("TEL") (OTCPK:TOELY) outperformed the mean growth. KLAC and TEL are two of the strongest competitors of AMAT in metrology/inspection and deposition/etch, respectively

While the other top WFE competitors including AMAT, Lam Research (LRCX),and ASML (ASML) underperformed, KLAC demonstrated a YoY growth of 40.3%, according to our report entitled Global Semiconductor Equipment: Markets, Market Shares and Market Forecasts.

Chart 1

Applied Materials' YoY Market Share Change 2021-2022

In Table 1, I show revenue growth of the Top 10 semiconductor equipment sectors that AMAT competes. The total YoY revenue growth for these 10 sectors was 10.2%, ahead of the global WFE (wafer front end) growth of 8.4%.

AMAT's share of these 10 sectors decreased 0.2%, but YoY revenues for the company these 10 sectors increased 9.4%, less than the 10.2% for these sectors.

Note that I do not include other segments such as stepper lithography, which AMAT doesn't participate. In 2022, lithography revenues were $16.9 billion representing 20% of the global WFE equipment market.

AMAT Global Share Trend

In Chart 2, I show AMAT's WFE revenues between 2013 and 2022. In these 10 years, the trendline (blue dotted line) shows a market share drop.

I also show on this chart with the orange bars that in 2019 AMAT took $331 million from 2018 revenues and put it into 2019 simply by changing its accounting policies. The $331 million propped up AMAT's share from $17.4% to 18.1%.

Chart 2

Headwinds for 2023

For the remainder of CY 2023, Table 2 shows that, while AMAT non-memory revenues were up 44% YoY, I project WFE sales for the sector will drop 12.5% in 2023. That means significant push-outs of equipment for AMAT.

Investor Takeaway

One must wonder why AMAT, which currently is the largest semiconductor equipment company in the world, would continue to lose market share to competitors and peers.

In this article, I showed statistical, empirical analysis in Chart 1 that YoY semiconductor revenues for AMAT increased 10.3%, but the mean growth of the Top 5 companies increased 11.3%.

I also showed in Chart 2 that between 2013 and 2022, AMAT's share of the WFE equipment market has decreased and the company underperformed even with devious attempts to prop up market share in 2019 by manipulating revenues.

At its last earnings call, CEO Dickerson commented:

"To position ourselves for the opportunities ahead, we are making strategic investments in R&D and infrastructure while driving improvements in productivity and speed across the organization."

Unfortunately, AMAT did not provide details of what these improvements will be, and again did not provide guidance for its semiconductor sector.

AMAT generated $2.29 billion in cash from operations and returned $1.02 billion to shareholders including $800 million in share repurchases and $219 million in dividends.

I've said consistently that AMAT, which is the largest equipment company and generated $6.2 billion in net income in F2023, continues to lose market share and underperform peers and competitors. They should be making the "equipment and hiring the best-of-the-best" employees, yet their share continues to drop since Dickerson took over.

Management continues to "talk-the-talk" by utilizing multimedia approaches to promote their products. However, I pointed out following two of their "webcasts."

I set the record straight following these with two Seeking Alpha articles:

• In my March 17, 2021, Seeking Alpha article entitled KLA Introduced 4 AI Metrology/Inspection Systems A Year Before Applied Materials, I noted that AMAT unveiled what they called a "major innovation in process control that uses Big Data and AI technology." However, I pointed out that KLAC had introduced four metrology/inspection systems utilizing AI a year earlier.
• In my December 20, 2022, Seeking Alpha article entitled Applied Materials Ballyhooed E-Beam Inspection Sector Lost Share To KLA's Optical, AMAT detailed its "eBeam Technology and Product Launch" in a webcast on December 14, 2022, I pointed out: 1) Despite efforts to promote its E-beam technology, Optical technology led by KLA continues to generate greater growth, 2) Optical wafer inspection held a 5.4X market share value over E-beam technology promoted by Applied Materials. 3) In the E-beam inspection sector, even ASML beats Applied Materials.

Perhaps the additional cash generated by AMAT in the past quarter could be used for that purpose.

Frankly, after analyzing AMAT since 1985, I don't concur, and rate the company a Sell.

This free article presents my analysis of this semiconductor equipment sector. A more detailed analysis is available on my Marketplace newsletter site Semiconductor Deep Dive. You can learn more about it here.