Applied Materials (AMAT) 10-K risk factor changes: FY2017 vs FY2016

For the fiscal year ended October [removed: 30, 2016][added: 29, 2017]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company or an emerging growth] company.

See [removed: the] definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange Act.

Aggregate market value of the voting stock held by non-affiliates of the registrant as of [removed: May 1, 2016,] [added: April 28, 2017,] based upon the closing sale price reported by the NASDAQ Global Select Market on that date: [removed: $22,248,434,583][added: $43,552,849,133]

Number of shares outstanding of the registrant’s Common Stock, $.01 par value, as of December 8, [removed: 2016: 1,076,570,134][added: 2017: 1,056,340,714]

Portions of Part III will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 27, 2017.][added: 26, 2018.]

This Annual Report on Form 10-K of Applied Materials, Inc. and its [removed: subsidiaries (Applied or the Company),] [added: subsidiaries,] including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, contains forward-looking statements that involve a number of risks and uncertainties.

FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER [removed: 30, 2016][added: 29, 2017]

| Item 1: | [removed: [Business](#s963EDF893CE85C38ABC5CE0B856DC4AF)] [added: [Business](#sB67DDBE84BD85883A4D803C7A012F790)] | [removed: [4](#s963EDF893CE85C38ABC5CE0B856DC4AF)] [added: [4](#sB67DDBE84BD85883A4D803C7A012F790)] |

| Item 1A: | [Risk [removed: Factors](#s8EE2B1192F235DC3BFE9C674B081AE44)] [added: Factors](#s4398AB6AC7DE5E35BB7F016111C9BCD6)] | [removed: [14](#s8EE2B1192F235DC3BFE9C674B081AE44)] [added: [14](#s4398AB6AC7DE5E35BB7F016111C9BCD6)] |

| Item 1B: | [Unresolved Staff [removed: Comments](#s03056C5935285C7F832689E61696FBAC)] [added: Comments](#sAEABCF6B9D41512AB7793A09B1C998CC)] | [removed: [23](#s03056C5935285C7F832689E61696FBAC)] [added: [24](#sAEABCF6B9D41512AB7793A09B1C998CC)] |

| Item 2: | [removed: [Properties](#s956EF92425165B9F936E0A36537A78ED)] [added: [Properties](#sCED670EFE9F0599399BBE60FF858FC99)] | [removed: [24](#s956EF92425165B9F936E0A36537A78ED)] [added: [25](#sCED670EFE9F0599399BBE60FF858FC99)] |

| Item 3: | [Legal [removed: Proceedings](#s659C37BDE9A8517C8F8E066A372E0791)] [added: Proceedings](#s97ADA66A980B5C008EBDAE98B09F8B8E)] | [removed: [25](#s659C37BDE9A8517C8F8E066A372E0791)] [added: [26](#s97ADA66A980B5C008EBDAE98B09F8B8E)] |

| Item 4: | [Mine Safety [removed: Disclosures](#s49AA03911E7955FB905B0E59064F12E5)] [added: Disclosures](#sEADA171F95D65367931A1D2B3C27D383)] | [removed: [25](#s49AA03911E7955FB905B0E59064F12E5)] [added: [26](#sEADA171F95D65367931A1D2B3C27D383)] |

| Item 5: | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s837F5E64A2FF53B98F167342E1A86E09)] [added: Securities](#s8165E9F76677572C8601330C91F326A2)] | [removed: [25](#s837F5E64A2FF53B98F167342E1A86E09)] [added: [26](#s8165E9F76677572C8601330C91F326A2)] |

| Item 6: | [Selected Financial [removed: Data](#sCF0B46FE664655C384C2F03A58172E92)] [added: Data](#s9EC9F4326594553B85DE7D9113444B7D)] | [removed: [27](#sCF0B46FE664655C384C2F03A58172E92)] [added: [28](#s9EC9F4326594553B85DE7D9113444B7D)] |

| Item 7: | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s8105F4732B3B57A689A0707B5684BC4B)] [added: Operations](#sFB53BC04D4A354FD8C2D034EB147292D)] | [removed: [28](#s8105F4732B3B57A689A0707B5684BC4B)] [added: [29](#sFB53BC04D4A354FD8C2D034EB147292D)] |

| Item 7A: | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s5ABB08CD69E45371A222EE4EDFBDB6BA)] [added: Risk](#sB5AD1880484D525EBD65AE39829D8A39)] | [removed: [50](#s5ABB08CD69E45371A222EE4EDFBDB6BA)] [added: [48](#sB5AD1880484D525EBD65AE39829D8A39)] |

| Item 8: | [Financial Statements and Supplementary [removed: Data](#sE82DA80A3BE851D3A034DBC76A481CFA)] [added: Data](#s0280F306B40351DF92F31CF8D06D2326)] | [removed: [50](#sE82DA80A3BE851D3A034DBC76A481CFA)] [added: [48](#s0280F306B40351DF92F31CF8D06D2326)] |

| Item 9: | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s911CA8506BB55FCBBC111DF80CEFCC92)] [added: Disclosure](#s739C9D21D6EB5D759AAB1444D7BBDC55)] | [removed: [50](#s911CA8506BB55FCBBC111DF80CEFCC92)] [added: [48](#s739C9D21D6EB5D759AAB1444D7BBDC55)] |

| Item 9A: | [Controls and [removed: Procedures](#s67D500210CC65B36A9168A3BDA657780)] [added: Procedures](#s766B002040DC5EDD9DA3CC1F38070837)] | [removed: [51](#s67D500210CC65B36A9168A3BDA657780)] [added: [49](#s766B002040DC5EDD9DA3CC1F38070837)] |

| Item 9B: | [Other [removed: Information](#s2668FACD6B395FFBA2F97AFB5D138E46)] [added: Information](#s0B73879225F05B7C82A8127189C3B5F4)] | [removed: [51](#s2668FACD6B395FFBA2F97AFB5D138E46)] [added: [49](#s0B73879225F05B7C82A8127189C3B5F4)] |

| Item 10: | [Directors, Executive Officers and Corporate [removed: Governance](#sB7E5F5CB39355A46BE144FD7B7FADD21)] [added: Governance](#sDDBBEDB561DD5BBC8FEBA32F68AC6210)] | [removed: [52](#sB7E5F5CB39355A46BE144FD7B7FADD21)] [added: [50](#sDDBBEDB561DD5BBC8FEBA32F68AC6210)] |

| Item 11: | [Executive [removed: Compensation](#s4D52E68BD3D056C383F6604991B3DF1A)] [added: Compensation](#s3E454854AB1F58DDAA1903F2102167F4)] | [removed: [52](#s4D52E68BD3D056C383F6604991B3DF1A)] [added: [50](#s3E454854AB1F58DDAA1903F2102167F4)] |

| Item 12: | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s2A47FCF5043A59E6851B9BE718DC3112)] [added: Matters](#s836125CE5B315F6EBE0529C2EA86251A)] | [removed: [53](#s2A47FCF5043A59E6851B9BE718DC3112)] [added: [51](#s836125CE5B315F6EBE0529C2EA86251A)] |

| Item 13: | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s052DAAAEE8805772B3F91CF27E4FDB2F)] [added: Independence](#s1B678C0FE44453F6B32FABBA32B55E17)] | [removed: [54](#s052DAAAEE8805772B3F91CF27E4FDB2F)] [added: [52](#s1B678C0FE44453F6B32FABBA32B55E17)] |

| Item 14: | [Principal Accounting Fees and [removed: Services](#s976495E1C3635CF483D6D2C3FC5CDF80)] [added: Services](#s59933D1D5C6B5A3990C56E52A31590DC)] | [removed: [54](#s976495E1C3635CF483D6D2C3FC5CDF80)] [added: [52](#s59933D1D5C6B5A3990C56E52A31590DC)] |

| Item 15: | [Exhibits, Financial Statement [removed: Schedules](#sBD452435A6575FA19C2903B4524F9027)] [added: Schedules](#s1F532DA06C665DF1B1DCDC07481B1CEA)] | [removed: [55](#sBD452435A6575FA19C2903B4524F9027)] [added: [53](#s1F532DA06C665DF1B1DCDC07481B1CEA)] |

Incorporated in 1967, Applied [added: Materials, Inc. (Applied)] is a Delaware corporation.

A global company with a broad set of capabilities in materials engineering, Applied provides manufacturing equipment, services and software to the [removed: global] semiconductor, display and related industries.

Applied’s customers include manufacturers of semiconductor chips, liquid crystal and [removed: other] [added: organic light-emitting diode (OLED)] displays, and other electronic devices.

[removed: As of October 30, 2016,] Applied operates in three reportable segments: Semiconductor [removed: Systems (previously Silicon Systems),] [added: Systems,] Applied Global Services, and Display and Adjacent Markets.

A summary of financial information for each reportable segment is found in Note [removed: 14] [added: 15] of Notes to Consolidated Financial Statements.

| | [removed: 2016] [added: 2017] | | | | | | [removed: 2015] | [added: 2016] | | | | | [removed: 2014] | | [added: 2015] | | | [added: | | |]

| | (In millions, except percentages) | | | | | | | | | | | | | | | | | [added: | | |]

| Semiconductor Systems | $ | [removed: 6,873] [added: 9,517] | | | [removed: 64%] [added: 65] | [added: %] | [added: |] $ | [removed: 6,135] [added: 6,873] | | | [removed: 64%] [added: 64] | [added: %] | [added: |] $ | [removed: 5,978] [added: 6,135] | | | [removed: 66%] [added: 64] | [added: % |]

| Applied Global Services | [added: 3,017 | | | | 21% | |] 2,589 | | | | 24% | | 2,447 | | | | 25% | | [removed: 2,114 | |] [added: 17%] | | [removed: 24%] [added: 6%] |

| Display and Adjacent Markets | [added: 1,900 | | | | 13% | |] 1,206 | | | | 11% | | 944 | | | | 10% | | [removed: 848 | |] [added: 58%] | | [removed: 9%] [added: 28%] |

| Corporate and Other | [removed: 157] [added: 103] | | | | [removed: 1%] [added: 1] | [added: %] | [removed: 133] | [added: 157] | | | [removed: 1%] | [added: 1] | [removed: 132] [added: %] | | [added: 133] | | [removed: 1%] | [added: | 1 | % |]

| Total | $ | [removed: 10,825] [added: 14,537] | | | 100% | | $ | [removed: 9,659] [added: 10,825] | | | 100% | | $ | [removed: 9,072] [added: 9,659] | | | 100% |

10-K 1 amat1029201710-kq42017.htm AMAT 10.29.2017 10-K

| | | Emerging growth company ¨ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| | [Signatures](#s6398237FF04C5AEA967CD5E052A34F10) | [103](#s6398237FF04C5AEA967CD5E052A34F10) |

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| Total | $ | 14,537 | | | 100 | % | | $ | 10,825 | | | 100 | % | | $ | 9,659 | | | 100 | % |

The Semiconductor Systems segment includes semiconductor capital equipment used for many steps of the chip making process including the transfer of patterns into device structures, transistor and interconnect fabrication, metrology, inspection and review, and packaging technologies for connecting finished IC die.

Applied’s packaging technologies address challenges resulting from the increasing integration of multiple IC dies in a single package.

| Selective Removal Selective removal is a new etch technology intended to remove a material of a particular composition without damaging materials of different composition that coexist on the wafer. | | Producer Systems |

| Total | $ | 6,031 | | | 100 | % | | $ | 4,578 | | | 100 | % |

______________________________

* Less than 10%

The semiconductor industry is driven by demand for advanced electronic products, including smartphones and other mobile devices, servers, personal computers, automotive devices, storage, and other products.

| Steve Ghanayem(4) | Senior Vice President, New Markets and Alliances Group |

| Prabu Raja(7) | Senior Vice President, Semiconductor Products Group |

| (3) | Mr. Durn, age 51, has been Senior Vice President and Chief Financial Officer of Applied since August 2017. Previously, Mr. Durn was Executive Vice President and Chief Financial Officer of NXP Semiconductors N.V., a semiconductor manufacturer (NXP), from December 2015 to August 2017. Mr. Durn served as Senior Vice President of Finance and Chief Financial Officer of Freescale Semiconductor, Inc., from June 2014 until its merger with NXP in December 2015. Prior to Freescale, Mr. Durn was Chief Financial Officer and Executive Vice President of Finance and Administration at GlobalFoundries, a semiconductor foundry, which he joined in December 2011. |

| (4) | Mr. Ghanayem, age 52, has been Senior Vice President, New Markets and Alliances Group of Applied since November 2017. He has served in various senior management, product development and operational roles since joining Applied in 1989, including Group Vice President and General Manager of the Transistor and Interconnect Group. |

| (7) | Mr. Raja, age 55, has been Senior Vice President, Semiconductor Products Group of Applied since November 2017. He previously served in various senior management, product development and operational roles since joining Applied in 1995, including Group Vice President and General Manager of the Patterning and Packaging Group. |

Applied’s industries historically have been cyclical, and are subject to volatility and sudden changes in customer requirements for new manufacturing capacity and advanced technology.

| • | investment in semiconductor manufacturing capabilities in China, which may be affected by changes in economic conditions and governmental policies in China; and |

| • | the increasing cost of research and development, and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes; |

| • | the importance of increasing market positions in products and technologies with growing demand; |

| • | geographically diverse operations and projects, and our ability to maintain appropriate business processes, procedures and internal controls, and comply with environmental, health and safety, anti-corruption and other regulatory requirements; |

| • | performance of third party providers of outsourced functions, including certain engineering, software development, manufacturing, information technology and other activities; |

The inability to timely obtain sufficient quantities of parts can have an adverse impact on Applied’s manufacturing operations and ability to meet customer demand for equipment, spares and services.

Applied is in the process of implementing new enterprise resource planning and related information systems in order to better manage its business operations, align its global organizations and enable future growth.

This implementation requires the commitment of significant personnel and financial resources, and entails risks to Applied’s business operations.

Income tax legislation in the U.S., the “Tax Cuts and Jobs Act”, could possibly be enacted during the first quarter of fiscal 2018, which could impact Applied’s provision for income taxes, effective tax rate, results of operations and financial condition.

For example, under legislative proposals requiring mandatory repatriation that are being considered, Applied would need to accrue U.S. taxes on previously unrepatriated earnings.

| Owned | 3,964 | | 1,652 | | 5,616 |

| Leased | 845 | | 1,153 | | 1,998 |

| Total | 4,809 | | 2,805 | | 7,614 |

| First quarter | $ | 35.04 | | | $ | 28.18 | |

| Second quarter | $ | 41.33 | | | $ | 34.25 | |

| Third quarter | $ | 47.45 | | | $ | 41.01 | |

| Fourth quarter | $ | 56.69 | | | $ | 42.03 | |

| Applied Materials | 100.00 | | | 171.03 | | | 207.01 | | | 165.34 | | | 293.64 | | | 586.91 | |

10-K 1 amat10302016-10k.htm FORM 10-K

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| --- | --- | --- |

| | [Signatures](#s195BC3713CF75C2AB3EDE3A830C0C72E) | [104](#s195BC3713CF75C2AB3EDE3A830C0C72E) |

Effective in the third quarter of fiscal 2016, Applied began to account for its flexible coating systems (previously included in its Energy and Environmental Solutions segment) and display upgrade equipment (previously included in its Applied Global Services segment) under its Display and Adjacent Markets segment (previously Display).

As a result of these changes, Applied’s solar business (previously included in the Energy and Environmental Solutions segment) is included in Corporate and Other as it did not meet the threshold for a separate reportable segment.

Results from prior periods have been recast to conform to the current presentation.

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Transistor and Interconnect

Applied offers products and technologies for transistor and interconnect fabrication, including epitaxy, ion implantation, oxidation and nitridation, rapid thermal processing, chemical vapor deposition, physical vapor deposition, chemical mechanical planarization and electrochemical deposition.

Many of these process steps are used multiple times throughout the semiconductor chip fabrication process.

Patterning and Packaging

Applied offers patterning, selective removal and packaging products and systems that enable the transfer of patterns onto device structures, making it possible to etch masks used for photolithography, and perform deposition, etching, and related processes.

| Patterning and Packaging Technologies | | Product(s) |

| Chemical Vapor Deposition (CVD) CVD is used to deposit dielectric and metal films on a wafer. During the CVD process, gases that contain atoms of the material to be deposited react on the wafer surface, forming a thin film of solid material. | | Producer Systems |

Imaging and Process Control

Applied offers a suite of metrology, inspection and review systems for front- and back-end-of-line applications.

| Imaging and Process Control Technologies | | Product(s) |

Backlog consists of: (1) orders for which written authorizations have been accepted and assigned shipment dates are within the next 12 months, or shipment has occurred but revenue has not been recognized; and (2) contractual service revenue and maintenance fees to be earned within the next 12 months.

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| Total | $ | 4,578 | | | 100% | | $ | 3,142 | | | 100% |

In addition, a significant driver in the semiconductor and display industries is end-demand for mobile consumer products, which is characterized by seasonality that impacts the timing of customer investments in manufacturing equipment and, in turn, Applied’s business.

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The semiconductor industry has been increasingly driven by consumer demand for lower-cost electronic products with increased capability, particularly mobility devices such as smartphones and tablets.

The competitive environment for Semiconductor Systems in fiscal 2016 reflected steady overall demand for semiconductor equipment, with continued investments by memory customers in technology upgrades and additional capacity, reflecting primarily the transition from planar technology to 3D architectures.

Demand from foundry customers reflected investments in new technology at advanced nodes, driven by demand for advanced mobile chips.

Industry conditions that affected Applied Global Services’ sales of spares and services in fiscal 2016 were principally semiconductor manufacturers’ wafer starts and factory utilization rates.

The Company has also entered a new business in yield control with its new inline e-beam review (EBR) system.

| (3) | Mr. Halliday, age 62, has been Senior Vice President, Chief Financial Officer of Applied since February 2013. He previously served as a Group Vice President and General Manager in Applied’s Silicon Systems segment following the completion of Applied’s acquisition of Varian in November 2011. Mr. Halliday had served as Chief Financial Officer of Varian since 2001 and as an Executive Vice President of Varian since 2004. He was Varian’s Treasurer from November 2002 to October 2006 and from February 2009 to February 2010. |

As a supplier to the global semiconductor and display and related industries, Applied is subject to business cycles, the timing, length and volatility of which can be difficult to predict and which vary among its businesses.

| • | investment in semiconductor manufacturing capabilities in China, and its effect on the demand for semiconductor manufacturing equipment; and |

In order to successfully grow its businesses, Applied must increase its position in its current markets, expand into adjacent and new markets, and optimize operational performance.

| • | geographically diverse operations and projects, which require an effective organizational structure and allocation of resources, and appropriate business processes, procedures and controls; |

To better align its costs with market conditions, locate closer to customers, enhance productivity, and improve efficiencies, Applied conducts certain engineering, software development, manufacturing, sourcing and other operations in regions outside the United States, including India, Taiwan, China, and Korea.

Applied has implemented a distributed manufacturing model, under which certain manufacturing and supply chain activities are conducted in various countries, including Germany, Israel, Italy, Singapore, Taiwan, the United States and other countries in Asia, and assembly of some systems is completed at customer sites.

In addition, Applied outsources certain functions to third parties, including companies in the United States, India, China, Korea, Malaysia and other countries.

Outsourced functions include contract manufacturing, engineering, customer support, software development, information technology support, finance and administrative activities.