Applied Materials (AMAT) 10-K risk factor changes: FY2022 vs FY2021

The [removed: ongoing] [added: continued effects of the] COVID-19 pandemic and global measures taken in response [removed: thereto] have adversely impacted, and may continue to adversely impact, Applied’s operations and financial results.

The [removed: ongoing] [added: continued effects of the] COVID-19 pandemic and measures taken in response by governments and businesses worldwide to contain its spread have adversely impacted and [removed: are expected to] [added: may] continue to adversely impact Applied’s supply chain, manufacturing, logistics, workforce and operations, as well as the operations of Applied’s customers, suppliers and partners globally.

There is [removed: considerable] [added: continued] uncertainty regarding the duration, scope and severity of the [removed: pandemic] [added: pandemic, particularly with the emergence of new variants of COVID-19] and [added: periodic spikes in COVID-19 cases in various geographic regions, and] the impacts on our business and the global economy from the effects of the [removed: ongoing] pandemic and response measures.

Travel and logistics restrictions, [removed: shelter-in-place orders and other measures, including working remotely, social distancing] [added: lockdowns, vaccine requirements] and other [removed: policies] [added: measures from time to time] implemented [removed: in] [added: by] foreign and domestic [removed: sites,] [added: authorities] have resulted in, and [removed: are expected to] [added: may] continue to result in, [removed: transportation disruptions (such as reduced availability of air transport, port closures,] [added: supply chain] and [removed: increased border controls or closures),] [added: transportation disruptions,] production delays and capacity limitations at Applied and some of its customers, suppliers and partners, as well as reduced workforce availability or productivity at Applied and customer sites, and additional data, information and cyber security risks associated with an extensive workforce [removed: now] working [removed: remotely full-time.][added: remotely.]

[removed: While] [added: As] economic activity and business operations in certain regions [removed: continue to] recover, there [added: have been and] may [added: continue to] be periods of significant or sudden increases in demand for Applied’s products, as well as worldwide demand for electronic products.

Significant or sudden demand increases [added: have resulted in, and] may [added: continue to] result [removed: in] [added: in,] a shortage of parts, materials or services needed to manufacture Applied’s [removed: products or may cause shipment delays due to transportation interruptions or capacity constraints.][added: products.]

Such shortages or delays [added: have adversely impacted, and] could [added: continue to] adversely [removed: impact] [added: impact,] our suppliers’ ability to meet our demand requirements and [added: do so on favorable terms, and] our ability to meet our customer demand.

There can be no assurance that Applied or its suppliers will be able to maintain manufacturing operations at [removed: current] levels [removed: or at increased levels that may be] necessary to [added: adequately] address demand for Applied products.

In addition, the pandemic and [removed: global] measures taken in response thereto have had, and may continue to [removed: have] [added: have,] a significant adverse impact on the global economic activity and could also result in a reduced demand for our products, delayed deliveries or installation, cancelled orders or increase in logistics and operating costs, and materially and adversely affect Applied’s business, financial condition and results of operations.

The degree to which the [removed: ongoing] pandemic ultimately impacts Applied’s business, financial condition and results of operations and the global economy will depend on future developments beyond our control, which are highly uncertain and difficult to predict, including the severity, duration and any resurgence of the pandemic, the [removed: extent] [added: extent, duration] and effectiveness of [added: periodic lockdowns and other] containment actions, the availability, public adoption and efficacy of COVID vaccines, [removed: effectiveness of government stimulus programs,] how quickly and to what extent normal economic and operating activity can resume, and the severity and duration of [removed: the] [added: resulting] global economic [removed: volatility that results from the ongoing pandemic.][added: volatility.]

Moreover, in fiscal [removed: 2021,] [added: 2022,] approximately [removed: 91%] [added: 88%] of Applied’s net sales were to customers in regions outside the United States.

- [removed: direct and indirect] global trade issues and changes in and uncertainties with respect to trade [removed: policies,] [added: and export regulations,] trade [added: policies and] sanctions, tariffs, and international trade disputes, including [removed: the rules] [added: new] and [removed: interpretations promulgated by the U.S. Department of Commerce expanding] [added: changing] export [removed: license requirements] [added: regulations] for certain [removed: products sold] [added: exports] to [removed: certain entities in China;][added: China and any retaliatory measures;]

- customer- or government-supported efforts to influence Applied to conduct more [added: or less] of its operations and sourcing in a particular [removed: country, such as Korea and China;][added: country;]

- positions taken by governmental agencies regarding possible [removed: national] [added: national,] commercial and/or security issues posed by [removed: international business operations;][added: the development, sale or export of certain products and technologies;]

- [removed: fluctuating] [added: the availability or increasing costs of] raw material, commodity, energy and shipping [added: or volatility in such] costs;

- delays or restrictions [added: on personnel travel and] in shipping materials or finished products between and within countries;

- [removed: supply chain interruptions, and] service interruptions from utilities, transportation, data hosting or telecommunications providers, or other events beyond our control;

- political instability, natural disasters, regional or global health epidemics, social unrest, [removed: terrorism or] [added: terrorism,] acts of war [added: or other geopolitical turmoil, or cybersecurity incidents] in locations where Applied has operations, suppliers or sales, or that may influence the value chain of the industries that Applied serves;

[removed: International] [added: Global] trade [removed: disputes could result in increases] [added: issues and changes] in [added: and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions,] tariffs and [removed: other] [added: international] trade [removed: restrictions] [added: disputes, have adversely impacted] and [removed: protectionist measures that] could [added: further] adversely impact our [removed: operations] [added: business] and [added: operations, and] reduce the competitiveness of our products relative to local and global competitors.

We sell a significant majority of our products into [removed: countries] [added: jurisdictions] outside of the United States including China, Taiwan, Japan and Korea.

There is inherent risk, based on the complex relationships among the United States and the countries in which we conduct our business, that political, [removed: diplomatic] [added: diplomatic,] and national security [removed: influences might] [added: factors can] lead to [added: global] trade [removed: disputes, impacts and/or disruptions,] [added: issues and changes] in [added: trade policies and export regulations, in] particular, with respect to those affecting the semiconductor industry.

The United States and other countries have imposed and may continue to impose [added: new] trade [removed: restrictions,] [added: restrictions] and [added: export regulations, and] have also levied tariffs and taxes on certain goods.

[removed: Increases in tariffs, additional taxes or other trade] [added: Trade] restrictions and [added: export regulations, or increases in tariffs and additional taxes, including any] retaliatory [removed: measures may increasingly] [added: measures, can negatively] impact end-user demand and customer investment in manufacturing equipment, increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, or [removed: inhibit] [added: prohibit] our ability to sell [removed: products] [added: products, provide services] or purchase necessary equipment and supplies, [added: any or all of] which could have a material adverse effect on our business, results of operations, or financial condition.

For example, certain international sales depend on our ability to obtain export licenses, and our inability to obtain such licenses has limited and could further limit our markets and [added: negatively] impact our business.

The U.S. Department of Commerce has promulgated [removed: several] rules and [removed: interpretations] [added: regulations] expanding export license requirements for U.S. companies that sell certain products to entities in China whose actions or functions are intended to support military end uses, eliminated certain export license exceptions that applied to exports of certain items to China, [removed: and] added certain Chinese [removed: companies, including one of the Company’s customers,] [added: companies] to its [removed: “entity list”.][added: “Entity List” and “Unverified List,” making those companies subject to additional licensing requirements, and expanded licensing requirements for exports to China of items for use in the development or production of integrated circuits and certain technologies.]

These rules and [removed: interpretations] [added: regulations] require us to obtain additional export licenses to supply certain of our products [added: or provide services] to [removed: such customer] [added: certain customers] in China.

[removed: Obtaining export licenses may be difficult, costly and time-consuming, and our] [added: Our] inability to obtain such licenses could limit our markets in [removed: China] [added: China, may cause us to be displaced by foreign businesses] and [added: competitors and] adversely affect our results of operations.

[removed: The implementation and interpretation of these rules are ongoing and their impact on our business is uncertain, and these rules] [added: These] and other regulatory changes that [removed: have occurred and] may occur in the future could materially and adversely affect our [added: business,] results of [removed: operations.][added: operations or financial condition.]

The U.S. and other governmental agencies may in the future promulgate new or additional export licensing or other requirements that have the effect of further limiting the Company’s ability to provide certain of its products [added: and services] to customers outside the U.S., including China.

[removed: In addition,] [added: Furthermore,] government authorities may [added: take retaliatory actions,] impose conditions that require the use of local suppliers or partnerships with local companies, require the license or other transfer of intellectual property, or engage in other efforts to promote local businesses and local competitors, which could have a significant adverse impact on Applied’s business.

Many of these challenges are present in China and Korea, markets that represent a significant portion of Applied’s [removed: current business as well as long-term growth opportunities.][added: business.]

Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, national debt, fiscal or monetary concerns, [added: rising] inflation and [removed: rising] interest rates in various regions, [added: and economic recession,] could materially adversely impact Applied’s operating results.

[removed: Uncertain or adverse economic and business conditions that result in] [added: Such] decreases in [removed: consumer] spending and demand [removed: or cause us to pass on increased costs to our customers] [added: have in the past caused, and] may [removed: cause certain of] [added: in the future cause,] our customers to push out, cancel or refrain from purchasing our equipment or services, which could [removed: materially adversely] [added: negatively] impact demand for our products and [added: services, reduce] our [added: backlog, increase our inventory, and materially adversely impact our] operating results.

Similarly, changes that result in sudden increases in consumer demand for electronic products [removed: (for example, as a result of the reopening of the economy with the easing of COVID-19 related restrictions)] have resulted in, and may continue to result in, a shortage of parts and materials needed to manufacture our products.

Such shortages, as well as shipment delays due to transportation [added: capacity and] interruptions, have adversely impacted, and may continue to adversely impact, our suppliers’ ability to meet our demand requirements.

Uncertain [added: or adverse economic and] market conditions, difficulties in obtaining capital, [added: increased costs] or reduced profitability may also cause some customers to scale back operations, exit businesses, merge with other manufacturers, or file for bankruptcy protection and potentially cease operations, which can also result in lower sales, additional inventory or bad debt expense for Applied.

Uncertain economic and industry conditions [added: and continued supply chain disruptions] also make it more challenging for Applied to forecast its operating results, make business decisions, and identify and prioritize the risks that may affect its businesses, sources and uses of cash, financial condition and results of operations.

The risks to Applied’s investment portfolio may be exacerbated if financial market conditions deteriorate [removed: (including from] [added: due to rising inflation, rising interest rates, economic recession or] impacts of the [removed: ongoing] COVID-19 [removed: pandemic)] [added: pandemic] and, as a result, the value and liquidity of the investment portfolio, as well as returns on pension assets, could be negatively impacted and lead to impairment charges.

As a supplier to the global semiconductor and display and related industries, Applied is subject to variable industry conditions, since demand for manufacturing equipment and services can change depending on several factors, including the nature and timing of technology inflections and advances in fabrication processes, the timing and requirements of new and emerging technologies and market drivers, production capacity relative to demand for chips and display technologies, end-user demand, customers’ capacity utilization, production volumes, access to affordable capital, consumer buying patterns and general economic [added: and political] conditions.

If Applied does not effectively manage these challenges during periods of changing demand, [removed: including as a result of the ongoing COVID-19 pandemic and] its [removed: effects, its] business performance and results of operations may be adversely impacted.

Business and Industry Risks

Uncertain or adverse economic and business conditions could result in decreases in consumer spending and demand.

- interruptions to Applied’s or its supplier’s supply chain;

The U.S. government recently announced new export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment and related parts and services, which have limited the market for certain of our products, adversely impacted our revenues, and increased our exposure to foreign competition.

Obtaining export licenses may be difficult, costly and time-consuming, and there is no assurance that we will be issued licenses that we apply for on a timely basis or at all.

The implementation and interpretation of these rules and other regulatory actions taken by the U.S. government is uncertain and evolving, and may make it more challenging for Applied to manage its operations and forecast its operating results.

As a global business with customers, suppliers and operations in many countries around the world, Applied may from time to time receive inquiries from government authorities about transactions between Applied and certain foreign entities.

For example, in August 2022, Applied received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts requesting information relating to certain China customer shipments.

We are cooperating fully with the government.

These inquiries are subject to uncertainties, and we cannot predict the outcome of this inquiry, or any other governmental inquires or proceedings that may occur.

Any violation or alleged violation of law or regulations could result in significant legal costs or in legal proceedings in which Applied or its employees could be subjected to fines and penalties and could result in restrictions on Applied’s business and damage to its reputation, and could have an adverse impact on its business operations, financial condition and results of operations.

Moreover, lockdowns that may from time to time be imposed in various geographic regions in response to periodic spikes in COVID-19 cases and related travel and logistics restrictions may result in additional supply chain and transportation disruptions, production delays, capacity limitations and cost increases.

Our operating results may be adversely impacted if we are unable to obtain parts, materials or services needed to manufacture Applied’s products, or if we are unable to do so on a timely manner or on favorable terms.

Ongoing supply chain constraints may continue to increase costs of logistics and parts for our products and may cause us to pass on increased costs to our customers.

Such increase in costs may lead to reduced demand for our products and materially adversely impact our operating results.

Supply chain disruptions have caused and may continue to cause delays in our equipment production and delivery schedules, which can lead to our business performance becoming significantly dependent on quarter-end production and delivery schedules, and could have an adverse impact on our operating and financial results.

- global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including new and changing export regulations for certain exports to China, where a significant portion of Applied’s supply chain is located, and any retaliatory measures, that adversely impact Applied or its direct or sub-tier suppliers;

- volatility in the availability and cost of parts, commodities, energy and shipping related to our products, including increased costs due to rising inflation or interest rates or other market conditions;

We have also experienced, and may continue to experience, shipment delays due to transportation interruptions or capacity constraints.

Operational and Financial Risks

Globally, cybersecurity attacks are increasing in number and the attackers are increasingly organized and well-financed, or at times supported by state actors.

In addition, geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine or increasing tension with China, may create a heightened risk of cybersecurity attacks.

Applied may be unable to anticipate, prevent or remediate future attacks, and in some instances Applied may be unaware of a cybersecurity incident or its magnitude and effects, particularly as attackers are becoming increasingly able to circumvent controls and remove forensic evidence.

We have experienced, and may continue to experience, increasing costs to attract and retain needed talent, driven by macro-economic conditions and a highly competitive labor market.

Beginning in fiscal 2023, the Tax Cuts and Jobs Act enacted on December 22, 2017 eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years.

Although Congress is considering legislation that would defer the capitalization and amortization requirement, there is no assurance that the provision will be repealed or otherwise modified.

If the requirement is not modified, it may increase Applied’s provision for income taxes and effective tax rates beginning in fiscal 2023.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act, which introduces a new 15% corporate minimum tax and includes an excise tax that would impose a 1% surcharge on stock repurchases, and which may impact Applied’s financial results beginning in fiscal 2024 and 2023, respectively.

Applied also may receive, and has received, inquiries, warrants, subpoenas, and other requests for information in connection with government investigations of potential or suspected violations of law or regulations by Applied and/or its employees.

Applied’s environmental, social and governance commitments could result in additional costs, and our inability to achieve them could have an adverse impact on our reputation and performance.

From time to time Applied communicates its strategies, commitments and targets related to sustainability, carbon emissions, diversity and inclusion, human rights, and other environmental, social and governance matters.

These strategies, commitments and targets reflect Applied’s current plans and aspirations, and Applied may be unable to achieve them.

In addition, standards and processes for measuring and reporting carbon emissions and other sustainability metrics may change over time, and may result in inconsistent data, or could result in significant revisions to our strategies, commitments and targets, or our ability to achieve them.

Any scrutiny of our carbon emissions or other sustainability disclosures or our failure to achieve related strategies, commitments and targets could negatively impact our reputation or performance.

Applied could also be required to alter its manufacturing, operations and product design, and incur substantial expense in order to comply with environmental, health and safety regulations.

Any failure to comply with these regulations could subject Applied to significant costs and liabilities that could adversely affect Applied’s business, financial condition and results of operations.

Risks Related to the COVID-19 Pandemic

Additionally, Applied has a multi-phase plan to return to working on-site, which gradually allows additional workers to return onsite while practicing social distancing and other safety measures.

However, there is no assurance that such plan and safety measures will be effective in preventing the inadvertent transmission of COVID-19 within the workplace.

Further, implementation of such plan could adversely impact Applied’s operations.

Risks Associated with Operating a Global Business

As more fully discussed in the risk factor “The ongoing COVID-19 pandemic and global measures taken in response thereto have adversely impacted, and may continue to adversely impact, Applied’s operations and financial results” above, the ongoing COVID-19 pandemic and measures taken in response by governments and businesses worldwide to contain its spread have adversely impacted and are expected to continue to adversely impact Applied’s supply chain, manufacturing, logistics, workforce and operations, as well as the operations of Applied’s customers, suppliers and partners globally.

In addition, the COVID-19 pandemic, and transportation interruptions and other measures taken in response thereto, have had, and may continue to have, a significant adverse impact on the global and regional economic activity, as well as our ability to meet our customer demand.

In addition, Lunar New Year and other holidays in the countries in which we or our suppliers operate may reduce the level of business activities during such times, and thus adversely impact our and our suppliers’ ability to manufacture and deliver products, supplies and services.

Risks Associated with Applied’s Industry

Risks Related to Applied’s Business, Finance and Operations

- volatility in the availability and cost of parts, materials or services, including rising prices due to inflation;

Risks Related to Intellectual Property and Cybersecurity

- [removed: *Off-Balance Sheet Arrangements] [added: *Contractual Obligations] and [removed: Contractual Obligations*][added: Off-Balance Sheet Arrangements*]

Applied’s top priority [removed: during the ongoing COVID-19 pandemic] remains protecting the health and safety of its employees and their families, customers, suppliers and community.

Applied [removed: will continue] [added: continues] to [removed: monitor and evaluate the ongoing COVID-19 pandemic] [added: support workplace flexibility] and will work to respond appropriately to the impact of COVID-19 on its business, its customers’ and suppliers’ businesses and its communities.

These customers may use what they manufacture in their own end products or sell the items to other companies for use in [removed: advanced] electronic [removed: components.][added: products.]

Each of Applied’s [removed: businesses] [added: segments] is subject to variable industry conditions, as demand for manufacturing equipment and services can change depending on supply and demand for chips, display technologies, and other electronic devices, as well as other factors, such as global [removed: economic] [added: economic, political] and market conditions, and the nature and timing of technological advances in fabrication processes.

A summary of financial information for each reportable segment is found in Note [removed: 18] [added: 17] of Notes to Consolidated Financial Statements.

Spending by semiconductor customers, which include companies that operate in the foundry, [removed: logic] [added: logic, memory,] and [removed: memory] [added: other semiconductor chip] markets, is driven by demand for [removed: advanced] electronic products, including smartphones and other mobile devices, servers, personal computers, automotive devices, storage, and other products.

| | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2021] [added: 2022] over [removed: 2020] [added: 2021] | | | | | | [removed: 2020] [added: 2021] over [removed: 2019] [added: 2020] | | |

| Net sales | | | $ | [removed: 23,063] [added: 25,785] | | | | | $ | [removed: 17,202] [added: 23,063] | | | | | $ | [removed: 14,608] [added: 17,202] | | | | | $ | [removed: 5,861] [added: 2,722] | | | | | $ | [removed: 2,594] [added: 5,861] | |

| Gross margin | | | [removed: 47.3] [added: 46.5] | | % | | | | [removed: 44.7] [added: 47.3] | | % | | | | [removed: 43.7] [added: 44.7] | | % | | | | [removed: 2.6] [added: (0.8)] points | | | | | | [removed: 1.0] [added: 2.6] points | | |

| Operating income | | | $ | [removed: 6,889] [added: 7,788] | | | | | $ | [removed: 4,365] [added: 6,889] | | | | | $ | [removed: 3,350] [added: 4,365] | | | | | $ | [removed: 2,524] [added: 899] | | | | | $ | [removed: 1,015] [added: 2,524] | |

| Operating margin | | | [removed: 29.9] [added: 30.2] | | % | | | | [removed: 25.4] [added: 29.9] | | % | | | | [removed: 22.9] [added: 25.4] | | % | | | | [removed: 4.5] [added: 0.3] points | | | | | | [removed: 2.5] [added: 4.5] points | | |

| Net income | | | $ | [removed: 5,888] [added: 6,525] | | | | | $ | [removed: 3,619] [added: 5,888] | | | | | $ | [removed: 2,706] [added: 3,619] | | | | | $ | [removed: 2,269] [added: 637] | | | | | $ | [removed: 913] [added: 2,269] | |

| Earnings per diluted share | | | $ | [removed: 6.40] [added: 7.44] | | | | | $ | [removed: 3.92] [added: 6.40] | | | | | $ | [removed: 2.86] [added: 3.92] | | | | | $ | [removed: 2.48] [added: 1.04] | | | | | $ | [removed: 1.06] [added: 2.48] | |

Fiscal [removed: 2021 contained 53 weeks,] [added: 2022] and fiscal 2020 [removed: and 2019] each contained 52 [added: weeks, while fiscal 2021 contained 53] weeks.

[removed: As a result, semiconductor] [added: Semiconductor] equipment customers continued to make strategic investments in new technology [removed: transitions.][added: transitions and new capacity during fiscal 2022.]

[removed: Spending] [added: Overall spending] by memory customers [removed: increased] [added: was flat] in fiscal [removed: 2021] [added: 2022] compared to fiscal [removed: 2020,] [added: 2021] as [removed: the industry made investments] [added: they continued] to maintain balance between supply and demand and invested in new technology.

[added: Although there have been improvements in supply chain performance,] Applied expects [removed: demand to remain strong and supply] [added: some] shortages to persist into fiscal [removed: 2022,] [added: 2023] and managing these [removed: near-term] supply chain constraints [removed: is] [added: to increase shipments to customers remains] a top priority.

Applied saw continued growth in its services business in fiscal [removed: 2021] [added: 2022] compared to fiscal [removed: 2020] [added: 2021] driven by an increase in the installed base of [added: equipment, the rate of customer] equipment [removed: and in] [added: utilization,] long-term service [removed: agreements.][added: agreements and spares and legacy systems sales.]

Applied’s Display and Adjacent Markets revenue [removed: remained relatively flat] [added: decreased] in fiscal [removed: 2021] [added: 2022] compared to fiscal [removed: 2020] [added: 2021 primarily] due to [removed: increased investment in display manufacturing equipment for TVs, offset by] decreased investment in display manufacturing equipment for [added: TVs and] mobile products.

For additional risks associated with the ongoing COVID-19 pandemic, see the risk factor entitled “*The [removed: ongoing] [added: continued effects of] COVID-19 pandemic and global measures taken in response [removed: thereto] have adversely impacted, and may continue to adversely impact, Applied’s operations and financial results*” in Part I, Item 1A, “Risk Factors.”

| | | | [removed: 2021] [added: 2022] | | | | | | | | | | | | | | | | | | [removed: 2020] [added: 2021] | | | | | | | | | | | | | | | | | | [removed: 2019] [added: 2020] | | | | | | | | | | | | [removed: 2021] [added: 2022] over [removed: 2020] [added: 2021] | | | | | | [removed: 2020] [added: 2021] over [removed: 2019] [added: 2020] | | |

| Semiconductor Systems | | | $ | [removed: 16,286] [added: 18,797] | | | | | [removed: 71%] [added: 73%] | | | | | | | | | | | | $ | [removed: 11,367] [added: 16,286] | | | | | [removed: 66%] [added: 71%] | | | | | | | | | | | | $ | [removed: 9,027] [added: 11,367] | | | | | [removed: 62%] [added: 66%] | | | | | | [removed: 43] [added: 15] | | % | | | | [removed: 26] [added: 43] | | % |

| Applied Global Services | | | [removed: 5,013] [added: 5,543] | | | | | | 22% | | | | | | | | | | | | [removed: 4,155] [added: 5,013] | | | | | | [removed: 24%] [added: 22%] | | | | | | | | | | | | [removed: 3,854] [added: 4,155] | | | | | | [removed: 26%] [added: 24%] | | | | | | [removed: 21] [added: 11] | | % | | | | [removed: 8] [added: 21] | | % |

| Display and Adjacent Markets | | | [removed: 1,634] [added: 1,331] | | | | | | [removed: 7%] [added: 5%] | | | | | | | | | | | | [removed: 1,607] [added: 1,634] | | | | | | [removed: 9%] [added: 7%] | | | | | | | | | | | | [removed: 1,651] [added: 1,607] | | | | | | [removed: 11%] [added: 9%] | | | | | | [removed: 2] [added: (19)] | | % | | | | [removed: (3)] [added: 2] | | % |

| Corporate and Other | | | [removed: 130] [added: 114] | | | | | | —% | | | | | | | | | | | | [removed: 73] [added: 130] | | | | | | [removed: 1%] [added: —%] | | | | | | | | | | | | [removed: 76] [added: 73] | | | | | | 1% | | | | | | [removed: 78] [added: (12)] | | % | | | | [removed: (4)] [added: 78] | | % |

| Total | | | $ | [removed: 23,063] [added: 25,785] | | | | | 100% | | | | | | | | | | | | $ | [removed: 17,202] [added: 23,063] | | | | | 100% | | | | | | | | | | | | $ | [removed: 14,608] [added: 17,202] | | | | | 100% | | | | | | [removed: 34] [added: 12] | | % | | | | [removed: 18] [added: 34] | | % |

Net sales in fiscal [removed: 2021] [added: 2022] compared to fiscal [removed: 2020] [added: 2021] and fiscal [removed: 2020] [added: 2021] compared to fiscal [removed: 2019] [added: 2020] increased primarily due to increased customer investments in semiconductor equipment [removed: and] [added: as well as customer] spending on [removed: services.][added: spares and comprehensive service agreements.]

| China | | | $ | [removed: 7,535] [added: 7,254] | | | | | [removed: 33%] [added: 28%] | | | | | | | | | | | | $ | [removed: 5,456] [added: 7,535] | | | | | [removed: 32%] [added: 33%] | | | | | | | | | | | | $ | [removed: 4,277] [added: 5,456] | | | | | [removed: 29%] [added: 32%] | | | | | | [removed: 38] [added: (4)] | | % | | | | [removed: 28] [added: 38] | | % |

| Korea | | | [removed: 5,012] [added: 4,395] | | | | | | [removed: 22%] [added: 17%] | | | | | | | | | | | | [removed: 3,031] [added: 5,012] | | | | | | [removed: 18%] [added: 22%] | | | | | | | | | | | | [removed: 1,929] [added: 3,031] | | | | | | [removed: 13%] [added: 18%] | | | | | | [removed: 65] [added: (12)] | | % | | | | [removed: 57] [added: 65] | | % |

| Taiwan | | | [removed: 4,742] [added: 6,262] | | | | | | [removed: 20%] [added: 24%] | | | | | | | | | | | | [removed: 3,953] [added: 4,742] | | | | | | [removed: 23%] [added: 20%] | | | | | | | | | | | | [removed: 2,965] [added: 3,953] | | | | | | [removed: 20%] [added: 23%] | | | | | | [removed: 20] [added: 32] | | % | | | | [removed: 33] [added: 20] | | % |

| Japan | | | [removed: 1,962] [added: 2,012] | | | | | | 8% | | | | | | | | | | | | [removed: 1,996] [added: 1,962] | | | | | | [removed: 11%] [added: 8%] | | | | | | | | | | | | [removed: 2,198] [added: 1,996] | | | | | | [removed: 15%] [added: 11%] | | | | | | [removed: (2)] [added: 3] | | % | | | | [removed: (9)] [added: (2)] | | % |

| Southeast Asia | | | [removed: 677] [added: 1,084] | | | | | | [removed: 3%] [added: 4%] | | | | | | | | | | | | [removed: 411] [added: 677] | | | | | | [removed: 2%] [added: 3%] | | | | | | | | | | | | [removed: 548] [added: 411] | | | | | | [removed: 4%] [added: 2%] | | | | | | [removed: 65] [added: 60] | | % | | | | [removed: (25)] [added: 65] | | % |

| Asia Pacific | | | [removed: 19,928] [added: 21,007] | | | | | | [removed: 86%] [added: 81%] | | | | | | | | | | | | [removed: 14,847] [added: 19,928] | | | | | | 86% | | | | | | | | | | | | [removed: 11,917] [added: 14,847] | | | | | | [removed: 81%] [added: 86%] | | | | | | [removed: 34] [added: 5] | | % | | | | [removed: 25] [added: 34] | | % |

| United States | | | [removed: 2,038] [added: 3,104] | | | | | | [removed: 9%] [added: 12%] | | | | | | | | | | | | [removed: 1,619] [added: 2,038] | | | | | | [removed: 10%] [added: 9%] | | | | | | | | | | | | [removed: 1,871] [added: 1,619] | | | | | | [removed: 13%] [added: 10%] | | | | | | [removed: 26] [added: 52] | | % | | | | [removed: (13)] [added: 26] | | % |

| Europe | | | [removed: 1,097] [added: 1,674] | | | | | | [removed: 5%] [added: 7%] | | | | | | | | | | | | [removed: 736] [added: 1,097] | | | | | | [removed: 4%] [added: 5%] | | | | | | | | | | | | [removed: 820] [added: 736] | | | | | | [removed: 6%] [added: 4%] | | | | | | [removed: 49] [added: 53] | | % | | | | [removed: (10)] [added: 49] | | % |

The [removed: changes] [added: increases] in net sales in all regions [added: other than China and Korea] in fiscal [removed: 2020] [added: 2022] compared to fiscal [removed: 2019] [added: 2021] primarily reflected changes in semiconductor equipment [removed: spending.][added: spending and customer spending on comprehensive service agreements.]

The [removed: increase] [added: decrease] in net sales to customers in [removed: China, Taiwan and Korea] [added: China] for fiscal [removed: 2020] [added: 2022] compared to fiscal [removed: 2019 was] [added: 2021] primarily [removed: due to increased investments] [added: reflected decreased investment] in [removed: semiconductor] [added: display] manufacturing equipment and [removed: customer] [added: semiconductor equipment, partially offset by increased] spending on [added: spares and] comprehensive service agreements.

The decrease in net sales to customers in [removed: Japan and United States] [added: Korea] for fiscal [removed: 2020] [added: 2022] compared to fiscal [removed: 2019] [added: 2021] primarily reflected [removed: a decrease in investments] [added: decreased investment] in semiconductor [removed: and] [added: equipment, partially offset by increased investment in] display manufacturing equipment.

Gross margin in fiscal [removed: 2020 increased] [added: 2022 decreased] compared to fiscal [removed: 2019] [added: 2021] primarily [removed: due to the increase in net sales and favorable changes in customer and product mix, partially offset] [added: driven] by higher [removed: freight costs,] [added: material, freight,] and [added: logistics costs and] higher personnel costs due to [added: an] increase in headcount to provide manufacturing capacity and flexibility, [removed: underutilization of headcount due to COVID-19 restrictions preventing travel to customer site] [added: partially offset by favorable changes in product mix] and [removed: incremental employee compensation related to the COVID-19 pandemic.][added: an increase in average selling prices.]

Foundry and logic spending increased in fiscal 2022 compared to fiscal 2021 driven by customer investments in both advanced and mature nodes.

While customer demand increased during fiscal 2022 compared to fiscal 2021, supply chain and logistics constraints impacted Applied’s ability to fulfill demand in fiscal 2022.

In fiscal 2023, Applied expects memory customers’ spending to be lower as compared to fiscal 2022 due to some customers deferring capacity additions as a result of weakness in consumer electronics and personal computer markets.

Advanced foundry and logic demand is expected to remain strong in fiscal 2023 as customers continue to invest in new technology.

On October 7, 2022, the United States government announced new export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment and related parts and services, that require export licenses and authorizations.

These new export regulations resulted in lower net sales in China than expected for fiscal 2022.

Applied is pursuing additional export licenses and authorizations where needed.

While Applied currently estimates lower net sales to China of up to $2.5 billion and lower overall gross margin of up to 1% in fiscal 2023, Applied is continuing to assess the implication of these complex regulations to its business.

*See also “Risk Factors – Global trade issues and changes in and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions, tariffs and international trade disputes, have adversely impacted and could further adversely impact our business and operations, and reduce the competitiveness of our products relative to local and global competitors”* *for further details.*

| Total | | | $ | 25,785 | | | | | 100% | | | | | | | | | | | | $ | 23,063 | | | | | 100% | | | | | | | | | | | | $ | 17,202 | | | | | 100% | | | | | | 12 | | % | | | | 34 | | % |

| Gross margin | | | 46.5 | | % | | | | 47.3 | | % | | | | 44.7 | | % | | | | (0.8) points | | | | | | 2.6 points | | |

The increases in RD&E expenses during fiscal 2022 compared to fiscal 2021 were primarily due to additional headcount, higher consumable and equipment costs associated with ongoing product development and share-based compensation expense.

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | 2021 over 2020 | | |

Marketing and selling expenses for fiscal 2022 increased compared to fiscal 2021 primarily due to additional headcount.

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | 2021 over 2020 | | |

G&A expenses in fiscal 2022 increased compared to fiscal 2021 primarily due to additional headcount and higher travel related expenses.

| 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | 2021 over 2020 | | | | | |

Operating income (loss) for fiscal 2021 included a $154 million deal termination fee associated with the termination of a Share Purchase Agreement with Kokusai Electric Corporation and KKR HKE Investment L. P. during the second quarter of

fiscal 2021.

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | 2021 over 2020 | | |

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | 2021 over 2020 | | |

The effective tax rate for fiscal 2022 was higher than fiscal 2021 primarily due to a reduction of deferred tax assets related to a new tax incentive in Singapore, partially offset by changes in uncertain tax positions.

On August 9, 2022, the U.S. government enacted the U.S. CHIPS and Science Act (“CHIPS Act”).

The CHIPS Act creates a 25% investment tax credit for certain investments in domestic semiconductor manufacturing.

The credit is provided for qualifying property, which is placed in service after December 31, 2022, and any impact to Applied would start in fiscal 2023.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act.

The Inflation Reduction Act introduces a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations.

Applicable corporations would be allowed to claim a credit for the minimum tax paid against regular tax in future years.

The minimum tax impacts Applied starting in fiscal 2024.

The Inflation Reduction Act also includes an excise tax that would impose a 1% surcharge on stock repurchases.

This excise tax is effective January 1, 2023.

Applied is currently evaluating the effect the CHIPS Act and the Inflation Reduction Act will have on its consolidated financial statements.

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | | | | | | | 2021 over 2020 | | | | | | | | |

Spending by DRAM customers increased and flash memory customers decreased in fiscal 2022 compared to fiscal 2021 due to changes in investments in new technology and capacity.

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | | | | | | | 2021 over 2020 | | | | | | | | |

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | | | | | 2022 over 2021 | | | | | | | | | | | | 2021 over 2020 | | | | | | | | |

Operating margin for fiscal 2022 increased compared to fiscal 2021 primarily due to reduction in headcount related costs as headcount moved to open positions within Semiconductor Systems and Applied Global Services segments, offset by higher material costs.

| | | | 2022 | | | | | | | | | 2021 | | | | | | | | | 2020 | | | | | | | | | 2022 over 2021 | | | | | | | | | | | | 2021 over 2020 | | | | | | | | |

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

Cash provided by operating activities remained relatively flat in fiscal 2022 compared to fiscal 2021 primarily due to higher inventory and income tax payments, partially offset by higher net income and lower year over year increase in accounts receivable.

Applied continues to support workplace flexibility such as remote working where possible and follow enhanced safety and health protocols—including screenings, social distancing, and use of personal protective equipment.

Applied is keeping its labs and operations active and continuing to support customers.

Applied has implemented a multi-phase plan to return to working on-site, which takes into consideration factors such as Applied’s business and employee needs, local government regulations, community case trends, and recommendations from public health officials.

The plan involves multiple phases that gradually allow additional workers to return onsite while practicing social distancing and other safety measures.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| | | | | | | | | | | | | | | | | | | | | | Change | | | | | | | | |

COVID-19 was designated a pandemic during fiscal 2020 and the resulting restrictions put in place worldwide impacted Applied’s supply chains and manufacturing operations.

In fiscal 2021, the COVID-19 pandemic accelerated the digital transformation of the economy, creating increased global demand for semiconductors.

While customers’ strategic investments continued, supply chain constraints impacted Applied’s ability to fulfill demand primarily in the fourth quarter of fiscal 2021.

The increase in China was partially offset by a decrease in customer spending in display manufacturing equipment.

The decrease in net sales to customers in Southeast Asia and Europe for fiscal 2020 compared to fiscal 2019 primarily reflected a decrease in investments in semiconductor manufacturing equipment and customer spending on legacy systems and spares.

Gross Margin

| | | | (In millions) | | | | | | | | | | | | | | | | | | | | | | | | | | |

Marketing and selling expenses remained relatively flat in fiscal 2020 compared to fiscal 2019.

G&A expenses in fiscal 2020 increased compared to fiscal 2019 primarily due to higher expenses associated with acquisition integration and deal costs, variable compensation, and share-based compensation.

Deal termination fee for the periods indicated were as follows:

On June 30, 2019, Applied entered into a Share Purchase Agreement (SPA) with Kokusai Electric Corporation (Kokusai Electric) and KKR HKE Investment L.P. (KKR) providing for Applied’s acquisition of all outstanding shares of Kokusai Electric.

The SPA, as subsequently amended, terminated as of March 19, 2021.

Applied paid KKR a termination fee of $154 million during the second quarter of fiscal 2021.

In addition, unrealized gains on equity investment securities from investments during fiscal 2020 were lower compared to fiscal 2019.

Applied’s effective tax rate for fiscal 2020 was lower than fiscal 2019 primarily due to a decline in the tax expense from changes to uncertain tax positions year-over-year, an increased tax benefit from tax credits, and increased excess stock compensation tax benefits.

This benefit was partly offset by an unfavorable settlement of an uncertain tax position in fiscal 2020.

On June 14, 2019, the U.S. government released regulations that significantly affect how the global intangible low-taxed income (GILTI) provision of the Tax Cuts and Jobs Act (Tax Act) is interpreted.

As a result, Applied reversed a tax benefit of $96 million in the third quarter of fiscal 2019 that had been realized in the first half of fiscal 2019.

An accounting policy may be selected to treat GILTI temporary differences in taxable income either as a current-period expense when incurred (period cost method) or factor such amounts into the measurement of deferred taxes (deferred method).

Applied has chosen the period cost method.

Net sales for fiscal 2020 increased compared to fiscal 2019 primarily due to higher spending, in absolute dollars, from foundry, logic and other customers.

Operating margin for fiscal 2020 increased compared to fiscal 2019, reflecting favorable changes in customer and product mix and lower travel-related spending due to COVID-19 travel restrictions.

*Kokusai Electric Corporation*

Cash provided by operating activities increased in fiscal 2020 compared to fiscal 2019 primarily due to higher net income.

Capital expenditures in fiscal 2019 were primarily for real property acquisitions and improvements in North America and Taiwan, as well as investments in demonstration, testing and laboratory tools.

In August 2019, Applied entered into a term loan credit agreement (Term Loan Credit Agreement) with a group of lenders under which the lenders committed to make an unsecured term loan to Applied of up to $2.0 billion to finance in part Applied’s planned acquisition of all outstanding shares of Kokusai Electric, to pay related transaction fees and expenses and for general corporate purposes.

In March 2021, the Term Loan Credit Agreement, as subsequently amended, terminated automatically in accordance with its terms upon the termination of the SPA.

No amounts were borrowed under the Term Loan Credit Agreement.

In May 2020, Applied issued $750 million aggregate principal amount of 1.750% senior unsecured notes due 2030 and $750 million aggregate principal amount of 2.750% senior unsecured notes due 2050, in a registered public offering.

In June 2020, Applied used a portion of the net proceeds from the offering to redeem the outstanding $600 million in aggregate principal amount of its 2.625% senior unsecured notes due October 1, 2020 and $750 million in aggregate principal amount of its 4.300% senior unsecured notes due June 15, 2021, at a total aggregate redemption price of $1.4 billion.

As a result, Applied recognized a $33 million loss on early extinguishment of these senior unsecured notes during the third quarter of fiscal 2020.

Before the Tax Act, U.S. income tax had not been provided for certain unrepatriated earnings that were considered indefinitely reinvested.

Income tax is now provided for all unrepatriated earnings.

*Available-for-sale Debt Securities.* The market value of [removed: Applied's] [added: Applied’s] investments in [removed: available-for-sales] [added: available-for-sale] securities was approximately $1.8 billion at October [removed: 31, 2021.][added: 30, 2022.]

An immediate hypothetical 100 basis point increase in interest rates would result in a decrease in the fair value of investments as of October [removed: 31, 2021] [added: 30, 2022] of approximately [removed: $26] [added: $23] million.

*Debt.* At October [removed: 31, 2021,] [added: 30, 2022,] the aggregate principal of long-term senior unsecured notes issued by Applied was $5.5 billion with an estimated fair value of [removed: $6.4] [added: $4.8] billion.

A hypothetical decrease in interest rates of 100 basis points would result in an increase in the fair value of Applied’s long-term senior notes issuances of approximately [removed: $731] [added: $454] million at October [removed: 31, 2021.][added: 30, 2022.]

A hypothetical 10% adverse change in foreign currency exchange rates relative to the U.S. Dollar would result in a decrease in the fair value of these hedging contracts of [removed: $177] [added: $196] million at October [removed: 31, 2021.][added: 30, 2022.]

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

With its diverse technology capabilities, Applied delivers products and services that improve device performance, [added: power,] yield and cost.

These customers may use what they manufacture in their own end products or sell the items to other companies for use in [removed: advanced] electronic [removed: components.][added: products.]

A summary of financial information for each reportable segment is found in Note [removed: 18] [added: 17] of Notes to Consolidated Financial Statements.

[removed: Applied’s new] [added: Applied’ Semiconductor Systems] equipment is sold to integrated device manufacturers and foundries worldwide.

| [removed: Technologies] [added: Semiconductor Systems Technologies] | | | | | | Product(s) | | |

| Atomic Layer Deposition (ALD) ALD technology enables ultra thin film growth of either a conducting or insulating material with uniform coverage in nanometer-sized structures. | | | | | | [removed: Olympia System] [added: Olympia, Sprinter, Morpher and P-300BV Systems] | | |

| Metrology and Inspection Metrology and inspection tools are used to locate, measure, and analyze defects and features on the wafer during various stages of the fabrication processes. Applied enables customers to characterize and control critical dimension (CD) and defect issues, especially at advanced generation technology nodes. | | | | | | SEMVision eBeam Review PROVision eBeam Metrology [removed: and Inspection] Enlight Optical Inspection UVision Optical Inspection VeritySEM CD-SEM Metrology Aera Mask Inspection | | |

Customer demand for products and services is fulfilled through a global distribution system in more than 170 locations and trained service engineers located in close proximity to customer sites to support over [removed: 45,900] [added: 49,000] installed Applied semiconductor, display and other manufacturing systems worldwide.

| Legacy [removed: Equipment] [added: Equipment and Upgrades] Comprehensive 200mm equipment and upgrades portfolio to address a full spectrum of production needs and extend tool lifetime. Applied 200mm equipment supports market inflections and new technology for a broad variety of devices including analog, power, and MEMS. | | |

| Automation Software Applied SmartFactory® automation software portfolio coordinates and streamlines every aspect of a [removed: factory-the] [added: factory (the] processes, equipment and [removed: people-to] [added: people) to] provide competitive advantage to customers. | | |

The Display and Adjacent Markets segment is comprised [added: primarily] of products for manufacturing liquid crystal displays (LCDs), organic light-emitting diodes (OLEDs), and other display technologies for TVs, monitors, laptops, personal computers (PCs), electronic tablets, smart phones, and other consumer-oriented devices.

Display and Adjacent Markets [removed: industry] [added: segment] growth depends primarily on consumer demand for increasingly larger and more advanced TVs and high-resolution displays for mobile devices as well as new form factors, including thin, light, curved and flexible displays, and new applications such as augmented and virtual reality.

Backlog by reportable segment as of October [removed: 31, 2021] [added: 30, 2022] and October [removed: 25, 2020] [added: 31, 2021] was as follows:

| | | | [removed: | | |] [added: 2022] | | | | | | 2021 | | | | | | [removed: | | | | | |] 2020 | | | [removed: | | | | | | | | | | | |]

| Semiconductor Systems | | | | | | | | | | | | | | | | | | $ | [removed: 6,679] [added: 12,691] | | | | | [removed: 57] [added: 67] | | % | | | | $ | [removed: 2,880] [added: 6,679] | | | | | [removed: 43] [added: 57] | | % |

| Applied Global Services | | | | | | | | | | | | | | | | | | [removed: 4,335] [added: 5,643] | | | | | | [removed: 37] [added: 30] | | % | | | | [removed: 2,607] [added: 4,335] | | | | | | [removed: 39] [added: 37] | | % |

| Display and Adjacent Markets | | | | | | | | | | | | | | | | | | [removed: 735] [added: 581] | | | | | | [removed: 6] [added: 3] | | % | | | | [removed: 1,115] [added: 735] | | | | | | [removed: 17] [added: 6] | | % |

| Corporate and Other | | | | | | | | | | | | | | | | | | [removed: 9] [added: 96] | | | | | | — | | % | | | | [removed: 54] [added: 9] | | | | | | [removed: 1] [added: —] | | % |

| Total | | | | | | | | | | | | | | | | | | $ | [removed: 11,758] [added: 19,011] | | | | | 100 | | % | | | | $ | [removed: 6,656] [added: 11,758] | | | | | 100 | | % |

Of the total backlog as of October [removed: 31, 2021,] [added: 30, 2022,] approximately [removed: 21%] [added: 32%] is not reasonably expected to be filled within the next 12 months.

Applied has implemented a distributed manufacturing model under which manufacturing and supply chain activities are conducted in various countries, [added: primarily] including [removed: Germany,] [added: China,] Israel, Singapore, Taiwan, the United States and other countries in Asia.

Applied’s supply chain strategy [removed: adheres] [added: commits] to [added: adhere to] ethical labor practices, responsible minerals sourcing, Responsible Business Alliance and SEMI guidelines, and the Applied Materials Standards of Business Conduct as defined in Applied’s Environmental, Social and Governance (ESG) commitment.

Applied’s product development and engineering organizations are located primarily in the United States, as well as in China, Europe, India, Israel, [added: Korea,] Singapore and Taiwan.

Applied has operations in many countries, with some of its business activities concentrated in certain geographic areas, and global and regional economic [added: and political] conditions can impact the company’s business and financial results.

Customers’ expenditures depend on many factors, including: general economic conditions; anticipated market demand and pricing for semiconductors, display technologies and other electronic devices; the development of new technologies; customers’ factory utilization; capital resources and financing; [removed: and government] [added: trade] policies and [added: export regulations; and government] incentives.

Information on net sales to unaffiliated customers and long-lived assets attributable to Applied’s geographic regions is included in Note [removed: 18] [added: 17] of Notes to Consolidated Financial Statements.

| Samsung Electronics Co., Ltd. | | | [removed: 20%] [added: 12%] | | | | | | [removed: 18%] [added: 20%] | | | | | | [removed: *] [added: 18%] | | |

| Taiwan Semiconductor Manufacturing Company Limited | | | [removed: 15%] [added: 20%] | | | | | | [removed: 18%] [added: 15%] | | | | | | [removed: 14%] [added: 18%] | | |

| Intel Corporation | | | [removed: *] [added: 10%] | | | | | | * | | | | | | [removed: 12%] [added: *] | | |

Competitors range from small companies that compete in a single region, which may benefit from policies and regulations that favor domestic companies, to global, diversified [removed: companies.][added: companies, which operate in more complex global economic and regulatory environments.]

[removed: Applied offers a variety of differentiated] [added: Applied’s] products [removed: that] must continuously evolve to satisfy customers’ requirements to compete effectively in the marketplace.

There are a number of competitors serving the semiconductor manufacturing equipment industry, which has experienced [removed: increasing] [added: increased] consolidation.

Products and services within the Applied Global Services segment complement [added: the] Semiconductor Systems and Display and Adjacent Markets segments’ products in markets that are characterized by demanding worldwide service [removed: requirements and a diverse group of numerous competitors.][added: requirements.]

Protection of Applied’s technology assets through enforcement of its intellectual property rights, including patents, is [removed: important.][added: important for its competitive position.]

Applied has [removed: approximately 15,700] [added: more than 17,300] patents in the United States and other countries, and additional applications are pending for new inventions.

These regulations, which differ among jurisdictions, include those related to financial and other disclosures, accounting standards, corporate governance, intellectual property, tax, trade, including import, export and customs, antitrust, environment, [added: and health and safety, climate change,] employment, immigration and travel regulations, privacy, data protection and localization, and anti-corruption.

*See “Risk Factors – [removed: Risks Related to Legal] [added: Legal, Compliance,] and [removed: Compliance] [added: Other Risks] – Applied is exposed to various risks related to the global regulatory environment” for further details.*

*See also “Risk Factors – Risks Related to [removed: Legal] [added: Legal, Compliance,] and [removed: Compliance -] [added: Other Risks –] Applied is subject to risks associated with environmental, health and safety [removed: regulations and sustainability requirements”*] [added: regulations”*] *for further details.*

Applied’s provision for income [removed: taxes and] [added: taxes,] effective tax rate [added: and financial results] could be affected by numerous factors, including changes in applicable tax laws, interpretations of applicable tax laws, amount and composition of pre-tax income in jurisdictions with differing tax rates, and valuation of deferred tax assets.

Applied also provides manufacturing equipment that helps improve performance, power, yield and cost of semiconductor devices that use mature process technologies and serve specialty markets such as the Internet of Things, Communications, Automotive, Power and Sensors.

In addition to display applications, the segment’s Chemical Vapor Deposition (CVD) technology is used to manufacture solar energy cells.

| | | | | | | | | | | | | 2022 | | | | | | | | | | | | 2021 | | | | | | | | | | | | | | |

New export rules and regulations issued in December 2022 are expected to reduce backlog that was not reasonably expected to be filled within 12 months by approximately $989 million.

Applied’s broad portfolio offers a variety of differentiated products, including co-optimized and integrated materials solutions that enable unique films, structures and devices.

Competition in the Applied Global Services segment includes a diverse group of numerous third-party service providers and customers that perform their own service.

Applied seeks to create growth and development opportunities to support an engaged and inclusive workforce.

Applied promotes holistic employee learning and development based on the 70/20/10 model--70% on-the-job learning, 20% social/collaborative and 10% formal training, with a focus on advancing technical skills as well as improving general business acumen to address increasing work complexity.

Also, to help expand professional breadth, Applied uses a federated model where the segments and functions provide technical and job-specific training tied to their disciplines, while general professional, management, and leadership training is provided at the corporate level.

All training is coordinated centrally and aligned with common objectives through Applied Global University.

In addition to instructor-led and web-based training, Applied offers state-of-the-art training modalities, such as AI-based simulations and Augmented and Virtual Reality learning capabilities, to help develop its new products, train its manufacturing and field support employees, and collaborate remotely.

Each fiscal year, employees are provided the opportunity to complete the required 40 hours of learning.

In fiscal 2022, the focus of the employee survey was on engagement and identifying actionable insights to enable a segmented talent strategy to address engagement and retention in targeted employee populations (e.g., early tenure employees).

| Timothy M. Deane (6) | | | Group Vice President, Applied Global Services | | |

Prior to joining Applied, Mr. Hill was Executive Vice President and Chief Financial Officer of Xilinx, Inc., a company that designed and developed programmable devices and associated technologies, from April 2020 until its acquisition by Advanced Micro Devices, Inc. in February 2022.

Prior to Xilinx, Mr. Hill served in various finance positions with Intel Corporation for 25 years, most recently as Corporate Vice President and Chief Financial Officer and Chief Operating Officer, Technology, Systems and Core Engineering Group.

He joined Applied in 1995 and previously served in various senior management and field operations roles, including head of Field Operations and Business Management for the Semiconductor Products Group, Account General Manager and Region General Manager.

Prior to joining Applied, Mr. Bodner served as Chief Accounting Officer since July 2021 and as Vice President, Accounting since April 2021 at ESS Tech, Inc., a company that designs, builds and deploys iron flow batteries for commercial and energy storage applications.

Prior to joining ESS Tech, Mr. Bodner served for almost 17 years at Intel Corporation in a variety of finance leadership roles, including Vice President of Finance and Director of Internal Audit.

Mr. Bodner also worked nearly 12 years at PwC in its assurance practice.

| | | | 2021 | | | | | | 2020 | | | | | | 2019 | | |

Applied’s competitive position significantly depends upon its research, development, engineering, manufacturing and marketing capabilities, as well as its patent position.

Applied believes continuous learning by its people feeds the Company’s pipeline of innovation and pays off in employee retention.

Applied’s business units maintain an independent strategy for skill-building, using content that is owned, supervised, developed, and managed by each unit’s learning team.

At the same time, these skill-building programs are aligned around a common set of objectives and framework focused on compliance, technical, professional and management development.

For example, the Company’s Environmental, Health & Safety (EHS) and Sustainability organization leads employee training and awareness on EHS management issues and the certification processes for safety and skills related to technical manufacturing and engineering work.

In addition, all employees have opportunities for training on a wide range of general professional skills that are designed to help them to be more effective in their current and future roles.

There is an expectation that every employee has a development goal as a part of individual performance objectives.

Historically more than 85% of employees have had development objectives.

The Company has used McKinsey & Company’s Organizational Health Index (OHI) and employee engagement pulse surveys to measure its organizational health and employee experiences.

Insights from the Company’s surveys are used to develop both company-wide and business unit level organizational and talent development plans.

| Ginetto Addiego(2) | | | Senior Vice President, Semiconductor Global Operations and Corporate Quality | | |

| Ali Salehpour(7) | | | Senior Vice President, Services, Display and Flexible Technology | | |

(2)Dr. Addiego, age 62, has been Senior Vice President, Semiconductor Global Operations and Corporate Quality since June 2015.

He served as Senior Vice President, Engineering from March 2014 to June 2019.

He previously worked at Applied from 1996 to 2005, leading various product groups as well as global organizations, including Global Operations, Facilities and Real Estate, Foundation Engineering, and Information Technology.

From March 2011 to March 2014, Dr. Addiego was President and Chief Operating Officer of Ultra Clean Technology Corp., a public company listed on Nasdaq and a supplier of critical subsystems for the semiconductor capital equipment, medical device, energy, research, and flat panel industries.

From February 2005 to March 2011, Dr. Addiego worked at Novellus Systems, Inc., a provider of advanced process equipment for the semiconductor industry, where he served as Executive Vice President of Corporate Global Operations responsible for Central Engineering, Facilities, Real Estate, Human Resources and Information Technology, and as Chief Administrative Officer.

Mr. Halliday previously served as Corporate Vice President and advisor to Applied in areas such as business development and government affairs since September 2017, and prior to that was Applied’s Chief Financial Officer from February 2013 to August 2017.

Prior to that he served as Group Vice President and General Manager of the 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.

He previously served as Group Vice President, General Manager Energy and Environmental Solutions and Display Business Groups, since joining Applied in November 2012.

Prior to Applied, Mr. Salehpour worked at KLA-Tencor for 16 years, where he served as a Senior Vice President and General Manager, and worked for 10 years in senior management positions at Schlumberger Test Systems.

Prior to Applied, Mr. Read worked at Brocade Communications Systems, Inc., a provider of semiconductor and software-based network solutions, since October 2002, where he most recently served as Vice President, Corporate Controller.

Prior to Brocade, Mr. Read worked at KPMG LLP, an audit, tax and advisory firm, from 1996 to 2002.

The information set forth under “Legal Matters” in Note [removed: 17] [added: 16] of Notes to Consolidated Financial Statements is incorporated herein by reference.

*See also “Risk Factors – Risks Related to [removed: Legal] [added: Legal, Compliance,] and [removed: Compliance.”*][added: Other Risks –* *Applied is exposed to various risks related to legal proceedings, claims and investigations.”*]

For the fiscal year ended October [removed: 31, 2021][added: 30, 2022]

| Large accelerated filer | | | ☑ | | | [removed: | | |] Accelerated filer | | | ☐ | | | [added: | | | | | |]

| Non-accelerated filer | | | ☐ | | | [added: Smaller reporting company] | | | [removed: Smaller reporting] [added: ☐ | | | Emerging growth] company | | | ☐ | | |

Aggregate market value of the voting stock held by non-affiliates of the registrant as of May [removed: 2, 2021,] [added: 1, 2022,] based upon the closing sale price reported by the NASDAQ Global Select Market on that date: [removed: $120,888,771,285][added: $95,725,229,751]

Number of shares outstanding of the registrant’s Common Stock, [removed: $.01] [added: $0.01] par value, as of December [removed: 10, 2021: 888,513,248][added: 9, 2022: 844,139,722]

Portions of Part III will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 28, 2022.][added: 27, 2023.]

Examples of forward-looking statements include those regarding Applied’s future financial or operating results, customer demand and spending, end-user demand, Applied’s and market and industry trends and outlooks, the impact of [added: new export regulations on our ability to export products and provide services to customers and on our results of operations, our intent to seek additional licenses pursuant to new export regulations,] the [added: impact of the] ongoing COVID-19 pandemic and responses thereto on Applied’s operations and financial results, cash flows and cash deployment strategies, declaration of dividends, share repurchases, business strategies and priorities, costs and cost controls, products, competitive positions, management’s plans and objectives for future operations, research and development, acquisitions, investments and divestitures, growth opportunities, restructuring and severance activities, backlog, working capital, liquidity, investment portfolio and policies, taxes, supply chain, manufacturing, properties, legal proceedings and claims, and other statements that are not historical facts, as well as their underlying assumptions.

FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER [removed: 31, 2021][added: 30, 2022]

| Item 1: | | | [removed: [Business](#ie3b4dd133255408488aec6011c49b801_16)] [added: [Business](#i3ccedc1bc7c14d6e98cf15823a2e0db8_16)] | | | [removed: [4](#ie3b4dd133255408488aec6011c49b801_16)] [added: [4](#i3ccedc1bc7c14d6e98cf15823a2e0db8_16)] | | |

| Item 1A: | | | [Risk [removed: Factors](#ie3b4dd133255408488aec6011c49b801_19)] [added: Factors](#i3ccedc1bc7c14d6e98cf15823a2e0db8_19)] | | | [removed: [16](#ie3b4dd133255408488aec6011c49b801_19)] [added: [16](#i3ccedc1bc7c14d6e98cf15823a2e0db8_19)] | | |

| Item 1B: | | | [Unresolved Staff [removed: Comments](#ie3b4dd133255408488aec6011c49b801_22)] [added: Comments](#i3ccedc1bc7c14d6e98cf15823a2e0db8_22)] | | | [removed: [29](#ie3b4dd133255408488aec6011c49b801_22)] [added: [30](#i3ccedc1bc7c14d6e98cf15823a2e0db8_22)] | | |

| Item 2: | | | [removed: [Properties](#ie3b4dd133255408488aec6011c49b801_25)] [added: [Properties](#i3ccedc1bc7c14d6e98cf15823a2e0db8_25)] | | | [removed: [30](#ie3b4dd133255408488aec6011c49b801_25)] [added: [31](#i3ccedc1bc7c14d6e98cf15823a2e0db8_25)] | | |

| Item 3: | | | [Legal [removed: Proceedings](#ie3b4dd133255408488aec6011c49b801_28)] [added: Proceedings](#i3ccedc1bc7c14d6e98cf15823a2e0db8_28)] | | | [removed: [31](#ie3b4dd133255408488aec6011c49b801_28)] [added: [32](#i3ccedc1bc7c14d6e98cf15823a2e0db8_28)] | | |

| Item 4: | | | [Mine Safety [removed: Disclosures](#ie3b4dd133255408488aec6011c49b801_31)] [added: Disclosures](#i3ccedc1bc7c14d6e98cf15823a2e0db8_31)] | | | [removed: [31](#ie3b4dd133255408488aec6011c49b801_31)] [added: [32](#i3ccedc1bc7c14d6e98cf15823a2e0db8_31)] | | |

| Item 5: | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#ie3b4dd133255408488aec6011c49b801_37)] [added: Securities](#i3ccedc1bc7c14d6e98cf15823a2e0db8_37)] | | | [removed: [32](#ie3b4dd133255408488aec6011c49b801_37)] [added: [33](#i3ccedc1bc7c14d6e98cf15823a2e0db8_37)] | | |

| Item 6: | | | [removed: [\[Reserved\]](#ie3b4dd133255408488aec6011c49b801_1471)] [added: [\[Reserved\]](#i3ccedc1bc7c14d6e98cf15823a2e0db8_40)] | | | [removed: [33](#ie3b4dd133255408488aec6011c49b801_1471)] [added: [34](#i3ccedc1bc7c14d6e98cf15823a2e0db8_40)] | | |

| Item 7: | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#ie3b4dd133255408488aec6011c49b801_43)] [added: Operations](#i3ccedc1bc7c14d6e98cf15823a2e0db8_43)] | | | [removed: [34](#ie3b4dd133255408488aec6011c49b801_43)] [added: [35](#i3ccedc1bc7c14d6e98cf15823a2e0db8_43)] | | |

| Item 7A: | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#ie3b4dd133255408488aec6011c49b801_64)] [added: Risk](#i3ccedc1bc7c14d6e98cf15823a2e0db8_64)] | | | [removed: [55](#ie3b4dd133255408488aec6011c49b801_64)] [added: [56](#i3ccedc1bc7c14d6e98cf15823a2e0db8_64)] | | |

| Item 8: | | | [Financial Statements and Supplementary [removed: Data](#ie3b4dd133255408488aec6011c49b801_67)] [added: Data](#i3ccedc1bc7c14d6e98cf15823a2e0db8_67)] | | | [removed: [55](#ie3b4dd133255408488aec6011c49b801_67)] [added: [56](#i3ccedc1bc7c14d6e98cf15823a2e0db8_67)] | | |

| Item 9: | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#ie3b4dd133255408488aec6011c49b801_70)] [added: Disclosure](#i3ccedc1bc7c14d6e98cf15823a2e0db8_70)] | | | [removed: [55](#ie3b4dd133255408488aec6011c49b801_70)] [added: [56](#i3ccedc1bc7c14d6e98cf15823a2e0db8_70)] | | |

| Item 9A: | | | [Controls and [removed: Procedures](#ie3b4dd133255408488aec6011c49b801_73)] [added: Procedures](#i3ccedc1bc7c14d6e98cf15823a2e0db8_73)] | | | [removed: [56](#ie3b4dd133255408488aec6011c49b801_73)] [added: [57](#i3ccedc1bc7c14d6e98cf15823a2e0db8_73)] | | |

| Item 9B: | | | [Other [removed: Information](#ie3b4dd133255408488aec6011c49b801_76)] [added: Information](#i3ccedc1bc7c14d6e98cf15823a2e0db8_76)] | | | [removed: [56](#ie3b4dd133255408488aec6011c49b801_76)] [added: [57](#i3ccedc1bc7c14d6e98cf15823a2e0db8_76)] | | |

| Item 10: | | | [Directors, Executive Officers and Corporate [removed: Governance](#ie3b4dd133255408488aec6011c49b801_85)] [added: Governance](#i3ccedc1bc7c14d6e98cf15823a2e0db8_85)] | | | [removed: [57](#ie3b4dd133255408488aec6011c49b801_85)] [added: [58](#i3ccedc1bc7c14d6e98cf15823a2e0db8_85)] | | |

| Item 11: | | | [Executive [removed: Compensation](#ie3b4dd133255408488aec6011c49b801_88)] [added: Compensation](#i3ccedc1bc7c14d6e98cf15823a2e0db8_88)] | | | [removed: [57](#ie3b4dd133255408488aec6011c49b801_88)] [added: [58](#i3ccedc1bc7c14d6e98cf15823a2e0db8_88)] | | |

| Item 12: | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#ie3b4dd133255408488aec6011c49b801_91)] [added: Matters](#i3ccedc1bc7c14d6e98cf15823a2e0db8_91)] | | | [removed: [58](#ie3b4dd133255408488aec6011c49b801_91)] [added: [59](#i3ccedc1bc7c14d6e98cf15823a2e0db8_91)] | | |

| Item 13: | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#ie3b4dd133255408488aec6011c49b801_94)] [added: Independence](#i3ccedc1bc7c14d6e98cf15823a2e0db8_94)] | | | [removed: [59](#ie3b4dd133255408488aec6011c49b801_94)] [added: [60](#i3ccedc1bc7c14d6e98cf15823a2e0db8_94)] | | |

| Item 14: | | | [Principal Accounting Fees and [removed: Services](#ie3b4dd133255408488aec6011c49b801_97)] [added: Services](#i3ccedc1bc7c14d6e98cf15823a2e0db8_97)] | | | [removed: [59](#ie3b4dd133255408488aec6011c49b801_97)] [added: [60](#i3ccedc1bc7c14d6e98cf15823a2e0db8_97)] | | |

| Item 15: | | | [Exhibits, Financial Statement [removed: Schedules](#ie3b4dd133255408488aec6011c49b801_103)] [added: Schedules](#i3ccedc1bc7c14d6e98cf15823a2e0db8_103)] | | | [removed: [60](#ie3b4dd133255408488aec6011c49b801_103)] [added: [61](#i3ccedc1bc7c14d6e98cf15823a2e0db8_103)] | | |

| Item 16: | | | [Form 10-K [removed: Summary](#ie3b4dd133255408488aec6011c49b801_103)] [added: Summary](#i3ccedc1bc7c14d6e98cf15823a2e0db8_103)] | | | [removed: [60](#ie3b4dd133255408488aec6011c49b801_103)] [added: [61](#i3ccedc1bc7c14d6e98cf15823a2e0db8_103)] | | |

| | | | | | | | | | | | | | | | | | |

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

| Item 9C: | | | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i3ccedc1bc7c14d6e98cf15823a2e0db8_1413) | | | [57](#i3ccedc1bc7c14d6e98cf15823a2e0db8_1413) | | |

| | | | [Signatures](#i3ccedc1bc7c14d6e98cf15823a2e0db8_187) | | | [109](#i3ccedc1bc7c14d6e98cf15823a2e0db8_187) | | |

| | | | | | | | | | | | | | | |

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

| | | | | | | | | | Emerging growth company | | | ☐ | | |

| | | | [Signatures](#ie3b4dd133255408488aec6011c49b801_190) | | | [108](#ie3b4dd133255408488aec6011c49b801_190) | | |

Products in Semiconductor Systems are manufactured [added: primarily] in [removed: Santa Clara, California;] [added: Singapore;] Austin, Texas; Gloucester, Massachusetts; [removed: Kalispell, Montana; Rehovot, Israel;] and [removed: Singapore.][added: Rehovot, Israel.]

Products in the Display and Adjacent Markets segment are manufactured [added: primarily] in [removed: Alzenau, Germany and] Tainan, Taiwan.

Applied also owns a total of approximately [removed: 269] [added: 279] acres of buildable land in [removed: Montana, Texas, California, Israel and] [added: the United States, Israel,] Italy [added: and India] that could accommodate additional building space.

| Owned | | | 5,500 | | | | | | 2,652 | | | | | | 8,152 | | |

| Leased | | | 2,466 | | | | | | 1,801 | | | | | | 4,267 | | |

| Total | | | 7,966 | | | | | | 4,453 | | | | | | 12,419 | | |

Applied also owns and leases facilities throughout the world for use as offices, plants and warehouses, and research and development centers, primarily in the United States, Taiwan, China, Israel and Singapore.

| Owned | | | 4,855 | | | | | | 2,472 | | | | | | 7,327 | | |

| Leased | | | 1,912 | | | | | | 1,800 | | | | | | 3,712 | | |

| Total | | | 6,767 | | | | | | 4,272 | | | | | | 11,039 | | |

Applied also owns and leases offices, plants and warehouse locations in many locations throughout the world, including in Europe, Japan, North America (principally the United States), Israel, China, India, Korea, Southeast Asia and Taiwan.

These facilities are principally used for manufacturing; research, development and engineering; and marketing, sales and customer support.

As of December [removed: 10, 2021,] [added: 9, 2022,] there were [removed: 2,833] [added: 2,825] registered holders of Applied common stock.

Information regarding quarterly cash dividends declared on Applied [removed: Materials’s] [added: Materials’] common stock during fiscal [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019] [added: 2020] may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources”.

The performance graph below shows the five-year cumulative total stockholder return on Applied common stock during the period from October [removed: 30, 2016] [added: 29, 2017] through October [removed: 31, 2021.][added: 30, 2022.]

The comparison assumes $100 was invested on October [removed: 30, 2016] [added: 29, 2017] in Applied common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.

[removed: ][added: ]

Copyright© [removed: 2021] [added: 2022] Standard & Poor’s, a division of S&P global.

| | | | [removed: 10/30/2016] [added: 10/29/2017] | | | | | | [removed: 10/29/2017] [added: 10/28/2018] | | | | | | [removed: 10/28/2018] [added: 10/27/2019] | | | | | | [removed: 10/27/2019] [added: 10/25/2020] | | | | | | [removed: 10/25/2020] [added: 10/31/2021] | | | | | | [removed: 10/31/2021] [added: 10/30/2022] | | |

In March [removed: 2021,] [added: 2022,] Applied’s Board of Directors approved a common stock repurchase program authorizing [removed: $7.5] [added: $6.0] billion in repurchases, which supplemented the previously existing [removed: $6.0] [added: $7.5] billion authorization approved in [removed: February 2018.][added: March 2021.]

The following table provides information as of October [removed: 31, 2021] [added: 30, 2022] with respect to the shares of common stock repurchased by Applied during the fourth quarter of fiscal [removed: 2021] [added: 2022] pursuant to the foregoing Board authorization.

The graph below assumes that the value of the investment in Applied’s common stock and in each of the indexes was $100 at October 29, 2017, and that all dividends were reinvested.

| Applied Materials | | | 100.00 | | | | | | 57.78 | | | | | | 101.54 | | | | | | 112.63 | | | | | | 254.61 | | | | | | 168.58 | | |

| S&P 500 Index | | | 100.00 | | | | | | 105.01 | | | | | | 121.84 | | | | | | 142.35 | | | | | | 192.01 | | | | | | 165.18 | | |

| PHLX Semiconductor Index | | | 100.00 | | | | | | 92.86 | | | | | | 135.50 | | | | | | 197.40 | | | | | | 292.41 | | | | | | 209.08 | | |

| (August 1, 2022 to August 28, 2022) | | | 2.2 | | | | | | $ | 106.73 | | | | | $ | 230 | | | | | 2.2 | | | | | | $ | 6,192 | |

| (August 29, 2022 to September 25, 2022) | | | 5.4 | | | | | | $ | 90.52 | | | | | 493 | | | | | | 5.4 | | | | | | $ | 5,699 | |

| (September 26, 2022 to October 30, 2022) | | | 9.4 | | | | | | $ | 82.36 | | | | | 777 | | | | | | 9.4 | | | | | | $ | 4,922 | |

| Total | | | 17.0 | | | | | | $ | 88.05 | | | | | $ | 1,500 | | | | | 17.0 | | | | | | | | |

*Assumes $100 invested on 10/30/16 in stock or 10/31/16 in index, including reinvestment of dividends.

Indexes calculated on month-end basis.

| Applied Materials | | | 100.00 | | | | | | 199.87 | | | | | | 115.48 | | | | | | 202.95 | | | | | | 225.12 | | | | | | 508.89 | | |

| S&P 500 Index | | | 100.00 | | | | | | 123.88 | | | | | | 130.09 | | | | | | 150.94 | | | | | | 176.35 | | | | | | 237.87 | | |

| PHLX Semiconductor Index | | | 100.00 | | | | | | 156.93 | | | | | | 145.72 | | | | | | 212.64 | | | | | | 309.77 | | | | | | 458.88 | | |

| (August 2, 2021 to August 29, 2021) | | | 3.5 | | | | | | $ | 134.64 | | | | | $ | 466 | | | | | 3.5 | | | | | | $ | 6,059 | |

| (August 30, 2021 to September 26, 2021) | | | 3.2 | | | | | | $ | 137.35 | | | | | 443 | | | | | | 3.2 | | | | | | $ | 5,616 | |

| (September 27, 2021 to October 31, 2021) | | | 4.5 | | | | | | $ | 131.23 | | | | | 591 | | | | | | 4.5 | | | | | | $ | 5,025 | |

| Total | | | 11.2 | | | | | | $ | 134.05 | | | | | $ | 1,500 | | | | | 11.2 | | | | | | | | |

Based on that evaluation, Applied’s management concluded that Applied’s internal control over financial reporting was effective as of October [removed: 31, 2021.][added: 30, 2022.]

KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Form 10-K and, as part of the audit, has issued a report, included herein, on the effectiveness of Applied’s internal control over financial reporting as of October [removed: 31, 2021.][added: 30, 2022.]

During the fourth quarter of fiscal [removed: 2021,] [added: 2022,] there were no changes in the internal control over financial reporting that materially affected, or are reasonably likely to materially affect, Applied’s internal control over financial reporting.

Due to the ongoing COVID-19 pandemic, Applied continues to support workplace flexibility such as remote work where possible.

Business continuity plans are in effect in order to mitigate potential impact on Applied’s control environment and its operating and disclosure controls and procedures.

The design of business continuity plans, which include remote access to secure data when needed, allow for remote and reliable execution of Applied’s operating and disclosure controls and procedures.

Applied evaluated the impact of the ongoing COVID-19 pandemic on its internal control over financial reporting.

None.

None

PART III

Not applicable.

PART III

Except for the information regarding executive officers required by Item 401 of Regulation S-K (which is included in Part I, Item 1 of this Annual Report on Form 10-K, under “Information about our Executive Officers”) and code of ethics (which is set forth below), the information required by this item will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 28, 2022.][added: 27, 2023.]

The above information, including the Standards of Business Conduct, is available on Applied’s website under the Corporate Governance section at [removed: *http://www.appliedmaterials.com/company/investor-relations/governance.*] [added: *https://www.appliedmaterials.com/us/en/about/corporate-governance.html.*] This website address is intended to be an inactive, textual reference only.

The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 28, 2022.][added: 27, 2023.]

Except for the information regarding securities authorized for issuance under equity compensation plans (which is set forth below), the information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 28, 2022.][added: 27, 2023.]

The following table summarizes information with respect to equity awards under Applied’s equity compensation plans as of October [removed: 31, 2021:][added: 30, 2022:]

| Equity compensation plans approved by security holders | | | [removed: 13] [added: 11] | | | | | | | | | $ | — | | | | | [removed: 51] [added: 45] | | | (3) | | |

| Total | | | [removed: 13] [added: 11] | | | | | | | | | $ | — | | | | | [removed: 51] [added: 45] | | | | | |

(1)Includes only restricted stock units and performance [removed: shares] [added: share units] outstanding under Applied’s equity compensation plans, as no options, stock warrants or other rights were outstanding as of October [removed: 31, 2021.][added: 30, 2022.]

(3)Includes [removed: 16] [added: 14] million shares of Applied common stock available for future issuance under the Applied Materials, Inc. Omnibus Employees’ Stock Purchase Plan.

Of these [removed: 16] [added: 14] million shares, 1 million are subject to purchase during the purchase period in effect as of October [removed: 31, 2021.][added: 30, 2022.]

Prior to September 1, 2021, Applied had two Employee Stock Purchase Plans, one generally for United States employees (U.S. ESPP) and a second for employees of international subsidiaries (Offshore ESPP), which enable eligible employees to purchase Applied common stock.

On March 11, 2021, Applied’s shareholders approved an amendment and restatement of the U.S. ESPP (as amended, the Omnibus ESPP).

The Omnibus ESPP became effective on September 1, 2021 (the Effective Date) in accordance with its terms, and amended the U.S. ESPP to, among other changes, (i) incorporate the Offshore ESPP as a sub-plan, and (ii) add 11.3 million shares to the number of shares of Applied common stock authorized for issuance.

The Offshore ESPP was terminated as an independent plan on the Effective Date.

The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 28, 2022.][added: 27, 2023.]

The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 28, 2022.][added: 27, 2023.]

Applied’s independent registered public accounting firm is KPMG LLP, Santa Clara, California, Auditor Firm ID: 185.

| | | | [Reports of Independent Registered Public Accounting [removed: Firm](#ie3b4dd133255408488aec6011c49b801_106)] [added: Firm](#i3ccedc1bc7c14d6e98cf15823a2e0db8_106)] | | | [removed: [61](#ie3b4dd133255408488aec6011c49b801_106)] [added: [62](#i3ccedc1bc7c14d6e98cf15823a2e0db8_106)] | | |

| | | | [Consolidated Statements of [removed: Operations](#ie3b4dd133255408488aec6011c49b801_112)] [added: Operations](#i3ccedc1bc7c14d6e98cf15823a2e0db8_112)] | | | [removed: [64](#ie3b4dd133255408488aec6011c49b801_112)] [added: [65](#i3ccedc1bc7c14d6e98cf15823a2e0db8_112)] | | |

| | | | [Consolidated Statements of Comprehensive [removed: Income](#ie3b4dd133255408488aec6011c49b801_115)] [added: Income](#i3ccedc1bc7c14d6e98cf15823a2e0db8_115)] | | | [removed: [65](#ie3b4dd133255408488aec6011c49b801_115)] [added: [66](#i3ccedc1bc7c14d6e98cf15823a2e0db8_115)] | | |

| | | | [Consolidated Balance [removed: Sheets](#ie3b4dd133255408488aec6011c49b801_118)] [added: Sheets](#i3ccedc1bc7c14d6e98cf15823a2e0db8_118)] | | | [removed: [66](#ie3b4dd133255408488aec6011c49b801_118)] [added: [67](#i3ccedc1bc7c14d6e98cf15823a2e0db8_118)] | | |

| | | | [Consolidated Statements of Stockholders’ [removed: Equity](#ie3b4dd133255408488aec6011c49b801_121)] [added: Equity](#i3ccedc1bc7c14d6e98cf15823a2e0db8_121)] | | | [removed: [67](#ie3b4dd133255408488aec6011c49b801_121)] [added: [68](#i3ccedc1bc7c14d6e98cf15823a2e0db8_121)] | | |

| | | | [Consolidated Statements of Cash [removed: Flows](#ie3b4dd133255408488aec6011c49b801_124)] [added: Flows](#i3ccedc1bc7c14d6e98cf15823a2e0db8_124)] | | | [removed: [68](#ie3b4dd133255408488aec6011c49b801_124)] [added: [69](#i3ccedc1bc7c14d6e98cf15823a2e0db8_124)] | | |

| | | | [Notes to Consolidated Financial [removed: Statements](#ie3b4dd133255408488aec6011c49b801_127)] [added: Statements](#i3ccedc1bc7c14d6e98cf15823a2e0db8_127)] | | | [removed: [69](#ie3b4dd133255408488aec6011c49b801_127)] [added: [70](#i3ccedc1bc7c14d6e98cf15823a2e0db8_127)] | | |

| | | | [The exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this Annual Report on Form [removed: 10-K](#ie3b4dd133255408488aec6011c49b801_187)] [added: 10-K](#i3ccedc1bc7c14d6e98cf15823a2e0db8_184)] | | | [removed: [105](#ie3b4dd133255408488aec6011c49b801_187)] [added: [106](#i3ccedc1bc7c14d6e98cf15823a2e0db8_184)] | | |

We have audited the accompanying consolidated balance sheets of Applied Materials, Inc. and subsidiaries (the Company) as of October [removed: 31, 2021] [added: 30, 2022] and October [removed: 25, 2020,] [added: 31, 2021,] the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October [removed: 31, 2021,] [added: 30, 2022,] and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October [removed: 31, 2021] [added: 30, 2022] and October [removed: 25, 2020,] [added: 31, 2021,] and the results of its operations and its cash flows for each of the years in the three-year period ended October [removed: 31, 2021,] [added: 30, 2022,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October [removed: 31, 2021,] [added: 30, 2022,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated December [removed: 17, 2021] [added: 16, 2022] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in notes 1 and 8 to the consolidated financial statements, the Company has inventories with a carrying value of [removed: $4,309] [added: $5,932] million as of October [removed: 31, 2021.][added: 30, 2022.]

We identified the evaluation of net realizable value adjustments to [added: certain] inventories for excess or obsolescence as a critical audit matter.

We have audited Applied Materials, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of October [removed: 31, 2021,] [added: 30, 2022,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October [removed: 31, 2021,] [added: 30, 2022,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October [removed: 31, 2021] [added: 30, 2022] and October [removed: 25, 2020,] [added: 31, 2021,] the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October [removed: 31, 2021,] [added: 30, 2022,] and the related notes (collectively, the consolidated financial statements), and our report dated December [removed: 17, 2021] [added: 16, 2022] expressed an unqualified opinion on those consolidated financial statements.

| Fiscal Year | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Net sales | | | $ | [removed: 23,063] [added: 25,785] | | | | | $ | [removed: 17,202] [added: 23,063] | | | | | $ | [removed: 14,608] [added: 17,202] | |

| Cost of products sold | | | [removed: 12,149] [added: 13,792] | | | | | | [removed: 9,510] [added: 12,149] | | | | | | [removed: 8,222] [added: 9,510] | | |

| Gross profit | | | [removed: 10,914] [added: 11,993] | | | | | | [removed: 7,692] [added: 10,914] | | | | | | [removed: 6,386] [added: 7,692] | | |

| Research, development and engineering | | | [removed: 2,485] [added: 2,771] | | | | | | [removed: 2,234] [added: 2,485] | | | | | | [removed: 2,054] [added: 2,234] | | |

| Marketing and selling | | | [removed: 609] [added: 703] | | | | | | [removed: 526] [added: 609] | | | | | | [removed: 521] [added: 526] | | |

| General and administrative | | | [removed: 620] [added: 735] | | | | | | [removed: 567] [added: 620] | | | | | | [removed: 461] [added: 567] | | |

| Severance and related charges | | | [removed: 157] [added: (4)] | | | | | | [removed: —] [added: 157] | | | | | | — | | |

| Deal termination fee | | | [removed: 154] [added: —] | | | | | | [removed: —] [added: 154] | | | | | | — | | |

| Total operating expenses | | | [removed: 4,025] [added: 4,205] | | | | | | [removed: 3,327] [added: 4,025] | | | | | | [removed: 3,036] [added: 3,327] | | |

| Income from operations | | | [removed: 6,889] [added: 7,788] | | | | | | [removed: 4,365] [added: 6,889] | | | | | | [removed: 3,350] [added: 4,365] | | |

| Interest expense | | | [removed: 236] [added: 228] | | | | | | [removed: 240] [added: 236] | | | | | | [removed: 237] [added: 240] | | |

| Interest and other income, net | | | [removed: 118] [added: 39] | | | | | | [removed: 41] [added: 118] | | | | | | [removed: 156] [added: 41] | | |

| Income before income taxes | | | [removed: 6,771] [added: 7,599] | | | | | | [removed: 4,166] [added: 6,771] | | | | | | [removed: 3,269] [added: 4,166] | | |

| Provision for income taxes | | | [removed: 883] [added: 1,074] | | | | | | [removed: 547] [added: 883] | | | | | | [removed: 563] [added: 547] | | |

| Net income | | | $ | [removed: 5,888] [added: 6,525] | | | | | $ | [removed: 3,619] [added: 5,888] | | | | | $ | [removed: 2,706] [added: 3,619] | |

| Basic | | | $ | [removed: 6.47] [added: 7.49] | | | | | $ | [removed: 3.95] [added: 6.47] | | | | | $ | [removed: 2.89] [added: 3.95] | |

| Diluted | | | $ | [removed: 6.40] [added: 7.44] | | | | | $ | [removed: 3.92] [added: 6.40] | | | | | $ | [removed: 2.86] [added: 3.92] | |

| Basic | | | [removed: 910] [added: 871] | | | | | | [removed: 916] [added: 910] | | | | | | [removed: 937] [added: 916] | | |

| Diluted | | | [removed: 919] [added: 877] | | | | | | [removed: 923] [added: 919] | | | | | | [removed: 945] [added: 923] | | |

| Change in unrealized gain (loss) on available-for-sale investments | | | [removed: (21)] [added: (74)] | | | | | | [removed: 9] [added: (21)] | | | | | | [removed: 21] [added: 9] | | |

| Change in unrealized net loss on derivative instruments | | | [removed: 30] [added: 51] | | | | | | [removed: (117)] [added: 30] | | | | | | [removed: (7)] [added: (117)] | | |

| Change in defined and postretirement benefit plans | | | [removed: 30] [added: 81] | | | | | | [removed: (11)] [added: 30] | | | | | | [removed: (51)] [added: (11)] | | |

| Other comprehensive income (loss), net of tax | | | [removed: 39] [added: 58] | | | | | | [removed: (119)] [added: 39] | | | | | | [removed: (38)] [added: (119)] | | |

| Comprehensive income | | | $ | [removed: 5,927] [added: 6,583] | | | | | $ | [removed: 3,500] [added: 5,927] | | | | | $ | [removed: 2,668] [added: 3,500] | |

| | | | October [removed: 31, 2021] [added: 30, 2022] | | | | | | October [removed: 25, 2020] [added: 31, 2021] | | |

| Cash and cash equivalents | | | $ | [added: 1,995 | | | | | $ |] 4,995 | | | | | $ | 5,351 | |

| Short-term investments | | | [removed: 464] [added: 586] | | | | | | [removed: 387] [added: 464] | | |

| Accounts receivable, net | | | [removed: 4,953] [added: 6,068] | | | | | | [removed: 2,963] [added: 4,953] | | |

| Inventories | | | [removed: 4,309] [added: 5,932] | | | | | | [removed: 3,904] [added: 4,309] | | |

| Other current assets | | | [removed: 1,386] [added: 1,344] | | | | | | [removed: 764] [added: 1,386] | | |

| Total current assets | | | [removed: 16,107] [added: 15,925] | | | | | | [removed: 13,369] [added: 16,107] | | |

| Fiscal Year | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

| Net income | | | $ | 6,525 | | | | | $ | 5,888 | | | | | $ | 3,619 | |

| Balance at October 30, 2022 | | | 844 | | | | | | $ | 8 | | | | | $ | 8,593 | | | | | $ | 37,892 | | | | | 1,173 | | | | | | $ | (34,097) | | | | | $ | (202) | | | | | $ | 12,194 | |

| Fiscal Year | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

| Net income | | | $ | 6,525 | | | | | $ | 5,888 | | | | | $ | 3,619 | |

However, under master netting agreements in place with its counterparties, Applied may net settle transactions of the same currency under certain circumstances.

*Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.* In June 2022, the FASB issued an accounting standard update which clarifies how the fair value of equity securities subject to contractual sale restrictions is determined (Topic 820).

The amendment clarifies that a contractual sale restriction should not be considered in measuring fair value.

It also requires certain qualitative and quantitative disclosures related to equity securities subject to contractual sale restrictions.

| Fiscal Year | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

| Net income | | | $ | 6,525 | | | | | $ | 5,888 | | | | | $ | 3,619 | |

| Cash | | | $ | 1,199 | | | | | $ | — | | | | | $ | — | | | | | $ | 1,199 | |

| Bank certificate of deposit | | | $ | 7 | | | | | $ | — | | | | | $ | — | | | | | $ | 7 | |

| U.S. Treasury and agency securities | | | 435 | | | | | | — | | | | | | 13 | | | | | | 422 | | |

| Municipal securities | | | 389 | | | | | | — | | | | | | 16 | | | | | | 373 | | |

| Commercial paper, corporate bonds and medium-term notes | | | 595 | | | | | | — | | | | | | 21 | | | | | | 574 | | |

| Total equity investments | | | 652 | | | | | | 149 | | | | | | 30 | | | | | | 771 | | |

*Includes Canadian provincial government debt.

| Total | | | $ | 2,517 | | | | | $ | 2,566 | |

During fiscal 2022, 2021 and 2020, gross realized gains and losses related to Applied’s debt investment portfolio investments were not material.

| Bank certificate of deposit | | | — | | | | | | 7 | | | | | | | | | | | | 7 | | | | | | — | | | | | | — | | | | | | | | | | | | — | | |

| Non-U.S. government securities | | | — | | | | | | 6 | | | | | | | | | | | | 6 | | | | | | — | | | | | | 5 | | | | | | | | | | | | 5 | | |

During fiscal 2022, 2021 and 2020, impairment charges on equity investments in privately-held companies were not material.

| Net Sales | | | $ | 25,785 | | | | | $ | 100 | | | | | $ | — | |

| Research, development and engineering | | | $ | 2,771 | | | | | (7) | | | | | | (1) | | |

| Marketing and selling | | | $ | 703 | | | | | (3) | | | | | | — | | |

| | | | | | | | | | $ | 62 | | | | | $ | (1) | |

New export rules and regulations issued in December 2022 are expected to reduce remaining unsatisfied performance obligations on contracts with an original estimated duration of one year or more by approximately $944 million, none of which was expected to be recognized within 12 months.

| | | | $ | 5,932 | | | | | $ | 4,309 | |

| | | | $ | 1,344 | | | | | $ | 1,386 | |

| | | | | | | | | | $ | 2,307 | | | | | $ | 1,934 | |

| | | | $ | 2,475 | | | | | $ | 2,146 | |

| | | | October 30, 2022 | | | | | | October 31, 2021 | | |

| | | | $ | 4,237 | | | | | $ | 4,268 | |

| | | | October 30, 2022 | | | | | | October 31, 2021 | | |

| | | | $ | 732 | | | | | $ | 692 | |

Details of goodwill and indefinite-lived intangible assets as of:

| | | | October 30, 2022 | | | | | | | | | | | | | | | | | | October 31, 2021 | | | | | | | | | | | | | | |

| | | | Goodwill | | | | | | Indefinite-lived Intangible Assets | | | | | | Total | | | | | | Goodwill | | | | | | Indefinite-lived Intangible Assets | | | | | | Total | | |

| | | | October 30, 2022 | | | | | | October 31, 2021 | | |

*Changes in Accounting Principles*

As discussed in note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as of October 28, 2019 due to the adoption of Accounting Standards Codification Topic 842, *Leases.* As discussed in note 16 to the consolidated financial statements, the Company changed its method of accounting for intra-entity transfers of assets other than inventory as of October 29, 2018 due to the adoption of Accounting Standards Update No. 2016-16, *Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory*.

December 17, 2021

| Change in cumulative translation adjustments | | | — | | | | | | — | | | | | | (1) | | |

| | | | | | | | | | | | |

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

| Balance at October 28, 2018 | | | 967 | | | | | | $ | 10 | | | | | $ | 7,274 | | | | | $ | 20,880 | | | | | 1,019 | | | | | | $ | (21,194) | | | | | $ | (125) | | | | | $ | 6,845 | |

| Adoption of new accounting standards (b) | | | — | | | | | | — | | | | | | — | | | | | | 1,570 | | | | | | — | | | | | | — | | | | | | (17) | | | | | | 1,553 | | |

(a) - Retained earnings balance as of October 28, 2018 included an increase of $6 million related to the adoption of the standard related to revenue recognition.

(b) - Represents the adjustment related to the adoption of Accounting Standard Update (ASU) 2016-01 *Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities* and ASU 2016-16 Income Tax (Topic 740): *Intra-Entity Transfers of Assets Other Than Inventory*.

*Leases.* In February 2016, the Financial Accounting Standard Board (FASB) issued authoritative guidance for lease accounting, which requires lessees to recognize lease assets and liabilities on the balance sheet for certain lease arrangements that are classified as operating leases under the previous standard, and to provide for enhanced disclosures.

Applied adopted this guidance in the first quarter of fiscal 2020 using the modified retrospective transition method which required applying the new standard as of the beginning of the period of adoption with no adjustment to comparative prior periods.

Applied elected the package of practical expedients permitted under the transition guidance, which allow Applied not to reassess whether a contract contains a lease, initial direct costs and lease classification for leases existing prior to adoption.

Applied also elected to combine the lease and non-lease components as a single lease component and not to use hindsight in determining the lease term.

Upon adoption, Applied recognized right-of-use assets of $160 million, net of deferred rent of $4 million and lease liabilities of $164 million.

*Retirement Benefits: Changes to the Disclosure Requirements for Defined Benefit and other Postretirement Plans.* In August 2018, the Financial Accounting Standard Board (FASB) issued authoritative guidance that adds, removes, and clarifies disclosure requirements for defined benefit and other postretirement plans.

*Goodwill Impairment.* In January 2017, the FASB issued authoritative guidance that simplifies the process required to test goodwill for impairment.

Applied adopted this guidance in the first quarter of fiscal 2021.

The adoption of this guidance did not have a significant impact on Applied’s consolidated condensed financial statements.

*Financial Instruments: Credit Losses.* In June 2016, the FASB issued authoritative guidance that modifies the impairment model for certain financial assets by requiring use of an expected loss methodology, which will result in more timely recognition of credit losses.

Applied adopted this guidance in the first quarter of fiscal 2021 on a modified retrospective basis.

| | | | | | | | | | | | | | | | | | | | | | | | |

| Municipal securities | | | 359 | | | | | | 6 | | | | | | — | | | | | | 365 | | |

| Total equity investments | | | 132 | | | | | | 61 | | | | | | 9 | | | | | | 184 | | |

| Total | | | $ | 2,411 | | | | | $ | 2,519 | |

Applied is also exposed to interest rate risk associated with its potential future borrowings.

During fiscal 2020, Applied entered into a series of interest rate contracts to hedge against the variability of cash flows due to changes in the benchmark interest rate of fixed rate debt.

These instruments were designated as cash flow hedges at inception and were settled in conjunction with the issuance of debt in May 2020.

| 2019 | | | | | | | | | | | | | | | | | |

| | | | | | | | | | $ | (4) | | | | | $ | 9 | |

| | | | $ | 4,309 | | | | | $ | 3,904 | |

| | | | $ | 1,386 | | | | | $ | 764 | |

| | | | | | | | | | $ | 1,934 | | | | | $ | 1,604 | |

| | | | $ | 2,146 | | | | | $ | 2,223 | |

| | | | $ | 4,268 | | | | | $ | 3,138 | |

| | | | $ | 692 | | | | | $ | 662 | |

Note 9 Business Combination

Kokusai Electric Corporation

On June 30, 2019, Applied entered into a Share Purchase Agreement (SPA) with Kokusai Electric Corporation (Kokusai Electric) and KKR HKE Investment L.P. (KKR) providing for Applied’s acquisition of all outstanding shares of Kokusai Electric.

The SPA, as subsequently amended, terminated as of March 19, 2021.