Item 1. Business

Applied Materials, Inc. is the leader in the materials engineering solutions used to produce virtually every semiconductor and advanced display in the world. We are experts in the design, development, production, and servicing of the critical wafer fabrication and display fabrication tools our customers need to manufacture semiconductors and displays. Our customers’ products are used in a wide variety of products such as personal computing devices, mobile phones, artificial intelligence (AI) and data center servers, automobiles, connected devices, industrial applications and consumer electronics. We have the semiconductor capital equipment industry’s most comprehensive portfolio of products. This breadth allows us the ability to connect and co-optimize technologies across our portfolio, enabling our customers to achieve superior results as manufacturing semiconductors and displays is becoming increasingly complex. Semiconductors provide the foundation for advances in technology that are reshaping the global economy, including artificial intelligence, internet of things, robotics, electric and autonomous vehicles, and clean energy.

Incorporated in 1967, we are a Delaware corporation. Our fiscal year ends on the last Sunday in October. We operate in three reportable segments: Semiconductor Systems, Applied Global Services® (AGS), and Display. The Semiconductor Systems segment represents the largest contributor to our net revenue. A summary of financial information for each reportable segment is found in Note 14 of Notes to Consolidated Financial Statements. A discussion of factors that could affect operations is set forth under “Risk Factors” in Item 1A, which is incorporated herein by reference.

Semiconductor Systems

Our Semiconductor Systems segment designs, develops, manufactures and sells a wide range of primarily 300mm equipment used to fabricate semiconductor chips, also referred to as integrated circuits (ICs). The Semiconductor Systems segment consists of the semiconductor capital equipment industry’s most comprehensive portfolio of products used in the chip making process. Our products address steps across materials engineering, process control and advanced packaging, including the conversion of patterns into device structures, transistor and interconnect fabrication, metrology, inspection and review, and packaging technologies for connecting finished IC die. In addition to providing equipment for individual process steps, we have the ability to combine, co-optimize and integrate our technologies to develop highly differentiated solutions for our customers. Our equipment helps customers improve the power, performance, yield and costs of the semiconductor devices.

Our patterning systems and technologies address challenges resulting from shrinking pattern dimensions and the growing complexity in vertical stacking found in today’s most advanced semiconductor devices. Our transistor and interconnect products and technologies enable continued power and performance improvements of 3D transistors. Our process control systems employ optical and eBeam technologies that allow customers to inspect and review critical semiconductor architectures throughout the manufacturing process, helping improve chip yields. Our advanced packaging systems use our materials engineering expertise to allow customers to connect multiple chips together through heterogeneous integration, enabling them to advance the technology roadmap beyond a single chip.

Our Semiconductor Systems sales are to customers that serve the following markets: foundry, logic and other; DRAM; flash memory. Foundry, logic, and other is comprised of leading-edge and non-leading edge technology nodes. Leading-edge represents customers that are producing on the most advanced technology nodes. Non-leading edge technology nodes serve markets such as internet of things, communications, automotive, power and sensors.

Applied Global Services

The AGS segment provides services, spares and factory automation software to customer fabrication plants globally. The AGS segment also manufactures and sells 200mm and other equipment, which is shipped to customers globally that serve non-leading-edge markets.

AGS’s transactional and subscription service products, spares and factory automation software is purchased by customers to optimize the performance of our large, global installed base of semiconductor, display and other equipment. These solutions are also used to optimize plant performance and productivity. Customer demand is fulfilled through a global distribution system in more than 200 locations and trained field engineers located near customer sites to support our semiconductor, display and other equipment worldwide.

Display

Display segment is comprised 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), tablets, smartphones, and other consumer-oriented devices. While similarities exist between the technologies utilized in semiconductor and display fabrication, the most significant differences are in the size and composition of the substrate. Substrates used to manufacture display panels and other devices are typically glass, although newer flexible materials are entering the market. Display segment growth depends primarily on consumer demand for increasingly larger and more advanced TVs and high-resolution displays for mobile devices and information technology (IT) products, including laptops, monitors and tablets, as well as new form factors, including thin, light, curved and flexible displays, and new applications such as augmented and virtual reality. In addition to display applications, the segment’s Chemical Vapor Deposition (CVD) technology is used to manufacture solar energy cells. The expertise that we have in materials engineering on large glass substrates is synergistic with the advanced packaging business in the Semiconductor Products Group, as there is a trend in the industry to utilize various types of substrates, including glass.

Backlog

We manufacture systems to meet demand represented by order backlog and customer commitments. Backlog consisted of: (1) orders for which written authorizations have been accepted, or shipment has occurred but revenue has not been recognized; and (2) contractual service revenue and maintenance fees.

Backlog by reportable segment as of October 27, 2024 and October 29, 2023 was as follows:

												2024												2023
																		(In millions, except percentages)
Semiconductor Systems																		$	8,259					52		%				$	11,127					65		%
Applied Global Services																		6,767						43		%				5,162						30		%
Display																		827						5		%				833						5		%
Corporate and Other																		20						—		%				49						—		%
Total																		$	15,873					100		%				$	17,171					100		%

Of the total backlog as of October 27, 2024, approximately 31% is not reasonably expected to be filled within the next 12 months.

As a result of new export rules and regulations issued in December 2024, backlog as of October 27, 2024 is expected to be reduced by approximately $549 million. This reduction would have resulted in total backlog as of October 27, 2024 of $15.3 billion, of which approximately 31% would not have been reasonably expected to be filled within 12 months.

Our backlog on any particular date is not necessarily indicative of actual sales for any future periods. Our backlog is subject to change, including the potential for customer changes such as new orders or cancellations, and changes in export rules and regulations. Customers may delay delivery of products or cancel orders prior to shipment, subject to possible cancellation penalties. Delays in delivery schedules or a reduction of backlog during any particular period could have a material adverse effect on our business and results of operations.

Manufacturing, Raw Materials and Supplies

Our worldwide manufacturing activities consist primarily of assembly, integration and test of various proprietary and commercial parts, components and subassemblies that are used to manufacture systems. We utilize a distributed manufacturing model under which manufacturing and supply chain activities are conducted in various countries, including United States, Singapore, Japan, China, Korea, Taiwan, Israel and other countries in Asia and Europe. We use qualified vendors, including contract manufacturers, to supply parts, services and product support. Our supply chain strategy commits to 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 our Environmental, Social and Governance (ESG) commitment.

Although we make reasonable efforts to assure that parts are available from multiple qualified suppliers, this is not always possible. Accordingly, some key parts may be obtained from only a qualified single supplier or a limited group of qualified suppliers. We seek to reduce costs and to lower the risks of manufacturing and service interruptions by selecting and qualifying alternate suppliers for parts; monitoring the financial condition of key suppliers; maintaining appropriate inventories of parts; qualifying new parts on a timely basis; and ensuring quality and performance of parts.

Research, Development and Engineering

Our long-term growth strategy requires continued development of new materials engineering solutions, including products and platforms that enable expansion into new and adjacent markets. Our significant investments in research, development and engineering (RD&E) must generally enable us to deliver new products and technologies before the emergence of strong demand, thus allowing customers to incorporate these products into their manufacturing plans during early-stage technology selection. We work closely with our global customers and ecosystem partners to design systems and processes that meet planned technical and production requirements. Our product development and engineering, and process support are performed primarily in the United States, India and Israel. Our customer demonstrations are performed primarily in the United States, China, Taiwan, Israel and South Korea.

Marketing and Sales

Because of the highly technical nature of our products, we market and sell products worldwide almost entirely through a direct sales force.

We have operations in many countries, with some of our business activities concentrated in certain geographic areas. Our business is based on capital equipment investments by major semiconductor, display and other manufacturers, and is subject to significant variability in customer demand for our products. 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; trade policies and export regulations; and government incentives.

Information on net revenue to unaffiliated customers and long-lived assets attributable to our geographic regions is included in Note 14 of Notes to Consolidated Financial Statements. The following companies accounted for at least 10 percent of our net revenue for the following fiscal years for products and services in multiple reportable segments.

			2024						2023
Samsung Electronics Co., Ltd.			12%						15%
Taiwan Semiconductor Manufacturing Company Limited			11%						19%

Competition

The industries in which we operate are highly competitive and characterized by rapid technological change. Our ability to compete generally depends on our ability to commercialize our technology in a timely manner, continually improve our products, and develop new products that meet constantly evolving customer requirements. Significant competitive factors include technical capability and differentiation, productivity, cost-effectiveness and the ability to support a global customer base. The importance of these factors varies according to customers’ needs, including product mix and respective product requirements, applications, and the timing and circumstances of purchasing decisions. Substantial competition exists across all the segments of our business. 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 companies, which operate in more complex global economic and regulatory environments. We could see increased competition from domestic equipment manufacturers in China resulting from local government incentives and funding as well as export controls established by the United States government to restrict the sale of certain technologies to customers in China. Export controls enacted by the United States government that restrict the sale of certain technologies to customers in China may also provide an advantage to our international competitors. Our ability to compete requires a high level of investment in RD&E, marketing and sales, and global customer support activities. We believe that many of our products have strong competitive positions.

The competitive environment for each segment is described below.

The semiconductor industry is driven by demand for advanced electronic products, including smartphones and other mobile devices, servers, personal computers, automotive electronics, storage, and other products. The growth of data and emerging end-market drivers such as artificial intelligence, the internet of things, 5G networks, smart vehicles and augmented and virtual reality are also creating the next wave of growth for the industry. As a result, products within the Semiconductor Systems segment are subject to significant changes in customer requirements, including transitions to smaller dimensions, increasingly complex chip architectures, new materials and an increasing number of applications. While certain existing technologies may be adapted to new requirements, some applications create the need for an entirely different technological approach. The rapid pace of technological change can quickly diminish the value of current technologies and products and create opportunities for existing and new competitors. Our comprehensive portfolio offers a variety of differentiated products, including co-optimized and integrated materials solutions that enable unique films, structures and devices. We must successfully anticipate technology inflections, and our products must continuously evolve to satisfy customers’ requirements to compete effectively in the marketplace. We allocate resources among our numerous product offerings and therefore may decide not to invest in an individual product depending on market requirements. Competitors serving the semiconductor equipment industry range from companies offering a single product line to others offering multiple product lines, and those that serve a single region to global, diversified companies.

The products and services offered by the AGS segment enhance those of the Semiconductor Systems and Display segments, particularly in markets with demanding global service requirements. Competition in the AGS segment includes a diverse group of third-party service providers as well as customers that choose to perform their own service.

To compete effectively, we offer products and services to improve system performance, lower overall cost of ownership, and increase yields and productivity of customers’ fab operations. Significant competitive factors include cost-effectiveness and the level of technical service and support. The importance of these factors varies according to customers’ needs and the type of products or services offered.

Products in the Display segment are generally subject to strong competition from a number of major competitors primarily in Asia. We hold established market positions with our technically-differentiated LCD and OLED manufacturing solutions for PECVD, color filter PVD, PVD array, PVD touch panel, and TFT array testing, although our market position could change quickly due to customers’ evolving requirements. Important factors affecting the competitive position of our Display products include: industry trends, our ability to innovate and develop new products, and the extent to which our products are technically-differentiated, as well as which customers within a highly concentrated customer base are making capital equipment investments and our existing position at these customers.

Patents and Licenses

Protection of our technology assets through enforcement of our intellectual property rights, including patents, is important for our competitive position. Our practice is to file patent applications in the United States and other countries for inventions that we consider significant. We have more than 22,000 active patents in the United States and other countries, and additional applications are pending for new inventions. Although we do not consider our business materially dependent upon any one patent, our rights and the products made and sold under our patents, taken as a whole, are a significant element of our business. In addition to our patents, we possess other intellectual property, including trademarks, know-how, trade secrets, and copyrights.

We enter into patent and technology licensing agreements with other companies when it is determined to be in our best interest. We pay royalties under patent license agreements for the use, in some of our products, of certain patented technologies. We also receive royalties from licenses granted to third parties. Royalties received from or paid to third parties have not been material to our consolidated results of operations.

In the normal course of business, we periodically address the possibility of patent infringement. In responding to such inquiries, it may become necessary or useful for us to obtain or grant licenses or other rights. However, there can be no assurance that such licenses or rights will be available to us on commercially reasonable terms, or at all. If we are not able to resolve or settle claims, obtain necessary licenses on commercially reasonable terms, or successfully prosecute or defend our position, our business, financial condition and results of operations could be materially and adversely affected.

Governmental Regulation

As a public company with global operations, we are subject to the laws and regulations of the United States and multiple foreign jurisdictions. These regulations, which differ among jurisdictions, include those related to financial and other disclosures, accounting standards, securities, corporate governance, public procurement and public funding, intellectual property, tax, trade (including import, export and customs), antitrust, cybersecurity, environment (including those related to sustainability and climate), health and safety employment, immigration and travel regulations, human rights, privacy, data protection and localization, and anti-corruption. See “Risk Factors – Legal, Compliance, and Other Risks – We are exposed to risks related to the global regulatory environment” for further details.

We are regulated under various international laws regarding the purchase and sale of goods and related items, including but not limited to those related to trade policies and export regulations, and limitations on transfer of intellectual property. See “Risk Factors – Business and Industry Risks – 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.

With respect to environmental, health and safety regulations, we maintain a number of programs that are primarily preventative in nature and regularly monitor ongoing compliance with applicable laws and regulations. In addition, we have trained personnel to conduct investigations of any environmental, health, or safety incidents, including, but not limited to, spills, releases, or possible contamination. See also “Risk Factors – Risks Related to Legal, Compliance, and Other Risks – We are subject to risks associated with environmental, health and safety regulations” for further details.

We are subject to income taxes in the United States and foreign jurisdictions. Our provision for income taxes, effective tax rate 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. There have been a number of proposed changes in the tax laws that could increase our tax liability. See “Risk Factors – Operational and Financial Risks – We operate in jurisdictions with complex and changing tax laws” for further details. For additional discussions regarding the impact of compliance with income tax laws and regulations on our business and operations, see also “Management’s Discussion and Analysis of Financial Condition and Results of Operations– Results of Operations – Income Taxes” and Note 12 of the Notes to the Consolidated Financial Statements.

Our People

Our commitment to innovation begins with the commitment to creating an environment in which our employees can do their best work. Our ability to create differentiated value in the marketplace is driven by the capability of our people to anticipate technology inflections and integrate customer requirements. To achieve this level of value creation, we believe we must continue to attract, hire, develop and retain a world-class global workforce. We invest in our employees by providing quality training and learning opportunities, a compelling career path, promoting inclusion, equity and diversity, and upholding a high standard of ethics and respect for human rights.

As of October 27, 2024, we employed approximately 35,700 regular full-time employees, of whom approximately 45%, 43% and 12% resided in the Asia-Pacific region, North America, and Europe/Middle East, respectively. Our team spans 24 countries, reflecting various cultures, back grounds, race, color, national origin, religion, sex, sexual orientation, gender identity, ages, and disability, veteran and military status.

Culture of Inclusion

We value great talent and different perspectives, knowing that diversity is one of our greatest strengths. We therefore strive to provide fair and equal opportunity for career development and advancement to all our employees and incorporate respect for diverse backgrounds and perspectives into our culture at every level – from strategy and policy down to everyday interactions.

We expect that our commitment to strengthening our culture of inclusion will broaden the diversity of our workplace and help us build a culture that benefits everyone. In recent years, we continued to make progress in our culture of inclusion journey, including, among other things, increasing female representation in the United States and global workforce, and increasing minority representation in the United States. As of October 27, 2024, our global workforce was 79.2% male and 20.6% female, and 19.8% of our workforce in the United States was composed of underrepresented minorities.

Talent Acquisition and Retention

We believe that our future success is highly dependent upon our continued ability to attract, develop, retain and engage employees. As part of our effort to attract and retain employees, we offer competitive rewards, compensation and benefits, including an Employee Stock Incentive Plan, an Employees’ Stock Purchase Plan, healthcare and retirement benefits, parental and family leave, adoption credits, holiday and paid time off, and tuition assistance.

Employee Learning & Development

We seek to create growth and development opportunities to support an engaged and inclusive workforce. We promote 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, 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, we offer state-of-the-art training modalities, such as AI-based simulations and Augmented and Virtual Reality learning capabilities, to further the development of our new products, train our manufacturing and field support employees, and facilitate remote collaboration.

Employee Engagement

We have historically measured employee engagement through surveys to gain insight into employees’ experiences, levels of workplace satisfaction, and key drivers for engagement, inclusion and overall well-being. We plan to conduct an all-employee survey anonymously in fiscal 2025 through an external partner to encourage maximal participation and elicit candid responses. We also plan to benchmark the survey results against a large and standardized data set involving large technology companies globally. We expect that the survey results and the benchmarking data will allow us to better understand enterprise-wide trends, gauge effectiveness of interventions, and define targeted employee populations (e.g., early tenure employees). The survey results are also expected to provide leaders and people managers with actionable insights tailored to their own groups that can further enhance employee engagement and inclusion. These actionable insights will then be integrated with the people strategy process and cadence within the Company.

Additional information regarding our activities related to our people and sustainability, as well as our workforce diversity data, can be found in our latest Sustainability Report, which is located on our website at https://www.appliedmaterials.com/us/en/corporate-responsibility.html. The Sustainability Report is updated annually. This website address is intended to be an inactive textual reference only. None of the information on, or accessible through, our website is part of this Form 10-K or is incorporated by reference herein.

Information about our executive officers

The following table and notes set forth information about our executive officers:

Name of Individual			Position
Gary E. Dickerson(1)			President, Chief Executive Officer
Brice Hill(2)			Senior Vice President, Chief Financial Officer and Global Information Services
Prabu Raja(3)			President, Semiconductor Products Group
Teri Little(4)			Senior Vice President, Chief Legal Officer and Corporate Secretary
Omkaram Nalamasu(5)			Senior Vice President, Chief Technology Officer
Timothy M. Deane(6)			Group Vice President, Applied Global Services

(1)Mr. Dickerson, age 67, was named President of Applied in June 2012 and appointed Chief Executive Officer and a member of the Board of Directors in September 2013. Before joining Applied, he served as Chief Executive Officer and a director of Varian Semiconductor Equipment Associates, Inc. (Varian) from 2004 until its acquisition by us in November 2011. Prior to Varian, Mr. Dickerson served 18 years with KLA-Tencor Corporation (KLA-Tencor), a supplier of process control and yield management solutions for the semiconductor and related industries, where he held a variety of operations and product development roles, including President and Chief Operating Officer. Mr. Dickerson started his semiconductor career in manufacturing and engineering management at General Motors’ Delco Electronics Division and then AT&T Technologies.

(2)Mr. Hill, age 58, has been Senior Vice President and Chief Financial Officer since March 2022. He also oversees Global Information Services for Applied. 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.

(3)Dr. Raja, age 62, has been President, Semiconductor Products Group since March 2023. He previously served as Senior Vice President, Semiconductor Products Group of Applied from November 2017 to March 2023, and before that served in various senior management, product development and operational roles since joining Applied in 1995, including Group Vice President and General Manager of the Patterning and Packaging Group.

(4)Ms. Little, age 60, joined Applied as Senior Vice President, Chief Legal Officer and Corporate Secretary in June 2020. Prior to joining Applied, Ms. Little served as Executive Vice President, Chief Legal Officer and Corporate Secretary at KLA Corporation from August 2017 to June 2020. Prior to that she was Senior Vice President, General Counsel and Corporate Secretary of KLA Corporation from October 2015 until August 2017, and prior to that she held various other positions at KLA Corporation since 2002. Prior to joining KLA Corporation, she was a Senior Corporate Associate at Wilson Sonsini Goodrich & Rosati, and a Litigation Associate at Heller Ehrman White & McAuliffe.

(5)Dr. Nalamasu, age 66, has been Senior Vice President, Chief Technology Officer since June 2013, and President of Applied Ventures, LLC, Applied’s venture capital arm, since November 2013. He had served as Group Vice President, Chief Technology Officer from January 2012 to June 2013, and as Corporate Vice President, Chief Technology Officer from January 2011 to January 2012. Upon joining Applied in June 2006 until January 2011, Dr. Nalamasu was an Appointed Vice President of Research and served as Deputy Chief Technology Officer and General Manager for the Advanced Technologies Group. From 2002 to 2006, Dr. Nalamasu was a NYSTAR distinguished professor of Materials Science and Engineering at Rensselaer Polytechnic Institute, where he also served as Vice President of Research from 2005 to 2006. Prior to Rensselaer, Dr. Nalamasu served in several leadership roles at Bell Laboratories.

(6)Mr. Deane, age 59, has been Group Vice President, Applied Global Services since September 2022. 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.

Available Information

Our website is http://www.appliedmaterials.com. We make available free of charge, on or through our website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with, or furnishing them to, the SEC. The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These website addresses are intended to be an inactive textual references only. None of the information on, or accessible through, these websites is part of this Form 10-K or is incorporated by reference herein.