I think we'll get started. Hi, I'm Joseph Moore, U.S. Semiconductor Equipment Analyst. With us today is Dr. Prabu Raja, President of Applied Materials Semiconductor Products Group. To get started, Dr. Raja, can you start by giving the audience just an introduction and sense of what you do in your role at Applied Materials? Thanks, Shane. Yeah. About me, Prabu Raja, I joined Applied 30 years back as an engineer. This is my first job, and I led some of the valuable businesses in Applied Materials, like a PVD business and three etch and integrated products. I spent lots and lots of time with the customers. Sometimes I think I spend more time in the flights than at home. Recently I had been to multiple customers throughout Asia and also the governments. Right now, governments want to be talking about semiconductors. The good news is I have a lot of valuable feedback from the customers on the demands, where they are, the challenges. The bad news is I sleep about three hours these days. If I mess up, just assume it's a jet lag, not me. Yeah. The air miles are pretty good. Yeah. That's right. Thanks. I guess just to get started then, as president of the Semi Products Group, just what are your key priorities today? Just where is your focuses with Applied? See, if you really look at those right now, it's all about demand. I, as I said, I talked to a lot of customers. The demand is very high. They all want to know are they getting the tools on time. I can tell you, pretty much I get emails every single day and want to make sure they're delivering on time. We have incredible visibility from the customers. I'm focusing on making sure that we can scale and we want to deliver the tools on time. That is right now. When you really look at the long term, what do you think about? When I'm in the flight, what do you think about? I think about this semi cap market, how big and how sustainable it is, number one. Number two, within semi cap, which part of semi cap is growing faster, where we should focus on. Number three, the customers are having the tough challenges right now with all the influxes. How can we work together with the customers in solving those challenges? These are the three high level is a wafer overall semi cap market. As you can see that the demand is high. The fab utilization is pretty high. We are tracking around 100 fabs today. Today, they're all in various stages. That part is really good. From what I hear from customers, they want me to be ready for the super cycle. That's what they call super cycle. I don't know what does that mean. Super cycle, that's what they say that, right? Wanna make sure I'm not the bottleneck. Okay. Number two, if you really look at those, if you segment within those semi cap. Not long ago, one year back, we say that, "Hey, it's a $1 trillion market by 2030, 1/3 is leading at Foundry logic, 1/3 is ICAPS, 1/3 is memory." That's all changed. Potentially we can do $1 billion or $1 trillion semi can do $1 trillion this year. Potentially can do that. If you really look at the mix, what I see that is the fastest growing markets are the ones which are enabling artificial intelligence right now, the data centers. When you look at those leading edge Foundry logic, DRAM, advanced packaging, these three are growing faster. Other ones are slow growth areas, we call it NAND and ICAPS, which are more in general computing. The good news is the fast-growing areas, three areas we talked about, Applied is number one in all those three areas. We thought about areas, we invested in those areas. The last one is we talk about tough challenges. What are the customers concerned about? If you really look at those, there are multiple influxes are happening in these areas. Each of those areas, multiple influxes are happening in each of the areas. What is customer doing? They are trying to integrate the devices to address their tough challenges. That means you put advanced logic and DRAM together through advanced packaging to solve their challenges. What we are doing is we are making it possible with our unique portfolio integrated solutions. Those are those. Got it. Got it. I guess just on this operating environment, you've talked about just semi cap model, your focuses and then customer challenges. We'll focus on the semi cap model first. You threw out the word super cycle as it relates to sort of AI driving kind of this equipment market. How does that sort of AI drive this equipment market, and how is it sort of beneficial to you guys focused on DRAM logic and advanced packaging? I think I talked about, I mean, 1 trillion, 1/3, 1/3, 1/3. That's not there anymore right now. Everything has changed right now. A lot of right now really that what is, what is a data center? That's all you got to think of. What is enabling a data center? When you really look at those advanced logic Sorry, leading edge, let me put the leading edge logic, advanced packaging and DRAM. These are the fastest growing markets as compared to that, compared to the other market. The multiple influxes are happening in these areas right now. If you really look at the Gate-All-Around, it's extremely complex and it's going through everything is going to 2D to 3D right now. You see that lot of complexity is there right now. The complexity means lot of more steps, lot of new steps are coming, and more steps. Applied is in a very, very good place to solve the complexities right now, okay? That's where I see that, where the market is going. I think the good part is we had a strategy, we call it inflection-focused innovations. You know, we kept talking about for four, five years. We talk about inflections are coming. It's time. Now we see that those wherever we strategize, wherever we invested, that is happening right now. We are in a very good place in all those three areas. That's why if you really segment it, that's the area of your biggest focus right now. It's paying off. Got it. Those inflection-focused innovations have sort of led you to DRAM leading logic and advanced packaging, and sort of the stars have aligned with AI. Yes. You got it. Got it. Got it. Got it. I wanna talk about 2026 'cause you sort of talked about more than 20% shipment growth for the calendar year. I think if the year plays out as you've sort of called it out to be, that'll be the highest growth for Applied since 2021, which was, you know, back then the semiconductor industry, just equipment was a big bottleneck at that time, with chip shortages just affecting a lot of other industries. How's the industry and Applied prepared relative to 2021 to sort of meet this kind of massive surge of demand? Okay. The short answer is we are in much, much better place, I can tell you that. It's a great opportunities. We are not going to let it go, okay? This is number one. Really look at those and, you know, like I said, I talk to customers a lot. They are giving us a great visibilities. They are forecasting the demand much, much early than ever before. The reason is they want to make sure they're getting the tools. I can see the demand is high, they want to make sure they're getting the tools. More important, when the tools are coming in, these tool needs to be installed, it has to be serviced, and for that, you need a manpower much, much earlier. Applied does that. You can't just hire a college graduate and ask them to go and do that. These are complex areas you need to learn. These guys need to be trained for one year or so. For that reason, the customers are giving a visibility much, much earlier right now. That's a great visibility we get. That really helps us right now to plan. What do we do with that? You are right. The COVID was a stress test for us. We learned our lessons, and we fundamentally changed how we do that in terms of how we plan, how we forecast, and how we scale, how we execute. We fundamentally changed that. We are in a much better place if you really look at those manufacturing. The capacity should double compared to what we had before COVID. Since we get a very good visibility from the customers, sometimes two years early, even beyond that. What we do with the visibility is we are going and talking to our suppliers, partnering with the suppliers early enough. We see where the bottlenecks potentially could be. We are well prepared for it. The suppliers are more ready right now. The third part is that we talk about service and support, and we are expanding our service team, we are training them. I think we are in a much better place. Like I said, we are not letting it go this time. For sure, we are more ready right now. Yes. Rallying 2,000 suppliers cannot be easy. Just how have you gotten ready for this inflection? I know we kinda spoke about earlier, you guys kinda talk about a five-year strategy. What were kind of the steps you put in place during the kind of five years leading up to this that allowed you to kind of meet this demand? If you really look at those, Applied, if you really look at Applied revenue, even after COVID, Applied revenue never went down. We didn't come down. We kept in the same. Every year, we kept increased the revenue the last 20 years. That kind of helped us to customers to have more of a confident on us. Other one is we changed the model. Right now, if you really look at those, with the customers, we truly work with the customers as partners rather than just a supplier-customer relationship. We work as a partners. I think we do the same thing for our suppliers. We work with them much more closely, so they're a lot more open, not only their capacity, they are also more open with their sub-supplier capacities. It's all about partnership, how closely work with them, how much visibility you give them, just all together. Yeah. Got it. Tighter partnerships with your suppliers, but also with your customers. I mean, you're talking about two years plus of visibility. We're seeing two years plusof visibility, there's so many tech inflections right now. This change in kind of rapid pace of complexity, how is that changing the way the equipment industry works with kind of your customers? Yeah. Equipment industry, I also talk about particularly Applied Materials. You know, not long ago, you know, I've been in industry for a long time and, you know, the scaling, if you really look at technologies, not that complex looking back and more predictable. Our litho-enabled scaling, very predictable. We had handful of materials and, so customers had their own process design team. They pretty much used to tell us, "Hey, what is my hardware spec? What is my process step? All I have to do is I got to meet the spec." Customer have their own, the team which can integrate everything together, all steps together. Right now, the complexity has changed. It is really complex right now. It's more of a customer-supplier relationship. With all the complexity we are talking about, multiple influxes are happening. These influxes are incredibly complex, I can tell you that. Gate-All-Around, you think about that. You know, more than 2,000 steps. A lot of new materials are coming in. More importantly, every angstrom matters. I can tell you the good example is in the transistor gate, the small 10 nanometer space, you got to put five to six different materials. Everything is 1 nanometer thickness. Therefore, one angstrom really matters, those kind of complexity. On the top of it, there is the step to step, when I saw 2,000 steps, some of the steps, they're interdependent. Okay? It's more like the Rubik's cube, you know. That if you touch one step, one material, it impacts everything. It fall apart. That complexity is increasing, right? That is more that part of it. On the top of it, the speed. Speed is the game. The customer want time to market becomes important. The customer, they don't have a time to put together every pieces together. Fundamentally, customers are working very closely with somebody, Applied Materials. The reason is, really look at Applied Materials. We understand the steps better than anyone because we have broad portfolios. With a broad portfolio, we understand the steps and the how they're interdependent on each other. We can come with optimized solutions better than anyone. The customers are coming to us, they're working with us, partnering with us three nodes ahead. In some cases, three to four nodes ahead. When you have a three to four nodes ahead and partnering with our customers, working together to solve the problem, rather than just meeting those hardware spec or process spec, now I become the part of solving the device challenges as a solution partner. That gives me incredible visibility on customer challenges, customer roadmap. I can use that to fund my R&D. More importantly, when you work that early, you are designed in into this. I'm telling you, these complexities like open heart surgery. You know, once you are designed in, you don't want to touch it. They fall apart. I think the biggest change is that the relationship, what used to be like a supplier customers versus partners. I think this is a really good segue 'cause you've spent kind of $ billions to invest into EPIC. Kind of my question here is just how should we see kind of the ROI on that $ billions that was spent into EPIC? You've had some nice customer announcements there. I'd love to hear about that. Just should we expect to hear about more customers? When are you opening? Just kind of the roadmap around when EPIC is gonna come up and up running. Yeah. No, I talked about complexity, right? Also I talked about speed. Okay. Right now, really today, if you really look at those, how the innovation works, innovation to commercialization, let's call it how it works. From university academic research, if you come with the new materials, academic research to the equipments, to semi manufacturers, to the commercial chip, takes 10- 15 years. Go back and look at those FinFET and high-k metal gate. This all invented somewhere around 10 years, 15 years, but that's the time it 10- 15 years it takes. Right now, nobody has the time to wait for 10 to 15 years with the complexity. You know, speed is the game. Everyone wants to be the first. What do they do? Rather than sequential way of innovating and commercialize, what Applied we are doing is, can we do it in parallel? Can we co-innovate together? That means universities, equipment, and customers, can we work together in parallel in one place under one roof? Imagine you come with the new materials. You can validate on the equipment, validate on the customer wafers, and your success rate goes up and the time to innovation to come has come down dramatically. That's the whole idea of success rate. I can tell you that otherwise success rate is too low because you can come with a new material, it doesn't work in the equipment. Right now, we all work together, success rate goes up and also time to market goes down. I think that is the biggest benefit the customers see. That's the reason the customer want to partner with us. Not just customers, but on universities and also the peers. They all want to be a part of it. Like you said, we announced with the Samsung. We are talking to and working with the other customers, universities, major U.S. universities, also with the peers. You'll see more announcement in coming months. I'm looking forward to that then. I guess let's talk about, dive into the roadmap here. Leading-edge foundry logic, you sort of highlighted that from FinFET to GAA with backside power, that sort of increases your revenue opportunity by about 30% for equivalent fab capacity. Just where specifically, 'cause you kind of gave color there, where specifically Applied is winning for those kind of inflections? Let me see. When you say leading-edge foundry logic, we are number one that process equipment provider in that space right now. If you really look at those, there are two big pieces if you really look at those. The one big piece is the transistor, other big piece is the wiring. Let me start with the transistors. Okay. Transistors are one time talking about the complexity. FinFET, we are number one. If you really look at non-litho, we're very close to 50%, maybe little less than 50% share right now. That Gate-All-Around makes it even more complex. Like I said, number of steps are increasing significantly. Lot of new materials are coming in, and these materials are interdependent. They really interact with each other. The complexities happening where Applied has a leadership positions. Like for example, EPI is a very critical, and PVD is critical. Metal yield is very critical. CVD is critical. Implant, treatments. You can see that where conductor etch, those are these inflections are happening, complexity is happening, where Applied Materials has a leadership positions. On the top of it, I talked about interdependencies between the steps. That means these all steps need to work together to get the solutions. That means Applied knows how to optimize better than anyone because we own all those pieces, and we know how to connect those pieces to make it work. The Integrated Materials Solution. That's why we call it Integrated Materials Solution right now. How we integrate. In some cases, you can't take it out of the tool, machines. It's all under vacuum. Imagine I talked about 1 nanometer, the 10 angstrom. Imagine you exposed to air, it's gone. It's not the same material anymore. Is that right? They all need to be integrated in one system. That's where Applied comes in and really helps. The customer, what they do is that these are the places we work together three to four nan technologies ahead right now, because this is not the one that you can just come and change it something. We work three to four technologies ahead. I think it benefit both of us win. For customers, they can do early validation on the wafer what we do, and also time to market. For us, we get this visibility into the roadmap, visibility into the technologies, roadmap, challenges, also our R&D funding. I don't have to put R&D in 10 different ways right now. I know I can validate. I can fund it in R&D funding, guide of my R&D funding. Even more important, I'm designed in. I know three nodes earlier, I'm designed in most cases. Win-win for both of us. All right. I wanna talk about two more things within leading edge logic, wiring and just copper. I think the first question is just wiring module and leading edge chips, just how is it changing, and where's the opportunity for Applied? I guess the second part of that question is, you know, there's been concerns about PVD copper being at risk from ALD Moly. Just what is your sort of answer to that concern? Okay. Maybe particularly this topic is more personal to me because I joined the company in the PVD wiring. That is my first job. Okay. I've been hearing this, you know, when I joined the company, people say that, hey, copper is going to end. PVD is going to end. Don't join that group. That was 25, 30 years back. Yet, copper continues to extend and PVD continue to extend. I think if you really look at the wiring, is a very valuable and large business for the company right now. Really look at those in the today's GPU, there are 800+ miles of wiring in this, in this. It's complex if you look at those. The complexity in wiring is equally there as transistor. People don't give importance to the wiring. Wiring is extremely complex. If you talk to the customers, any customer, they tell you, "litho is not my bottleneck. Wiring is my bottleneck." That's the first thing they say that. Wiring, focus on the wiring. That is the most important message. What we see that is now 20+ layers right now in the GPU right now. We see that copper, number of copper layers are increasing. Layers are increasing. What has changed is, to put one layer, we used to have three different technologies integrated together 10 years back. Today, can you imagine? There's seven different technologies are integrated into the one system, machine, under vacuum to get one layers of wiring. Number of layers are increasing. Number of technology steps inside each layer is increasing on the wiring. Wiring is big. I can tell you that with the breakthrough innovations, at least we have three-plus nodes of copper would extend. I can confidently say copper is going to extend for three more nodes or even more. Okay? We have a path. That brings to the moly question. There is always a misconception that moly is going to replace copper. Clearly, answer is no. Moly is not going to replace copper. Okay. Copper is going to stay here. Copper will continue to be here, continue to grow on more and more layers. Where moly comes in, really look at those wiring, then you have transistor. Something in between which connects them is contact. There are three layers of contacts today. Yeah, three layers of contacts. tungsten is the materials, contact material today. tungsten. That moly has benefits over tungsten. That's where I see that people are talking about. Sometimes we call the contact also as wiring. That also moly could be replacing tungsten. I think we recently announced the product, the Spectral ALD Moly. With the foundry logic, we already have a BTR position right now because the ALD Moly is replacing tungsten. It's a very critical rare of it is. Really look at those molys not as big as what you think. Really look at this market overall. Copper is at least a magnitude or more than the moly itself. Okay. Copper will stay, continue to stay, and moly has its own place. It could inflect, but copper will be much, much bigger. Sure. Copper will continue to grow. Quite honestly, copper is growing layers of faster than anything. Yeah. The people that doubted you 25, 30 years ago, they'll be reminded in five years that copper is still around. Copper will be still around, I can tell you that. I had told you, I worked with a customer three to four nodes ahead. I know exactly what's going on. It will excel. There we go. Next question I wanna move on to is DRAM, 'cause I think there's a perception that Applied is a bit more of a leading edge, like a foundry logic company, but you guys have gained a lot of share in DRAM over the last decade. Yeah. Can you kind of remind the audience where those DRAM share gains have come, just how you sort of position yourself with this sort of inflection in DRAM spending? Yeah. One thing I always I thought about underappreciated Applied is that they think we are a foundry logic company. You're right, not a memory company. Really look at DRAM. I think over the last 10 years, we increased the market share in DRAM significantly. Where it came from is that patterning. Conventional patterning, EUV patterning, in both places, we increased the market share significantly. Particularly EUV patterning, we increased a lot more than conventional patterning. One thing. Number two is that the capacitor module, it's a pretty complex structure. We had a lot of key wins because a lot of new materials as a hard mask. You know, we talk about integrated approach. There is another term we use, co-optimized approach. When we said integrated, one machine, multiple technologies are all inside the one machine, not exposed to air, right? Co-optimized is the one that, A, they don't have to be in the same system. They interact with each other so that we got to optimize for each other's steps. The step could be a neighboring step or even after 10 steps. Simple example is if you come with a new material, you should know how to deposit the material, you should know how to etch the materials, you should know how to remove the materials, you should know how to analyze the material. If you give to the customer new materials, if they talk to four different suppliers, it'll take five, seven, eight years, 10 years. They want you to come out with the complete solutions for that. "Hey, give me everything so that I can just insert in my flow." That's where they be a lot of key wins in capacitor. That is what happened. The moving forward, let me break down to two, conventional DRAM and HBM DRAM. Conventional DRAM is following logic roadmap. Very simple. Transistor is going from planar transistor to high-k metal gate to FinFET. Where you get all the learnings? Nobody wants to reinvent the whole thing. Applied has a great share in each of them. Very easy plug and play there. Is that right? Customer would work with us. DRAM also adopting copper layers, number of copper layers are increasing in DRAM. Our market share position over many years in foundry logic is really helping us right now. When you go to and on the top of it, you talk about even conventional DRAM, you talk about 4F², you talk about 3D DRAM. These are less EUV or more material sensitive. These are the ones. All materials engineering, everything going in the third dimension. This inflection will further help us because it's all a lot more materials, a lot more process technologies, a lot more integrated tools. That's for conventional DRAM. HBM is very simple, right? HBM, you need 3x- 4x more number of wafers per die. That's it. Very simple. That's where HBM is growing. On the top of it, the HBM packaging part alone is more process intensive. That's where HBM is growing. It's a combination of inflection, what is happening, combination of number of copper layers growing, and the combination of where the HBM is going right now. See, I think we are really in a good place in all those DRAM influxes right now. Yeah. Just to summarize your take on DRAM, the kind of TAM around just materials engineers and materials engineering is expanding, which is sort of leading to a bigger opportunity set for Applied. That's correct. Yeah. Got it. I guess on the topic of HBM, at the very start when you kinda talked about this AI inflection, we kinda called out DRAM, leading-edge logic and advanced packaging. Advanced packaging is small portion of your business, but is also portion of your business where you're very dominant in HBM. Yeah. Can you talk about just what are Applied's strengths in advanced packaging, and where do you kinda see the opportunities to grow there? Yeah. Like I said, we are number one in advanced packaging overall. HBM, we are number one. If you really at 26, what are the strong growth area? HBM packaging and the 3D chiplet stacking. There are different names, different customer, different name chiplets. Within advanced packaging. Within the. Yeah. No, even 3D chiplet stacking. Okay. 3D stacking, whatever it is. Those areas are growing very strong, and Applied has a really good position there. Really look at this advanced packaging, right? Packaging is nothing but wiring. On-chip wiring, whatever the learning what we have, we talk about copper wiring, what we had, all the wiring learning what we had for so many years, all the machines we developed for so many years on wiring, now all are being adopted off the chip right now. It's nothing but wiring, right? It's a good place to start with for us because all these products are already helping us, all the learnings are there. That helps us. On top of it, we already saw this influx on coming 10 to 12 years back. Personally, I was involved in this. I started this. In Singapore, we started a packaging lab. It's a complete flow lab in Singapore. We call it Advanced Packaging Lab. Sometimes we call it EPIC Packaging, similar to what EPIC, what we have dream right now. What we do there is we have complete flow. We have customers coming and partnering with us, and we have peers coming and partnering with us. Some of the areas where we are not participating, we are working with them right now. That gives us a great advantage. If customer wants to validate a new scheme, they come and work with us right there. That kind of help us. We saw that early. We formed a packaging team, and this integration flow really helps us right now. The two big influx in what is happening right now is bonding, for sure. The other one is panel. Really look at those. The bonding areas, we can see we have partnership with the Besi. The panel area, we thought about it even 10 years back or seven, eight years back. There's a Tango Systems panel. We acquired the company right now. On the top of it, we are developing multiple products in panel right now. Since we have a display business, for us it's much easier. We have bigger tools to do the panel right now and metrology, other area of focus on. I guess my last question would be, I look at this industry and think with market conditions being so tight, you have a once in a generation opportunity to raise prices and improve gross margins with-. I know this is coming, yeah. What's your view on that? If you really look at those, in terms of margin, I think we, you know, ever since Gary joined the company, we increased 7 percentage point margin right now. I think we are on the right track right now. I think we think a little different. I had many questions from you guys. One time can you increase the pricing and all. We think a little differently in this, in this space right now. I talk about we believe in creating the value for the customer and sharing the value for the customer. That's what we believe in. Really look at those. I talk about complexity. I talk about working with the customers much earlier, three-plus nodes ahead. This all customer, what they care about is device performance, yield, reliability, time to market. I think what we do is we partner with them, work together with them to address those challenges right now, three nodes ahead. This creating a lot of value to the customers. They get a more chips, they get a better chips. They are open to share the value right now. We see that already. You see that complexity is happening where we have high share areas and partnering with the customer much earlier, and we have a control on the value, what customers can share with us. I think that's the way we think about sharing the value. What do you do with the value? You know, something for the margin and also R&D investment. We want to increase the R&D investment, sometimes we want to return to the shareholders in some areas. That is on overall value sharing. Let's not forget that we have a big, big focus on cost. We talk about cost through technology, cost through innovations, how we can cut down the overall cost. We are working on both front. I'm very confident not only we increase the margin over the years, I think it will continue to incrementally will increase those margin over years. Great. Well, on that positive note, that brings us to time. Thank you, Dr. Raja. Yeah. Thank you.