Applied Materials, Inc. (AMAT) Earnings Call Transcript & Summary

Why don't we go ahead and get started? I'd like to welcome everyone this afternoon to the fireside chat with the management team of Applied Materials. It's sort of my distinct pleasure to welcome on stage to my left, Gary Dickerson, the President and CEO of Applied Materials. Also in attendance is Mike Sullivan, Corporate VP, Investor Relations. We're going to do a fireside chat here for about 35, 40 minutes. There are some opportunities to ask questions. So if you do have a question, please raise your hand, and we'll try to get you a mic. But with that, Gary, first, welcome, and thanks for showing up. It's great to actually be able to do this in person after 20 months of being sequestered in our homes. I think that everyone is happy to see one another face to face.

I guess my first question, Gary, is always an open-ended question. I've gone back and looked at your tenure as CEO of AMAT. I think the stock is up tenfold since you joined and became CEO, massively outperforming the S&P. And I guess the question I always ask first is what's the value proposition from here for all of your stakeholders? What's the mission statement? What's going to drive performance going forward for Applied Materials?

Yes, John. Well, again, I'm really happy to be here and certainly happy to be here in person. If I look at our markets, certainly, this is the best I've ever seen in my entire career. The digital transformation of every industry is really the biggest inflection of our lifetimes at the foundation as a semiconductor digital infrastructure. And really, what matters from a competitive standpoint is power, performance and cost of that infrastructure from the edge to the cloud and who gets there first. And for Applied Materials, what we talked about is a vision of being a PPACt company, power, performance, area cost and then time, who gets there first. And if I look at what's going to drive innovation going forward from the edge to the cloud, the -- many people, TSMC, Mark Liu talked about what -- their road map for energy-efficient computing, application-specific workloads, new materials, new structures, new ways to connect chips together through packaging, new ways to shrink. And I really believe for Applied Materials, our position enabling that road map has never been better. If you look at new materials, new structures, new ways to connect chips together through advanced packaging, that's really the sweet spot for Applied Materials. We have the most enabling technologies. Our contribution to the road map going forward is going to increase.

No, that makes a lot of sense. I've got a lot of Applied-specific questions, but I want to kind of get the industry questions out of the way and talk a little bit about your view on WFE. And the first is maybe a little bit of a history lesson. If you go back 5 years ago, if I would have said then that WFE was going to be up 150-plus percent over the next 5 years, and yet the semi industry would be in the worst supply shortage we've ever seen, most people probably would have locked me up. And yet here's where we are with WFE up significantly over the last 5 years, yet there still being significant supply shortages out there. In your opinion, what's driven that?

Yes. So again, it's the digital transformation of everything. If you look at data, data is up 150x in the last 6 years. And 2018, I believe, was the first year machines generated more data than people. In 2025, it's going to be 100:1 machines versus people. So there's an explosion of data. Every industry is being transformed, how we work. All of us have experienced that. My 12-year-old twins, how they learn, how we shop, health care, automotive. The basis of competition of every industry is being transformed over the next few years, and really, the pandemic has accelerated that. Then if you look at content, content is up a significant amount in all of those different industries. And lastly, the capital intensity is going up. So if you go back from around 2000 to 2013 when you went from 200-millimeter to 300-millimeter, you were -- you gained 2.3x the number of chips per wafer. So there was this massive productivity improvement. And capital intensity, I think, dropped all the way down to around 9%. There will be no more wafer size increases going forward. And if you look at capital intensity, I think in 2020, it was around 14%. And certainly, this year is higher. And if you look at complexity, the value of the chips from the edge to the cloud enabling all those vertical industries, the value has never been higher. Complexity is going to be the same or increase going forward.

Well, Gary, I know it's difficult for you to say that you're going to outgrow your customers. But you went through almost a 15-year period where you meaningfully undergrew your customers as capital intensity came down. As you think about WFE from here, is it a semi growth market, a semi plus growth market? How do you think about the growth rate longer term?

Yes. I think, again, the semiconductor digital infrastructure is going to be what everything sit -- every vertical will sit on top of. So the value there is tremendous, and many people talk about 1 trillion or more semiconductor market by 2030. And then if you look at capital intensity, last year was 14%. This year is higher. And so you multiply those numbers together, you get a pretty good growth relative to the overall semiconductor equipment market. And then I think for Applied Materials, it really comes back to what is going to enable that digital infrastructure from the edge to the cloud with a 0.5 trillion or 1 trillion connected devices on the edge, all the way to high-performance computing in the cloud and everything in between. And again, it's really about power, performance and cost. And so if you look at Applied, in terms of what is driving this industry, certainly in the foundry/logic market, which is the largest segment within all of semi, that is really driven by innovations in transistor where Applied has a tremendous position. Certainly, a gate all around. That, we said, it creates a $1 billion opportunity for us, and our market share, we're in a position to increase as that inflection happens. Wiring, if you ask many semiconductor companies, what is the biggest limiting factor if I go forward? Wiring is right at the top of that list because you can drive the data faster. But if it gets stuck as you shrink in smaller dimensions, then that increases power consumption, lowers the performance. And so again, Applied is in a tremendous position in many of these enabling technologies.

And then, Gary, I want to harken back to the earnings call about a week ago and kind of get a refresher on how you're thinking about WFE for next year. It's clearly going to be a growth year for you. Can you talk about the bottoms-up driver between memory within memory, DRAM, NAND and then logic foundry? And I also thought one of the interesting statistics you gave out on the call is that you're tracking over 59 projects out there that you think represent close to $300 billion of WFE over sort of a 3-year period. Maybe you can go into that a little bit as well.

Yes, John. So if I look at the market for '22, as you said, we believe '22 is up I believe we said on the earnings call, around 10%, something like that next year. And then if we look at breaking that down, foundry/logic was around 60%, I believe, in 2021. And going forward, we believe that, that percentage of the overall wafer fab equipment market is going to go higher. And if you look at, I think, 18 of the previous 21 years, foundry/logic has been larger than memory relative to the overall spending. And certainly, we see especially if you look at what all of our customers are saying about really big multiyear investments, and this is a race for all of these different companies to provide power, performance and cost ahead of their competitors. So we believe foundry/logic is going to be strong next year percentage-wise, again, increasing above the 60% we saw in 2021. We believe memory is up, probably a little bit more weighted towards NAND than DRAM. And then geographically, we think all the regions are up. China is down some amount in '22. That's kind of roughly what we see.

No, that's a good segue when you talk about China because one of the things that I'm grateful for and I'm sure you're grateful for is that world governments have finally figured out something that a lot of people in this room already knew, that chips are pretty strategically important. And we're seeing a drive for -- or a push towards regionalization or domestication of semiconductor manufacturing. How does that play into your view for WFE either next year or over a 3-year period as world governments start to subsidize more and more domestic production?

Yes, John. So relative to investments from a government perspective, you're absolutely right. I think everybody understands this AI, big data inflection this decade is the inflection of our lifetimes. And having an advantage in power, performance and cost with the semiconductor digital infrastructure that every industry sits on top of is incredibly important. And certainly, we see that in the pandemic. If you don't have chips for automotive, if you don't have chips in many of these other industries, the growth rates are certainly limited, and content is increasing. So I think that -- I think there's really 2 things, and I've spent a lot of time certainly in the U.S. and in other regions around these different strategies. Having the secure supply chain -- supply chain continuity is very important. So there are a lot of initiatives going forward to add investment on a regional basis. I'd say the other thing is running faster relative to the semiconductor digital infrastructure. It's so important for economic and employment growth that whatever country or allies -- allies of countries have an advantage in power, performance and cost in that semiconductor digital infrastructure, it has a big multiplier effect on all of those different verticals. So we're working on how you run faster in terms of that strategy, and I believe there will be a lot of investment there. Applied will be a part of that. But also the domestic manufacturing capability, big initiatives there. And the good aspect for us is we're working with all of those big customers that are moving factories into new regions. That creates an opportunity for us as they move to another location, especially in our service business, to support them as they make those transitions from where they've traditionally been located.

Well, just to unpack that a little bit, I think you and I would both agree that ultimately, the amount of WFE that gets spent is going to be driven by demand more than subsidies.

Absolutely, absolutely.

That said, this regionalization of supply does make life a little bit more inefficient for your customers going from mega fabs to more regional fabs. Is that going to be a meaningful opportunity, you think?

I think it's an incremental opportunity. As we talked about, we are tracking 59 factories worth $300 billion right now. I do think that, that's incremental. But again, over -- it will be somewhat less efficient as you move into the different geometries. Maybe the size of those operations will also be not at the same scale. So I would say it's incrementally helpful for sure. There's going to be a lot of focus, especially over the next, I'd say, 5 years as governments drive these strategies' additional investment. But again, really, I'm most excited about the macro situation. If you look at the digital transformation of every industry, 1 trillion, 0.5 trillion connecting devices at the edge to the cloud, that is really what's going to drive the overall opportunity.

Gary, my last sort of industry question before getting to Applied-specific questions, supply constraints always create odd dynamics. And one of the things you guys talked about in your last conference call is your inability to ship tools because you can't get enough chips, which is kind of ironic that the guy that provides the tools that makes the chips can't provide the tools because they can't get the chips. And it's not a small number. It's probably $300 million, plus or minus, in the quarter of a revenue impact. When do you see the supply shortage kind of correcting itself? And how should we think about incremental supply availability for you over the next several quarters?

Yes, John. So if you look at our backlog, I think our backlog was up 77%, and we're really in a tremendous position. We have, I think as everyone knows, an extremely strong position in foundry/logic. And really, what enables the road map going forward, we've never been in a better position than today. What we've seen here recently, especially at the end of our last quarter, were some of those components moving out. We talked about chips, logic, analog, power, chips in some of our different products. It wasn't the same across all of our different businesses. If we look at PDC, CMP, those businesses really outperformed. Etch really was on track relative to what we had expected. Some of the other areas, we did have those silicon component shortages. And I can say, I almost feel like I'm Chief Supply Chain Officer now. I've been in contact with a number of our chip CEO customers. And if you look at our supply chain, we have many components with chips embedded in those different systems. And again, for our suppliers, that visibility on availability in some cases was not as good as they would have liked. So there's been tremendous focus I think within our company, within our suppliers, driving resolution to all of those different issues. Again, I've personally contacted maybe 10 different CEOs. And we've been working through all of those different issues. So I expect, as we said on the earnings call, for this to get incrementally better going forward.

And then, Gary, you've talked about at least 3 legs to the AMAT strategy. And some of you've talked about already this morning: PPACt, subscription business and adjacent markets. And I have a few questions in each. And the first, let's talk a little bit about PPACt. And I'd be kind of curious as you think about the changes in architectural shifts in chip manufacturing, what specific product areas do you think you're best positioned? And question number one. And question number two, you're sort of in a unique position that you own a lot of the process steps. And there's this sort of tension between best-of-breed point solutions and the ability to actually bring kind of a multi-tool solution to bear. Do you feel like your ability to do the latter is going to drive significant share gains going forward?

So John, I think that if I look at it -- and I've in the last quarter met with pretty much all of our top customer CEOs, leading-edge ICAPS in Europe, Asia, here in the United States. Just really tremendous pull for power and performance and cost improvements in all of those different markets. So if I look at foundry/logic, I talked before about really what is enabling that road map going forward. Wiring resistance, as you shrink those features, resistance goes up. So innovating in wiring is one of the biggest areas of focus for our customers. We have extremely high share there. One of the things that we shared was an integrated platform where we have ALD, CVD, PVD, copper reflow, surface engineering, selective removal, metrology, all on one platform. That one system is worth billions of dollars as customers move forward. And that is applied to multiple layers in foundry/logic, multiple metal layers in foundry/logic. And I also talked about this on last earnings call that we have 5 different we call low R, low resistance initiatives that we're driving. The one on the copper barrier seat that's worth billions is one we've already talked about, but there are others in foundry/logic, DRAM, NAND that are worth just an enormous amount of money. And really no other company has the ability to co-optimize all of these different structures at the same time. And then we've talked about the co-optimization with our broad portfolio. One example that I talked about was in the capacitor formation of the DRAM. We have a unique material. We have -- that we call Draco. We have a unique etch technology. And then we have leadership with e-beam in resolution, high-speed mapping, so we can fingerprint and dial in those processes faster and better. So those combinations around co-optimization are enormous opportunity. I talked again on the earnings call on dielectric materials where we had 15 different initiatives that we're driving right now. So again, certainly, we're still driving on those unit processes. PDC was up over 60%. I talked about a lot of areas that we're driving on the unit processes. But I do believe that the co-optimization and integration of these technologies going forward are worth billions of dollars. And it's not only in the chips, but it's also in packaging.

Well, Gary, can you talk a little bit about AI(x), the actionable insights? I think it's kind of an interesting new twist. I suspect it's something you guys have been doing for a while, but you've now packaged it as bringing more value to the customer. What exactly is AI(x)?

So I love AI(x). One of the -- our top customers I met with the Chairman actually of one of our top customers. He said, "Gary, who came up with AI(x)? So it's actionable -- AI being actionable insight, I think, is a great way to think about it. And if you look at this increase in capital intensity and increasing complexity, really what we're doing with AI(x) is combining -- you have actionable data. Our tools create a petabyte of data per year. And most people can't really get much actionable insight out of all of that data. So creating actionable data with unique sensor technology that's in our chambers and in our platforms, unique metrology on our systems where we're innovating there. And then our unique e-beam technology, that business almost doubled in '21, tremendous growth. And when you think about mapping out the -- all of these different processes, I mentioned the capacitor scaling example where you're looking at fingerprints across a chip, there's something called pattern loading, where I have very dense or very isolated structures. Optimizing both at the same time is hard. And then across the wafer, I want really high yield for the chips at the edge of the wafer in addition to the chips at the center of the wafer. So we're able to map out these fingerprints, orders of magnitude faster, combine it with the actionable data that's coming off our systems, our sensors, our metrology, our e-beam in a multi-dimension space. And really no 20-, 30-year experienced PhD can do all of that in their head. So all of this machine learning and AI, combining this together is an enormous opportunity for us. And really if you think about PPACt, t acceleration is worth a lot. Who gets there first makes a lot of money. So the R&D acceleration 2x faster, 30% bigger process windows for higher yield, ramping factories, $20 billion factories. So all the tools are producing the same high-yield results with big process windows. That's enormous. And I talked about on the earnings call, this last year with AI(x), the Applied process recipe optimizer, we had 25 engagements with customers. In '22, we'll have 75. So when I think about this, certainly, we've done a great job growing our service business, but that's been really focused around high-volume manufacturing. When you really move upstream into R&D acceleration and ramp acceleration, it offers an enormous opportunity for us.

And then, Gary, you also talked about metrology, and that's an area where I would kind of argue you've had technology that was perhaps ahead of the market. But now we're moving from sort of visible light to more exotic technologies for defect detection. What's the outlook on your metrology and inspection business?

Yes. So we were up over 60% in 2021. And really, I think one thing that's important to understand, people talk about optical inspection versus e-beam inspection. We will innovate in e-beam inspection with new source technology, and that will be a growth opportunity for us. But the bigger part of this is the metrology, just massive mapping out of these fingerprints for overlay or critical dimensions across the chip and across the wafer, what I talked about as part of AI(x). And really, you can't fix what you can't see. And so again, for us, I think the metrology where the e-beam, where we have real leadership in electron optics, cold field emission sources that are more than 50% higher resolution, much faster than any other company, the moat around that business is very strong. So it's growing, almost doubled in '21. But it's also, in combination, accelerating R&D worth billions of dollars accelerating the rest of our business.

Historically, we've separated the world between sort of bleeding edge and the lagging edge. And I'd kind of make the argument that lagging edge is a little bit of a misnomer. And I'd like to prefer to call it mission-critical.

Yes.

You call it ICAPS. I'm wondering if you could spend a few minutes just telling the audience what exactly this division is all about and the strength you see here, not just this year, but for many years to come.

Yes. So I think about edge innovation. And so if you think about automotive with power electronics, power devices, silicon carbide, we have deep relationships there. We had a Master Class recently, and we talked about innovations there, implant CMP with Wolfspeed. Sensor innovations also. I mean, everything you see tiny eyes, tiny ears in so many places in our world, and that's going to accelerate going forward. So I really think about this as edge innovation. So we -- about almost 3 years ago, we formed the ICAPS group. So IoT, communication, auto, power, sensors, and brought together all the technologists from across the company for 200-millimeter, 300-millimeter. And we have -- just like we do on bleeding edge, the integrated material solutions, we have great technologists that are only focused on this edge innovation in this ICAPS market. So in the last quarter, I said I was in Europe and other areas with leading ICAPS CEOs and customers. I just -- forming this group was a really great move for us. It put us in a really super position. We have, by far, the broadest technology portfolio. And when you think about it, again, this is not litho-driven. It's materials and structure-driven, where, again, we just have tremendous strengths going forward. And that market is growing faster than the overall market.

Well, Gary, that's truly clear this year. And I think right now today, foundry/logic, half or slightly more than half is actually in the ICAPS bucket as opposed to the bleeding edge bucket. How worried should we be cyclically about that? If you look at a lot of the companies that I cover on the semi side that have exposure to this, they're all running CapEx-to-rev ratios that are a couple of hundred basis points above their target. But given where that target is, it's 25%, 30% higher. Are we in a new era where this is always going to be 40% to 50% of the business? Or what's the more normalized run rate for this, in your opinion, over time?

Yes. I think overall, if you look at capital intensity, I gave some numbers on that earlier relative to around 14% in 2020, increasing in '21. And I believe that the value is so high as you think about all of these technologies really at the basis of how multiple industries compete. I think that capital intensity is going to remain in that range. I think another way to look at it also is to look at capital intensity as a percentage of profits. And that's actually very healthy when you look at the overall industry. That's been improving. And when you think about ICAPS, I talked before about the explosion of data, 150x in the last 6 years and really going from machine -- machines generating more data than people in '18 for the first time, and then you're 100:1 by 2025. And we're also engaged with system companies that are really deploying tiny eyes, tiny ears and all of these different devices. And that data generation is incredibly important to all of those different industries. So again, we see a few years out in the future what people are driving relative to that edge innovation. And I really think that people talk about 0.5 trillion, 1 trillion connected devices how much data will be generated as everything around us is smarter, I think that the opportunity there is tremendous.

Gary, I wanted to pivot towards Applied Global Services and subscription businesses. I thought at the Analyst Day earlier this year, one of the more interesting data points that your team put together, I thought they did a great job kind of outlining this business is that the SAM for AGS today is $20 billion. Not the TAM, the SAM is $20 billion. And that's 4x kind of what the revenue run rate is for the business right now. So there's clearly line of sight to significant growth in this business. Kind of help us understand how you're going to go out and capitalize on that growth. And to what extent can you move the model there to more subscription?

Yes. So if you look -- since I've come to Applied -- when I first came to Applied around 2012, 2013, the subscription percentage of our business was around 30% or 40%. And now it's around 60%, and we've talked about in our model going to 70%. And a lot of it is focused on high-volume manufacturing, optimizing yield, output, cost. I'll give you one kind of interesting data point. I was in Europe talking with one of our top ICAPS customers. And they said, "Gary, we're so happy we have your service agreement because that's helping us get through the pandemic." So we have things like forecasted parts management, where they have those parts there with very fast response time. And really, again, the value of the upside, capturing the upside, the agility and the whole supply chain is really important. So I think that this move to the more subscription revenue, for sure, that's going to continue to increase. But most of it today is focused in high-volume manufacturing. I think that where -- there's certainly a big opportunity there. But an even bigger opportunity is if you think about what I talked about earlier, the R&D acceleration, the t acceleration in PPACt. What is that worth? If I can bring a chip to market 6 months or 12 months faster through the combination of the actionable data, actionable insight, the AI(x) services, those kinds of things, and we talked about increasing engagements from 25 to 75 in 2022, that is enormous. If I can drive R&D 2x faster where 30% bigger process windows through a combination of these technologies, that is enormously enabling. Then once I do that, I have to ramp a $20 billion factory. So I make one chamber or platform golden, I need them all golden. I need them all performing with that big process window. So again, I -- we -- that business grew 21% this last year. We've talked about double-digit growth into '22. But I really believe that just as technology is transforming every industry, we have an enormous opportunity to transform how we work in high-volume manufacturing, R&D acceleration and ramp acceleration.

Want to pivot again into the adjacent market strategy and talk a little bit about the flat panel business. And that's one that's kind of been on again, off again. And one that investors have often asked, is there real value in maintaining this business longer term? What's kind of your view of the flat panel business?

Yes. I mean, it's a good adjacent market. We have very strong market share in CVD, PVD. We've actually taken our e-beam technologies also into this flat panel business. And as we talked about in the Investor Day, we're totally committed to driving that business to high 20s operating profit going forward. And in the model, I believe what we said was around $600 million in free cash flow. So it's really a great adjacent business for us where, again, we will optimize profitability in that market to get in that type of range.

And then other adjacent markets, can you talk a little bit about advanced packaging and what you might be doing on that front?

Advanced packaging is great. So we grew that business about 55% this last year to over $800 million. And when you think about it, connecting chips or chiplets, IP blocks is enormously important. When you, I'm sure, listen to some of the CEOs from chip companies earlier today or listened to them in their technology days, it's enormously important. I think people underestimate how important it is going forward. And Applied, we have this broad portfolio, PVD, CVD, CMP, the plating. We have the new Sym3 via etcher. So really a very broad portfolio. We've entered into a relationship with Besi in hybrid bonding, where you can bond chips together directly and increase the IO density, a matter of 4x. And there are other initiatives that we're driving there that are just really, really, really tremendous. And I believe if we're sitting here 2 or 3 years from now, that for the whole industry is incredibly important, driving the PPACt road map forward. And again, every one of the large customers have talked about that being critical to their strategy. And we're by far in the best position of anyone and just incredibly deep relationships with all of those customers.

I'm going to ask you an uncomfortable question about value capture.

Okay.

I think you're much better served talking about how you're going to make your customers more successful. And I think you do a very good job at that.

Yes.

That said, there are very few chokepoints in the global economy. I look at the semiconductor industry as being one, but if you dig deeper inside the semi industry, there's probably 3 or 4 key chokepoints within semis. There's the EDA software industry. There's your industry. There's probably high-end analog. And then there's [indiscernible]. Those to me are massive chokepoints within semis. I look at the margin profile of those other companies, and I look at your margin profile, and I don't think your industry is doing a good enough job capturing value. I'm curious how you think about the value capture over a longer period of time.

Well, I would agree with you. We're not doing a good enough job. So if you look at '21, I actually think the performance there was pretty good. We're up 240 basis points in a market where it's really hard if you think about all of the expedite fees and supply chain challenges. And that really is something that will be with us for a while as we've talked about earlier, but I believe we are making progress there. We're very close if you look at where we were in Q4, almost right on top of our Analyst Day model. And certainly, we aspire to do better than that. And I think value capture starts with value creation, really unique and differentiated value creation. And that's really -- I mean, again, I'm an engineer. As I said, I met with pretty much all the CEOs and R&D leaders in the last 3 months in Asia, Europe and the United States. It really -- when you think about driving the PPACt road map forward, as I talked about, wiring resistance. We're #1 in wiring resistance. We have very high share. We have enabling products and platforms that no one else can drive that are worth, just single platforms, billions of dollars. So when I think about all of the IMS solutions, enabling the gate all around or wiring resistance or the capacitor scaling or high-speed DRAM with logic-like features in the periphery, packaging, we have tremendous technologies, co-optimization as you're scaling 3D NAND devices. I really believe, John, that we're in a -- we've never ever been in a better position relative to the value creation. And of course, part of our focus going forward is also capturing some of that value as we're enabling really I almost think it's like magic tremendous innovations to the industry.

Well, and I should have prefaced that by saying if you exclude some of the headwinds that the inflationary pressures are causing right now and you adjust for mix, your gross margins are near all-time high. So...

They're near an all-time high, and we'd be right on top of our model already in terms of what we accomplished.

The high-class problem that you have. You've got a great revenue growth story, a great sort of profitability profile. You generate a ton of cash. What do you do with that cash? You've tried to make 2 meaningful acquisitions in the last several years. Regulators wouldn't let you do that. Are big acquisitions done in the semi cap equipment space? Is M&A still part of your tool chest? And if the former, what do you do with the cash?

Yes, I think it's really hard to get large M&A deals done any time in the foreseeable future. So we've committed the cash to shareholders. I think in '21, we returned almost 100% of cash we generated, I believe, around $5 billion in free cash flow. And we communicated in our investor meeting, we would return 80% to 100% of our free cash flow to shareholders. We've been -- last year, and I think in the past, closer to 100%. And I believe, given the environment that we're in right now, John, we'll be toward the top end of that 80% to 100% really weighted towards buybacks.

The last sort of set of questions I had was something that I think you were relatively early on that's become much more important to the investment community, and that's ESG. I think it was SEMICON West a couple of years ago where you did a very extensive presentation on this. I know you've given talks across the globe about this. Help us understand your philosophy on sort of the ESG and especially on the environmental side and what you're trying to do relative to your product suite to actually affect change.

Yes. So our vision is to make possible a better future. I think our role as leaders is to leave the world in a better place for our children and future generations. And as you mentioned, we had that -- we talked about our ESG strategy on the environmental side, 1x really what we're doing inside Applied Materials, 100x what we're doing with customers. And then 10,000x is really enabling a power-efficient semiconductor digital infrastructure. And we've talked a lot about that part. Again, I believe that I'm so lucky to be in a company, John, that can have such an impact, a big impact on the world. And relative to the 100x, I've had many customers, we're engaged with them, and they loved our 100x 3 by 30 strategy...

3 by 30, yes.

Where we talked about 30% better energy efficiency, 30% lower chemical consumption and 30% better throughput per floor space in the wafer fab. And I think for us, certainly, it's important for us to drive these things so that we do leave the world in a better place. But when you think about platforms that give you better throughput density, that improves your competitiveness. And the same thing is true when you think about operating costs for our equipment. If we're improving on these metrics, that's also making our products more competitive. So that's a big focus. One of our biggest customers in their newsletter highlighted Applied Materials recently and the work that we've been doing together with them in these areas. We're making a lot of progress. We have a ways to go, but I think we have a clear vision of how to get there.

That's a great way to end it, Gary. I really appreciate your time this afternoon. I appreciate everyone joining us. Really enjoyed the conversation.

Okay. Thank you, everybody.

Thank you.