By Maria Armental
Semiconductor-equipment supplier Applied Materials says 2020 could be a recovery year for the memory sector, albeit one that shaped like a "U" implying a long, slow rebound.
"We don't see any big hockey sticks," Chief Executive Gary Dickerson said in a conference call with analysts, referring to a sudden, sharp recovery. "It's going go be a long journey."
Chief Financial Officer Dan Durn reiterated that while he can't yet call the bottom of the cycle, early signs of improvement are visible as inventories fall and prices stabilize.
Asked why he didn't feel comfortable saying that the cycle has hit a turning point, Mr. Durn cited the geopolitical environment, saying: "I just think it's prudent...to set expectations in a modest way."
Based on what the executives are observing, the recovery will be led by NAND flash, the memory chips used in most mobile devices, followed by DRAM, or dynamic random-access memory, which is used in desktop computers and servers.
Along with the cyclical downturn, the sector has experienced a shift brought about by artificial intelligence, big-data analytics and the so-called Internet of Things, which connects everyday objects such as household appliances and automobiles to the internet.
"At a time when improvements in power, performance, area and cost are paramount, classic Moore's law scaling is running out of gas," Mr. Dickerson said, referring to what for decades was the golden rule for the electronics industry.
He said Applied is rearranging and boosting its business around what it calls the sector's new play book, one that urges new architecture, materials and manufacturing techniques, among other things.
Last month, Applied disclosed plans to buy Japanese semiconductor-equipment supplier Kokusai Electric Corp. from investment group KKR & Co. (KKR).
Applied has long focused on single-wafer processing, while Kokusai is a leader in batch-processing technology and is especially strong in the memory market.
Late on Thursday, Applied posted sharply lower profit and revenue in the July quarter and forecast another difficult period this quarter.
Profit for the quarter ended July 28 dropped 44% to $571 million, or 61 cents a share. On an adjusted basis, profit fell to 74 cents a share from $1.04 a share in the same quarter a year earlier.
Net sales fell 14% to $3.56 billion.
The company had projected 67 cents to 75 cents a share in adjusted profit and about $3.53 billion in revenue, while analysts surveyed by FactSet forecast 70 cents a share and $3.53 billion.
Gross profit margin narrowed to 43.7% from 44.8%.
For the first nine months of the year, profit narrowed 12% while net sales slid 16%.
This quarter, Applied Materials projects adjusted profit of 72 cents to 80 cents a share and about $3.69 billion in revenue, compared with analysts' expectations for 76 cents a share in adjusted profit and $3.66 billion in revenue.
Write to Maria Armental at email@example.com