Businessmodel of Applied Materials

Customer Segments

Applied Materials has a niche market business model, with a specialized customer segment. The company targets its offerings at integrated device manufacturers and foundries that need semiconductors in their products.

Value Proposition

Applied Materials offers two primary value propositions: innovation and brand/status.

The company has been a pioneer in the semiconductor industry, introducing many innovations. These include the following:

• The Precision 5000 CVD, a system featuring single-wafer, multichamber processing that can handle larger and more complex microchips
• The AME 8100 Series Plasma Etch Systems, which represented a breakthrough in the dry etching of semiconductors
• The Precision Etch 8300A, which offered higher levels of automation than previously seen and significant improvements in contamination control The company has built a powerful brand. As one of the early innovators in the microchip space, it is well-established. It has also won several honors as a result of its success. The Precision 5000 CVD was inducted into the Smithsonian Institution’s permanent collection of technology for the Information Age. In addition, in 2015 alone the firm garnered Intel’s Preferred Quality Supplier Award for the fifth consecutive year, received TSMC’s supplier award for a sixth year, and was recognized as “World’s Most Ethical Company“ by the Ethisphere Institute for the fourth year in a row.

Channels

Applied Materials’ main channel is its direct sales team, which operates through 81 locations in 18 countries, including the U.S., Canada, India, Israel, Japan, Korea, Taiwan, and various parts of Europe. The company promotes its offerings through its website and social media pages.

Customer Relationships

Applied Materials’ customer relationship is primarily of a self-service, automated nature. Customers utilize its products while having limited interaction with employees. The company’s website includes two types of customer portals – the “My Applied” Customer Portal that provides access to service, support, and materials; and the Software Portal that enables users to receive the most up-to-date software upgrades, patches, and enhancements. The site also provides a Product Library where users can easily obtain information on its equipment and technologies.

Despite this orientation, there is also a personal assistance component in the form of phone and  e-mail support.

Key Activities

Applied Materials’ business model entails designing, developing, and manufacturing its products for customers. The company maintains manufacturing facilities in Germany, Italy, Israel, the United States, Singapore, Taiwan, and other countries in Asia.

Key Partners

Applied Materials’ primary partners are the numerous vendors that supply parts and assembly services for the manufacture of its products. They operate in many of the same countries that contain its manufacturing facilities. Specific suppliers include XP Power Limited, Ichor Systems, Sanmina Corporation, Brooks Instrument, Foxsemicon Integrated Technology, Meopta-optika, and Rockwell Automation.

Key Resources

Applied Materials’ main resource is its staff of research/development and engineering employees, which works constantly to generate new, innovative offerings for the company. Other important human resources include its sales employees, who are spread out in offices around the world, and its customer support staff, which includes contract employees. The company places a high priority on intellectual property, and has 10,200 patents issued in the U.S. and other countries.

Cost Structure

Applied Materials has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of products sold, a variable expense. Other major drivers are in the areas of research/development/engineering, sales/marketing, and administration, all fixed costs.

Revenue Streams

Applied Materials has two revenue streams:

Product Revenues – Revenue generated from the sale of its products to manufacturers

Service Revenues – Revenue generated from the sale of its services to manufacturers; these include upgrades and consulting