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Applied Materials Says Smartphone Demand Boosting Sales

Applied Materials Inc. shares rose 3.4 percent after the biggest maker of semiconductor equipment said industry spending will pick up next year as chipmakers boost output to meet demand for mobile-device parts.

Competition among smartphone providers is driving demand for more advanced parts and improvement in the machines that make them, Applied Materials Chief Executive Officer Mike Splinter said yesterday at an analyst briefing in San Francisco.

The Santa Clara, California-based company is the largest seller of machinery used in the production of semiconductors and flat-screen displays. Analysts watch Applied Materials’ earnings for a broad indication of demand for electronics, because chipmakers order equipment based on their view of future sales.

“It’s really all about mobile,” Splinter said. “We expect foundry spending will have to increase. We expect Nand spending will have to increase.”

Foundries, which manufacture chips to order for other companies, use Applied Materials’ machines to produce semiconductors including applications processors and radio chips, some of the key components of smartphones. Nand flash memory provides the storage in mobile devices such as tablets and handsets.

Applied Materials rose 52 cents to $15.66 at the close in New York. The stock has gained 37 percent this year.

Profit Forecast

The company predicts that the total market for machines used to make semiconductors will be $27 billion to $30 billion this year. In its fiscal second quarter, Applied Materials’ sales fell 22 percent to $1.97 billion.

The chip-equipment maker is targeting annual profit, excluding certain items, of $1.50 to $2.15 a share by 2016, Chief Financial Officer Bob Halliday told analysts. The company will get closer to the higher end of that range if the total market for equipment reaches $37 billion, the highest of the company’s projected scenarios for 2016, he said.

Under Splinter, the company has branched out into machinery that makes flat-panel displays and solar panels. While growth has returned in orders for display equipment, the solar market remains challenging, he said on a conference call with analysts in May.

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