Many have wondered what the heck Applied Materials is doing getting into equipment for photovoltaic cells (PVCs). If you have thought this, you are thinking too tactically. Applied Materials is taking a very strategic perspective on the future and positioning themselves for maximum growth. They have looked ten to twenty years out and asked what it will look like. So let’s reverse engineer their strategy.
We know today that the semiconductor market is unlikely to grow much faster than the nominal economy for the long term. Silicon demand from IC production amounts to about 3.8M square meters per year and let’s give it the benefit of the doubt and say it will grow at 10% per annum over the next twenty years. So new IC demand will amount to a total of 21.8M square meters of silicon. In contrast, there are more than 50,000M square meters of roof space available for solar panels in Europe, Japan, and the United States. So that’s a market potential that is more than 2000 times greater than that for ICs. So that’s the strategy. It is a strategy that can err by 341x and still match the growth ICs will bring to the equipment industry.
But is solar a goal worth taking? What if PVCs don’t take off. To answer that question you have to look at oil and its alternatives. It is well documented that oil production has either peaked or will peak soon and that energy demand is growing and will continue to grow faster than oil production. That means that $4 for a gallon of premium will someday seem cheap to Americans. This discrepancy is a natural pressure front that will continue to move storms in and make alternatives ever more attractive in time. There’s coal, but that’s another cause for global warming. There’s nuclear, which has a disposal problem. There’s biomass, but it has the same warming problem as coal. There are hydrogen fuel cells, but they take more energy to make than they can store.
That leaves solar, for which the supply is virtually limitless. The sunlight that falls on the earth every hour is equal to all the oil produced by man to date. Most of those photons get turned into either heat or biomass, which also converts carbon dioxide into oxygen. So, we do need to turn around the global destruction of biomass (i.e. forests). We also need to take a large part of the photons that create heat and turn them into electricity. PVCs arguably represent the best alternative for the future’s energy needs.
The problem with PVCs is cost, which is something Applied knows how to solve. The strategy is very similar to that of their Flat Panel Display effort initiated around 1987. Many scoffed then, but they don’t today. Another proof I see is that many of the best executives I know are moving from chips to PVCs. People like Bruce Sohn, who ran Intel’s fab 11x or Tom Newsom, who ran Verigy’s marketing. So that’s what the heck Applied Materials is thinking in solar and I’ll bet they laugh all the way to the bank (providing they execute of course).
About weQuest: weQuest's are written by G Dan Hutcheson, his career spans more than thirty years, in which he became a well-known as a visionary for helping companies make businesses out of technology. This includes hundreds of successful programs involving product development, positioning, and launch in Semiconductor, Technology, Medicine, Energy, Business, High Tech, Enviorntment, Electronics, healthcare and Business devisions.