Applied Materials Bets Big on Solar

Solar energy is hot. Venture capital firms have seen the light and even the U.S. government is upping its investment efforts.

Among the true believers is Michael Splinter, president and CEO of Applied Materials. Splinter, a semiconductor industry veteran who left Intel in 2003 to take the helm at Applied Materials. made a strategic decision to enter the solar business, a move that has already meant more than $1 billion dollars in investment.

Applied Materials makes the equipment used to build solar panels and expects some $600 million in contracts in its 2007 fiscal year. Its premier product, SunFab Thin Film Line, sprays a large sheet of glass with a thin coat of light-sensitive silicon, which generates power when hit by rays of the sun. Customers include companies in Europe and India.

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Splinter says his goal is to reduce solar costs from the current $2-$3 per watt to $1 per watt within the next two years and to 70 cents by about 2010, making it a competitive energy source.

Splinter, an engineer and technologist, is also member of the Technology CEO Council and Governors’ Council of the World Economic Forum.

What were the key factors in entering the solar business?

We started to think about core capabilities of our company -- where there are markets and areas to grow. We had looked at a lot of options. One of the options with great opportunity we thought was the energy market, which is very, very large. We had capability no one else had. It certainly was not a mature market. It was open to new players and capabilities.

You’re a technologist among other things. How excited are you about the technological potential?

I think we have the opportunity to set the standard in the market place. It is an exciting opportunity that doesn’t come along very often in the lifetime of the marketplace.

Is this a place where personal philosophy and business opportunities meet?

I certainly have philosophical views on clean energy and steering the company to the energy market. I believe the great social issues of our time are energy and the environment and you have to couple them with solutions that have to be economically viable.

Just how competitive can it be?

Over a period of time, it has to be directly competitive with other forms of energy -- when all the other costs are accounted. Now that it going to take us some time – somewhere between five and ten years, maybe three to seven years.

When it comes to the green movement, is some of it corporate fashion versus a legitimate search for cost-effective alternatives?

I don’t know about fashion so much. It depends on what kind of activity you are talking about. For companies talking about reducing their carbon footprint, it is something that could be taken as corporate fashion but you have to look inside their plans to see what they are about.

What we’re really doing is bringing technology to bear on real problems that face the world for the next 50 years. The environment and energy are two fundamental problems we face. We have to do some serious thinking, create some interesting technology to bring the world forward.

I was thinking about this the other morning. In a time period of 50 years, if every person in India uses the same amount of energy as someone in the United States does, it would require eight times the amount of energy currently available in the U.S.

What are your customers telling you?

A lot of our customers are really aiming at the European market where there are requirements to have a menu of different technologies. Since our technology is the most cost effective today, customers are pretty excited about it even given today’s capabilities.

How big of an investment are you prepared to make?

We think this market can be very, very big. Capital spending in the energy field right now is about $350 billion a year. If solar could be just 1% of that, it’s a giant step.

What sort of revenue projections do you have for down the road?

If we’re talking on a five-year horizon, I would like to see solar energy take 1% of all cap-ex energy investment. Now how much of that share we’d be able to get is a competitive issue.

The thing to realize in our company, this is really a start up. In 2007 we have a very small amount of revenue in this area. We have a relatively large number of contracts coming in. I’ve been surprised at how fast this thing has progressed.

In the push for globalization, energy consumption was something corporations didn’t accurately factor in, did they?

Certainly not. That has been a huge factor that has come to the fore recently, partly because of the increase in prices.

What’s the biggest mistake that corporations and people are making in dealing with the sustainability and growth?

I would think, because it constantly surprises me, it is the size of the problem and the size of the opportunity.