A stronger-than-expected recovery in semiconductor demand is the key reason behind Applied Materials' upgrade of its 2010 sales forecast, Chief Executive Mike Splinter told CNBC on Thursday.
Splinter said companies which make chips, particularly the memory and foundry firms, have started investing in technology again in a big way, fueling a dramatic turnaround in a sector which was hard hit by a slump in orders and falling chip prices just over a year ago.
"It's kind of like, what a difference a year makes. A year ago, at this time, there was difficulty in many different electronics markets. But since last summer things have started to improve for our customers, and now things are improving for us as well," said Splinter.
"This (chip business) is still our most profitable segment by far, and it's growing very fast and we're very pleased with to see that."
Splinter said that while the U.S. chipmaker currently boast a warchest of over $3 billion in cash, it isn't looking at significant capital spending this year, apart from investments in its Asian operations.
"Our business is one that doesn't take a lot of capital spending, but we have a significant amount of cash on our balance sheet today, $3.2 billion at the end of the quarter. This should allow us to participate in any growth that we need to fund, or any acquisitions that we might want to make in this time or in future times," said Splinter.
"But we are investing, in particular, in operations in Singapore and in Taiwan," Splinter added. "Most of our customers these days are in Asia, about 85% of our sales are outside the United States."
When asked about the potential impact of China's measures to pull back stimulus spending on the sector, Splinter said he's taking a wait-and-see approach.
"(We) will have to see how it does unfold. The stimulus that's happening all over the world, in the United States of course, as much as the stimulus money is just now getting into the economy, so hopefully that will help create jobs," he said.
"Also in the United States there's lots of discussion about a job spill that's coming up, and hopefully that will drive new employment in the United States."
Overnight, Applied Materials reported a first quarter net income of $83 million, or 6 cents a share, compared with a year-ago loss of $133 million, or 10 cents a share. Revenue rose to $1.85 billion during the quarter from $1.33 billion a year ago.
It also forecast net sales to increase 50 percent in fiscal 2010.