{ "ticker": "AMAT", "company": "Applied Materials Inc.", "filing_type": "10-K", "year_current": "2023", "year_prior": "2022", "summary": { "added": 3, "removed": 4, "modified": 33, "unchanged": 3, "total_current": 39, "total_prior": 40 }, "source": "SEC EDGAR", "url": "https://riskdiff.com/amat/2023-vs-2022/", "markdown_url": "https://riskdiff.com/amat/2023-vs-2022/index.md", "json_url": "https://riskdiff.com/amat/2023-vs-2022/index.json", "generated": "2026-05-10", "ai_summary": "Applied Materials removed four risks from its 2023 10-K, including COVID-19 pandemic impacts and the Kokusai Electric acquisition termination fee, while adding three new risks focused on capital allocation (dividend and share repurchase sustainability) and financial performance (gross margin). The company substantially modified 33 of its risk factor disclosures, with notable changes to risks covering business combinations, market expansion, regulatory compliance, and industry-specific challenges in semiconductors and display markets. These changes reflect Applied Materials' shift away from pandemic-related concerns toward structural business risks tied to financial returns, operational margins, and evolving technology sector dynamics.", "risks": [ { "status": "ADDED", "current_title": "We may not continue to declare cash dividends or repurchase our shares.", "prior_title": null, "current_body": "Our ability to continue to pay quarterly dividends and to repurchase our shares is subject to capital availability and periodic determinations by our Board of Directors that cash dividends and share repurchases are in the best interest of our stockholders and are in compliance with applicable laws and agreements. Future dividends and share repurchases may be affected by, among other factors, our cash flow; potential future capital requirements for investments, acquisitions, infrastructure projects, and research and development; changes in applicable tax, corporate, or other laws; contractual restrictions, such as financial or operating covenants in our debt arrangements; and changes to our business model. Our dividend payments and share repurchases may change from time to time, and we cannot provide assurance that we will continue to declare dividends or repurchase shares in any particular amounts or at all. A reduction or suspension in our dividend payments or share repurchases could have a negative effect on the price of our common stock." }, { "status": "ADDED", "current_title": "the Programs*", "prior_title": null, "current_body": "*Effective January 1, 2023, amounts include the 1% surcharge on stock repurchases under the Inflation Reduction Act’s excise tax. This excise tax is recorded in equity and reduces the amount available under the repurchase program, as applicable. Item 6: [Reserved] 33 33 33 33 33 33 Table of Contents Table of Contents Table of Contents Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations" }, { "status": "ADDED", "current_title": "Gross Margin", "prior_title": null, "current_body": "Gross margins for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages)Gross margin46.7 %46.5 %47.3 %0.2 points(0.8) points Gross margin in fiscal 2023 increased compared to fiscal 2022 primarily driven by favorable changes in customer and product mix and an increase in average selling prices, partially offset by higher material costs and inventory charges. Gross margin in fiscal 2022 decreased compared to fiscal 2021 primarily driven by higher material, freight, and logistics costs and higher personnel costs due to an increase in headcount to provide manufacturing capacity and flexibility, partially offset by favorable changes in product mix and an increase in average selling prices. Gross margin during fiscal 2023, 2022 and 2021 included $180 million, $147 million and $118 million, respectively, of share-based compensation expense." }, { "status": "REMOVED", "current_title": null, "prior_title": "The continued effects of the COVID-19 pandemic and global measures taken in response have adversely impacted, and may continue to adversely impact, Applied’s operations and financial results.", "prior_body": "The continued effects of the COVID-19 pandemic and measures taken in response by governments and businesses worldwide to contain its spread have adversely impacted and may continue to adversely impact Applied’s supply chain, manufacturing, logistics, workforce and operations, as well as the operations of Applied’s customers, suppliers and partners globally. There is continued uncertainty regarding the duration, scope and severity of the pandemic, particularly with the emergence of new variants of COVID-19 and periodic spikes in COVID-19 cases in various geographic regions, and the impacts on our business and the global economy from the effects of the pandemic and response measures. Travel and logistics restrictions, lockdowns, vaccine requirements and other measures from time to time implemented by foreign and domestic authorities have resulted in, and may continue to result in, supply chain and transportation disruptions, production delays and capacity limitations at Applied and some of its customers, suppliers and partners, as well as reduced workforce availability or productivity at Applied and customer sites, and additional data, information and cyber security risks associated with an extensive workforce working remotely. As economic activity and business operations in certain regions recover, there have been and may continue to be periods of significant or sudden increases in demand for Applied’s products, as well as worldwide demand for electronic products. Significant or sudden demand increases have resulted in, and may continue to result in, a shortage of parts, materials or services needed to manufacture Applied’s products. We have also experienced, and may continue to experience, shipment delays due to transportation interruptions or capacity constraints. Such shortages or delays have adversely impacted, and could continue to adversely impact, our suppliers’ ability to meet our demand requirements and do so on favorable terms, and our ability to meet our customer demand. There can be no assurance that Applied or its suppliers will be able to maintain manufacturing operations at levels necessary to adequately address demand for Applied products. In addition, the pandemic and measures taken in response thereto have had, and may continue to have, a significant adverse impact on the global economic activity and could also result in a reduced demand for our products, delayed deliveries or installation, cancelled orders or increase in logistics and operating costs, and materially and adversely affect Applied’s business, financial condition and results of operations. The degree to which the pandemic ultimately impacts Applied’s business, financial condition and results of operations and the global economy will depend on future developments beyond our control, which are highly uncertain and difficult to predict, including the severity, duration and any resurgence of the pandemic, the extent, duration and effectiveness of periodic lockdowns and other containment actions, the availability, public adoption and efficacy of COVID vaccines, how quickly and to what extent normal economic and operating activity can resume, and the severity and duration of resulting global economic volatility." }, { "status": "REMOVED", "current_title": null, "prior_title": "Introduction", "prior_body": "Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to facilitate an understanding of Applied’s business and results of operations. This MD&A should be read in conjunction with Applied’s Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this Form 10-K. The following discussion contains forward-looking statements and should also be read in conjunction with the cautionary statement set forth at the beginning of this Form 10-K. MD&A consists of the following sections: •Applied's Pandemic Response •Overview: a summary of Applied’s business and measurements •Results of Operations: a discussion of operating results •Segment Information: a discussion of segment operating results •Recent Accounting Pronouncements: a discussion of new accounting pronouncements and its impact to Applied’s consolidated financial statements •Financial Condition, Liquidity and Capital Resources: an analysis of cash flows, sources and uses of cash •Contractual Obligations and Off-Balance Sheet Arrangements •Critical Accounting Policies and Estimates: a discussion of critical accounting policies that require the exercise of judgments and estimates •Non-GAAP Adjusted Results: a presentation of results reconciling GAAP to non-GAAP adjusted measures" }, { "status": "REMOVED", "current_title": null, "prior_title": "Severance and Related Charges", "prior_body": "Severance and related charges for the periods indicated were as follows: Change2022202120202022 over 20212021 over 2020 (In millions)Severance and related charges$(4)$157 $— $(161)$157 In the first quarter of fiscal 2021, Applied enacted a severance plan (Fiscal 2021 Severance Plan) to realign its workforce. Under this plan, Applied implemented a one-time voluntary retirement program and other workforce reduction actions. The voluntary retirement program was available to certain U.S. employees who met minimum age and length of service requirements, as well as other business-specific criteria. In addition, Applied implemented other workforce reduction actions globally across the Display and Adjacent Markets business." }, { "status": "REMOVED", "current_title": null, "prior_title": "Deal Termination Fee", "prior_body": "Operating income (loss) for fiscal 2021 included a $154 million deal termination fee associated with the termination of a Share Purchase Agreement with Kokusai Electric Corporation and KKR HKE Investment L. P. during the second quarter of 39 39 39 39 39 39 Table of Contents Table of Contents Table of Contents fiscal 2021." }, { "status": "MODIFIED", "current_title": "Marketing and Selling", "prior_title": "Marketing and Selling", "similarity_score": 0.911, "confidence": "high", "key_changes": [ "Reworded sentence: \"Marketing and selling expenses for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)Marketing and selling$776 $703 $609 $73 $94 Marketing and selling expenses for fiscal 2023 increased compared to fiscal 2022 primarily due to additional headcount and higher travel related expenses.\"" ], "current_body": "Marketing and selling expenses for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)Marketing and selling$776 $703 $609 $73 $94 Marketing and selling expenses for fiscal 2023 increased compared to fiscal 2022 primarily due to additional headcount and higher travel related expenses. Marketing and selling expenses for fiscal 2022 increased compared to fiscal 2021 primarily due to additional headcount. Marketing and selling expenses for fiscal years 2023, 2022 and 2021 included $55 million, $49 million and $43 million, respectively, of share-based compensation expense.", "prior_body": "Marketing and selling expenses for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions)Marketing and selling$703 $609 $526 $94 $83 Marketing and selling expenses for fiscal 2022 increased compared to fiscal 2021 primarily due to additional headcount. Marketing and selling expenses for fiscal 2021 increased compared to fiscal 2020 primarily due to additional headcount and higher variable compensation. Marketing and selling expenses for fiscal years 2022, 2021 and 2020 included $49 million, $43 million and $36 million, respectively, of share-based compensation expense." }, { "status": "MODIFIED", "current_title": "We are exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures.", "prior_title": "Applied is exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures.", "similarity_score": 0.89, "confidence": "high", "key_changes": [ "Reworded sentence: \"We may engage in acquisitions of or investments in companies, technologies or products in existing, related or new markets.\"", "Reworded sentence: \"We may not receive the necessary regulatory approvals or the approvals may come with significant conditions or obligations.\"" ], "current_body": "We may engage in acquisitions of or investments in companies, technologies or products in existing, related or new markets. Business combinations, acquisitions and investments involve numerous risks to our business, financial condition and operating results, including: •inability to complete proposed transactions timely or at all due to the failure to obtain regulatory or other approvals, litigation or other disputes, and any ensuing obligation to pay a termination fee; •diversion of management’s attention and disruption of ongoing businesses; •the failure to realize expected revenues, gross and operating margins, net income and other returns from acquired businesses; 24 24 24 24 24 24 Table of Contents Table of Contents Table of Contents •requirements imposed by government regulators in connection with their review of a transaction, which may include, among other things, divestitures and restrictions on the conduct of our existing business or the acquired business; •following completion of acquisitions, ineffective integration of businesses, operations, systems, digital and physical security, technologies, products, employees, compliance programs, changes in laws or regulations, including tax laws, or other factors, may impact the ability to realize anticipated synergies or other benefits; •failure to commercialize technologies from acquired businesses or developed through strategic investments; •dependence on unfamiliar supply chains or relatively small supply partners; •inability to capitalize on characteristics of new markets that may be significantly different from our existing markets and where competitors may have stronger market positions and customer relationships; •failure to retain and motivate key employees of acquired businesses; •the impact of the announcement or consummation of a proposed transaction on relationships with third parties; •changes in our credit rating, which could adversely impact our access to and cost of capital; •increases in debt obligations to finance activities associated with a transaction, which increase interest expense, and reductions in cash balances, which reduce the availability of cash flow for general corporate or other purposes, including share repurchases and dividends; •exposure to new operational risks, rules, regulations, worker expectations, customs and practices to the extent acquired businesses are located in regions where we have not historically conducted business; •challenges associated with managing new, more diverse and more widespread operations, projects and people; •inability to obtain and protect intellectual property rights in key technologies; •inadequacy or ineffectiveness of an acquired company’s internal financial controls, disclosure controls and procedures, cybersecurity, privacy policies and compliance programs, or environmental, health and safety, anti-corruption, human resource, or other policies or practices; •impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance of the segment; •the risk of litigation or claims associated with a proposed or completed transaction; •unknown, underestimated, undisclosed or undetected commitments or liabilities, including potential intellectual property infringement claims, or non-compliance with laws, regulations or policies; and •the inappropriate scale of acquired entities’ critical resources or facilities for business needs. We make investments in other companies, including companies formed as joint ventures, which may decline in value or not meet desired objectives. The success of these investments depends on various factors over which we may have limited or no control and, particularly with respect to joint ventures, requires ongoing and effective cooperation with partners. In addition, new legislation, additional regulations or global economic or political conditions may affect or impair our ability to invest in certain countries or require us to obtain regulatory approvals to do so. We may not receive the necessary regulatory approvals or the approvals may come with significant conditions or obligations. The risks to our investment portfolio may be exacerbated by unfavorable financial market and macroeconomic conditions and, as a result, the value of the investment portfolio could be negatively impacted and lead to impairment charges. We may seek to divest portions of our business that are not deemed to fit with our strategic plan. Divestitures involve additional risks and uncertainties, such as ability to sell such businesses on satisfactory price and terms and in a timely manner, or at all, disruption to other parts of the businesses and distraction of management, allocation of internal resources that would otherwise be devoted to completing strategic acquisitions, loss of key employees or customers, exposure to unanticipated liabilities or ongoing obligations to support the businesses following such divestitures, and other adverse financial impacts.", "prior_body": "Applied engages in acquisitions of or investments in companies, technologies or products in existing, related or new markets for Applied. Business combinations, acquisitions and investments involve numerous risks to Applied’s business, financial condition and operating results, including but not limited to: •inability to complete proposed transactions timely or at all due to the failure to obtain regulatory or other approvals, litigation or other disputes, and any ensuing obligation to pay a termination fee; •diversion of management’s attention and disruption of ongoing businesses; •the failure to realize expected revenues, gross and operating margins, net income and other returns from acquired businesses; •requirements imposed by government regulators in connection with their review of a transaction, which may include, among other things, divestitures and restrictions on the conduct of Applied’s existing business or the acquired business; •following completion of acquisitions, ineffective integration of businesses, operations, systems, digital and physical security, technologies, products, employees, compliance programs, changes in laws or regulations, including tax laws, or other factors, may impact the ability to realize anticipated synergies or other benefits; •failure to commercialize technologies from acquired businesses or developed through strategic investments; •dependence on unfamiliar supply chains or relatively small supply partners; •inability to capitalize on characteristics of new markets that may be significantly different from Applied’s existing markets and where competitors may have stronger market positions and customer relationships; •failure to retain and motivate key employees of acquired businesses; •the potential impact of the announcement or consummation of a proposed transaction on relationships with third parties; •potential changes in Applied’s credit rating, which could adversely impact the Company’s access to and cost of capital; •reductions in cash balances or increases in debt obligations to finance activities associated with a transaction, which increase interest expense, and reductions in cash balances, which reduce the availability of cash flow for general corporate or other purposes, including share repurchases and dividends; •exposure to new operational risks, rules, regulations, worker expectations, customs and practices to the extent acquired businesses are located in regions where Applied has not historically conducted business; •challenges associated with managing new, more diverse and more widespread operations, projects and people; •inability to obtain and protect intellectual property rights in key technologies; •inadequacy or ineffectiveness of an acquired company’s internal financial controls, disclosure controls and procedures, cybersecurity, privacy policies and compliance programs, or environmental, health and safety, anti-corruption, human resource, or other policies or practices; •impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance of the segment; •the risk of litigation or claims associated with a proposed or completed transaction; •unknown, underestimated, undisclosed or undetected commitments or liabilities or non-compliance with laws, regulations or policies; and •the inappropriate scale of acquired entities’ critical resources or facilities for business needs. Applied also makes investments in other companies, including companies formed as joint ventures, which may decline in value or not meet desired objectives. The success of these investments depends on various factors over which Applied may have limited or no control and, particularly with respect to joint ventures, requires ongoing and effective cooperation with partners. In addition, new legislation, additional regulations or global economic or political conditions may affect or impair our ability to invest in certain countries or require us to obtain regulatory approvals to do so. Applied may not receive the necessary regulatory approvals or the approvals may come with significant conditions or obligations. The risks to Applied’s investment portfolio may be exacerbated by unfavorable financial market and macroeconomic conditions and, as a result, the value of the investment portfolio could be negatively impacted and lead to impairment charges. 26 26 26 26 26 26 Table of Contents Table of Contents Table of Contents Applied continually assesses the strategic fit of its businesses and may from time to time seek to divest portions of its business that are not deemed to fit with its strategic plan. Some divestitures may take the form of Applied contributing assets to a joint venture, and thus are subject to the joint venture risks discussed above. In addition, divestitures involve significant risks and uncertainties, such as ability to sell such businesses on satisfactory price and terms and in a timely manner (including long and costly sales processes and the possibility of lengthy and potentially unsuccessful attempts by a buyer to receive required regulatory approvals), or at all, disruption to other parts of the businesses and distraction of management, allocation of internal resources that would otherwise be devoted to completing strategic acquisitions, loss of key employees or customers, exposure to unanticipated liabilities (including, among other things, those arising from representations and warranties made to a buyer regarding the businesses) or ongoing obligations to support the businesses following such divestitures, and other adverse financial impacts." }, { "status": "MODIFIED", "current_title": "We are exposed to risks associated with expanding into new and related markets and industries.", "prior_title": "Applied is exposed to risks associated with expanding into new and related markets and industries.", "similarity_score": 0.887, "confidence": "high", "key_changes": [ "Reworded sentence: \"As part of our growth strategy, we seek to continue to expand into related or new markets and industries, either with our existing products or with new products developed internally, or those developed in collaboration with third parties, or obtained through acquisitions.\"" ], "current_body": "As part of our growth strategy, we seek to continue to expand into related or new markets and industries, either with our existing products or with new products developed internally, or those developed in collaboration with third parties, or obtained through acquisitions. Our ability to successfully expand our business into new and related markets and industries may be adversely affected by a number of factors, including: •the need to devote additional resources to develop new products for, and operate in, new markets; •the need to develop new sales and technical marketing strategies, and to develop relationships with new customers; •differing rates of profitability and growth among multiple businesses; •our ability to anticipate demand, capitalize on opportunities, and avoid or minimize risks; •the complexity of managing multiple businesses with variations in production planning, execution, supply chain management and logistics; •the adoption of new business models, business processes and systems; •the complexity of entering into and effectively managing strategic alliances or partnering opportunities; •new materials, processes and technologies; •the need to attract, motivate and retain employees with skills and expertise in these new areas; •new and more diverse customers and suppliers, including some with limited operating histories, uncertain or limited funding, evolving business models or locations in regions where we do not have, or have limited, operations; •new or different competitors with potentially more financial or other resources, industry experience and established customer relationships; •entry into new industries and countries, with differing levels of government involvement, laws and regulations, and business, employment and safety practices and requirements; •third parties’ intellectual property rights; and •the need to comply with, or work to establish, industry standards and practices. From time to time we receive funding from the United States and other government agencies for certain strategic development programs to increase our research and development resources and address new market opportunities. As a condition to this government funding, we are often subject to certain record-keeping, audit, intellectual property rights-sharing, and/or other obligations.", "prior_body": "As part of its growth strategy, Applied seeks to expand into related or new markets and industries, either with its existing products or with new products developed internally, or those developed in collaboration with third parties, or obtained through acquisitions. Applied’s ability to successfully expand its business into new and related markets and industries may be adversely affected by a number of factors, including: •the need to devote additional resources to develop new products for, and operate in, new markets; •the need to develop new sales and technical marketing strategies, cultivate relationships with new customers and meet different customer service requirements; •differing rates of profitability and growth among multiple businesses; •Applied’s ability to anticipate demand, capitalize on opportunities, and avoid or minimize risks; •the complexity of managing multiple businesses with variations in production planning, execution, supply chain management and logistics; •the adoption of new business models, business processes and systems; •the complexity of entering into and effectively managing strategic alliances or partnering opportunities; •new materials, processes and technologies; •the need to attract, motivate and retain employees with skills and expertise in these new areas; •new and more diverse customers and suppliers, including some with limited operating histories, uncertain or limited funding, evolving business models or locations in regions where Applied does not have, or has limited, operations; •new or different competitors with potentially more financial or other resources, industry experience and established customer relationships; •entry into new industries and countries, with differing levels of government involvement, laws and regulations, and business, employment and safety practices and requirements; •third parties’ intellectual property rights; and •the need to comply with, or work to establish, industry standards and practices. In addition, Applied from time to time receives funding from United States and other government agencies for certain strategic development programs to increase its research and development resources and address new market opportunities. As a condition to this government funding, Applied is often subject to certain record-keeping, audit, intellectual property rights-sharing, and/or other obligations. 24 24 24 24 24 24 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "We are exposed to risks related to the global regulatory environment.", "prior_title": "Applied is exposed to various risks related to the global regulatory environment.", "similarity_score": 0.884, "confidence": "high", "key_changes": [ "Reworded sentence: \"We are subject to the laws of the United States and multiple foreign jurisdictions and the rules and regulations of various governing bodies, which may differ among jurisdictions, including those related to financial and other disclosures, accounting standards, corporate governance, intellectual property, tax, trade (including import, export and customs), antitrust, environment, health and safety (including those relating to climate change), employment, immigration and travel regulations, human rights, privacy, data protection and localization, and anti-corruption.\"" ], "current_body": "We are subject to the laws of the United States and multiple foreign jurisdictions and the rules and regulations of various governing bodies, which may differ among jurisdictions, including those related to financial and other disclosures, accounting standards, corporate governance, intellectual property, tax, trade (including import, export and customs), antitrust, environment, health and safety (including those relating to climate change), employment, immigration and travel regulations, human rights, privacy, data protection and localization, and anti-corruption. Changing, inconsistent or conflicting laws, rules and regulations, and ambiguities in their interpretation and application create uncertainty and challenges, and compliance with laws, rules and regulations may be onerous and expensive, divert management time and attention from revenue-generating activities, and otherwise adversely impact our business operations. Violations of law, rules and regulations, including, among others, those related to financial and other disclosures, trade, import and export regulations, antitrust, privacy, data protection, and anti-corruption, could result in fines, criminal penalties, restrictions on our business, and damage to our reputation, and could have an adverse impact on our business operations, financial condition and results of operations.", "prior_body": "As a public company with global operations, Applied is subject to the laws of the United States and multiple foreign jurisdictions and the rules and regulations of various governing bodies, which may differ among jurisdictions, including those related to financial and other disclosures, accounting standards, corporate governance, intellectual property, tax, trade (including import, export and customs), antitrust, environment, health and safety (including those relating to climate change), employment, immigration and travel regulations, privacy, data protection and localization, and anti-corruption. Changing, inconsistent or conflicting laws, rules and regulations, and ambiguities in their interpretation and application create uncertainty and challenges, and compliance with laws, rules and regulations may be onerous and expensive, divert management time and attention from revenue-generating activities, and otherwise adversely impact Applied’s business operations. Violations of law, rules and regulations, including, among others, those related to financial and other disclosures, trade, import and export regulations, antitrust, privacy, data protection, and anti-corruption, could result in fines, criminal penalties, restrictions on Applied’s business, and damage to its reputation, and could have an adverse impact on its business operations, financial condition and results of operations." }, { "status": "MODIFIED", "current_title": "We are exposed to ongoing changes specific to the display industry.", "prior_title": "Applied is exposed to risks as a result of ongoing changes specific to the display industry.", "similarity_score": 0.877, "confidence": "high", "key_changes": [ "Reworded sentence: \"The global display industry has experienced considerable volatility in capital equipment investment levels, due in part to the limited number of display manufacturers, the concentrated nature of end-use applications, production capacity relative to end-use demand, and panel manufacturer profitability.\"", "Reworded sentence: \"The display industry is characterized by ongoing changes particular to this industry that impact demand for and the profitability of our display products and services, including: 21 21 21 21 21 21 Table of Contents Table of Contents Table of Contents •the importance of new types of display technologies, such as organic light-emitting diode (OLED), low temperature polysilicon (LTPS) and metal oxide transistor backplanes, flexible displays, and new touch panel films; •the increasing cost of research and development, and complexity of technology transitions and inflections, and our ability to timely and effectively anticipate and adapt to these changes; •the timing and extent of an expansion of manufacturing facilities in China, which may be affected by changes in economic conditions and governmental regulations, including trade policies and export regulations; •the importance of increasing market positions in products and technologies with growing demand; •the rate of transition to new display technologies for TVs, information technology products and mobile applications, and augmented and virtual reality applications, and the resulting effect on capital intensity in the industry and on our product differentiation, gross margin and return on investment; •the concentration of display manufacturer customers, and fluctuations in customer spending quarter over quarter and year over year for display manufacturing equipment; and •the dependence on a limited number of display manufacturer customers’ selection of new technologies, and their ability to successfully commercialize new products and technologies, and uncertainty with respect to future display technology end-use applications and growth drivers.\"" ], "current_body": "The global display industry has experienced considerable volatility in capital equipment investment levels, due in part to the limited number of display manufacturers, the concentrated nature of end-use applications, production capacity relative to end-use demand, and panel manufacturer profitability. Industry growth depends primarily on consumer demand for increasingly larger and more advanced TVs, and on demand for advanced smartphones and mobile device displays, which demand is highly sensitive to cost and improvements in technologies and features. The display industry is characterized by ongoing changes particular to this industry that impact demand for and the profitability of our display products and services, including: 21 21 21 21 21 21 Table of Contents Table of Contents Table of Contents •the importance of new types of display technologies, such as organic light-emitting diode (OLED), low temperature polysilicon (LTPS) and metal oxide transistor backplanes, flexible displays, and new touch panel films; •the increasing cost of research and development, and complexity of technology transitions and inflections, and our ability to timely and effectively anticipate and adapt to these changes; •the timing and extent of an expansion of manufacturing facilities in China, which may be affected by changes in economic conditions and governmental regulations, including trade policies and export regulations; •the importance of increasing market positions in products and technologies with growing demand; •the rate of transition to new display technologies for TVs, information technology products and mobile applications, and augmented and virtual reality applications, and the resulting effect on capital intensity in the industry and on our product differentiation, gross margin and return on investment; •the concentration of display manufacturer customers, and fluctuations in customer spending quarter over quarter and year over year for display manufacturing equipment; and •the dependence on a limited number of display manufacturer customers’ selection of new technologies, and their ability to successfully commercialize new products and technologies, and uncertainty with respect to future display technology end-use applications and growth drivers. The display industry has experienced decreased levels of investment in manufacturing equipment. If we do not successfully develop and commercialize products to meet demand for new and emerging display technologies, or if industry demand for display manufacturing equipment and technologies does not grow, our business and our operating results may continue to be adversely impacted.", "prior_body": "The global display industry historically has experienced considerable volatility in capital equipment investment levels, due in part to the limited number of display manufacturers, the concentrated nature of end-use applications, production capacity relative to end-use demand, and panel manufacturer profitability. Industry growth depends primarily on consumer demand for increasingly larger and more advanced TVs, and on demand for advanced smartphones and mobile device displays, which demand is highly sensitive to cost and improvements in technologies and features. The display industry is characterized by ongoing changes particular to this industry that impact demand for and the profitability of Applied’s display products and services, including: •the importance of new types of display technologies, such as organic light-emitting diode (OLED), low temperature polysilicon (LTPS) and metal oxide transistor backplanes, flexible displays, and new touch panel films; •the increasing cost of research and development, and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes; •the timing and extent of an expansion of manufacturing facilities in China, which may be affected by changes in economic conditions and governmental regulations, including trade policies and export regulations; •the importance of increasing market positions in products and technologies with growing demand; •the rate of transition to larger substrate sizes for TVs and to new display technologies for TVs, information technology products and mobile applications, and the resulting effect on capital intensity in the industry and on Applied’s product differentiation, gross margin and return on investment; and •fluctuations in customer spending quarter over quarter and year over year for display manufacturing equipment, concentration of display manufacturer customers and their ability to successfully commercialize new products and technologies, and uncertainty with respect to future display technology end-use applications and growth drivers. If Applied does not successfully develop and commercialize products to meet demand for new and emerging display technologies, or if industry demand for display manufacturing equipment and technologies slows, Applied’s business and its results of operations may be adversely impacted." }, { "status": "MODIFIED", "current_title": "We are exposed to ongoing changes specific to the semiconductor industry.", "prior_title": "Applied is exposed to risks as a result of ongoing changes specific to the semiconductor industry.", "similarity_score": 0.867, "confidence": "high", "key_changes": [ "Reworded sentence: \"The largest proportion of our consolidated net sales and profitability is derived from sales of manufacturing equipment in the Semiconductor Systems segment to the global semiconductor industry, and a majority of the revenues of Applied Global Services is from sales to semiconductor manufacturers.\"" ], "current_body": "The largest proportion of our consolidated net sales and profitability is derived from sales of manufacturing equipment in the Semiconductor Systems segment to the global semiconductor industry, and a majority of the revenues of Applied Global Services is from sales to semiconductor manufacturers. The semiconductor industry is characterized by ongoing changes particular to this industry that impact demand for and the profitability of our semiconductor manufacturing equipment and service products, including: •the frequency and complexity of technology transitions and inflections, and our ability to timely and effectively anticipate and adapt to these changes; •the cost of research and development due to many factors, including shrinking geometries, the use of new materials, new and more complex device structures, more applications and process steps, increasing chip design costs, and the cost and complexity of integrated manufacturing processes; •the need to reduce product development time and meet technical challenges; •the number of types and varieties of semiconductors and number of applications; •the cost and complexity for semiconductor manufacturers to move more technically advanced capability and smaller geometries to volume manufacturing, and the impact on investment in capital equipment; •semiconductor manufacturers’ levels of capital expenditures and the allocation of capital investment to market segments that we do not serve, such as lithography, or segments where our products have lower relative market presence; •delays in installation of manufacturing equipment delivered to customers; •the importance of increasing market positions in segments with growing demand; •semiconductor manufacturers’ ability to reconfigure and re-use equipment, resulting in diminished need to purchase new equipment and services from us, and challenges in providing parts for reused equipment; •shorter cycle times between order placements by customers and product shipment require greater reliance on forecasting of customer investment, which may lead to inventory write-offs and manufacturing inefficiencies that decrease gross margin; •competitive factors that make it difficult to enhance position, including challenges in securing development-tool-of-record (DTOR) and production-tool-of-record (PTOR) positions with customers; •consolidation in the semiconductor industry, including among semiconductor manufacturers and among manufacturing equipment suppliers; •shifts in sourcing strategies by computer and electronics companies, and manufacturing processes for advanced circuit technologies, that impact the equipment requirements of our foundry customers; •the concentration of new wafer starts in Korea and Taiwan, where our service penetration and service-revenue-per-wafer-start have been lower than in other regions; •the increasing fragmentation of semiconductor markets, leading certain markets to become too small to support the cost of a new fabrication plant, while others require less technologically advanced products; and •the growing importance of specialty markets (such as Internet of Things, communications, automotive, power and sensors) that use mature process technologies and have a low barrier to entry. If we do not accurately forecast and allocate appropriate resources and investment towards addressing key technology changes and inflections, successfully develop and commercialize products to meet demand for new technologies, and effectively address industry trends, our business and results of operations may be materially and adversely impacted.", "prior_body": "The largest proportion of Applied’s consolidated net sales and profitability is derived from sales of manufacturing equipment in the Semiconductor Systems segment to the global semiconductor industry. In addition, a majority of the revenues of Applied Global Services is from sales to semiconductor manufacturers. The semiconductor industry is characterized by ongoing changes particular to this industry that impact demand for and the profitability of Applied’s semiconductor manufacturing equipment and service products, including: •the increasing frequency and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes; •the increasing cost of research and development due to many factors, including shrinking geometries, the use of new materials, new and more complex device structures, more applications and process steps, increasing chip design costs, and the increasing cost and complexity of integrated manufacturing processes; •the need to reduce product development time, despite the increasing difficulty of technical challenges; •the growing number of types and varieties of semiconductors and number of applications across multiple substrate sizes; •the increasing cost and complexity for semiconductor manufacturers to move more technically advanced capability and smaller geometries to volume manufacturing, and the resulting impact on the rates of technology transition and investment in capital equipment; •challenges in generating organic growth given semiconductor manufacturers’ levels of capital expenditures and the allocation of capital investment to market segments that Applied does not serve, such as lithography, or segments where Applied’s products have lower relative market presence; •customer investment in semiconductor manufacturing capabilities in China, which has been affected by changes in economic conditions and governmental regulations, including trade policies and export regulations; •the importance of increasing market positions in segments with growing demand; •semiconductor manufacturer’s ability to reconfigure and re-use equipment, resulting in diminished need to purchase new equipment and services from us, and challenges in providing parts for reused equipment; •shorter cycle times between order placements by customers and product shipment require greater reliance on forecasting of customer investment, which may lead to inventory write-offs and manufacturing inefficiencies that decrease gross margin; •competitive factors that make it difficult to enhance position, including challenges in securing development-tool-of-record (DTOR) and production-tool-of-record (PTOR) positions with customers; •consolidation in the semiconductor industry, including among semiconductor manufacturers and among manufacturing equipment suppliers; •shifts in sourcing strategies by computer and electronics companies, and manufacturing processes for advanced circuit technologies, that impact the equipment requirements of Applied’s foundry customers; 22 22 22 22 22 22 Table of Contents Table of Contents Table of Contents •the concentration of new wafer starts in Korea and Taiwan, where Applied’s service penetration and service-revenue-per-wafer-start have been lower than in other regions; •the increasing fragmentation of semiconductor markets, leading certain markets to become too small to support the cost of a new fabrication plant, while others require less technologically advanced products; and •the growing importance of specialty markets (such as Internet of Things, communications, automotive, power and sensors) that use mature process technologies and have a low barrier to entry. If Applied does not accurately forecast and allocate appropriate resources and investment towards addressing key technology changes and inflections, successfully develop and commercialize products to meet demand for new technologies, and effectively address industry trends, its business and results of operations may be adversely impacted." }, { "status": "MODIFIED", "current_title": "Applied Global Services Segment", "prior_title": "Applied Global Services Segment", "similarity_score": 0.854, "confidence": "high", "key_changes": [ "Reworded sentence: \"Demand for Applied Global Services’ solutions are driven by our large and growing installed base of manufacturing systems, and customers’ needs to shorten ramp times, improve device performance and yield, and optimize factory output and operating costs.\"", "Removed sentence: \"In fiscal 2022, one customer accounted for at least 10 percent of this segment’s total net sales.\"", "Removed sentence: \"Net sales for fiscal 2021 increased compared to fiscal 2020 primarily due to higher customer spending on comprehensive service agreements and spares, and the impact of an additional one week during fiscal 2021.\"", "Removed sentence: \"Operating margin for fiscal 2021 increased compared to fiscal 2020 primarily due to higher net sales, partially offset by higher expense related to an increase in headcount to support business growth and higher freight costs.\"" ], "current_body": "The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, certain remanufactured earlier generation equipment and factory automation software for semiconductor, display and solar products. Demand for Applied Global Services’ solutions are driven by our large and growing installed base of manufacturing systems, and customers’ needs to shorten ramp times, improve device performance and yield, and optimize factory output and operating costs. Industry conditions that affect Applied Global Services’ sales of spares and services are primarily characterized by changes in semiconductor manufacturers’ wafer starts and higher utilization rates, growth of the installed base of equipment, growing service intensity of newer tools, and our ability to sell more comprehensive service agreements. Certain significant measures for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages and ratios)Net sales$5,732 $5,543 $5,013 $189 3 %$530 11 %Operating income$1,657 $1,661 $1,508 $(4)— %$153 10 %Operating margin28.9 %30.0 %30.1 %(1.1) points(0.1) points Net sales for fiscal 2023 increased compared to fiscal 2022 primarily due to an increase in sales associated with long-term service agreements and higher customer spending on legacy systems, partially offset by a decrease in net sales due to additional export regulations issued by the United States government in 2022 and lower customer utilization rates. Operating margin for fiscal 2023 decreased compared to fiscal 2022 primarily due to the impact of the export regulations, higher inventory charges and unfavorable changes in product mix. Net sales for fiscal 2022 increased compared to fiscal 2021 primarily due to higher customer spending on comprehensive service agreements, spares and legacy systems. Operating margin for fiscal 2022 decreased compared to fiscal 2021 primarily due to higher expense related to an increase in headcount to support business growth and higher freight costs, partially offset by higher net sales in fiscal 2022.", "prior_body": "The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, certain remanufactured earlier generation equipment and factory automation software for semiconductor, display and solar products. Demand for Applied Global Services’ solutions are driven by Applied’s large and growing installed base of manufacturing systems, and customers’ needs to shorten ramp times, improve device performance and yield, and optimize factory output and operating costs. Industry conditions that affect Applied Global Services’ sales of spares and services are primarily characterized by increases in semiconductor manufacturers’ wafer starts and higher utilization rates, growth of the installed base of equipment, growing service intensity of newer tools, and the Company’s ability to sell more comprehensive service agreements. Certain significant measures for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions, except percentages and ratios)Net sales$5,543 $5,013 $4,155 $530 11 %$858 21 %Operating income$1,661 $1,508 $1,127 $153 10 %$381 34 %Operating margin30.0 %30.1 %27.1 %(0.1) points3.0 points Net sales for fiscal 2022 increased compared to fiscal 2021 primarily due to higher customer spending on comprehensive service agreements, spares and legacy systems. Operating margin for fiscal 2022 decreased compared to fiscal 2021 primarily due to higher expense related to an increase in headcount to support business growth and higher freight costs, partially offset by higher net sales in fiscal 2022. In fiscal 2022, one customer accounted for at least 10 percent of this segment’s total net sales. Net sales for fiscal 2021 increased compared to fiscal 2020 primarily due to higher customer spending on comprehensive service agreements and spares, and the impact of an additional one week during fiscal 2021. Operating margin for fiscal 2021 increased compared to fiscal 2020 primarily due to higher net sales, partially offset by higher expense related to an increase in headcount to support business growth and higher freight costs." }, { "status": "MODIFIED", "current_title": "We are exposed to risks associated with an uncertain global economy.", "prior_title": "Applied is exposed to risks associated with an uncertain global economy.", "similarity_score": 0.846, "confidence": "high", "key_changes": [ "Reworded sentence: \"Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, national debt, fiscal or monetary concerns, rising inflation and interest rates, bank failures, and economic recession, could materially and adversely impact our operating results.\"", "Reworded sentence: \"Decreases in spending and demand have caused, and may in the future cause, our customers to push out, cancel or refrain from purchasing our equipment or services, which could negatively impact demand for our products and services, reduce our backlog, increase our inventory, and materially and adversely impact our operating results.\"" ], "current_body": "Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, national debt, fiscal or monetary concerns, rising inflation and interest rates, bank failures, and economic recession, could materially and adversely impact our operating results. Markets for semiconductors and displays depend largely on business and consumer spending and demand for electronic products. Uncertain or adverse economic and business conditions could result in decreases in consumer spending and demand. Decreases in spending and demand have caused, and may in the future cause, our customers to push out, cancel or refrain from purchasing our equipment or services, which could negatively impact demand for our products and services, reduce our backlog, increase our inventory, and materially and adversely impact our operating results. Sudden increases in demand for electronic products have caused, and may in the future cause, a shortage of parts and materials needed to manufacture our products. Such shortages, and shipment delays due to transportation capacity and interruptions, have adversely impacted, and may in the future adversely impact, our suppliers’ ability to meet our requirements. Accelerated digital transformation may further increase demand and exacerbate shortages and strain our manufacturing capacity, which may adversely impact our ability to meet customer demand and have an adverse impact on our revenues, operating results and financial condition. Uncertain or adverse economic and market conditions, difficulties in obtaining capital, increased costs or reduced profitability may cause some customers to scale back operations, exit businesses, merge with other manufacturers, or file for bankruptcy protection and potentially cease operations, which can result in lower sales, additional inventory or bad debt expense. Economic and industry uncertainty may impair the ability of suppliers to deliver parts and negatively affect our ability to manage operations and deliver our products. These conditions may also lead to consolidation or strategic alliances among other equipment manufacturers, which could adversely affect our ability to compete effectively. Uncertain economic and industry conditions and supply chain challenges make it more difficult to accurately forecast operating results, make business decisions, and identify and prioritize the risks that may affect our businesses, sources and uses of cash, financial condition and results of operations. If we do not appropriately manage our business operations in response to changing economic and industry conditions, it could have a material and adverse impact on our business performance and financial condition. We may be required to implement additional cost reduction efforts, including restructuring activities, which may adversely impact our ability to capitalize on opportunities. Even during periods of economic uncertainty or lower demand, we must continue to invest in research and development and maintain a global business infrastructure to compete effectively and support our customers, which can have a negative impact on our operating results. We maintain an investment portfolio that is subject to general credit, liquidity, market and interest rate risks. The risks to our investment portfolio may be exacerbated if financial market conditions deteriorate due to rising inflation, rising interest rates, bank failures or economic recession and, as a result, the value and liquidity of the investment portfolio and returns on pension assets, could be negatively impacted and lead to impairment charges. We also maintain cash balances in various bank 16 16 16 16 16 16 Table of Contents Table of Contents Table of Contents accounts globally in order to fund normal operations. If any of these financial institutions become insolvent, it could limit our ability to access cash in the affected accounts, which could affect our ability to manage our operations.", "prior_body": "Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, national debt, fiscal or monetary concerns, rising inflation and interest rates in various regions, and economic recession, could materially adversely impact Applied’s operating results. Markets for semiconductors and displays depend largely on business and consumer spending and demand for electronic products. Uncertain or adverse economic and business conditions could result in decreases in consumer spending and demand. Such decreases in spending and demand have in the past caused, and may in the future cause, our customers to push out, cancel or refrain from purchasing our equipment or services, which could negatively impact demand for our products and services, reduce our backlog, increase our inventory, and materially adversely impact our operating results. Similarly, changes that result in sudden increases in consumer demand for electronic products have resulted in, and may continue to result in, a shortage of parts and materials needed to manufacture our products. Such shortages, as well as shipment delays due to transportation capacity and interruptions, have adversely impacted, and may continue to adversely impact, our suppliers’ ability to meet our demand requirements. Accelerated digital transformation may further increase consumer demand and exacerbate such shortages and also strain our manufacturing capacity, which may adversely impact our ability to meet customer demands and thus have an adverse impact on our revenues, results of operations and financial condition. Uncertain or adverse economic and market conditions, difficulties in obtaining capital, increased costs or reduced profitability may also cause some customers to scale back operations, exit businesses, merge with other manufacturers, or file for bankruptcy protection and potentially cease operations, which can also result in lower sales, additional inventory or bad debt expense for Applied. Economic and industry uncertainty may similarly affect suppliers, which could impair their ability to deliver parts and negatively affect Applied’s ability to manage operations and deliver its products. These conditions may also lead to consolidation or strategic alliances among other equipment manufacturers, which could adversely affect Applied’s ability to compete effectively. 16 16 16 16 16 16 Table of Contents Table of Contents Table of Contents Uncertain economic and industry conditions and continued supply chain disruptions also make it more challenging for Applied to forecast its operating results, make business decisions, and identify and prioritize the risks that may affect its businesses, sources and uses of cash, financial condition and results of operations. If Applied does not appropriately manage its business operations in response to changing economic and industry conditions, it could have a significant negative impact on its business performance and financial condition. Applied may be required to implement additional cost reduction efforts, including restructuring activities, which may adversely affect Applied’s ability to capitalize on opportunities. Even during periods of economic uncertainty or lower revenues, Applied must continue to invest in research and development and maintain a global business infrastructure to compete effectively and support its customers, which can have a negative impact on its operating margins and earnings. Applied maintains an investment portfolio that is subject to general credit, liquidity, market and interest rate risks. The risks to Applied’s investment portfolio may be exacerbated if financial market conditions deteriorate due to rising inflation, rising interest rates, economic recession or impacts of the COVID-19 pandemic and, as a result, the value and liquidity of the investment portfolio, as well as returns on pension assets, could be negatively impacted and lead to impairment charges. Applied also maintains cash balances in various bank accounts globally in order to fund normal operations. If any of these financial institutions becomes insolvent, it could limit Applied’s ability to access cash in the affected accounts, which could affect its ability to manage its operations." }, { "status": "MODIFIED", "current_title": "General and Administrative", "prior_title": "General and Administrative", "similarity_score": 0.842, "confidence": "high", "key_changes": [ "Reworded sentence: \"General and administrative (G&A) expenses for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)General and administrative$852 $735 $620 $117 $115 G&A expenses in fiscal 2023 increased compared to fiscal 2022 primarily due to additional headcount, higher professional fees and depreciation expense.\"" ], "current_body": "General and administrative (G&A) expenses for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)General and administrative$852 $735 $620 $117 $115 G&A expenses in fiscal 2023 increased compared to fiscal 2022 primarily due to additional headcount, higher professional fees and depreciation expense. G&A expenses in fiscal 2022 increased compared to fiscal 2021 primarily due to additional headcount and higher travel related expenses. G&A expenses during fiscal 2023, 2022 and 2021 included $76 million, $66 million and $56 million, respectively, of share-based compensation expense.", "prior_body": "General and administrative (G&A) expenses for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions)General and administrative$735 $620 $567 $115 $53 G&A expenses in fiscal 2022 increased compared to fiscal 2021 primarily due to additional headcount and higher travel related expenses. G&A expenses in fiscal 2021 increased compared to fiscal 2020 primarily due to additional headcount and higher variable compensation. G&A expenses during fiscal 2022, 2021 and 2020 included $66 million, $56 million and $52 million, respectively, of share-based compensation expense." }, { "status": "MODIFIED", "current_title": "We are exposed to the risks of operating a global business.", "prior_title": "Applied is exposed to the risks of operating a global business.", "similarity_score": 0.835, "confidence": "high", "key_changes": [ "Reworded sentence: \"We have product development, engineering, manufacturing, sales and other operations in many countries, and some of our business activities are concentrated in certain geographic areas.\"" ], "current_body": "We have product development, engineering, manufacturing, sales and other operations in many countries, and some of our business activities are concentrated in certain geographic areas. In fiscal 2023, approximately 85% of our net sales were to customers in regions outside the United States. As a result of the global nature of our operations, our business performance and results of operations may be adversely affected by a number of factors, including: •uncertain global economic, political and business conditions and demand; •global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including new and changing export regulations and their impact on our ability to export products and provide services to customers; •positions taken by governmental agencies regarding possible national, commercial or security issues posed by the development, sale or export of certain raw materials, products and technologies; •political instability, natural disasters, regional or global health epidemics, social unrest, terrorism, acts of war or other geopolitical turmoil, or cybersecurity incidents in locations where we have operations, suppliers or sales, or that may influence the value chain of the industries we serve; •political and social attitudes, laws, rules, regulations and policies within countries, including in China, the United States, and countries in Europe and Asia, that favor domestic companies over non-domestic companies, including efforts to promote the development and growth of local competitors and reduce dependence on foreign semiconductor equipment and manufacturing capabilities through policies and financial incentives; •efforts to influence us to conduct more or less of our operations and sourcing in a particular country; •different and changing local, regional, national or international laws and regulations, including contract, intellectual property, cybersecurity, data privacy, labor, tax, and import/export laws, and the interpretation and application of laws and regulations; •ineffective or inadequate legal protection of intellectual property rights in certain countries; •interruptions to our or our suppliers’ supply chain; •the availability of, and increases and volatility of, raw materials, commodity, energy and shipping costs; •delays or restrictions on personnel travel and in shipping materials or products; •geographically diverse operations and projects, and our ability to maintain appropriate business processes, procedures and internal controls, and comply with environmental, health and safety, anti-corruption and other regulatory requirements; •challenges in hiring and integrating workers in different countries, and in effectively managing a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues; •the ability to develop relationships with local customers, suppliers and governments; •fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against the Japanese yen, Israeli shekel, euro, Taiwanese dollar, Singapore dollar, Chinese yuan or Korean won; •the need to provide technical support in different locations around the world; •performance of geographically diverse third-party providers, including certain engineering, software development, manufacturing, information technology and other functions; •service interruptions from utilities, transportation, data hosting or telecommunications providers; •impacts of climate change on our operations and those of our customers and suppliers; •the increasing need for a mobile workforce and travel to different regions; and •uncertainties with respect to economic growth rates in various countries, including for the manufacture and sale of semiconductors and displays in the developing economies of certain countries. 17 17 17 17 17 17 Table of Contents Table of Contents Table of Contents", "prior_body": "Applied has product development, engineering, manufacturing, sales and other operations distributed throughout many countries, and some of its business activities are concentrated in certain geographic areas. Moreover, in fiscal 2022, approximately 88% of Applied’s net sales were to customers in regions outside the United States. As a result of the global nature of its operations, Applied’s business performance and results of operations may be adversely affected by a number of factors, including: •uncertain global economic and political business conditions and demands; •global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including new and changing export regulations for certain exports to China and any retaliatory measures; •positions taken by governmental agencies regarding possible national, commercial and/or security issues posed by the development, sale or export of certain products and technologies; •political instability, natural disasters, regional or global health epidemics, social unrest, terrorism, acts of war or other geopolitical turmoil, or cybersecurity incidents in locations where Applied has operations, suppliers or sales, or that may influence the value chain of the industries that Applied serves; •political and social attitudes, laws, rules, regulations and policies within countries that favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors; •customer- or government-supported efforts to influence Applied to conduct more or less of its operations and sourcing in a particular country; •variations among, and changes in, local, regional, national or international laws and regulations, including contract, intellectual property, cybersecurity, data privacy, labor, tax, and import/export laws, and the interpretation and application of such laws and regulations; •ineffective or inadequate legal protection of intellectual property rights in certain countries; •interruptions to Applied’s or its supplier’s supply chain; •the availability or increasing costs of raw material, commodity, energy and shipping or volatility in such costs; •delays or restrictions on personnel travel and in shipping materials or finished products between and within countries; •geographically diverse operations and projects, and our ability to maintain appropriate business processes, procedures and internal controls, and comply with environmental, health and safety, anti-corruption and other regulatory requirements; 17 17 17 17 17 17 Table of Contents Table of Contents Table of Contents •failure to effectively manage a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues; •variations in the ability to develop relationships with local customers, suppliers and governments; •fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against the Japanese yen, Israeli shekel, euro, Taiwanese dollar, Singapore dollar, Chinese yuan or Korean won; •the need to provide sufficient levels of technical support in different locations around the world; •performance of third-party providers of outsourced functions, including certain engineering, software development, manufacturing, information technology and other activities; •service interruptions from utilities, transportation, data hosting or telecommunications providers, or other events beyond our control; •impacts of climate change on the operations of Applied, its customers and suppliers; •challenges in hiring and integration of an increasing number of workers in new countries; •the increasing need for a mobile workforce to work in or travel to different regions; and •uncertainties with respect to economic growth rates in various countries, including for the manufacture and sale of semiconductors and displays in the developing economies of certain countries." }, { "status": "MODIFIED", "current_title": "Supply chain disruptions, manufacturing interruptions or delays, or the failure to accurately forecast customer demand, could affect our ability to meet customer demand, lead to higher costs, or result in excess or obsolete inventory.", "prior_title": "Supply chain disruptions, manufacturing interruptions or delays, or the failure to accurately forecast customer demand, could affect Applied’s ability to meet customer demand, lead to higher costs, or result in excess or obsolete inventory.", "similarity_score": 0.83, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our business depends on our timely supply of equipment, services and related products to meet the changing requirements of our customers, which depends in part on the timely delivery of parts, materials and services from suppliers and contract manufacturers.\"", "Reworded sentence: \"Cybersecurity incidents affecting our suppliers could impact our supply chain and may also cause difficulties and delays in our ability to obtain parts, materials and services needed to manufacture our products and provide services, and may adversely impact our manufacturing operations, our ability to meet customer demand, and our operating results.\"" ], "current_body": "Our business depends on our timely supply of equipment, services and related products to meet the changing requirements of our customers, which depends in part on the timely delivery of parts, materials and services from suppliers and contract manufacturers. Increases in demand for our products and worldwide demand for electronic products can impact our suppliers’ ability to meet our demand requirements, and have resulted in, and may continue to result in, a shortage of parts, materials and services needed to manufacture our products. Such shortages, as well as delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may continue to adversely impact, our manufacturing operations and our ability to meet customer demand. Volatility of demand for manufacturing equipment can also increase our and our suppliers’ capital, technical, operational and other risks, and may cause some suppliers to exit businesses, or scale back or cease operations, which could impact our ability to meet customer demand. Ongoing supply chain constraints may continue to increase costs of logistics and parts for our products and may cause us to pass on increased costs to our customers, which may lead to reduced demand for our products and materially and adversely impact our operating results. Supply chain disruptions have caused and may continue to cause delays in our equipment production and delivery schedules, which can lead to our business performance becoming significantly dependent on quarter-end production and delivery schedules, and could have an adverse impact on our operating and financial results. Cybersecurity incidents affecting our suppliers could impact our supply chain and may also cause difficulties and delays in our ability to obtain parts, materials and services needed to manufacture our products and provide services, and may adversely impact our manufacturing operations, our ability to meet customer demand, and our operating results. Failure to timely recover from such delays could materially and adversely affect our business, financial condition and results of operations, and may also cause our business and financial outlook to be inaccurate. We may experience supply chain disruptions, significant interruptions of our manufacturing operations, delays in our ability to deliver or install products or services, increased costs, customer order cancellations or reduced demand for our products as a result of: •global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, international trade disputes, and new and changing regulations for exports of certain technologies to China, where a significant portion of our supply chain is located, and any retaliatory measures, that adversely impact us or our direct or sub-tier suppliers; •the failure or inability to accurately forecast demand and obtain quality parts on a cost-effective basis; •volatility in the availability and cost of parts, commodities, energy and shipping related to our products, including increased costs due to rising inflation or interest rates or other market conditions; •difficulties or delays in obtaining required import or export licenses and approvals; •shipment delays due to transportation interruptions or capacity constraints; •a worldwide shortage of semiconductor components as a result of sharp increases in demand for semiconductor products in general; •limited availability of feasible alternatives to per- and polyfluoroalkyl substances, which are found in parts, components, process chemicals and other materials supplied to us or used in the operations of our products; 19 19 19 19 19 19 Table of Contents Table of Contents Table of Contents •cybersecurity incidents or information technology or infrastructure failures, including those of a third-party supplier or service provider; and •natural disasters, the impacts of climate change, or other events beyond our control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or extreme weather conditions, fires, regional economic downturns, regional or global health epidemics, geopolitical turmoil, increased trade restrictions between the U.S. and China and other countries, social unrest, political instability, terrorism, or acts of war) in locations where we or our customers or suppliers have manufacturing, research, engineering or other operations. If a supplier fails to meet our requirements concerning quality, cost, intellectual property protection, socially-responsible business practices, or other performance factors, we may transfer our business to alternative sources. Transferring business to alternative suppliers could result in manufacturing delays, additional costs or other difficulties, and may impair our ability to protect, enforce and extract the full value of our intellectual property rights, and the intellectual property rights of our customers and other third parties. These outcomes could have a material and adverse impact on our business and competitive position and subject us to legal proceedings and claims. If we are unable to meet our customers’ demand for a prolonged period due to our inability to obtain certain parts or components from suppliers on a timely basis or at all, our business, results of operations and customer relationships could be adversely impacted. If we need to rapidly increase our business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may strain our manufacturing and supply chain operations, and negatively impact our working capital. If we are unable to accurately forecast demand for our products, we may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. If we purchase or commit to purchase inventory in anticipation of customer demand that does not materialize, or such inventory is rendered obsolete by the rapid pace of technological change, or if customers reduce, delay or cancel orders, we may incur excess or obsolete inventory charges.", "prior_body": "Applied’s business depends on its timely supply of equipment, services and related products to meet the changing technical and volume requirements of its customers, which depends in part on the timely delivery of parts, materials and services, including components and subassemblies, from suppliers and contract manufacturers. Significant and sudden increases in demand for Applied’s products, as well as worldwide demand for electronic products, have resulted in, and may continue to result in, a shortage of parts, materials and services needed to manufacture Applied’s products. Such shortages, as well as delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may continue to adversely impact, our suppliers’ ability to meet our demand requirements. Difficulties in obtaining sufficient and timely supply of parts, materials or services, and delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may continue to adversely impact, Applied’s manufacturing operations and its ability to meet customer demand. Moreover, lockdowns that may from time to time be imposed in various geographic regions in response to periodic spikes in COVID-19 cases and related travel and logistics restrictions may result in additional supply chain and transportation disruptions, production delays, capacity limitations and cost increases. Our operating results may be adversely impacted if we are unable to obtain parts, materials or services needed to manufacture Applied’s products, or if we are unable to do so on a timely manner or on favorable terms. Ongoing supply chain constraints may continue to increase costs of logistics and parts for our products and may cause us to pass on increased costs to our customers. Such increase in costs may lead to reduced demand for our products and materially adversely impact our operating results. Some key parts are subject to long lead-times or available only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers located in countries other than the countries where Applied conducts its manufacturing. Supply chain disruptions have caused and may continue to cause delays in our equipment production and delivery schedules, which can lead to our business performance becoming significantly dependent on quarter-end production and delivery schedules, and could have an adverse impact on our operating and financial results. Volatility of demand for manufacturing equipment can also increase capital, technical, operational and other risks for Applied and for companies throughout its supply chain, and may cause some suppliers to exit businesses, or scale back or cease operations, which could impact our ability to meet customer demand. Applied may also experience significant interruptions of its manufacturing operations, delays in its ability to deliver or install products or services, increased costs, customer order cancellations or reduced demand for its products as a result of: •global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including new and changing export regulations for certain exports to China, where a significant portion of Applied’s supply chain is located, and any retaliatory measures, that adversely impact Applied or its direct or sub-tier suppliers; •the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a cost-effective basis; •volatility in the availability and cost of parts, commodities, energy and shipping related to our products, including increased costs due to rising inflation or interest rates or other market conditions; •difficulties or delays in obtaining required import or export licenses and approvals; •shipment delays due to transportation interruptions or capacity constraints; •a worldwide shortage of semiconductor components as a result of sharp increases in demand for semiconductor products in general; •information technology or infrastructure failures, including those of a third party supplier or service provider; and •natural disasters, the impacts of climate change, or other events beyond Applied’s control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or extreme weather conditions, fires, regional economic downturns, regional or global health epidemics, including the COVID-19 pandemic, geopolitical turmoil, increased trade restrictions between the U.S. and China and other countries, social unrest, political instability, terrorism, or acts of war) in locations where it or its customers or suppliers have manufacturing, research, engineering or other operations. If a supplier fails to meet Applied’s requirements concerning quality, cost, intellectual property protection, socially-responsible business practices, or other performance factors, Applied may transfer its business to alternative sources. Transferring business to alternative suppliers could result in manufacturing delays, additional costs or other difficulties, and may impair Applied’s ability to protect, enforce and extract the full value of its intellectual property rights, as well as the intellectual property rights of its customers’ and other third parties. These outcomes could have an adverse impact on its business and competitive position and subject Applied to legal proceedings and claims. In addition, if Applied is unable to meet its customers’ demand for a prolonged period due to its inability to obtain certain parts or components from suppliers on a timely basis or at all, its business, results of operations and customer relationships could be adversely impacted. 20 20 20 20 20 20 Table of Contents Table of Contents Table of Contents In addition, if Applied needs to rapidly increase its business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may strain Applied’s manufacturing and supply chain operations, and negatively impact Applied’s working capital. Moreover, if actual demand for Applied’s products is different than expected, Applied may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. If Applied purchases or commits to purchase inventory in anticipation of customer demand that does not materialize, or such inventory is rendered obsolete by the rapid pace of technological change, or if customers reduce, delay or cancel orders, Applied may incur excess or obsolete inventory charges." }, { "status": "MODIFIED", "current_title": "Research, Development and Engineering", "prior_title": "Research, Development and Engineering", "similarity_score": 0.82, "confidence": "high", "key_changes": [ "Reworded sentence: \"Research, Development and Engineering (RD&E) expenses for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)Research, development and engineering$3,102 $2,771 $2,485 $331 $286 Our future operating results depend to a considerable extent on our ability to maintain a competitive advantage in the equipment and service products we provide.\"", "Reworded sentence: \"Most of our existing products resulted from internal development activities and innovations involving new technologies, materials and processes.\"", "Reworded sentence: \"In Display and Adjacent Markets, RD&E investments were focused on expanding our market opportunity with new display technologies.\"" ], "current_body": "Research, Development and Engineering (RD&E) expenses for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)Research, development and engineering$3,102 $2,771 $2,485 $331 $286 Our future operating results depend to a considerable extent on our ability to maintain a competitive advantage in the equipment and service products we provide. Development cycles range from 12 to 36 months depending on whether the product is an enhancement of an existing product, which typically has a shorter development cycle, or a new product, which typically has a longer development cycle. Most of our existing products resulted from internal development activities and innovations involving new technologies, materials and processes. In certain instances, we acquire technologies, either in existing or new product areas, to complement our existing technology capabilities and to reduce time to market. We believe that it is critical to continue to make substantial investments in RD&E to assure the availability of innovative technology that meets the current and projected requirements of our customers’ most advanced designs. We have maintained and intend to continue our commitment to investing in RD&E in order to continue to offer new products and technologies. We continued our RD&E investments in Semiconductor Systems and Display and Adjacent Markets on the development of new unit process systems and integrated materials solutions. Areas of investment include etch, deposition, metrology and inspection, patterning, packaging and other technologies to improve chip performance, power, area, cost and time-to-market. In Display and Adjacent Markets, RD&E investments were focused on expanding our market opportunity with new display technologies. The increases in RD&E expenses during fiscal 2023 compared to fiscal 2022 were primarily due to additional headcount, higher depreciation expense and consumable and equipment costs associated with ongoing product development. In addition, the increases in RD&E expenses in fiscal 2023 compared to fiscal 2022 also included a $30 million impairment of fixed assets. The increases in RD&E expenses during fiscal 2022 compared to fiscal 2021 were primarily due to additional headcount, higher consumable and equipment costs associated with ongoing product development and share-based compensation expense. These increases reflect our ongoing investments in product development initiatives, consistent with our growth strategy. We continued to prioritize existing RD&E investments in technical capabilities and critical research and development programs in current and new markets, with a focus on semiconductor technologies. 37 37 37 37 37 37 Table of Contents Table of Contents Table of Contents RD&E expenses during fiscal 2023, 2022 and 2021 included $179 million, $151 million and $129 million, respectively, of share-based compensation expense.", "prior_body": "Research, Development and Engineering (RD&E) expenses for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions)Research, development and engineering$2,771 $2,485 $2,234 $286 $251 Applied’s future operating results depend to a considerable extent on its ability to maintain a competitive advantage in the equipment and service products it provides. Development cycles range from 12 to 36 months depending on whether the product is an enhancement of an existing product, which typically has a shorter development cycle, or a new product, which typically has a longer development cycle. Most of Applied’s existing products resulted from internal development activities and innovations involving new technologies, materials and processes. In certain instances, Applied acquires technologies, either in existing or new product areas, to complement its existing technology capabilities and to reduce time to market. Management believes that it is critical to continue to make substantial investments in RD&E to assure the availability of innovative technology that meets the current and projected requirements of its customers’ most advanced designs. Applied has maintained and intends to continue its commitment to investing in RD&E in order to continue to offer new products and technologies. Applied continued its RD&E investments across Semiconductor Systems and Display and Adjacent Markets on the development of new unit process systems and integrated materials solutions. Areas of investment include etch, deposition, metrology and inspection, patterning, packaging and other technologies to improve chip performance, power, area, cost and time-to-market. In Display and Adjacent Markets, RD&E investments were focused on expanding the Company’s market opportunity with new display technologies. 38 38 38 38 38 38 Table of Contents Table of Contents Table of Contents The increases in RD&E expenses during fiscal 2022 compared to fiscal 2021 were primarily due to additional headcount, higher consumable and equipment costs associated with ongoing product development and share-based compensation expense. The increases in RD&E expenses during fiscal 2021 compared to fiscal 2020 were primarily due to additional headcount and higher expense associated with share-based compensation and variable compensation. These increases reflect Applied’s ongoing investments in product development initiatives, consistent with the Company’s growth strategy. Applied continued to prioritize existing RD&E investments in technical capabilities and critical research and development programs in current and new markets, with a focus on semiconductor technologies. RD&E expenses during fiscal 2022, 2021 and 2020 included $151 million, $129 million and $116 million, respectively, of share-based compensation expense." }, { "status": "MODIFIED", "current_title": "Market Information", "prior_title": "Market Information", "similarity_score": 0.819, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our common stock is traded on the NASDAQ Global Select Market under the symbol AMAT.\"" ], "current_body": "Our common stock is traded on the NASDAQ Global Select Market under the symbol AMAT. As of December 8, 2023, there were 2,755 registered holders of our common stock. Information regarding quarterly cash dividends declared on our common stock during fiscal 2023, 2022 and 2021 may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources”.", "prior_body": "Applied’s common stock is traded on the NASDAQ Global Select Market under the symbol AMAT. As of December 9, 2022, there were 2,825 registered holders of Applied common stock. Information regarding quarterly cash dividends declared on Applied Materials’ common stock during fiscal 2022, 2021 and 2020 may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources”." }, { "status": "MODIFIED", "current_title": "The failure to successfully implement enterprise resource planning and other information systems changes could adversely impact our business and operating results.", "prior_title": "The failure to successfully implement enterprise resource planning and other information systems changes could adversely impact Applied’s business and results of operations.", "similarity_score": 0.815, "confidence": "high", "key_changes": [ "Reworded sentence: \"We periodically implement new or enhanced enterprise resource planning and related information systems in order to better manage our business operations, align our global organizations and enable future growth.\"" ], "current_body": "We periodically implement new or enhanced enterprise resource planning and related information systems in order to better manage our business operations, align our global organizations and enable future growth. Implementation of new business processes and information systems requires the commitment of significant personnel, training and financial resources, and entails risks to our business operations. If we do not successfully implement enterprise resource planning and related information systems improvements, or if there are delays or difficulties in implementing these systems, we may not realize anticipated productivity improvements or cost efficiencies, and may experience interruptions in service and operational difficulties, which could result in quality issues, reputational harm, lost market and revenue opportunities, and otherwise adversely affect our business, financial condition and results of operations. 26 26 26 26 26 26 Table of Contents Table of Contents Table of Contents", "prior_body": "Applied periodically implements new or enhanced enterprise resource planning and related information systems in order to better manage its business operations, align its global organizations and enable future growth. Implementation of new business processes and information systems requires the commitment of significant personnel, training and financial resources, and entails risks to Applied’s business operations. If Applied does not successfully implement enterprise resource planning and related information systems improvements, or if there are delays or difficulties in implementing these systems, Applied may not realize anticipated productivity improvements or cost efficiencies, and may experience interruptions in service and operational difficulties, such as its ability to track orders, timely manufacture and ship products, project inventory requirements, effectively manage its supply chain and allocate human resources, aggregate financial data and report operating results, and otherwise effectively manage its business, all of which could result in quality issues, reputational harm, lost market and revenue opportunities, and otherwise adversely affect Applied’s business, financial condition and results of operations." }, { "status": "MODIFIED", "current_title": "The industries in which we operate are highly competitive and subject to rapid technological and market changes.", "prior_title": "The industries in which Applied operates are highly competitive and subject to rapid technological and market changes.", "similarity_score": 0.806, "confidence": "high", "key_changes": [ "Reworded sentence: \"We operate in a highly competitive environment in which innovation is critical, and our future success depends on many factors, including the development of new technologies and effective commercialization and customer acceptance of our equipment, services and related products, and our ability to increase our position in our current markets, expand into adjacent and new markets, and optimize operational performance.\"" ], "current_body": "We operate in a highly competitive environment in which innovation is critical, and our future success depends on many factors, including the development of new technologies and effective commercialization and customer acceptance of our equipment, services and related products, and our ability to increase our position in our current markets, expand into adjacent and new markets, and optimize operational performance. The development, introduction and support of products in a geographically diverse and competitive environment requires collaboration with customers and other industry participants, which has grown more complex and expensive over time. New or improved products may entail higher costs, longer development cycles, lower profits and may have unforeseen product design or manufacturing defects. To compete successfully, we must: •identify and address technology inflections, market changes, competitor innovations, new applications, customer requirements and end-use demand in a timely and effective manner; •develop new products and disruptive technologies, improve and develop new applications for existing products, and adapt products for use by customers in different applications and markets with varying technical requirements; •complete major infrastructure projects on schedule and on budget, and realize the anticipated benefits of those projects; •differentiate our products from those of competitors, meet customers’ performance specifications (including those related to energy consumption and environmental impact more broadly), appropriately price products, and achieve market acceptance; •effectively and timely implement artificial intelligence strategies for our product and service offerings, which may be costly or ineffective, introduce errors, cause loss of intellectual property, and raise complex regulatory compliance, intellectual property and other issues; •maintain operating flexibility to enable responses to changing markets, applications and customer requirements; •enhance our worldwide operations across our businesses to reduce cycle time, enable continuous quality improvement, reduce costs, and enhance design for manufacturability and serviceability; •focus on product development and sales and marketing strategies that address customers’ high value problems and strengthen customer relationships; •effectively allocate resources between our existing products and markets, the development of new products, and expanding into new and adjacent markets; •improve the productivity of capital invested in R&D activities; •accurately forecast demand, work with suppliers and meet production schedules for our products; •improve our manufacturing processes and achieve cost efficiencies across product offerings; 22 22 22 22 22 22 Table of Contents Table of Contents Table of Contents •adapt to changes in value offered by companies in different parts of the supply chain; •qualify products for evaluation and volume manufacturing with our customers; and •implement changes in our design engineering methodology to reduce material costs and cycle time, increase commonality of platforms and types of parts used in different systems, and improve product life cycle management. If we do not successfully anticipate technology inflections, develop and commercialize new products and technologies, and respond to changes in customer requirements and market trends, our business performance and operating results may be materially and adversely impacted.", "prior_body": "Applied operates in a highly competitive environment in which innovation is critical, and its future success depends on many factors, including the development of new technologies and effective commercialization and customer acceptance of its equipment, services and related products, and its ability to increase its position in its current markets, expand into adjacent and new markets, and optimize operational performance. The development, introduction and support of a broadening set of products in a geographically diverse and competitive environment, and that may require greater collaboration with customers and other industry participants, have grown more complex and expensive over time. Furthermore, new or improved products may entail higher costs, longer development cycles, lower profits and may have unforeseen product design or manufacturing defects. To compete successfully, Applied must: •identify and address technology inflections, market changes, competitor innovations, new applications, customer requirements and end-use demand in a timely and effective manner; •develop new products and disruptive technologies, improve and develop new applications for existing products, and adapt products for use by customers in different applications and markets with varying technical requirements; •differentiate its products from those of competitors, meet customers’ performance specifications (including those related to energy consumption and environmental impact more broadly), appropriately price products, and achieve market acceptance; 23 23 23 23 23 23 Table of Contents Table of Contents Table of Contents •maintain operating flexibility to enable responses to changing markets, applications, customers and customer requirements; •enhance its worldwide operations across its businesses to reduce cycle time, enable continuous quality improvement, reduce costs, and enhance design for manufacturability and serviceability; •focus on product development and sales and marketing strategies that address customers’ high value problems and strengthen customer relationships; •effectively allocate resources between its existing products and markets, the development of new products, and expanding into new and adjacent markets; •improve the productivity of capital invested in R&D activities; •accurately forecast demand, work with suppliers and meet production schedules for its products; •improve its manufacturing processes and achieve cost efficiencies across product offerings; •adapt to changes in value offered by companies in different parts of the supply chain; •qualify products for evaluation and volume manufacturing with its customers; and •implement changes in its design engineering methodology to reduce material costs and cycle time, increase commonality of platforms and types of parts used in different systems, and improve product life cycle management. If Applied does not successfully anticipate technology inflections, develop and commercialize new products and technologies, and respond to changes in customer requirements and market trends, its business performance and results of operations may be adversely impacted." }, { "status": "MODIFIED", "current_title": "We are subject to risks associated with environmental, health and safety regulations.", "prior_title": "Applied is subject to risks associated with environmental, health and safety regulations.", "similarity_score": 0.798, "confidence": "high", "key_changes": [ "Reworded sentence: \"We are subject to environmental, health and safety regulations in connection with our global business operations, including but not limited to: regulations related to the design, manufacture, sale, shipping and use of our products; use, handling, discharge, recycling, transportation and disposal of hazardous materials used in our products or in producing our products; the operation of our facilities; and the use of our real property, including in connection with construction of our infrastructure projects.\"", "Reworded sentence: \"We also own and lease facilities throughout the world for use as offices, plants and warehouses, and research and development centers, primarily in the United States, Taiwan, China, Israel and Singapore.\"" ], "current_body": "We are subject to environmental, health and safety regulations in connection with our global business operations, including but not limited to: regulations related to the design, manufacture, sale, shipping and use of our products; use, handling, discharge, recycling, transportation and disposal of hazardous materials used in our products or in producing our products; the operation of our facilities; and the use of our real property, including in connection with construction of our infrastructure projects. The failure or inability to comply with existing or future environmental, health and safety regulations could result in: significant remediation or other legal liabilities; the imposition of penalties and fines; restrictions on the development, manufacture, sale, shipping or use of certain of our products; limitations on the operation of our facilities or ability to use our real property; and a decrease in the value of our real property. We could be required to alter our product design, manufacturing, and operations, and incur substantial expense in order to comply with environmental, health and safety regulations. Any failure to comply with these regulations could subject us to significant costs and liabilities that could materially and adversely affect our business, financial condition and results of operations. 28 28 28 28 28 28 Table of Contents Table of Contents Table of Contents Item 1B: Unresolved Staff Comments None. 29 29 29 29 29 29 Table of Contents Table of Contents Table of Contents Item 2: Properties Information concerning our properties is set forth below: (Square feet in thousands)United StatesOther CountriesTotalOwned5,6272,9318,558Leased2,7331,9094,642Total8,3604,84013,200 Because of the interrelation of our operations, properties within a country may be shared by the segments operating within that country. Our headquarters offices are in Santa Clara, California. Products in Semiconductor Systems are manufactured primarily in Singapore; Austin, Texas; Gloucester, Massachusetts; and Rehovot, Israel. Remanufactured equipment products in the Applied Global Services segment are produced primarily in Austin, Texas. Products in the Display and Adjacent Markets segment are manufactured primarily in Tainan, Taiwan. We also own and lease facilities throughout the world for use as offices, plants and warehouses, and research and development centers, primarily in the United States, Taiwan, China, Israel and Singapore. We also own a total of approximately 279 acres of buildable land in the United States, Israel, Italy and India that could accommodate additional building space. We consider the properties that we own or lease as adequate to meet our current and future requirements. We regularly assess the size, capability and location of our global infrastructure and periodically make adjustments based on these assessments. 30 30 30 30 30 30 Table of Contents Table of Contents Table of Contents Item 3: Legal Proceedings The information set forth under “Legal Matters” in Note 15 of Notes to Consolidated Financial Statements is incorporated herein by reference. See also “Risk Factors – Risks Related to Legal, Compliance, and Other Risks – We are exposed to risks related to legal proceedings, claims and investigations.” Item 4: Mine Safety Disclosures None. 31 31 31 31 31 31 Table of Contents Table of Contents Table of Contents PART II Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities", "prior_body": "Applied is subject to environmental, health and safety regulations in connection with its global business operations, including but not limited to: regulations related to the development, manufacture, sale, shipping and use of its products; handling, discharge, recycling and disposal of hazardous materials used in its products or in producing its products; the operation of its facilities; and the use of its real property. The failure or inability to comply with existing or future environmental, health and safety regulations could result in: significant remediation or other legal liabilities; the imposition of penalties and fines; restrictions on the development, manufacture, sale, shipping or use of certain of its products; limitations on the operation of its facilities or ability to use its real property; and a decrease in the value of its real property. Applied could also be required to alter its manufacturing, operations and product design, and incur substantial expense in order to comply with environmental, health and safety regulations. Any failure to comply with these regulations could subject Applied to significant costs and liabilities that could adversely affect Applied’s business, financial condition and results of operations. 29 29 29 29 29 29 Table of Contents Table of Contents Table of Contents Item 1B: Unresolved Staff Comments None. 30 30 30 30 30 30 Table of Contents Table of Contents Table of Contents Item 2: Properties Information concerning Applied’s properties is set forth below: (Square feet in thousands)United StatesOther CountriesTotalOwned5,5002,6528,152Leased2,4661,8014,267Total7,9664,45312,419 Because of the interrelation of Applied’s operations, properties within a country may be shared by the segments operating within that country. The Company’s headquarters offices are in Santa Clara, California. Products in Semiconductor Systems are manufactured primarily in Singapore; Austin, Texas; Gloucester, Massachusetts; and Rehovot, Israel. Remanufactured equipment products in the Applied Global Services segment are produced primarily in Austin, Texas. Products in the Display and Adjacent Markets segment are manufactured primarily in Tainan, Taiwan. Applied also owns and leases facilities throughout the world for use as offices, plants and warehouses, and research and development centers, primarily in the United States, Taiwan, China, Israel and Singapore. Applied also owns a total of approximately 279 acres of buildable land in the United States, Israel, Italy and India that could accommodate additional building space. Applied considers the properties that it owns or leases as adequate to meet its current and future requirements. Applied regularly assesses the size, capability and location of its global infrastructure and periodically makes adjustments based on these assessments. 31 31 31 31 31 31 Table of Contents Table of Contents Table of Contents Item 3: Legal Proceedings The information set forth under “Legal Matters” in Note 16 of Notes to Consolidated Financial Statements is incorporated herein by reference. See also “Risk Factors – Risks Related to Legal, Compliance, and Other Risks – Applied is exposed to various risks related to legal proceedings, claims and investigations.” Item 4: Mine Safety Disclosures None. 32 32 32 32 32 32 Table of Contents Table of Contents Table of Contents PART II Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" }, { "status": "MODIFIED", "current_title": "We are exposed to risks associated with a highly concentrated customer base.", "prior_title": "Applied is exposed to risks associated with a highly concentrated customer base.", "similarity_score": 0.791, "confidence": "high", "key_changes": [ "Reworded sentence: \"A relatively limited number of customers account for a substantial portion of our business.\"" ], "current_body": "A relatively limited number of customers account for a substantial portion of our business. Our customer base is geographically concentrated, particularly in China, Taiwan, Korea and Japan. As a result, the actions of even a single customer or export regulations that apply to customers in certain countries, such as those in China, have exposed and can further expose 18 18 18 18 18 18 Table of Contents Table of Contents Table of Contents our business and operating results to greater volatility. The geographic concentration of our customer base could shift over time as a result of government policy and incentives to develop regional semiconductor industries. The mix and type of customers, and sales to any single customer, including as a result of changes in government policy, have varied and may vary significantly from quarter to quarter and from year to year, and have had, and may continue to have, a significant impact on our operating results. Our products are configured to customer specifications, and changing, rescheduling or canceling orders may result in significant, non-recoverable costs. If customers do not place orders, or they substantially reduce, delay or cancel orders (including as a result of uncertain or adverse economic conditions, our inability to fulfill orders due to export regulations, shortage of parts, transportation capacity/interruptions or any other reason), we may not be able to replace the business, which may have a material and adverse impact on our results of operations and financial condition. The concentration of our customer base increases our risks related to the financial condition of our customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform its obligations could have a material and adverse effect on our results of operations and cash flow. To the extent our customers experience liquidity constraints, we may incur bad debt expense, which may have a significant impact on our results of operations. Major customers may seek pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us, which may have a negative impact on our business, cash flow, revenue and gross margins.", "prior_body": "Applied’s customer base is highly concentrated and has become increasingly so as a result of continued consolidation. Applied’s customer base is also geographically concentrated, particularly in China, Taiwan and Korea. A relatively limited number of manufacturers account for a substantial portion of Applied’s business. As a result, the actions of even a single customer or export regulations that apply to customers in certain countries, such as those in China, have exposed and can further expose Applied’s business and results of operations to greater volatility. The geographic concentration of Applied’s customer base could shift over time as a result of government policy and incentives to develop regional semiconductor industries. The mix and type of customers, and sales to any single customer, including as a result of changes in government policy, have varied and may vary significantly from quarter to quarter and from year to year, and have had, and may continue to have, a significant impact on Applied’s net sales, gross margins and net income. Applied’s products are configured to customer specifications, and changing, rescheduling or canceling orders may result in significant, non-recoverable costs. If customers do not place orders, or they substantially reduce, delay or cancel orders (including as a result of uncertain or adverse economic conditions, our inability to fulfill orders due to export regulations, shortage of parts, transportation capacity/interruptions or any other reason), Applied may not be able to replace the business, which may have a significant adverse impact on its results of operations and financial condition. The concentration of Applied’s customer base increases its risks related to the financial condition of its customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform its obligations could have a material adverse effect on Applied’s results of operations and cash flow. To the extent its customers experience liquidity constraints, Applied may incur bad debt expense, which may have a significant impact on its results of operations. Major customers may also seek pricing, payment, intellectual property-related, or other commercial terms that are less favorable to Applied, which may have a negative impact on Applied’s business, cash flow, revenue and gross margins. 19 19 19 19 19 19 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "We are exposed to cybersecurity threats and incidents.", "prior_title": "Applied is exposed to risks related to cybersecurity threats and incidents.", "similarity_score": 0.788, "confidence": "high", "key_changes": [ "Reworded sentence: \"In the conduct of our business, we collect, use, transmit, store, and otherwise process data using information technology systems, including systems owned and maintained by us or our third-party providers.\"" ], "current_body": "In the conduct of our business, we collect, use, transmit, store, and otherwise process data using information technology systems, including systems owned and maintained by us or our third-party providers. These data include confidential information and intellectual property belonging to us or our customers or other business partners, and personal information of individuals. All information technology systems are subject to disruptions, outages, failures, and security breaches or incidents. We and our third-party providers have experienced, and expect to continue to experience, cybersecurity incidents. Cybersecurity incidents may range from employee or contractor error or misuse or unauthorized use of information technology systems or confidential information, to individual attempts to gain unauthorized access to these information systems, to sophisticated cybersecurity attacks, known as advanced persistent threats, any of which may target us directly or indirectly through our third-party providers and global supply chain. Cybersecurity attacks are increasing in number and the attackers are increasingly organized and well-financed, or at times supported by state actors. Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine or increasing tension with China, may create a heightened risk of cybersecurity attacks. To the extent artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and craft increasingly sophisticated cybersecurity attacks. Vulnerabilities may be introduced from the use of artificial intelligence by us, our customers, suppliers and other business partners and third-party providers. Although we are not aware of any cybersecurity incidents impacting us directly that have been material to us to date, we continue to devote significant resources to network security, data encryption, and other measures to protect our systems and data from unauthorized access or misuse, and we may be required to expend greater resources in the future, especially in the face of evolving and increasingly sophisticated cybersecurity threats and laws, regulations, and other actual and asserted obligations to which we are or may become subject relating to privacy, data protection, and cybersecurity. We may be unable to anticipate, prevent, or remediate future attacks, vulnerabilities, breaches, or incidents, and in some instances we may be unaware of vulnerabilities or cybersecurity breaches or incidents or their magnitude and effects, particularly as attackers are becoming increasingly able to circumvent controls and remove forensic evidence. Cybersecurity incidents may result in business disruption; delay in the development and delivery of our products; disruption of our manufacturing processes, internal communications, interactions with customers and suppliers and processing and reporting financial results; the theft or misappropriation of intellectual property; corruption, loss of, or inability to access (e.g., through ransomware or denial of service) confidential information and critical data (i.e., that of our company and our third-party providers and customers); reputational damage; private claims, demands, and litigation or regulatory investigations, enforcement actions, or other proceedings related to contractual or regulatory privacy, cybersecurity, data protection, or other confidentiality obligations; diminution in the value of our investment in research, development and engineering; and increased costs associated with the implementation of cybersecurity measures to detect, deter, protect against, and recover from such incidents. Our efforts to comply with, and changes to, laws, regulations, and contractual and other actual and asserted obligations concerning privacy, cybersecurity, and data protection, including developing restrictions on cross-border data transfer and data localization, could result in significant expense, and any actual or alleged failure to comply could result in inquiries, investigations, and other proceedings against us by regulatory authorities or other third parties. Customers and third-party providers increasingly demand rigorous contractual provisions regarding privacy, cybersecurity, data protection, confidentiality, and intellectual property, which may increase our overall compliance burden.", "prior_body": "In the conduct of its business, Applied collects, uses, transmits and stores data on information technology systems, including systems owned and maintained by Applied or its third-party providers. These data include confidential information and intellectual property belonging to Applied or its customers or other business partners, as well as personal information of individuals. All information technology systems are subject to disruption, breach or failure. Applied and its third-party providers have experienced, and expect to continue to experience, cybersecurity incidents, some of which have been, and may continue to be, successful. These cybersecurity incidents may range from employee error or misuse or unauthorized use of information technology systems or confidential information, to individual attempts to gain unauthorized access to these information systems, to sophisticated cybersecurity attacks, known as advanced persistent threats, any of which may target the Company directly or indirectly through its third party providers and global supply chain. Globally, cybersecurity attacks are increasing in number and the attackers are increasingly organized and well-financed, or at times supported by state actors. In addition, geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine or increasing tension with China, may create a heightened risk of cybersecurity attacks. Although no such cybersecurity incident has been material to the Company to date, Applied continues to devote significant resources to network security, data encryption, and other measures to protect its systems and data from unauthorized access or misuse, and it may be required to expend greater resources in the future, especially in the face of continuously evolving and increasingly sophisticated cybersecurity threats and privacy and data protection laws. Applied may be unable to anticipate, prevent or remediate future attacks, and in some instances Applied may be unaware of a cybersecurity incident or its magnitude and effects, particularly as attackers are becoming increasingly able to circumvent controls and remove forensic evidence. Depending on their nature and scope, cybersecurity incidents may result in business disruption, such as delay in the development and delivery of Applied’s products or disruption of Applied’s manufacturing processes, internal communications, interactions with customers and suppliers and processing and reporting financial results; the theft or misappropriation of intellectual property; corruption, loss of, or inability to access (e.g., through ransomware or denial of service) confidential information and critical data (i.e., that of Applied and its third party providers and customers); reputational damage; litigation or regulatory enforcement action related to contractual or regulatory privacy, cybersecurity, data protection, or other confidentiality obligations; diminution in the value of Applied’s investment in research, development and engineering; and increased costs associated with the implementation of cybersecurity measures to detect, deter, protect against, and recover from such incidents. Compliance with, and changes to, laws and regulations concerning privacy, cybersecurity, and data protection, including developing restrictions on cross-border data transfer, could result in significant expense, and any failure to comply could result in proceedings against Applied by regulatory authorities or other third parties. Further, customers and third-party providers increasingly demand rigorous contractual provisions regarding privacy, cybersecurity, data protection, confidentiality, and intellectual property, which may also increase our overall compliance burden. 25 25 25 25 25 25 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "We are exposed to risks related to protection and enforcement of intellectual property rights.", "prior_title": "Applied is exposed to various risks related to protection and enforcement of intellectual property rights.", "similarity_score": 0.779, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our success depends on the protection of our technology using patents, trade secrets, copyrights and other intellectual property rights.\"" ], "current_body": "Our success depends on the protection of our technology using patents, trade secrets, copyrights and other intellectual property rights. Infringement or misappropriation of our intellectual property rights, such as the manufacture or sale of equipment or spare parts that use our technology without authorization, could result in uncompensated lost market and revenue opportunities. Monitoring and detecting any unauthorized access, use or disclosure of our intellectual property is difficult and costly and we cannot be certain that the protective measures we have implemented will completely prevent misuse. Our ability to enforce our intellectual property rights is subject to litigation risks and uncertainty as to the protection and enforceability of those rights in some countries. If we seek to enforce our intellectual property rights, we may be subject to claims that those rights are invalid or unenforceable, and others may seek counterclaims against us, which could have a negative impact on our business. If we are unable to enforce and protect intellectual property rights, or if they are circumvented, rendered obsolete, invalidated by the rapid pace of technological change, or stolen or misappropriated by employees or third parties, it could have an adverse impact on our competitive position and business. Changes in intellectual property laws or their interpretation may impact our ability to protect and assert our intellectual property rights, increase costs and uncertainties in the prosecution of 23 23 23 23 23 23 Table of Contents Table of Contents Table of Contents patent applications or related enforcement actions, and diminish the value and competitive advantage conferred by our intellectual property assets. From time to time third parties have asserted, and may continue to assert, intellectual property claims against us and our products. Claims that our products infringe the rights of others, whether or not meritorious, can be expensive and time-consuming to defend and resolve, and may divert the efforts and attention of management and personnel. The inability to obtain rights to use third-party intellectual property on commercially reasonable terms could have an adverse impact on our business. We may face claims based on the theft or unauthorized use or disclosure of third-party trade secrets and other confidential business information. Any such incidents and claims could severely harm our business and reputation, result in significant expenses, harm our competitive position, and prevent us from selling certain products, all of which could have a material and adverse impact on our business and results of operations.", "prior_body": "Applied’s success depends in significant part on the protection of its technology using patents, trade secrets, copyrights and other intellectual property rights. Infringement or misappropriation of Applied’s intellectual property rights, such as the unauthorized manufacture or sale of equipment or spare parts, could result in uncompensated lost market and revenue opportunities for Applied. Monitoring and detecting any unauthorized use of intellectual property is difficult and costly and Applied cannot be certain that the protective measures it has implemented will completely prevent misuse. Applied’s ability to enforce its intellectual property rights is subject to litigation risks, as well as uncertainty as to the protection and enforceability of those rights in some countries. If Applied seeks to enforce its intellectual property rights, it may be subject to claims that those rights are invalid or unenforceable, and others may seek counterclaims against Applied, which could have a negative impact on its business. If Applied is unable to enforce and protect intellectual property rights, or if they are circumvented, rendered obsolete or invalidated by the rapid pace of technological change, or stolen or misappropriated by employees or third parties, it could have an adverse impact on its competitive position and business. In addition, changes in intellectual property laws or their interpretation may impact Applied’s ability to protect and assert its intellectual property rights, increase costs and uncertainties in the prosecution of patent applications or related enforcement actions, and diminish the value and competitive advantage conferred by Applied’s intellectual property assets. Third parties may also assert claims against Applied and its products. Claims that Applied’s products infringe the rights of others, whether or not meritorious, can be expensive and time-consuming to defend and resolve, and may divert the efforts and attention of management and personnel. The inability to obtain rights to use third party intellectual property on commercially reasonable terms could have an adverse impact on Applied’s business. In addition, Applied may face claims based on the theft or unauthorized use or disclosure of third-party trade secrets and other confidential business information. Any such incidents and claims could severely harm Applied’s business and reputation, result in significant expenses, harm its competitive position, and prevent Applied from selling certain products, all of which could have a significant adverse impact on Applied’s business and results of operations." }, { "status": "MODIFIED", "current_title": "Our environmental, social and governance strategies and targets could result in additional costs, and our inability to achieve them could have an adverse impact on our reputation and performance.", "prior_title": "Applied’s environmental, social and governance commitments could result in additional costs, and our inability to achieve them could have an adverse impact on our reputation and performance.", "similarity_score": 0.774, "confidence": "high", "key_changes": [ "Reworded sentence: \"We periodically communicate our strategies and targets related to sustainability, carbon emissions, diversity and inclusion, human rights, and other environmental, social and governance matters.\"" ], "current_body": "We periodically communicate our strategies and targets related to sustainability, carbon emissions, diversity and inclusion, human rights, and other environmental, social and governance matters. These strategies and targets, and their 27 27 27 27 27 27 Table of Contents Table of Contents Table of Contents underlying assumptions and projections, reflect our current plans and aspirations, and we may be unable to achieve them. Changing customer and shareholder sustainability expectations and regulatory requirements, as well as our sustainability targets, could cause us to incur substantial expense and alter our manufacturing, operations or equipment designs and processes. Any failure or perceived failure to timely meet these sustainability requirements, expectations or targets, or a failure to realize the anticipated benefits of planned investments and technology innovations related to sustainability, could adversely impact the demand for our products and subject us to significant costs and liabilities and reputational risks that could in turn adversely affect our business, financial condition and results of operations. In addition, standards and processes for measuring and reporting carbon emissions and other sustainability metrics may change over time, and may result in inconsistent data, or could result in significant revisions to our strategies and targets, or our ability to achieve them. Any scrutiny of our carbon emissions or other sustainability disclosures, our failure to achieve related strategies and targets, or our failure to disclose our sustainability measures consistent with applicable laws and regulations or to the satisfaction of our stakeholders could negatively impact our reputation or performance.", "prior_body": "From time to time Applied communicates its strategies, commitments and targets related to sustainability, carbon emissions, diversity and inclusion, human rights, and other environmental, social and governance matters. These strategies, commitments and targets reflect Applied’s current plans and aspirations, and Applied may be unable to achieve them. Changing customer sustainability requirements, as well as Applied’s sustainability targets, could cause Applied from time to time to alter its manufacturing, operations or equipment designs and processes, and incur substantial additional expense to meet such requirements and targets. Any failure to meet these sustainability requirements or targets could adversely impact the demand for Applied’s products and subject Applied to significant costs and liabilities and reputational risks that could adversely affect Applied’s business, financial condition and results of operations. In addition, standards and processes for measuring and reporting carbon emissions and other sustainability metrics may change over time, and may result in inconsistent data, or could result in significant revisions to our strategies, commitments and targets, or our ability to achieve them. Any scrutiny of our carbon emissions or other sustainability disclosures or our failure to achieve related strategies, commitments and targets could negatively impact our reputation or performance." }, { "status": "MODIFIED", "current_title": "Interest Expense and Interest and Other Income (expense), net", "prior_title": "Interest Expense and Interest and Other Income (loss), net", "similarity_score": 0.773, "confidence": "high", "key_changes": [ "Reworded sentence: \"Interest expense and interest and other income (expense), net for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)Interest expense$238 $228 $236 $10 $(8)Interest and other income (expense), net$300 $39 $118 $261 $(79) Interest expense incurred was primarily associated with issued senior unsecured notes.\"" ], "current_body": "Interest expense and interest and other income (expense), net for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions)Interest expense$238 $228 $236 $10 $(8)Interest and other income (expense), net$300 $39 $118 $261 $(79) Interest expense incurred was primarily associated with issued senior unsecured notes. Interest expense in fiscal 2023 remained relatively flat compared to fiscal 2022 and fiscal 2021 primarily due to the average principal balance of the senior unsecured notes remained consistent at $5.5 billion in each of the last three years. Interest and other income (expense), net in fiscal 2023 increased compared to fiscal 2022, primarily driven by higher interest income as a result of an increase in market rates of interest and higher net gain on equity investments, partially offset by higher impairment losses on equity investments, compared to the prior year. Interest and other income (expense), net in fiscal 2022 decreased compared to fiscal 2021, primarily driven by higher net loss from equity investments, partially offset by higher interest income during fiscal 2022 compared to fiscal 2021. 38 38 38 38 38 38 Table of Contents Table of Contents Table of Contents", "prior_body": "Interest expense and interest and other income (loss), net for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions)Interest expense$228 $236 $240 $(8)$(4)Interest and other income, net$39 $118 $41 $(79)$77 Interest expense incurred was primarily associated with the senior unsecured notes. Interest expense in fiscal 2022 remained relatively flat compared fiscal 2021 and fiscal 2020 due to the average principal balance of the senior unsecured notes remained consistent at $5.5 billion in each of the last three years. Interest and other income, net in fiscal 2022 decreased compared to fiscal 2021, primarily driven by higher net loss from equity investments, partially offset by higher interest income during fiscal 2022 compared to fiscal 2021. Interest and other income, net in fiscal 2021 increased compared to fiscal 2020, primarily driven by a higher net gain from equity investments, partially offset by lower interest income during fiscal 2021 compared to fiscal 2020." }, { "status": "MODIFIED", "current_title": "We are exposed to risks related to legal proceedings, claims and investigations.", "prior_title": "Applied is exposed to various risks related to legal proceedings, claims and investigations.", "similarity_score": 0.769, "confidence": "high", "key_changes": [ "Reworded sentence: \"From time to time we are, and in the future may be, involved in legal proceedings or claims regarding patent infringement, trade secret misappropriation, other intellectual property rights, trade compliance, including import, export and customs, antitrust, environmental regulations, privacy, data protection, securities, contracts, product performance, product liability, unfair competition, employment, workplace safety, and other matters.\"" ], "current_body": "From time to time we are, and in the future may be, involved in legal proceedings or claims regarding patent infringement, trade secret misappropriation, other intellectual property rights, trade compliance, including import, export and customs, antitrust, environmental regulations, privacy, data protection, securities, contracts, product performance, product liability, unfair competition, employment, workplace safety, and other matters. We may receive, and have received, inquiries, warrants, subpoenas, and other requests for information in connection with government investigations of potential or suspected violations of law or regulations by our company and/or our employees. We also on occasion receive notifications from customers who believe we owe them indemnification, product warranty or have other obligations related to claims made against such customers by third parties. Legal proceedings, claims, and government investigations, whether with or without merit, and internal investigations, may be time-consuming and expensive to prosecute, defend or conduct; divert management’s attention and our other resources; constrain our ability to sell our products and services; result in adverse judgments for damages, injunctive relief, penalties and fines; and negatively affect our business. We cannot predict the outcome of current or future legal proceedings, claims or investigations.", "prior_body": "Applied from time to time is, and in the future may be involved in legal proceedings or claims regarding patent infringement, trade secret misappropriation, and other intellectual property rights, trade, including import, export and customs, antitrust, environmental regulations, privacy, data protection, securities, contracts, product performance, product liability, unfair competition, employment, workplace safety, and other matters. Applied also may receive, and has received, inquiries, warrants, subpoenas, and other requests for information in connection with government investigations of potential or suspected violations of law or regulations by Applied and/or its employees. Applied also on occasion receives notification from customers who believe that Applied owes them indemnification, product warranty or has other obligations related to claims made against such customers by third parties. Legal proceedings, claims, and government investigations, whether with or without merit, and internal investigations, may be time-consuming and expensive to prosecute, defend or conduct; divert management’s attention and other Applied resources; inhibit Applied’s ability to sell its products; result in adverse judgments for damages, injunctive relief, penalties and fines; and negatively affect Applied’s business. There can be no assurance regarding the outcome of current or future legal proceedings, claims or investigations. 28 28 28 28 28 28 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "The ability to attract, retain and motivate key employees is vital to our success.", "prior_title": "The ability to attract, retain and motivate key employees is vital to Applied’s success.", "similarity_score": 0.768, "confidence": "high", "key_changes": [ "Reworded sentence: \"Our success depends in large part on our ability to attract, retain and motivate qualified employees and leaders with the necessary expertise and capabilities, representing diverse backgrounds and experiences.\"" ], "current_body": "Our success depends in large part on our ability to attract, retain and motivate qualified employees and leaders with the necessary expertise and capabilities, representing diverse backgrounds and experiences. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, management or organizational changes, ongoing competition for talent, the availability of qualified employees, the ability to obtain necessary authorizations for workers to provide services outside their home countries, the attractiveness of our compensation and benefit programs, our career growth and development opportunities, and our employment policies. If we are unable to attract, retain and motivate qualified employees and leaders, we may be unable to fully capitalize on current and new market opportunities, which could 25 25 25 25 25 25 Table of Contents Table of Contents Table of Contents adversely impact our business and results of operations. The loss of knowledgeable and experienced employees may result in unexpected costs, reduced productivity, or difficulties with respect to internal processes and controls.", "prior_body": "Applied’s success, competitiveness and ability to execute on its global strategies and maintain a culture of innovation depend in large part on its ability to attract, retain and motivate qualified employees and leaders with the necessary expertise and capabilities, representing diverse backgrounds and experiences. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, management or organizational changes, increasing competition for talent, the availability of qualified employees in the markets, availability of career development opportunities, the ability to obtain necessary authorizations for workers to provide services outside their home countries, and the attractiveness of Applied’s compensation and benefit programs, including its share-based programs, and Applied’s employment policies, including the flexibility of its remote-work arrangements. We have experienced, and may continue to experience, increasing costs to attract and retain needed talent, driven by macro-economic conditions and a highly competitive labor market. If we are unable to attract, retain and motivate qualified employees and leaders, we may be unable to fully capitalize on current and new market opportunities, which could adversely impact Applied’s business and results of operations. The loss or retirement of employees presents particular challenges to the extent they involve the departure of knowledgeable and experienced employees and the resulting need to identify and train existing or new candidates to perform necessary functions, which may result in unexpected costs, reduced productivity, and/or difficulties with respect to internal processes and controls." }, { "status": "MODIFIED", "current_title": "Our indebtedness and debt covenants could adversely affect our financial condition and business.", "prior_title": "Applied’s indebtedness and debt covenants could adversely affect its financial condition and business.", "similarity_score": 0.76, "confidence": "high", "key_changes": [ "Reworded sentence: \"As of October 29, 2023, we had $5.5 billion in aggregate principal amount of senior unsecured notes outstanding.\"" ], "current_body": "As of October 29, 2023, we had $5.5 billion in aggregate principal amount of senior unsecured notes outstanding. Under the indenture governing the senior unsecured notes, we may be required to offer to repurchase the notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest, if we experience a change of control and a contemporaneous downgrade of the notes below investment grade. We also have in place a $1.5 billion revolving credit facility. While no amounts were outstanding under this credit facility as of October 29, 2023, we may borrow amounts in the future under this credit facility or enter into new financing arrangements. Our ability to satisfy our debt obligations is dependent upon the results of our business operations and subject to other risks discussed in this section. If we fail to satisfy our debt obligations, or comply with financial and other debt covenants, we may be in default and any borrowings may become immediately due and payable, and such default may constitute a default under our other obligations. There can be no assurance that we would have sufficient financial resources or be able to arrange financing to repay any borrowings at such time. Significant changes in our credit rating, disruptions in the global financial markets, or incurrence of new or refinancing of existing indebtedness at higher interest rates could have a material and adverse impact on our access to and cost of capital for future financings, and financial condition.", "prior_body": "Applied has $5.5 billion in aggregate principal amount of senior unsecured notes outstanding. Under the indenture governing the senior unsecured notes, it may be required to offer to repurchase the notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest, upon a change of control of Applied and a contemporaneous downgrade of the notes below investment grade. Applied also has in place a $1.5 billion revolving credit facility. While no amounts were outstanding under this credit facility as of October 30, 2022, Applied may borrow amounts in the future under this credit facility. Applied may also enter into new financing arrangements. Applied’s ability to satisfy its debt obligations is dependent upon the results of its business operations and subject to other risks discussed in this section. Significant changes in Applied’s credit rating, disruptions in the global financial markets or changes in the interest rate environment could have a material adverse consequence on Applied’s access to and cost of capital for future financings, and financial condition. If Applied fails to satisfy its debt obligations, or comply with financial and other debt covenants, it may be in default and any borrowings may become immediately due and payable, and such default may also constitute a default under other of Applied’s obligations. There can be no assurance that Applied would have sufficient financial resources or be able to arrange financing to repay any borrowings at such time." }, { "status": "MODIFIED", "current_title": "We are exposed to ongoing changes in the various industries in which we operate.", "prior_title": "Applied is exposed to risks as a result of ongoing changes in the various industries in which it operates.", "similarity_score": 0.757, "confidence": "high", "key_changes": [ "Reworded sentence: \"The global semiconductor, display and related industries are characterized by ongoing changes that impact demand for and the profitability of our products and services and our operating results, including: •the nature, timing and degree of visibility of changes in end-user demand for electronic products, including those related to fluctuations in consumer buying patterns tied to general economic conditions, seasonality or the introduction of new products, and the effects of these changes on customers’ businesses and on demand for our products; •increasing capital requirements for building and operating new fabrication plants and customers’ ability to raise the necessary capital; •trade, regulatory, tax or government incentives impacting the timing of customers’ investment in new or expanded fabrication plants; •differences in growth rates among the semiconductor, display and other industries in which we operate; •the importance of establishing, improving and maintaining strong relationships with customers; •the cost and complexity for customers to move from product design to volume manufacturing, which may slow the adoption rate of new manufacturing technology; •the importance of reducing the total cost of manufacturing system ownership; •the importance to customers of system reliability and productivity and the effect on demand for fabrication systems as a result of their increasing productivity, device yield and reliability; •manufacturers’ ability to reconfigure and re-use fabrication systems which can reduce demand for new equipment; •the importance of developing products with sufficient differentiation to influence customers’ purchasing decisions; •requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment; •price and performance trends for semiconductor devices and displays, and the impact on demand for such products; •the importance of the availability of spare parts to maximize the time that customers’ systems are available for production; •government incentives for local suppliers and domestic semiconductor research, development and manufacturing capabilities; •the increasing role for and complexity of software in our products; •the increasing role of machine learning and artificial intelligence with respect to semiconductor equipment and related services; and 20 20 20 20 20 20 Table of Contents Table of Contents Table of Contents •the focus on reducing energy usage and improving the environmental impact and sustainability associated with manufacturing operations.\"" ], "current_body": "The global semiconductor, display and related industries are characterized by ongoing changes that impact demand for and the profitability of our products and services and our operating results, including: •the nature, timing and degree of visibility of changes in end-user demand for electronic products, including those related to fluctuations in consumer buying patterns tied to general economic conditions, seasonality or the introduction of new products, and the effects of these changes on customers’ businesses and on demand for our products; •increasing capital requirements for building and operating new fabrication plants and customers’ ability to raise the necessary capital; •trade, regulatory, tax or government incentives impacting the timing of customers’ investment in new or expanded fabrication plants; •differences in growth rates among the semiconductor, display and other industries in which we operate; •the importance of establishing, improving and maintaining strong relationships with customers; •the cost and complexity for customers to move from product design to volume manufacturing, which may slow the adoption rate of new manufacturing technology; •the importance of reducing the total cost of manufacturing system ownership; •the importance to customers of system reliability and productivity and the effect on demand for fabrication systems as a result of their increasing productivity, device yield and reliability; •manufacturers’ ability to reconfigure and re-use fabrication systems which can reduce demand for new equipment; •the importance of developing products with sufficient differentiation to influence customers’ purchasing decisions; •requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment; •price and performance trends for semiconductor devices and displays, and the impact on demand for such products; •the importance of the availability of spare parts to maximize the time that customers’ systems are available for production; •government incentives for local suppliers and domestic semiconductor research, development and manufacturing capabilities; •the increasing role for and complexity of software in our products; •the increasing role of machine learning and artificial intelligence with respect to semiconductor equipment and related services; and 20 20 20 20 20 20 Table of Contents Table of Contents Table of Contents •the focus on reducing energy usage and improving the environmental impact and sustainability associated with manufacturing operations.", "prior_body": "The global semiconductor, display and related industries in which Applied operates are characterized by ongoing changes affecting some or all of these industries that impact demand for and the profitability of Applied’s products and its consolidated results of operations, including: •the nature, timing and degree of visibility of changes in end demand for electronic products, including those related to fluctuations in consumer buying patterns tied to general economic conditions, seasonality or the introduction of new products, and the effects of these changes on customers’ businesses and on demand for Applied’s products; •increasing capital requirements for building and operating new fabrication plants and customers’ ability to raise the necessary capital; •trade, regulatory, tax or government incentive policies impacting the timing of customers’ investment in new or expanded fabrication plants; •differences in growth rates among the semiconductor, display and other industries in which Applied operates; •the increasing importance of establishing, improving and maintaining strong relationships with customers; •the increasing cost and complexity for customers to move from product design to volume manufacturing, which may slow the adoption rate of new manufacturing technology; •the need for customers to continually reduce the total cost of manufacturing system ownership; 21 21 21 21 21 21 Table of Contents Table of Contents Table of Contents •the heightened importance to customers of system reliability and productivity and the effect on demand for fabrication systems as a result of their increasing productivity, device yield and reliability; •manufacturers’ ability to reconfigure and re-use fabrication systems which can reduce demand for new equipment; •the increasing importance of, and difficulties in, developing products with sufficient differentiation to influence customers’ purchasing decisions; •requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment; •price and performance trends for semiconductor devices and displays, and the corresponding effect on demand for such products; •the increasing importance of the availability of spare parts to maximize the time that customers’ systems are available for production; •increasing government incentives for local suppliers; •the increasing role for and complexity of software in Applied products; and •the increasing focus on reducing energy usage and improving the environmental impact and sustainability associated with manufacturing operations." }, { "status": "MODIFIED", "current_title": "Introduction", "prior_title": "Applied’s Pandemic Response", "similarity_score": 0.739, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to facilitate an understanding of our business and results of operations.\"", "Reworded sentence: \"Each of our segments is subject to variable industry conditions, as demand for manufacturing equipment and services can change depending on supply and demand for chips, display technologies, and other electronic devices, as well as other factors, such as global economic, political and market conditions, and the nature and timing of technological advances in fabrication processes.\"", "Reworded sentence: \"Our broad range of equipment and service products are highly technical and are sold primarily through a direct sales force.\"", "Removed sentence: \"While certain existing technologies may be adapted to new requirements, some applications create the need for an entirely different technological approach.\"", "Reworded sentence: \"In light of these conditions, our results can vary significantly year-over-year, as well as quarter-over-quarter.\"" ], "current_body": "Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to facilitate an understanding of our business and results of operations. This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this Form 10-K. The following discussion contains forward-looking statements and should also be read in conjunction with the cautionary statement set forth at the beginning of this Form 10-K. MD&A consists of the following sections: •Overview: a summary of our business and measurements •Results of Operations: a discussion of operating results •Segment Information: a discussion of segment operating results •Recent Accounting Pronouncements: a discussion of new accounting pronouncements and its impact to our consolidated financial statements •Financial Condition, Liquidity and Capital Resources: an analysis of cash flows, sources and uses of cash •Contractual Obligations and Off-Balance Sheet Arrangements •Critical Accounting Policies and Estimates: a discussion of critical accounting policies that require the exercise of judgments and estimates Overview We provide manufacturing equipment, services and software to the semiconductor, display, and related industries. Our customers include manufacturers of semiconductor wafers and chips, liquid crystal and organic light-emitting diode (OLED) displays, and other electronic devices. These customers may use what they manufacture in their own end products or sell the items to other companies for use in electronic products. Each of our segments is subject to variable industry conditions, as demand for manufacturing equipment and services can change depending on supply and demand for chips, display technologies, and other electronic devices, as well as other factors, such as global economic, political and market conditions, and the nature and timing of technological advances in fabrication processes. We operate in three reportable segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. A summary of financial information for each reportable segment is found in Note 16 of Notes to Consolidated Financial Statements. A discussion of factors that could affect our operations is set forth under “Risk Factors” in Part I, Item 1A, which is incorporated herein by reference. Product development and manufacturing activities occur primarily in the United States, Europe, Israel, and Asia. Our broad range of equipment and service products are highly technical and are sold primarily through a direct sales force. Our results are driven primarily by customer spending on capital equipment and services to support key technology transitions or to increase production volume in response to worldwide demand for semiconductors and displays. Spending by semiconductor customers, which include companies that operate in the foundry, logic, memory, and other semiconductor chip markets, is driven by demand for electronic products, including smartphones and other mobile devices, servers, personal computers, automotive devices, storage, and other products. The growth of data and emerging end-market drivers such as artificial intelligence, the Internet of Things, 5G networks, smart vehicles and augmented and virtual reality are also creating the next wave of growth for the industry. As a result, products within the Semiconductor Systems segment are subject to significant changes in customer requirements, including transitions to smaller dimensions, increasingly complex chip architectures, new materials and an increasing number of applications. Demand for display manufacturing equipment spending depends primarily on consumer demand for increasingly larger and more advanced TVs as well as larger and higher resolution displays for next-generation mobile devices, and investments in new types of display technologies. The timing of customer investment in manufacturing equipment is also affected by the timing of next-generation process development and the timing of capacity expansion to meet end-market demand. In light of these conditions, our results can vary significantly year-over-year, as well as quarter-over-quarter. 34 34 34 34 34 34 Table of Contents Table of Contents Table of Contents Our strategic priorities include developing products that help solve customers’ challenges at technology inflections; expanding our served market opportunities in the semiconductor and display industries; and growing our services business. Our long-term growth strategy requires continued development of new materials engineering capabilities, including products and platforms that enable expansion into new and adjacent markets. Our significant investments in research, development and engineering must generally enable us to deliver new products and technologies before the emergence of strong demand, thus allowing customers to incorporate these products into their manufacturing plans during early-stage technology selection. We work closely with our global customers to design systems and processes that meet their planned technical and production requirements. The following table presents certain significant measurements for the past three fiscal years: Change2023202220212023 over 20222022 over 2021 (In millions, except per share amounts and percentages)Net sales$26,517 $25,785 $23,063 $732 $2,722 Gross margin46.7 %46.5 %47.3 %0.2 points(0.8) pointsOperating income$7,654 $7,788 $6,889 $(134)$899 Operating margin28.9 %30.2 %29.9 %(1.3) points0.3 pointsNet income$6,856 $6,525 $5,888 $331 $637 Earnings per diluted share$8.11 $7.44 $6.40 $0.67 $1.04 Fiscal 2023 and fiscal 2022 each contained 52 weeks, while fiscal 2021 contained 53 weeks. Semiconductor equipment customers continued to make strategic investments in new capacity and new technology transitions during fiscal 2023. Foundry and logic spending increased in fiscal 2023 compared to fiscal 2022 driven by customer investments in mature manufacturing nodes to serve demand across a wide range of products. Memory customers’ spending in fiscal 2023 was lower as compared to fiscal 2022 due to deferred capacity additions primarily as a result of weakness in demand for consumer electronic products. Our Applied Global Services net sales in fiscal 2023 increased compared to fiscal 2022 primarily due to an increase in sales associated with long-term service agreements and higher customer spending on legacy systems, partially offset by a decrease in net sales due to additional export regulations issued by the United States government in 2022 and lower customer utilization rates. Our Display and Adjacent Markets net sales decreased in fiscal 2023 compared to fiscal 2022 primarily due to lower customer investments in display manufacturing equipment for TVs as a result of weakness in demand for consumer electronic products. We experienced supply chain and logistics constraints in fiscal 2022, and although there have been significant improvements in supply chain performance in fiscal 2023, we expect some shortages to persist, and managing these supply chain constraints to increase shipments to customers remains a top priority. In fiscal 2024, we expect advanced foundry and logic demand to be stronger as compared to fiscal 2023 due to increased customer spending in PC, cloud and Artificial Intelligence (AI) data centers as well as customers’ continued investments in new technology. Demand for mature manufacturing nodes is expected to be lower as compared to fiscal 2023, primarily due to decreased customer spending in the industrial automation and automotive markets. We expect memory customers’ spending to be higher as compared to fiscal 2023 as customers continue to invest in new technology. In the past two years, the United States government announced additional export regulations for U.S. semiconductor technology sold in China. For a description of risks associated with global trade, see the risk factor entitled “Business and Industry Risks - Global trade issues and changes in and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions, tariffs and international trade disputes, have adversely impacted and could further adversely impact our business and operations, and reduce the competitiveness of our products relative to local and global competitors” in Part I, Item 1A, “Risk Factors.” 35 35 35 35 35 35 Table of Contents Table of Contents Table of Contents", "prior_body": "As the COVID-19 pandemic emerged in 2020, Applied Materials responded quickly to put in place precautionary measures to keep its workplaces healthy and safe, while ensuring compliance with orders and restrictions imposed by government authorities, everywhere Applied operates in the world. Applied’s top priority remains protecting the health and safety of its employees and their families, customers, suppliers and community. Applied continues to support workplace flexibility and will work to respond appropriately to the impact of COVID-19 on its business, its customers’ and suppliers’ businesses and its communities. Overview Applied provides manufacturing equipment, services and software to the semiconductor, display, and related industries. Applied’s customers include manufacturers of semiconductor wafers and chips, liquid crystal and organic light-emitting diode (OLED) displays, and other electronic devices. These customers may use what they manufacture in their own end products or sell the items to other companies for use in electronic products. Each of Applied’s segments is subject to variable industry conditions, as demand for manufacturing equipment and services can change depending on supply and demand for chips, display technologies, and other electronic devices, as well as other factors, such as global economic, political and market conditions, and the nature and timing of technological advances in fabrication processes. Applied operates in three reportable segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. A summary of financial information for each reportable segment is found in Note 17 of Notes to Consolidated Financial Statements. A discussion of factors that could affect Applied’s operations is set forth under “Risk Factors” in Part I, Item 1A, which is incorporated herein by reference. Product development and manufacturing activities occur primarily in the United States, Europe, Israel, and Asia. Applied’s broad range of equipment and service products are highly technical and are sold primarily through a direct sales force. 35 35 35 35 35 35 Table of Contents Table of Contents Table of Contents Applied’s results are driven primarily by customer spending on capital equipment and services to support key technology transitions or to increase production volume in response to worldwide demand for semiconductors and displays. Spending by semiconductor customers, which include companies that operate in the foundry, logic, memory, and other semiconductor chip markets, is driven by demand for electronic products, including smartphones and other mobile devices, servers, personal computers, automotive devices, storage, and other products. The growth of data and emerging end-market drivers such as artificial intelligence, the Internet of Things, 5G networks, smart vehicles and augmented and virtual reality are also creating the next wave of growth for the industry. As a result, products within the Semiconductor Systems segment are subject to significant changes in customer requirements, including transitions to smaller dimensions, increasingly complex chip architectures, new materials and an increasing number of applications. Demand for display manufacturing equipment spending depends primarily on consumer demand for increasingly larger and more advanced TVs as well as larger and higher resolution displays for next-generation mobile devices, and investments in new types of display technologies. While certain existing technologies may be adapted to new requirements, some applications create the need for an entirely different technological approach. The timing of customer investment in manufacturing equipment is also affected by the timing of next-generation process development and the timing of capacity expansion to meet end-market demand. In light of these conditions, Applied’s results can vary significantly year-over-year, as well as quarter-over-quarter. Applied’s strategic priorities include developing products that help solve customers’ challenges at technology inflections; expanding its served market opportunities in the semiconductor and display industries; and growing its services business. Applied’s long-term growth strategy requires continued development of new materials engineering capabilities, including products and platforms that enable expansion into new and adjacent markets. Applied’s significant investments in research, development and engineering must generally enable it to deliver new products and technologies before the emergence of strong demand, thus allowing customers to incorporate these products into their manufacturing plans during early-stage technology selection. Applied works closely with its global customers to design systems and processes that meet their planned technical and production requirements. The following table presents certain significant measurements for the past three fiscal years: Change2022202120202022 over 20212021 over 2020 (In millions, except per share amounts and percentages)Net sales$25,785 $23,063 $17,202 $2,722 $5,861 Gross margin46.5 %47.3 %44.7 %(0.8) points2.6 pointsOperating income$7,788 $6,889 $4,365 $899 $2,524 Operating margin30.2 %29.9 %25.4 %0.3 points4.5 pointsNet income$6,525 $5,888 $3,619 $637 $2,269 Earnings per diluted share$7.44 $6.40 $3.92 $1.04 $2.48 Fiscal 2022 and fiscal 2020 each contained 52 weeks, while fiscal 2021 contained 53 weeks. Semiconductor equipment customers continued to make strategic investments in new technology transitions and new capacity during fiscal 2022. Foundry and logic spending increased in fiscal 2022 compared to fiscal 2021 driven by customer investments in both advanced and mature nodes. Overall spending by memory customers was flat in fiscal 2022 compared to fiscal 2021 as they continued to maintain balance between supply and demand and invested in new technology. Applied saw continued growth in its services business in fiscal 2022 compared to fiscal 2021 driven by an increase in the installed base of equipment, the rate of customer equipment utilization, long-term service agreements and spares and legacy systems sales. Applied’s Display and Adjacent Markets revenue decreased in fiscal 2022 compared to fiscal 2021 primarily due to decreased investment in display manufacturing equipment for TVs and mobile products. While customer demand increased during fiscal 2022 compared to fiscal 2021, supply chain and logistics constraints impacted Applied’s ability to fulfill demand in fiscal 2022. Although there have been improvements in supply chain performance, Applied expects some shortages to persist into fiscal 2023 and managing these supply chain constraints to increase shipments to customers remains a top priority. In fiscal 2023, Applied expects memory customers’ spending to be lower as compared to fiscal 2022 due to some customers deferring capacity additions as a result of weakness in consumer electronics and personal computer markets. Advanced foundry and logic demand is expected to remain strong in fiscal 2023 as customers continue to invest in new technology. 36 36 36 36 36 36 Table of Contents Table of Contents Table of Contents On October 7, 2022, the United States government announced new export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment and related parts and services, that require export licenses and authorizations. These new export regulations resulted in lower net sales in China than expected for fiscal 2022. Applied is pursuing additional export licenses and authorizations where needed. While Applied currently estimates lower net sales to China of up to $2.5 billion and lower overall gross margin of up to 1% in fiscal 2023, Applied is continuing to assess the implication of these complex regulations to its business. See also “Risk Factors – Global trade issues and changes in and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions, tariffs and international trade disputes, have adversely impacted and could further adversely impact our business and operations, and reduce the competitiveness of our products relative to local and global competitors” for further details. In response to the ongoing COVID-19 pandemic and evolving conditions and worldwide response, Applied made adjustments to its global operations and is actively managing its responses in collaboration with its employees, customers and suppliers. However, the situation remains fluid and uncertain. For additional risks associated with the ongoing COVID-19 pandemic, see the risk factor entitled “The continued effects of COVID-19 pandemic and global measures taken in response have adversely impacted, and may continue to adversely impact, Applied’s operations and financial results” in Part I, Item 1A, “Risk Factors.”" }, { "status": "MODIFIED", "current_title": "We operate in jurisdictions with complex and changing tax laws.", "prior_title": "Applied is exposed to risks associated with operating in jurisdictions with complex and changing tax laws.", "similarity_score": 0.726, "confidence": "medium", "key_changes": [ "Reworded sentence: \"We are subject to income taxes in the United States and foreign jurisdictions.\"", "Reworded sentence: \"Our provision for income taxes and effective tax rates could be affected by numerous factors, including changes in applicable tax laws, interpretations of applicable tax laws, amount and composition of pre-tax income in jurisdictions with differing tax rates, and valuation of deferred tax assets.\"", "Reworded sentence: \"An increase in our provision for income taxes and effective tax rate could, in turn, have a material and adverse impact on our results of operations and financial condition.\"" ], "current_body": "We are subject to income taxes in the United States and foreign jurisdictions. Significant judgment is required to determine and estimate worldwide tax liabilities. Our provision for income taxes and effective tax rates could be affected by numerous factors, including changes in applicable tax laws, interpretations of applicable tax laws, amount and composition of pre-tax income in jurisdictions with differing tax rates, and valuation of deferred tax assets. There have been a number of proposed changes in the tax laws that, if enacted, would increase our tax liability. While it is too early to predict the outcome of these proposals, if enacted, they could have a material impact on our provision for income taxes and effective tax rate. An increase in our provision for income taxes and effective tax rate could, in turn, have a material and adverse impact on our results of operations and financial condition. For example, several countries where we do business have announced plans to implement global minimum tax regimes based on the Organization for Economic Cooperation and Development Base Erosion and Profit Shifting Project. If implemented, these global minimum tax regimes would change various aspects of the existing framework under which our global tax obligations are determined, which would unfavorably impact our existing tax incentives and effective tax rate. As this framework is subject to further negotiation and implementation by each member country, the timing and ultimate impact of any such changes on our tax obligations are uncertain. Consistent with the international nature of our business, we conduct certain manufacturing, supply chain, and other operations in Asia, bringing these activities closer to customers and reducing operating costs. In some foreign jurisdictions, we must meet certain requirements to continue to qualify for tax incentives. There is no assurance we will be able to meet such requirements in the future to fully realize benefits from these incentives. Furthermore, the proposed plans to implement global minimum tax regimes could reduce or eliminate the benefits of our tax incentives. We are subject to examination by the U.S. Internal Revenue Service and other tax authorities, and from time to time amend previously filed tax returns. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations and amendments to determine the adequacy of our provision for income taxes, which requires estimates and judgments. Although we believe our tax estimates are reasonable, there can be no assurance the tax authorities will agree with such estimates. We may have to engage in litigation to achieve the results reflected in the estimates, which may be time-consuming and expensive. There can be no assurance that we will be successful or that any final determination will not be materially different from the treatment reflected in our historical income tax provisions and effective tax rates.", "prior_body": "Applied is subject to income taxes in the United States and foreign jurisdictions. Significant judgment is required to determine and estimate worldwide tax liabilities. Applied’s provision for income taxes and effective tax rates could be affected by numerous factors, including changes in applicable tax laws, interpretations of applicable tax laws, amount and composition of pre-tax income in jurisdictions with differing tax rates, and valuation of deferred tax assets. Beginning in fiscal 2023, the Tax Cuts and Jobs Act enacted on December 22, 2017 eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years. Although Congress is considering legislation that would defer the capitalization and amortization requirement, there is no assurance that the provision will be repealed or otherwise modified. If the requirement is not modified, it may increase Applied’s provision for income taxes and effective tax rates beginning in fiscal 2023. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act, which introduces a new 15% corporate minimum tax and includes an excise tax that would impose a 1% surcharge on stock repurchases, and which may impact Applied’s financial results beginning in fiscal 2024 and 2023, respectively. There have been a number of proposed changes in the tax laws that, if enacted, would increase our tax liability. While it is too early to predict the outcome of these proposals, if enacted, they could have a material impact on our provision for income taxes and effective tax rate. An increase in Applied’s provision for income taxes and effective tax rate could, in turn, have a material adverse impact on Applied’s results of operations and financial condition. Consistent with the international nature of its business, Applied conducts certain manufacturing, supply chain, and other operations in Asia, bringing these activities closer to customers and reducing operating costs. In certain foreign jurisdictions, conditional reduced income tax rates have been granted to Applied. To obtain the benefit of these tax incentives, Applied must meet requirements relating to various activities. Applied’s ability to realize benefits from these incentives could be materially affected if, among other things, applicable requirements are not met or Applied incurs net losses in these jurisdictions. In addition, Applied is subject to examination by the U.S. Internal Revenue Service and other tax authorities, and from time to time amends previously filed tax returns. Applied regularly assesses the likelihood of favorable or unfavorable outcomes resulting from these examinations and amendments to determine the adequacy of its provision for income taxes, which requires estimates and judgments. Although Applied believes its tax estimates are reasonable, there can be no assurance that the tax authorities will agree with such estimates. Applied may have to engage in litigation to achieve the results reflected in the estimates, which may be time-consuming and expensive. There can be no assurance that Applied will be successful or that any final determination will not be materially different from the treatment reflected in Applied’s historical income tax provisions and effective tax rates. 27 27 27 27 27 27 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "Results of Operations", "prior_title": "Results of Operations", "similarity_score": 0.725, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Net Sales Net sales for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages)Semiconductor Systems$19,698 74%$18,797 73%$16,286 71%5 %15 %Applied Global Services5,732 22%5,543 22%5,013 22%3 %11 %Display and Adjacent Markets868 3%1,331 5%1,634 7%(35)%(19)%Corporate and Other219 1%114 —%130 —%92 %(12)%Total$26,517 100%$25,785 100%$23,063 100%3 %12 % The Semiconductor Systems segment continued to represent the largest contributor of net sales.\"", "Removed sentence: \"The changes in net sales in all regions in fiscal 2021 compared to fiscal 2020 primarily reflected changes in investments in semiconductor manufacturing equipment and customer spending on comprehensive service agreements.\"", "Removed sentence: \"The decrease in net sales to customers in Japan for fiscal 2021 compared to fiscal 2020 primarily reflected a decrease in investments in semiconductor manufacturing equipment, partially offset by an increase in customer spending on comprehensive service agreements.\"", "Removed sentence: \"Gross margins for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions, except percentages)Gross margin46.5 %47.3 %44.7 %(0.8) points2.6 points Gross margin in fiscal 2022 decreased compared to fiscal 2021 primarily driven by higher material, freight, and logistics costs and higher personnel costs due to an increase in headcount to provide manufacturing capacity and flexibility, partially offset by favorable changes in product mix and an increase in average selling prices.\"", "Removed sentence: \"Gross margin in fiscal 2021 increased compared to fiscal 2020 primarily due to the increase in net sales and favorable changes in customer and product mix, partially offset by higher freight costs and higher personnel costs due to an increase in headcount to provide manufacturing capacity and flexibility.\"" ], "current_body": "Net Sales Net sales for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages)Semiconductor Systems$19,698 74%$18,797 73%$16,286 71%5 %15 %Applied Global Services5,732 22%5,543 22%5,013 22%3 %11 %Display and Adjacent Markets868 3%1,331 5%1,634 7%(35)%(19)%Corporate and Other219 1%114 —%130 —%92 %(12)%Total$26,517 100%$25,785 100%$23,063 100%3 %12 % The Semiconductor Systems segment continued to represent the largest contributor of net sales. Net sales in fiscal 2023 compared to fiscal 2022 and fiscal 2022 compared to fiscal 2021 increased primarily due to continued customer investment in semiconductor equipment, partially offset by the reduction in customer investment in display manufacturing equipment. The increase in net sales in fiscal 2023 compared to fiscal 2022 was also due to improvements in our supply chain performance enabling us to better fulfill demand. Net sales by geographic region, determined by the location of customers’ facilities to which products were shipped, were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages)China$7,247 27%$7,254 28%$7,535 33%— %(4)%Korea4,609 18%4,395 17%5,012 22%5 %(12)%Taiwan5,670 21%6,262 24%4,742 20%(9)%32 %Japan2,075 8%2,012 8%1,962 8%3 %3 %Southeast Asia758 3%1,084 4%677 3%(30)%60 %Asia Pacific20,359 77%21,007 81%19,928 86%(3)%5 %United States4,006 15%3,104 12%2,038 9%29 %52 %Europe2,152 8%1,674 7%1,097 5%29 %53 %Total$26,517 100%$25,785 100%$23,063 100%3 %12 % The increases in net sales to customers in the U.S. and Europe for fiscal 2023 compared to fiscal 2022 primarily reflected increased investment by customers in semiconductor equipment and increased customer spending on legacy systems and comprehensive service agreements. The increase in net sales to customers in Korea for fiscal 2023 compared to fiscal 2022 primarily reflected increased investment by customers in semiconductor equipment and increased customer spending on comprehensive service agreements, spares and legacy systems, partially offset by decreased investment in display manufacturing equipment. The increase in net sales to customers in Japan for fiscal 2023 compared to fiscal 2022 primarily reflected increased investment in display manufacturing equipment, partially offset by decreased investment by customers in semiconductor equipment. Net sales to customers in China for 2023 compared to fiscal 2022 remained flat and primarily reflected increased investment in semiconductor equipment, offset by decreased in customer spending on long-term service agreements due to the impact of additional export regulations issued by the United States government in 2022 and decreased investment in display manufacturing equipment. The changes in net sales in all other regions for fiscal 2023 compared to fiscal 2022 primarily reflected changes in semiconductor manufacturing equipment spending. 36 36 36 36 36 36 Table of Contents Table of Contents Table of Contents The increases in net sales in all regions other than China and Korea in fiscal 2022 compared to fiscal 2021 primarily reflected changes in semiconductor equipment spending and customer spending on comprehensive service agreements. The decrease in net sales to customers in China for fiscal 2022 compared to fiscal 2021 primarily reflected decreased investment in display manufacturing equipment and semiconductor equipment, partially offset by increased spending on spares and comprehensive service agreements. The decrease in net sales to customers in Korea for fiscal 2022 compared to fiscal 2021 primarily reflected decreased investment in semiconductor equipment, partially offset by increased investment in display manufacturing equipment.", "prior_body": "Net Sales Net sales for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions, except percentages)Semiconductor Systems$18,797 73%$16,286 71%$11,367 66%15 %43 %Applied Global Services5,543 22%5,013 22%4,155 24%11 %21 %Display and Adjacent Markets1,331 5%1,634 7%1,607 9%(19)%2 %Corporate and Other114 —%130 —%73 1%(12)%78 %Total$25,785 100%$23,063 100%$17,202 100%12 %34 % The Semiconductor Systems segment continued to represent the largest contributor of net sales. Net sales in fiscal 2022 compared to fiscal 2021 and fiscal 2021 compared to fiscal 2020 increased primarily due to increased customer investments in semiconductor equipment as well as customer spending on spares and comprehensive service agreements. Net sales by geographic region, determined by the location of customers’ facilities to which products were shipped, were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions, except percentages)China$7,254 28%$7,535 33%$5,456 32%(4)%38 %Korea4,395 17%5,012 22%3,031 18%(12)%65 %Taiwan6,262 24%4,742 20%3,953 23%32 %20 %Japan2,012 8%1,962 8%1,996 11%3 %(2)%Southeast Asia1,084 4%677 3%411 2%60 %65 %Asia Pacific21,007 81%19,928 86%14,847 86%5 %34 %United States3,104 12%2,038 9%1,619 10%52 %26 %Europe1,674 7%1,097 5%736 4%53 %49 %Total$25,785 100%$23,063 100%$17,202 100%12 %34 % 37 37 37 37 37 37 Table of Contents Table of Contents Table of Contents The increases in net sales in all regions other than China and Korea in fiscal 2022 compared to fiscal 2021 primarily reflected changes in semiconductor equipment spending and customer spending on comprehensive service agreements. The decrease in net sales to customers in China for fiscal 2022 compared to fiscal 2021 primarily reflected decreased investment in display manufacturing equipment and semiconductor equipment, partially offset by increased spending on spares and comprehensive service agreements. The decrease in net sales to customers in Korea for fiscal 2022 compared to fiscal 2021 primarily reflected decreased investment in semiconductor equipment, partially offset by increased investment in display manufacturing equipment. The changes in net sales in all regions in fiscal 2021 compared to fiscal 2020 primarily reflected changes in investments in semiconductor manufacturing equipment and customer spending on comprehensive service agreements. The decrease in net sales to customers in Japan for fiscal 2021 compared to fiscal 2020 primarily reflected a decrease in investments in semiconductor manufacturing equipment, partially offset by an increase in customer spending on comprehensive service agreements. Gross margins for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions, except percentages)Gross margin46.5 %47.3 %44.7 %(0.8) points2.6 points Gross margin in fiscal 2022 decreased compared to fiscal 2021 primarily driven by higher material, freight, and logistics costs and higher personnel costs due to an increase in headcount to provide manufacturing capacity and flexibility, partially offset by favorable changes in product mix and an increase in average selling prices. Gross margin in fiscal 2021 increased compared to fiscal 2020 primarily due to the increase in net sales and favorable changes in customer and product mix, partially offset by higher freight costs and higher personnel costs due to an increase in headcount to provide manufacturing capacity and flexibility. Gross margin during fiscal 2022, 2021 and 2020 included $147 million, $118 million and $103 million, respectively, of share-based compensation expense." }, { "status": "MODIFIED", "current_title": "Semiconductor Systems Segment", "prior_title": "Semiconductor Systems Segment", "similarity_score": 0.721, "confidence": "medium", "key_changes": [ "Added sentence: \"Spending can also depend on customer facility readiness and timeline for installation of capital equipment at customer sites.\"", "Reworded sentence: \"Certain significant measures for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages and ratios)Net sales$19,698 $18,797 $16,286 $901 5 %$2,511 15 %Operating income$7,090 $6,969 $6,311 $121 2 %$658 10 %Operating margin36.0 %37.1 %38.8 %(1.1) points(1.7) points Net sales for Semiconductor Systems by end use application for the periods indicated were as follows: 202320222021Foundry, logic and other77 %66 %60 %Dynamic random-access memory (DRAM)17 %19 %19 %Flash memory6 %15 %21 %100 %100 %100 % Semiconductor equipment customers continued to make strategic investments in new capacity and new technology transitions during fiscal 2023.\"", "Reworded sentence: \"40 40 40 40 40 40 Table of Contents Table of Contents Table of Contents\"" ], "current_body": "The Semiconductor Systems segment is comprised primarily of capital equipment used to fabricate semiconductor chips. Semiconductor industry spending on capital equipment is driven by demand for electronic products, including smartphones and other mobile devices, servers, personal computers, automotive electronics, storage, and other products, and the nature and timing of technological advances in fabrication processes, and as a result is subject to variable industry conditions. Spending can also depend on customer facility readiness and timeline for installation of capital equipment at customer sites. Development efforts are focused on solving customers’ key technical challenges in transistor, interconnect, patterning and packaging performance. Certain significant measures for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages and ratios)Net sales$19,698 $18,797 $16,286 $901 5 %$2,511 15 %Operating income$7,090 $6,969 $6,311 $121 2 %$658 10 %Operating margin36.0 %37.1 %38.8 %(1.1) points(1.7) points Net sales for Semiconductor Systems by end use application for the periods indicated were as follows: 202320222021Foundry, logic and other77 %66 %60 %Dynamic random-access memory (DRAM)17 %19 %19 %Flash memory6 %15 %21 %100 %100 %100 % Semiconductor equipment customers continued to make strategic investments in new capacity and new technology transitions during fiscal 2023. Foundry and logic spending increased in fiscal 2023 compared to fiscal 2022 primarily driven by customer investment in mature manufacturing nodes to serve demand across a wide range of products. Spending by memory customers decreased in fiscal 2023 compared to fiscal 2022 due to deferred capacity additions primarily as a result of weakness in demand for consumer electronic products. Operating margin for fiscal 2023 decreased compared to fiscal 2022, primarily driven by increased RD&E expenses, higher inventory charges, the impact of export regulations, partially offset by favorable changes in customer and product mix, an increase in average selling prices and lower freight and logistics costs. Foundry and logic spending increased in fiscal 2022 compared to fiscal 2021 driven by customer investment in both advanced and mature nodes. Spending by DRAM customers increased and flash memory customers decreased in fiscal 2022 compared to fiscal 2021 due to changes in investments in new technology and capacity. Operating margin for fiscal 2022 decreased compared to fiscal 2021, primarily driven by higher material, freight, logistics costs and higher personnel costs due to the hiring of additional headcount to provide manufacturing capacity and flexibility, partially offset by favorable changes in product mix and an increase in average selling prices. 40 40 40 40 40 40 Table of Contents Table of Contents Table of Contents", "prior_body": "The Semiconductor Systems segment is comprised primarily of capital equipment used to fabricate semiconductor chips. Semiconductor industry spending on capital equipment is driven by demand for electronic products, including smartphones and other mobile devices, servers, personal computers, automotive electronics, storage, and other products, and the nature and timing of technological advances in fabrication processes, and as a result is subject to variable industry conditions. Development efforts are focused on solving customers’ key technical challenges in transistor, interconnect, patterning and packaging performance. Certain significant measures for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions, except percentages and ratios)Net sales$18,797 $16,286 $11,367 $2,511 15 %$4,919 43 %Operating income$6,969 $6,311 $3,714 $658 10 %$2,597 70 %Operating margin37.1 %38.8 %32.7 %(1.7) points6.1 points Net sales for Semiconductor Systems by end use application for the periods indicated were as follows: 202220212020Foundry, logic and other66 %60 %59 %Dynamic random-access memory (DRAM)19 %19 %20 %Flash memory15 %21 %21 %100 %100 %100 % Semiconductor equipment customers continued to make strategic investments in new technology transitions and new capacity during fiscal 2022. Foundry and logic spending increased in fiscal 2022 compared to fiscal 2021 driven by customer investment in both advanced and mature nodes. Spending by DRAM customers increased and flash memory customers decreased in fiscal 2022 compared to fiscal 2021 due to changes in investments in new technology and capacity. Operating margin for fiscal 2022 decreased compared to fiscal 2021, primarily driven by higher material, freight, logistics costs and higher personnel costs due to the hiring of additional headcount to provide manufacturing capacity and flexibility, partially offset by favorable changes in product mix and an increase in average selling prices. In fiscal 2022, three customers each accounted for at least 10 percent of this segment’s total net sales, and together they accounted for approximately 49 percent of this segment’s total net sales. Foundry and logic spending increased in fiscal 2021 compared to fiscal 2020 driven by customer investment in both advanced and mature nodes. Spending by memory customers also increased in fiscal 2021 compared to the prior year. Operating margin for fiscal 2021 increased compared to fiscal 2020, primarily reflecting higher net sales and favorable changes in customer and product mix, partially offset by higher personnel costs due to the hiring of additional headcount to provide manufacturing capacity and flexibility, and higher freight costs. There was no single region that accounted for at least 30 percent of total net sales for the Semiconductor Systems segment for any of the past three fiscal years. 41 41 41 41 41 41 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "Performance Graph", "prior_title": "Performance Graph", "similarity_score": 0.691, "confidence": "medium", "key_changes": [ "Reworded sentence: \"The performance graph below shows the five-year cumulative total stockholder return on our common stock during the period from October 28, 2018 through October 29, 2023.\"", "Reworded sentence: \"The comparison assumes $100 was invested on October 28, 2018 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.\"", "Reworded sentence: \"The graph below assumes that the value of the investment in our common stock and in each of the indexes was $100 at October 28, 2018, and that all dividends were reinvested.\"" ], "current_body": "The performance graph below shows the five-year cumulative total stockholder return on our common stock during the period from October 28, 2018 through October 29, 2023. This is compared with the cumulative total return of the Standard & Poor’s 500 Stock Index and the PHLX Semiconductor Index over the same period. The comparison assumes $100 was invested on October 28, 2018 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph represents past performance and should not be considered an indication of future performance. The graph below assumes that the value of the investment in our common stock and in each of the indexes was $100 at October 28, 2018, and that all dividends were reinvested. Copyright© 2023 Standard & Poor’s, a division of S&P global. All rights reserved. 10/28/201810/27/201910/25/202010/31/202110/30/202210/29/2023Applied Materials100.00 175.74 194.93 440.65 291.76 431.02 S&P 500 Index100.00 116.03 135.57 182.86 157.30 168.81 PHLX Semiconductor Index100.00 145.93 212.58 314.91 225.17 302.44 32 32 32 32 32 32 Table of Contents Table of Contents Table of Contents", "prior_body": "The performance graph below shows the five-year cumulative total stockholder return on Applied common stock during the period from October 29, 2017 through October 30, 2022. This is compared with the cumulative total return of the Standard & Poor’s 500 Stock Index and the PHLX Semiconductor Index over the same period. The comparison assumes $100 was invested on October 29, 2017 in Applied common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph represents past performance and should not be considered an indication of future performance. The graph below assumes that the value of the investment in Applied’s common stock and in each of the indexes was $100 at October 29, 2017, and that all dividends were reinvested. Copyright© 2022 Standard & Poor’s, a division of S&P global. All rights reserved. 10/29/201710/28/201810/27/201910/25/202010/31/202110/30/2022Applied Materials100.00 57.78 101.54 112.63 254.61 168.58 S&P 500 Index100.00 105.01 121.84 142.35 192.01 165.18 PHLX Semiconductor Index100.00 92.86 135.50 197.40 292.41 209.08 33 33 33 33 33 33 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "Income Taxes", "prior_title": "Income Taxes", "similarity_score": 0.657, "confidence": "medium", "key_changes": [ "Reworded sentence: \"Provision for income taxes and effective tax rates for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages)Provision for income taxes$860 $1,074 $883 $(214)$191 Effective income tax rate11.1 %14.1 %13.0 %(3.0) points1.1 points Our provision for income taxes and effective tax rate are affected by the geographical composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates and other income tax incentives.\"", "Added sentence: \"The effective tax rate for fiscal 2023 was lower than fiscal 2022 primarily due to a reduction of deferred tax assets that occurred in fiscal 2022, related to a new tax incentive in Singapore.\"", "Reworded sentence: \"Beginning in our fiscal 2023, the Tax Cuts and Jobs Act (Tax Act), enacted on December 22, 2017, eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years for activities performed in the U.S.\"" ], "current_body": "Provision for income taxes and effective tax rates for the periods indicated were as follows: Change 2023202220212023 over 20222022 over 2021 (In millions, except percentages)Provision for income taxes$860 $1,074 $883 $(214)$191 Effective income tax rate11.1 %14.1 %13.0 %(3.0) points1.1 points Our provision for income taxes and effective tax rate are affected by the geographical composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates and other income tax incentives. It is also affected by events that vary from period to period, such as changes in income tax laws and the resolution of prior years’ income tax filings. The effective tax rate for fiscal 2023 was lower than fiscal 2022 primarily due to a reduction of deferred tax assets that occurred in fiscal 2022, related to a new tax incentive in Singapore. The effective tax rate for fiscal 2022 was higher than fiscal 2021 primarily due to a reduction of deferred tax assets related to a new tax incentive in Singapore, partially offset by changes in uncertain tax positions. Beginning in our fiscal 2023, the Tax Cuts and Jobs Act (Tax Act), enacted on December 22, 2017, eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years for activities performed in the U.S. or fifteen years for activities performed outside of the U.S. This capitalization requirement increases our effective tax rates, deferred tax assets and cash tax liabilities beginning in fiscal 2023. 39 39 39 39 39 39 Table of Contents Table of Contents Table of Contents", "prior_body": "Provision for income taxes and effective tax rates for the periods indicated were as follows: Change 2022202120202022 over 20212021 over 2020 (In millions, except percentages)Provision for income taxes$1,074 $883 $547 $191 $336 Effective income tax rate14.1 %13.0 %13.1 %1.1 points(0.1) points Applied’s provision for income taxes and effective tax rate are affected by the geographical composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates and other income tax incentives. It is also affected by events that vary from period to period, such as changes in income tax laws and the resolution of prior years’ income tax filings. The effective tax rate for fiscal 2022 was higher than fiscal 2021 primarily due to a reduction of deferred tax assets related to a new tax incentive in Singapore, partially offset by changes in uncertain tax positions. Applied’s effective tax rate for fiscal 2021 was slightly lower than fiscal 2020 primarily due to higher proportion of pre-tax income in lower tax jurisdictions, partially offset by resolutions of prior years’ income tax filings. On August 9, 2022, the U.S. government enacted the U.S. CHIPS and Science Act (“CHIPS Act”). The CHIPS Act creates a 25% investment tax credit for certain investments in domestic semiconductor manufacturing. The credit is provided for qualifying property, which is placed in service after December 31, 2022, and any impact to Applied would start in fiscal 2023. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act. The Inflation Reduction Act introduces a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations. Applicable corporations would be allowed to claim a credit for the minimum tax paid against regular tax in future years. The minimum tax impacts Applied starting in fiscal 2024. The Inflation Reduction Act also includes an excise tax that would impose a 1% surcharge on stock repurchases. This excise tax is effective January 1, 2023. Applied is currently evaluating the effect the CHIPS Act and the Inflation Reduction Act will have on its consolidated financial statements. 40 40 40 40 40 40 Table of Contents Table of Contents Table of Contents" }, { "status": "MODIFIED", "current_title": "The industries we serve can be volatile and difficult to predict.", "prior_title": "The industries that Applied serves can be volatile and difficult to predict.", "similarity_score": 0.64, "confidence": "medium", "key_changes": [ "Reworded sentence: \"We are a supplier to the global semiconductor and display and related industries, which historically have been cyclical and are subject to volatility and sudden changes in customer demand.\"" ], "current_body": "We are a supplier to the global semiconductor and display and related industries, which historically have been cyclical and are subject to volatility and sudden changes in customer demand. Factors that impact demand for our products and services include technology inflections and advances in fabrication processes, new and emerging technologies and market drivers, production capacity relative to demand for chips and display technologies, end-user demand, customers’ capacity utilization, production volumes, access to affordable capital, business and consumer buying patterns and general economic and political conditions. Changes in demand can affect the timing and amounts of customer investments in technology and manufacturing equipment and can significantly impact our operating results. The amount and mix of our customers’ capital equipment spending between different products and technologies can also significantly impact our operating results. To meet rapidly changing demand, we must accurately forecast demand and effectively manage our resources, investments, production capacity, supply chain, workforce, inventory, and other components of our business. We may incur unexpected or additional costs to align our business operations with changes in demand. If we do not effectively manage these challenges, our business performance and operating results may be adversely impacted. Even with effective allocation of resources and management of costs, our gross and operating margins, cash flows and earnings may be adversely impacted during periods of changing demand.", "prior_body": "As a supplier to the global semiconductor and display and related industries, Applied is subject to variable industry conditions, since demand for manufacturing equipment and services can change depending on several factors, including the nature and timing of technology inflections and advances in fabrication processes, the timing and requirements of new and emerging technologies and market drivers, production capacity relative to demand for chips and display technologies, end-user demand, customers’ capacity utilization, production volumes, access to affordable capital, consumer buying patterns and general economic and political conditions. Applied’s industries historically have been cyclical, and are subject to volatility and sudden changes in customer requirements for new manufacturing capacity and advanced technology. These changes can affect the timing and amounts of customer investments in technology and manufacturing equipment and can have a significant impact on Applied’s net sales, operating expenses, gross margins and net income. The amount and mix of capital equipment spending between different products and technologies can have a significant impact on Applied’s results of operations. To meet rapidly changing demand in the industries it serves, Applied must accurately forecast demand and effectively manage its resources and production capacity across its businesses, and may incur unexpected or additional costs to align its business operations. During periods of increasing demand for its products, Applied must have sufficient manufacturing capacity and inventory to meet customer demand; effectively manage its supply chain; attract, retain and motivate a sufficient number of qualified employees; and continue to control costs. During periods of decreasing demand, Applied must reduce costs and align its cost structure with prevailing market conditions; effectively manage its supply chain; and motivate and retain key employees. If Applied does not effectively manage these challenges during periods of changing demand, its business performance and results of operations may be adversely impacted. Even with effective allocation of resources and management of costs, during periods of decreasing demand, Applied’s gross margins, cash flows and earnings may be adversely impacted." }, { "status": "MODIFIED", "current_title": "Issuer Purchases of Equity Securities", "prior_title": "Issuer Purchases of Equity Securities", "similarity_score": 0.572, "confidence": "low", "key_changes": [ "Reworded sentence: \"In March 2023, our Board of Directors approved a common stock repurchase program authorizing $10.0 billion in repurchases, which supplemented the previously existing $6.0 billion authorization approved in March 2022.\"" ], "current_body": "In March 2023, our Board of Directors approved a common stock repurchase program authorizing $10.0 billion in repurchases, which supplemented the previously existing $6.0 billion authorization approved in March 2022. At October 29, 2023, approximately $12.7 billion remained available for future stock repurchases under the repurchase program. The following table provides information as of October 29, 2023 with respect to the shares of common stock repurchased by us during the fourth quarter of fiscal 2023 pursuant to the foregoing Board authorization. PeriodTotal Number of Shares PurchasedAveragePrice Paidper Share*AggregatePrice Paid*Total Number ofShares Purchased asPart of PubliclyAnnounced Programs Maximum DollarValue of SharesThat May Yet bePurchased Underthe Programs* (In millions, except per share amounts)Month #1(July 31, 2023 to August 27, 2023)0.3 $147.17 $50 0.3 $13,375 Month #2(August 28, 2023 to September 24, 2023)1.6 $144.00 226 1.6 $13,149 Month #3(September 25, 2023 to October 29, 2023)3.2 $136.43 429 3.2 $12,720 Total5.1 $139.50 $705 5.1 Average Price Paid", "prior_body": "In March 2022, Applied’s Board of Directors approved a common stock repurchase program authorizing $6.0 billion in repurchases, which supplemented the previously existing $7.5 billion authorization approved in March 2021. The following table provides information as of October 30, 2022 with respect to the shares of common stock repurchased by Applied during the fourth quarter of fiscal 2022 pursuant to the foregoing Board authorization. PeriodTotal Number of Shares PurchasedAveragePrice Paidper ShareAggregatePrice PaidTotal Number ofShares Purchased asPart of PubliclyAnnounced Programs Maximum DollarValue of SharesThat May Yet bePurchased Underthe Programs (In millions, except per share amounts)Month #1(August 1, 2022 to August 28, 2022)2.2 $106.73 $230 2.2 $6,192 Month #2(August 29, 2022 to September 25, 2022)5.4 $90.52 493 5.4 $5,699 Month #3(September 26, 2022 to October 30, 2022)9.4 $82.36 777 9.4 $4,922 Total17.0 $88.05 $1,500 17.0 Item 6: [Reserved] 34 34 34 34 34 34 Table of Contents Table of Contents Table of Contents Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations" }, { "status": "UNCHANGED", "current_title": "Segment Information", "prior_title": "Segment Information", "current_body": "We report financial results in three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. A description of the products and services, as well as financial data, for each reportable segment can be found in Note 16 of Notes to Consolidated Financial Statements. The Corporate and Other category includes revenues from products, as well as costs of products sold, for fabricating solar photovoltaic cells and modules and certain operating expenses that are not allocated to our reportable segments and are managed separately at the corporate level. These operating expenses include costs for share-based compensation; certain management, finance, legal, human resource, and RD&E functions provided at the corporate level; and unabsorbed information technology and occupancy. In addition, we do not allocate to our reportable segments restructuring, severance and asset impairment charges and any associated adjustments related to restructuring actions, unless these actions pertain to a specific reportable segment. The results for each reportable segment are discussed below." }, { "status": "UNCHANGED", "current_title": "Global trade issues and changes in and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions, tariffs and international trade disputes, have adversely impacted and could further adversely impact our business and operations, and reduce the competitiveness of our products relative to local and global competitors.", "prior_title": "Global trade issues and changes in and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions, tariffs and international trade disputes, have adversely impacted and could further adversely impact our business and operations, and reduce the competitiveness of our products relative to local and global competitors.", "current_body": "We sell a significant majority of our products into jurisdictions outside of the United States, including China, Taiwan, Korea and Japan. We also purchase a significant portion of equipment and supplies from suppliers outside of the United States. There is inherent risk, based on the complex relationships among the United States and the countries in which we conduct our business, that political, diplomatic, and national security factors can lead to global trade restrictions and changes in trade policies and export regulations, in particular, with respect to those affecting the semiconductor industry. The United States and other countries have imposed and may continue to impose new trade restrictions and export regulations, and have levied tariffs and taxes on certain goods. Trade restrictions and export regulations, or increases in tariffs and additional taxes, including any retaliatory measures, can negatively impact end-user demand and customer investment in manufacturing equipment, increase our supply chain complexity and our manufacturing costs, decrease margins, reduce the competitiveness of our products, or restrict our ability to sell products, provide services or purchase necessary equipment and supplies, any or all of which could have a material and adverse effect on our business, results of operations, or financial condition. For example, certain international sales depend on our ability to obtain export licenses, and our inability to obtain such licenses has limited and could further limit our markets and negatively impact our business. In the past two years, the U.S. government announced new export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment and related parts and services, which have limited the market for certain of our products, adversely impacted our revenues, and increased our exposure to foreign competition. The U.S. Department of Commerce has promulgated rules and regulations expanding export license requirements for U.S. companies that sell certain products to entities in China whose actions or functions are intended to support military end uses, eliminated certain export license exceptions that applied to exports of certain items to China, added certain Chinese companies to its “Entity List” and “Unverified List,” making those companies subject to additional licensing requirements, and expanded licensing requirements for exports to China of items for use in the development or production of integrated circuits and certain technologies. These rules and regulations require us to obtain additional export licenses to supply certain of our products or provide services to certain customers in China. Obtaining export licenses may be difficult, costly and time-consuming, and there is no assurance we will be issued licenses on a timely basis or at all. Our inability to obtain such licenses could limit our markets in China, may cause us to be displaced by foreign businesses and competitors and adversely affect our results of operations. The implementation and interpretation of these complex rules and other regulatory actions taken by the U.S. government is uncertain and evolving, and may make it more challenging for us to manage our operations and forecast our operating results. The U.S. and other government agencies may promulgate new or additional export licensing or other requirements that have the effect of further limiting our ability to provide certain products and services to customers outside the U.S., including China. The U.S. government may also revise or expand existing requirements or issue guidance clarifying the scope and application of these requirements, which could change the impact of these rules on our business and manufacturing operations. The U.S. government may also continue to add customers to its “Entity List” and “Unverified List,” or take measures that could disrupt our product shipments to certain customers. These and other potential future regulatory changes could materially and adversely affect our business, results of operations or financial condition. As a global business with customers, suppliers and operations in many countries around the world, from time to time we may receive inquiries from government authorities about transactions between us and certain foreign entities. In August 2022, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts requesting information relating to certain China customer shipments. In November 2023, we received a subpoena from the U.S. Commerce Department’s Bureau of Industry and Security requesting the same information. We are cooperating fully with the government in these matters. These inquiries are subject to uncertainties, and we cannot predict the outcome of these inquiries, or any other governmental inquires or proceedings that may occur. Any violation or alleged violation of law or regulations could result in significant legal costs or in legal proceedings in which we or our employees could be subjected to fines and penalties and could result in restrictions on our business and damage to our global brand and reputation, and could have a material and adverse impact on our business operations, financial condition and results of operations. Furthermore, government authorities may take retaliatory actions, impose conditions that require the use of local suppliers or partnerships with local companies, require the license or other transfer of sensitive data or intellectual property, or engage in other efforts to promote local businesses and local competitors, which could have a material and adverse impact on our business. Many of these challenges are present in China and Korea, markets that represent a significant portion of our business." }, { "status": "UNCHANGED", "current_title": "We may incur impairment charges related to goodwill or long-lived assets.", "prior_title": "Applied may incur impairment charges related to goodwill or long-lived assets.", "current_body": "We have a significant amount of goodwill and other acquired intangible assets related to acquisitions. Goodwill and purchased intangible assets with indefinite useful lives are not amortized, but are reviewed for impairment annually during the fourth quarter of each fiscal year, and more frequently when events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The review compares the fair value for each of our reporting units to its associated carrying value, including goodwill. Factors that could lead to impairment of goodwill and intangible assets include adverse industry or economic trends, reduced estimates of future cash flows, declines in the market price of our common stock, changes in our strategies or product portfolio, and restructuring activities. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and projections of future operating performance. We may be required to record future charges to earnings during the period in which an impairment of goodwill or intangible assets is determined to exist." } ] }