Gary Dickerson
President and CEO at Applied Materials
Thanks, Mike. With record revenues in our third quarter and earnings toward the high end of our guided range, Applied Materials continues to deliver strong results in 2024. Secular trends are growing our available market and our unique and connected portfolio of capabilities, products, and services positions us to outperform the industry over the longer term. At our recent investor event at SEMICON West, leaders from our semiconductor business shared their perspective on the powerful multi-decade technology trends driving the industry forward and explained the role Applied is playing to enable the next generations of semiconductor technology.
In today's call, I will summarize some of the key themes we talked about at that event, including how advancing energy-efficient computing performance is critical to deploying AI at scale, why the energy-efficient computing roadmap is increasingly enabled by Materials Engineering and Applied Materials, and how we're working in new ways to accelerate this complex roadmap and create new growth opportunities for Applied. Semiconductors provide the foundation for tectonic shifts in technology that will reshape the global economy over the next several decades, including AI, IoT, robotics, electric and autonomous vehicles, and clean energy.
These multi-trillion dollar global inflections are increasing demand for chips and driving the need for significant advances in semiconductor technology. The biggest tectonic shift of all is AI and the race for AI leadership will in large part be determined by which companies in the semiconductor industry are first to deliver substantial improvements in energy-efficient compute performance.
In our discussions with leading AI companies, they are telling us that reducing power per operation is now more important than increasing operations per second. They are also talking about the need to drive a 10,000 times improvement in performance per watt over the next 15 years. Evolutionary innovation is insufficient to deliver improvements of this magnitude and we're seeing the emergence of a new industry playbook made up of major device architecture inflections in logic, memory, and advanced packaging. These device architecture inflections are increasingly enabled by materials science and materials engineering were applied as the clear market and technology leader.
For AI, the advanced chips in the data center used for training AI models are built upon four critical categories of semiconductor technology, leading-edge logic, high-performance DRAM, high-bandwidth memory enabled by die-stacking technology and advanced packaging to connect the logic and memory chips together in a single integrated package. In leading-edge logic, key device inflections in both transistor and interconnect are currently moving from chipmaker's R&D pilot lines to high-volume production.
The transition from FinFET to Gate-All-Around transistors grows Applied's available market for the transistor module from around $6 billion to approximately $7 billion for every 100,000 wafer starts per month of capacity. We also expect to gain share through the Gate-All-Around transition and we're on track to capture more than 50% of the process equipment spending for the transistor fabrication steps. For the interconnect module, our available market is also about $6 billion for every 100,000 wafer starts per month. We forecast this will also grow by about $1 billion with the implementation of backside power delivery, and we expect to win more than 50% of the applications we address in interconnect when backside power ramps in volume manufacturing.
In DRAM, we've also established clear leadership in-process equipment and are in a great position for future growth. Over the past decade, we've grown our market share in DRAM by around 10 points. As DRAM plays a critical role in energy-efficient computing performance, there is a huge focus on advancing the roadmap. The next major DRAM inflection from 6F squared to 4F squared or vertical transistor architectures is materials-enabled and we expect our market opportunity to grow by approximately 10% to around $6.5 billion for each 100,000 wafer starts per month of capacity. We also expect to increase our share based on our position to enable the 4F squared inflection.
In addition, we believe the subsequent transition to 3D DRAM will grow our addressable market by an incremental 15% further compounding Applied's opportunity. In the die-stacking technologies that enable high-bandwidth memory, we also have strong leadership positions, both in micro-bump and Through Silicon Via. We have seen demand for high-bandwidth memory accelerating in 2024 and expect to generate more than $600 million of HBM packaging revenue this year, which is approximately six times 2023.
Overall, including HBM, we expect revenue from our advanced packaging product portfolio to grow to approximately $1.7 billion in 2024. We believe this business can double in size over the next several years as heterogeneous integration is more widely adopted and we introduced new solutions that grow our addressable market. Advanced logic, high-performance DRAM, high-bandwidth memory, and advanced packaging are all great examples of how future device architecture inflections are increasingly enabled by materials engineering. As a result, we expect materials engineering as a percentage of total wafer fab equipment to grow in both logic and memory through the coming node transitions.
At the same time, thanks to our inflection-focused approach to R&D and the strong positions we've established at these future device architecture inflections, we expect to capture more of the expanded opportunities we serve. The value of bringing next-generation semiconductor technology to market faster has never been greater. At Applied, our strategy and investments are focused on accelerating the industry's roadmap to support the highest-growth rate global inflections, spanning AI data centers, edge AI and IoT, robotics, electric vehicles, and clean energy. This strategy is enabled by three pillars.
First, we have built a broad, unique, and connected portfolio of highly enabling technologies as well as providing traditional best-in-class unit processes, we can co-optimize, combine, and integrate our technologies to deliver more comprehensive solutions that address higher-value challenges for our customers. These integrated fab-in-a-fab solutions have grown from approximately 20% of our semiconductor products revenue in 2019 to around 30% today. We expect demand for our integrated products to continue growing, both at the leading edge and from our ICAPS customers who are serving specialty markets.
Second, we are changing the way we work inside and outside the Company. Over the past five years, we have built new capabilities and dedicated teams focused on module integration, device design and simulation, data analytics and AI, advanced packaging, and ICAPS. At the same time, we are driving earlier, deeper, and more extensive collaboration with our customers and partners to win the device architecture inflection races, accelerate mutual success rates, and increase investment efficiencies. To further support these collaborative partnerships, we will build out our global EPIC platform over the next several years, which is specifically designed for high-velocity innovation and commercialization of next-generation technologies.
And third, we are helping customers transfer new technology into high-volume manufacturing faster and then optimize performance, yield, output, and cost in their factory operations. This is supporting double-digit growth in services with a high percentage of our service revenue coming from subscriptions in the form of long-term agreements. Overall, AGS delivered another record quarter, which is their 20th consecutive quarter of year-on-year growth.
Before I hand over to Brice, I'll quickly summarize. Applied Materials is delivering record results in 2024, and we're in a great position to benefit from secular growth trends over the longer term. Semiconductors are the foundation for tectonic shifts in technology, which will reshape the global economy over the next several decades. This is driving increasing demand for chips as well as the need for significant advances in semiconductor innovation. The race for AI leadership depends on delivering significant improvements in energy-efficient compute performance in the range of 10,000 times over the next 15 years. The need for more energy-efficient compute is driving major device architecture inflections within the semiconductor roadmap that are enabled by materials engineering and Applied Materials innovations. This expands our served market and is accretive to our share. And the increasingly complex industry roadmap creates new collaboration and growth opportunities for Applied, enabled by our broad, unique, and connected portfolio of capabilities, products, and services.
Finally, as you may be aware, Mike Sullivan will be retiring at the end of this calendar year and handing the reigns to Liz Morali, who recently joined Applied as our new head of Investor Relations. I would like to say a huge thank you to Mike for his many contributions to the success of our Company and congratulate him on an outstanding career.
Now, over to Brice.
