Anger mounts as Applied puts SunFab on notice

Applied expands in Asia
Applied itself hopes to be profitable in solar this year. Like most companies, Applied has been hit hard by the solar downturn. But to return to profitability, the company has moved many of its solar--and other units--outside the U.S.

In late 2008, for example, Applied broke ground for the construction of a new operations facility in Singapore. The facility will serve as a hub for Applied throughout Asia. The roughly 300,000-square-meter facility is located in the Changi North Industrial Park.

Then, in October of 2009, Applied opened what it described as the largest non-government solar energy research facility in the world in Xi'an, China. Applied first broke ground in Xi'an in 2006. The total investment in the multi-phase project is more than $250 million dollars. Xian is roughly a 150,000-square-foot plant.

Mark Pinto, senior vice president and chief technology officer, relocated from Santa Clara to Beijing, China, in January 2009. He will continue to lead both the Energy and Display Systems (EDS) business and the office of the CTO from China.

To a large degree, Applied's shift to Asia makes sense. ''With around 70 percent of our revenue coming from Asia and many of our customers and suppliers based there, it is essential to establish executive leadership in the region,'' Splinter said in an internal memo last year, which was obtained by EE Times. ''China itself already accounts for more than 40 percent of the world's production of solar panels, with that number expected to grow, and 100 percent of our display revenue is generated from Asia.''

Continuing to embark upon its expansion program in Asia, Applied in March opened its expanded Tainan Manufacturing Center in Tainan, Taiwan. The nearly 150,000-square-meter facility will ''enhance'' Applied's capability to serve its flat-panel and thin-film solar customers in Asia, according to the company.

''We must look forward, focusing our employees on 'The Future Applied' and positioning our company for the opportunities ahead,'' Splinter said in another memo, which was also obtained by EE Times.

''Applied is in the midst of a transition of its manufacturing/supply chain to Asia. While semiconductor related manufacturing would be moved to Singapore as well as China, solar related manufacturing and research is being relocated to Xi'an, China and display related manufacturing to Taiwan. Singapore will also likely serve as a supply chain co-ordination hub,'' said C.J. Muse, an analyst with Barclays Capital, in a recent report.

Applied's service and supply chain unit ''transition to Asia (Asia-based employees will expand from 42 percent in 2008 to 65 percent in 2012; local sourcing will grow from 18 percent to 55 percent in 2012; and authorized partners will expand from 2 to 50 in 2012),'' Muse said.

What's next? ''AMAT is moving the majority of the company overseas,'' according to one employee. ''They want to close down multiple campus sites here in Santa Clara. Trust me, more layoffs are coming.''

Needless to say, many of Applied's U.S. employees are upset. ''It is pretty obvious that the 'Future Applied' does not include the U.S. workers here that have built that company,'' according to one employee.

Applied ''is destroying what Jim Morgan and all us old timers spent most of our lives building. It is sad,'' according to another employee, referring to former CEO Morgan.

On the bright side, Applied recently raised its outlook for 2010. Applied now expects fiscal 2010 net sales to be more than 60 percent higher than in fiscal 2009 -- compared to its previous forecast of up more than 50 percent.

The company's fab tool business is expected to grow greater than 120 percent in 2010, compared to greater than 100 percent in the previous forecast. Its service business is expected to grow greater than 35 percent in 2010, compared to 30 percent in the previous forecast.

Its display business is expected to grow greater than 50 percent in 2010, compared to 30 percent in the previous forecast. Its solar business is expected to grow greater than 5 percent in 2010, compared to flat to minus or plus 10 percent in the previous forecast.