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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.     )
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
 
 
Preliminary Proxy Statement
 
 
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
 
Definitive Proxy Statement
 
 
Definitive Additional Materials
 
 
Soliciting Material Pursuant to §240.14a-12
Applied Materials, Inc.
 
 
(Name of Registrant as Specified In Its Charter)
 
 
 
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
 
 
No fee required.
 
 
Fee paid previously with preliminary materials:
 
 
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.


LOGO


LOGO   

Applied Materials, Inc.

3050 Bowers Avenue

Santa Clara, California 95054

(408) 727-5555

January 24, 2024

Dear Fellow Shareholders:

On behalf of the Board of Directors, we are pleased to invite you to attend Applied Materials’ 2024 Annual Meeting of Shareholders, which will be held on Thursday, March 7, 2024, at 10:00 a.m. Central Time at our offices at 9700 US 290 East, Building 37, Austin, Texas 78724.

We encourage you to read this Proxy Statement because it contains important information for voting your shares and sets forth how the Board oversaw your investment over the past year. This year’s Proxy Statement reflects our continued focus on our business strategy, an engaged and effective Board, sound corporate governance and executive compensation practices, our sustainability strategy, and our regular dialogue with and responsiveness to our shareholders.

Financial Performance and Business Strategy

In fiscal 2023, Applied Materials delivered record revenue, earnings and cash flow, and we are outgrowing the wafer fabrication equipment market for the fifth year in a row. Our revenue increased 3% and earnings per share increased 9% year-over-year, despite semiconductor and wafer fabrication equipment spending both being down in 2023.

As we look ahead, we remain very positive about our long-term growth opportunities. Semiconductors are the foundation of digital transformation that will affect nearly every sector of the global economy in the coming years. The strategic importance of semiconductors is increasing throughout the world, and Applied Materials is in a great position to benefit from this exciting period of industry innovation and growth. We have the industry’s broadest portfolio of products and technologies that enable improvements in chip performance and power consumption, and we are collaborating closely with our customers to accelerate development and commercialization of next-generation technologies.

Making Possible a Better Future

We also continued to make strong progress towards our 10-year sustainability roadmap, which considers our direct impact and how we run our business (1X), our industry’s impact and those of our customers and suppliers (100X), and how our technology can be used to advance sustainability on a global scale (10,000X). Among our other achievements, we continued to make progress toward our 2030 greenhouse gas emission goals – which were validated in 2023 by the Science Based Targets initiative, strengthen our culture of inclusion, and accelerate sustainable innovation, including improving the energy efficiency and longevity of our products. We also designed and deployed a Net Zero 2040 Playbook to work collaboratively across our industry to reduce and mitigate our climate impact. We are committed to significantly reducing our impacts by bringing improved efficiency across our global operations, using cleaner, renewable energy and enabling groundbreaking technology innovation.

An Independent, Diverse and Skilled Board

This year’s director nominees possess a wide range of backgrounds, skills and experience, and further our Board’s commitment to maintain a composition that aligns with the Company’s evolving business and strategic needs. With a balance of tenures, a diversity of personal characteristics and experiences, and a range of skills – including relevant subject matter expertise – our Board is well-positioned to oversee Applied’s management team and support Applied’s long-term strategy. This Proxy Statement also includes information about the Board’s governance practices – including its active and ongoing Board refreshment process, annual self-evaluation, independent leadership and committee practices – that foster this effective oversight.

Robust Shareholder Engagement

We remain committed to effective corporate governance that is informed by our shareholders, promotes the long-term interests of our Company and its shareholders, and strengthens the Board’s and management’s accountability. Our corporate governance practices are enhanced by a robust shareholder engagement program, which includes regular outreach to holders of more than half of our outstanding shares. Our shareholder engagement program focuses on issues of interest to our shareholders, particularly in the areas of governance, compensation, environmental sustainability, and human capital matters such as diversity, equity and inclusion. Shareholder feedback continues to directly inform the Board’s decision-making on a variety of important matters.

Thank you for your continued investment in and support of Applied Materials.

Sincerely,

 

LOGO

 

Thomas J. Iannotti

 

Chairman of the Board

  

LOGO

 

Gary E. Dickerson

 

President and Chief Executive Officer


Notice of 2024 Annual Meeting of Shareholders

 

LOGO           When     

 

Thursday, March 7, 2024 at 10:00 a.m. Central Time

 

     

 

LOGO     

     Where     

 

Applied Materials, Inc., 9700 US 290 East, Building 37, Austin, Texas 78724

 

     
LOGO          
Who
Can Vote
 
 
  

 

Shareholders of record at the close of business on January 10, 2024 and holders of proxies for those shareholders

 

Items of Business

 

1.  To elect ten directors to serve for a one-year term and until their successors have been duly elected and qualified.

2.  To approve, on an advisory basis, the compensation of our named executive officers for fiscal year 2023.

4.  To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2024.

5.  To consider two shareholder proposals, if properly presented at the Annual Meeting.

6.  To transact any other business that may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting.

Your vote is important to us. You may vote via the Internet or by telephone, or if you requested to receive printed proxy materials, by signing, dating and returning your proxy card. If you are voting via the Internet or by telephone, your vote must be received by 11:59 p.m. Eastern Time on Wednesday, March 6, 2024. For specific voting instructions, please refer to the information provided in the following Proxy Statement, together with your proxy card or the voting instructions you receive by e-mail or that are provided via the Internet.

If you received a Notice of Internet Availability of Proxy Materials on how to access the proxy materials via the Internet, a proxy card was not sent to you, and you may vote only via the Internet, unless you have requested a paper copy of the proxy materials, in which case, you may also vote by telephone or by signing, dating and returning your proxy card. Shares cannot be voted by marking, writing on and returning the Notice of Internet Availability. Any Notices of Internet Availability that are returned will not be counted as votes. Instructions for requesting a paper copy of the proxy materials are set forth on the Notice of Internet Availability.

By Order of the Board of Directors

Teri A. Little

Senior Vice President,

Chief Legal Officer and Corporate Secretary

Santa Clara, California

January 24, 2024

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on March 7, 2024: The Proxy Statement and Annual Report to Shareholders are available at www.proxyvote.com.


Table of Contents

 

   

Page

2024 Proxy Statement Summary     i  

Annual Meeting of Shareholders

    i  

Proposals and Board Recommendations

    i  

Director Nominees

    ii  

Board Practices and Composition

    iii  

Corporate Governance

    iv  

Executive Compensation

    v  

Our Commitment to Sustainability

    xi  
Proposal 1 – Election of Directors     1  

Nominees

    1  
Board and Corporate Governance Practices     12  

Board Composition and Nominee Considerations

    12  

Nominee Skills and Experience

    12  

Board Matrix

    13  

Board Composition and Refreshment

    15  

Corporate Governance

    17  

Corporate Governance Guidelines

    17  

Board Leadership

    17  

Director Onboarding and Education

    18  

Board and Committee Evaluations

    18  

Board’s Role in Risk Oversight

    20  

Board’s Role in Oversight of Strategy

    21  

Management Succession Planning

    21  

Shareholder Rights

    22  

Shareholder Engagement

    22  

Shareholder Communications

    24  

Stock Ownership Guidelines

    24  

Standards of Business Conduct

    24  

Board Meetings and Committees

    24  
Director Compensation     26  

Compensation Program for Directors

    26  

Director Compensation for Fiscal 2023

    28  
Stock Ownership Information     29  

Principal Shareholders

    29  

Directors and Executive Officers

    30  
Proposal 2 – Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers     31  
Compensation Discussion and Analysis     32  

Executive Summary

    32  

Compensation Governance and Decision-Making Framework

    38  

Components of Total Direct Compensation

    39  

Additional Compensation Programs and Policies

    51  
   

Page

Human Resources and
Compensation Committee Report
    53  
Executive Compensation     54  

Summary Compensation Table for Fiscal 2023, 2022 and 2021

    54  

Grants of Plan-Based Awards for Fiscal 2023

    55  

Outstanding Equity Awards at Fiscal 2023 Year-End

    56  

Option Exercises and Stock Vested for Fiscal 2023

    57  

Non-Qualified Deferred Compensation

    58  

Employment Agreement

    58  

Potential Payments Upon Termination or Change of Control

    59  

CEO Pay Ratio

    60  

Pay Versus Performance

    61  

Certain Relationships and Related Transactions

    65  
Proposal 3 – Ratification of the Appointment of Independent Registered Public Accounting Firm     66  

Fees Paid to KPMG LLP

    66  

Policy on Audit Committee’s Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

    67  

Audit Committee Report

    67  
Proposal 4 – Shareholder Proposal Regarding Lobbying Report     69  

Shareholder Proposal

    69  

Board of Directors Statement in Opposition

    70  
Proposal 5 – Shareholder Proposal Regarding Pay Equity Reporting     72  

Shareholder Proposal

    72  

Board of Directors Statement in Opposition

    73  
Questions and Answers About the Proxy Statement and Our 2024 Annual Meeting     76  
Other Matters     81  

Shareholder Proposals or Nominations for 2025 Annual Meeting

    81  

No Incorporation by Reference

    81  
Appendix A: Unaudited Reconciliation of Non-GAAP Adjusted Financial Measures     A-1  

Reconciliation of non-GAAP adjusted financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, can be found in Appendix A.

 

 

Cautionary Note Regarding Forward-Looking Statements

This Proxy Statement contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business, strategies and financial performance, our investment and growth strategies, our development of new products and technologies, our sustainability goals and commitments, and other statements that are not historical fact, and actual results could differ materially. Risk factors that could cause actual results to differ are set forth in the “Risk Factors” section of, and elsewhere in, our 2023 Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. All forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof, and we undertake no obligation to update any such statements.


LOGO

 

         Proxy Statement Summary

    

 

2024 Proxy Statement Summary

Your proxy is being solicited on behalf of the Board of Directors of Applied Materials, Inc. We are making this Proxy Statement available to shareholders beginning on January 24, 2024. This summary highlights information contained in detail elsewhere in this Proxy Statement. We encourage you to read the entire Proxy Statement for more information prior to voting.

Annual Meeting of Shareholders

 

Date and Time:   March 7, 2024, 10:00 a.m. Central Time
Location:   Applied Materials, Inc., 9700 US 290 East, Building 37, Austin, Texas 78724
Record Date:   January 10, 2024
Voting:   Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on.
Attendance:   Shareholders and their duly appointed proxies may attend the meeting.

Proposals and Board Recommendations

 

  

 

  For More Information   Board Recommendation

 

PROPOSAL 1 – Election of Directors

  Pages 1 to 11  

 

LOGO

  FOR each Nominee

 

Rani Borkar

 

 

Gary E. Dickerson

 

 

  Yvonne McGill

Judy Bruner

  Thomas J. Iannotti  

  Scott A. McGregor

Xun (Eric) Chen

Aart J. de Geus

 

Alexander A. Karsner

Kevin P. March

 

 

PROPOSAL 2 – Executive Compensation

 

 

Page 31

 

LOGO

  FOR

 

Approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2023

 

PROPOSAL 3 – Ratification of Registered Accounting Firm

 

 

Page 66

 

LOGO

  FOR

 

Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2024

 

PROPOSAL 4 – Shareholder Proposal Regarding Lobbying Report

 

 

Pages 69 to 71

 

LOGO

  AGAINST

 

Shareholder proposal requesting that the Company prepare a report disclosing Company policy and procedures governing lobbying and payments by the Company used for lobbying

 

PROPOSAL 5 – Shareholder Proposal Regarding Pay Equity Reporting

 

 

Pages 72 to 75

 

LOGO

  AGAINST

 

Shareholder proposal requesting that the Company report on quantitative median and adjusted pay gaps across race and gender

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    i


LOGO

 

         Proxy Statement Summary

    

 

Director Nominees

 

Name and Occupation

 

 

Age

 

 

Director Since

 

 

Independent

 

 

Committees

 

Rani Borkar

Corporate Vice President, Azure Hardware Systems and Infrastructure, Microsoft Corporation

  62   2020  

LOGO

 

Compensation

Strategy and Investment

Judy Bruner

Executive Vice President, Administration and Chief Financial Officer, SanDisk Corporation (retired)

  65   2016  

LOGO

 

Audit (Chair)

Governance (Chair)

Xun (Eric) Chen

Executive Chairman,

ParityBit Technologies, Inc.

  54   2015  

LOGO

 

Compensation

Strategy and Investment

Aart J. de Geus

Executive Chair of the Board of Directors, Synopsys, Inc.

  69   2007  

LOGO

  Strategy and Investment

Gary E. Dickerson

President and Chief Executive Officer, Applied Materials, Inc.

  66   2013    

 

   

 

Thomas J. Iannotti

Senior Vice President and General Manager, Enterprise Services, Hewlett-Packard Company (retired)

  67   2005  

LOGO

  Compensation (Chair)

Alexander A. Karsner

Senior Strategist, X (parent company: Alphabet Inc.)

  56   2008  

LOGO

 

Compensation

Governance

Kevin P. March

Senior Vice President, Chief Financial Officer, Texas Instruments, Incorporated (retired)

  66   2022  

LOGO

  Audit

Yvonne McGill

Chief Financial Officer,

Dell Technologies Inc.

  56   2019  

LOGO

 

Audit

Governance

Scott A. McGregor

President and Chief Executive Officer, Broadcom Corporation (retired)

  67   2018  

LOGO

 

Strategy and Investment (Chair)     

Audit

 

ii    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

         Proxy Statement Summary

    

 

Board Practices and Composition

Ensuring the Board is composed of directors who possess a wide variety of relevant skills, professional experience and backgrounds, bring diverse viewpoints and perspectives, and effectively represent the long-term interests of shareholders is a top priority of the Board and the Corporate Governance and Nominating Committee (the “Governance Committee”). Our Board composition reflects strong Board practices that support regular refreshment based on our board needs, evolving strategy, and proactive succession planning.

Director Nominee Expertise

 

 

LOGO

Key Attributes

 

 

LOGO

* Ethnically diverse means a director who self-identifies as one or more of the following (defined by Nasdaq as an Underrepresented Minority): African American or Black, Alaskan Native or Native American, Asian, Hispanic or Latinx, or Native Hawaiian or Pacific Islander.

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    iii


LOGO

 

         Proxy Statement Summary

    

 

Board Practices Support Thoughtful Board Composition

 

Board Composition to Support Company Strategy

 

The Board and the Governance Committee regularly evaluate the size and composition of the Board to ensure appropriate alignment with the Company’s evolving business and strategic needs.

 

Policy on Board Diversity

 

The Board is committed to having a Board that reflects diverse perspectives, including those based on gender, ethnicity, skills, experience at policy-making levels in areas that are relevant to the Company’s global activities, and functional, geographic or cultural background. The Board has adopted a Policy on Board Diversity as part of its Corporate Governance Guidelines, which highlights its commitment to actively seek out women and ethnically diverse director candidates.

 

Annual Board Evaluations

 

The Board conducts an annual self-assessment of the Board, Board Committees and individual directors to evaluate effectiveness.

 

Board Refreshment

 

The Board believes the fresh perspectives brought by new directors are critical to a forward-looking and strategic Board when appropriately balanced by the deep understanding of Applied’s business provided by longer-serving directors.

 

Director Succession Planning

 

The Governance Committee reviews the short-term and long-term strategies and interests of Applied to determine what current and future skills and experience are required of the Board in exercising its oversight function.

 

Corporate Governance

We are committed to effective corporate governance that is informed by our shareholders, promotes the long-term interests of our shareholders, and strengthens Board and management accountability.

Governance Highlights

 

LOGO

  Annual Election of Directors

LOGO

  Independent Chair of the Board

LOGO

  Highly Independent Board (9 of 10 Director
nominees) and Committees

LOGO

  Annual Board, Committee and Individual
Evaluations

LOGO

  Robust Board Succession Planning

LOGO

  Policy on Board Diversity

LOGO

  Active Shareholder Engagement Practices

LOGO

  Shareholder Right to Call a Special Meeting

LOGO

  Shareholder Right to Act by Written Consent

LOGO

  Shareholder Proxy Access

LOGO

  No Poison Pill

LOGO

  No Supermajority Vote Requirements

LOGO

  Majority Voting for Directors

LOGO

  Regular Executive Sessions of Independent Directors

LOGO

  Stock Ownership Guidelines for Directors and Executives

LOGO

  Clawback Policy for Annual and Long-Term Incentive Plans
 

 

iv    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

         Proxy Statement Summary

    

 

Shareholder Engagement

We believe that strong corporate governance should include regular engagement with our shareholders to enable us to understand and respond to shareholder concerns. In addition to the regular meetings that our CEO, CFO and Investor Relations team holds with investors, prospective investors and investment analysts, we have a robust shareholder outreach program led by a cross-functional team that includes members of our Investor Relations, Global Rewards, ESG and Legal functions. Independent members of our Board are also involved, as appropriate. In the fall, we proactively solicit feedback on our executive compensation program, corporate governance practices, and sustainability and diversity and inclusion initiatives, as well as any matters voted on at our prior annual meeting. After the filing of our proxy statement, we engage again with our shareholders about important topics to be addressed at our annual meeting. Following our annual meeting, our Board of Directors, led by its Human Resources and Compensation Committee (the “HRCC”) and Governance Committee, reviews the results of the meeting and investor feedback, as well as evaluate emerging trends in corporate governance and other areas. See “Shareholder Engagement” on page 22 for more information.

In response to shareholder support at last year’s annual meeting for the proposal to lower the ownership threshold required for shareholders to call a special meeting to 10%, as part of our shareholder outreach in 2023, we also asked our shareholders about their views on our special meeting right. The feedback we received from our shareholders on this topic was reviewed and discussed with our Governance Committee and the Board. In response to the feedback and the support for the proposal at last year’s annual meeting, in December 2023 the Board approved an amendment and restatement of our Bylaws to lower the ownership threshold required to call a special meeting from 20% to 10%. See “Shareholder Engagement” on page 22 for more information.

Executive Compensation

Company Overview

Applied Materials is the leader in the materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations Make Possible® a Better Future.

We develop, design, produce and service semiconductor and display equipment for manufacturers that sell into highly competitive and rapidly changing end markets. Our competitive positioning is driven by the ability of our talented workforce to identify major technology inflections early, and to develop highly differentiated materials engineering solutions for our customers to enable those technology inflections. Through our broad portfolio of products, technologies and services, innovation leadership and focused investments in research and development, we are enabling our customers’ success and creating significant value for our shareholders. Applied’s ability to hire, develop and retain a world-class global workforce is based on our commitment to creating a Culture of Inclusion that embraces different backgrounds, perspectives, and experiences to build stronger, more resilient teams. Consistent with our core values, we enable our employees to do their best work by providing quality training, learning and career development opportunities; promoting diversity, equity and a connected and inclusive culture; and upholding a high standard of ethics and respect for human rights.

In addition to our other accomplishments, we continue to make strong progress towards our 10-year road map for environmental and social responsibility, which we introduced in 2020. At Applied, making a positive contribution is at the foundation of our culture and of our vision to Make Possible® a Better Future. Our 1x, 100x and 10,000x sustainability framework refers to the holistic goals and commitments we’ve set for our operations, how we work with customers and suppliers, and how our technology can be used to advance sustainability on a global scale. In 2023, we announced our Net Zero 2040 playbook – a clear pathway and detailed plan to work across our industry, including with customers and supply chain partners, to reduce the semiconductor industry’s carbon emissions. More details of Applied’s sustainability vision and strategy, including a copy of the Company’s most recent Sustainability Report, can be found at https://www.appliedmaterials.com/company/corporate-responsibility.

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    v


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         Proxy Statement Summary

    

 

Our Performance Highlights

Over the past several years, our broad portfolio of products and services has enabled Applied to extend its leadership at the major technology inflections that are driving our customers’ roadmaps and future industry growth. In fiscal 2023, we delivered record revenue, earnings and cash flow, and we are outgrowing the wafer fabrication equipment market for the fifth year in a row. Key highlights of our financial outperformance include:

 

  »  

Record revenue of $26.5 billion, up 3% year-over-year, despite overall semiconductor and wafer fabrication equipment spending both being down in 2023.

 

  »  

Record GAAP EPS of $8.11, and record non-GAAP adjusted EPS of $8.05 (see Appendix A for a reconciliation of non-GAAP adjusted measures).

 

  »  

Record $8.7 billion in cash from operations, and record free cash flow of $7.6 billion (see Appendix A for a reconciliation of non-GAAP measures).

Highlights of five-year performance achievements across key financial measures

 

 

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Non-GAAP adjusted operating margin and non-GAAP adjusted EPS are performance targets under our long-term incentive and bonus plans. See Appendix A for non-GAAP reconciliations.

Key financial highlights for our reporting segments in fiscal 2023 include the following:

 

  »  

Semiconductor Systems segment: we grew annual revenue by 5% year-over-year to $19.7 billion and outperformed the market by delivering record net sales overall and in key product areas: foundry-logic, implant, packaging, metal deposition and chemical vapor deposition (CVD).

 

  »  

Applied Global Services segment: we grew revenue to a record $5.7 billion, increased the number of installed base tools by 5% year-over-year and grew long-term subscription service agreements to 63% of our total parts and service revenues.

 

  »  

Display and Adjacent Markets segment: we delivered revenue of $868 million and maintained profitability during an industry down cycle.

Strategic and Operational Highlights

Applied’s strategy is to deliver highly differentiated materials engineering products and services that enable major technology inflections and drive our customers’ success.

 

 

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vi    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


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         Proxy Statement Summary

    

 

Semiconductors are at the foundation of the digital transformation that will affect almost every sector of the economy over the coming years. Long-term megatrends including the Internet of Things (IoT), big data and artificial intelligence (AI) are fueling a new era of growth for semiconductors and driving the need for advancements in silicon technologies. Applied Materials has focused its strategy and investments to deliver innovations that accelerate improvements in the power, performance, area, cost and time-to-market (PPACt) of semiconductor devices. Key strategic and operational accomplishments during fiscal 2023 include:

 

  »  

Many of our business units delivered new records and major milestones including in etch, where we passed 10,000 shipments of our Centris Sym3 chamber.

 

  »  

We released new products and secured production-tool-of-record positions in gate-all-around, backside power delivery, patterning, advanced dynamic random-access memory (DRAM) and high-bandwidth memory, and heterogeneous integration.

 

  »  

We strengthened our IoT, communications, automotive, power and sensors (ICAPS) business that serves IoT, communications, automotive, power and sensor customers with new products and application wins in etch, epitaxy, and implant, as well as metrology and inspection.

 

  »  

In our services business, we grew our industry-leading installed base to more than 48,000 systems, increased the number of systems under service agreement to 16,600, and added new types of subscription agreements including sensor and AI-based solutions. In addition, we signed a unique environmental services agreement with a customer that helps reduce electricity consumption and carbon emissions.

 

  »  

We continued to make substantial progress towards our 10-year roadmap for environmental and social responsibility, as described in more detail on pages xii and xiii.

Total Shareholder Return Performance

In fiscal 2023, Applied delivered strong total shareholder return, as a result of the Company’s ability to deliver record financial results in a down year for the wafer fabrication equipment market. As shown below, for the five year period beginning with fiscal 2019, Applied has substantially outperformed the S&P 500 Index, reflecting the company’s ability to create unique and innovative materials engineering solutions that accelerate our customers’ technology roadmaps.

Fiscal 2019 – Fiscal 2023 Total Shareholder Return vs. S&P 500 and Proxy Peers1

 

 

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1

Reflects results from October 28, 2018 through October 29, 2023. Proxy peer data reflects the companies in Applied’s current compensation peer group approved by the HRCC in June 2023, as described on page 39, weighted by market capitalization.

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    vii


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         Proxy Statement Summary

    

 

Key Compensation Actions

Performance-Based Compensation Decisions. The HRCC approved an aggressive set of performance goals for the executive officers for fiscal 2023, including challenging financial and operational targets despite a difficult external landscape, including macro-economic uncertainty, a complex geopolitical environment and an anticipated down year for the wafer fabrication equipment market. During fiscal 2023, Applied delivered exceptional financial and operational results, meeting or exceeding most of its stretch objectives for the year in a continuing challenging environment, and made meaningful progress towards our long-term strategic goals that remain focused on enabling strong longer-term revenue and EPS growth. As a result, bonus payouts for the executive officers were, on average, modestly above target. No adjustments were made during the year to the performance goals or to the Company’s results used in determining incentive payouts.

As part of our multi-year incentive program, for the period of fiscal 2021 through 2023, the HRCC approved challenging goals for non-GAAP adjusted operating margin and relative total shareholder return. The results for this three-year performance period significantly exceeded target performance levels, resulting in above-target vesting of performance share unit awards granted to our executive officers in fiscal 2021.

 

viii    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


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         Proxy Statement Summary

    

 

Primary Compensation Elements and Executive Compensation Highlights for Fiscal 2023

The primary elements of our compensation program are base salary, annual incentive bonuses and long-term incentive awards. Other elements of compensation include a 401(k) savings plan, deferred compensation benefits and other benefits programs that are generally available to all eligible employees. Primary elements and highlights of our fiscal 2023 compensation program for our named executive officers (“NEOs”) were as follows:

 

Element of Pay     Structure   Highlights     

 

 

 

 

 

Base Salary

 

(see page 40)

 

 

 

 

 

 

»Fixed cash compensation for performing expected day-to-day responsibilities

 

»Reviewed annually and adjusted as appropriate, based on scope of responsibility, performance, time in role, experience, and competitive market for executive talent

 

 

 

»Reflecting (i) continued strong performance across the business, driven by our executive leadership, (ii) the continued growth in the size and complexity of the Company and (iii) continued demand for proven executive talent among technology companies, in fiscal 2023, the HRCC approved salary increases for three of our NEOs ranging from 5% to 9.5%

 

»Reflecting the increased responsibilities of his role assumed in late fiscal 2022, the HRCC approved a salary increase of 37% for Mr. Deane for fiscal 2023

 

»Reflecting the HRCC’s belief that CEO compensation should be predominantly tied to long-term results, the Committee has not increased the salary for our CEO since December 2018

 

   

 

 

 

 

 

Annual

 

Incentive

 

Bonus

 

(see page 40)

 

 

 

 

 

 

 

 

»Variable cash compensation

 

»Based on performance compared to pre-established financial, operational, strategic and individual performance objectives

 

»Includes assessment of the Company’s progress towards sustainability goals

 

»Financial and non-financial metrics provide a comprehensive assessment of executive performance

 

»Performance metrics evaluated annually to maintain continued alignment with strategy and market practice

 

»NEO annual incentives determined through a three-step performance assessment process:

 

 

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»No increase in target bonus as a percentage of base salary from fiscal 2022 to fiscal 2023 for any of the NEOs, with the exception of Mr. Deane, to reflect his new role

 

»The initial performance hurdle for fiscal 2023 was $6.00 of non-GAAP adjusted EPS, requiring continued strong financial performance. Actual non-GAAP adjusted EPS for fiscal 2023 was $8.05

 

»Because the initial performance hurdle was met, annual bonuses for the NEOs were based on (i) the Company’s results as compared to the objective and quantifiable business and strategic goals in the corporate scorecard and (ii) an assessment of individual performance results as compared to quantitative and strategic objectives

 

»Resulting payouts ranged from 98% to 108% of target for our NEOs

 

  Corporate scorecard modifiers ranged from 0.893x to 0.980x (see corporate scorecard information on pages 42 and 43)

 

  Individual performance modifiers were set at 1.1x for each of the NEOs (see individual performance factor details on page 44)

   
 

 

 


Long-Term

 

Incentives

 

(see page
47)

 

 

 

 

»Significant portion delivered through performance share units (PSUs), to establish rigorous long-term performance alignment

 

»Balance of award delivered in restricted stock units (RSUs) to provide a strong tie to shareholder value and enhance retention

 

»PSUs vest based 50% on achievement of 3-year non-GAAP adjusted operating margin goal and 50% on 3-year TSR relative to the members of the S&P 500 Index

 

»PSUs vest at end of 3-year performance period, based on achievement of performance goals; RSUs vest ratably over 3 years

 

»The target mix of long-term incentive awards consists of 75% PSUs and 25% RSUs for the CEO and 50% PSUs and 50% RSUs for the other NEOs

 

»Non-GAAP adjusted operating margin is a key measure of our Company’s long-term success

 

»Relative TSR incentivizes management to outperform the market in any business environment

 
 
   

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    ix


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         Proxy Statement Summary

    

 

Pay Mix

In fiscal 2023, a significant portion of our executives’ compensation consisted of variable compensation and long-term incentives. As illustrated below, 96% of CEO compensation for fiscal 2023 consisted of variable compensation elements, and 90% of CEO compensation was delivered in long-term incentive awards with multi-year vesting.

 

Fiscal 2023 Compensation Mix1
CEO    All Other NEOs
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1

Represents total direct compensation for fiscal 2023, including the grant date fair value of annual long-term incentive awards.

Summary of 2023 Total Direct Compensation

The following table summarizes elements of annual total direct compensation for our NEOs for fiscal 2023, consisting of (1) base salary received during the year, (2) actual annual incentive bonus payout and (3) long-term incentive awards (the grant date fair value of stock awards). This table excludes amounts not considered by the HRCC to be annual total direct compensation, such as certain other amounts required by the SEC to be reported in the “All Other Compensation” column in the Summary Compensation Table (see page 54 of this Proxy Statement).

 

Name and Principal Position

  

Salary

($)

    

Annual
Incentive
Bonus

($)

    

Annual
Long-Term
Incentive
Award

($)

    

Total

($)

 

Gary E. Dickerson

President and Chief Executive Officer

     1,030,000        1,631,520        23,951,048        26,612,568  

Brice Hill

Senior Vice President, Chief Financial Officer and Global Information Services

     708,846        1,019,304        5,530,849        7,258,999  

Prabu G. Raja

President, Semiconductor Products Group

     740,000        1,091,475        6,636,826        8,468,301  

Omkaram Nalamasu

Senior Vice President, Chief Technology Officer

     625,385        742,203        4,037,503        5,405,091  

Timothy M. Deane

Group Vice President, Applied Global Services

     574,947        733,590        3,097,266        4,405,803  

 

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         Proxy Statement Summary

    

 

Our Commitment to Sustainability

Our Approach

Our unique industry position comes with responsibility to our employees, customers and society. In the era of Artificial Intelligence and the Internet of Things, we are committed to working across the technology ecosystem to “Make Possible a Better Future” for our shareholders and other stakeholders.

At the heart of Applied’s sustainability vision and strategy is a focus on how we can use our technology and people to strengthen our industry, improve our communities and enable leading innovation – all with an additional focus on limiting our environmental footprint. To drive change and innovation, we invest in our research and development, operations, supply chain, and interactions with our local communities. We are committed to advancing sustainability, not only through improvements in our own operations but also through investing in technological innovation. We are also committed to transparency and have aligned our disclosures and objectives with the United Nations Sustainable Development Goals and leading Environmental, Social and Governance reporting standards and frameworks such as those developed by the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosure (TCFD) and CDP (formerly the Carbon Disclosure Project).

To learn more about Applied’s approach to sustainability, please refer to our annually published Sustainability Report, which can be found at https://www.appliedmaterials.com/company/corporate-responsibility.

Sustainability Framework

Our sustainability framework covers our direct impact and the impact of our value chain (customers and suppliers), as well as how we can advance sustainability on a global scale. Our 10-year sustainability strategy, which we introduced in 2020, considers the magnitude of our opportunities, including social and environmental impacts in our operations (1X), how we design solutions to address our industry’s impact, including that of our customers and suppliers (100X), and how our technology can be used in innovation to advance sustainability and equity on a global scale (10,000X).

 

 

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  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    xi


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         Proxy Statement Summary

    

 

Our Sustainability Strategy and Recent Initiatives

 

       
       LOGO         

Lead with Purpose

Leaning into our core values to make
our company, industry and
communities stronger and more
resilient

            LOGO     

Invest in People

Cultivating a culture and talent engine
where every person feels included and
inspired to grow in a technology career

 

» Leading with purpose is about protecting our brand reputation, attracting the best talent, building operational efficiency and resiliency, and ensuring the long-term sustainability of our company and industry.

 

» Our Standards of Business Conduct was refreshed for improved readability and comprehension, and has been released in 14 languages.

 

» We have established regional compliance committees and conducted a company-wide, third-party administered Ethical Culture and Compliance Perceptions Assessment.

 

» We completed 240 supply chain cybersecurity assessments and are monitoring approximately 2,500 suppliers for disruption

 

» We successfully advocated for inclusion of an investment tax credit in the U.S. CHIPS and Science Act; Applied Chief Technology Officer Omkaram Nalamasu serves on the Industrial Advisory Committee of CHIPS for America.

        

 

» We value diversity of thought, race, ethnicity, national origin, gender, gender identity, sexual orientation, age, culture and expertise because they strengthen our business and power the innovations that define our enterprise.

 

» Our commitment to invest in Applied’s people is underpinned by goals to increase women’s representation at Applied globally and in the U.S., increase underrepresented minorities’ representation in our U.S. workforce, and maintain ambitious occupational health and safety total case incident rates.

 

» We have created a Diversity, Equity and Inclusion (DEI) Engine, a framework of tools, training and processes to accelerate our Culture of Inclusion.

 

» We achieved a 98% completion rate for training and learning hours by full-time employees, with a per-employee average of 57 training hours.

 

» Our commitment to protecting human rights was furthered by our completion of a human rights salience assessment, including an implementation action plan, and we began building a Responsible Manufacturing Program to implement our Human Rights Statement of Principles and the Responsible Business Alliance (RBA) Code of Conduct.

 

   
       
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Protect our Planet

Accelerate our transition to a low-carbon future powered by renewables

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Innovate for Progress

Advancing innovations that enable our
customers – and their customers – to
reduce environmental impacts

 

» With 99% of our greenhouse gas emissions stemming from our value chain, we designed a Net Zero 2040 Playbook to work collaboratively across our industry to reduce and mitigate our climate impact.

 

» Our science-based Scope 1, 2 and 3 emissions reduction targets received validation from the Science Based Targets initiative (SBTi).

 

» Through a combination of onsite generation, virtual power purchase agreements, green utility programs and renewable energy credits, we have achieved 100% renewable electricity in the U.S. and 69% worldwide, through 2022.

 

» We achieved a decrease in water intensity even as absolute water withdrawal increased due to business growth.

        

 

» From the earliest stages of design, we employ Design for Sustainability (DfSu) methods and principles—innovating systems that consume fewer resources, last longer, and support circularity.

 

» Our commitment to innovate for progress is underpinned by our 3x30 goals pertaining to energy consumption, chemical consumption and footprint intensity for semiconductor products.

 

» Our Supply Chain Certification for Environmental and Social Sustainability (SuCCESS2030) initiative offers training and resources to help our suppliers deliver on our sustainability expectations, and we conduct periodic supplier audits and assessments to verify their compliance.

 

» Our supplier diversity program is one of the main pillars of our SuCCESS2030 initiative, and in 2022 we achieved $462 million of spending with certified diverse suppliers.

 

 

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         Proxy Statement Summary

    

 

Our 2030 Sustainability Goals

Applied drives progress under our 1X/100X/10,000X framework in large part through setting and focusing on a series of 2030 environmental and social goals.

 

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»Greater than 25% women representation at Applied globally

   

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»100% of electricity at Applied globally to come from renewable sources

 

»50% reduction in Scope 1 and Scope 2 CO2e emissions (from 2019 baseline)

 

»55% reduction of Scope 3 GHG emissions from use of sold products per $1 million of value added (gross profit) by 2030 (from 2019 baseline)

 

 

»Greater than 21% executive women representation at Applied globally, with an aspiration to achieve equal global and executive representation of women by 2040

 

 

»Greater than 25% underrepresented minority representation in Applied’s U.S. workforce

 

 

»Greater than 10% executive underrepresented minority representation in Applied’s U.S. workforce

 

   

 

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»Reduce equivalent energy consumption per wafer for semiconductor products by 30% by 2030 (from 2019 baseline)

 

 

»Reduce the impact from chemical consumption per wafer for semiconductor products by 20% by 2030 (from 2019 baseline)

 

 

»30% reduction in the physical footprint of our semiconductor products (sqm/wph) (from 2019 baseline)

 

 

»$1 billion spend with (and representation of) women- and minority-owned businesses by 2027

 

 

   

For more information on Applied’s recent progress toward meeting the goals underpinning our sustainability strategy, including our SuCCESS2030 roadmap and 3x30 product improvements, please refer to our 2022 Sustainability Report available at https://www.appliedmaterials.com/company/corporate-responsibility.

Our 2023 Sustainability Accomplishments

To better enable Applied to meet its ambitious long-term sustainability goals, we established a set of interim objectives for fiscal 2023. As described in more detail on page 42, the Company’s level of achievement of these objectives was added to the corporate scorecard, which informs bonus payouts for our executive officers. In 2023, Applied made strong progress toward our 10-year sustainability roadmap. Key achievements included that we:

 

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  Continued to reduce our Scope 1 and 2 emissions, achieved our goal of 100% renewable electricity in the U.S., and remained on track to achieve our 2030 environmental goals  

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  Designed and deployed a Net Zero 2040 Playbook to work collaboratively across our industry to reduce and mitigate our climate impact, including through accelerating grid decarbonization, innovating with customers, and improving product efficiency

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  Received SBTi validation for our Scope 1, 2 and 3 science-based targets, and continued to report our carbon impact and risks in-line with the TCFD  

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  Advanced our 3x30 and SuCCESS2030 goals, including accelerating sustainable innovation, improving the longevity of our products, and enabling our suppliers to better meet our sustainability expectations

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  Established a Diversity, Equity and Inclusion Engine, a framework of tools, training and processes to empower employees at every level to accelerate our progress  

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  Strengthened our Culture of Inclusion by continuing to provide comprehensive diversity training, including a month-long Culture of Inclusion Summit at 17 Applied sites globally

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  Working in partnership with third-party advisors, completed an assessment to proactively identify potential human rights risks and assess how effectively we are managing any such risks  

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  Followed or exceeded all regulatory requirements applicable to the health and safety performance of our operations, processes and products

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    xiii


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         Proxy Statement Summary

    

 

Sustainability Oversight and Management

Our Board and management actively oversee sustainability matters to foster accountability. The Board’s Governance Committee oversees the Company’s overall sustainability strategy, policies and performance. We have established executive leadership of a company-wide strategy on sustainability matters and reporting. We are focused on integrating sustainability into our operations and company culture through initiatives aligned to company strategy that address a broad set of stakeholders, including shareholders, customers, employees, suppliers, governments, and our local communities.

Our ESG Leadership Council, which includes leaders from across all of Applied’s sustainability-focused delivery teams, oversees implementation of our sustainability strategy. To ensure accountability, the Council regularly reports progress to Applied’s Executive Leadership Team as part of the strategic review process, and quarterly to the Governance Committee. The Council is also responsible for reviewing all content in our annual Sustainability Report. The Council is supported by employees and leaders from across all business units and functions that are responsible for delivering progress toward our sustainability strategy. Our Senior Director of ESG, Corporate Sustainability and Reporting leads the Council and sustainability efforts across our business and has primary responsibility for the quarterly written and in-person reports to the Governance Committee and Executive Leadership Team. The Governance Committee’s sustainability oversight process also includes presentations by internal and third-party experts to discuss topics such as renewable energy, our Net Zero 2040 Playbook, the sustainability data assurance process, our 3x30 program and other relevant topics.

Our Environmental, Health and Safety (“EHS”) organization is dedicated to maintaining a safe and healthful working environment, demonstrating environmental leadership, and meeting or exceeding regulatory compliance. The Governance Committee receives a quarterly report on EHS matters, including an annual in-depth review of Applied’s EHS practices and policies.

We have a team fully dedicated to supporting our work in designing a Culture of Inclusion, and the HRCC oversees our corporate culture and human capital management programs, including our diversity and inclusion practices and initiatives. The HRCC approved the sustainability objectives for our annual bonus program to incentivize our leadership team to maintain progress toward all our 2030 sustainability goals.

 

xiv    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


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         PROPOSAL 1 – Election of Directors

 

Proxy Statement

PROPOSAL 1 – Election of Directors

Nominees

Applied’s Board of Directors is elected each year at the Annual Meeting of Shareholders. Applied currently has ten directors. Upon the recommendation of the Governance Committee, the Board has nominated the ten individuals listed below for election at the Annual Meeting, each of whom currently serves as a director of Applied. These nominees bring a wide variety of relevant skills, professional experience and backgrounds, as well as diverse viewpoints and perspectives to represent the long-term interests of shareholders and to fulfill the leadership and oversight responsibilities of the Board.

If any nominee listed below becomes unable to stand for election at the Annual Meeting, the persons named as proxies may vote for any person designated by the Board to replace the nominee. Alternatively, the proxies may vote for the remaining nominees and leave a vacancy that the Board may fill later, or the Board may reduce the authorized number of directors. As of the date of this Proxy Statement, the Board is not aware of any nominee who is unable or will decline to serve as a director.

Each director elected at the Annual Meeting will serve until Applied’s 2025 Annual Meeting of Shareholders or until they are succeeded by another qualified director who has been elected, or, if earlier, until their death, resignation, or removal.

 

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The Board recommends that you vote FOR each of the following director nominees

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    1


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         PROPOSAL 1 – Election of Directors

 

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Rani Borkar

 

Corporate Vice President, Azure Hardware Systems and Infrastructure, Microsoft Corporation

 

 

Ms. Borkar brings extensive semiconductor industry experience to our Board in technology, strategy and innovation, and global business operations and services. Ms. Borkar has served as Corporate Vice President, Azure Hardware Systems and Infrastructure, at Microsoft Corporation, a global technology provider, since June 2019. She also served as Microsoft’s Corporate Vice President, Microsoft Cloud Capacity, Supply Chain and Provisioning, from 2017 to June 2019. From 2016 to 2017, Ms. Borkar was Vice President, OpenPOWER Development at IBM Corporation, a global technology and consulting company. Prior to IBM, Ms. Borkar worked at Intel Corporation for 27 years, most recently as Intel’s Corporate Vice President and General Manager, Product Development Group.

 

Key skills and qualifications

 

Industry and Technology: Ms. Borkar has gained over 30 years of experience in our industry and related technologies. This experience includes her current leadership role at Microsoft Azure and prior roles at IBM and Intel. Ms. Borkar also serves as a board member of the Global Semiconductor Alliance, a leading semiconductor and technology industry organization which strives to establish a profitable and sustainable semiconductor ecosystem.

 

Strategy and Innovation; Executive Leadership; Growth and Emerging Technologies; Global Business: Each role in Ms. Borkar’s career has featured increased responsibility and accountability for strategic planning and oversight in a broad range of global, high-growth businesses. As the head of Azure Hardware Systems and Infrastructure, she leads organizations that architect, invent, and sustain the silicon, platforms, and systems that power Azure. She is responsible for the vision, strategy, and architecture of silicon development as well as global capacity deployment for Microsoft’s cloud data center infrastructure. Ms. Borkar’s other relevant experience includes her role as Corporate Vice President at Intel, leading Intel’s silicon product development strategy while managing a large and diverse global engineering organization.

 

Service, Operations and Manufacturing: Under Ms. Borkar’s leadership in her current role, Microsoft’s engineers focus on developing technologies to drive end-to-end business value for Azure’s products and solutions. Her experience with and understanding of service management and service offerings for technology companies, manufacturing operations and other operational processes provide important insights to our Board.

 

 

INDEPENDENT

 

Age: 62

 

Director Since: 2020

 

Board Committees

 

  Human Resources and Compensation

 

  Strategy and Investment

 

Other Current Public Company Directorships

 

  None

 

Former Public Company Directorships (within last five years)

 

  None

 

Other Directorships and Memberships

 

  Board member, Global Semiconductor Alliance

 

 

 

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         PROPOSAL 1 – Election of Directors

 

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Judy Bruner

 

Executive Vice President, Administration and Chief Financial Officer, SanDisk Corporation (retired)

 

 

 

 

Ms. Bruner has deep financial, accounting and strategic planning expertise, as well as global operations and leadership experience, that provides valuable insights and contributions to our Board. Ms. Bruner is the former Executive Vice President, Administration and Chief Financial Officer of SanDisk Corporation, a supplier of flash storage products, a role she held from 2004 until its acquisition by Western Digital in 2016. Previously, she was Senior Vice President and Chief Financial Officer of Palm, Inc., a provider of handheld computing and communications solutions, from 1999 until 2004. Prior to Palm, Inc., Ms. Bruner held financial management positions at 3Com Corporation, Ridge Computers and Hewlett-Packard Company.

 

Key skills and qualifications

 

Executive Leadership; Financial and Accounting; Strategy and Innovation; Global Business: Ms. Bruner’s career has been distinguished by roles of increasing responsibility in and oversight of financial management. These roles included serving as Chief Financial Officer at SanDisk Corporation and Palm, Inc. Ms. Bruner’s experience also included setting corporate strategy and diversifying businesses into new product areas that are less cyclical and less capital intensive, while focusing on the core business. Her prior roles in finance also included positions at 3Com, Ridge Computers and Hewlett-Packard.

 

Industry and Technology: Ms. Bruner’s career has been centered in the technology sector, giving her particular insight into the challenges and opportunities of our sector and industry, as well as our end markets. Ms. Bruner’s extensive experience in the semiconductor industry at SanDisk provided an understanding of the capital intensity, business cycles, customers and engineering requirements of the semiconductor equipment business, which she brings to our Board.

 

Risk Management; Cybersecurity: In Ms. Bruner’s role at SanDisk, she was responsible for the firm’s enterprise risk management and information technology, including cybersecurity. As a director, Ms. Bruner oversees enterprise risk management and cybersecurity at all the companies on which she currently serves as a board member, including at Rapid7, a security data and analytics solutions provider. She brings valuable insights from this experience to our Board to facilitate its oversight and considerations of these important topics.

 

 

INDEPENDENT

 

Age: 65

 

Director Since: 2016

 

Board Committees

 

  Audit (Chair)

 

  Corporate Governance and Nominating (Chair)

 

Other Current Public Company Directorships

 

  Qorvo, Inc.

 

  Rapid7, Inc.

 

  Seagate Technology plc

 

Former Public Company Directorships (within last five years)

 

  Varian Medical Systems, Inc.

 

 

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    3


LOGO

 

         PROPOSAL 1 – Election of Directors

 

 

LOGO

 

 

  

Xun (Eric) Chen

 

Executive Chairman, ParityBit Technologies, Inc.

 

 

 

 

 

 

Dr. Chen has extensive experience establishing, working for and investing in companies in the technology sector and related industries. Since August 2023, Dr. Chen has been Executive Chairman of ParityBit Technologies, Inc. (“ParityBit”), a data technology company he co-founded. From 2018 to August 2023, Dr. Chen was a Managing Partner of SB Investment Advisers (“SBIA”), an investment adviser focused on investments in the technology sector. Prior to joining SBIA, Dr. Chen was the Chief Executive Officer and Co-Founder of ParityBit. He served as CEO of ParityBit since it was founded in 2015, except from 2016 until 2017, when ParityBit was a portfolio company of Team Curis Group, a group of integrated biotechnology and data technology companies and laboratories, during which time Dr. Chen served as CEO of Team Curis Group. From 2008 to 2015, Dr. Chen served as a managing director of Silver Lake, and prior to Silver Lake, he was a senior vice president and member of the executive committee of ASML Holding N.V. Dr. Chen joined ASML following its 2007 acquisition of Brion Technologies, Inc., a company he co-founded in 2002 and served as Chief Executive Officer. Prior to Brion Technologies, Dr. Chen was a senior vice president at J.P. Morgan.

 

Key skills and qualifications

 

Industry and Technology; Strategy and Innovation; Growth and Emerging Technologies: Dr. Chen’s career has focused on the technology sector, and he provides his expertise on our industry, technologies and end markets in the boardroom. Dr. Chen is currently Executive Chairman of ParityBit, a technology company focused on leveraging the power of Big Data, AI technologies, and privacy computing. His other relevant experiences have included serving as a Managing Partner of SBIA, an investment adviser focused on investments in the technology sector, serving as a managing director at Silver Lake, a leading private investment firm focused on technology-enabled and related growth industries, and founding and serving as CEO of Brion Technologies, a firm working in computational lithography for integrated circuits in semiconductor manufacturing.

 

Executive Leadership; Global Business: The Board values Dr. Chen’s perspective gained through his various leadership roles at firms with global operations. For example, Dr. Chen is currently the Executive Chairman, and prior to joining SBIA was the CEO and Co-Founder, of ParityBit. Dr. Chen grew ParityBit’s presence globally, including throughout the Asia Pacific Region. Prior to this, Dr. Chen worked at ASML Holding N.V., an industrial manufacturer for chipmakers in the semiconductor industry that is headquartered in The Netherlands and has 60 locations globally.

 

 

INDEPENDENT

 

Age: 54

 

Director Since: 2015

 

Board Committees

 

  Human Resources and Compensation

 

  Strategy and Investment

 

Other Current Public Company Directorships

 

  None

 

Former Public Company Directorships (within last five years)

 

  None

 

 

 

4    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

         PROPOSAL 1 – Election of Directors

 

LOGO

 

 

  

Aart J. de Geus

 

Executive Chair of the Board of Directors, Synopsys, Inc.

 

 

 

 

Dr. de Geus has extensive executive leadership experience and provides the Board his deep expertise in our industry, technology and corporate strategy. Dr. de Geus currently serves as Executive Chair of the Board of Directors of Synopsys, Inc., the leading provider of electronic design automation software, design IP and related services for semiconductor design companies. Since founding Synopsys in 1986, Dr. de Geus has held various positions at the company, including serving as Chief Executive Officer or co-Chief Executive Officer from 1994 to January 2024, Chairman of the Board from 1998 to January 2024, Senior Vice President of Engineering and Senior Vice President of Marketing. Prior to founding Synopsys, Dr. de Geus was employed by General Electric, where he was the Manager of the Advanced Computer-Aided Engineering Group.

 

Key skills and qualifications

 

Industry and Technology; Executive Leadership; Strategy and Innovation; Global Business; Risk Management: As the leading founder of Synopsys, Dr. de Geus has grown Synopsys for over three and a half decades and has held senior roles in engineering and marketing before becoming Chief Executive Officer and subsequently Executive Chair of the Board. He has been involved in all aspects of executive leadership at Synopsys, including determining corporate strategy, overseeing enterprise risk management, closing well over a hundred strategic acquisitions and transactions, and expanding the operations globally. Synopsys now has offices and development centers in North America, Europe, Armenia, Israel, India, Japan, Vietnam, South Korea and China.

 

Growth and Emerging Technologies; Government Policy and Sustainability: Dr. de Geus has expanded Synopsys from a start-up synthesis company to a global high-tech leader in electronic design automation. He has long been considered one of the world’s leading experts on logic synthesis and simulation, frequently keynotes major conferences, is a member of the National Academy of Engineering and the recipient of numerous awards including the IEEE Robert N. Noyce Medal, the Global Semiconductor Alliance Dr. Morris Chang Exemplary Leadership Award, and the Silicon Valley Leadership Group Lifetime Achievement Award. As a longtime CEO, Dr. de Geus has experience in government policy, such as the CHIPS Act and evolving international export controls, as well as driving sustainability initiatives in the context of regulatory requirements and stakeholder input.

 

 

INDEPENDENT

 

Age: 69

 

Director Since: 2007

 

Board Committees:

 

  Strategy and Investment

 

Other Current Public Company Directorships:

 

  Synopsys, Inc.

 

Former Public Company Directorships (within last five years):

 

  None

 

Other Directorships and Memberships

 

  Executive Board Member and Past Chairman, Silicon Valley Leadership Group

 

 

  Board Member, Global Semiconductor Alliance

 

  Governing Council Member, Electronic System Design Alliance

 

 

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    5


LOGO

 

         PROPOSAL 1 – Election of Directors

 

LOGO

 

 

  

Gary E. Dickerson

 

President and Chief Executive Officer, Applied Materials, Inc.

 

 

 

 

Mr. Dickerson has been President of Applied Materials since 2012 and Chief Executive Officer and a member of the Board of Directors since 2013. Mr. Dickerson joined Applied following its acquisition in 2011 of Varian Semiconductor Equipment Associates, Inc., a supplier of semiconductor manufacturing equipment. Mr. Dickerson had served as Chief Executive Officer and a director of Varian since 2004. Prior to joining Varian in 2004, Mr. Dickerson served 18 years with KLA-Tencor Corporation, a supplier of process control and yield management solutions for the semiconductor and related industries, where he held a variety of roles, including President and Chief Operating Officer. Mr. Dickerson started his semiconductor career in manufacturing and engineering management at General Motors’ Delco Electronics Division and AT&T Technologies, Inc.

 

Key skills and qualifications

 

Industry and Technology; Executive Leadership; Strategy and Innovation; Global Business; Risk Management: Mr. Dickerson has over three decades of experience in executive-level positions at large multi-national companies in the semiconductor and technology industries, including nearly two decades as a chief executive officer at Varian and Applied. Mr. Dickerson’s knowledge of our industry, technologies and end markets provides important insight and leadership to the oversight, planning and execution of our business strategy and operations. At Applied, this has resulted in the company being the world’s leading semiconductor and display equipment company with over $26 billion in annual revenues and operations in 150 cities in 24 countries.

 

Growth and Emerging Technologies; Service, Sales and Operations; Government Policy and Sustainability: Throughout Mr. Dickerson’s career, he has held roles responsible for identifying and developing emerging technologies and service offerings for the semiconductor industry. This includes his first roles in manufacturing and engineering management with General Motors’ Delco Electronics Division and AT&T Technologies, 18 years at KLA-Tencor, progressing from roles in product development and general management of products, sales and services business units to his appointment as President and Chief Operating Officer, and to his leadership and contributions as Chief Executive Officer at Varian and Applied. Mr. Dickerson has government policy experience in guiding Applied through the geopolitical and regulatory environment, as well as from his service as a board of member of the U.S.-China Business Council. Mr. Dickerson’s experience in sustainability stems from his deep involvement in developing Applied’s sustainability roadmap and championing its sustainability initiatives. Mr. Dickerson draws on these experiences to provide leadership and insight in guiding our core semiconductor business, and as we develop new technologies and services to enable significant value creation for our customers and Applied.

 

 

EXECUTIVE DIRECTOR

 

Age: 66

 

Director Since: 2013

 

Board Committees

 

  None

 

Other Current Public Company Directorships

 

  None

 

Former Public Company Directorships (within last five years)

 

  None

 

Other Directorships and Memberships

 

  Board Member, U.S. – China Business Council

 

 

 

6    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

         PROPOSAL 1 – Election of Directors

 

LOGO

 

  

Thomas J. Iannotti

 

Senior Vice President and General Manager, Enterprise Services, Hewlett-Packard Company (retired)

 

 

 

 

Mr. Iannotti serves as the Chairman of the Board of Applied. Mr. Iannotti has extensive leadership experience at global firms where he gained invaluable expertise in service management, offerings for technology companies, and operational processes. He served as Senior Vice President and General Manager, Enterprise Services, for Hewlett-Packard Company, a technology solutions provider to consumers, businesses, and institutions globally, from 2009 until his retirement in 2011. Prior to that role, Mr. Iannotti held various executive positions at Hewlett-Packard, including Senior Vice President and Managing Director, Enterprise Business Group, Americas. Mr. Iannotti also worked at Digital Equipment Corporation, a vendor of computer systems and software, and at Compaq Computer Corporation, a supplier of personal computing systems, following its acquisition of Digital Equipment Corporation.

 

Key skills and qualifications

 

Industry and Technology; Executive Leadership; Strategy and Innovation; Global Business: Mr. Iannotti had a distinguished three-decade career managing large, complex global businesses in the electronics and technology industries. He held numerous executive positions at Hewlett-Packard, with his final role as Senior Vice President and General Manager, Enterprise Services, responsible for driving profitable revenue growth and customer satisfaction across the globe. Mr. Iannotti also chaired the Americas Leadership Team responsible for managing cross-business group strategies and developing partnerships with key Hewlett-Packard stakeholders. His other relevant experience included working at Digital Equipment Corporation, a vendor of computer systems and software, and at Compaq Computer Corporation, a supplier of personal computing systems.

 

Service, Operations and Manufacturing; Risk Management: While at Hewlett-Packard, Mr. Iannotti was integral in setting and executing operational and service strategies for the Enterprise Services group, which supported and provided services and products for all of the company’s offerings. Mr. Iannotti’s roles also involved oversight and management of risk, and he has served as the lead independent director of the board of directors of a large, public global services company. These experiences provide important input to our Board and are an integral part of successful planning and execution of our long-term vision, including the Board’s oversight of Applied’s enterprise risk management program.

 

 

Chairman of the Board

 

INDEPENDENT

 

Age: 67

 

Director Since: 2005

 

Board Committees

 

  Human Resources and Compensation (Chair)

 

Other Current Public Company Directorships

 

  Rigetti Computing, Inc.

 

Former Public Company Directorships (within last five years)

 

  Atento S.A.

 

 

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    7


LOGO

 

         PROPOSAL 1 – Election of Directors

 

LOGO

 

  

Alexander A. Karsner

 

Senior Strategist, X (parent company: Alphabet Inc.)

 

 

Mr. Karsner has extensive global executive leadership experience as well as deep expertise in technology innovation, private equity, public policy and regulation, corporate strategy and sustainability. He is currently a Senior Strategist at X (the Moonshot Factory), the innovation lab of Alphabet Inc., and Executive Chairman of Manifest Energy Inc., an energy technology development and investment firm he founded in 2009. Mr. Karsner is also Founder of Elemental, which innovates market-based solutions and technology for conservation and environment.

 

Key skills and qualifications

 

Executive Leadership; Global Business: Mr. Karsner has over 30 years of experience in executive leadership positions with numerous organizations with significant global operations, including his current role at X and public company board experience at ExxonMobil. Mr. Karsner was the Founder and Managing Director of Enercorp., a company involved in international project development, management and financing of energy infrastructure.

 

Industry and Technology; Growth and Emerging Technologies; Strategy and Innovation: Mr. Karsner currently serves as Senior Strategist at X, which has catalyzed technologies for autonomous vehicles, drone delivery and industrial robotics. From 2016 to 2019, Mr. Karsner served as Managing Partner of Emerson Collective, an investment platform funding venture and private equity portfolios, as well as non-profit, philanthropic investments advancing education, immigration, health and the environment. As a private equity investor, venture partner and strategic advisor, Mr. Karsner’s portfolios have included some of the most innovative startups over the last 15 years, such as Nest (AI), Tesla (mobility), Recurrent (solar), Codexis (biotech), Boom (aerospace) and Carbon (3-D printing).

 

Government Policy and Sustainability: Mr. Karsner has extensive experience in government policy and relations, and offers our Board valuable insight into the regulatory environment. From 2006 to 2008, he served as Assistant Secretary for Energy Efficiency and Renewable Energy at the U.S. Department of Energy, responsible for multi-billion dollar federal applied science R&D programs and national labs. In this role, he helped assemble significant bipartisan coalitions to implement the Energy Policy Act and enact the Energy Independence and Security Act and the America Competes Act. Mr. Karsner was a U.S. Principal representative to the United Nations Framework Convention on Climate Change and a delegate to the bilateral U.S.-China and U.S.-India Track II dialogues on Climate Change, and is a member of the Council on Foreign Relations and the Trilateral Commission. Mr. Karsner also serves on the board of Conservation International and is a member of the boards of advisors of the Energy Futures Initiative, MIT Media Lab and the Precourt Institute for Energy at Stanford University. With these experiences, Mr. Karsner brings a valuable perspective to our Board’s oversight of sustainability, government relations and public policy engagement strategies.

 

 

INDEPENDENT

 

Age: 56

 

Director Since: 2008

 

Board Committees

 

  Corporate Governance and Nominating

 

  Human Resources and Compensation

 

Other Current Public Company Directorships

 

  Exxon Mobil Corporation

 

Former Public Company Directorships (within last five years)

 

  Broadscale Acquisition Corp.

 

Other Directorships and Memberships

 

  Board Member of Conservation International

 

  Advisory Board Member of: Energy Futures Initiative; Precourt Institute for Energy, Stanford University; MIT Media Lab

 

 

 

8    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

         PROPOSAL 1 – Election of Directors

 

LOGO

 

  

Kevin P. March

 

Senior Vice President, Chief Financial Officer of Texas Instruments, Incorporated (retired)

 

 

 

 

Mr. March brings deep semiconductor industry experience, strong financial expertise, and executive leadership to our Board. Mr. March joined Texas Instruments Incorporated, a global semiconductor company, in 1984 and built a career of varying positions of increasing responsibility over his 33-year tenure at the company. He was appointed Controller in 2002 and was named Chief Financial Officer in 2003.

 

Key skills and qualifications

 

Industry and Technology; Strategy and Innovation; Service, Operations and Manufacturing; Global Business: Mr. March was a longtime executive of Texas Instruments, with extensive experience in the semiconductor industry. Mr. March held numerous roles in finance, operations and business management across corporate and business unit functions during his career at Texas Instruments. Mr. March’s leadership was instrumental in shaping Texas Instruments into a focused semiconductor company, including his role in the formation of the company’s global Analog Semiconductor segment, which became the world’s largest analog semiconductor business.

 

Executive Leadership; Financial and Accounting; Risk Management: From 2003 to 2017, Mr. March served as Senior Vice President and Chief Financial Officer of Texas Instruments, where he led its finance organization and developed the company’s capital management strategy and was also responsible for executive management of the company’s global information technology services, procurement, logistics, facilities, and operations planning. In addition to being a member of the company’s management committee, Mr. March was a member of its strategic leadership team. At Texas Instruments, Mr. March led the company’s assessment and management of strategic, financial and operational risks, including facilitating the oversight of risk management processes by the company’s board of directors. Given the breadth and scope of its businesses and range of strategic, operational, financial and compliance risks, Mr. March’s experience at Texas Instruments positions him well to provide Applied with guidance across our risk landscape.

 

 

INDEPENDENT

 

Age: 66

 

Director Since: 2022

 

Board Committees:

 

  Audit

 

Other Current Public Company Directorships

 

  None

 

Former Public Company Directorships (within last five years)

 

  None

 

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    9


LOGO

 

         PROPOSAL 1 – Election of Directors

 

LOGO

 

  

Yvonne McGill

 

Chief Financial Officer, Dell Technologies Inc.

 

 

 

 

 

 

Ms. McGill has extensive executive leadership experience and provides the Board deep industry expertise, financial acumen, and strategic planning experience. She has been Chief Financial Officer of Dell Technologies Inc. (“Dell”), a leading global end-to-end technology provider, since August 2023, and previously held various leadership positions at Dell since joining the company in 1997, including corporate controller and CFO of the Infrastructure Solutions Group, CFO of Asia-Pacific, Japan and China business, and Chief Accounting Officer.

 

Key skills and qualifications

 

Executive Leadership; Financial and Accounting; Strategy and Innovation; Risk Management: Since joining Dell in 1997, Ms. McGill has served in various finance leadership roles, including her current role as Chief Financial Officer. At Dell, Ms. McGill oversees all aspects of the company’s finance function, including accounting, financial planning and analysis, tax, treasury and investor relations, as well as corporate development, global business operations and Dell financial services. She also partners closely with the office of Dell’s CEO to develop and execute a long-term strategy that creates value for Dell’s stakeholders. Prior to Dell, Ms. McGill worked at ManTech International Corporation and Price Waterhouse. Ms. McGill is a Certified Public Accountant (inactive).

 

Industry and Technology; Global Business: During her over 26-year career at Dell, Ms. McGill has gained experience across the company’s comprehensive portfolio of IT hardware, software and service solutions spanning both traditional infrastructure and emerging, multi-cloud technologies. Ms. McGill’s deep knowledge and expertise in the technology sector, including with regards to our end-users and the markets in which we compete, offer valuable insights to our Board.

 

 

INDEPENDENT

 

Age: 56

 

Director Since: 2019

 

Board Committees:

 

  Audit

 

  Corporate Governance and Nominating

 

Other Current Public Company Directorships

 

  None

 

Former Public Company Directorships (within last five years)

 

  None

 

 

10    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

         PROPOSAL 1 – Election of Directors

 

LOGO

 

  

Scott A. McGregor

 

President and Chief Executive Officer, Broadcom Corporation (retired)

 

 

 

 

Mr. McGregor brings to our Board executive leadership and deep experience working in the semiconductor and technology industries over many decades. Mr. McGregor served as President and Chief Executive Officer and as a member of the board of directors of Broadcom Corporation, a world leader in wireless connectivity, broadband and networking infrastructure, from 2005 until the company was acquired by Avago Technologies Limited in 2016. Mr. McGregor joined Broadcom from Philips Semiconductors (now NXP Semiconductors), where he was President and Chief Executive Officer. He previously served in a range of senior management positions at Santa Cruz Operation Inc., Digital Equipment Corporation (now part of HP), Xerox Corporation’s Palo Alto Research Center (PARC) and Microsoft, where he was the architect and development team leader for Windows 1.0.

 

Key skills and qualifications

 

Industry and Technology; Executive Leadership; Global Business: Mr. McGregor was CEO of Philips Semiconductors (now NXP Semiconductors), headquartered in the Netherlands, where he oversaw one of the world’s largest semiconductor suppliers. Mr. McGregor was also President and CEO of Broadcom, where he was responsible for guiding the strategic direction of the company, business development and day-to-day operations.

 

Growth and Emerging Technologies; Strategy and Innovation: Throughout his career, Mr. McGregor held strategic roles developing new technologies and growing businesses in new directions. Mr. McGregor started his career at Xerox PARC working on user interface design for the world’s first personal computers. He then joined Microsoft and led the team that created the first version of Microsoft Windows. After pivoting to the semiconductor industry, Mr. McGregor continued to lead through technological innovation at both Broadcom and Philips, expanding each company’s footprint and offerings. At Broadcom, Mr. McGregor led revenue growth from $2.4 billion to over $8 billion during his tenure as CEO.

 

Financial and Accounting; Cybersecurity; Risk Management: As CEO of Broadcom and Philips for approximately 15 years, Mr. McGregor had oversight responsibility for financing activities, risk management and cybersecurity at large companies within the semiconductor industry. As a result of these experiences, as well as oversight of cybersecurity as a board member at Equifax, Mr. McGregor brings invaluable insights in these areas to our Board.

 

 

INDEPENDENT

 

Age: 67

 

Director Since: 2018

 

Board Committees:

 

  Audit

 

  Strategy and Investment (Chair)

 

Other Current Public Company Directorships

 

  Equifax, Inc.

 

Former Public Company Directorships (within last five years)

 

  Luminar Technologies, Inc.

 

 

 

 

 

Chairman Emeritus

James C. Morgan became Chairman Emeritus in 2009, following his retirement as our director and Chairman of the Board. Mr. Morgan spent more than 31 years as a director and employee of Applied, including over 20 years as Chairman of the Board.

Mr. Morgan first joined Applied in 1976 and served as Chief Executive Officer from 1977 to 2003. As Chairman Emeritus, Mr. Morgan does not attend any Board or Committee meetings, has no voting rights and receives no retainer or meeting fees.

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    11


LOGO

 

                  Board and Corporate Governance Practices

 

Board and Corporate Governance Practices

Board Composition and Nominee Considerations

Nominee Skills and Experience

The Board values having directors who possess a wide variety of relevant skills, professional experience and backgrounds, bring diverse viewpoints and perspectives, and effectively represent the long-term interests of shareholders. Listed below are certain of the key skills and experience that the Board considers important for our directors to have in light of our current business in order to contribute to the effective leadership and exercise of oversight responsibilities by the Board.

 

LOGO

 

Industry and

Technology

  Experience with and knowledge of our industry and technologies, as well as our end markets, facilitate a deeper understanding within the Board of our equipment and service products and the markets in which we compete.

LOGO

 

Executive

Leadership

  Experience in executive-level positions at large multi-national companies, including public company board experience, contribute practical insight into our business strategy and operations.

LOGO

 

Growth and

Emerging

Technologies

  Experience identifying and developing emerging technologies are important to our growth strategies and provide important insights as we develop new technologies and our business grows into new areas.

LOGO

  Global Business   Experience in a leadership role at an organization with substantial global operations can provide valuable business and cultural perspectives.

LOGO

 

Financial and

Accounting

  Experience with financial markets, financing operations, and accounting and financial reporting processes provide important oversight of our capital structure, financing activities, and financial reporting and internal controls.

LOGO

 

Service,

Operations and

Manufacturing

  Experience with and understanding of service management and service offerings for technology companies, manufacturing operations and other operational processes contributes to understanding our business and also can provide important insights on the operations of our customers.

LOGO

 

Strategy and

Innovation

  Experience in setting and executing corporate strategy and with strategic transactions is important to the successful planning and execution of our long-term vision.

LOGO

  Cybersecurity   Experience managing cybersecurity, information and data security risks or cybersecurity threats can provide important input to the Board in its oversight of the Company’s cybersecurity risks.

LOGO

 

Risk

Management

  Experience overseeing enterprise risk management or business continuity planning in a large organization, or other experience in managing risk at the enterprise level or in a senior compliance or regulatory role, provide important input to the Board in its oversight of the Company’s enterprise risk management program.

LOGO

 

Government

Policy and

Sustainability

  Experience working with government policy offers us insight into the regulatory environment in which we operate and experience with sustainability initiatives contributes to the Board’s oversight of our sustainability strategy.

 

12    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

                  Board and Corporate Governance Practices

 

Board Matrix

The matrix below summarizes certain of the key experiences, qualifications, skills and attributes that our director nominees bring to the Board to enable effective oversight. This matrix is intended to provide a summary of our director nominees’ qualifications and is not a complete list of each director nominee’s strengths or contributions to the Board. Additional details on each director nominee’s experiences, qualifications, skills and attributes are set forth in their biographies.

 

                 
  Skills and Experience          LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO LOGO

Industry and Technology

 

Executive Leadership

 

Growth and Emerging Technologies

 

 

 

 

 

Global Business

 

Financial and Accounting

 

 

 

 

 

 

 

Service, Operations and Manufacturing

 

 

 

 

 

 

 

Strategy and Innovation

 

Cybersecurity

 

 

 

 

 

 

 

 

 

Risk Management

 

 

 

 

Government Policy and Sustainability

 

 

 

 

 

 

 

 

  Tenure and Independence

 

 

 

 

 

 

 

 

Tenure (years)

 

3 7 8 16 10 18 15 2 4 6

Independence

 

 

  Demographics

 

 

 

 

 

 

 

 

 

 

 

Age

 

62 65 54 69 66 67 56 66 56 67

Gender Identity

 

F F M M M M M M F M

African American or Black

 

 

 

 

 

 

 

 

 

 

 

Alaskan Native or Native American

 

 

 

 

 

 

 

 

 

 

 

Asian

 

 

 

 

 

 

 

 

 

Hispanic or Latinx

 

 

 

 

 

 

 

 

 

 

 

Native Hawaiian or Pacific Islander

 

 

 

 

 

 

 

 

 

 

 

White

 

 

 

LGBTQ+

 

 

 

 

 

 

 

 

 

 

 

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    13


LOGO

 

         Board and Corporate Governance Practices

 

Diversity. Our Board values having a Board that reflects diverse perspectives, including those based on gender, ethnicity, skills, experience at policy-making levels in areas that are relevant to the Company’s global activities, and functional, geographic or cultural backgrounds. Our Board has adopted a Policy on Board Diversity within our Corporate Governance Guidelines, which reflects the Board’s commitment to actively seek out women and ethnically diverse director candidates and to consider the factors above, among others, in the context of the current composition of the Board and needs of the Company, when identifying and evaluating director candidates.

The ten director nominees for election at our 2024 Annual Meeting bring to our Board a variety of different backgrounds, skills, professional and industry experience, and other attributes and perspectives that contribute to the overall diversity of our Board.

Independence. The Board’s Governance Committee expects each non-employee director to be free of relationships, interests or affiliations that could give rise to conflicts of interest or interfere with the director’s exercise of independent judgment. Applied’s Corporate Governance Guidelines require that a majority of our directors must be independent, and that our Audit, HRCC and Governance Committees must consist solely of independent directors. Director independence is determined under Nasdaq listing standards and SEC rules. The Board has affirmatively determined that, other than Mr. Dickerson, our Chief Executive Officer, all members of the Board who served during 2023 and all director nominees are independent under applicable Nasdaq listing standards and SEC rules.

Tenure. The Board believes that new ideas and perspectives are critical to a forward-looking and strategic Board, as are the valuable experiences and deep understanding of Applied’s business and industries that longer-serving directors offer. Our Corporate Governance Guidelines do not impose a term limit on Board service, but our directors are not typically nominated for re-election after they reach the age of 72. Feedback from the annual Board evaluations and discussions regarding individual performance between each non-employee director and our Chair are important considerations of director tenure. As a result of our ongoing Board refreshment efforts, we have added three new directors to the Board over the last five years, which has resulted in a balanced range of tenures, ensuring both continuity and fresh perspectives among our director nominees. Our nominees have an average tenure of nine years.

Key Attributes of the Board

 

 

LOGO

* Ethnically diverse means a director who self-identifies as one or more of the following (defined by Nasdaq as an Underrepresented Minority): African American or Black, Alaskan Native or Native American, Asian, Hispanic or Latinx, or Native Hawaiian or Pacific Islander.

 

14    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


LOGO

 

         Board and Corporate Governance Practices

 

Board Composition and Refreshment

Identification of New Director Candidates. Identifying and recommending individuals for nomination and election to our Board is a principal responsibility of our Governance Committee, which performs this function through an ongoing process.

The Governance Committee regularly considers the size and composition of the Board and assesses whether the composition appropriately aligns with the Company’s evolving business and strategic needs. The focus is on ensuring that the Board is composed of directors who possess a wide variety of relevant skills, professional experience and backgrounds, bring diverse viewpoints and perspectives, and effectively represent the long-term interests of shareholders. In accordance with the Policy on Board Diversity, including our commitment to having a Board that reflects diverse perspectives, the Governance Committee actively seeks out women and ethnically diverse director candidates, as well as candidates diverse in skills, experience at policy-making levels in areas that are relevant to our global activities, and functional, geographic or cultural background.

In its consideration of potential director candidates, the Governance Committee reviews the short-term and long-term strategies and interests of the Company to determine what current and future skills and experiences are required of the Board in exercising its oversight function. Specific search criteria evolve over time to reflect the Company’s dynamic business and strategic needs and the changing composition of the Board, and may include factors such as:

 

  »  

Operating experience or thought leadership in key markets, industries, technologies, or business models that are aligned with the Company’s strategic growth plans;

 

  »  

Business or cultural background in regions where the Company does significant business;

 

  »  

Senior executive leadership and management experience; and

 

  »  

Subject matter expertise in such areas as corporate finance and financial reporting, governance, compensation, risk management and operations.

The Governance Committee also considers succession planning in light of anticipated retirements, and for Board and Committee Chair roles, to maintain relevant expertise and depth of experience.

In addition, all director candidates are also expected to possess or demonstrate:

 

  »  

Sound judgment, analytical and inquisitive perspective, and practical wisdom;

 

  »  

Strategic mindset and an engaged and collaborative approach;

 

  »  

Independence, personal and professional ethics, integrity and values; and

 

  »  

Commitment to representing the long-term interests of Applied’s shareholders.

The Governance Committee may retain a search firm to assist in identifying and evaluating new candidates for director nominees and may also consider referrals from directors, shareholders, or other sources. The Governance Committee evaluates and interviews potential Board candidates and makes appointment recommendations to the full Board. All members of the Board may interview candidates.

 

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Regular Review of Board Composition Drives Refreshment

 

 

 

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Recent Board Refreshment. As a result of the foregoing process, the Board has added three new directors over the last five years, each of whom has brought valuable and diverse backgrounds and perspectives to the Board. The most recent two appointments were Mr. March in 2022 and Ms. Borkar in 2020. Mr. March brings decades of finance and business operations expertise and strong semiconductor industry experience to our Board. Ms. Borkar brings to our Board experience in the semiconductor industry, chip design and cloud computing, as well as leadership and management experience.

Re-nomination of Directors for Election at Annual Meeting. In considering whether to recommend re-nomination of a director for election at our Annual Meeting, the Governance Committee considers factors such as:

 

  »  

The extent to which the director’s skills, qualifications and experience continue to contribute to the success of our Board, taking into account current core competencies of the Board, and the mix of desired skills and experience;

 

  »  

Feedback from the annual Board evaluations and individual discussions between each director and our Chair;

 

  »  

Attendance and participation at, and preparation for, Board and Committee meetings;

 

  »  

Shareholder feedback, including the support received by director nominees elected at our 2023 Annual Meeting;

 

  »  

Outside board, employment and other affiliations, including any actual or perceived conflicts of interest; and

 

  »  

Considerations under the Board’s Policy on Board Diversity and the extent to which the director continues to contribute to the diversity of our Board.

Based on the Governance Committee’s recommendation, the Board selects director nominees and recommends them for election by Applied’s shareholders.

 

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Shareholder Recommendations or Nominations. The evaluation procedures described above apply to all candidates for director nomination, including candidates submitted by shareholders. Shareholders wishing to recommend a candidate for consideration by the Governance Committee should submit the candidate’s name, biographical data and a description of their qualifications in light of the criteria listed above to Teri A. Little, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1268, P.O. Box 58039, Santa Clara, CA 95052, or by e-mail at corporatesecretary@amat.com.

Shareholders wishing to nominate a director should follow the specific procedures set forth in our Bylaws.

Corporate Governance

Corporate Governance Guidelines

Applied’s Corporate Governance Guidelines establish the governance framework within which the Board conducts its business and fulfills its responsibilities. These guidelines and other important governance materials are available on our website at: https://www.appliedmaterials.com/us/en/about/corporate-governance/corporate-governance-documents.html. The Board regularly reviews our Corporate Governance Guidelines in light of legal and regulatory requirements, evolving best practices and other developments.

Board Leadership

Our corporate governance framework provides the Board flexibility to determine the appropriate leadership structure for the Company and whether the roles of Chair and CEO should be separated or combined. In making this determination, the Board considers many factors, including the needs of the business, the Board’s assessment of its leadership needs from time to time, and the best interests of shareholders. If the role of Chair is filled by a director who does not qualify as an independent director, the independent directors will designate a Lead Independent Director. As discussed below, our Chair is currently an independent director. However, if Applied were to designate a Lead Independent Director in the future, our Corporate Governance Guidelines set forth the roles and authority such individual would have, including, among other things, presiding at all meetings of the Board at which the Chair is not present, including executive sessions of the independent directors, having the authority to call meetings of the independent directors, and serving as a liaison for consultation and direct communication with shareholders.

The Board believes that it is currently appropriate to separate the roles of Chair and CEO. The CEO is responsible for setting our strategic direction and the day-to-day leadership of our business, while the Chair, along with the rest of our independent directors, ensures that the Board’s time and attention are focused on effective oversight of the matters most critical to Applied. Mr. Iannotti, an independent director, currently serves as the Chair of the Board. Mr. Iannotti has significant experience and knowledge of Applied, including having worked with two CEOs and different management teams at Applied, and the Board believes that his deep knowledge of the Company and industry, as well as his strong leadership and governance experience, enables him to lead the Board effectively and independently.

As the independent Board Chair, Mr. Iannotti’s roles include:

 

  »  

Presiding at all meetings of the Board, including executive sessions of the independent directors

 

  »  

Having the authority to call meetings of the Board and of the independent directors

 

  »  

Serving as a liaison between the CEO and the independent directors

 

  »  

Approving information sent to the Board and advising management on the Board’s information needs

 

  »  

Approving meeting agendas and meeting schedules

 

  »  

Having the authority to retain outside advisors and consultants who report directly to the Board

 

  »  

Presiding at all meetings of shareholders

 

  »  

Serving as a liaison for direct communication with shareholders

 

  »  

Providing direct guidance to the CEO, including advising on executing the Company’s long-term strategy

 

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  »  

Leading, along with the members of the HRCC and the other independent directors, the annual performance review of the CEO

 

  »  

In conjunction with the relevant committees of the Board, reviewing and assessing director performance and compensation, and the size and composition of the Board

The Chairs of all the Board’s Committees – Audit, Governance, HRCC and Strategy and Investment – are also independent directors.

Director Onboarding and Education

When new directors join our Board, they participate in a comprehensive onboarding program to learn about our industry, business, strategies and policies. The multi-day onboarding program includes meetings with senior executives to discuss our businesses, strategy and operations, and our corporate functions, such as finance, technology, information systems and legal, and a tour of the Maydan Technology Center, our state-of-the-art R&D facility. New directors also meet with the executives and staff supporting the Committees on which they sit, as well as the Committees’ external consultants and advisors. Each new director is also partnered with an experienced fellow director “mentor” to facilitate the integration of the new director to the Board.

For continued education regarding our business and industry, we provide presentations by internal and external experts during Board meetings on topics such as technology inflections, industry trends, changes in the geopolitical and macroeconomic landscape, and the sustainability landscape, with particular focus on the implications and impact to the Company. Our Board and Committees also regularly review developments in corporate governance to continue enhancing the Board’s effectiveness. We encourage directors to participate in external continuing director education programs and provide reimbursement for expenses associated with this participation. Throughout the year, Board members also visit our manufacturing facilities and attend Company events, including our Engineering and Technology (ET) Conference and the announcement of our investment to build the Equipment and Process Innovation and Commercialization (EPIC) Center, an advanced facility for collaborative semiconductor process technology and manufacturing equipment R&D. These interactions, along with meetings with leaders below the CEO Executive Leadership Team level throughout the year, provide directors additional visibility to provide oversight of the Company’s culture, strategies and operations.

Board and Committee Evaluations

Our Board recognizes that a thorough, constructive evaluation process enhances our Board’s effectiveness and is an essential element of good corporate governance. Each year, the Governance Committee, in consultation with our independent Board Chair, reviews and determines the design, scope, content and execution of the evaluation process, including whether to modify the written evaluation questionnaire or to engage a third party to facilitate the evaluation.

In 2023, the Governance Committee reviewed the evaluation process that had been in place for a number of years and considered the input of Board members on the evaluation process. Based on this review, the Governance Committee determined to make enhancements to the process to include more focused questions to invite open-ended responses, rather than numerical ratings, on each director’s assessments of the Board, the Board Committees and individual directors. Written questionnaires were used in the evaluation to solicit feedback on a range of topics, including overall Board effectiveness; Board dynamics and communication; interaction with management; Board skills and experience; the role of the Board and Committee chairs; and information and resources.

 

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Following completion of the written questionnaires, all written comments were provided to the Chair, who met with each director individually to discuss additional input on these topics and to provide individual feedback. Directors were also invited to provide feedback on our Board Chair to the Chair of the Governance Committee. Committee chairs led a discussion of evaluation results for their respective Committees and a summary of Board and Committee evaluation results was discussed with the full Board, including suggestions for updating policies and practices per evaluation results. Director suggestions for improvements to the evaluation questionnaires and process are considered for incorporation for the following year.

2023 Board Evaluation Process

 

 

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Board’s Role in Risk Oversight

One of the Board’s most important functions is overseeing risk management for the Company. While Applied’s management team is responsible for the day-to-day management of risk, the Board is responsible for ensuring that the risk-management processes designed and implemented by management are functioning as intended. Applied’s risk oversight framework illustrated below shows the close interaction between the full Board, individual committees and senior management.

 

 

 

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Applied has implemented an enterprise risk management (“ERM”) program, overseen by the Audit Committee, which provides an enterprise-wide perspective on Applied’s risks. The Board has established a management committee to oversee and monitor the ERM program. This ERM Committee, comprising members of Applied’s senior management, is led by our CFO and Chief Legal Officer, with representatives from the Company’s largest business segment and supply chain operations.

 

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The risks identified by the ERM program are reported to the Board, with a focus on the most significant risks facing the Company, including strategic, operational, financial, legal and compliance risks. Oversight responsibility for a particular risk may fall within an area of responsibility and expertise of one of the Board Committees. Management presents regular analyses of risk mitigation strategies to the Board or the respective Committee with oversight responsibility for the relevant risk. The ERM Committee reports to the Audit Committee at least semi-annually and provides a broader annual risk mitigation update to the full Board.

Risk Assessment of Compensation Programs. We have assessed our compensation policies, plans and practices, and determined that they do not create risks that are reasonably likely to have a material adverse effect on Applied. To make this determination, our management reviewed Applied’s compensation policies, plans and practices, and assessed the following aspects: design, payment methodology, potential payment volatility, relationship to our financial results, length of performance period, risk-mitigating features, performance measures and goals, oversight and controls, and plan features and values compared to market practices. Management reviewed its analysis with the HRCC, which agreed with this determination. Applied also has in place various controls to mitigate risks relating to compensation policies, plans and practices, such as executive stock ownership guidelines and a clawback policy that enables the recovery of certain incentive compensation payments in certain circumstances.

Board’s Role in Oversight of Strategy

The Board and its Committees actively engage with management to provide guidance on and oversight of Applied’s business strategy throughout the year. The Board dedicates one meeting annually to focus on Applied’s long-term strategy, which include strategic plans from members of senior management on the priorities and implementation strategies for their respective lines of business. These strategic plans guide Applied’s actions to manage risk and deliver shareholder value. The Board’s expanded strategy sessions also include presentations by internal experts to discuss technologies and markets relevant to our core businesses as well as adjacent and emerging technologies. In addition, various elements of strategy are discussed at every Board meeting, as well as at many meetings of the Board’s Committees, including the Strategy and Investment Committee. In order to assess performance against our strategic plans, the Board receives regular updates on progress and execution, and provides direction to senior management throughout the year.

To enhance its oversight of Applied’s strategy and process for considering long-term trends within the Company’s industries, the Board also leverages Applied’s Growth Technical Advisory Board, which is composed of leading academic and industry luminaries with a diverse set of backgrounds in fields such as science, technology, government and education. This Advisory Board, which includes a former member of the Applied Board, provides Applied and the Board with additional, independent insights on how major industries will continue to evolve in a technology-centric world.

Management Succession Planning

The Board and the HRCC recognize that developing the capabilities of Applied’s executives is vital to our ability to capitalize on our opportunities and increase long-term shareholder value. Accordingly, the HRCC’s most important goal is to oversee the Company’s programs that foster executive capability and retention, with emphasis on leadership development, management capabilities and succession plans.

We build our leadership capability using a multi-step approach to succession planning for our most critical roles, including CEO, executive and technology leadership positions. Our executive succession planning process is a carefully designed, thoughtful and long-term approach overseen by the HRCC and the Board. With the guidance of the HRCC, the Board also maintains a CEO emergency succession plan. We plan, and prepare as many years in advance as possible, for anticipated transitions to ensure leadership continuity and positive outcomes for the Company. Another key component of succession planning is leadership assessment and development of potential successors, including moving leaders into new, increasingly complex roles that complement their professional development. In addition, diversity of our succession pipelines is a priority of our Board and the Company, and we strive to ensure a diverse succession slate.

 

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Management reports quarterly either to the HRCC or the full Board on executive leadership development and succession planning. The reports include updates regarding succession and development programs for the CEO and other senior executives, with an eye toward ensuring development of the talent needed to lead Applied today and in the future and readiness of succession candidates who can assume top management positions without undue interruption. Board members have opportunities throughout the year to engage with members of senior management and other high-potential leaders in a variety of formal and informal settings, including Board meetings and events, preparatory meetings, analyst meetings, and internal and external business and technology conferences. The HRCC and Board also regularly discuss individual executive transitions as needed over the course of the year. The Board’s goal is to have a long-term and continuing process for effective senior leadership capability, development and succession, and to ensure that there are readily available choices when the need arises.

Shareholder Rights

In addition to direct engagement through our recurring shareholder engagement program discussed below, we have instituted a number of mechanisms that allow shareholders to advance their points of view, including:

Right to Call a Special Meeting. Our Bylaws permit shareholders holding at least 10% of our outstanding shares of common stock to call a special meeting. Our Board approved an amendment and restatement of our Bylaws to lower the threshold from 20% to 10% in response to majority support of a shareholder proposal on this topic at our 2023 annual meeting and subsequent feedback we received during our shareholder outreach, as discussed further below under “Shareholder Engagement.”

Right to Act by Written Consent. Our Certificate of Incorporation permits shareholders holding at least 20% of our outstanding shares of common stock to initiate the process for shareholders to take action by written consent without a meeting.

Proxy Access. Our Bylaws permit proxy access. Any shareholder (or group of up to 20 shareholders) owning 3% or more of Applied’s common stock continuously for at least three years may nominate up to two individuals or 20% of our Board, whichever is greater, as director candidates for election to the Board, and require us to include such nominees in our annual meeting proxy statement.

Majority Voting. Under our Bylaws, in any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “for” their election than votes cast “against” their election will be elected.

Our Bylaws provide that in the event an incumbent director receives more “against” than “for” votes, they shall tender their resignation after certification of the shareholder vote. Our Governance Committee, composed entirely of independent directors, will consider the offer of resignation, taking into consideration all factors it deems relevant, and recommend to the Board the action to be taken. The Board must take action on the recommendation within 90 days following certification of the shareholder vote. No director who tenders an offer of resignation may participate in the vote on the Governance Committee’s recommendation or the Board’s determination of whether to accept the resignation offer. Applied will publicly disclose the Board’s decision, including, if applicable, the reasons for rejecting an offer to resign.

Shareholder Engagement

We believe that strong corporate governance should include regular engagement with our shareholders to enable us to understand and respond to shareholder concerns.

Investor Relations. Our senior management team, including our CEO, CFO and members of our Investor Relations team, maintain regular contact with a broad base of investors, including through quarterly earnings calls, individual meetings and other channels for communication, to understand their concerns. In 2023, senior management participated in 103 meetings with investors, including 91 meetings with our CFO and 15 with our CEO.

Shareholder Outreach Program. In addition, we have a robust shareholder outreach program, which is a recurring, year-round effort, led by a cross-functional team that includes members of our Investor Relations, Global Rewards, ESG and Legal functions, with participation of our independent directors, where appropriate. This engagement enables us to build meaningful relationships over time with our shareholders. The Board’s Governance Committee oversees our shareholder engagement program.

 

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We engage with a significant cross-section of our shareholder base, including large institutional investors, pension funds and other investors. Topics of discussion include key business, Board, governance, executive compensation, environmental, sustainability and diversity and inclusion matters, as well as other subjects of interest to our shareholders. Feedback received by the Company during these engagements is shared with the Governance Committee, other relevant Committees, the full Board, and relevant members of senior management. Based on feedback from shareholders, we have over the years adopted proxy access, a special meeting right and the right for shareholders to act by written consent, and implemented changes to our executive compensation program.

During our off-season outreach in 2023, we contacted over 45 of our largest shareholders, who collectively hold more than 50% of our outstanding shares, and engaged in active discussions on these topics with investors who requested meetings, representing approximately 38% of our shares outstanding. Shareholder feedback during these engagements has been widely positive, with no significant concerns raised about Applied’s governance, compensation or sustainability practices.

 

Key Themes Discussed with Shareholders in 2023

Corporate Governance  

»  Appropriate response to the support for a shareholder proposal at last year’s annual meeting seeking a reduced threshold for shareholders to call special meeting

»  Governance practices, including Board leadership structure and shareholder rights

Sustainability  

»  Applied’s strategy, initiatives and Board oversight related to sustainability matters

»  Shareholders’ sustainability focus areas

 

»  Applied’s 2030 environmental and social goals and Net Zero 2040 Playbook

Board Composition and Oversight  

»  Thoughtful Board processes for refreshment, succession planning and tenure

»  Board members’ skills, experience and focus areas

Executive Compensation  

»  Compensation program, recent actions, metrics, sustainability considerations and link between pay and performance

Responsiveness to 2023 Shareholder Proposal to Lower the Threshold to Call a Special Meeting. In response to the support received at our 2023 annual meeting for the shareholder proposal requesting that we lower the ownership threshold required to call a special meeting to 10%, and at the direction of our Governance Committee, we asked our shareholders about their views on our special meeting right during our off-season outreach discussed above. The feedback we received from our shareholders on this topic was reviewed and discussed with our Governance Committee and the Board. After careful consideration of the results of the 2023 proposal and the shareholder feedback we received, as well as a review of market practices and provisions adopted by other companies with respect to the right to call a special meeting, in December 2023, the Board approved an amendment and restatement of our Bylaws to lower the ownership threshold required to call a special meeting from 20% to 10%.

Adjusted Pay Equity Disclosure. During our regular engagement, we have heard from certain shareholders that additional quantitative disclosure regarding employee pay equity would be beneficial. This feedback was reviewed with and considered by the HRCC and the Governance Committee. In response to this feedback, and as part of our continued commitment to enhanced transparency and accountability, we recently published adjusted pay ratios by

 

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gender for our employees, both globally and in the U.S., as well as the adjusted pay ratio comparing compensation for minorities with non-minorities in the U.S. In each instance, the ratio is based on total compensation, consisting of base salary, cash bonus and equity awards, and in alignment with our compensation philosophy, accounts for factors such as employees’ roles, organizational levels and geographic locations. These adjusted pay ratios are disclosed on our corporate website at: https://www.appliedmaterials.com/us/en/corporate-responsibility/people.html#payequity. We will continue to publish these ratios annually in our Sustainability Report.

Shareholder Communications

Any shareholder wishing to communicate with any of our directors regarding Applied may write to the director, c/o Teri A. Little, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1268, P.O. Box 58039, Santa Clara, CA 95052, or by e-mail at corporatesecretary@amat.com. The Board has instructed the Corporate Secretary to review correspondence directed to the Board and, at the Corporate Secretary’s discretion, forward items that she deems appropriate for the Board’s consideration.

Stock Ownership Guidelines

The Board has adopted stock ownership guidelines to align the interests of our directors and executive officers with those of our shareholders. The guidelines provide that non-employee directors should each own Applied stock with a value of at least five times the annual base retainer for non-employee directors. Applied’s Chief Executive Officer should own Applied stock with a value of at least six times his annual base salary. Each Section 16 officer on the CEO Executive Leadership Team should own Applied stock with a value of at least three times their annual base salary. Unearned performance awards and unexercised options (or portions thereof) are not included for purposes of satisfying the applicable ownership requirement. Under our guidelines, directors and officers may not sell any shares of Applied stock if their ownership is, or following the sale, would fall, below the applicable guideline. As of December 31, 2023, all of our directors and executive officers were in compliance with the stock ownership guidelines.

Standards of Business Conduct

Applied’s Standards of Business Conduct embody our commitment to ethical and legal business practices. The Board expects Applied’s directors, officers and all other members of its workforce to act ethically at all times and to acknowledge their commitment to Applied’s Standards of Business Conduct. The Standards of Business Conduct are available on our website at: https://www.appliedmaterials.com/us/en/about/corporate-governance/corporate-governance-documents.html.

Board Meetings and Committees

The Board met four times in fiscal 2023. Each director attended over 75% of all Board and applicable committee meetings held during fiscal 2023. Directors are strongly encouraged to attend the Annual Meeting of Shareholders, and all of the directors serving on our Board at the time attended our 2023 Annual Meeting of Shareholders.

The Board has three principal committees performing the functions required by applicable SEC rules and Nasdaq listing standards to be performed by independent directors: the Audit Committee, the HRCC and the Governance Committee. Each of these committees meets regularly and has a written charter approved by the Board that is reviewed annually by the respective committee and by the Board. The Board also has a Strategy and Investment Committee, whose role and responsibilities are described in Applied’s Corporate Governance Guidelines.

At each regularly-scheduled Board meeting, the Chair of each committee reports on any significant matters addressed by the committee since the last regularly-scheduled Board meeting. Each director who serves on the Audit Committee, HRCC, or Governance Committee is an independent director under applicable Nasdaq listing standards and SEC rules.

Copies of the current charters for the Audit, HRCC and Governance Committees can be found on our website at: https://www.appliedmaterials.com/us/en/about/corporate-governance/corporate-governance-documents.html.

 

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  Audit Committee    Meetings in Fiscal 2023: 28   

 

  Members:

 

  Judy Bruner, Chair*

 

  Kevin P. March*

 

  Yvonne McGill*

 

  Scott A. McGregor*

  

Primary responsibilities:

 

»  Oversee financial statements, internal control over financial reporting and auditing, accounting, and financial reporting processes

 

»  Oversee the qualifications, independence, performance and engagement of our independent registered public accounting firm

 

»  Oversee financial policies and procedures, disclosure controls and procedures, and internal audit function

 

»  Review and pre-approve audit and permissible non-audit services and approve all audit engagement fees

 

»  Oversee tax, trade, legal, regulatory, and ethical compliance

 

»  Review and approve related-person transactions

 

»  Oversee financial-related risks, enterprise risk management program, and cybersecurity

 

  * Audit Committee Financial
Expert

 

 

  Human Resources and Compensation Committee    Meetings in Fiscal 2023: 4   

 

  Members:

 

  Thomas J. Iannotti, Chair

 

  Rani Borkar

 

  Xun (Eric) Chen

 

  Alexander A. Karsner

  

Primary responsibilities:

 

»  Oversee human resources, compensation and employee benefits programs, policies and plans

 

»  Review and advise on management succession planning and executive organizational development

 

»  Determine compensation policies for executive officers and employees

 

»  Evaluate the performance, and determine the compensation, of executive officers

 

»  Approve and oversee equity-related incentive plans and executive bonus plans

 

»  Review compensation policies and practices as they relate to risk management practices

 

»  Approve the compensation program for Board members

 

»  Oversee human capital management, including the Company’s culture, talent development, and diversity and inclusion programs and initiatives

 

 

  Corporate Governance and Nominating Committee      Meetings in Fiscal 2023: 4     

 

  Members:

 

  Judy Bruner, Chair

 

  Alexander A. Karsner

 

  Yvonne McGill

  

Primary responsibilities:

 

»  Oversee the composition, structure and evaluation of the Board and its committees

 

»  Identify and recommend qualified candidates for election to the Board

 

»  Establish procedures for director candidate nomination and evaluation

 

»  Oversee corporate governance policies and practices, including the Company’s Corporate Governance Guidelines

 

»  Review and approve director service on the board of directors of other companies and oversee director education

 

»  Review shareholder proposals, recommend to the Board actions to be taken in response to each proposal, and consider the voting results of such proposals

 

»  Review strategy, policies, performance and reporting related to the Company’s management of sustainability issues not delegated to other committees

 

»  Oversee the Company’s public policy activities and review the Company’s charitable activities

 

»  Review conflict of interest matters for the Board

 

 

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Director Compensation

Compensation Program for Directors

We compensate our non-employee directors for their service on the Board with a combination of cash and equity awards. Directors who are employees of Applied do not receive any compensation for their service as directors.

Retainer and Meeting Fees

Each non-employee director receives an annual cash retainer for their service on the Board, as well as additional cash retainers if they serve as the Chair of the Board, as a member of a committee, or as the chair of a committee. Annual retainers are paid quarterly and are prorated based on the director’s service during the fiscal year. The following table sets forth cash compensation for non-employee directors in effect during fiscal 2023.

 

Annual Base Retainer (prorated and paid quarterly)

   $ 85,000  

  Additional Annual Retainers for Committee Service (prorated and paid quarterly):

    

 

 

 

 

 

Audit Committee

   $ 25,000  

Human Resources and Compensation Committee

   $ 12,500  

Corporate Governance and Nominating Committee

   $ 10,000  

Strategy and Investment Committee

   $ 10,000  

  Additional Annual Retainers for Chair and Committee Chairs (prorated and paid quarterly):

    

 

 

 

 

 

Chair of the Board

   $ 150,000  

Audit Committee Chair

   $ 25,000  

Human Resources and Compensation Committee Chair

   $ 20,000  

Corporate Governance and Nominating Committee Chair

   $ 12,500  

Strategy and Investment Committee Chair

   $ 12,500  

In addition, upon the determination of the Chair of the Board, non-employee directors may receive $2,000 per meeting for service on any ad-hoc committee of the Board. Non-employee directors are reimbursed for travel and other reasonable out-of-pocket expenses related to attendance at Board and committee meetings, business events on behalf of Applied, and seminars and programs on subjects related to their Board responsibilities.

 

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         Director Compensation

 

Equity Compensation

Initial Grant. Upon initial appointment (by the Board) or election (by the shareholders) to the Board other than at an annual meeting of shareholders, a non-employee director receives a non-discretionary grant of restricted stock units with respect to a number of shares of Applied common stock with a fair market value on the date of grant equal to $240,000 (rounded down to the nearest whole share), pro-rated based on the period starting on the day of initial appointment or election and ending on the day of the next scheduled annual meeting of shareholders.

Annual Grant. Each non-employee director elected at an annual meeting receives on that date a non-discretionary grant of restricted stock units with respect to a number of shares of Applied common stock with a fair market value on the date of grant equal to $240,000 (rounded down to the nearest whole share). A non-employee director who is initially appointed or elected to the Board on the day of an annual meeting of shareholders receives only an annual grant. Each of our non-employee directors who was re-elected at the 2023 Annual Meeting received a grant of 2,050 restricted stock units on that date.

Vesting. Grants made to our non-employee directors vest in full on the earlier of March 1 of the year following the date of grant or the date of the next annual meeting, provided the non-employee director remains on the Board through the scheduled vesting date. Vesting of these grants is accelerated in full upon a non-employee director’s earlier termination of service on the Board due to disability or death, or upon a change of control of Applied if the director ceases to be a non-employee director (and does not become a member of the board of directors of any successor corporation or its parent). Non-employee directors may elect in advance to defer receipt of vested shares until their termination of service on the Board.

Limit on Awards. Under our amended and restated Employee Stock Incentive Plan, grants of equity awards to any individual non-employee director may not exceed a fair market value totaling more than $400,000 in any fiscal year.

Charitable Matching Contributions

Non-employee directors are eligible to participate in The Applied Materials Foundation Matching Gift Program, under which The Applied Materials Foundation will annually match up to $3,000 of a non-employee director’s donations to eligible non-profit and educational organizations, and will match an unlimited amount of donations to our annual food drive. In addition, non-employee directors are eligible to participate in a matching program under the Applied Materials, Inc. Political Action Committee, under which the Company annually will match up to $2,500 of a non-employee director’s contributions for the benefit of eligible non-profit organizations and kindergarten to 12th grade public and non-profit private schools in the U.S. These maximum matching amounts and other terms are the same as those that apply to Applied’s employees.

 

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         Director Compensation

 

Director Compensation for Fiscal 2023

 

Name

   Fees Earned
or Paid in
Cash
($)
     Stock
Awards
($)(1)(2)
     All Other
Compensation
($)(3)
     Total
($)
 

Rani Borkar

     107,500        237,452               344,952  

Judy Bruner

     157,500        237,452        3,500        398,452  

Xun (Eric) Chen

     107,500        237,452               344,952  

Aart J. de Geus

     95,000        237,452               332,452  

Thomas J. Iannotti

     267,500        237,452        4,000        508,952  

Alexander A. Karsner

     107,500        237,452               344,952  

Kevin P. March

     110,000        237,452        5,000        352,452  

Yvonne McGill

     120,000        237,452               357,452  

Scott A. McGregor

     132,500        237,452               369,952  

Adrianna C. Ma(4)

     30,357               1,000        31,357  

 

(1)

Amounts shown do not reflect compensation actually received by the directors. Instead, these amounts represent the grant date fair value of stock awards granted in fiscal 2023 (consisting of 2,050 restricted stock units granted to each director on March 9, 2023), as determined pursuant to FASB Accounting Standards Codification 718 (“ASC 718”). The assumptions used to calculate the value of stock awards are set forth in Note 12 of the Notes to Consolidated Financial Statements included in Applied’s Annual Report on Form 10-K for fiscal 2023 filed with the SEC on December 15, 2023.

 

(2)

Each director other than Ms. Ma had 2,050 restricted stock units outstanding at the end of fiscal 2023. In addition, Dr. Chen had 23,769 restricted stock units that had vested in previous years and for which settlement was deferred until the date of his termination of service from the Board.

 

(3)

Amounts shown represent The Applied Materials Foundation’s and/or the Company’s matching contribution of the director’s donations/contributions to eligible non-profit organizations.

 

(4)

Ms. Ma’s term of office expired upon the election of directors at the 2023 annual meeting of shareholders on March 9, 2023 and so she did not receive a stock award in fiscal 2023 for her service as a director.

 

28    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


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         Stock Ownership Information

 

Stock Ownership Information

Principal Shareholders

The following table shows the number of shares of our common stock beneficially owned as of December 31, 2023 by each person known by Applied to own 5% or more of our common stock. In general, “beneficial ownership” refers to shares that an entity or individual had the power to vote or the power to dispose of, and shares that such entity or individual had the right to acquire within 60 days after December 31, 2023.

 

 

 

   Shares Beneficially Owned  

Name

   Number     Percent(1)  

The Vanguard Group

100 Vanguard Blvd.
Malvern, PA 19355

     73,671,156 (2)      8.87%  

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

     69,254,574 (3)      8.34%  

 

(1)

Percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by 830,476,616 shares of common stock outstanding as of December 31, 2023.

 

(2)

The amended Schedule 13G filed with the SEC by The Vanguard Group (“Vanguard”) on February 9, 2023 indicates that as of December 30, 2022, Vanguard had sole dispositive power over 70,056,331 shares, shared dispositive power over 3,614,825 shares and shared voting power over 1,281,629 shares.

 

(3)

The amended Schedule 13G filed with the SEC by BlackRock, Inc. (“BlackRock”) on February 7, 2023 indicates that as of December 31, 2022, BlackRock had sole dispositive power over 69,254,574 shares and sole voting power over 61,737,825 shares.

 

  APPLIED MATERIALS, INC. 2024 PROXY STATEMENT    |    29


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         Stock Ownership Information

 

Directors and Executive Officers

The following table shows the number of shares of our common stock beneficially owned as of December 31, 2023 by: (1) each director and director nominee, (2) each named executive officer and (3) the current directors and executive officers as a group. In general, “beneficial ownership” refers to shares that a director or executive officer had the power to vote or the power to dispose of, and shares that such individual had the right to acquire within 60 days after December 31, 2023.

 

      Shares Beneficially Owned  
  Name    Number(1)         Percent(2)  

  Directors, not including the CEO:

                

  Rani Borkar

     4,438 (3)      *  

  Judy Bruner

     29,380 (4)      *  

  Xun (Eric) Chen

     40,043 (5)      *  

  Aart J. de Geus

     106,281       *  

  Thomas J. Iannotti

     56,084       *  

  Alexander A. Karsner

     11,347       *  

  Kevin P. March

     1,178 (6)      *  

  Yvonne McGill

     11,820       *  

  Scott A. McGregor

     19,075       *  

  Named Executive Officers:

    

 

 

 

 

 

   

 

 

 

 

 

  Gary E. Dickerson

     1,414,881       *  

  Brice Hill

     16,679       *  

  Prabu G. Raja

     362,440       *  

  Omkaram Nalamasu

     120,730       *  

  Timothy M. Deane

     54,920 (7)      *  

  Current Directors and Executive Officers, as a Group (16 persons)

     2,366,638 (8)      *  

 

*

Less than 1%

 

(1)

Except as subject to applicable community property laws and as specified in the footnotes below, the persons named in the table have sole voting and investment power with respect to all of their shares of common stock.

 

(2)

Percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of 830,476,616 shares of common stock outstanding as of December 31, 2023, plus the number of shares of common stock that such person or group had the right to acquire within 60 days after December 31, 2023.

 

(3)

Consists of 4,438 shares of common stock held in a family trust for which Ms. Borkar shares voting and investment power.

 

(4)

Consists of 29,380 shares of common stock held in a family trust for which Ms. Bruner shares voting and investment power.

 

(5)

Includes 23,944 restricted stock units that have vested and which, pursuant to Dr. Chen’s election to defer, will be converted to shares of Applied common stock and paid to him on the date of his termination of service from the Applied Board.

 

(6)

Consists of 1,178 shares of common stock held in a family trust for which Mr. March shares voting and investment power.

 

(7)

Includes 8,989 restricted stock units that are scheduled to vest within 60 days after December 31, 2023.

 

(8)

Includes (a) 14,342 restricted stock units that are scheduled to vest within 60 days after December 31, 2023 and (b) 23,944 restricted stock units that have vested and which, pursuant to Dr. Chen’s election to defer, will be converted to shares of Applied common stock and paid to Dr. Chen on the date of his termination of service from the Applied Board.

 

30    |    APPLIED MATERIALS, INC. 2024 PROXY STATEMENT  


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         PROPOSAL 2 – Approval, on an Advisory Basis, of

the Compensation of Our Named Executive Officers

 

PROPOSAL 2 – Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers

Pursuant to Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), we are asking shareholders to approve, on a non-binding, advisory basis, the compensation of our NEOs, as described in this Proxy Statement. We seek this approval each year. Our annual “say-on-pay” proposals have been supported by our shareholders each year since we began providing this vote in 2011, and received the support of 92% of votes cast in 2023.

Our Board of Directors believes that our compensation policies and practices promote a performance-based culture and align our executives’ interests with those of our shareholders through a strong emphasis on at-risk compensation tied to the achievement of performance objectives and shareholder value. Our executive compensation program is also designed to attract and retain highly-talented executives who are critical to the successful implementation of Applied’s strategic plan.

Performance-Based Compensation. We align compensation with our business objectives, performance and shareholder interests. See the section titled “Overview of Compensation Program Philosophy and Governance Framework” on page 38 for a discussion of the principal objectives of our executive compensation program.

Significant Portion of CEO Pay Consists of Variable Compensation and Long-Term Incentives. In fiscal 2023, 96% of our CEO’s compensation comprised variable compensation elements, and 90% of his overall compensation was delivered in equity with multi-year vesting. Performance objectives include financial and market objectives relating to adjusted operating margin, relative TSR, adjusted gross margin and wafer fabrication equipment market share, as well as other strategic and operational objectives, as described on pages 42 and 43.

Please see the “Compensation Discussion and Analysis” section for further discussion of our executive compensation program and the fiscal 2023 compensation of our NEOs.

We are asking our shareholders to approve the compensation of our NEOs as described in this Proxy Statement by voting in favor of the following resolution:

“RESOLVED, that the shareholders approve, on a non-binding, advisory basis, the compensation paid to the Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 2024 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis section, the Summary Compensation Table, other compensation tables, narrative discussion and related disclosure.”

Even though this say-on-pay vote is advisory and therefore will not be binding on the Company, the HRCC and the Board value the opinions of our shareholders, and will consider the results of the vote when making future compensation decisions for our NEOs.

 

    LOGO   The Board recommends that you vote FOR the approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2023, as disclosed in this Proxy Statement

 

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         Compensation Discussion and Analysis

 

Compensation Discussion and Analysis

Executive Summary

Our Business and Strategy

Applied Materials is the leader in the materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations Make Possible® a Better Future.

We develop, design, produce and service semiconductor and display equipment for manufacturers that sell into highly competitive and rapidly changing end markets. Our competitive positioning is driven by the ability of our talented workforce to identify major technology inflections early, and to develop highly differentiated materials engineering solutions for our customers to enable those technology inflections. Through our broad portfolio of products, technologies and services, innovation leadership and focused investments in research and development, we are enabling our customers’ success and creating significant value for our shareholders. Applied’s ability to hire, develop and retain a world-class global workforce is based on our commitment to creating a Culture of Inclusion that embraces different backgrounds, perspectives, and experiences to build stronger, more resilient teams. Consistent with our core values, we enable our employees to do their best work by providing quality training, learning and career development opportunities; promoting diversity, equity and a connected and inclusive culture; and upholding a high standard of ethics and respect for human rights.

In addition to our other accomplishments, we continue to make strong progress towards our 10-year road map for environmental and social responsibility, which we introduced in 2020. At Applied, making a positive contribution is at the foundation of our culture and of our vision to Make Possible® a Better Future. Our 1x, 100x and 10,000x sustainability framework refers to the holistic goals and commitments we’ve set for our operations, how we work with customers and suppliers, and how our technology can be used to advance sustainability on a global scale. In 2023, we announced our Net Zero 2040 playbook – a clear pathway and detailed plan to work across our industry, including with customers and supply chain partners, to reduce the semiconductor industry’s carbon emissions. More details of Applied’s sustainability vision and strategy, including a copy of the Company’s most recent Sustainability Report, can be found at https://www.appliedmaterials.com/company/corporate-responsibility.

Our Performance Highlights

Over the past several years, our broad portfolio of products and services has enabled Applied to extend its leadership at the major technology inflections that are driving our customers’ roadmaps and future industry growth. In fiscal 2023, we delivered record revenue, earnings and cash flow, and we are outgrowing the wafer fabrication equipment market for the fifth year in a row. Key highlights of our financial outperformance include:

 

  »  

Record revenue of $26.5 billion, up 3% year-over-year, despite overall semiconductor and wafer fabrication equipment spending both being down in 2023.

 

  »  

Record GAAP EPS of $8.11, and record non-GAAP adjusted EPS of $8.05 (see Appendix A for a reconciliation of non-GAAP adjusted measures).

 

  »  

Record $8.7 billion in cash from operations, and record free cash flow of $7.6 billion (see Appendix A for a reconciliation of non-GAAP measures).

 

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         Compensation Discussion and Analysis

 

Highlights of five-year performance achievements across key financial measures

 

 

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Non-GAAP adjusted operating margin and non-GAAP adjusted EPS are performance targets under our long-term incentive and bonus plans. See Appendix A for non-GAAP reconciliations.

Key financial highlights for our reporting segments in fiscal 2023 include the following:

 

  »  

Semiconductor Systems segment: we grew annual revenue by 5% year-over-year to $19.7 billion and outperformed the market by delivering record net sales overall and in key product areas: foundry-logic, implant, packaging, metal deposition and CVD.

 

  »  

Applied Global Services segment: we grew revenue to a record $5.7 billion, increased the number of installed base tools by 5% year-over-year and grew long-term subscription service agreements to 63% of our total parts and service revenues.

 

  »  

Display and Adjacent Markets segment: we delivered revenue of $868 million and maintained profitability during an industry down cycle.

Strategic and Operational Highlights

Applied’s strategy is to deliver highly differentiated materials engineering products and services that enable major technology inflections and drive our customers’ success.

 

 

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Semiconductors are at the foundation of the digital transformation that will affect almost every sector of the economy over the coming years. Long-term megatrends including the Internet of Things (IoT), big data and artificial intelligence (AI) are fueling a new era of growth for semiconductors and driving the need for advancements in silicon technologies. Applied Materials has focused its strategy and investments to deliver innovations that accelerate improvements in the power, performance, area, cost and time-to-market (PPACt) of semiconductor devices. Key strategic and operational accomplishments during fiscal 2023 include:

 

  »  

Many of our business units delivered new records and major milestones including in etch, where we passed 10,000 shipments of our Centris Sym3 chamber.

 

  »  

We released new products and secured production-tool-of-record positions in gate-all-around, backside power delivery, patterning, advanced DRAM and high-bandwidth memory, and heterogeneous integration.

 

  »  

We strengthened our ICAPS business that serves IoT, communications, automotive, power and sensor customers with new products and application wins in etch, epitaxy, and implant, as well as metrology and inspection.

 

  »  

In our services business, we grew our industry-leading installed base to more than 48,000 systems, increased the number of systems under service agreement to 16,600, and added new types of subscription agreements including sensor and AI-based solutions. In addition, we signed a unique environmental services agreement with a customer that helps reduce electricity consumption and carbon emissions.

 

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         Compensation Discussion and Analysis

 

  »  

We continued to make substantial progress towards our 10-year roadmap for environmental and social responsibility, as described in more detail on pages xii and xiii.

Total Shareholder Return Performance

In fiscal 2023, Applied delivered strong total shareholder return, as a result of the Company’s ability to deliver record financial results in a down year for the wafer fabrication equipment market. As shown below, for the five year period beginning with fiscal 2019, Applied has substantially outperformed the S&P 500 Index, reflecting the company’s ability to create unique and innovative materials engineering solutions that accelerate our customers’ technology roadmaps.

Fiscal 2019 – Fiscal 2023 Total Shareholder Return vs. S&P 500 and Proxy Peers1

 

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1 

Reflects results from October 28, 2018 through October 29, 2023. Proxy peer data reflects the companies in Applied’s current compensation peer group approved by the HRCC in June 2023, as described on page 39, weighted by market capitalization.

Key Compensation Actions

Performance-Based Compensation Decisions. The HRCC approved an aggressive set of performance goals for the executive officers for fiscal 2023, including challenging financial and operational targets despite a difficult external landscape, including macro-economic uncertainty, a complex geopolitical environment and an anticipated down year for the wafer fabrication equipment market. During fiscal 2023, Applied delivered exceptional financial and operational results, meeting or exceeding most of its stretch objectives for the year in a continuing challenging environment, and made meaningful progress towards our long-term strategic goals that remain focused on enabling strong longer-term revenue and EPS growth. As a result, bonus payouts for the executive officers were, on average, modestly above target. No adjustments were made during the year to the performance goals or to the Company’s results used in determining incentive payouts.

As part of our multi-year incentive program, for the period of fiscal 2021 through 2023, the HRCC approved challenging goals for non-GAAP adjusted operating margin and relative total shareholder return. The results for this three-year performance period significantly exceeded target performance levels, resulting in above-target vesting of performance share unit awards granted to our executive officers in fiscal 2021.

 

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         Compensation Discussion and Analysis

 

Primary Compensation Elements and Executive Compensation Highlights for Fiscal 2023

The primary elements of our compensation program are base salary, annual incentive bonuses and long-term incentive awards. Other elements of compensation include a 401(k) savings plan, deferred compensation benefits and other benefits programs that are generally available to all eligible employees. Primary elements and highlights of our fiscal 2023 compensation program for our NEOs were as follows:

 

Element of Pay   Structure   Highlights

 

Base Salary

 

(see page 40)

 

 

»Fixed cash compensation for performing expected day-to-day responsibilities

 

»Reviewed annually and adjusted as appropriate, based on scope of responsibility, performance, time in role, experience, and competitive market for executive talent

 

 

»Reflecting (i) continued strong performance across the business, driven by our executive leadership, (ii) the continued growth in the size and complexity of the Company and (iii) continued demand for proven executive talent among technology companies, in fiscal 2023, the HRCC approved salary increases for three of our NEOs ranging from 5% to 9.5%

 

»Reflecting the increased responsibilities of his role assumed in late fiscal 2022, the HRCC approved a salary increase of 37% for Mr. Deane for fiscal 2023

 

»Reflecting the HRCC’s belief that CEO compensation should be predominantly tied to long-term results, the Committee has not increased the salary for our CEO since December 2018

 

   

Annual

 

Incentive

 

Bonus

 

(see page 40)

 

»Variable cash compensation

 

»Based on performance compared to pre-established financial, operational, strategic and individual performance objectives

 

»Includes assessment of the Company’s progress towards sustainability goals

 

»Financial and non-financial metrics provide a comprehensive assessment of executive performance

 

»Performance metrics evaluated annually to maintain continued alignment with strategy and market practice

 

»NEO annual incentives determined through a three-step performance assessment process:

 

 

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»No increase in target bonus as a percentage of base salary from fiscal 2022 to fiscal 2023 for any of the NEOs, with the exception of Mr. Deane, to reflect his new role

 

»The initial performance hurdle for fiscal 2023 was $6.00 of non-GAAP adjusted EPS, requiring continued strong financial performance. Actual non-GAAP adjusted EPS for fiscal 2023 was $8.05

 

»Because the initial performance hurdle was met, annual bonuses for the NEOs were based on (i) the Company’s results as compared to the objective and quantifiable business and strategic goals in the corporate scorecard and (ii) an assessment of individual performance results as compared to quantitative and strategic objectives

 

»Resulting payouts ranged from 98% to 108% of target for our NEOs

 

  Corporate scorecard modifiers ranged from 0.893x to 0.980x (see corporate scorecard information on pages 42 and 43)

 

  Individual performance modifiers were set at 1.1x for each of the NEOs (see individual performance factor details on page 44)

 

   

Long-Term

 

Incentives

 

(see page 47)

 

 

»Significant portion delivered through performance share units (PSUs), to establish rigorous long-term performance alignment

 

»Balance of award delivered in restricted stock units (RSUs) to provide a strong tie to shareholder value and enhance retention

 

»PSUs vest based 50% on achievement of 3-year non-GAAP adjusted operating margin goal and 50% on 3-year TSR relative to the members of the S&P 500 Index

 

»PSUs vest at end of 3-year performance period, based on achievement of performance goals; RSUs vest ratably over 3 years

 

 

»The target mix of long-term incentive awards consists of 75% PSUs and 25% RSUs for the CEO and 50% PSUs and 50% RSUs for the other NEOs

 

»Non-GAAP adjusted operating margin is a key measure of our Company’s long-term success

 

»Relative TSR incentivizes management to outperform the market in any business environment

   

 

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         Compensation Discussion and Analysis

 

Pay Mix

In fiscal 2023, a significant portion of our executives’ compensation consisted of variable compensation and long-term incentives. As illustrated below, 96% of CEO compensation for fiscal 2023 consisted of variable compensation elements, and 90% of CEO compensation was delivered in long-term incentive awards with multi-year vesting.

 

Fiscal 2023 Compensation Mix1
CEO    All Other NEOs

 

 

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1

Represents total direct compensation for fiscal 2023, including the grant date fair value of annual long-term incentive awards.

Summary of 2023 Total Direct Compensation

The following table summarizes elements of annual total direct compensation for our NEOs for fiscal 2023, consisting of (1) base salary received during the year, (2) actual annual incentive bonus payout and (3) long-term incentive awards (the grant date fair value of stock awards). This table excludes amounts not considered by the HRCC to be annual total direct compensation, such as certain other amounts required by the SEC to be reported in the “All Other Compensation” column in the Summary Compensation Table (see page 54 of this Proxy Statement).

 

Name and Principal Position

  

Salary

($)

    

Annual
Incentive
Bonus

($)

    

Annual
Long-Term
Incentive
Award

($)

    

Total

($)

 

Gary E. Dickerson

President and Chief Executive Officer

     1,030,000        1,631,520        23,951,048        26,612,568  

Brice Hill

Senior Vice President, Chief Financial Officer and Global Information Services

     708,846        1,019,304        5,530,849        7,258,999  

Prabu G. Raja

President, Semiconductor Products Group

     740,000        1,091,475        6,636,826        8,468,301  

Omkaram Nalamasu

Senior Vice President, Chief Technology Officer

     625,385        742,203        4,037,503        5,405,091  

Timothy M. Deane

Group Vice President, Applied Global Services

     574,947        733,590        3,097,266        4,405,803  

 

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         Compensation Discussion and Analysis

 

Other Key Compensation Practices

We are committed to executive compensation practices that drive performance, mitigate risk and align the interests of our leadership team with those of our shareholders. Below is a summary of best practices that we have implemented because we believe they are in the best interests of Applied and our shareholders, and practices that we avoid because we believe they run counter to those interests.

 

WHAT WE DO     

 

  WHAT WE DO NOT DO

 

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Pay for Performance – Significant majority of NEO target compensation is performance-based and tied to pre-established performance goals aligned with our short- and long-term objectives.

   

 

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No Guaranteed Bonuses – Our annual bonus plans are performance-based and do not include any guaranteed minimum payment levels.

 

   

 

 

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Mitigation of Risk – Use of varied performance measures and of payout limits in incentive programs mitigates risk that executives will be motivated to pursue results with respect to any one performance measure to the detriment of Applied as a whole.

   

 

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No Hedging or Pledging – Our insider trading policy prohibits all directors, NEOs and other employees from engaging in hedging or other speculative trading, and prohibits directors and NEOs from pledging their shares.

 

   

 

 

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Compensation Recovery Policy – We have a compensation recovery policy that, in certain circumstances, requires reimbursement of compensation received by our NEOs under our annual cash bonus plan and our stock incentive plan.

   

 

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No Excessive Perquisites – We do not provide material perquisites or other personal benefits to our NEOs or directors, except for security purposes or in connection with business-related relocation.

 

   

 

 

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Stock Ownership Guidelines – All senior officers and directors are subject to stock ownership guidelines to ensure their interests are aligned with shareholders’ interests.

   

 

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No Dividends on Unvested Long-Term Incentive Awards – We do not pay dividends or dividend equivalents on unvested long-term incentive awards.

 

   

 

 

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Double-Trigger Change-in-Control Provisions – For vesting to accelerate, long-term incentive awards for all NEOs require a “double-trigger” of both a change-in-control and subsequent termination of employment.

   

 

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No Executive Pensions – We do not offer any executive pension plans.

 

   

 

 

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Annual Say-On-Pay Vote – We seek annual shareholder feedback on our executive compensation program.

 

     

 

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No Tax Gross-Ups – We do not pay tax gross-ups, except in connection with business-related relocation or expatriate assignments.

 

 

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         Compensation Discussion and Analysis

 

Compensation Governance and Decision-Making Framework

Overview of Compensation Program Philosophy and Governance Framework

Our executive compensation program has three principal objectives:

 

  »  

To attract, reward and retain highly-talented executive officers and other key employees;

 

  »  

To motivate these individuals to achieve short-term and long-term goals that enhance shareholder value; and

 

  »  

To support our core values and culture.

We seek to achieve these objectives by:

 

  »  

Providing compensation that is competitive with the practices of other leading high-technology companies; and

 

  »  

Linking rewards to Company and individual performance by:

 

   

Setting challenging performance goals for executive officers and other key employees;

 

   

Balancing retention needs with performance objectives; and

 

   

Providing a high proportion of total target compensation in the form of long-term incentive awards to motivate executive officers and other key employees to increase long-term value in alignment with shareholders’ interests.

The HRCC uses these principles to set appropriate base salary levels and to design and determine annual incentive bonuses and long-term incentive awards. The HRCC also considers Applied’s business strategy and objectives, external factors such as the geopolitical and economic environment, competitive practices and trends, and corporate factors, including the overall cost of the compensation program.

The HRCC further considers the results of the annual advisory “say-on-pay” vote and shareholder feedback. At our Annual Meeting in 2023, our “say-on-pay” proposal received a substantial majority (92%) of votes cast, reflecting continuing strong support for our ongoing executive compensation program. Following the Annual Meeting and throughout the remainder of 2023, we continued our extensive shareholder outreach efforts and specifically solicited feedback on our executive compensation program. A broad group of Applied management team members participated in the outreach through a series of virtual meetings and conference calls, with active independent director participation either directly on the calls or through oversight of the shareholder engagement program. During those discussions, we continued to receive broadly positive investor feedback on the compensation program structure and design. Taking into account the results of the “say-on-pay” vote at our 2023 Annual Meeting and the shareholder feedback gathered through our outreach efforts, the HRCC approved an executive compensation program structure for fiscal 2023 that was generally unchanged from the fiscal 2022 program.

Compensation Program Peer Group

The HRCC regularly reviews the structure and amount of compensation paid by our peer group, which consists of high-technology companies whose businesses are comparable to ours and with whom we are likely to compete for executive talent, as a reference point for evaluating our compensation program. The HRCC generally screens for companies that meet the following criteria: (1) innovative technology companies with product manufacturing, (2) companies whose revenues and market capitalization were approximately one-fourth to five times that of Applied, (3) publicly-traded companies with global operations that disclose executive compensation pursuant to SEC rules, and (4) companies that represent: (i) industry competitors, (ii) competitors for key talent, (iii) customers or suppliers, and/or (iv) comparable alternatives for shareholder investment.

Data gathered on executive compensation practices across the peer group include base salary levels, bonus payouts, target and actual cash compensation, long-term incentive award values and total compensation levels. The HRCC uses this information as a reference point in informing its decision making, rather than targeting a specific percentile of the peer data for our NEOs. The executive compensation data for the peer companies is gathered from the sources described in “Role of Compensation Consultant” below.

 

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Our fiscal 2023 peer group established in March 2022 and unchanged from the fiscal 2022 peer group, and our relative size compared to the peer companies at the time of the HRCC’s establishment of the peer group, are set forth below.

 

Fiscal 2023 Peer Group

Advanced Micro Devices, Inc.

 

Lam Research Corporation

Analog Devices, Inc.

 

Micron Technology, Inc.

Broadcom Inc.

 

Motorola Solutions, Inc.

Cisco Systems, Inc.

 

NVIDIA Corporation

Corning Incorporated

 

NXP Semiconductors N.V.

Intel Corporation

 

QUALCOMM Incorporated

NetApp, Inc.

 

Texas Instruments Incorporated

KLA Corporation

 

Western Digital Corporation

Applied Materials Positioning Relative to Peers1

 

 

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1

As of the HRCC’s review in March 2022.

In June 2023, the HRCC conducted a review of the peer group, using the screening criteria described above. Based on this assessment, the HRCC determined to (i) remove NetApp and replace it with International Business Machines Corporation (IBM), to bring the median size of the peer group closer to that of Applied, and (ii) otherwise leave the fiscal 2023 peer group unchanged. Each of the companies in the resulting peer group met most or all of the four screening criteria.

Components of Total Direct Compensation

Determining Total Direct Compensation

At the beginning of fiscal 2023, the HRCC evaluated and established total direct compensation – consisting of base salary, target annual incentive opportunity for the fiscal year and long-term incentive award value – for each NEO. As part of this annual evaluation, the HRCC considered the NEO’s scope of responsibility, performance, skill set, prior experience and achievements, advancement potential, impact on results and expected future contribution to our business. The HRCC also considered the compensation levels of each executive officer relative to other Applied officers, the need to attract and retain talent, business conditions, and compensation levels at our peer companies for comparable positions; however, no individual element of compensation was targeted to a peer percentile range. Following the end of fiscal 2023, the HRCC determined payouts for performance-based compensation programs, based on the performance of the Company and individual NEOs as compared to pre-established objectives.

Target Cash Compensation

Base salaries and bonus opportunities are designed to attract, motivate, reward and retain highly-talented executives, as well as to align pay with performance. Applied continues to focus the weighting of cash compensation more heavily toward performance-based incentives. At the beginning of each fiscal year (or at the time of an executive officer’s hire or appointment, as applicable), the HRCC determines each NEO’s target total cash compensation (salary and target bonus).

 

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Base Salaries

Base salaries represent an annual fixed level of cash compensation. Based on its review in early fiscal 2023, the HRCC determined to increase the base salary level for each NEO other than Mr. Dickerson, whose base salary the HRCC determined not to change, consistent with their belief that CEO compensation should be predominantly tied to long-term results. The HRCC believed that such increases were appropriate given the significant increase in the size and complexity of Applied and its businesses over the preceding years, the continued expansion of the scope and complexity of the NEOs’ responsibilities and the ongoing demand for proven executive talent among technology companies.

Annual Incentive Bonus Opportunities

Bonus Plan Overview. In fiscal 2023, all of our NEOs participated in the Senior Executive Bonus Plan (the “Bonus Plan”). The Bonus Plan is a shareholder-approved bonus program designed to motivate and reward achievement of Applied’s business goals, in alignment with delivering shareholder value. The annual incentive bonus for each NEO under the Bonus Plan is directly linked to Applied’s achievement of financial and market performance, operational performance and strategic objectives, in addition to individual performance. Company and individual goals are structured to incentivize management to drive strong operating performance, invest in innovation to drive future growth and create shareholder value. Our Bonus Plan is performance-based and does not include any guaranteed minimum payment levels.

Determining Target Bonus Amounts. Target bonus amounts for the NEOs are expressed as a percentage of base salary. The HRCC approves the annual target bonus amount for each NEO, taking into consideration Mr. Dickerson’s recommendations regarding the annual target bonus amounts for each of the NEOs other than himself. In early fiscal 2023, Mr. Dickerson recommended that the target bonus amount as a percentage of base salary for Mr. Deane be increased to 120%, in recognition of his new role, and that the target bonus amounts for each other NEO remain unchanged from fiscal 2022. Similarly, based on a comprehensive review and with input from its independent compensation consultant, the HRCC determined not to change Mr. Dickerson’s target bonus amount from fiscal 2022.

Assessing Performance and Payout. The determination of fiscal 2023 performance and annual incentive bonuses for our NEOs consisted of three key steps, as illustrated and described in more detail below.

 

 

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Initial Performance Hurdle. For fiscal 2023, the HRCC chose non-GAAP adjusted EPS as the initial performance hurdle measure under the Bonus Plan. EPS, an indicator of overall Company financial performance, is a measure of profits generated on a per-share basis that are available either to reinvest in the business or to distribute to shareholders, and has a strong link to share price. Adjusted EPS is a non-GAAP measure that excludes certain items

 

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from EPS determined in accordance with GAAP (see Appendix A for a reconciliation of non-GAAP adjusted EPS). Non-GAAP adjusted EPS includes the impact of share-based compensation expenses.

If Applied did not achieve the initial performance hurdle (a threshold non-GAAP adjusted EPS for the fiscal year, set at $6.00 for fiscal 2023), no bonus would be payable. If this threshold is achieved, the maximum bonus that becomes payable for each NEO is the lowest of: (a) $5 million, (b) 3x the corporate bonus pool funding modifier multiplied by that NEO’s target bonus, and (c) 3x that NEO’s target bonus. The HRCC established a somewhat lower threshold for fiscal 2023 compared to fiscal 2022 to reflect the potential impact to fiscal 2023 financial results stemming from the uncertain macroeconomic and geopolitical environment at the beginning of the fiscal year. The HRCC believed that the initial hurdle was sufficiently challenging given that it represented performance far ahead of levels the Company had achieved prior to fiscal 2021 and because the bonus payouts for the NEOs are ultimately determined by the HRCC’s assessments of achievement of objectives on the balanced corporate scorecard and individual NEO performance.

In fiscal 2023, Applied exceeded the initial performance hurdle under the Bonus Plan by delivering non-GAAP adjusted EPS of $8.05.

Balanced Corporate Scorecard. If the initial performance hurdle is achieved, the HRCC then reviews the level of achievement of pre-defined objectives on the corporate scorecard and determines the appropriate scorecard result for the fiscal year. The scorecard is designed to measure achievement of financial and non-financial objectives that are considered by the HRCC to be key drivers of the Company’s near-term financial and operational success that will create shareholder value over the longer-term. The fiscal 2023 scorecard measured company performance in five broad categories: (1) Financial and Market Performance and Execution, (2) Products and Growth, (3) Services and Subscription, (4) Customers and Markets, and (5) People and Organization. These categories align with and support the Company’s strategy of strengthening our materials engineering capabilities to enable major technology inflections for our customers and positioning Applied for sustainable growth to support long-term value creation for our shareholders. Since fiscal 2021, the corporate scorecard has included sustainability objectives, with performance measured based on Applied’s successfully making annual progress required to meet our long-term DEI and sustainability goals.

 

 Scorecard Category   Weighting
for CEO
  Link to Company Strategy and Performance

Financial and Market Performance and Execution

  50%  

Incentivizes achievement of financial, market share and TSR goals and focuses on delivering sustainable performance that increases shareholder value

 

Aligns with increased efficiency in operational process and quality and safety performance

Products and Growth

  30%  

Reinforces strategy of developing new and differentiated products and positioning Applied and its products for future revenue, profitability and market share growth

Services and Subscription

  10%  

Increases focus on continued profitable growth of the services business with an increasingly large portion being converted to subscriptions

Customers and Markets

  5%  

Promotes focus on customer service by improving growth and efficiency at key accounts and applications

People and Organization

  5%  

Drives progress towards achieving long-term sustainability objectives and enhancing the diversity and inclusion of Applied’s talent

NEO Objectives and Weightings. Each NEO was assigned individualized weightings for scorecard objectives to reflect the relative impact and contributions of that NEO and their business or organizational unit to Applied’s overall performance with respect to a particular objective. The corporate scorecard objectives and weightings for each NEO are set forth in the table below.

Goal Setting and Measurement. At the beginning of the fiscal year, the HRCC reviewed objectives and individual weightings proposed by management, and provided input on the corporate scorecard and weightings for each NEO. Performance objectives were set with a score of 1.0 indicating performance that met very high expectations and with

 

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scores over 1.0 indicating extraordinary achievement. Scorecard objectives are intended to be very challenging, to incentivize our NEOs to achieve performance levels that are higher than our externally communicated financial targets. Consequently, delivering results below the 1.0 level can still represent very meaningful progress towards our long-term strategic goals. At the end of the fiscal year, scores were calculated based on actual performance against objectives and were presented to the HRCC to review, adjust and approve.

The following table shows the fiscal 2023 corporate scorecard objectives, their relative weightings for each of the NEOs, the achievements based on performance against rigorous objectives and the resulting scores, as approved by the HRCC (see Appendix A for non-GAAP reconciliations). The HRCC approved an aggressive set of scorecard targets for the executive officers for fiscal 2023, including financial targets that required continued sustained strong performance in an uncertain external environment, equally challenging operational targets, and a focus on continued progress towards positioning the company to achieve its long-term objectives. During fiscal 2023, Applied delivered exceptional financial and operational performance and made meaningful progress towards our long-term strategic goals focused on enabling strong longer-term revenue and EPS growth. However, due to an industry-wide slowdown and a challenging geopolitical and macroeconomic environment during fiscal 2023, the Company did not fully meet some of the aggressive goals set for the year.

Beginning with the fiscal 2021 corporate scorecard, the HRCC added a broader sustainability objective – beyond the Company’s existing focus on diversity and inclusion – to demonstrate Applied’s commitment to driving sustainability throughout our business and to provide a discrete incentive for management to execute on our sustainability strategy. While the Company’s sustainability goals are long-term in nature, the HRCC believes that it is important to annually review, measure and assess progress towards those goals. As a result, the HRCC included sustainability objectives in the annual incentive program, rather than in long-term incentive awards. More detail on the Company’s sustainability framework and 2023 accomplishments can be found on pages xi through xiv.

 

Objectives   Weightings      Achievements   LOGO  
 

 

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Financial and Market Performance and Execution

    50%       50%       50%       50%       

 

   

 

 

 

 

 

Grow wafer fabrication equipment market share (measured by VLSI Research)

    10%       10%       10%       7%      Estimated market share for CY23 is highest in 20 years     1.5  

Achieve targeted Services core revenue growth

    2%       2%       2%       5%      Delivered record Services core revenue, but fell short of our aggressive goal     0.5  

Achieve targeted talent and productivity milestones and execute on employee engagement initiatives to position Applied to place in top quartile of benchmark for FY24 employee engagement survey

    2.5%       2.5%       2.5%       2.5%      Achieved targeted talent and productivity milestones and executed on employee engagement initiatives     1.0  

Achieve adjusted gross margin targets (gross margin reported externally) and deliver key milestones for gross margin improvement initiatives

    10%       10%       10%       10%      Delivered 46.8% non-GAAP adjusted gross margin, a modest increase from fiscal 2022, but below target     0.5  

Achieve adjusted operating margin goal (operating margin reported externally) and days inventory outstanding targets

    10%       10%       10%       10%      Achieved 29.1% non-GAAP adjusted operating margin, a modest decrease from fiscal 2022, and below target     0.5  

Achieve TSR ranking target relative to peers

    8%       8%       8%       8%      Outperformed peers during the fiscal year     1.5  

Improve operational, quality and employee health and safety performance

    7.5%       7.5%       7.5%       7.5%      Achieved key operational and quality metrics     1.0  

 

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Objectives   Weightings      Achievements   LOGO  
 

 

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Products and Growth

    30%       30%       40%       20%       

 

   

 

 

 

 

 

Deliver key milestones that demonstrate progress towards targeted fiscal 2025 performance for semiconductor businesses

    15%       20%       5%       7.5%      Achieved milestones towards meeting 2025 revenue target for semiconductor businesses     1.0  

Achieve key milestones that demonstrate progress towards targeted fiscal 2025 performance for Integrated Materials Solution (IMS) business

    3.5%       5%       1.5%       3%      Achieved milestones towards meeting 2025 targets for IMS business     1.0  

Deliver key milestones that demonstrate progress towards targeted fiscal 2025 performance for AIx application

    3.5%       5%       1.5%       5%      Achieved milestones towards meeting 2025 targets for AIx application     1.0  

Deliver key milestones that demonstrate progress towards targeted fiscal 2025 performance for Display business

    5%       0%       7%       2.5%      Made progress towards 2025 targets for Display business, but did not fully achieve milestones set for the year     0.75  

Deliver key milestones that demonstrate progress towards targeted fiscal 2025 performance for new and adjacent market growth

    3%       0%       25%       2%      Developed pipeline of opportunities in new and adjacent growth areas but did not fully meet the milestones for the year     0.75  
             

Services and Subscription

    10%       10%       5%       20%       

 

   

 

 

 

 

 

Achieve key milestones that demonstrate progress towards targeted fiscal 2025 performance for Service business

    7.5%       7.5%       3.5%       15%      Achieved milestones towards 2025 targets for Service business     1.0  

Achieve targeted subscription revenue growth for Service business

    2.5%       2.5%       1.5%       5%      Subscription revenue growth fell short of aggressive goals     0.5  
             

Customers and Markets

    5%       5%             5%       

 

   

 

 

 

 

 

Win prioritized target engagements at leading customers and accounts

    2.5%       2.5%             2.5%      Exceeded development and production tool of record goals, as well as application growth goals for systems and services     1.5  

Enhance customer trust by achieving targeted product safety, on-time delivery and installation performance

    2.5%       2.5%             2.5%      Met product safety and on-time delivery performance targets     1.0  
             

People and Organization

    5%       5%       5%       5%       

 

   

 

 

 

 

 

Demonstrate targeted progress towards increasing representation of women and underrepresented minorities and launch DEI Engine

    2.5%       2.5%       2.5%       2.5%      Continued progress toward achieving our longer-term objectives and successfully launched the DEI Engine     1.0  

Demonstrate progress towards achieving other long-term sustainability goals

    2.5%       2.5%       2.5%       2.5%      Met key milestones towards Company’s 2030 sustainability goals and launched our collaborative net-zero playbook     1.0  

Scores are based on achievement of goals tied to objective and quantifiable metrics aligned with Company strategy

 

 

 

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Individual Performance Factor. Each NEO’s individual performance factor (“IPF”) reflects an assessment of their individual performance and contributions. The IPF is only applied if the initial performance hurdle and at least some of the corporate scorecard objectives are achieved. The IPF modifies the initial bonus amount as determined based on achievement of corporate scorecard objectives. IPF modifiers can range from 0 to 1.5.

The HRCC determined the IPF for each NEO, other than Mr. Dickerson, after taking into consideration Mr. Dickerson’s recommendation, which included his assessment of the achievement of strategic, financial, operational and organizational performance goals specific to the business or organizational unit for which the NEO was responsible, as well as the NEO’s leadership skills and current and expected contributions to the business.

In determining the fiscal 2023 IPF for each NEO, the HRCC took into consideration: (i) financial performance, which exceeded threshold performance on non-GAAP adjusted EPS, (ii) results on the corporate scorecard and associated goals, (iii) the leadership team’s ability to guide Applied through continued external challenges including the continued challenging geopolitical and macroeconomic environment, and (iv) each executive’s capable leadership of their respective business unit or function, and in Mr. Dickerson’s case, of Applied overall. Based on this review, the HRCC determined that an IPF somewhat above target would be appropriate for fiscal 2023. In consideration of the individual accomplishments noted below, the HRCC assigned an IPF of 1.1 for each NEO.

The following table shows the highlights of each NEO’s performance in fiscal 2023 that the HRCC considered in determining their respective IPFs.

 

NEO    Fiscal 2023 Individual Performance Highlights

Gary E. Dickerson

  

»  Led Applied to record performance for the year, growing revenue by 3% and non-GAAP adjusted EPS by 5% year-over-year

 

  

»  Guided the Company in making significant and sustainable improvements in our operations and supply chain and to identify critical long-term partnerships and investments, including the EPIC center

 

  

»  Drove the organization to make significant progress across key strategic areas that position Applied to deliver its targeted 2025 financial model

 

 

  

»  Positioned Applied as one of the semiconductor industry’s leaders in sustainability, including by launching the Company’s collaborative net-zero playbook

Brice Hill

  

»  Delivered annual revenue of $26.5 billion and non-GAAP adjusted EPS of $8.05 and distributed over $3.16 billion to shareholders, including $2.2 billion in share repurchases and $975 million in dividends

 

  

»  Successfully managed external investor relationships and communications

 

 

  

»  Oversaw several key support functions, including Global Information Services and Global Indirect Procurement Services, driving enterprise enablement

Prabu G. Raja

  

»  Delivered record annual performance with Semiconductor Systems revenue of nearly $20 billion and the Company’s highest estimated market share in the last twenty years

 

  

»  Demonstrated strong momentum in key growth areas, specifically etch, metal deposition products (MDP), dielectric deposition products (DDP) and packaging, while continuing to establish Applied as a clear leader in the DRAM market and maintaining leadership in foundry-logic

 

 

  

»  Brought highly enabling technologies to market while securing and gaining share in key products and driving technology roadmap for our ICAPS business

Omkaram Nalamasu

  

»  Identified disruptive opportunities and developed potential future growth platforms

 

  

»  Continued to identify external sources of investment to support and accelerate the Company’s innovation pipeline

 

 

  

»  Led the Applied Ventures group in both investing for returns and incubating promising businesses in new and adjacent markets

 

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NEO    Fiscal 2023 Individual Performance Highlights

Timothy M. Deane

  

»  Delivered record Applied Global Services revenues of over $5.7 billion

 

  

»  Supported the largest installed base of tools in the industry, with more than double the installed base of process chambers versus our nearest competitor

 

 

  

»  Grew the number of tools under long-term subscription agreements, which now generate 63% of total parts and service revenues, with a 90% renewal rate for these subscriptions

Actual Bonus Payouts. The illustration below shows the results for each of the three key steps in determining the NEOs’ fiscal 2023 annual incentive bonuses under the Bonus Plan. Reflecting our record financial performance and significant individual contributions by the NEOs, bonus payouts for our NEOs were, on average, approximately 104% of target bonus amounts.

Fiscal 2023 Annual Incentive Calculation

 

 

 

 
   Performance Measures     

 

 
  Fiscal 2023 Achievement

Initial Performance

Hurdle

   Fiscal 2023 non-GAAP adjusted EPS of $6.00   

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  Achieved non-GAAP adjusted EPS of $8.05

Corporate Scorecard

  

Assessment of performance against predefined financial, operational and strategic corporate goals:

 

»  Financial and Market Performance and Execution

 

»  Products and Growth

 

»  Services and Subscription

 

»  Customers and Markets

 

»  People and Organization

   LOGO  

Strong performance on core objectives that – in some cases – fell short of exceptionally challenging goals set for the year

 

Scorecard results achieved in a range from 0.893 to 0.980 based on varying weighting of objectives

Individual Performance

Modifier

   NEO performance against personal objectives and individual contribution to business performance   

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  IPF achieved at a level of 1.1

 

  

 

  

Average NEO bonus, as multiple

of target: 1.04

 

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The following table shows for each NEO: (1) the bonus-eligible base salary, (2) the target bonus amount expressed as a percentage of base salary, (3) the target bonus expressed as a dollar amount and (4) the actual fiscal 2023 bonus amount approved by the HRCC and paid to the NEO.

 

 NEO    (1)
Base Salary
($)
    

(2)

Target
Bonus as a
Percentage
of Base
Salary

(%)

    

(3)

Target
Bonus

($)

    

(4)

Actual
Bonus

($)

 

 Gary E. Dickerson

   $ 1,030,000        150%      $ 1,545,000      $ 1,631,520  

 Brice Hill

   $    715,000        135%      $    965,250      $ 1,019,304  

 Prabu G. Raja

   $    750,000        135%      $ 1,012,500      $ 1,091,475  

 Omkaram Nalamasu

   $    630,000        120%      $    756,000      $    742,203  

 Timothy M. Deane

   $    600,000        120%      $    720,000      $    733,590  

Rigor in Annual Bonus Program. Our process of establishing challenging financial and operating objectives under the annual bonus program has resulted in judicious payouts during a period of significant growth for the Company. The chart below shows the actual annual bonus awards to our CEO as a percentage of his target bonus opportunity and our non-GAAP adjusted EPS achievements over the last five fiscal years.

CEO Actual Annual Bonus vs. Earnings Per Share

 

 

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Non-GAAP adjusted EPS is a performance target under the Bonus Plan. See Appendix A for non-GAAP reconciliations.

 

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Long-Term Incentives

Overview. Applied’s long-term incentive compensation program is intended to help (1) focus participants on achieving our business objectives, (2) attract, retain and motivate key talent, and (3) align our executives’ interests with shareholders’ interests to maximize long-term shareholder value.

Timing of Awards. The HRCC grants long-term incentive awards to our NEOs under our shareholder-approved Employee Stock Incentive Plan (the “Stock Plan”). The HRCC has not granted, nor does it intend to grant, equity awards in anticipation of the release of material, nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement. Similarly, Applied has not timed, nor does it intend to time, the release of material, nonpublic information based on equity award grant dates.

Fiscal 2023 Equity Awards

The HRCC believes that a meaningful portion of our NEOs’ target compensation should be in the form of long-term incentives. These awards are intended to reward performance over a multi-year period, align the interests of executives with those of shareholders, instill an ownership culture, enhance the personal stake of executive officers in the growth and success of the Company and provide an incentive for continued service at the Company.

Given our shareholders’ ongoing strong support of our incentive programs, we continued our approach of making performance-based equity awards a substantial portion of the overall value of equity awards granted to our NEOs.

The fiscal 2023 long-term incentive awards for NEOs consist of two forms of equity vehicles: performance share units and restricted stock units. The target vehicle mix of the awards for the fiscal 2023 grant remained unchanged from the previous year’s grants and consisted of 75% PSUs and 25% RSUs for the CEO and 50% PSUs and 50% RSUs for the other NEOs.

 

CEO LTI Vehicle Mix   All Other NEO LTI Vehicle Mix

 

 

 

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For fiscal 2023, in December 2022, the HRCC approved the target award values, which were converted to the corresponding number of PSUs and RSUs, listed in the below table for our NEOs.

 

  NEO   

Target Value
of Awards(1)

($)

     Equivalent
Target
Number of
PSUs(2)
     Equivalent
Number of
RSUs(2)
 

  Gary E. Dickerson

   $ 20,500,000        140,578        46,860  

  Brice Hill

   $ 5,000,000        22,859        22,859  

  Prabu G. Raja

   $ 6,000,000        27,430        27,430  

  Omkaram Nalamasu

   $ 3,650,000        16,687        16,687  

  Timothy M. Deane

   $ 2,800,000        12,801        12,801  

 

(1)

Reflects target values of awards on the date of grant. These target values differ from the amounts shown in the “Stock Awards” column of the Summary Compensation Table, which represent grant date fair values determined pursuant to Accounting Standards Codification 718.

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