And so I think it is a mix. You’ve got real demand there. When we look at the macro, we compare the amount of capacity put in place to local China consumption, and we think they’re still behind the amount of local China consumption. So we think the investments are rational. And actually, the utilizations look okay. They’re lower than rest of the world generally speaking, but they’re improving, and we expect yields to be improving also over time. And then I know, Gary, you’re asking Gary, about the free lunch. We think you’re right from the perspective of no capacity, we’re planning for all of the tools that we sell, whether it’s to China or whether it’s to a government incentivized project. None of these things, we think, increase the amount of equipment installed sort of abnormally such that it’s not going to be used and not going to serve an end market.
So we don’t believe that China demand is an end line free launch. We don’t believe the government incentives are a free lunch from that perspective, it’s just affecting a location of needed equipment. Thank you.
Timothy Arcuri: Thanks a lot.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Joseph Moore from Morgan Stanley. Your question please.
Joseph Moore: Yes, I wonder if you could give us some clarity on the $500 million of HBM related revenue that you’re forecasting – and actually – that’s a relatively small portion of your overall DRAM run rate, at least. And I guess I would have thought it would be even bigger. Can you talk about that? And then there’s more than just HBM, when it comes to Advanced Packaging for AI DRAM people are doing stacks for other types of memory? Are you – is that HBM kind of encompassing all of the Advanced Packaging? Or is there other opportunity above and beyond that?
Brice Hill: Okay. Thanks, Joe. So on the DRAM, I think going back to that Q4, the first quarter, we saw elevated DRAM from the China demand. That was the approximation we used for the impact of that. So you’re right, it doesn’t – it’s not going to exactly describe every single quarter, but I think that was a good estimate of the incremental that we’re seeing. So we’ll end up with three straight quarters of incremental DRAM shipping to customers in China for those allowed technologies. And Gary, on the…
Gary Dickerson: Yes, Joe. On the HBM, again, the HBM packaging is what we talked about increasing to almost $0.5 billion in 2024. And our overall Packaging – overall Advanced Packaging is around $1.5 billion. So that’s kind of how to think about it. About $0.5 billion in HBM Packaging and the total Advanced Packaging for us is around $1.5 billion.
Joseph Moore: Okay. That’s helpful. Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Brian Chin from Stifel. Your question please.
Brian Chin: Hi there. Good afternoon. Thanks for letting [ph] us ask a question here. Just curious, in route to Applied doing better than the industry over the full year. In terms of the handshake that occurs maybe around midyear, but between some digestion and ICAPS and some pickup in advanced foundry-logic – but the current timing around this suggest maybe a bigger dip in revenue in the July quarter?
Brice Hill: Hi, Brian, it’s Brice. So yes, we’re not going to guide future quarters beyond the outlook quarter. So we’ve given you the shape that we think the end markets will take. And to your point, it’s hard to tell which force will be stronger, whether leading – growing leading edge or a little digestion on the ICAPS side. So we’re not going to call that until we get to those quarters.
Brian Chin: Okay. Fair enough. Thanks.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Charles Shi from Needham & Company. Your question please.
Charles Shi: Hi. Thanks for taking my question. I have a long-term question for leading-edge foundry-logic. So you guys talked a lot about the Material engineering potentially driving outperformance. If I look at the back in the last 10 years, I mean, I think the back half of the last decade, I mean, between 2015 and 2019 because the manufacturers kind of slow to jump on to EUV, there was a lot more adoption of multi-pattern. – actually led to like outperformance of the depth [ph] and edge equipment suppliers like Applied Materials, but the last five years because of the EUV adoption seems to be that trend has reversed a little bit. But looking out for the next five years, I know there are recent discussions about maybe high end EUV may not actually get adopted before 2030.
Does that – does Applied think that may lead to more of the multi-patterning EUV again and that could actually drive up the material engineering intensity again? And any thoughts would be helpful. Thank you.
Gary Dickerson: Yes. Thanks for the question. So one thing I would point to, one of our largest customers, they talked about what’s driving their road map going forward. They talked about something called design technology co-optimization. So what they said basically was that much of the area scaling they were driving going forward is coming from new structures and new materials. So an example is backside power you can get 30% area savings through that type of a structure with no change in feature size. So I think what – certainly, what we see and we’re working with customers for technology nodes out, past the end of the decade, we see the relative contribution of materials innovations spending going higher, the percentage of that going higher.
Gate-all-around, backside power, there’s CFAT technology. There’s many different innovations, Packaging technologies. All of those areas, we have over 50% share opportunity in those inflections that are very accretive. And again, we do see a relative contribution from – of spending for those innovations to go higher over time. I’ll give you one more data point. So gate-all-around. Gate-all-around is a new innovation and the transistor to process the data faster. We see Gate-all-around ramping to more than $1.5 billion for Applied revenue in 2024 and almost double that amount in calendar 2025. So again, those are – they’re very powerful new architecture inflections, where Applied is extremely well positioned.
Charles Shi: Thank you.
Michael Sullivan: Okay. Thanks, Charles. And operator, we’re getting close to the end of the session. So if we have time for one more quick question, please.
Operator: Certainly one moment for our final question for today then. And our final question for today comes from the line of Thomas O’Malley from Barclays. Your question please.
Thomas O’Malley: Hey guys, thanks for sneaking me in. I had another question on kind of the handoff in the first half, for the second half. Clearly, you’re kind of talking about the ICAPS business, getting a little softer in the back half, but leading edge is really picking up slightly offsetting. In terms of where you’re seeing the strength in the leading edge, is that greenfield new fab build-outs or is that existing capacity additions? Any kind of help on where that strength is coming from in the second half would be helpful. Thank you.
Brice Hill: Sure, Tom. It’s Brice. Typically, it’s greenfield. So I think that when companies start the first part of a process, you’re typically putting in greenfield and you’ll shift some of your reused equipment later if you’re able to do that. So that would be my expectation. Thank you.
Thomas O’Malley: Thank you.
Michael Sullivan: Okay. Thanks, Tom. And appreciate that question. Brice, how would you like to give us your closing thoughts for today?
Brice Hill: Sure, Mike. What stands out to me from a summary perspective, is that we’ve anticipated the major market trends and we work closely with our customers to invest in the most important technology inflections. I think will be a major beneficiary, as AI and IoT spending grows over the next several years. Our number one positions in gate-all-around, backside power and advanced packaging are higher than our corporate average, which gives me confidence that we’ll continue to gain share. Beyond our strong portfolio, we’re also making operational progress, which makes me confident we can meet strong demand and make progress in gross margins. Finally, our services growth is accelerating to double digits and generating more than enough profit to fund our growing dividend. Also, I hope to see many of you at the Morgan Stanley conference on March 4. Mike, thank you. Let’s close the call.
Michael Sullivan: Okay. Thanks, Brice. And we’d like to thank everybody for joining us today. A replay of today’s call is going to be available on the IR page of our website by 5 o’clock Pacific Time, and we’d really like to thank you for your continued interest in Applied Materials.
Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
