Applied Material’s Solar Machine

by Todd Woody
GreenWombat – Fortune.com

It’s been almost a year since Applied Materials – the Silicon Valley company that is the world’s biggest manufacturer of the machines that make computer chips and flat-screen video displays – announced it was jumping into the booming solar energy business. It was a natural fit – most solar technology is silicon based and the Applied (AMAT) machines that churn out video displays can, with a few modifications, produce thin-film solar panels. And tools used to make the chips in your laptop can be reconfigured to make wafers for solar cells. Applied’s move into the solar market promises to lower the cost of solar electricity. How? By standardizing and improving the solar manufacturing process, much as the company did for the semiconductor industry, allowing companies like Intel (INTC) and Advanced Micro Devices (AMD) to produce ever-cheaper chips that made laptops and mobile phones mass commodities.

So Green Wombat recently headed down the 101 to pay a visit to Charlie Gay, a solar industry veteran who runs Applied’s Solar Business Group, for a Year One update and to take a look at the company’s big metal. An avuncular exec, Gay began his solar career more than three decades ago at Boeing subsidiary Spectrolab. He subsequently joined Arco Solar and worked at its various incarnations and later served as director of the U.S. government’s National Renewable Energy Laboratory. He recently chaired solar-cell maker SunPower’s (SPWR) advisory board.

“Things are growing very rapidly, both for the solar industry as well as for Applied,” says Gay at the company’s Santa Clara campus. In the first quarter of the year the company forecast its solar business would do $200 million in revenue in 2007. By the second quarter, it raised that estimate to $400 million, and last week during the third quarter earnings call, CEO Mike Splinter upped the ante to more than $600 million.

The reason for the optimism is Applied’s growing thin-film solar business. So far this year it has signed contracts to build thin-film production lines for half a dozen solar companies in Europe and India. Unlike traditional solar panels, thin-film manufacturing involves depositing photovoltaic materials on large and slender pieces of glass or flexible material. Though not as efficient at converting photons into electrons as standard solar cells, the promise of thin-film is that will be cheaper to produce. (Unlike thin-film solar startups like Nanosolar, which are developing next-generation technology based on copper indium gallium diselenide, or CIGS, Applied’s clients use an older amorphous silicon-based process.) “What we’ve done is lay out production lines for thin-film solar,” says Gay. “One advantage we bring is integrating the tools with the production process in a solar factory.” The aim is to cut the cost per watt of solar electricity by designing smooth-running and efficient factories.

Over at another Applied building I don a lab coat, booties and safety glasses – not quite the full-on bunny suit – and Teresa Trowbridge, an Applied senior manager in the solar group, takes me on a tour of the massive clean room where Applied builds its equally massive flat-panel manufacturing machines (photo above). Sheets of glass as large as 7 by 8 feet (2.2 by 2.5 meters) are fed into the AKT Gen 8.5 and layers of semiconductors and circuitry are applied. Once the machines are tweaked to handle thicker thin-film glass and a couple of other mechanical changes are made, they can use the same process to produce solar panels.

CIGS thin-film would seem to threaten Applied’s silicon-based thin-film market. But Gay says CIGS thin-film processes still use layers of amorphous silicon – layers that can be deposited by Applied machines. “It grows our market,” he says of efforts by startups like Nanosolar and Miasole. Applied also makes tools that can be used in the production of crystalline silicon wafers for traditional solar panels. The company has not yet done any big wafer deals but Gay hinted that some may be in offing. “There’s a real renaissance of solar,” he says.