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By Erik Kobayashi-Solomon | 04-19-2010 04:42 PM

Chipper Outlook for This Semiconductor Equipment Maker

Scale and a one-stop-shop approach give this firm an advantage over its competitors.

Erik Kobayashi-Solomon: Hi, I'm Erik Kobayashi-Solomon, co-editor of Morningstar's OptionInvestor.

Today, it's my great pleasure to welcome Andy Ng, stock analyst here at Morningstar covering chip and chip equipment companies. Andy, thanks for coming.

Andy Ng: Sure.

Kobayashi-Solomon: So, a couple of weeks ago, I wrote a bullish option strategy on Applied Materials--a company that you cover and you really like.

First thing that I wanted to ask you is, Applied Materials is a chip equipment company. Exactly what does that mean--a "chip equipment company"? How is that different from a chip company?

Ng: Applied Materials, they sell chip equipment, which is the manufacturing tools that are used to manufacture semiconductors.

Their customers include chipmakers like Intel, Samsung, and other firms in the semiconductor industry.

Kobayashi-Solomon: OK. So they're not making the actual chips that go into a computer or a cell phone, or something like that. They're making the equipment to make those chips.

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