Beyond the Chip:

How Applied Materials is Engineering the Future

After more than 70 years of steady growth, semiconductors have become a $500-billion-plus industry. And the momentum is far from slowing — analysts expect the market to double before the end of the decade, with revenue projected to reach $600 billion as early as 2025.

Applied Materials has been a leader in semiconductor innovation and production since the industry’s beginning and is poised to further spearhead global expansion while defining the next generation of chip technology. Omkaram Nalamasu, the company’s senior vice president and chief technology officer (CTO), shared Applied Materials’ mission and his personal technology and business development philosophy during a discussion at TDK Ventures’ 100X 2025 conference in San Francisco.

>> Watch the full 100X discussion with Om Nalamasu here.

Nalamasu explained that Applied Materials works to perfect “atomic engineering on an industrial scale.” “Any chip that has ever been made in the last 70 years, we have had 50% of the technologies making that chip happen,” he told moderator Dante Zakhidov, a TDK Ventures investment analyst. That core capability provides the strategic lens through which the company identifies and incubates future technical and market disruptions, from AR waveguides to solid-state batteries.

Nalamasu also serves as president of Applied Ventures, the company’s corporate venture capital (CVC) arm. The roles overlap more than might be expected, because at Applied, the CTO’s office is “not a pointy-head organization,” Nalamasu said. “It’s more of a business incubator and venture studio. We look at the disruptions in the core markets where we play. If we are going to be disrupted, we should disrupt ourselves. Secondly, we look at the big inflections that are going to be shaping the world of tomorrow.” The CTO function and the CVC share a common goal: exploring innovation-driven markets while avoiding commoditized, cost-driven sectors.

While Applied Ventures is one of the oldest, most profitable, and largest deep tech CVCs, with $500 million invested, Nalamasu is proudest of its strategic foundation.

“We have clarity on why we exist,” he elaborated. “We invest to learn…about a new ecosystem that we want to test. Some of those companies become invest-to-acquire for us. We also invest in suppliers…looking for a critical technology or a critical component [with] a vibrant supply chain. If I’m going after a new market, the product is important, but equally important, if not more important, is how we enable that market. How do we get paid for the innovation that we are bringing to the table?”

Likewise, within Applied Materials’ CTO organization, Nalamasu follows an “open innovation methodology” that aligns with the CVC, actively collaborates with university researchers around the world, and connects internal R&D with customers.

“But fundamentally, it is about taking your own capabilities, combining with the capabilities that are out there at large, and creatively stitching them together so you have a time-effective and cost-effective innovation to commercialization [process] with a high hit rate,” Nalamasu said.

The approach has served Applied Materials well, enabling it to deliver solutions beyond semiconductors — including its current efforts around photonics. “If you can control photons in a pixilated way using a material stack, what kind of problems can you solve?” he asked. “We call it ‘engineered optics’ or ‘flat optics,” and the first application is augmented reality. Applied Materials has seen significant progress in this area, publicly announcing partnerships to provide lightweight waveguides for AR glasses.

One venture that didn’t work out, but taught a valuable lesson, was Applied’s foray into solar energy.

“Applied got into solar because the wisdom around the 2006–2007 timeframe was that the semiconductor industry reached a peak,” Nalamasu recalled. “So, we needed to look for new opportunities. We had built up the [solar] business to be $3 billion. But that industry is not like the semiconductor industry, [which] constantly reinvents itself. Solar doesn’t have that kind of innovation. And secondly, there isn’t a whole lot of service revenue, because you sell this tool that works for the next 25 years without needing tender loving care.”

The misstep, he said, was not technological, but structural.

“If you are selling the panels, this industry never had a downturn — it’s growing at 30% year over year,” he said. “And solar in many parts of the world, is cheaper for a new power plant based on solar versus fossil fuels.”

But Applied wasn’t selling panels; it was selling solar manufacturing equipment, which Chinese businesses eventually duplicated.

“The moment an industry transitions from an innovation-driven industry to cost-driven industry…high-tech companies in the United States are at a disadvantage,” Nalamasu argued. “That’s exactly what happened in the telecom industry. The same thing happened in solar. The same thing happened in LEDs. The same thing is happening now in batteries.”

The key lesson? “Pay as much attention to the business model as to the product,” he advised.

The solar experience informed Applied Materials’ battery materials strategy, which has since spun out as Elevated Materials. Leveraging the roll-to-roll tools that they developed to coat aluminum oxide films in potato chip bags, Applied’s Office of the CTO incubated a battery film business.

This time, however, instead of selling battery-manufacturing equipment, Elevated Materials aims to sell lithium metal films by the meter. Its objectives include:

1. Reducing battery costs from $100–120 a kilowatt hour to approximately $60, achieving parity with internal combustion engines.

2. Enabling fast charging — allowing drivers to “pump 150 miles’ worth of electrons in about five minutes,” making use of existing gas station infrastructure.

3. Creating a material technology that has a clear roadmap of progression, from increasing the energy density to improving long-term stability.

Unsurprisingly, Nalamasu views quantum and AI as the next major frontiers for semiconductor innovation.

“At this point, almost all the innovation is coming from software and algorithms,” he warned. “Very little focus is done on manufacturing-compatible qubits. We believe that it has to do with controlling the surfaces, interfaces, increasing the Q factor, reducing the error rate, increasing the coherence length, and increasing the uniformity of qubits. And everything else is still going to be icing on the cake. We need to go from physics-driven device innovation software and algorithm innovation, to manufacturing innovations to make low-cost, high-fidelity, qubits and quantum devices.”

On AI, he emphasized the need for increasing architectural sophistication and compactness.

“The complexity of the technology is going up,” he said. “If you are looking at logic at two nanometers, we’re already talking about 2,500 process steps, and now you’re talking about 14-angstrom, 10-angstrom devices. The innovation vector has been the third dimension, starting with FinFET to gate-all-around to complementary field-effect transistors, and then advanced packaging with heterogeneous integration.”

Nalamasu concluded by noting that the energy cost for computation has fallen 10,000x over the last two decades. The semiconductor industry’s central challenge now is to replicate those gains over the next 10 years to meet AI’s exploding energy demands. At TDK Ventures, we are tackling this challenge directly, investing in the 100x innovations that will power the world’s next 10,000x leap.

About 100X 2025

*TDK Ventures’ 100X 2025 combines three premier events — Energy Week, Digital Transformation Week, and Portfolio Summit — sponsored by the venture capital arm of TDK Corp., the global electronics giant. The event brought together innovators, investors, researchers, and thought leaders to explore digital and energy transformation in accordance with TDK Ventures’ mission to catalyze iconic companies in materials science, renewable energy, transportation, industry, and AI through early-stage investing, providing startups with technical expertise, global market access, and resources to scale rapidly. The event showcased visionary entrepreneurs working to create a more sustainable, just, and peaceful planet.*

Please see the 100X 2025 event reel, which highlights the energy, participation, and rigor of the conversations throughout the event.

For more updates on our events and CVC insights, follow TDK Ventures on LinkedIn.