2018 Guide to Effective Proxies

2.17.10 Peer groups | 457 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES COMPENSATION DISCUSSION AND ANALYSIS The tables below set forth our fiscal 2017 peer group and related information. Fiscal 2017 Peer Group Advanced Micro Devices, Inc. Micron Technology, Inc. Avago Technologies (renamed Broadcom Ltd.) Motorola Solutions, Inc. Cisco Systems, Inc. NetApp, Inc. Corning Inc. NVIDIA Corp. EMC Corp. QUALCOMM, Inc. Intel Corp. SanDisk Corp. Juniper Networks, Inc. Seagate Technology plc KLA-Tencor Corp. Texas Instruments Incorporated Lam Research Corp. Western Digital Corp. Applied Materials Positioning Relative to Peers Revenue 100 th Market Capitalization 100 th percentile percentile R&D as % of Revenue 100 th percentile 50 th percentile Percentile Rank 66 th 35 th 59 th Components of Total Direct Compensation Determining Annual Total Direct Compensation At the beginning of fiscal 2017, the HRCC evaluated each NEO’s annual total direct compensation – consisting of annual base salary, annual incentive bonus and annual long- term incentive award. As part of this annual evaluation, the HRCC considers the NEO’s scope of responsibility, performance, skill set, prior experience and achievements, advancement potential, impact on results and expected future contributions to our business. The HRCC also considers the compensation levels of an executive officer relative to other Applied officers, the need to attract and retain talent, and business conditions, and compensation levels at our peer companies for comparable positions; however, no individual element of compensation is targeted to a peer percentile range. The HRCC uses peer group data as a tool to assess how our executives’ compensation compares to the market rather than as a means to establish specific target compensation levels. Actual pay results vary based on the overall performance of the Company and individual NEO performance, as the largest portion of NEO compensation is performance-based. Base Salaries Base salaries and bonus opportunities are designed to attract, motivate, reward and retain executive talent, as well as to align pay with performance. At the beginning of each fiscal year, the HRCC determines each NEO’s targeted total cash compensation (salary and target bonus). Base salaries are an annual fixed level of cash compensation. At the beginning of fiscal 2017, the HRCC increased Mr. Salehpour’s base salary from $550,000 to $600,000 and Dr. Nalamasu’s from $460,000 to $490,000 to reflect each officer’s performance, role and responsibilities, and retention considerations. The HRCC did not change base salaries for the other NEOs in fiscal 2017. The HRCC determined that continuing base salary amounts from fiscal 2016 for those other NEOs was sufficiently competitive to provide adequate retention value and allowed Applied to continue its focus on weighting cash compensation toward performance-based incentives. Annual Incentive Bonus Opportunities Bonus Plan Overview. In fiscal 2017, all of our NEOs participated in the Senior Executive Bonus Plan (the “Bonus Plan”), except for Mr. Durn. Mr. Durn was not eligible to participate in the Bonus Plan for fiscal 2017 due to the timing of his hire two months before the end of the fiscal year. The Bonus Plan is a shareholder-approved bonus program designed to motivate and reward achievement of Applied’s business goals and to attract and retain highly-talented individuals. The annual incentive bonus opportunity 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 designed 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 minimum payment levels. Fiscal 2017 bonuses under this plan are intended to qualify as “performance-based” compensation under Section 162(m). Determining Target Bonus Amounts. Target bonus amounts for the NEOs are expressed as a percentage of base salary. The HRCC set the annual target bonus amount for each NEO, taking into consideration Mr. Dickerson’s recommendations regarding the annual target bonus amounts Applied Materials, Inc. 29 APPLIED MATERIALS, INC.