Applied Materials Inc.'s (AMAT) chief executive again lowered projections on the amount chip manufacturers are expected to spend on equipment this year but said his company is on track with its guidance for the current quarter.

The comments from Applied Materials Chief Executive Mike Splinter are the latest indications of cautiousness in the semiconductor industry, which has seen weakness of late. Consumer spending on PCs has remained soft, some large handset makers have been struggling and macroeconomic worries have hurt demand.

Splinter, at the Semicon West Conference in San Francisco, said the company--which makes tools used to produce semiconductors, television screens and solar panels--still backs its third-quarter guidance despite uncertainty about the short-term economic outlook.

In May, Applied Materials projected cautious fiscal third-quarter results and lowered 2011 expectations for spending on equipment to make chips.

Tuesday, Splinter again lowered expectations for such spending, this time to $30 billion to $33 billion, down from prior estimates for $31 billion to $34 billion. He noted that spending for dynamic random access memory, typically used in PCs, and by foundries, which manufacture chips for other companies, has been soft in the short term.

"But fundamental drivers remain strong," he said. "We continue to believe major semi companies are going to continue aiming at the goals of spending they set earlier in the year."

Applied Materials shares, down 10% in the year-to-date, recently slid 3.1% to $12.57.

Monday, fellow semiconductor equipment maker Novellus Systems Inc. (NVLS) also projected weak third-quarter results and warned customers are feeling more cautious.

The comments from Applied Materials and Novellus, as well as a dismal forecast late Monday from chip maker Microchip Technology Inc. (MCHP), are raising investor concerns about the industry's second half of 2011. Tuesday, shares of Philadelphia Semiconductor Index fell 3.2% in recent trading.

Specifically, Novellus shares dropped 12% to $31.59, while Microchip, which cited broad-based weakness in its businesses and soft automotive demand for its guidance, fell 14% to $32.33.

Other companies exposed to auto also declined, including Texas Instruments, down 3.6% to $31.28, and Analog Devices Inc. (ADI), down 5.1% to $36.56. And several semiconductor equipment companies also dropped, with KLA-Tencor Corp. (KLAC) down 6.7% to $9.97 and Lam Research Corp. (LRCX) down 6.2% to $42.10.

A clearer outlook for the industry's second half should emerge when larger companies--such as Intel Corp. (INTC), Texas Instruments Inc. (TXN) and Qualcomm Inc. (QCOM)--post results in the coming weeks.

Meanwhile, Splinter said Applied Materials has received approval for its purchase of Varian Semiconductor Equipment Association Inc. (VSEA) from half of the countries required, with approval still needed from the U.S., China and Korea.

Applied Materials in April agreed to buy Varian for $4.9 billion in cash, betting that the demand for popular gadgets such as smartphones and energy-efficient technology will drive growth at a combined company.

"As we've gotten together planning integration work with Varian, we're even more impressed," Splinter said Tuesday. "We think it's an even better deal than when we made it."

He said Applied Materials received a second request for information from the U.S. Department of Justice, and he expects to receive all approvals "sometime later in the year" to complete the acquisition.

-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com

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