Applied Materials announced the biggest deal in the company's history Tuesday, a $1.9 billion blockbuster that further moves the Santa Clara tech firm into the burgeoning solar space.

The deal is five times larger than any order or project that Applied Materials has ever received, one analyst reported. "It is the largest sales agreement in Applied history and quite possibly in the history of the solar industry" is how spokeswoman Patricia Zepeda-Vera described it.

The company, which makes fabrication equipment for the semiconductor and flat-panel display markets, wouldn't name its customer, only identifying it in an SEC filing as "a privately held corporation based outside the United States." The deal will provide thin-film solar-panel production equipment for "multiple solar factories," it said in its filing.

Timothy Arcuri, an analyst with Citigroup, said the deal was for a large solar manufacturing project in Suzhou, China, which he described as a "solar city." He wrote in a note to investors Tuesday that the project includes investments from "wealthy individuals related to the solar industry" as well as "some existing solar ventures" and "a big component of government sponsorship." He raised Applied Materials' rating and increased his price target for the company's stock.

The tools will be used in a factory that will manufacture enough thin-film solar panels to produce 1 gigawatt of electricity a year, said Zepeda-Vera. That's about the peak use of a city the size of San Francisco.

Last year, the world's solar industry produced enough panels to make 12 gigawatts of electricity, she said.

The machines that Applied Materials will supply will be able to make huge solar panels - 5.7 square meters. "Basically the size of a garage door," said Mark Pinto, the company's chief technology officer.

And the scale of the factory complex will be huge, too. "This factory is roughly the size of 15 individual factories," he said. The panels likely would be used to create ground-mounted power plants, often called solar farms.

The result, Pinto said, will be solar panels that can be produced at a much lower cost, "close" to the industry's target goal of making panels costing $1 a watt to build vs. the current $2 to $3 a watt price.

New technologies coming in 2009 would get its customer to that $1 level, and probably 80 cents a watt soon after, Pinto said. "The scale makes a big difference," he said.

The result, he said, is that solar could become more affordable "without needing some disruptive breakthrough that we sometimes like to talk about. This is a breakthrough - using these huge, huge pieces of glass."

Applied Materials took $260 million worth of orders in its division that sells solar-panel-production equipment in its first fiscal quarter of 2008, up from $31 million in its first fiscal quarter of 2007.

Most of those orders came from companies outside the United States, it said - 24 percent from Taiwan, 19 percent from Korea, 13 percent from Japan, 12 percent from Europe and 10 percent from China and Southeast Asia. North American companies placed 22 percent of the orders.

Applied Materials' shares rose 7.6 percent on the news of the $1.9 billion sales agreement, closing at $20.32. Arcuri forecast that the deal could add 20 cents a share to the company's earnings, mostly in fiscal 2010.

Contact Matt Nauman at mnauman@mercurynews.com or (408) 920-5701.

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