Applied Materials Inc. (AMAT), the world's biggest supplier of machines that make solar panels and computer chips, said China remains a bright spot for the company, propping up global sales even as parts of Europe remain at risk.

"I thought personally that this year was going to be a down year, but it will be bigger than two years ago" in terms of global sales, said Applied Materials Chief Technology Officer Mark Pinto. In a measure of how important China is to the firm, he relocated to Beijing in January and the company has built its newest research lab in the western Chinese city of Xian .

(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com).

Earlier this month, Applied Materials said it swung to a profit in the second fiscal quarter ended May 2 after revenue doubled when stronger demand for products like cell phones, and personal computers outweighed weakness in the solar panel market. The company said machines to make the type of solar panels called thin-film solar panels has been slower to take off than expected.

The solar industry has been recovering from a slowdown last year after Spain , one of the world's biggest markets for the alternative energy, abruptly cut generous subsidies it could no longer afford amid the global financial crisis.

Now, Applied Materials thinks China will provide a big boost for solar-power demand. Applied Materials signed an agreement Wednesday to sell equipment to manufacture thin film-solar panels to China manufacturer ENN Solar Energy Co. for a new big solar-power farm in Inner Mongolia to be built by China Energy Conservation & Environmental Protection Group, a leading state-owned alternative-energy project developer. On Wednesday, Applied Materials also signed a preliminary agreement to work with China Energy to monitor the performance of the solar panels.

Such projects underscore a major shift under way in China . Until recently, China has moved slowly in developing large solar-power farms because government officials worried that they were too expensive. Chinese companies are among the world's biggest suppliers of solar panels, but until recently they have exported most of their products because of a lack of government support for the domestic market, while the overseas market was booming because of subsidies.

By contrast, government support of wind power means China has the world's biggest installed capacity for wind turbines. But growth is so fast that some 30% of wind power capacity isn't hooked up to the electricity grid, and the government has warned that there's overcapacity in turbine manufacturers.

"Right now, solar has been handled very pragmatically by the government," Pinto said Thursday.

Broadly speaking there are two types of photovoltaic cells: crystalline and thin film. Most Chinese solar-panel makers manufacture crystalline panels which use more silicone but tend to be more efficient. The newer-technology thin-film panels can perform just as well or better in some conditions but are harder to make. Pinto said thin-film panels are easier to install in big-scale projects like the huge solar-power farms China is planning, while the crystalline models are better for rooftops where space is a premium.

"The power-plant market, because it naturally fits here in China , will see steady growth," Pinto said. "The rooftop market in Europe , California and Japan could see some risk."

Still, there is the potential for a glut of solar-panel makers in China , he cautioned. "The risk is on the other side. We have over 100 crystalline silicone customers in China . There's a huge number of them and they just keep popping up. That's really where the China bubble is. Not on the demand end," he said.

Despite gloomy projections, sales have remained surprisingly strong in other parts of Europe , especially Germany , and continue apace in Japan and California because panel prices have fallen, Pinto said. Analysts say pressure from low-cost Chinese manufacturers has helped push down global prices.

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