Applied Materials Chops Revenue Forecasts on China Curbs

Applied Materials, a California-based supplier of chipmaking technology, said on Wednesday US export restrictions to China would result in a net sales loss of $250-$550 million in the current quarter and a similar impact in the following three months.

US companies were told last Friday of sweeping new regulations by the Biden administration, which ban them from supplying Chinese chipmakers with equipment that can produce advanced chips unless they obtain a licence.

Applied Materials became the first US semiconductor company to put a dollar figure to the perceived impact. The company’s stock was down 1.6% in extended trade.

China accounted for 29% of Applied Materials’ total sales in 2021, according to Evercore ISI analyst CJ Muse.

Sales of tool-makers including KLA Corp, Lam Research Corp and Applied Materials are expected to be affected by 5% to 10%, Muse wrote in a recent note, and that any retaliatory measure from China could further impact revenue.

Applied Materials said the restrictions would reduce its fourth-quarter net sales by about $400 million, plus or minus $150 million. Adjusted profit is expected to be $1.54 to $1.78 per share, down from an earlier forecast of $1.82 to $2.18.

Consequently, it has revised fourth-quarter revenue outlook to $6.15 billion to $6.65 billion, compared with the prior forecast of $6.25 billion to $7.05 billion and lower than analysts’ estimate of $6.67 billion, according to Refinitiv data.

“Applied is pursuing additional export licenses and authorisations where needed,” the company said.

The company also said it recently received a subpoena from the US Attorney’s Office for the District of Massachusetts requesting information relating to its customers in China.

Applied Materials’ warning comes as the global chip industry already faces major headwinds from tumbling demand post-Covid in computers, smartphones and other electronic devices.