Applied Materials cuts revenue, profit estimates on China export curbs

Chip-making technology supplier Applied Materials has lowered its target for revenue and profit for the fourth quarter of 2022 in the wake of export restrictions to China.
Applied Materials semiconductorApplied Materials said the new rules in selling semiconductor technology to China would force the US company to reduce its fourth-quarter net sales by about $400 million, plus or minus $150 million. As a result, 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.

Applied Materials said adjusted profit is expected to be $1.54 to $1.78 per share, down from an earlier forecast of $1.82 to $2.18.

Applied Materials said export restrictions to China would result in a $250 million-$550 million loss in net sales in the quarter ending Oct. 30, with a similar impact expected in the following three months.

US companies must cease supplying Chinese chipmakers with equipment that can produce advanced chips unless they first obtain a license – as per new regulations announced by the Joe Biden administration on Friday. United States wants to protect its semiconductor industry and kill China’s.

Applied Materials became the first U.S. semiconductor company to put a dollar figure to the perceived impact.

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

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

Applied Materials said it would be pursuing additional export licenses and authorizations where needed.

Applied Materials also said it recently received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts requesting information relating to its customers in China.

On Oct. 7, 2022, the United States announced export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment and related parts and services.