LOS ANGELES - Applied Materials, the biggest maker of chip-manufacturing equipment, slashed its forecast for the fourth quarter, warning that new export regulations rippling through the industry will hurt its sales to China.
The company estimates that the rules will reduce sales by about US$400 million (S$574 million) in the period, according to a statement on Wednesday. It now expects revenue of about US$6.4 billion, plus or minus US$250 million, compared with a previous forecast of roughly US$6.65 billion.
Under sweeping new regulations announced by the United States on Oct 7, US companies must cease supplying Chinese chipmakers with equipment that can produce relatively advanced chips unless they first obtain a licence.
The rules will affect sales of wafer fabrication equipment and related parts and services, Applied Materials said.
It became the first US semiconductor company to put a dollar figure to the perceived impact.
Makers of chip equipment have been scrambling to adjust to the restrictions, which hit at a time when the industry is already suffering a downturn because of high inflation and tumbling demand in computers, smartphones and other electronic devices post-Covid-19.
ASML Holding, another top producer of manufacturing gear, told its employees in the US to refrain from servicing customers in China. The Netherlands-based company has been selling its deep ultraviolet, or DUV, machines to Chinese customers but has held back its more advanced extreme ultraviolet, or EUV, technology.
Companies such as Applied Materials and Intel cannot easily walk away from China, which is the biggest single market for their products and part of a global supply chain for electronics.
China accounted for 29 per cent of Applied Materials' total sales in 2021, according to Evercore ISI analyst C.J. Muse.
Sales of toolmakers, including KLA, Lam Research and Applied Materials, are expected to be affected by 5 per cent to 10 per cent, Mr Muse wrote in a recent note, adding that any retaliatory measure from China could further impact revenue.
Applied Materials shares have been down about 14 per cent since last Thursday, the day before the new restrictions were announced. After that steep decline, its latest warning did not do much to jar investors. The stock was little changed in late trading on Wednesday.
The company also trimmed its profit forecast. Excluding some items, earnings will be US$1.54 to US$1.78 a share in the fourth quarter, which ends on Oct 30. This is down from as much as US$2.18 previously.
The lower earnings outlook is a result of reduced sales and a write-down for inventory and manufacturing tied to the new export regulations, the company said. Applied Materials also expects the rules to hurt sales in its fiscal first quarter by roughly the same amount. BLOOMBERG, REUTERS
