AlwaysFree: Applied Material Inc. (Applied Materials) Cuts Forecast, Blaming China Export Curbs

According to The Edge Markets, a Malaysian media company’s article published on October 13, 2022, Applied Materials Inc., 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 $400 million in the period, according to a statement 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.

The export curbs, aimed at hampering China’s ability to develop the most advanced chips and equip its military, were ratcheted up Friday. The rules will affect sales of wafer-fabrication equipment and related parts and services, Applied Materials said.

Makers of chip equipment have been scrambling to adjust to the restrictions, which hit at a time when the industry was already suffering a downturn. ASML Holding NV, 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 Corp. can’t easily walk away from China, which is the biggest single market for their products and part of a global supply chain for electronics. Makers of chips and manufacturing equipment have both seen their stocks hammered by the rules in recent days.

Applied Materials shares are down about 14% since last Thursday, the day before the new restrictions were announced. After that steep decline, its latest warning didn’t do much to jar investors. The stock was little changed in late trading Wednesday.

The Santa Clara, California-based 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 Oct. 30. That’s down from as much as US$2.18 previously.

The lower earnings outlook is a result of reduced sales and a writedown of 23 cents a share 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.

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