New restrictions on doing business with China imposed by the administration of US President Joe Biden are sending shock waves through the global semiconductor industry, with chip-equipment makers girding for perhaps the most painful fallout.
Applied Materials Inc, a leading maker of chipmaking equipment, on Wednesday slashed its forecast for this quarter, saying that the new export regulations would reduce sales by about US$400 million in the period.
It now expects revenue of about US$6.4 billion, plus or minus US$250 million, compared with a previous forecast of about US$6.65 billion.
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In another sign of retreat, Applied Materials, along with KLA Corp and Lam Research Corp, have started or are preparing to pull employees from Yangtze Memory Technologies Co (長江存儲), China’s most advanced maker of memory chips, people familiar with the matter told reporters.
ASML Holding NV, another top producer of manufacturing gear, told its employees in the US to refrain from servicing customers in China.
“The US government’s recent restrictions are serious and escalate the economic, and potentially geopolitical, conflict with China — the largest customer of semis,” Bank of America Corp analyst Vivek Arya wrote, estimating the restrictions could shave off as much as US$7 billion in next year’s sales for vendors such as Applied Materials.
The White House outlined the export curbs on Friday last week, part of a years-long campaign to hamper China’s ability to develop the most advanced chips and equip its military.
China is pouring billions of dollars into developing a domestic semiconductor industry that is less dependent on the rest of the world, but those chipmakers still need to purchase highly specialized equipment from suppliers in the US, Europe and other parts of Asia.
“The new regulations could deliver a heavy blow to Applied Materials and Lam Research, which have a high sales exposure to China,” Bloomberg Intelligence analysts Masahiro Wakasugi and Brian Moran wrote in a research note yesterday.
Netherlands-based ASML has been selling its deep ultraviolet machines to Chinese customers, but has held back its more advanced extreme ultraviolet technology.
It is not clear whether those existing sales would be affected by the new Biden administration regulations.
The company will follow regulations from the Biden administration, an internal e-mail sent to staff said.
“ASML US employees must refrain — either directly, or indirectly — from servicing, shipping or providing support to any customers in China until further notice, while ASML is actively assessing which particular fabs are affected by this regulation,” an e-mail from the US management team addressed to employees in the country said.
The ban applies to all US employees, including US citizens, people with residency and foreign nationals who live in the country, the e-mail said.
The semiconductor industry has had an inkling for weeks that tighter rules were coming, with Nvidia Corp last month warning that US government restrictions on exporting artificial intelligence chips to China could affect hundreds of millions of dollars in revenue.
Companies such as Applied Materials and Intel Corp cannot easily walk away from China, which is the biggest single market for their products and part of a global supply chain for electronics.
On Wednesday, Applied Materials also trimmed its profit forecast. Excluding some items, earnings would be US$1.54 to US$1.78 a share this quarter, which ends on Oct. 30. That is down from as much as US$2.18 previously.
The lower earnings outlook is a result of reduced sales and a writedown of US$0.23 a share for inventory and manufacturing tied to the new export regulations, the company said.
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