Anti-Chinese sanctions will cost US Applied Materials about $400 million in lost revenue

American chip-making equipment suppliers have had a hard time lobbying for synchronization of U.S. export controls with allies, as sanctions have changed the competitive landscape for the worse. Last week, Applied Materials executives admitted that the company will lose about $400 million in revenue this year because of sanctions against China.

Image source: applied materials

Applied Materials’ fiscal 2025 ends at the end of October, and last week it reported its first-quarter results. The company’s management’s guidance for the current quarter disappointed investors. They had expected revenue of $7.22 billion, while the company suggests targeting no more than $7.1 billion. At the same time, the specific income of $2.3 per share in this forecast turned out to be close to market expectations.

China accounts for about a third of Applied Materials’ total revenue, so the tightening of export controls is hitting the company hard. The year before, this supplier’s Chinese revenue accounted for 45% of its total. The company will lose about $400 million in revenue this fiscal year due to sanctions against China, with about half of the loss coming in the current quarter. Essentially, it will be caused by the company’s loss of the ability to service its own equipment used by Chinese customers. In the long term, increased demand in other geographic areas will offset these losses, but for now they will have to live with them. Data centers will soon surpass PCs and smartphones, which have historically led the way in terms of the amount of silicon they consume.

Applied Materials’ quarterly results were better than expected. Revenue grew 6.8% to $7.17 billion versus the forecast of $7.15 billion, and EPS was $2.38 versus the forecast of $2.28. In addition to the growing need for chips for the AI ​​segment as such, demand for equipment for their production will be fueled by increasing complexity of the layout, which will stimulate the modernization of the tooling.