By Arunima Kumar and Yuvraj Malik
(Reuters) – Chip-making technology supplier Applied Materials Inc. (NASDAQ) said Wednesday that export restrictions to China will result in a $250-$550 million loss in net sales in the quarter ending Oct. 30, with a similar impact expected in the following three months.
Under sweeping new regulations announced by the Biden administration on Friday, US companies must stop providing Chinese chipmakers with equipment that can produce relatively advanced chips unless they first obtain a license.
Applied Materials became the first American semiconductor company to put a dollar value to the noticeable impact. The company’s stock fell 1.6% in the expanded trade.
China accounted for 29% of all Applied Materials sales in 2021, according to Evercore ISI analyst CJ Muse.
Tool makers sales including KLA Corp, Lamm Research Foundation (NASDAQ 🙂 and Applied Materials are expected to be affected by 5% to 10%, Muse wrote in a recent note, and any retaliatory action from China could further impact revenue.
Applied Materials said the restrictions would cut its fourth-quarter net sales by about $400 million, plus or minus $150 million. Adjusted earnings are expected to be $1.54 to $1.78 per share, down from previous forecast of $1.82 to $2.18.
As a result, it revised fourth-quarter revenue forecasts from $6.15 billion to $6.65 billion, compared to the previous forecast of $6.25 billion to $7.05 billion and below analysts’ estimates of $6.67 billion, according to Refinitiv data.
“Applied is seeking additional export licenses and permits when needed,” the company said.
The company also said it recently received a subpoena from the US Attorney’s Office for the Massachusetts District requesting information regarding its customers in China.
Applied Materials’ warning comes as the global chip industry is already facing significant headwinds from post-COVID demand slump in computers, smartphones and other electronic devices.