The U.S. government's latest China trade restrictions have shaken semiconductor equipment stocks, with Applied Materials becoming the first vendor to quantify the impact.
Late Wednesday, Applied Materials warned that the new restrictions will reduce its sales by about $400 million, plus or minus $150 million, in its fiscal fourth quarter ending Oct. 30. The negative impact is about 6% of its total revenue.
Further, the Santa Clara, Calif.-based company expects the regulations to impact its fiscal first-quarter sales by a similar amount.
Applied Materials stock fell as much as 6.4% in morning trades on the stock market today before rebounding. AMAT stock ended the regular session up 4.5% to 79.42. Year to date, however, Applied Materials stock is down 49.5%.
KLA, Lam Likely To Guide Lower
On Oct. 7, the U.S. Department of Commerce announced new export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment. The Biden administration is concerned about the possible transfer of advanced technology to China's military as well as anticompetitive behavior by Chinese chipmakers.
"With these new restrictions, it is clear the U.S.'s aim is to crush China's ambitions to be a leader in the semiconductor industry," Evercore ISI analyst C.J. Muse said in a note to clients.
Barclays analyst Blayne Curtis said he expects to see other chip gear makers lower their outlooks as well. Lam Research could see a low-teens percentage impact from the new trade restrictions, he said in a note to clients. And KLA could see a negative impact in the high single digits, Curtis said.
The latest restrictions essentially stop the sale in China of semiconductor equipment for making Nand and DRAM memory chips, Curtis said. Earlier restrictions covered cutting-edge technology for supercomputing and artificial-intelligence chips.
TSMC Cuts Semiconductor Equipment Purchases
Also weighing on semiconductor equipment stocks are chipmakers cutting their spending plans for new chip gear. Further, this comes amid a slowdown in chip sales. Early Thursday, Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker, lowered its planned capital expenditures this year by at least 10%.
Taiwan Semi lowered its capital expenditure forecast to $36 billion for 2022. That compares with an earlier goal of at least $40 billion.
"While the company declined to provide 2023 capex guidance at this point, investors may be left to question downside potential," Wells Fargo analyst Aaron Rakers said in a note to clients.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
