Applied Materials Slows Revenue Growth, Blames U.S. Export Restrictions

Applied Materials, a leading supplier of semiconductor manufacturing equipment, has issued a tepid revenue forecast for the current quarter, citing U.S. export restrictions on sensitive technology to China. The company expects net revenue to be approximately $7.15 billion, plus or minus $400 million, and non-GAAP diluted EPS to be approximately $2.29, plus or minus $0.18. This outlook excludes known charges related to completed acquisitions and includes a net income tax benefit related to intra-entity intangible asset transfers.

The U.S. government recently implemented new rules that expanded export licensing requirements for certain sensitive semiconductors and semiconductor manufacturing equipment to China. These rules require companies like Applied Materials to obtain additional export licenses to supply certain products or services to specific customers in China. The company has acknowledged that obtaining these licenses may be difficult, costly, and time-consuming, and there is no assurance that they will be issued on a timely basis or at all.



Applied Materials has also received multiple subpoenas from various U.S. government agencies, including the Bureau of Industry and Security, the U.S. Attorney's Office for the District of Massachusetts, the Securities and Exchange Commission, and the Department of Justice, requesting information about its exports to Chinese customers. The company is cooperating fully with the government in these matters and remains committed to complying with all trade rules. However, the uncertainty and evolving nature of the new rules and other regulatory actions taken by the U.S. government may make it more challenging for the company to manage its operations and forecast its operating results.



In response to these challenges, Applied Materials is attempting to obtain export licenses and is exploring alternative strategies to mitigate the effects of the new regulations. The company expects some customers may decide to change their plans or change their technology to avoid the new regulations, which could impact its revenue and market share. However, the effectiveness of these strategies is uncertain, and the company has not provided specific estimates of the potential impact on its financial performance.

The geopolitical tensions between the U.S. and China have significantly impacted the semiconductor industry's supply chain dynamics, particularly in relation to export controls and restrictions. These tensions have created uncertainty and challenges for companies like Applied Materials, which supply advanced chipmaking tools and technologies. The company is currently under investigation for allegedly violating U.S. export controls and has received multiple subpoenas from various U.S. government agencies. These challenges have the potential to impact Applied Materials' business and operating results, as well as the broader semiconductor industry.

In conclusion, Applied Materials has issued a tepid revenue forecast for the current quarter, citing U.S. export restrictions on sensitive technology to China. The company is facing challenges in obtaining export licenses and managing the uncertainty and evolving nature of the new rules and regulations. While the company is exploring alternative strategies to mitigate the effects of the new regulations, the effectiveness of these strategies is uncertain. The geopolitical tensions between the U.S. and China have significantly impacted the semiconductor industry's supply chain dynamics, creating challenges for companies like Applied Materials.