Applied Materials' Wobble in the Trade Storm
Slip in Applied Materials' sales figures
In an informal chat, let's dive into the lackluster forecast from Applied Materials Inc., the big cheese in US chip-equipment manufacturing—and the potential fallout from the US-China trade squabble.
The company offered a sales projection of around US$7.2 billion for the current quarter, with a wiggle room of US$500 million. Wall Street predicted something similar, but a few analysts aimed for US$7.4 billion. Profit is projected at around US$2.35 per share.
In plain speak, Applied Materials and other industry players are grappling with restrictions on sales to China, a key market. The bite of tariffs slapped by Washington and the uncertainty surrounding future revenue projections are making things rough.
"It's a brave new world out there," said Gary Dickerson, CEO of Applied Materials, in a candid interview. "Despite the chaos, the company's performance has been impressive," he added.
The company's shares slid more than 4% in extended trading post the announcement. Earlier, they closed at US$174.75, with a commendable 7.5% annual growth.
Back in February, Applied Materials confessed that rules introduced under former US president Joe Biden would whack about US$400 million off the company's annual revenue for 2025. This is due to Applied Materials ceasing servicing at certain customer sites in China.
Yet, the technology export restrictions have been evolving under US President Donald Trump. China contributed around 25% of Applied Materials' revenue in the last quarter, a noticeable drop from the 43% a year back.
The financial picture remains rosy for high-end processor machinery for AI computing. However, orders for less complex gear used in car and industrial components have eased, according to Dickerson.
Applied Materials' management expects the semiconductor industry to be in a boom period. The rapid spread of semiconductors to new products, the AI boom, and the sheer complexity of chips are poised to sustain demand, Dickerson has said.
The company's A-list clientele includes the heavyweights of the chip industry, such as Taiwan Semiconductor Manufacturing Co, Samsung Electronics Co, and Intel Corp., who place orders well ahead of manufacturing. As a result, Applied Materials' forecasts serve as a weather vane for future demand.
- The challenging trade environment between the US and China is impacting not only Applied Materials but also the wider technology industry, as sales restrictions to China, such as tariffs and evolving export policies, are causing concerns about future revenue projections.
- Despite the unfavorable trade conditions and a drop in China's contribution to its revenue, Applied Materials remains optimistic about the semiconductor industry, anticipating a boom period due to the spread of semiconductors to new products, the AI boom, and the growing complexity of chips, which should sustain demand among their high-end clients like Taiwan Semiconductor Manufacturing Co, Samsung Electronics Co, and Intel Corp.
