Post by : Bianca
Haleem
Shares of Applied Materials fell by 5% in pre-market trading on Friday after the semiconductor equipment leader hinted at reduced spending in China next year due to stricter U.S. export laws. This downturn highlights the mounting friction between global chip demand and regulatory obstacles.
The U.S. government has intensified efforts against foreign entities, especially Chinese firms, that attempt to sidestep export controls for advanced semiconductor production tools. These restrictions have affected Applied Materials, in addition to competitors like ASML and KLA Corp., who have also expressed concerns about their exposure to the Chinese market.
Since 2020, China has been the foremost market for chipmaking machinery globally; however, Applied Materials has diminished its dependency on this region. The company now estimates that China constitutes just over 20% of its overall revenue, down significantly from almost 40% in previous years. Still, analysts predict a relatively mild impact on total sales, with revenue anticipated to improve in the latter half of 2026.
Earlier this year, the suspension of the "affiliate rule" during discussions between U.S. President Donald Trump and Chinese President Xi Jinping opened up approximately $600 million in prospective sales for Applied Materials. Nevertheless, the company concedes that its competitors are still penetrating the Chinese market in segments where it faces limitations.
The organization has forecasted a revenue drop of $600 million for the fiscal year 2026 and has recently reduced its workforce by around 4% to navigate through the challenging regulatory landscape. Despite these hurdles, Applied Materials' stock price has surged by 37.3% year-to-date, with several investment firms raising their price targets following the announcement of results.
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