Applied Materials sees weaker China spending in 2026 on tighter US curbs
News Summary
Applied Materials stated it anticipates a decline in China's spending on chipmaking equipment in 2026, primarily due to tighter U.S. export controls limiting its market access. Despite this, robust memory output driven by surging AI investments is expected to partially offset the impact, with overall revenue projected to be stronger in the second half of 2026. The company previously forecasted a $600 million hit to its fiscal 2026 revenue from expanded U.S. export restrictions. Notably, about $110 million worth of products were not shipped in the fourth quarter due to an affiliate rule, which was later suspended following talks between U.S. President Donald Trump and Chinese President Xi Jinping; these products are now slated for shipment in the current quarter. CEO Gary Dickerson mentioned that the company can no longer supply China's memory chip and older-generation chipmaking markets. Non-U.S. equipment companies continue to sell to restricted Chinese customers, causing Applied Materials' share of China sales to revert from nearly 40% to the mid-20% range.
Background
Since 2018, the U.S. government has implemented a series of export controls against China, aiming to restrict its access to advanced semiconductor technology for military modernization and critical infrastructure. These measures, initiated and tightened under President Donald Trump's administration, target chipmaking equipment and advanced chips, particularly those used in AI and high-performance computing. Applied Materials, a leading global semiconductor equipment supplier, has its business deeply intertwined with the global chip industry supply chain. The U.S. Commerce Department's expanding list of restrictions and measures like the "foreign direct product rule" directly challenge the company's ability to supply Chinese customers, forcing it to adjust business strategies and revenue forecasts. Recently, an "affiliate rule" that had previously halted product shipments was suspended after talks between President Trump and Chinese President Xi Jinping, indicating continued communication between the leaders and potential short-term impacts on specific trade restrictions.
In-Depth AI Insights
What are the true geostrategic objectives of U.S. chip restrictions on China, beyond stated economic or national security concerns? - The tightening of U.S. restrictions ostensibly aims to curb China's rise in advanced technology and ensure national security. - However, a deeper objective may be to maintain U.S. strategic dominance in the global semiconductor supply chain and prevent China from achieving complete self-sufficiency in critical technologies, thereby preserving long-term leverage over China's future technological development. - Restricting even "older-generation" chipmaking technology could be intended to weaken the foundation of China's entire semiconductor ecosystem, making it harder for them to upgrade to more advanced nodes in the future, rather than solely targeting cutting-edge tech. How does the continued selling by non-U.S. equipment companies to Chinese customers impact the long-term effectiveness of U.S. restrictions and the reshaping of the global semiconductor industry landscape? - This phenomenon highlights the limitations of unilateral U.S. restrictions. As long as alternative international suppliers exist, China's chip industry can continue to acquire necessary equipment, albeit potentially at higher costs or lower efficiency. - In the long run, this will accelerate China's reliance on non-U.S. suppliers and likely prompt greater R&D investment in "non-U.S." technology pathways, thereby fragmenting global semiconductor technology standards and supply chains. - For the global semiconductor equipment market, this could lead to a shift in market share towards non-U.S. companies and the formation of two relatively independent semiconductor ecosystems, increasing the complexity and potential instability of global supply chains. Applied Materials' forecast of accelerating global wafer fab equipment spending in H2 2026, juxtaposed with weaker China spending, reveals what potential market structural changes? - This is not contradictory; rather, it reveals a significant shift in the global semiconductor market's investment structure. - The decline in China's market spending will be offset or even surpassed by capacity expansions in other regions, particularly for AI-related memory and advanced logic chips. This suggests a shift in global semiconductor investment focus from general-purpose capacity building to specific high-growth areas. - This shift indicates that while geopolitical restrictions impact specific regions, strong global demand for high-performance computing and AI-related chips is driving overall industry capital expenditure to remain high, or even accelerate, pointing to a more fragmented yet still growing semiconductor equipment market.