Applied Materials Warns: China Curbs to Hit Sales

• Applied Materials Inc. (AMAT) anticipates a $600 million revenue hit in fiscal 2026 from expanded U.S. export restrictions to China, as outlined in a Sept. 29 Commerce Department rule targeting subsidiaries with at least 50% ownership by sanctioned entities.
• Shares of the Santa Clara-based semiconductor equipment leader dropped as much as 5.6% in extended trading after closing up 2.7% at $223.59, highlighting market sensitivity to geopolitical curbs on China sales.
• The measure advances Washington’s national security strategy to hinder China’s domestic chip production, compelling firms like Applied Materials to adapt operations amid tightening global controls on competitors.

Applied Materials Inc. (AMAT), a pivotal player in the semiconductor equipment sector as the largest U.S. manufacturer of machinery essential for chip production, disclosed in a regulatory filing that forthcoming export restrictions to China will erode its fiscal 2026 revenue by $600 million. This projection stems from a U.S. Commerce Department rule published on Sept. 29, which expands curbs on sanctioned entities by imposing identical restrictions on their subsidiaries holding at least 50% ownership, thereby limiting access to restricted U.S. goods through affiliates. The measure, issued by the Bureau of Industry and Security, underscores Washington’s escalating efforts to curb China’s advancements in domestic semiconductor capabilities, driven by national security imperatives that have prompted successive administrations to advocate for parallel restrictions on global competitors.

The announcement triggered a sharp market response, with shares of the Santa Clara, California-based firm dropping as much as 5.6% in extended trading after closing the regular session up 2.7% at $223.59. This volatility reflects the semiconductor industry’s vulnerability to geopolitical frictions, where Applied Materials and peers like Lam Research and KLA Corporation navigate a landscape of tightening controls that have progressively hampered sales to China, a market historically accounting for a substantial portion of revenue in the sector. Fiscal 2026, spanning through next October, amplifies the stakes, as the company contends with not only these direct revenue hits but also indirect effects on supply chains and customer support for existing installations in the region.

Amid these challenges, Applied Materials continues to leverage its technological edge in deposition, etching, and inspection tools critical for advanced node fabrication, positioning it to pivot toward allied markets in Europe and Asia-Pacific. The rule’s focus on preventing evasion via corporate structures highlights a maturing U.S. strategy to safeguard intellectual property and production expertise, even as it compels firms to recalibrate global operations and invest in compliance frameworks to mitigate long-term exposure.

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