US lithography equipment supplier Applied Materials ended its fiscal first quarter in January, and the related reporting surprised investors to the upside. Revenue rose 7.5% to $6.74 billion versus $6.7 billion expected, and earnings per share came in at $2.03 versus $1.93 expected. In the current quarter, the company expects revenue of $6.4 billion, indicating strong demand across a number of market segments.
Analysts had expected Applied Materials to post sales of $6.3 billion this quarter. The company itself is more bullish, with its shares eventually up 3.5% by the close. The supplier of equipment for manufacturing chips noted that demand for its products from memory manufacturers had declined and that the market for consumer components was also characterized by weakness.
From Opinion CEO Gary Dickerson said both the growing complexity of semiconductor components, which require more sophisticated devices, and strong demand for chips for the automotive industry are reasons for optimism. Although the latter are mostly manufactured with more mature technology, Applied Materials’ customers are increasing production capacity to meet market demand. “People underestimated the power of this market. We are poised to outperform the market in 2023. We are more resilient” said Gary Dickerson.
Significantly, one of Applied Materials’ suppliers is expected to have a negative impact on the company’s business of $250 million in lost revenue in the current quarter. We are most likely talking about a cyber attack on MKS Instruments that became public this month. This company supplies Applied Materials with components for the manufacture of devices, due to a cyber security incident, its work has been interrupted and the quarterly report has been delayed. Since MKS Instruments also supplies TSMC, Samsung, Intel and ASML, this incident could also have a negative impact on the activities of these chip and device manufacturers.
Speaking of US sanctions against China: Applied Materials estimates the resulting loss at 2.5 billion US dollars over the entire fiscal year 2023. If the US authorities at least partially compensate for these restrictions by issuing export licenses, the losses will be reduced according to the Management of Applied Materials to $2 billion or even $1.5 billion. On the one hand, China remains the largest consumer of equipment used in the manufacture of semiconductor components for the automotive industry. On the other hand, the US sanctions in their current form cannot significantly affect the supply of special equipment to China.