In the third quarter, many chip equipment manufacturers experienced a characteristic trend: overall demand for their products remained low, but increased towards China. At least at the end of September, the top five equipment suppliers’ revenues depended on China for an average of more than 42%.
The agency came to this conclusion Bloomberg, which analyzed the quarterly reports of three American, one Dutch and one Japanese companies that specialize in the supply of equipment for chip production. The largest supplier of lithography scanners, the Dutch company ASML, increased its share of sales in China to 46% since September this year from 24% last year.
The American company Applied Materials, which presented its quarterly results yesterday, increased this share from 19.8 to 44%, and in the current quarter, according to management, this figure will remain at an inflated level. Applied Materials attributes the temporary increase in China’s share of sales to the supply of equipment to a specific memory manufacturer, but expects China’s share of the company’s total sales to return to the historical norm of approximately 30% over time. Apparently, Applied Materials is now supplying its equipment to CXMT or YMTC – these are the two largest manufacturers of DRAM and NAND memory in China, respectively, and the latter is subject to US sanctions and therefore may accelerate the purchase of equipment in anticipation of new restrictions.
Applied Materials management does not expect the tightening of sanctions against China in October to have a material impact on the company’s financial position. The equipment provider’s revenue rose 5% sequentially to $6.72 billion in its most recent quarter but was flat year-over-year. The profit margin increased from 46 to 47.3%, and operating profit even fell by 1% to $1.99 billion. The company’s fiscal year just ended, with revenue increasing 3% to $26.5 billion and profit margin increasing from 46.6% to 46.8%. . Operating profit fell 2% to $7.72 billion.
If you look at the September results of another American provider, Lam Research, the share of sales going to China rose from 30.2 to 48.5% over the course of the year. Its competitor KLA increased its share from 30.8 to 42.8%, while the Japanese group Tokyo Electron increased from 25.6 to 42.8%. Analysts at Asymmetric Advisors are convinced that the increase in demand for chip production equipment in China will be temporary, as the market will sooner or later become saturated and new possible restrictions will make further purchases in existing volumes problematic.