For years, US chip The sector complained The Washington chip control tools will harm their business and stimulate the creation of a Chinese competitor– These warnings, Ran Jawfa, with the continued revenues to hit the records Thanks to the mutation of artificial intelligence.

But modern profit reports from equipment manufacturers such as applied materials and LAM research show that the United States’ era against the church sector in China has begun to bite.

Applied materials, the largest American chip equipment manufacturing company, issued lukewarm revenue expectations last week, noting the risk of new export controls from Washington. Revenue from China, the company’s largest market, decreased by 25 % in the last quarter to $ 2.2 billion, out of a total of $ 7.2 billion.

China’s contribution to the revenue of applied materials Decline From 45 % a year ago to 31 % today.

The company thinks it will decrease further. “For the second quarter, we expect China to be a percentage of total revenue to be about five percentage points less than the first quarter”, “CFO BRICE Hill He said Analysts last week.

Equipment manufacturers, at the present time, still report an increase in the total revenue, as the technology industry creates a mutation of artificial intelligence. But analysts warn that these companies will strongly lose what China has: a lot of semiconductor manufacturing, and the consumer market is eager to capture products that use these chips.

“China is not just a semiconductor manufacturing center,” Moonsup SHIN, Hardware, Semiconductor and Data Companyi at Bain & Company. “About or more than 50 % of the semiconductors manufactured by Chinese manufacturers are consumed in China.”

Worse, there is no ready alternative. Southeast Asia areas are investing in local manufacturing to place themselves Neutral area In a chip war. However, in practice, these arrivals lack both manufacturing and consumer demand in China.

Lower

Applied materials are not the only manufacturer for chip industry equipment worrying about China’s controls. China’s revenues for Lam Research over the past three months of 2024 Decline 10 % year on an annual basis to reach $ 1.4 billion. The contribution of Chinese revenue has also decreased from 40 % a year ago to 31 % now.

“Our sales of clients in China, an important area for us, are affected by us and negatively affected by the requirements of export license and other organizational changes, or other government measures in the context of the trade relationship between the United States and China,” Lam Research warned in its profit report.

The decreases and warnings come after the Chinese main mainland market has grown to form a large part of the revenues of these companies.

China’s revenue in Kla Tencor, another major American equipment maker, maintains a large extent, which depends on David Chuang, the chief research analyst in ISAIHAH Research, on the company’s measurement tools. China says China has not yet has a local alternative to Kla Tencor products, and is used in measurements and inspection processes, which means that the Chinese cake “will do anything to gain standards.”

Why is China important?

While the China’s chip industry is not made after semi -advanced conductors, they are, but they are Dominate What the industry calls “mature” chips, the components of the oldest generation used in everything from electric cars to home appliances.

“China is still a major area for manufacturing the logic of the old knot and memory chips, which adds to its role as the largest consumer in the world in ICS [integrated circuits]Both Tenkour wrote in her profit statement.

The flooding of Chinese shoppers who pick up consumer electronics means a large demand for chips, which in turn supports the chips sector in China. The request abroad on devices from companies such as Huawei, Xiaomi and Translsion only adds to China’s demand for chips.

Controls of the export of the chip

Since 2019, the United States has strongly abolished chips to China, as sanctions were slapped on individual companies such as Huawei and Seiconductor Manufacturing Corp. (SMIC).

The United States then Enter the export control items In 2022, access to China’s chips was not only limited to advanced chips, but also the equipment needed to make these chips. The United States later tightened those restrictions, and has pushed other countries such as the Netherlands and Japan to impose its own bases.

Ironically, the regulations helped the equipment companies, at least in the beginning. Chinese chips manufacturers Rush Machinery due to fears that Washington may impose more strict export controls at a later time.

But this demand may begin to mitigate, like Beijing More money pour In the chips sector in the drive for self -sufficiency. China is now encouraging companies to use local equipment wherever possible, and the market available for foreign companies shrinks.

This creates a “dual negative” where American chips are pressed by both Washington and Beijing policies.

China is yet to have the ability to produce advanced machines made by the United States and other non -Chinese companies. However, Shin notes that Chinese companies have achieved some success in replacing non -critical equipment.

Analysts have also suggested that manufacturers were able to use old equipment in innovative ways to create more advanced chips.

The United States and Japan, the most advanced markets, invest in new ground chips factories in an attempt to separate their supply chains from China. However, both Xin and Chawang believes that these markets will not grow somewhat like China.

Shin suggests that India can be an alternative to China, given that the population of the big consumer and its aspirations is a technical power. But it will take a long time to catch up with the country: India needs to build its ecosystem almost completely from scratch.

But until then, there may be no alternative to the Chinese chips sector. “It will be difficult to replace what Chinese companies buy,” says Chuang.

This story was originally shown on Fortune.com

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2025-02-21 22:00:00