Shares of prominent U.S. chip-equipment manufacturers fell on Tuesday following a report that the U.S. Department of Commerce instructed companies to stop certain shipments of tools and related materials to Hua Hong, China s second-largest semiconductor maker.
According to the report, the Commerce Department sent letters last week to at least several firms notifying them of new limits specifically targeted at equipment and other inputs destined for Hua Hong facilities that U.S. officials believe could be used to produce China s most advanced chips.
Among the companies named in the report were Lam Research, Applied Materials and KLA. Each of those firms has substantial business in China and were identified as being among the companies potentially affected by the new restrictions.
The report noted the possibility that U.S. chip-equipment companies and other suppliers could forfeit billions of dollars in revenue if they were providing equipment to a chipmaking plant that is either still under construction or is retooling to produce more sophisticated chips. That potential loss of sales was highlighted as a key commercial risk tied to the reported measures.
The scope and precise technical details of the tools and materials covered by the letters were not specified in the report, and the extent of the impact on individual suppliers will depend on which firms were notified and the nature of their contracts or deliveries to Hua Hong facilities.
Market reaction
Markets reacted promptly to the report, with the shares of the U.S. equipment makers mentioned moving lower during the session. The companies involved are notable suppliers to the Chinese semiconductor sector, and any abrupt change in export permissions has immediate implications for their near-term revenue outlook where China is a meaningful market.
Outlook and limitations
The report presents a scenario in which suppliers could see meaningful revenue disruption, particularly if affected shipments relate to fabs in the process of construction or retooling for advanced node production. However, the report did not provide a detailed accounting of firms impacted, the dollar value of the shipments affected, or any formal confirmation from the Department of Commerce in the material provided.