On April 28, 2026 the U.S. Department of Commerce issued letters to Applied Materials, Lam Research and KLA ordering the companies to stop shipping certain semiconductor equipment to Hua Hong, China’s second‑largest contract chipmaker. The directive targets tools that could enable advanced chip production, including equipment used for 7‑nanometer (nm) process development, a technology that Hua Hong is pursuing to compete in AI‑related applications.
The restriction removes a significant portion of Applied Materials’ China revenue. In fiscal 2024 China accounted for $10.12 billion, 37.23 % of total revenue, and in fiscal 2025 the figure fell to $8.53 billion, 30.07 %. The loss of these sales is expected to reduce the company’s revenue potential in China and could pressure margins as the firm reallocates sales to other regions.
Management has acknowledged export‑control related headwinds. In a Q1 2025 earnings call, Applied Materials’ leadership noted that the expanded controls announced in December and January would create a revenue headwind of roughly $400 million for fiscal 2025, with nearly half of that impact in the second quarter. The company’s guidance for the year reflects this expectation, and the restriction is a key driver of the forecasted decline in China revenue.
The market reacted strongly to the news. Shares of Applied Materials, Lam Research and KLA fell 5.8 %, 4.7 % and 3.1 % respectively on the day the letters were issued, reflecting investor concern over the immediate loss of sales and the broader implications for the U.S. semiconductor supply chain.
The U.S. action is part of a broader strategy to limit China’s access to advanced semiconductor technology. Hua Hong’s development of 7‑nm process capability is a key factor, and the restriction may push the company to seek alternative suppliers in Japan or from domestic sources. The move also signals a tightening of U.S. export controls that could affect other U.S. equipment suppliers and may lead to billions of dollars in lost sales for the industry.
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