U.S. chip equipment makers rely on China for 40% of sales
Applied Materials, Lam Research ship legacy products not targeted by export curbs
PALO ALTO, California -- U.S. chipmaking equipment manufacturers have become more dependent on the Chinese market despite Washington's export restrictions on advanced products as they boost shipments of machinery used to make legacy chips.
China accounted for 43% of sales at Applied Materials in the February-April period, up 22 points on the year. China's share of sales at Lam Research rose 20 points to 42% for the January-to-March period.
This seems to run counter to Washington's plans under the export curbs targeting China.
The U.S. government in 2022 restricted shipments of chipmaking equipment used to manufacture cutting-edge semiconductors, aiming to curb Beijing's efforts in the field. Equipment for commodity-grade products are not part of the restrictions.
At chip industry event Semicon West, held in San Francisco through Thursday, senior U.S. government officials touted the success of another program -- the CHIPS and Science act.
The law, also enacted in 2022, provides $52.7 billion in subsidies to chip research and manufacturing in the U.S., prompting chipmakers to announce big investment plans.
In a speech on Tuesday, U.S. Undersecretary of Commerce Laurie Locascio listed the names of companies that have decided to invest in the U.S., including Intel, Samsung Electronics and Taiwan Semiconductor Manufacturing Co. (TSMC).
"This growth would not have happened without the CHIPS and Science Act," she said, adding that "the dedicated teams have worked day and night to implement it back home" to put the program on track in less than two years.
Semiconductor equipment manufacturers are also benefiting, as the delivery of equipment is essential to launching chip fabrication plants. U.S. revenue accounted for 15% of the total at Applied Materials in fiscal 2023, up 6 percentage points from fiscal 2021.
But despite efforts to build a supply chain in the U.S., equipment makers have not been able to shake off their reliance on China, the top market.
If there were no restrictions, the proportion of our Chinese business would be even higher, an executive at a major equipment manufacturer said. The companies are seeing their sales to China rise solely from non-advanced equipment.
SEMI -- the international trade group behind Semicon -- announced on Tuesday that global sales of chipmaking equipment are expected to grow 3.4% to $109 billion in 2024. China is expected to account for more than 30% of that figure, driving demand as the largest market.
"We have very strong commercial relations with China," U.S. Undersecretary for Economic Growth Jose Fernandez told Nikkei and other media at Semicon. Even though the U.S. will regulate areas related to national security, its aim is not to decouple the two economies, he said.
But the rise of exports of non-advanced equipment to China also poses risks to the U.S., as the supply of any kind of products can help the growth of China's domestic chip industry.
Beijing has set a national policy to establish its own chip supply chains, potentially creating strong competition for U.S. equipment makers in the long run.