Analysts expect a Q2 sales decline at seven out of the top nine chip equipment makers, including Applied Materials and Lam Research, as memory demand slumps
Kentaro Tsutsumi / Nikkei Asia :
Context & Ripple Effects
The memory downturn was visible before this call landed: TrendForce had already flagged DRAM bit growth falling to its weakest rate on record, and TSMC soon reported its first quarterly decline since 2019 as all non-AI chips lagged [[a:842266]]. Against that backdrop, analysts penciling Q2 declines at seven of the top nine toolmakers is the equipment layer of the same cycle catching up.
The confirmation came fast: Lam Research logged its third straight quarter of decline by October [[a:845351]]. What made the downturn bearable was the escape valve — both Applied Materials and Lam leaned on legacy-equipment shipments into China until that region alone accounted for 40%+ of their sales [[a:869372]].
First-order effects
- Memory customers pausing fab spending hit toolmakers' order books directly — Lam's slide through a third consecutive down quarter [[a:845351]] turned the analysts' consensus estimate into reported reality.
Second-order effects
- With advanced-node orders scarce, Applied Materials and Lam substituted volume from legacy-node China shipments [[a:869372]] — trading near-term revenue stability for concentration risk in a single, policy-exposed buyer region.
Third-order effects
- That substitution has an expiry date: once China boosted local players, Japan's top five equipment makers posted their first-ever fall in combined China sales [[a:1171313]] — the same dynamic now waiting for US toolmakers whose China share ballooned during the slump.
- If the pattern holds, equipment demand splits structurally between AI-linked leading-edge spend and commodity-memory cycles, leaving toolmaker revenue hostage to whichever segment funds fabs next.
The trend: Chip equipment demand is bifurcating between AI-driven leading edge and slumping commodity memory, pushing the major toolmakers to backfill revenue with China legacy-node sales.