China accounts for 40%+ of sales at Applied Materials and Lam Research, as they boost shipments of legacy chipmaking equipment not targeted by US export curbs
Kosuke Shimizu / Nikkei Asia :
Context & Ripple Effects
China’s equipment buying had already become unusually concentrated: more than half of Japan’s chipmaking-equipment exports went to China for three consecutive quarters through Q1 2024, led by less-advanced tools. This report shows that demand is also materially shaping the revenue mix of major US suppliers.
The pattern extends an earlier playbook in which Tokyo Electron expanded sales of less-advanced tools in China to offset the effect of US restrictions. It matters because controls aimed at advanced production equipment can leave a large commercial channel open in mature-node manufacturing tools.
First-order effects
- Applied Materials and Lam Research gain substantial current exposure to Chinese demand through shipments of legacy equipment that remains outside the stated export curbs.
- Chinese chipmakers retain access to imported tools for less-advanced production, even as restrictions constrain some higher-end equipment categories.
Second-order effects
- Other equipment vendors have an incentive to steer sales, service, and product capacity toward tool categories still permitted for China, reinforcing competition in mature-node equipment.
- A larger China revenue share raises the operational importance for suppliers of any future change in export-control scope, because restrictions on legacy tools would reach a broader installed commercial base.
Third-order effects
- If this pattern persists, export controls may increasingly shift from blocking a country’s overall equipment purchases to segmenting the market between advanced and mature-node production capabilities.
- The industry could become more dependent on China’s mature-node equipment cycle while China’s domestic capacity build-out advances, creating a longer-term tension between near-term supplier sales and customers’ self-sufficiency goals.
The trend: Export controls are reshaping semiconductor-equipment trade by redirecting demand and supplier growth toward tool categories that remain outside advanced-technology restrictions.