Shares of Applied Materials (AMAT) declined approximately 1% in premarket trading Thursday following the announcement of a major settlement with U.S. authorities. The chip equipment maker agreed to pay $252.5 million to resolve allegations it violated export controls by shipping tools to China's Semiconductor Manufacturing International Corp (SMIC).
Regulatory Settlement Details
The U.S. Commerce Department stated that Applied Materials exported roughly $126 million worth of semiconductor manufacturing equipment, specifically ion implanters, across 56 shipments in 2021 and 2022. These shipments were directed to SMIC after the Chinese chipmaker had been placed on the U.S. Entity List, which restricts technology exports. The company characterized the violations as a misunderstanding of regulatory requirements.
Applied Materials noted that separate investigations by the Department of Justice and the Securities and Exchange Commission have concluded without further action. The settlement shifts investor focus squarely onto the company's compliance framework and the potential for future regulatory challenges in key markets.
Earnings and Guidance in Focus
All eyes are now on the company's fiscal first-quarter results, scheduled for release after Thursday's market close. Options market activity implies an expected post-earnings stock move of about 6% in either direction. Analysts, according to Visible Alpha, project revenue to decline 1% to $6.89 billion, with earnings per share expected to fall 6% to $2.23.
Investors will scrutinize management's commentary on the impact of export controls on future China shipments and any changes to demand across foundry, logic, and memory segments. The company recently highlighted its long-term growth pipeline, including a planned $5 billion EPIC Center R&D facility in Silicon Valley with Samsung Electronics as a partner.
Applied Materials also unveiled new deposition and etch tools this week aimed at advancing 2-nanometer-class transistor technology. CEO Gary Dickerson linked these developments to "unprecedented demand for energy-efficient chips" driven by global AI infrastructure expansion.
The settlement, while resolving past issues, underscores the persistent geopolitical risks facing semiconductor equipment suppliers. Stricter enforcement or sudden shifts in trade policy could pressure future revenue and complicate operations in one of the industry's largest markets.
