Applied Materials, the world's second-largest semiconductor equipment company, is facing the direct impact of the trade war between the United States and China. The share of the Chinese market, which accounted for about half of its total sales until last year, has shrunk to a quarter. The Trump administration's efforts to strengthen export regulations on semiconductors to China, along with a review of additional tariffs on the semiconductor industry, are increasing the losses incurred by global corporations.
Applied Materials, the largest semiconductor equipment manufacturer in the U.S., saw its stock drop 5.67% in after-hours transactions on the 15th (local time) after announcing its second-quarter results for the 2025 fiscal year (April to June). This was due to the semiconductor systems division's revenue ($5.26 billion) missing the lowered market expectations of $5.32 billion. The total revenue for the second quarter was $7.1 billion, which also fell slightly short of the market forecast of $7.13 billion. The adjusted earnings per share were $2.39.
Despite unprecedented high demand for high-performance semiconductor equipment for artificial intelligence (AI) computing, the company's performance has been sluggish due to restrictions on sales to China, its largest overseas market. One year ago, the Chinese market accounted for 43% of Applied Materials' total revenue, but it plummeted to 25% in the second quarter of this year. The sales in China have been decreasing steadily each quarter. According to U.S. Census Bureau trade statistics, the volume of semiconductor equipment exported to China in the first quarter of this year was halved compared to the same period last year.
The damage from the trade war is expected to increasingly affect other corporations as well. Applied Materials noted that some maintenance services for Chinese customers were suspended due to the semiconductor export regulations implemented in December last year. As a result, the company anticipates a loss of about $400 million in the 2025 fiscal year. The world's largest semiconductor equipment company, the Netherlands' ASML, also saw its share of revenue from China drop sharply from 47% in the fourth quarter of last year to 27% in the first quarter of this year.
Regulations that block the export of advanced semiconductors and equipment to China were first introduced at the end of the Biden administration, and the Trump administration is tightening controls on Chinese technology even further. Corporations that manufacture and sell advanced semiconductor equipment using U.S. technology are unable to export to China or provide local equipment services.
Moreover, if the tariffs on semiconductor products currently under review by the Trump administration are implemented, the three major semiconductor equipment corporations in the U.S. are estimated to incur losses exceeding $1 billion annually. Executives from U.S. semiconductor equipment companies, including Applied Materials, Lam Research, and KLA, reported to government officials last month that the losses from the implementation of semiconductor tariffs could reach $350 million per company annually.