Applied Materials Inc. Is Temporarily Losing Out On Quarterly Revenue Due To The Chip-equipment.

Due to supply chain issues, like the recent Covid-19 lockdowns in China, several manufacturers are stockpiling extra inventory. The Santa Clara, Calif.-based firm is one among them. Amid the worldwide semiconductor scarcity, demand for chip-equipment producers is high, but they are unable to fulfill orders due to a lack of components.

Two years into the epidemic, Applied Materials, Inc. (NASDAQ: AMAT) and other chip-equipment companies are encountering a variety of inventory management issues. Consumer buying patterns have changed rapidly in recent weeks, and retailers have expressed their desire to get rid of surplus inventory as a result.

As a result of the pandemic limitations in Shanghai, Applied Materials lost around $150 million in revenue for the quarter ending May 1. At $6.25 billion in sales, it was up 12 percent over last year’s figure. When components are delayed and orders are completed, the company expects to realize the revenue it lost in the quarter.

The company’s chief financial officer, Brice Hill, stated, “We have the potential to raise and move, but we have these supply concerns.”

Once Applied Materials delivers its tools, the firm normally realizes revenue. As a result of today’s economic climate, it is necessary to send components to clients in advance of completing the whole order. As soon as the delayed components are fitted, the business starts earning money.

A year ago, the company had $4 billion in inventory on its financial sheet, but on May 1, it had $5 billion. Lockdown restrictions in China have hampered the firm’s supply chain, but it hasn’t revealed which items have been affected. The company is working closely with its suppliers to accelerate production and delivery. A few examples include finding new shipping lines and buying various subcomponents, as well as physically transferring parts between manufacturing facilities to complete production, Mr. Hill added.

In the quarter ending March 27, Lam Research Corp. reported slightly over $2 billion in deferred revenue, which often refers to sales of equipment that has been delivered to clients but is lacking certain components. Lam’s sales for the third quarter were just over $4 billion, or about 6 percent more than the year before. As of December, the corporation situated in Fremont, California, has delayed revenue of nearly $1.5 billion.

During a June 7 industry conference, Lam’s CFO, Douglas Bettinger, said that the business has had difficulty obtaining semiconductors for use in the equipment it manufactures for the semiconductor sector. “We need additional equipment in the business.” For the equipment, we can’t acquire parts like semiconductors. To be honest, it’s a strange circle of talk.” Mr. Bettinger stated this. According to statistics from research company Oxford Economics, manufacturers had 1.47 times their inventory to sales as of March. This is down from 1.60 two years earlier. While that number for merchants was 1.16 in March, it had been 1.53 two years before, according to Oxford.

If they’re impeding our progress, we engage with them on a finer level to identify alternatives. When asked about the company’s work with its suppliers, Mr. Hill stated, “That’s the best we can do.” Revenue for the current quarter, which ends in July, is expected to reach $6.25 billion. That’s approximately the same as the previous quarter, which concluded on May 1.

As a result of the China lockdowns, B Riley Financial Inc. analyst Craig Ellis estimates the business might lose around $500 million in sales in the July quarter, mostly due to their effect on the current quarter.

According to Mr. Hill, the business knows exactly how rapidly its Chinese suppliers are ramping up production and when they will be shipping and delivering products. This autumn, when supplies and client orders arrive, the business intends to begin boosting revenue steadily, he added.

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