Increased restrictions on selling chip equipment to China could be 'last bit of bad news'
sankai

The report that the U.S. Department of Commerce is looking to intensify restrictions on several chip equipment makers over selling equipment to China could be seen as "the last bit" of bad news for the group, according to some Wall Street analysts.
Citi analyst Atif Malik said that the restrictions, which the Commerce Department is expected to announce in short order, could be targeted at Chinese memory projects and lithography tools. However, the investment firm did not change its annual estimate of $80B in wafer fab equipment sales, as the estimate already includes a 40% year-over-year decline in Chinese spending on 14 nanometer and below production and memory projects.
"We continue to believe the group bottoms in [September/October] with expanded China restrictions the last bit of [wafer fab equipment] bad news," Malik wrote in a note to clients.
The Commerce Department is slated to publish new guidelines constructed from the restrictions outlined in the letters that were sent to Applied Materials (NASDAQ:AMAT), KLA Corporation (NASDAQ:KLAC), and Lam Research (NASDAQ:LRCX).
Applied Materials (AMAT), KLA Corporation (KLAC), and Lam Research (LRCX) were fractionally lower in premarket trading.
It's also possible that other semiconductor companies, such as Nvidia (NVDA) and Advanced Micro Devices (AMD), may be impacted, UBS analyst Timothy Arcuri said. However, the analyst added there was not "much new" to what the Commerce Department is already planning to do. 
"The incremental piece to the story would, in our view, be if the [Commerce Department] placed more direct bans on [Yangtze Memory Technologies] â one of the most successful domestic Chinese chipmakers, we think representing [more than] 10% of revenue for [Lam Research] and mid to high single digit revenue for other US suppliers," Arcuri wrote in a note to clients.
Last week, several GOP lawmakers said that Apple (AAPL) would face further scrutiny from Congress if it sourced products from Chinese-based Yangtze Memory Technologies for its iPhones.
Arcuri added that chip equipment makers are likely to see continued headwinds for the next few quarters, with wafer fab equipment sales declining. 
However, Nvidia (NVDA) is viewed favorably as it may be able to sell older products and "work around" some of the China-related restrictions and recapture some of the lost $400M in revenue the company highlighted in a recent filing.
Nvidia (NVDA) and AMD (AMD) both recently disclosed they had been informed by U.S. officials that certain semiconductor products could no longer be sold in China or Russia due to their potential use in military projects in those countries. 
Applied Materials (AMAT) recently announced its 26-cent-per-share dividend, payable on December 15 to shareholders of record November 25.