US Tech Companies Disclose Continued Impacts of China Chip Controls

Several U.S. technology companies recently disclosed their ongoing efforts to comply with new export restrictions against China (see 2210070049), with some determining the regulations will have little effect and others saying the uncertainty is leading to business interruptions.

Synopsys, an American electronic design automation company, said current U.S. export regulations “do not materially impact our business at this time,” according to its Dec. 12 Securities and Exchange Commission filing. But that could change, Synopsys warned. “We cannot predict the impact that additional regulatory changes may have on our business in the future.”

It specifically pointed to “significant changes” recently made for exports to Russia and China of items controlled under the Export Administration Regulations, and said it “anticipate[s] additional changes to the Export Regulations in the future.” New foreign direct product rule restrictions for companies on the Entity List could “create delays in the introduction of our products or services” in foreign markets, Synopsys said, or “could prevent our customers with international operations from deploying our products or services globally.”

The company added that it has received “administrative subpoenas” from the Bureau of Industry and Security “requesting production of information and documentation relating to transactions with certain Chinese entities.” Synopsys believes “we are in full compliance with all applicable regulations and are working with the BIS to respond to its subpoenas.”

Marvell Technologies, a semiconductor company that reportedly had planned to lay off hundreds of employees in China due to the new restrictions (see 2211040012), said in an SEC filing that it expects the controls to “continue to impact our revenue.” Marvell said BIS’ October controls include restrictions on U.S. persons activities “that are not subject” to the EAR, “which differs from the agency’s historical approach of controlling items that are subject to the EAR, and could further restrict our engagement in the China market.”

It also said their Chinese customers have concerns that U.S. companies “may not be reliable suppliers as a result” of the export controls. This may cause some Marvell customers to “amass large inventories of our products well in advance of need or cause some of our customers to replace our products in favor of products from other suppliers,” the company said, adding that its customers may also look to “develop indigenous solutions” as replacements for imports from the U.S.

Marvell added that BIS additions to the Entity List have “dampened demand for our products in China,” and other controls have restricted sales to its customers in China. The company said BIS has denied some of its licenses, preventing it from continuing to sell to China. “If export restrictions related to Chinese customers are sustained for a long period of time, or increased, or if other export restrictions are imposed, it will have an adverse impact on our revenues and results of operations,” Marvell said.

Amtech Systems, a semiconductor equipment supplier, said the new controls “have not significantly impacted our operations, but we are continually monitoring their impact.” Amtech said in an SEC filing it could see lost sales if more companies are added to the Entity List or if more controls restrict “our ability to sell our products or services to other customers in China.”

Applied Materials said the controls “have limited the market for certain of our products, adversely impacted our revenues, and increased our exposure to foreign competition.” The company earlier this year said it expected its revenue to drop by $2.5 billion” in fiscal year 2023 as a result of the restrictions (see 2211230035).

The new controls, along with additions to the Entity List and licensing requirements for military end-users in China, have caused Applied Materials to try to secure “additional export licenses to supply certain of our products or provide services to certain customers in China,” the company said in an SEC filing. “Obtaining export licenses may be difficult, costly and time-consuming, and there is no assurance that we will be issued licenses that we apply for on a timely basis or at all. Our inability to obtain such licenses could limit our markets in China, may cause us to be displaced by foreign businesses and competitors and adversely affect our results of operations.”