Mizuho downgraded Applied Materials to Neutral from Outperform on Friday, citing intensifying competition in China and technology transitions that could erode the company’s market share.
In a research note, Mizuho analysts said, “We see share shifts within the WFE industry as China competition and technology transitions drive increased competition.”
The firm lowered its price target on AMAT to $175 from $200.
The analysts warned that AMAT’s exposure to physical vapour deposition (PVD), plasma chemical vapour deposition (CVD), and legacy nodes above 28 nanometres leaves it vulnerable.
“AMAT exposed to PVD/Sputtering, Plasma CVD, and 28nm+ Conductor Etch (~60% of Revs for AMAT, but only 40% of Revs for LAM), losing share,” Mizuho said, adding that Chinese rivals such as Naura and AMEC are “strategically gaining share in PVD, CVD, and etch (>28nm).”
Mizuho expects AMAT’s revenue in China to decline sharply. “We believe AMAT could see downside with continued China share loss driving China revs down 15–20% y/y to <$6.5B/yr China revs for AMAT, implying ~5% downside to ~$29.1B consensus,” the note stated.
Although the analysts acknowledged that AMAT retains leadership in some smaller wafer fabrication equipment segments, they stressed that competition at the legacy nodes is mounting.
“China domestic OEMs like Naura and AMEC are gaining share in PVD (Naura gaining ~2-5pts/yr as AMAT loses 2-4pts),” Mizuho wrote.
By contrast, Mizuho remains more optimistic on Lam Research, which it said is better positioned in critical etch and deposition steps.
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