Tokyo Electron and the Rivals Export Rules FavourThin moat

Applied Materials (AMAT) — moat facet

American export rules can hand Applied's Chinese orders to Tokyo Electron and other non-American rivals, and Applied says so itself.

Some of Applied's competitors gain from rules Applied must follow. The 10-K says export regulations "may also provide an advantage to our international competitors"1. Tokyo Electron, one of the five largest equipment suppliers2, is one of them.

Expected revenue reduction from the Affiliates Rule ($M)110Q4 FY2025600FY2026Applied Materials Form 8-K, 29 September 2025
A rule, not a rival, took the first $700 million.

The mechanism is simple. When the American Commerce Department restricts sales to a Chinese customer, a supplier based outside the United States may still be able to sell. The September 2025 Affiliates Rule alone was expected to reduce Applied's fiscal 2026 revenue by about $600 million3, and the rule restricts Applied's ability to "provide certain parts and services to specific China-based customers"4.

This is a rival that does not need to out-engineer Applied. It needs only a customer that Applied cannot serve.

The effect shows in Applied's China share, which fell from 37.2% of revenue in fiscal 2024 to 30.1% in 20255 and 28% in the quarter to July 20266.

Applied's own guidance shows the rule's reach. It expected the rule to reduce fourth-quarter fiscal 2025 revenue by about $110 million7, before the larger fiscal 2026 effect. China's share of revenue in the quarter to July 2026, 28%, was seven points lower than a year earlier8.

The rules also hand advantages to Chinese rivals directly. The 10-K notes that competitors "which may benefit from policies and regulations that favor domestic companies" range from small regional firms upward9. Between foreign rivals outside American rules and Chinese rivals backed by Beijing, Applied is squeezed in the market that gave it 37.2% of revenue in fiscal 202410.

This relationship is set by governments rather than by products. The evidence to follow is whether China's share keeps falling while Chinese chipmakers keep spending; if so, some of that spending is going to rivals outside the reach of American rules.

Moat trajectory: Narrowing

Affiliates Rule expected to cost about $600M of FY2026 revenue.

The number that tests this moat
Reported
Expected revenue impact of the Affiliates Rule
About $600M in FY2026 (estimate of September 2025)

Business lost to export rules rather than to products; further rules would raise it.

Source: Applied Materials 8-K on the BIS Affiliates Rule ↗
References
  1. ReportedThe 10-K says export regulations "may also provide an advantage to our international competitors".
    Applied Materials Form 10-K for fiscal 2025 (year ended 26 October 2025) - Item 1A risk factors: competition, export controls, customer concentration, backlog and the EPIC Center. — FY2025 · publ. 12 December 2025 · source ↗
  2. ReportedTokyo Electron, one of the five largest equipment suppliers, is one of them.
    TechInsights, top IC manufacturing equipment suppliers 2025 - ASML led with $27.5 billion of revenue; Applied Materials, Lam Research, Tokyo Electron and KLA completed the top five, unchanged from 2024. — 2025 · publ. 2026 · source ↗
  3. ReportedThe September 2025 Affiliates Rule alone was expected to reduce Applied's fiscal 2026 revenue by about $600 million, and the rule restricts Applied's ability to "provide certain parts and services to specific China-based customers".
    Applied Materials Form 8-K Item 7.01 - expected revenue impact of the BIS Affiliates Rule: about $110 million in Q4 FY2025 and about $600 million in FY2026. — September 2025 · publ. 29 September 2025 · source ↗
  4. ReportedThe September 2025 Affiliates Rule alone was expected to reduce Applied's fiscal 2026 revenue by about $600 million, and the rule restricts Applied's ability to "provide certain parts and services to specific China-based customers".
    Applied Materials Form 8-K Item 7.01 - expected revenue impact of the BIS Affiliates Rule: about $110 million in Q4 FY2025 and about $600 million in FY2026. — September 2025 · publ. 29 September 2025 · source ↗
  5. Moat Explorer calcThe effect shows in Applied's China share, which fell from 37.2% of revenue in fiscal 2024 to 30.1% in 2025 and 28% in the quarter to July 2026.
    Moat Explorer calculation from Applied Materials' reported figures ($ millions unless stated). Segment shares FY2025: Semiconductor Systems 20,798 / 28,368 = 73.3%; Applied Global Services 6,385 / 28,368 = 22.5%; Corporate and Other 1,185 / 28,368 = 4.2%. Segment operating margins FY2025: 7,379 / 20,798 = 35.5%; 1,792 / 6,385 = 28.1%; FY2024 6,981 / 19,911 = 35.1%, 1,812 / 6,225 = 29.1%; FY2023 6,879 / 19,698 = 34.9%, 1,529 / 5,732 = 26.7%. Q3 FY2026 margins: Semiconductor Systems 2,657 / 7,040 = 37.7%; Applied Global Services 536 / 1,781 = 30.1%; company operating margin 3,075 / 9,115 = 33.7%. Q1 FY2026 Semiconductor Systems 1,427 / 5,141 = 27.8%. Nine months FY2026 6,176 / 18,146 = 34.0% and 1,461 / 5,005 = 29.2%. Growth Q3 FY2026: Semiconductor Systems 7,040 / 5,564 - 1 = 26.5% year on year and 7,040 / 5,965 - 1 = 18.0% on the quarter; Applied Global Services 1,781 / 1,463 - 1 = 21.7%; revenue 9,115 / 7,910 - 1 = 15.2% on the quarter; United States revenue 1,367 / 683 - 1 = 100%; Europe 483 / 160 = 3.0 times. Nine months: 18,146 / 16,562 - 1 = 9.6%; 5,005 / 4,236 - 1 = 18.2%. Segment history, revenue: Semiconductor Systems 11,367 (FY2020), 16,286, 18,797, 19,698, 19,911, 20,798 (FY2025), compound growth (20,798 / 11,367)^(1/5) - 1 = 12.8% a year; Applied Global Services 4,155, 5,013, 5,543, 5,732, 6,225, 6,385, compound growth (6,385 / 4,155)^(1/5) - 1 = 9.0% a year, 6,385 / 5,732 - 1 = 11.4% over two years; Corporate and Other including Display 1,607 + 73 = 1,680 (FY2020), 1,634 + 130 = 1,764 (FY2021), 1,331 + 114 = 1,445 (FY2022), 868 + 219 = 1,087, 885 + 155 = 1,040, 1,185 (FY2025); 1,185 / 1,680 - 1 = -29%. Display operating margin 235 / 1,060 = 22% (FY2025) and 51 / 885 = 6% (FY2024). DRAM equipment 26% x 20,798 = about 5,400; flash 7% x 20,798 = about 1,460. Company margins: gross 13,808 / 28,368 = 48.7% (FY2025), 12,897 / 27,176 = 47.5% (FY2024), 12,384 / 26,517 = 46.7% (FY2023); operating 8,289 / 28,368 = 29.2%. R&D 3,570 / 28,368 = 12.6%; 3,570 / 1,451 = 2.5 times (FY2015-FY2025). Effective tax 2,273 / 9,271 = 24.5% (FY2025) and 975 / 8,152 = 12.0% (FY2024). Revenue FY2019 14,608 / 16,705 - 1 = -12.6%. Diluted shares 808 / 1,226 - 1 = -34%. Revenue outside the United States 25,305 / 28,368 = 89%. China share of revenue: 5,456 / 17,202 = 31.7% (FY2020); 7,535 / 23,063 = 32.7%; 7,254 / 25,785 = 28.1%; 7,247 / 26,517 = 27.3%; 10,117 / 27,176 = 37.2% (FY2024); 8,529 / 28,368 = 30.1% (FY2025). Taiwan 6,857 / 4,010 - 1 = 71%. Two largest customers 19% + 15% = 34% (FY2025) and 20% + 14% = 34% (nine months FY2026). Backlog: 15,002 / 19,011 - 1 = -21% (October 2022 to October 2025); Semiconductor Systems 7,105 / 12,691 - 1 = -44%; Applied Global Services 7,141 / 5,643 - 1 = +27%; shares of backlog 7,141 / 15,002 = 48% and 7,105 / 15,002 = 47%. Contract liabilities 3,271 / 2,566 - 1 = +27%; receivables 7,691 / 5,185 - 1 = +48%. Cash: net cash 7,241 + 1,332 - 100 - 6,455 = 2,018 (October 2025); 8,022 + 1,449 - 799 - 5,460 = 3,212 (October 2024); 7,037 + 2,196 - 1,299 - 5,245 = 2,689 (July 2026). Payout 1,384 / 6,998 = 19.8%; dividends plus buybacks 1,384 + 4,893 = 6,277, 6,277 / 7,958 = 79% of operating cash flow. ROE 6,998 / ((20,415 + 19,001) / 2) = 35.5% (FY2025), 40.6% (FY2024), 48.0% (FY2023). Trailing twelve months to July 2026: revenue 6,800 + 24,037 = 30,837; net income 1,897 + 7,370 = 9,267; operating cash flow 2,828 + 5,568 = 8,396; capital expenditure 785 + 1,988 = 2,773. Implied FY2026 revenue at the guidance midpoint 24,037 + 10,250 = 34,287, 34,287 / 28,368 - 1 = 20.9%; fourth-quarter midpoint 10,250 / 6,800 - 1 = 50.7%; implied non-GAAP EPS 8.73 + 4.02 = 12.75. Market: 376,360 / 9,267 = 40.6 times trailing earnings; 376,360 / 30,837 = 12.2 times sales; price 474.25 / 723.00 - 1 = -34.4%; Lam Research 384.36 - 376.36 = 8.00 bn more market value. ASML 662.45 / 376.36 = 1.8 times; KLA 246.05 / 376.36 = 0.65. Calendar year-end 2025 P/E 203,780 / 6,998 = 29.1; fiscal year-end P/E 40.91 / 11.83 = 3.5 times the FY2022 low. Other: services growth FY2025 6,385 / 6,225 - 1 = 2.6%; company revenue 28,368 / 27,176 - 1 = 4.4%; dividends 1,384 / 7,958 = 17.4% of operating cash flow; two largest customers FY2024 12% + 11% = 23%; Korea 1,521 / 1,160 - 1 = 31%; Semiconductor Systems 20,798 / 11,367 = 1.83 times (FY2020-FY2025); Display 1,060 / 1,607 - 1 = -34%; net income 6,998 / 1,377 = 5.1 times and EPS 8.66 / 1.12 = 7.7 times (FY2015-FY2025); revenue 28,368 / 9,659 = 2.9 times; balance sheet build July 2026 6,564 + 7,691 + 5,606 = 19,861; Display revenue excluded from Corporate and Other FY2025 1,185 - 1,060 = 125. Revenue FY2024 27,176 / 26,517 - 1 = 2.5%; R&D Q4 917 / 858 - 1 = 6.9%; revenue 30,837 / 25,785 - 1 = 19.6% (FY2022 to trailing July 2026); strategic investment gains 755 + 949 = 1,704; China less Taiwan nine months 6,688 - 5,902 = 786; forward earnings implied 40.91 / 26.95 = 1.52 times trailing; Q4 guide 10,250 / 9,115 - 1 = 12.5% above Q3. Memory share of systems revenue: DRAM plus flash 19% + 21% = 40% (FY2021), 17% + 6% = 23% (FY2023), 26% + 7% = 33% (FY2025). Market value 376,360 / 182,232 = 2.07 times the FY2025 year-end value; trailing net income 9,267 / 6,998 - 1 = 32%. Operating income 8,289 / 1,693 = 4.9 times (FY2015-FY2025). P/E gap to Lam 57.7 - 40.9 = 16.8. Q3 FY2026 returns 860 / 3,037 = 28% of operating cash flow. China plus Taiwan nine months (6,688 + 5,902) / 24,037 = 52%. Systems revenue Q1 to Q3 FY2026 7,040 / 5,141 - 1 = 37%. Systems share of segment operating income FY2025 7,379 / (7,379 + 1,792) = 7,379 / 9,171 = 80%. Systems R&D 3,042 / 20,798 = 14.6%. Third quarter share of nine-month systems profit 2,657 / 6,176 = 43%. Services FY2024 6,225 / 5,732 - 1 = 8.6%. Services share of backlog 4,335 / 11,758 = 37% (October 2021). Research per diluted share 1,451 / 1,226 = 1.18 (FY2015) and 3,570 / 808 = 4.42 (FY2025). Net cash plus long-term investments 2,689 + 5,268 = 7,957. Dividends per share 1.78 / 1.22 - 1 = 46%. ROE 35.5% / 10% = 3.5 times - geography, customers and backlog. — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Applied Materials' Forms 10-K and 10-Q, results releases and market data; operands shown in the source line.
  6. ReportedThe effect shows in Applied's China share, which fell from 37.2% of revenue in fiscal 2024 to 30.1% in 2025 and 28% in the quarter to July 2026.
    Applied Materials third-quarter fiscal 2026 results release, Form 8-K exhibit 99.1 - record revenue, segment results, revenue by geography, employees and fourth-quarter guidance - revenue by geography and employees. — Q3 FY2026 · publ. 13 August 2026 · source ↗
  7. ReportedIt expected the rule to reduce fourth-quarter fiscal 2025 revenue by about $110 million, before the larger fiscal 2026 effect.
    Applied Materials Form 8-K Item 7.01 - expected revenue impact of the BIS Affiliates Rule: about $110 million in Q4 FY2025 and about $600 million in FY2026. — September 2025 · publ. 29 September 2025 · source ↗
  8. ReportedChina's share of revenue in the quarter to July 2026, 28%, was seven points lower than a year earlier.
    Applied Materials third-quarter fiscal 2026 results release, Form 8-K exhibit 99.1 - record revenue, segment results, revenue by geography, employees and fourth-quarter guidance - revenue by geography and employees. — Q3 FY2026 · publ. 13 August 2026 · source ↗
  9. ReportedThe 10-K notes that competitors "which may benefit from policies and regulations that favor domestic companies" range from small regional firms upward.
    Applied Materials Form 10-K for fiscal 2025 (year ended 26 October 2025) - Item 1A risk factors: competition, export controls, customer concentration, backlog and the EPIC Center. — FY2025 · publ. 12 December 2025 · source ↗
  10. Moat Explorer calcBetween foreign rivals outside American rules and Chinese rivals backed by Beijing, Applied is squeezed in the market that gave it 37.2% of revenue in fiscal 2024.
    Moat Explorer calculation from Applied Materials' reported figures ($ millions unless stated). Segment shares FY2025: Semiconductor Systems 20,798 / 28,368 = 73.3%; Applied Global Services 6,385 / 28,368 = 22.5%; Corporate and Other 1,185 / 28,368 = 4.2%. Segment operating margins FY2025: 7,379 / 20,798 = 35.5%; 1,792 / 6,385 = 28.1%; FY2024 6,981 / 19,911 = 35.1%, 1,812 / 6,225 = 29.1%; FY2023 6,879 / 19,698 = 34.9%, 1,529 / 5,732 = 26.7%. Q3 FY2026 margins: Semiconductor Systems 2,657 / 7,040 = 37.7%; Applied Global Services 536 / 1,781 = 30.1%; company operating margin 3,075 / 9,115 = 33.7%. Q1 FY2026 Semiconductor Systems 1,427 / 5,141 = 27.8%. Nine months FY2026 6,176 / 18,146 = 34.0% and 1,461 / 5,005 = 29.2%. Growth Q3 FY2026: Semiconductor Systems 7,040 / 5,564 - 1 = 26.5% year on year and 7,040 / 5,965 - 1 = 18.0% on the quarter; Applied Global Services 1,781 / 1,463 - 1 = 21.7%; revenue 9,115 / 7,910 - 1 = 15.2% on the quarter; United States revenue 1,367 / 683 - 1 = 100%; Europe 483 / 160 = 3.0 times. Nine months: 18,146 / 16,562 - 1 = 9.6%; 5,005 / 4,236 - 1 = 18.2%. Segment history, revenue: Semiconductor Systems 11,367 (FY2020), 16,286, 18,797, 19,698, 19,911, 20,798 (FY2025), compound growth (20,798 / 11,367)^(1/5) - 1 = 12.8% a year; Applied Global Services 4,155, 5,013, 5,543, 5,732, 6,225, 6,385, compound growth (6,385 / 4,155)^(1/5) - 1 = 9.0% a year, 6,385 / 5,732 - 1 = 11.4% over two years; Corporate and Other including Display 1,607 + 73 = 1,680 (FY2020), 1,634 + 130 = 1,764 (FY2021), 1,331 + 114 = 1,445 (FY2022), 868 + 219 = 1,087, 885 + 155 = 1,040, 1,185 (FY2025); 1,185 / 1,680 - 1 = -29%. Display operating margin 235 / 1,060 = 22% (FY2025) and 51 / 885 = 6% (FY2024). DRAM equipment 26% x 20,798 = about 5,400; flash 7% x 20,798 = about 1,460. Company margins: gross 13,808 / 28,368 = 48.7% (FY2025), 12,897 / 27,176 = 47.5% (FY2024), 12,384 / 26,517 = 46.7% (FY2023); operating 8,289 / 28,368 = 29.2%. R&D 3,570 / 28,368 = 12.6%; 3,570 / 1,451 = 2.5 times (FY2015-FY2025). Effective tax 2,273 / 9,271 = 24.5% (FY2025) and 975 / 8,152 = 12.0% (FY2024). Revenue FY2019 14,608 / 16,705 - 1 = -12.6%. Diluted shares 808 / 1,226 - 1 = -34%. Revenue outside the United States 25,305 / 28,368 = 89%. China share of revenue: 5,456 / 17,202 = 31.7% (FY2020); 7,535 / 23,063 = 32.7%; 7,254 / 25,785 = 28.1%; 7,247 / 26,517 = 27.3%; 10,117 / 27,176 = 37.2% (FY2024); 8,529 / 28,368 = 30.1% (FY2025). Taiwan 6,857 / 4,010 - 1 = 71%. Two largest customers 19% + 15% = 34% (FY2025) and 20% + 14% = 34% (nine months FY2026). Backlog: 15,002 / 19,011 - 1 = -21% (October 2022 to October 2025); Semiconductor Systems 7,105 / 12,691 - 1 = -44%; Applied Global Services 7,141 / 5,643 - 1 = +27%; shares of backlog 7,141 / 15,002 = 48% and 7,105 / 15,002 = 47%. Contract liabilities 3,271 / 2,566 - 1 = +27%; receivables 7,691 / 5,185 - 1 = +48%. Cash: net cash 7,241 + 1,332 - 100 - 6,455 = 2,018 (October 2025); 8,022 + 1,449 - 799 - 5,460 = 3,212 (October 2024); 7,037 + 2,196 - 1,299 - 5,245 = 2,689 (July 2026). Payout 1,384 / 6,998 = 19.8%; dividends plus buybacks 1,384 + 4,893 = 6,277, 6,277 / 7,958 = 79% of operating cash flow. ROE 6,998 / ((20,415 + 19,001) / 2) = 35.5% (FY2025), 40.6% (FY2024), 48.0% (FY2023). Trailing twelve months to July 2026: revenue 6,800 + 24,037 = 30,837; net income 1,897 + 7,370 = 9,267; operating cash flow 2,828 + 5,568 = 8,396; capital expenditure 785 + 1,988 = 2,773. Implied FY2026 revenue at the guidance midpoint 24,037 + 10,250 = 34,287, 34,287 / 28,368 - 1 = 20.9%; fourth-quarter midpoint 10,250 / 6,800 - 1 = 50.7%; implied non-GAAP EPS 8.73 + 4.02 = 12.75. Market: 376,360 / 9,267 = 40.6 times trailing earnings; 376,360 / 30,837 = 12.2 times sales; price 474.25 / 723.00 - 1 = -34.4%; Lam Research 384.36 - 376.36 = 8.00 bn more market value. ASML 662.45 / 376.36 = 1.8 times; KLA 246.05 / 376.36 = 0.65. Calendar year-end 2025 P/E 203,780 / 6,998 = 29.1; fiscal year-end P/E 40.91 / 11.83 = 3.5 times the FY2022 low. Other: services growth FY2025 6,385 / 6,225 - 1 = 2.6%; company revenue 28,368 / 27,176 - 1 = 4.4%; dividends 1,384 / 7,958 = 17.4% of operating cash flow; two largest customers FY2024 12% + 11% = 23%; Korea 1,521 / 1,160 - 1 = 31%; Semiconductor Systems 20,798 / 11,367 = 1.83 times (FY2020-FY2025); Display 1,060 / 1,607 - 1 = -34%; net income 6,998 / 1,377 = 5.1 times and EPS 8.66 / 1.12 = 7.7 times (FY2015-FY2025); revenue 28,368 / 9,659 = 2.9 times; balance sheet build July 2026 6,564 + 7,691 + 5,606 = 19,861; Display revenue excluded from Corporate and Other FY2025 1,185 - 1,060 = 125. Revenue FY2024 27,176 / 26,517 - 1 = 2.5%; R&D Q4 917 / 858 - 1 = 6.9%; revenue 30,837 / 25,785 - 1 = 19.6% (FY2022 to trailing July 2026); strategic investment gains 755 + 949 = 1,704; China less Taiwan nine months 6,688 - 5,902 = 786; forward earnings implied 40.91 / 26.95 = 1.52 times trailing; Q4 guide 10,250 / 9,115 - 1 = 12.5% above Q3. Memory share of systems revenue: DRAM plus flash 19% + 21% = 40% (FY2021), 17% + 6% = 23% (FY2023), 26% + 7% = 33% (FY2025). Market value 376,360 / 182,232 = 2.07 times the FY2025 year-end value; trailing net income 9,267 / 6,998 - 1 = 32%. Operating income 8,289 / 1,693 = 4.9 times (FY2015-FY2025). P/E gap to Lam 57.7 - 40.9 = 16.8. Q3 FY2026 returns 860 / 3,037 = 28% of operating cash flow. China plus Taiwan nine months (6,688 + 5,902) / 24,037 = 52%. Systems revenue Q1 to Q3 FY2026 7,040 / 5,141 - 1 = 37%. Systems share of segment operating income FY2025 7,379 / (7,379 + 1,792) = 7,379 / 9,171 = 80%. Systems R&D 3,042 / 20,798 = 14.6%. Third quarter share of nine-month systems profit 2,657 / 6,176 = 43%. Services FY2024 6,225 / 5,732 - 1 = 8.6%. Services share of backlog 4,335 / 11,758 = 37% (October 2021). Research per diluted share 1,451 / 1,226 = 1.18 (FY2015) and 3,570 / 808 = 4.42 (FY2025). Net cash plus long-term investments 2,689 + 5,268 = 7,957. Dividends per share 1.78 / 1.22 - 1 = 46%. ROE 35.5% / 10% = 3.5 times - geography, customers and backlog. — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Applied Materials' Forms 10-K and 10-Q, results releases and market data; operands shown in the source line.
Sources
Generated September 25, 2026