US Chip Equipment Makers Rise Amid Reports of "Watered-Down" China Curbs

US semiconductor equipment makers rose in premarket trading following a Bloomberg News report indicating that an additional round of US restrictions on semiconductor equipment sales to China might be less severe than previously anticipated. 

People familiar with trade policy said the new restrictions could debut as soon as next week. The measures were part of a multi-month deliberation by top US officials, negotiations with allies in Japan and the Netherlands, and lobbying by US chip equipment makers who've cautioned that stricter measures would harm the industry. 

Here are the key differences between the latest proposal and earlier drafts, according to Bloomberg, citing those familiar with trade policy:

The first is which Chinese companies the US would add to a trade restriction list. The US had previously considered sanctioning six suppliers to Huawei Technologies Co. — the telecom giant at the center of China's tech industry — and officials are aware of at least a half dozen more, the people said. But they now plan to add only some of those Huawei suppliers to the entity list, with the notable omission of ChangXin Memory Technologies Inc., which is trying to develop AI memory chip technology.

As a result of the report, Japanese and European chip-related stocks gained on the news on Thursday, while US markets closed for Thanksgiving.

In premarket trading in New York, Applied Materials rose 2.5%, Lam Research increased 3%, and KLA moved higher by 4.3%. 

"The watered-down rules are a partial win for the three firms, which have argued against unilateral US restrictions on key Chinese companies, saying this would put them at an unfair disadvantage to Tokyo Electron and ASML, whose governments have not yet agreed to the toughest restrictions on sales to China," Bloomberg said. 

On Thursday, Citi analyst Kevin Chen told clients that the news report was a "near-term positive relief to investor concerns of escalating export controls." 

Chen continued, "Still, there could be future restrictions under the Trump administration next year and we expect China's semiconductor localization to continue to positively impact supply chain companies' share prices." 

Also, watch other chip stocks, including Nvidia, Intel, Qualcomm, ARM Holdings, Broadcom, Micron Technology, Super Micro Computer, and AMD.