Applied Materials (AMAT.US), America's largest chip manufacturing equipment producer, delivered disappointing sales and earnings forecasts, reigniting concerns that China-US trade tensions are constraining demand. Following this announcement, Applied Materials shares tumbled over 13% in after-hours trading on Thursday.

For the third quarter ended July 27, Applied Materials reported revenue of $7.3 billion, up 8% year-over-year and beating analyst expectations of $7.21 billion. Adjusted net income reached $1.989 billion, growing 13% year-over-year, while adjusted earnings per share came in at $2.48, surpassing the analyst consensus of $2.36.

However, the company's fourth-quarter outlook fell significantly short of expectations. Applied Materials forecasts Q4 revenue of approximately $6.7 billion, well below the analyst estimate of $7.32 billion. The company also expects adjusted earnings per share of around $2.11, missing the consensus forecast of $2.38.

Applied Materials serves some of the world's largest chip manufacturers, including Taiwan Semiconductor Manufacturing Company, Samsung Electronics, and Intel. These manufacturers typically place equipment orders well in advance of production startup, making Applied Materials' guidance a key barometer of future demand.

CEO Gary Dickerson noted that the company is experiencing declining demand from Chinese customers while also facing delays in obtaining approvals for technology exports to China. Additionally, major clients have postponed some purchasing plans amid ongoing negotiations over tariffs and other economic issues. "This does create a degree of uncertainty," Dickerson stated.

In July, Applied Materials' competitor Lam Research (LRCX.US) indicated that revenue for the quarter ending in December would likely fall below current levels, as Chinese customers may reduce spending following a previous wave of large-scale purchases.

Despite near-term challenges, Dickerson maintained that long-term demand prospects for computing power remain robust. He pointed out that Chinese customers have significantly increased their purchases in recent years and are now simply in a phase of inventory digestion.

Notably, Applied Materials announced last week its participation in Apple's expanded US manufacturing initiative, committing to invest over $200 million in building a facility in Arizona. The company will also supply equipment to Texas Instruments' US factories to support Apple product manufacturing.

Bloomberg Intelligence analyst Masahiro Wakasugi commented: "Applied Materials' decision to become a core member of Apple's 'Made in America' initiative, a move that promotes domestic factory capacity expansion, could strengthen its position as a key supplier of advanced semiconductor manufacturing equipment for chips used in iPhones."

Dickerson also expressed optimism about policy developments, stating: "The new administration is very focused on enhancing America's semiconductor supply, and we are very optimistic about this."