China's E-Town Claims Applied Materials Poached Staff, Misused Proprietary Chip Tech

Beijing E-Town Semiconductor Technology Co. sued Applied Materials, Inc. AMAT, a U.S. chip-equipment supplier, in the Beijing Intellectual Property Court, accusing the latter of stealing trade secrets.

E-Town alleged that Applied Materials illegally obtained, used, and disclosed core plasma-source wafer treatment technologies.

The Chinese company alleged that Applied Materials hired two former employees from E-Town’s U.S. subsidiary, Mattson, who had access to proprietary plasma technology, Bloomberg reported on Wednesday, citing regulatory filings.

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E-Town is seeking a court order to stop Applied Materials from using the disputed trade secrets, destroy related materials, and pay 100 million Chinese yuan ($13.9 million) in damages.

The dispute unfolds against the backdrop of heightened U.S.-China tech tensions. Washington has already curbed China’s access to advanced chipmaking tools from Dutch supplier ASML Holding ASML, which depends on U.S. technology from companies including Applied Materials and Lam Research LRCX.

The litigation also echoes a 2022 case in which Applied Materials sued Mattson for alleged corporate espionage, allegations that Mattson denied.

China remains a critical market for Applied Materials, accounting for 37% of its fiscal 2024 revenue and 27% in fiscal 2023, according to company filings.

However, analysts warn that U.S. tariffs could weigh heavily on near-term results. KeyBanc Capital Markets’ Steve Barger estimates the levies could cost the company roughly $400 million in fiscal 2025, with half of that impact likely hitting in the second quarter. He projects China’s share of revenue could drop to about 25% this quarter.

The lawsuit comes just days after Washington and Beijing extended their trade truce by 90 days, avoiding a new round of tariffs. The agreement maintains a 30% U.S. levy on Chinese imports and a 10% Chinese tariff on U.S. goods.

Applied Materials shares have risen 17% year-to-date, outpacing the Nasdaq 100 Index’s 14% gain, as surging AI investment from major tech firms drives demand for semiconductor manufacturing equipment.

Price Action: AMAT stock is trading lower by 0.12% to $189.81 premarket on Wednesday.

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