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Applied Materials (AMAT - Analyst Report) lowered its sales and earnings guidance for full-year 2012. Following the news, the shares fell 2.72% to $10.71 after the market closed yesterday.

The chip-fab equipment maker expects full-year net sales and adjusted earnings to be below the previous forecast of $9.1–$9.5 billion and 85–95 cents, respectively. Though management did not provide any explicit new guidance range, it did mention that full-year earnings could go down by 15 cents to 20 cents due to slowing demand.

Additionally, management now expects worldwide spending on wafer fabrication equipment (WFE) in the range of $30–$33 billion, down from its previous estimate of $32–$35 billion.

According to the market research firm, Gartner, WFE spending will total $33 billion in 2012, down 8.9% from 2011. But it will increase in 2013 to more than $35.4 billion, up 7.4% from 2012.

Management said that the guidance cut was on account of lower-than-expected demand in its semiconductor equipment business, primarily among foundry customers.

For the upcoming third quarter, the company expects earnings on the lower end of the previously announced guidance range of 21 cents to 29 cents per share.

Applied Materials is the global leader in providing manufacturing solutions for the semiconductor, display and solar industries, and we remain positive about its strong position in the semiconductor market. In the second quarter, Applied posted decent numbers, with both revenue and earnings surpassing our expectations.

The company is expected to update its annual sales and earnings guidance on August 15, when it reports its third quarter results.

This marks yet another guidance reduction in the semiconductor industry. Recently, chip maker Advanced Micro Devices (AMD - Analyst Report) slashed its sales forecast for the second quarter due to weaker-than-expected sales in China and Europe. Advanced Micro’s shares fell 11.2% to $4.99 following the guidance revision.

Applied, which competes with other large equipment makers, such as KLA-Tencor Corp. (KLAC - Analyst Report) and Lam Research Corp. (LRCX - Snapshot Report), holds a Zacks #3 Rank that translates into a short-term Hold rating.

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