ASML, the largest supplier of equipment to computer chip makers, reported today that its latest orders failed to meet analyst forecasts due to a decline in demand from the chip-making industry for its most sophisticated machinery, but it had strong sales to China despite U.S.-led restrictions on what it could export.
TakeAway Points:
- ASML said its latest orders failed to meet analyst forecasts due to a decline in demand from the chip-making industry for its most sophisticated machinery.
- According to ASML, sales of ASML’s lithography systems to customers in China made up a record 49% of the total in the first quarter, or around 2 billion euros.
- Peter Wennink, CEO, stated that the second half of 2024 is predicted to be better than the first, consistent with the industry’s ongoing recovery from the slump. Our analysis for the entire year remains unchanged.
ASML sees Decline in Orders
LSEG data shows that net income for the first quarter of 2023 was 1.22 billion euros, slightly better than projected but still down from 2.05 billion euros in the fourth quarter of 2023. Sales decreased from 7.24 billion euros to 5.29 billion euros.
According to ASML, sales of its lithography equipment to Chinese clients accounted for a record 49% of the total in the first quarter, or over 2 billion euros, in an investor presentation that was released concurrently with the results.
3.6 billion euros were made in new reservations, far less than the 5.4 billion euros that Reuters polled analysts to predict.
“Our outlook for the full year 2024 is unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry’s continued recovery from the downturn,” Peter Wennink, Chief Executive Officer, said in the statement.
“We see 2024 as a transition year.” Wennink added.
ASML is the only manufacturer in the world of the components required to create the most cutting-edge chips, which power everything from high-tech military equipment to cellphones. The US and Dutch export regulations aimed at impeding Beijing’s chip ambitions have targeted the capacity of the Veldhoven-based company to provide China with state-of-the-art equipment.
China’s chipmakers hurried to acquire cutting-edge lithography machines last year, which helped ASML capitalise on the country’s high demand. As of January 1, the new regulations prohibit ASML from exporting its second-most competent type of machinery, immersion DUV lithography machines, to China.
ASML Challenges
According to the report, per US government pressure, ASML has never been able to offer China its most sophisticated extreme ultraviolet devices. According to the corporation, the new export control procedures might impact up to 15% of China sales this year.
In the meantime, a few of ASML’s largest clients have shown encouraging outcomes. Taiwan Semiconductor Manufacturing Co. reported earlier this month that the growth of its quarterly revenue was the fastest it has been in over a year.
Later this month, Wennink will retire, and ASML’s chief business officer, Christophe Fouquet, will succeed him as CEO. In order to appease stockholders used to growth, he will need to strike a balance between US geopolitical pressure and other factors. Shares increased by around 1,400% in ten years under Wennink.
Sales this year are expected to be comparable to those in 2023, ASML reaffirmed.
About
Established in 1984, Advanced Semiconductor Materials Lithography, or ASML, is a worldwide company based in the Netherlands. ASML is a leader in the design and production of photolithography equipment used in the fabrication of computer chips.
By 2023, it will be the leading provider to the semiconductor industry and the only manufacturer of extreme ultraviolet lithography (EUV) photolithography equipment needed to produce the most sophisticated devices. With a market valuation of over US$397 billion as of March 2024, ASML was the most valuable tech company in Europe.
