Europe’s tech darling ASML is forecasting increased sales following a mixed calendar Q2, but its share price is down amid talk of tighter restrictions on China exports being considered by the US government.
The Netherlands-based supplier of chipmaking equipment announced net sales for Q2 that are down year-on-year, but up from the previous quarter, and said bookings were up as chip companies invest in the kit needed to make more advanced semiconductors.
A cloud on the horizon, however, is a report claiming that Washington may use “the most severe trade restrictions available” against companies such as ASML and Tokyo Electron that supply the Chinese semiconductor industry.
This report comes from Bloomberg and cites only anonymous sources, so must be viewed in that context. It claims the US government is looking at a drastic measure called the foreign direct product rule (FDPR) that lets it impose controls on foreign-made products that use American tech, no matter how small that contribution may be.
The effect of that report has been an immediate fall of 6 percent in the value of ASML shares on the Amsterdam stock exchange, following gains of 41 percent over the previous year.
China accounted for 49 percent of ASML’s sales during Q1 of this year, despite the company already being barred from selling its most advanced kit to customers in that country.
ASML declined to comment on further restrictions. We asked the US Commerce Department if it could confirm the move, and will update if we get a response.
In terms of ASML’s Q2 performance, it reported net income of €1.578 billion ($1.7 billion) on sales of €6.2 billion ($6.7 billion). The latter is down from the €6.9 billion ($7.5 billion) it reported for the same quarter last year, but order bookings are up at €5.6 billion ($6.1 billion), of which €2.5 billion ($2.7 billion) is represented by its more advanced extreme ultraviolet (EUV) equipment.
In a statement, ASML president and CEO Officer Christophe Fouquet claimed net sales were at the high end of the company’s earlier guidance, primarily driven by shifting more immersion lithography systems.
Fouquet struck a note of cautious optimism, hinting that the overall semiconductor market was still in recovery mode but that ASML’s chipmaking customers were looking to increase production.
“In line with previous quarters, overall semiconductor inventory levels continue to improve, and we also see further improvement in litho tool utilization levels at both Logic and Memory customers,” he said.
“While there are still uncertainties in the market, primarily driven by the macro environment, we expect industry recovery to continue in the second half of the year,” Fouquet added.
Looking ahead, ASML expects to see net sales rise in Q3, to between €6.7 billion ($7.3 billion) and €7.3 billion ($7.9 billion), but Fouquet said the company’s outlook for the full year 2024 remains unchanged, forecasting stronger second half and overall revenue similar to that for last year.
“We see 2024 as a transition year with continued investments in both capacity ramp and technology. We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments,” he stated.
Looking further ahead, he said ASML expects 2025 to be a strong year for company sales, driven by a number of factors, including the energy transition, electrification and AI continuing to drive demand. ASML is preparing for “a number of new fabs” to come online that are being built today around the globe, he added.
Fouquet indicated that customer interest is high in the company’s latest “High NA” EUV machines, as it enables “an almost three times increase in transistor density”. Intel received the first machine at its facility in Hillsboro, Oregon, earlier this year, and this is now “running qualification wafers”, while the second system to ship is now undergoing installation. ®
