ASML’s Orders Rise as Chip Gear Giant Shrugs Off Weak Demand

ASML Holding NV’s orders rose in the second quarter as demand for its chip-making machines is picking up, signaling optimism that a slump in the semiconductor industry may be nearing an end.

(Bloomberg) — ASML Holding NV’s orders rose in the second quarter as demand for its chip-making machines is picking up, signaling optimism that a slump in the semiconductor industry may be nearing an end. 

Europe’s most valuable technology company reported order bookings of €4.5 billion ($5 billion) in April to June, ASML said in a statement on Wednesday. That is 20% higher from the previous quarter and beat an average estimate of €3.98 billion among analysts polled by Bloomberg.

The company raised its full year guidance, and now expects net sales in 2023 to grow toward 30%, Chief Executive Officer Peter Wennink said in the statement. 

ASML, which is the leading producer of the lithography equipment needed to produce semiconductors for the most advanced smartphones and computers, said the demand is still higher than supply for its deep ultraviolet, or DUV, lithography machines. 

While ASML maintains an order backlog of around €38 billion, the semiconductor industry has slowed as inflation and recession fears last year triggered a rapid pullback on consumer and business spending that’s hammered sales of electronics worldwide. Earlier this month, Samsung Electronics Co. reported its worst decline in quarterly revenue since at least 2009. ASML’s backlog dropped by around €900 million from the previous quarter.

Last week, ASML said it plans to slow hiring this year amid the downturn in the chip industry, after it added 10,000 employees in 2022. 

The extreme ultraviolet business, which is the company’s most advanced product line, is going through “some shift in demand timing” largely driven by fab readiness, Wennink said in a video released together with earnings. “There is also some element in there of course of the macroeconomic situation, where people have some concerns about the duration of this downcycle.”

Revenue is on track for €6.5 billion to €7 billion in the third quarter, compared to net sales of €6.9 billion in the previous period, the Dutch company said. The forecast compares to analysts’ average estimate of €6.51 billion, according to a Bloomberg survey.

Read More: ASML, Europe’s Most Valuable Tech Firm, Defines Global Chip War

ASML has been impacted by the US bid to curb exports of cutting-edge technology to China, its third-biggest market. Pressure from President Joe Biden’s administration pushed the Dutch government last month to announce plans to prohibit ASML from shipping some so-called immersion DUV lithography machines, its second-most capable machinery, to China without a license. 

ASML is already prohibited from selling its most sophisticated EUV technology to Chinese companies. Still, sales to China remain robust, according to Wennink. 

“Chinese customers say: We are happy to take the machines that others don’t want,” Wennink said. “Because their fabs are ready. They can take the tools.”

What Bloomberg Intelligence Says

ASML could still achieve 30% sales growth in 2023 despite macro headwinds. Demand for lithography tools for mature-node chips might stay strong, including in China. 3Q order booking improved sequentially and the backlog remained high at €38 billion, which is greater than 2024 consensus estimates of €29.7 billion for sales and might relieve investors’ concerns.

— Masahiro Wakasugi, BI senior industry analyst

In addition to the Dutch controls, the US is expected to bar ASML from selling DUV lithography gear to about half a dozen of Chinese plants without approval from Washington.

Wennink called US plans to tighten restrictions on more of its DUV sales “speculative.” “But what we understand, it will not have a major impact on what we said before,” he said.

(Updates with details throughout)

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