ASML 2025 outlook reveals US chip export curbs impacting China gross sales
An ASML icon is being displayed on a circuit board, alongside the flags of the USA and China, on this picture illustration taken in Brussels, Belgium, on January 4, 2024.
Jonathan Raa | Nurphoto | Getty Photographs
ASML lastly supplied a primary glimpse into how U.S. restrictions on exports of its superior chip manufacturing instruments to China will influence its gross sales within the Asian nation.
The Netherlands-based chip gear maker mentioned in its earnings report Tuesday, which was launched a day early attributable to a “technical error,” that it expects internet gross sales for 2025 to return in between 30 billion euros and 35 billion euros ($32.7 billion and $38.1 billion). That is on the decrease half of the vary ASML had guided beforehand.
ASML is a essential a part of the worldwide chip provide chain. The agency’s excessive ultraviolet lithography machines are utilized by lots of the world’s largest chipmakers — from Nvidia to Taiwan Semiconductor Manufacturing — to provide superior chips.
Whereas third-quarter internet gross sales on the agency reached 7.5 billion euros — beating expectations — internet bookings got here in at 2.6 billion euros ($2.83 billion), the corporate mentioned. That was effectively under a 5.6 billion euro consensus estimate from LSEG.
ASML shares plunged as a lot as 16% on Tuesday in response, inflicting the agency to shed over $50 billion in market capitalization in a single day, based on CNBC calculations utilizing LSEG knowledge.
Past the frustration on bookings — which analysts mentioned was attributable to weak point in a choose variety of clients, together with Intel and Samsung — AMSL additionally gave a sign of how geopolitical tensions are placing stress on its 2025 outlook.
Roger Dassen, ASML’s chief monetary officer, mentioned on a name with analysts Wednesday that the corporate expects China gross sales to drop subsequent 12 months, citing U.S. export restrictions as one of many causes.
“All of us learn newspapers, proper? All of us see that there’s hypothesis round round export management,” Dassen mentioned in response to an analyst query on why the corporate sees income in China slumping subsequent 12 months. “That could be a driver for us to take a extra cautious view on the China gross sales.”
UBS analysts mentioned the change in ASML’s 2025 steering was primarily associated to delays with the event of recent logic fabrication amenities from Intel and Samsung, including that the brand new steering implies gross sales to China would fall 25% to 30% in 2025.
How essential is China to ASML?
ASML’s China-based clients have been stockpiling the agency’s much less superior machines to get forward of U.S. export restrictions on the Dutch agency and to proceed having the ability to entry its essential expertise, which permits them to producer chips for the electronics business.
ASML has by no means offered its most superior excessive ultraviolet lithography, or EUV machines to Chinese language clients attributable to earlier restrictions.
As a substitute, chip corporations within the nation have opted to order ASML’s deep extremely violet lithography, or DUV machines. DUV machines are ASML’s second-tier lithography programs which might be essential to make the circuitry of chips.
Final 12 months ASML sourced 29% of its gross sales from China. It now expects that contribution from China to drop to round 20% of its complete income in 2025.
Gross sales to China grew dramatically within the first three quarters of 2024 as clients scrambled to purchase ASML’s DUV machines in bulk head of U.S. and Dutch export restrictions.
Within the firm’s second-quarter 2024 earnings presentation, ASML mentioned that it sourced as a lot as 49% of its gross sales from China.
In September, the Netherlands expanded export restrictions on superior chip manufacturing gear by bringing licensing necessities of ASML’s machines below its purview and thereby taking up from the U.S. on controlling what machines ASML is ready to export to different nations.
The transfer meant that the Dutch authorities would be capable to successfully block ASML from sustaining the DUV machines it has offered to China to date.
“China is a vital marketplace for ASML,” Chris Miller, assistant professor of worldwide historical past on the Fletcher College of Regulation and Diplomacy at Tufts College and creator of the e book “Chip Struggle,” instructed CNBC in emailed feedback. “Most of this income is from older-generation chipmaking instruments.”
Paradoxically, restrictions on exports of DUV machines to China “have in all probability helped ASML on internet, as a result of China has accelerated purchases of older technology DUV instruments because of this,” Miller added.
Now, ASML is anticipating a drop-off in gross sales to China on account of U.S. commerce restrictions. The agency expects China to return to taking over a smaller share of its total international gross sales in 2025, CFO Dassen mentioned in a transcript of a video interview Tuesday.
“We do see China trending in direction of extra traditionally regular percentages in our enterprise,” Dassen mentioned. “So we count on China to return in at round 20% of our complete income for subsequent 12 months. Which might even be in keeping with its illustration in our backlog.”
Analysts at Financial institution of America mentioned the agency faces a “sharp decline in China revenues.” They added that ASML’s forecast of China accounting for round 20% of its income in 2025, implies a 48% income decline year-over-year — extra extreme than the three% that they had anticipated.
Abishur Prakash, founding father of Toronto-based advisory agency The Geopolitical Enterprise, mentioned that demand from China for ASML’s machines is prone to drop considerably because the agency is “severely restricted by export controls.”
“Like Intel, for whom China is the most important market, ASML is deeply reliant on China,” Prakash instructed CNBC through electronic mail. “For ASML, it’s watching what’s going down with China as a possible restriction on enterprise.”
“Because the chip world is lower from China, ASML might see demand for its gear drop — from China and elsewhere,” Prakash added.
