Chip, Asml disappoints but does not collapse thanks to China

Dutch company Asml, Europe’s largest technology company and leading supplier of advanced semiconductor manufacturing machinery, reported lower-than-expected data on new orders in the first quarter of 2024. The shares, which since the start of This year they grew by 34 percent, today they lost 6 percent.

ASML RESULTS IN THE FIRST QUARTER OF 2024

The data on orders is not the only disappointing or negative data: in the quarter just ended, in fact, Asml recorded a net profit of 1.2 billion euros (compared to 2 billion in the fourth quarter of 2023) and a turnover of 5. 2 billion (compared to 7.2 billion in the previous period). The value of new orders is 3.6 billion euros, but analysts expected much more: 5.4 billion.

Nonetheless, the company did not change its financial forecast for the full year 2024, expecting sales figures to be essentially the same as those in 2023 (27.6 billion euros) but robust growth in 2025.

According to CEO Peter Wennink, 2024 will be a “transition year” for Asml and the second half of the year will prove more positive than the first. The transition will also affect the management, because Wennink – who is sixty-seven years old – will soon be replaced by Christophe Fouquet.

CHINA SUPPORTS SALES, DESPITE RESTRICTIONS

Despite the restrictions of the US and Dutch governments on the export of advanced machinery to China, the Chinese market itself proved to be decisive in supporting Asml’s sales in the first quarter of 2024. In this period, in fact, the sales of lithography systems in China represented 49 percent of the total – a record -, for a value of around 2 billion euros.

According to estimates by Semi, the main semiconductor industry association, China is the country that will have the greatest microchip manufacturing capacity (chipmaking, in jargon) in 2024, followed by Taiwan and South Korea. Beijing, however, is suffering from a technological delay: that is, it does not possess the capabilities and means to build the most advanced types of chips and is having difficulty accessing new machinery due to export controls introduced by the United States with the support of allied governments . Washington’s objective is to slow down its rival’s industrial and military development.

Asml is the dominant company in the lithography systems market: these are very expensive machines – in the order of hundreds of millions of euros each – which use light beams to create circuits on very small scales. When we talk about lithography we can refer to various processes: the most complex is that of extreme ultraviolet lithography, or Euv. ASML’s EUV machines are not exported to China, and a good portion of its deep ultraviolet (DUV) lithography machines are also restricted. Chinese chip manufacturers, therefore, have to fall back on more backward devices.

ASML’S PROSPECTS, ACCORDING TO THE MARKETS

Despite the uninspiring results of the first quarter, the general sentiment of sector analysts towards Asml is positive: as it is almost impossible to do without it, given its dominant position in the market for advanced machinery chipmakingin the medium to long term the company will probably be able to capitalize on both the growing demand for artificial intelligence processors and memory chips, and government stimulus plans for semiconductor manufacturing (in particular those approved by the United States, Japan , Taiwan and South Korea).