close
close
HomeNews UpdateSemiconductor equipment giant ASML’s order backlog is likely to benefit from AI chip boom

Semiconductor equipment giant ASML’s order backlog is likely to benefit from AI chip boom

July 16, 2024
Semiconductor equipment giant ASML’s order backlog is likely to benefit from AI chip boom

ASML dominates the global market for lithography systems, complex tools that use lasers to create the tiny circuits of semiconductors. It is the only manufacturer of lithography systems that use extreme ultraviolet (EUV) wavelengths, which TSMC needs to create the most complex processors for Smartphones and AI chips.
Christophe Fouquet took over as President and CEO of the Dutch semiconductor manufacturer ASML on April 25, 2024. Photo: Reuters

“We expect ASML’s order value to reach nearly 5 billion euros ($5.4 billion) in the second quarter, higher than consensus estimates,” said Mihuzo analyst Kevin Wang, noting strong orders from TSMC for ASML’s EUV product line.

The results are the first under the new ASML management Christophe Fouquetwho has taken over the leadership of Europe’s largest tech company as it navigates the ongoing chip dispute between the US and China.

ASML, which is worth around 400 billion euros, described 2024 as a “transition year” in which business will stagnate before experiencing a strong recovery in 2025 due to demand for its most advanced tools.

The company’s shares have risen by 45 percent this year and are currently trading at record levels of over 1,000 euros. This corresponds to around 40 times the earnings forecast for the next twelve months and is therefore significantly higher than the STOXX Europe 600 technology index.

A growing order backlog would reassure investors that demand for ASML’s most advanced products is returning after a weak first half of 2024, when the company relied heavily on orders for older equipment from China.

Analysts expect second-quarter net profit of 1.41 billion euros on revenue of 6.04 billion euros. This is the average estimate of 16 analysts based on data from the London Stock Exchange Group.

For comparison: In the same period last year, net profit was 1.94 billion euros on sales of 6.90 billion euros.

ASML engineers walk past an extreme ultraviolet lithography system at the company’s headquarters in Veldhoven, the Netherlands, on November 20, 2023. Photo: Reuters

ASML had an order backlog of €38 billion at the end of the first quarter. This means that the company needs new orders of €4 billion to €6 billion each quarter to meet its 2025 sales forecast, which is at the upper end of a €30 billion to €40 billion range.

The company’s machines, each costing up to $300 million, have delivery times of 12 to 18 months, and orders are closely coordinated with customers, including Samsung Electronics, Inteland memory chip specialists SK Hynix And Micron technology.
When it comes to slightly older generations of chip manufacturing technology, ASML competes with Canon and Nikon. Japan. Chinese companies, including Shanghai Microelectronics Equipment try to develop competing lithography tools.
But Chinese chipmakers, who are prevented from doing so by Export restrictions imposed by the United States were excluded from purchasing ASML’s best tools, increased their purchases of older ASML equipment over the past year, accounting for almost half of the company’s revenue in the first quarter.
China’s rapid rise means lost market share and more competition for non-Chinese companies. European Commission has begun conducting a survey among European semiconductor companies on whether they believe that Chinese state subsidies lead to market distortions.

ASML argues that the world needs older chips, as shown by shortages during the Covid-19 pandemic, and that China is stepping in to supply them.

Tags:, , , , , , , , , , , , , , , , , , , , , , , ,

Related Posts

About The Author

vergie