The chip recovery timeline is facing further delays as a result of escalating tensions between the United States and China. ASML Holding, a crucial supplier to the semiconductor industry, has now forecasted that chip-makers will postpone investments in the upcoming year.
ASML, Europe’s most valuable technology company, manufactures the essential ‘lithography’ machines used in semiconductor production. Its esteemed clientele includes Taiwan Semiconductor Manufacturing, Samsung Electronics, and Intel.
Given its prominent role in the semiconductor industry, ASML’s latest projections raise concerns. ASML CEO Peter Wennink expressed the uncertainty prevailing among customers regarding the industry’s demand recovery. Consequently, the company anticipates a transition year in 2024.
ASML expects its revenue to remain mostly unchanged next year. This tempered outlook is primarily influenced by the heightened uncertainties caused by the United States’ recent imposition of stricter export restrictions on artificial intelligence chips, announced on Tuesday.
ASML Reports Flat Outlook Amidst China Restrictions
In the face of new China restrictions announced by the U.S. government, ASML, a leading semiconductor equipment manufacturer, has reported a flat outlook for the third quarter. Jefferies analyst Janardan Menon suggests that these restrictions may apply to only a limited number of fabs in China.
ASML’s net profit for the third quarter amounted to €1.89 billion ($2.0 billion), slightly lower than the €1.94 billion reported for the second quarter. Net sales for the quarter dropped from €6.90 billion to €6.67 billion.
A concerning trend was seen in net bookings for the quarter, which fell to €2.60 billion from an expected €4.50 billion predicted by Jefferies analyst Menon. Notably, bookings for ASML’s most advanced systems, extreme ultraviolet (EUV) lithography machines, reached €500 million. It should be noted that ASML is currently prohibited from selling EUV systems to China. These high-tech systems require 18 months to build.
Looking ahead to the fourth quarter, ASML anticipates reporting net sales between €6.7 billion and €7.1 billion, with a gross margin ranging from 50% to 51%. The company reiterates its full-year guidance of net sales growth approaching 30%.
In premarket trading, U.S.-listed shares of ASML experienced a 1.0% decline. Meanwhile, American depositary receipts of Taiwan Semiconductor Manufacturing slipped 1.4%, and Intel fell 0.4%. The tech industry at large is grappling with a downturn driven by elevated government bond yields.
