ASML Holding, a leading chip-equipment maker, has raised its sales guidance for the year amidst an eagerly awaited U.S. decision that could potentially result in restrictions on sales to China.
Strong Financial Performance
ASML reported a significant increase in earnings, with a rise to €1.94 billion ($2.2 billion), or €4.93 per share, compared to €1.41 billion, or €3.54 per share previously.
Sales also experienced a substantial growth, reaching €6.9 billion from €5.43 billion, driven by the sale of 113 lithography systems. This exceeded expectations, with an 8% surpassing of EPS projections and a 3% beat on revenue estimates, based on Bank of America’s analysis.
ASML CEO Peter Wennick expressed satisfaction with the strong performance, highlighting that the company sold more immersion systems than initially predicted. He also shed light on a change in the company’s revenue recognition policy, stating that revenue is now booked upon machine completion at their Netherlands factory, rather than at customer installation sites.
Notably, 24% of ASML’s shipments in the second quarter were destined for China, despite restrictions on the sale of their most advanced systems to the country. Wennick remarked that Chinese customers demonstrated enthusiasm for acquiring systems that others may overlook, as their fabs (semiconductor fabrication facilities) are prepared for implementation.
ASML acknowledged that new Dutch regulations on the sale of deep ultraviolet lithography systems to China will be implemented in September. The company expressed contentment with these forthcoming restrictions, as they aligned closely with their expectations.
In summary, ASML Holding has reported robust financial performance and adjusted their sales guidance for the year, even as they navigate potential restrictions on sales to China. The company continues to cater to emerging markets while ensuring compliance with evolving regulations.
The Global Impact of Government Rulings on ASML’s Business
ASML, one of the world’s leading chip-making companies, has been closely monitoring the recent government rulings in various countries. The Japanese government has already made its ruling at the end of May, and the Dutch government followed suit a few weeks ago. ASML is now eagerly awaiting the ruling from the American government.
Speculation has arisen that the American ruling may include additional measures. While the exact details are unknown, industry experts believe that these measures will not significantly impact ASML’s previous statements.
Looking beyond China, ASML acknowledges that end markets are showing signs of stabilization. However, chipmakers continue to grapple with high levels of inventory. As a result, companies are expected to reduce wafer output and rely less on ASML’s cutting-edge tools.
Additionally, there is a growing concern about a shortage of skills in the industry. Whether in Taiwan or the U.S., there is a clear shortage of individuals with the necessary capabilities to construct advanced fabs.
Despite these challenges, ASML remains optimistic about its future performance. The company now expects sales growth to reach around 30%, surpassing its previous guidance of over 25%. Furthermore, ASML anticipates a slight improvement in gross margins for the year.
Sandeep Deshpande, an analyst at JPMorgan, provides a perspective on the improved guidance. He attributes it to revenue recognition and the impact of China. However, investor perception suggests that Chinese semiconductor companies are primarily driven by the fear of potential U.S. restrictions rather than genuine market demand.
Reflecting this positive outlook, ASML’s shares on the Dutch stock exchange have risen by 1% following the announcement. In total, the stock has witnessed an impressive 33% increase so far this year.