ASML reported record earnings and profits as demand for chip manufacturing equipment remains extremely strong despite slowdown in PC and smartphone sales. The order book, including equipment for DUV and EUV lithography, exceeds $38 billion as chipmakers continue to invest in capacity expansion.
It is known that ASML continues to sell DUV lithography equipment to Chinese customers, and buyers of EUV equipment are focused on the latest solutions to work with ultra-hard ultraviolet lithography at high numerical aperture (High-NA EUV).
ASML sales in the third quarter were €5.8 billion, with over 80 new lithography systems sold, including 12 EUV tools and 74 DUV machines, and six used scanners.
Profit in the quarter was €2.994 billion, while gross profit reached 51.8%. It is known that some customers prefer the so-called. “fast deliveries”, when the stages of intermediate testing are skipped, and the final one takes place already at the client’s site.
Although demand for many types of chips is falling, manufacturers expect that the situation will improve and the chips will be in demand as early as 2024-2025, by which time companies will need new capacities. In particular, new plants are being built by Intel, Micron, Samsung and SK hynix.
ASML’s order book exceeds $38 billion (versus $33 billion in the second quarter) – including 600 DUV scanners and more than 100 EUV scanners, many of which are ordered for future use, to maintain technological sovereignty in chip production. It will take years for the company to fill all the orders, as it plans to produce some 375 DUV machines and more than 50 EUVs in 2023.
Q4 sales are expected to be €6.1-6.6 billion, with gross margins of 49%. For the year, revenue will be € 21.1 billion, and gross profit – 50%.
Unlike manufacturers of similar equipment from the United States, ASML does not reduce sales forecasts for the 4th quarter – American business is forced to reckon with laws that block equipment sales to Chinese business without a special export license. Since ASML is located in the Netherlands and uses almost no American components in DUV machines, it can supply most of its solutions of the appropriate level to companies like Semiconductor Manufacturing International Co. (SMIC) and Yangtze Memory Technology Co. (YMTC).
However, ASML cannot supply Chinese customers with US-based EUV scanners. Since the company did not initially intend to sell such equipment to China, the new sanctions will not affect ASML’s profitability forecasts for the next quarter and in 2022 as a whole.
Sanctions may affect ASML’s business indirectly. In addition to the company’s products, manufacturers also need other equipment, the sale of which to China may be blocked, which will affect demand for DUV machines, and some orders may be canceled. However, Chinese semiconductor companies can count on huge public funds to buy such equipment for future use, until it becomes possible to acquire additional machines for the production chain one way or another. One way or another, even if the demand from China falls, for ASML, the total demand still significantly exceeds the supply for the time being.
New orders are also coming in for the advanced High-NA EUV Scanner Twinscan EXE:5200, taking manufacturers to the next level of EUV lithography. It is assumed that among the clients – Intel, Samsung Foundry and TSMC, as well as SK Hynix. It is possible that the first order was made by Micron, which is building new factories in the United States. Back in May, it was reported that ASML already had five buyers for the new generation of scanners.
In general, the demand for equipment is so strong that the order book increased to $38 billion in the 3rd quarter, up $5 billion for the quarter. It is predicted that even the complete loss of Chinese customers will go unnoticed by ASML for at least two years.
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