ASML Orders Boom But Export Restrictions Could Hamper Growth

Chipmaking kit maker ASML grew 30 percent last year and the order book more than tripled in calendar Q4 as customers rushed to invest in new tools - yet the business remains cautious for 2024 amid stringent export restrictions.

The Dutch operation – which is still the only company in the world that makes extreme ultraviolet (EUV) photolithography equipment – reported Q4 results that were slightly above expectations, up to €7.2 billion ($7.8 billion) from €6.43 billion ($6.98 billion) a year earlier.

Net bookings in Q4 reached €9.2 billion ($10 billion), more than three times the net bookings for Q3 of €2.602 billion ($2.8 billion). Of the latest figure, €5.6 billion ($6.1 billion) is represented by order bookings for the more advanced extreme ultraviolet (EUV) lithography machines, for which ASML is currently the sole supplier.

For the whole of 2023, the chip gear champ claimed net sales of €27.6 billion ($30 billion) and net income of €7.8 billion ($8.5 billion). ASML said it expects 2024 net sales to be similar to 2023.

Last year we had Dutch rules kicking in and we had additional US rules kicking in... We should now expect that for 2024 we will not get export licenses for shipment into China for, let's say, advanced immersion...

"ASML achieved another strong year in 2023 with 30 percent growth," president and CEO Peter Wennink said in a statement. He hinted that this was a sign that the semiconductor industry was turning the corner and may be heading back into an upcycle after the downturn in demand for chips over the last year or so.

"The semiconductor industry continues to work through the bottom of the cycle. Although our customers are still not certain about the shape of the semiconductor market recovery this year, there are some positive signs," Wennink said.

"Industry end-market inventory levels continue to improve and litho tool utilization levels are beginning to show improvement. Our strong order intake in the fourth quarter clearly supports future demand."

Another reason is likely to be Chinese chip companies rushing to get their orders fulfilled before stricter export restrictions came into effect, as was reported last year.

The company shipped initial modules of its first High NA EUV system, EXE:5000, to a customer before the end of last year. According to reports, the recipient of this first equipment was Intel, while High NA EUV gear is also said to be earmarked for another US customer, a research facility in upstate New York overseen by NY Creates, as The Register detailed late last year.

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CFO Roger Dassen said that there were positive signs, but it was too early for the company to revise its guidance, which is that 2024 will be similar in revenue to 2023.

"That said, we also said 2024 is very much a transition year in which we're really building up capacity. We're making good investments into our capacity because we believe 2025 is going to be a year of strong growth, and that's what we're preparing for in this year as well," he said.

ASML believes memory will be bigger than in 2023 because it sees node transitions to support increased demand for advanced DRAM such as DDR5 and High Bandwidth Memory (HBM), Dassen stated.

On the logic side, he said there may well be a small decline in comparison to 2023 because customers will take time to "digest the capacity additions" they bought during last year.

"On EUV, we believe that we're looking at an increase," Dassen forecast as the company will benefit from a higher average selling price (ASP) for its EUV and High NA tools.

Dassen admitted that ASML will likely take something of a hit from the US and Dutch export restrictions on selling its advanced equipment to China.

"Last year we had Dutch rules kicking in and we had additional US rules kicking in," he said. "We should now expect that for 2024 we will not get export licenses for shipment into China for, let's say, advanced immersion, so NXT:2000i and up tools."

The impact of this will be somewhere between 10 to 15 percent of the China system sales ASML saw in 2023, Dassen said.

For the first quarter of this year, ASML estimates that it will see net sales between €5 billion ($5.4 billion) and €5.5 billion ($6 billion), down on the €6.7 billion ($7.3 billion) it reported for the same period last year.

Looking further ahead, Dassen sees stronger growth in 2025.

"I think clearly by 2025 we should see our customers go through the upward trend in the cycle," he said, adding: "It's clear that many fab openings are scheduled that will require the intake of quite some tools in the 2025 time frame." ®